Scrapping EU red tape?

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One of the great claims made by those supporting Brexit was that it would enable the UK to get rid of all those regulations made by those dreaded unelected Eurocrats in Brussels, and free UK businesses from what is always described as ‘red tape’.  There are at least two obvious problems with this.  The first is that the regulations aren’t made by those unelected Eurocrats in isolation; they’re made with the agreement and input of the representatives of the elected governments of the 28 member states.  Not every state always gets exactly what it wants, but it’s democracy, not the lack of it, which ends up following the wishes of the majority – or perhaps more accurately, getting to a conclusion which a majority can support.

Leaving that aside, the second obvious problem is their apparent inability to point to many concrete examples of regulations which can in future be disregarded.  There were two stories last week which brought this to mind.

The first was a story about the possibility of giving priority to electric vehicles in a number of English cities.  This is, it seems, part of a response to a Supreme Court ruling, ordering the UK Government to comply with European limits on air pollution.  Would this, I wonder, be one of those horribly European bits of red tape which we should be tearing up post-Brexit in order to free up UK enterprises to make more money by paying less attention to environmental issues?  I mean, outside of Brussels, who really cares about having clean air to breathe?

The second was rather more local; it was about the decision to give protected status to Carmarthen Ham.  This ‘protected status’ is another of those horrid European regulations, and it’s clearly a barrier to other businesses who want to muscle in to this market and exercise their right to sell their product as they wish.  So is this one of the pieces of red tape doomed to be abolished, I wonder?

Perhaps these might look like silly examples, but that would also apply to almost any other example that I picked; and the second isn’t so far away from the one concrete example that the Prime Minister gave us in her speech to her party’s conference, when she talked about “how we label our food”.  This ‘plucky island nation’ (I should probably attribute the copyright of that phrase to someone or other) standing against the foreign foe for the right to put whatever labels we like on our food sounds like the sort of thing that might go down well in a Tory conference – but how sensible is it?

For any food producer wanting to sell its produce only in the UK, it might have some advantages, particularly if it means that they can get away with more (although I’m not sure why so many of those who will be consuming the products appear to think that’s such a good idea).  But any food producers wishing to sell into the single market (paying whatever tariffs are necessary for the privilege) will still have to comply with the rules of the EU.  But in this case, that would be in addition to complying with UK rules.  This is just one example of many where having separate UK rules will not necessarily mean less regulation and red tape – they could actually mean more.

And that’s the point about most of the EU regulations that people are raging against – they exist because having one set of rules to follow is better than having 28 with which exporting businesses need to comply.  It's actually a way of reducing the overall regulatory burden on companies trading within the market bloc.  This is far from being the first or the only example of what sounds like a good sound bite actually coming back to place a real bite on the posterior.  But then, as long as we have control of our borders…

Socks, gags, and red tape

Tweet A number of MPs and journalists have been getting quite excited recently about what they like to call “gagging clauses” in the agreements under which some public sector employees – notably in the health service – have left their posts.  The suspicion is that, ungagged, the ex-employees concerned would have some juicy stories to tell.

I suspect reality is rather more mundane than that.  What are more properly called “compromise agreements” are not unique to the public sector in any event; and buying the silence of those with whom they are made is rarely – if ever – the main objective (although it would be hard to draw that conclusion from the press coverage).

They are, rather, an attempt to short-circuit the processes which employees who might feel their dismissal to be unfair could otherwise follow, including of course employment tribunals.  Pay people enough, the theory goes, and you can sack them for any reason you like – even the colour of their socks. 

From the employer’s point of view it avoids the hassle and bother of the legal processes.  That’s what some of the same people condemning the practice might otherwise call “red tape” – that’s certainly a label which has been placed on the process by Tory MPs and ministers in the past.  There’s a certain amount of irony in seeing some of that party’s MPs being so vocal about the practice, given that background.

The “gagging” part is usually incidental.  Is it necessary?  In almost all cases, probably not.  Staff offered such an agreement don’t have to accept it, of course – if they do so it’s probably because they think it’s a better deal than they’d otherwise get.  Having left by “mutual consent” looks better on the CV than having been sacked.

On the other hand, if any employer really had sacked someone because they didn’t like the colour of the socks, I suppose that they probably would prefer that not to come out…

Pickles has a point, even if he's missed it

Tweet The little spat between Cardiff and London last week over changes to building regulations in Wales highlighted yet again the loose way in which politicians use the words ‘red tape’.  Eric Pickles claimed that the new law on installing sprinkler systems, and the rules requiring higher carbon emissions standards for housing, are examples of ‘red tape’ which should be abolished; as ever, one man’s ‘red tape’ is another’s environmental protection or improved safety.  And it’s not as if the UK Government can really claim that they’re against regulation anyway – the recent Queen’s speech proposed extra regulation around employment and housing for immigrants as I recall.  It’s only some ‘red tape’ that they’re against.

Pickles’ rationale was based on the potential damage to the house-building industry in Wales, highlighted by some builders suggesting that they’d now prefer to build new homes in England where they don’t have to comply with such standards than in Wales where they do.  It’s the normal capitalist response to changes in the market conditions – existing capitalists must be protected from such changes, preferably by not making them.  (Although the economic purists would argue that change promotes innovation, and that the companies which manage to find the best and cheapest ways of complying will grow whilst the dinosaurs die.  It’s just that capitalist dinosaurs never die quietly.)

He does have a point, though, at a purely economic level.  There is surely no doubt that the changes made in Wales will increase the capital cost of building new homes, in the short term at least; and even in the long term, the capital cost of building a new house in Wales is likely to remain higher than the capital cost of building a new house in England.  With no increase in earnings on the Welsh side of the border, that will put a squeeze on housebuilders’ profits, which is why they are protesting so much (although it is precisely that squeeze which is supposed to drive innovation, isn’t it?).

Forgetting the housebuilders for a moment, the people likely to lose out here are those families in Wales who want to buy a new house.  Prices are already high compared to wages; a further increase in prices with no change to wages simply prices even more people out of the market.  There is a danger that the main beneficiaries will be another group of capitalists – those who operate the burgeoning market for private rented housing.  The Welsh government’s response is hopelessly inadequate – it’s as though they believe, or pretend, that there isn’t a problem at all.  Or at least, if there is, it isn’t their problem.  But there is a problem, and it’s a very real one.

However, the fact that there is a problem doesn’t mean that Pickles is right to call for the abandonment of changes which will, undoubtedly, improve safety and reduce environmental impact.  That’s simply throwing the baby out with the bath water.

The essence of the problem is this: improving the environmental performance, and the safety, of new housing will reduce the lifetime cost of home ownership, but at the cost of increasing the initial purchase price.  Long term revenue costs are reduced in exchange for an immediate increase in the capital cost.  But the financing structures for home purchase – the mortgage market – aren’t changing to reflect that.  Purchasers and mortgagors see only the increased capital cost; the reduced revenue costs aren’t taken into account in assessing affordability of mortgages.  So what we need isn’t to scrap the changes, but to look at how we can reflect that front-loading of cost in financial arrangements.  And that’s something which neither government seems to be willing to tackle.

Red meat and red tape

Tweet One of the important questions thrown up by the horsemeat scandal is the question of the extent to which the food industry should be regulated and monitored. In that sense, there's a parallel with the banking crisis; in both cases what happened was only able to happen because of a 'light-touch' approach to regulating and monitoring.

In both cases, the extent to which the government and its agencies actively monitored what was happening – and the resources available to do the monitoring – were scaled back as a deliberate act by government. Whilst those being regulated were only too glad to be rid of another 'burden' of red tape, and whilst government could argue that reducing that 'burden' was a good thing for enterprise, the effect, in both cases, was to open the door to the crooked and the unscrupulous.

And that's the problem that I always have when I hear politicians – of all parties – bemoaning the amount of red tape and regulation with which businesses have to conform. Whilst there are extreme examples of silly and petty interference, most of the regulation is there for a reason. It protects consumers, the workforce, or the environment.

Trusting businesses to follow the rules when they're not being watched has been demonstrated not to work. There will always be some who see an opportunity and take it. (And I wouldn't be at all surprised to find out, in a few years time, that some of the organisations being feted today as 'successes' are actually up to similar misdemeanours – after all, the UK's banking sector was a huge 'success' until they were caught out).

It probably looks very unfair to those businesses and organisations which follow the rules that they have to be regulated and monitored just in case someone else is cheating, but there isn't really much alternative. Businesses, and capitalism in general, have shown that we cannot trust them to behave, and if we cannot trust them all, we have to monitor them all. And actually, although it may be a pain for those honest people dealing with the regulations, it protects them as well – from unfair and dishonest competition.

The next time we hear anyone talking about cutting red tape and regulation, we need to demand to read the small print.

Following the rules

Tweet There was a story in the Western Mail a few weeks ago about the WW2 veterans who were being prevented from receiving medals from Russia by what seemed to be a rather arcane rule laid down by the UK Government.  It wasn’t until I read this follow-up story in Saturday’s paper that I realised that I had a ‘family interest’ in the matter, as it were.

The veteran who died on Remembrance Sunday was an uncle of mine.  Uncle Don was an officer in the Merchant Navy and spent much of the war on convoys running supplies through the Arctic to Russia.  With his death at the age of 92, it seems that there are now only a dozen convoy veterans left in South Wales – and it’s obviously one of those numbers which changes in only one direction.

Perhaps the Russians should simply decide to pop a few medals in the post to the remaining veterans.  I’m not sure who would be committing the offence if they did.  Would it be the Russians for sending them, or the aging veterans for receiving them?  Either way, the probability of anyone launching a prosecution seems rather slim to me – the publicity would make anyone who took such a decision look a complete idiot.  And I can’t believe that the UK Government would really want to provoke a diplomatic spat with Russia over such a trivial matter either.

What I really don’t understand is the rationale behind the rule.  Usually, I can see some sense or logic behind decisions made by those in authority, even if I disagree with them, but in this case, I just can’t.  It’s not that the UK Government is opposed to foreign governments giving awards to UK citizens; they’ve just decided that it must be within 5 years of the service of the individuals concerned.  Why 5?  Why not 4, or 6, or 10?  Why have a time limit at all, once the principle is recognised?

Trivial it may be to the governments concerned; but it matters to those involved.  I find it hard to believe that the UK Government can be so intransigent over such a wholly arbitrary time limit on a matter of such little import other than to those directly involved.

Never mind the facts

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I’ve referred to the Beecroft report previously.  The Prime Minister asked Beecroft, a venture capitalist, to review employment laws and come up with some suggestions for cutting red tape, which Beecroft duly did.  The main thrust of his idea of cutting red tape seems to have been whittling away hard-gained employment rights in the name of flexibility.

From earlier reports, most people will have assumed that there was at least some basis for his claims that he was putting forward the views of ‘business’ in general; but it seems from this report that was a wildly inaccurate conclusion.  In fact, the recommendations seem to have been put forward on the basis of what he and a few of his (presumably like-minded) mates think.

He didn’t have time to do any research or investigation into what businesses in general might think, so he had a chat with a few people and then sat down to write his report.  And, on such a flimsy basis, the government is proceeding to implement the bulk of his recommendations.

But then, if you think – as he said he did – that the case for making it easier for small firms to hire and fire people is ‘self-evident’, then what need is there for any objective evidence?  And why should anyone expect the PM to require any more evidence than that?