Rules Britannia


Economic Affairs
Briefing Papers

Why we can't all work from home

Analysing Britain's regulatory burden
In our political discourse there is much discussion of red tape, frequently phrased in terms of ‘challenges’ and ‘bonfires’ to reduce and cut it. Supporters of free markets often have a general feeling that there is too much regulation or that it is too intrusive, badly formulated and ineffective. However, proponents of these positions are often lacking in empirical evidence so are susceptible to accusations of either exaggerating the impact of regulation or not caring about the environment, workers, children or consumers, when often the opposite is true. Supporters of free markets value and recognise the importance of all of these and believe that market solutions, and less state regulation, would improve the situation for them, as well as improve prospects for economic growth.

As the UK leaves the EU it will adopt an independent regulatory policy with the ability to repeal and amend EU rules, and to introduce new regulations in fields of EU competence. This freedom will have to be exercised within the parameters of international commitments such as WTO rules, free-trade agreements (including whatever is agreed with the EU) and other international agreements. It will also have to be done in full consideration of the impact on trade with the EU that will come from diverging at a national level from its regulations. Additional consideration needs to be given to the impact on Northern Ireland, which will remain bound to EU goods regulations at least until 2024 when it will have the option to vote to exit that arrangement.

Regulation has been a tool of EU integration. The implications of this driver being removed from UK regulatory policy should not be underestimated. The former Chancellor of the Exchequer signalled the government’s intention to ‘liberate businesses’ from the ‘overbearing bureaucracy’ of EU laws and design ‘smarter, more flexible regulations’.1 But apart from the Brexit aspect, this sounds sadly familiar, and calls to mind similar rhetoric and initiatives of successive governments since at least the 2000s, including the then Chancellor himself when he was Business Secretary.

There is no doubt though, that regulation is a major source of concern for businesses, although the concerns tend to differ between the strategic interests of larger businesses with legal and lobbying firepower, and small and new businesses for whom the costs of regulation represent barriers to entry and growth. The perception that unelected officials in entrenched positions are enforcing rules that only seem to increase in scope and prescriptiveness whichever party is in power, contributed to the feelings of dissatisfaction that led British people to vote to leave the EU in 2016. There is a risk now, with EU laws being transposed en masse into UK law and regulators pouring cold water on suggestions of reforms, that the innate stickiness of the regulatory state will assert itself and the opportunity for meaningful change will be lost.

The Regulatory Affairs Programme will examine regulators and regulation across a range of sectors and test the performance of the UK’s regulatory measures and institutions. This will help in understanding the scale and scope of regulators’ powers and where they are operating effectively, as against their own remit and in objective terms. It will provide both an empirical and normative basis for challenging existing regulators and regulations.

We start this paper with a high-level review of regulation as a concept, and set out the principles that will underpin the work of the programme. This will be followed by a series of studies of regulation in specific cases, covering particular commercial activities such as financial services and energy, economy-wide or horizontal regulators such as the Competition and Markets Authority (CMA) and the Information Commissioner’s Office, and civil society regulators such as the Electoral and Charity Commissions.

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Head of Regulatory Affairs

Victoria joined the IEA’s International Trade and Competition Unit in Spring 2018. She is a lawyer and practiced for 12 years in the fields of technology and financial services, before joining the Legatum Institute Special Trade Commission to focus on trade and regulatory policy. She has published work on the implications and opportunities of Brexit in financial services and movement of goods and the issues in connection with the Irish border. Before entering the legal profession Victoria worked for Procter & Gamble in the UK and Germany.