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Thursday, April 28, 2005


Red tape? My arse!

For as long as anyone can remember, the business lobby has always complained about there being too much 'red tape'. It likes to paint a picture of British industry struggling under an enormous burden of onerous regulation and punitive corporate taxation.

It's a refrain that was traditionally repeated only by the Tories until New Labour jumped on the bandwagon. More recently, the Liberal Democrats seem to have endorsed this world view. In 2003, the party approved a green paper tendentiously titled "Setting business free" and its economic spokesmen have sometimes sounded more like Rotary Club bores than Liberal Democrats. But is this new consensus based on sound assumptions?

An analysis in today's
Financial Times (available online only to subscribers) explodes a lot of myths.

This would appear to demolish the 'red tape' argument. British business does have problems but might it be the case that they are to be found elsewhere? Might it be the case that the real problems are bad management, low productivity and under-investment? Might it be the case that Britain's business leaders would rather not talk about these problems but prefer to shift the blame somewhere else? Might it be the case that Britain's politicians are afraid to challenge the business lobby and its self-serving propaganda?

A true story.

In my last job we wanted to take out a partition wall in the reception area to improve the look of the thing - good for business and so on. We were told by the Planning Officer that the whole area would have to be remodelled, the stairs moved, a lift installed and so on, in order to bring it up to current standards. This was beyond our financial means. So the investment didn't happen.

Regulation is a major factor in pushing manufacturing jobs out of the UK. It is costing people their jobs. So serious an issue deserves a less flippant post.
One anecdote does not constitute an argument.

No-one is arguing that regulation is perfect and one can find plenty of examples of absurd and over-zealous officialdom.

However, the claim that "Regulation is a major factor in pushing manufacturing jobs out of the UK" is unsupported by any evidence.

The OECD's survey quoted in my original post (which, by the way, was not "flippant") shows that the UK is relatively lightly regulated.

The decline in UK manufacturing is a function of globalisation more than anything else.

The obsession conservatives have with "regulation" deserves closer scrutiny. It is my thesis that, since the Thatcher/Reagan era, the idea has gained currency that business exists in a moral bubble and is not subject to the same social obligations as the rest of us.

For further examination of this issue, see my article 'It's not personal, it's business' in the November 2004 edition of Liberator.
The OECD and EU comparisons are interesting but not entirely relevant. We are not losing jobs to the wealthy countries that make up these bodies, but to the low regulation economies in the Far East.

You are right that the major cause of the loss of manufacturing jobs is globalisation, and I was careful to say "a major cause" and not "the cause". This change is probably inevitable, but I see no need to speed it up by overregulation. I'm not an economist and I can only speak from experience - I was formerly a director of a small manufacturing business. It was a constant battle to cope with the new rules and government inspectors. You complain of underinvestment, but there would have been much more cash to invest without the state telling us to spend it on their priorities.

By the way, do you have any idea what research the OECD do to reach the conclusions they have?

You speak of business operating in a moral vacuum. Do you, a Liberal, believe that government has the right to dictate morals?
Are you seriously suggesting that the answer to the British economy's problems is a race to the bottom with the least scrupulous regimes of the Far East?

If you were to stand in a British election on a platform of copying Chinese standards of pay or health and safety, all I can say is good luck!

This is not a question of governments "dictating morals". (Although I trust that, when parliaments legislate on any matter, their decisions are rooted in a moral standpoint).

"Regulation" is basically just a fancy word for the law. Just as we need laws to help prevent bad behaviour by individuals, so we need laws to help prevent bad behaviour by corporate bodies.

What I object to is double standards, in this case the idea that we are somehow obliged to indulge bad business behaviour in a way that we would not for bad individual behaviour.
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