Subverting the urge to regulate


Two golf clubs on the Costa Geriatrica north of London play by different rules. Club A pours out regulations and spreads little instructional notices around the course. The new health and safety leaflet is only picked up because it looks like a score card. No one ever reads it. The club even specifies the socks gentlemen are allowed to wear. Club B has none of that. If their Captain suggests a new rule, he is quietly taken to one side and urged to lie down in a dark room until the urge passes. No prizes for guessing which club is the more harmonious. Brussels and Whitehall both trumpet the need for deregulation and then do the opposite. Last week’s Research Note “EUtopian Regulation” discusses whether total regulation could be reduced by competition between the three factories, global, EU, and member states, and concludes that competition might decrease or increase total regulation. It is not the mechanism that matters, i.e. who regulates, but the will to deregulate. We need to take a hard look at the fundamental causes of the urge to regulate and then consider how the vice can be cured.

Yes, it is a vice. For example, complaints about the NHS have grown proportionately to the increase in its “management”, while malpractice in the City has grown in proportion to the number of regulators. I’m not suggesting that correlation is causality, merely that rule-making has improved satisfaction neither in the NHS nor in the banks, nor in golf clubs.

The drivers of regulation are at least threefold:

Cause One is the rise of the lobby group. Unions, NGOs and save-the-worlders all claim to represent ordinary people in pressing for additional regulations. Alongside all those telling government how to spend other people’s money, are those telling government to stop us doing whatever we happen to be doing. In a democracy, we should be free to express our opinions but that is not the same as getting the law changed to remove our freedoms. We should be governed by those we elect, not by those who think they know better. They should be taxed, for a start, on their gross income in order to compensate society for the amount of governmental time they waste.

Cause Two is the excessive number of levels of law-making and law-makers at each level. Every single one of them, like the Captain of a golf club, wants to leave his or her mark on society, to be famous for some Anti-X Act. We even hand out CBEs to these controllistas. Much better would be to reserve medals and pensions for those civil servants who can show that they have simplified and improved our lives. Performance should be measured by outcomes, not activity, i.e. the net reduction of regulation they have achieved.

Cause Three is the excessive number of supposedly independent regulators who have become arms of government. Margaret Thatcher introduced regulators to provide proxy-markets where competition did not exist, e.g. telecoms. The idea was to benefit consumers. Some still push prices down from time to time but too many are now working against consumers, e.g. imposing “compliance” costs, in order to carry out the wishes of government. As government in other colours, we should insist that regulators are funded not by levies on the private sector, but transparently by the government they represent. The squeeze on public expenditure to balance the books would then help bring sanity to regulation.

How can we subvert the urge to regulate? These three solutions should help but we need a much bigger change in the establishment mindset than that. It happened when nationalisation was found to fail and it will happen one day when we recognise the dangers to innovation, entrepreneurship and competition created by these factories of regulation. Bring it on.