27 June 2024

The real cost of red tape


They say the best things in life are free. In British politics the second-best things are paid for in a way that doesn’t show up on OBR public spending forecasts. 

Every major party has now released their manifesto. Each has come with a pious declaration that it is ‘fully costed’ i.e. the spending commitments contained within can be funded exclusively out of existing revenue, along with cuts and tax rises found elsewhere in the document. 

Some of these stretch the definition ‘fully costed’ with their vagueness. Reform, for example, promises to save £50 billion by cutting wasteful spending and bureaucracy, without really specifying what this would include except that it would not involve getting rid of public services.

But there is at least the attempt to outline how the costs of new spending measures will be borne, which allows the public a chance to properly scrutinise the trade-offs. When it comes to regulation, however, there is not even the fig leaf of costing found in manifesto tax and spending proposals. 

My colleague Matthew Lesh – in a move testament either to his dedication to the job or to a weird form of masochism – has gone through the manifestos of the six main parties adding up each new regulatory proposal. He has produced a report (which you can read here) outlining just what we can expect from each of the parties were they to implement their manifestos. 

Across the manifestos, there are a total of 361 policies that would increase the regulatory burden – and just 67 which would decrease it. 

Some of these 361 regulatory proposals are unlikely to place a huge burden on the economy. The Green Party’s mandatory hedgehog holes in new fencing are probably not going to involve huge costs in isolation. The rule will, however, add friction to an industry which is already burdened with compliance costs, and help stack the odds against smaller developers. 

However, other regulatory proposals have price tags that run into the billions of pounds. Take for example ‘Martyn’s Law’ (backed by the Conservatives, Labour, and the SNP) requiring public venues to come up with ‘terrorist prevention plans’, which is estimated by the Home Office to cost £2.7 billion. Or the Labour proposal requiring rented homes to meet energy efficiency standards which in 2020 BEIS costed at £12.2bn. On paper these costs are to be borne by businesses, but there is every reason to believe that a large part of the cost will ultimately fall on the consumer. 

Here’s a flavour of the findings: 

Top of the list in terms of new regulatory proposals come the Lib Dems, who in their manifesto promise no fewer than 128 new policies that will increase the regulatory burden. These include increasing checks on imported food, requiring large employers to monitor LGBT+ pay gaps and introducing ‘use-it-or lose it’ planning permission. That last proposal is ironic given ‘land banking’ is itself a product of an arbitrary and restrictive planning system which Lib Dems have been all too willing to exploit. They do also propose 11 pieces of deregulation including a promise to reduce regulation for childminders, which is, I suppose, something.

The Greens are the next up with 104 regulatory expansions. These are roughly what you’d expect, including the aforementioned hedgehog holes, along with compulsory bee corridors, swift bricks and a ban on animal testing.

Barring the worst polling failure in a century, Labour will be the next party of government. They are offering us 62 new pieces of regulation and only 13 pieces of deregulation. In many cases these proposals overlap with the Conservatives, such as the plan to introduce a generational ban on tobacco and create a football regulator. But they also have their own ideas for new rules, including introducing a Race Equality Act and a ban on new oil and gas exploration. 

The Conservatives are often seen as the party of deregulation, defending the rights of the freeborn Englishman to peaceably live his life without the interference of state officials. Surely we can expect a few deregulatory crumbs from Rishi Sunak? Well, sort of. The Conservatives do propose 20 pieces of deregulation, including fast track development on brownfield land and the expansion of free ports. But they also propose 28 regulatory expansions, including bans on smoking and disposable vapes, as well as giving councils the power to restrict holiday lets. They have also attacked Labour for some of their few deregulatory proposals, including making it easier to build on parts of the greenbelt, which would help alleviate the housing crisis.

Reform is the only party to propose more deregulatory policies than regulatory ones. Even here, it’s s close-run thing. They make 14 promises of more regulation and 15 for less. A surprising proportion of Reform’s regulatory promises relate to fish, including a ban on electric pulse fishing by Dutch vessels within 200 miles of Britain and a requirement that all fish caught in British waters be landed in the UK. Their deregulatory proposals, though few in number, would if implemented represent a dramatic shift in the UK’s regulatory environment. They include scrapping net zero targets, permitting shale gas test sites and fast-tracking permission for small nuclear reactors. They also promise to change planning law (hurrah!)  – to support the creation of farm shops (the chronic lack of housing seems like a more pressing issue, but I suppose this is fine).

It is not that all new regulation is bad and every bit of deregulation is a good idea. The majority of regulatory proposals are the product of good intentions. But as with fiscal measures, good intentions are not sufficient. It is madness to look only at the benefits of regulation without trying to assess its costs. With the economy stagnant and any future government having to deal with tight fiscal constraints, regrettably parties are looking to regulatory measures as a ‘free’ way to signal their preferences.

Unfortunately, we’re going to have to relearn the lesson that there’s no such thing as a free lunch.

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Daniel Freeman is Managing Editor at the Institute of Economic Affairs.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.