Labour’s bonfire of the quangos is barely smouldering so far. The run-up to last month’s ‘Spring-Statement-that-honestly-wasn’t-an-Emergency-Budget’ included a big anti-red tape fanfare, with lots of worthy rhetoric about tackling bureaucratic complexity and regulatory risk-aversion.
But it always starts this way, because talk is cheap. Governments promise to slash red tape and, for a while, hopes are high as the sound of chainsaws felling quangos echoes through the government forest.
Then things start to slow down because the deeply ingrained habits of Westminster, Whitehall and regulators are to produce more rules, not fewer. Ambitious MPs and campaign groups make their names calling for new regulations. Ministers build careers by taking legislation through Parliament. Officials and regulators get promoted by helping them do it. Every government instinct and process points towards red tape rather than away from it.
That’s what happened to the last Conservative government. We began with a ‘one-in-two-out’ system which worked pretty well for a while. But after a few ministerial reshuffles, the true believers had either been moved on, or were exhausted by endless, attritional trench warfare against those pro-red tape instincts. By the end of David Cameron’s government, the pro-regulation culture had won, and red tape costs ballooned every year from then on. Now Labour are discovering that changing those entrenched Whitehall habits is hard. So far they’ve created 27 new quangos and axed just one.
It’s hardly a promising start, but it’s a battle that no government can afford to lose. Every pound of regulatory costs has the same effect on our economic growth and export competitiveness as a pound taken through tax. So for struggling Chancellor Rachel Reeves, cutting red tape is the equivalent of a ‘get out of jail free’ card. It gives her a way to deliver the economic equivalent of a tax cut, lower bills and create a stronger economy without putting her precariously-balanced budget under even more pressure.
How can future governments deliver what’s needed? By upgrading and strengthening the Chancellor’s fiscal rules to include limits on red tape costs for the first time ever, in the same way that governments limit taxpayer-funded spending and borrowing already. At the moment, because the money for regulatory costs isn’t raised through taxes, governments behave as though it is free. Instead, we should control our red tape costs as carefully as every other type of public spending, because their effects on our economy are just as important.
This single change would upend our pro-rules culture for good. Anti-red tape zealots wouldn’t have to fight wars of attrition anymore, because there would be a strong, permanent smarter-regulation ratchet built into every decision instead. All the figures would be published with the same degree of rigour as taxpayer-funded spending already faces today, using official measurement standards and independent auditors to prevent ministers from marking their own homework. And the new rules would apply to all red tape burdens without exception, in the same way as there are no loopholes in our normal controls on taxpayer-funded spending either. So there would be no free pass for key areas where complaints about poor value for money have been loudest, like the environmental regulations which led to the £121m HS2 ‘bat tunnel’.
Rachel Reeves has, rightly, rushed to reassure financial markets that Labour’s fiscal rules won’t be watered down to cope with extra spending demands. So anything that boosts the economy without putting ministerial budgets under even more pressure ought to be a no-brainer. A stronger set of fiscal rules that finally solves Britain’s ever-growing red-tape problem wouldn’t cost taxpayers a bean, but it just might save her Chancellorship.
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