If you ever find yourself frustrated with red tape (I do), you might welcome talk of a regulatory bonfire. Various publications are certainly covering it.
Now might seem the right time. Amid endless negative economic indicators, the idea of some kind of great regulatory liberation might seem appealing. But it’s an unfortunate coincidence that the very same people arguing for one (I’m looking at you, Jacob Rees-Mogg) may not fully see the podium beneath their feet.
It’s time for a bonkers-sounding point. Bear with me. I think of Rees-Mogg and his ilk as cats. Cats are proud, reclusive and independent animals. They bask in their own ability to call the shots, and particularly love the freedom to come and go it affords them. Except that anyone who has actually owned a cat knows this is only one side of the story.
What cats don’t appreciate is the amount of effort that goes into giving them that life. They are utterly high-maintenance. And so it is with our laissez-faire friends.
Some may disagree, but I do think MPs live a pretty awesome life. As long as they don’t occupy ministerial office, they have a pretty impressive amount of freedom to say what they want and work on the causes that matter both to them and their constituents.
None of it comes without risk, but it’s a varied, interesting, and (hopefully) fulfilling job. It’s very easy to argue in favour of a regulatory bonfire when you live so freely yourself, and there’s a vast network of people catering to your needs in the tea room. But while that’s brilliant and fulfilling and all that, it’s also utterly unrelatable.
Regulation, Problem, Regulation, Repeat
Probably in a bid to head off accusations of being "out of touch" certain politicians would claim to represent the views of ordinary working folk, who they describe as overburdened with regulation. So let’s look at that.
Among politicians’ biggest concerns are the frustrations felt by small and medium-sized businesses, which play a crucial role in spurring economic activity in their constituencies.
I can see why. Businesses have to jump through hoops just to employ someone, demonstrate their compliance with all the laws relevant to them, and then do things like continuous professional development. The phrase "I’m trying to run a business here" springs to mind. They want to make money. Fair enough.
I believe in regulation, and I believe firmly in the power of the state to establish moral consensus on what is good and bad in society.
However, I do question the piecemeal approach to building that tapestry. Because that is what small businesses find so frustrating. They feel locked in a cycle of regulation, problem, more regulation, repeat (I touched on this in the opening explainer video for our special week of content on governance).
The results are bewildering. In some cases they are bizarre. If you look at the world of personal finance (and auto-enrolment specifically), the regulations could not be clearer, but they incentivise people incoherently.
When you start saving for your retirement in auto-enrolment your employer takes care of the legwork, but at the other end you’re very likely to be left on your own. Small business owners would be right to feel frustrated if that’s the mix that "good regulation" produces.
They would rightly ask what’s the point of all this, particularly if they themselves are going to have to go through the same process at some point. They're humans too, after all.
Just a Warm Up
There is one reason to be very careful, however. As the clamour for some great regulatory reckoning grows, it would be easy to join in calls just to tear up the book and start afresh. But quite apart from that being a fantasy, it is also incongruent with the biggest challenge of our era: climate change.
Quite apart from that bonfire of regulation being a bonfire of the governance hard fought for through decades of scandal and mistrust, deregulation is the wrong direction for a host of other reasons. Remember the pandemic?
In March 2020 the "futurist" and podcast host Mark Stevenson (correctly, in my mind) identified that the pandemic was "just a warm up" for the results of environmental destruction inflicted by humans (and companies) on their world.
His remarks were grounded in the very real disruption caused by coronavirus at that time, but it’s not difficult to extrapolate. During that emergency, there were more rules, not fewer; more co-operation was required, not less; and the decisions made were hard.
The same goes for the planet. Burning up the rule books necessitates agreement that rules are bad, when the truth is we are going to need them more, whether we like it or not. That particularly goes for corporations, whose carbon footprints are huge. They will need climate governance whether they like it or not. We are going to have make many, many more hard decisions. The era of ease is over.
Though it's little wonder the idea of a regulatory bonfire is presented as an easy one (just as Liz Truss’s plan for "growth growth growth" and a ripping up of the Treasury rule book was presented as an easy one), it will end in tears (just as Truss's tenure did).
Whatever the solution to the governance tapestry, there must be an appreciation of the hard reality of what is coming down the line. Anything else is just make-believe.
Ollie Smith is UK Editor at Morningstar
