Katie Lam: Britain’s regulators care more about quotas than profits

Katie Lam is a shadow Home Office minister and MP for Weald of Kent.

If you put aside money for your retirement, and entrust it to a company to manage, who do you expect to make the decisions about how to invest that money – your money?

Most people would very reasonably expect that their cash would be invested by whatever company they had asked to to invest it, in line with whatever instructions they had given about their preferences and risk tolerance.

Shockingly – but perhaps not surprisingly – this Government doesn’t agree. Their Pension Schemes Bill would give the power to direct pension investments to Government ministers, who could, for example, force private pension providers to invest in British assets, even if those assets will provide lower returns than assets abroad. You can work hard for a lifetime, save a little at the end of each month – and at the stroke of a pen, ministers will be able to decide where that money goes, even if it means that you’ll end up with less money in your retirement.

As shadow welfare secretary Helen Whately has already said, this is an absurd power grab. It is a breathtaking violation of basic property rights: your money is yours to do what you want with, not just a vehicle for the state to achieve its ideological aims.

The Government is right to identify that British assets are not always attractive investments. But the solution is not to just force people to invest in them anyway. It is to make the British economy a better place to operate and grow, to let people take risks, and allow businesses to do what they’re good at, so that people choose of their own free will to invest here.

We see this approach from the Government all the time: overregulate something to destruction, and then either force people to support it, or use taxpayers’ money to subsidise it. It’s exactly the approach they’ve taken to employing young people: they’ve made it prohibitively expensive, so now they’re offering businesses thousands of pounds of your money in subsidies.

And the general approach of Government knows best is one we see writ large all over the economy. Too many people, whether politicians or bureaucrats, have decided that secondary social aims are a good reason to interfere with how businesses operate. We are now harvesting the bitter fruits of this approach – which is a large part of why I haven’t experienced proper economic growth in my adult lifetime.

The market economy is exceptionally good at providing, or inventing, goods and services that people want, at a cost that they’re willing to pay. If individual businesses are allowed to fulfil that function, and are good enough to succeed against their competitors, then they can create jobs, and invest in coming up with new goods and services, or improving their existing offering.

The net result is that we get to live in a country where people have more money, and more choice over how to spend it. This simple premise is what made Britain so successful for so long. Indeed, it has been the single most reliable blueprint for human flourishing and prosperity in history.

However, if politicians try to use the market economy as a tool to achieve other aims, it will be less effective at that original function. The net result is that people end up with fewer job opportunities, less money to spend, and less choice about how to spend it.

These directives are bad enough when they come from ministers – but far more corrosive when they’re set, or enforced, by unaccountable regulators and bureaucrats.

While regulators are sometimes directed by legislation, they have a tendency to take the maximalist position on implementation. After all, if somebody is employed to think about eliminating risk from the financial system, or achieving a particular demographic makeup in the boards of companies, then that’s exactly what they’ll do.

And if the public doesn’t like what those regulators have achieved, or how they’ve achieved it, then they have no mechanism by which to remove them.

Yet we find ourselves in a position where these unaccountable regulators have the power to set, and enforce, all sorts of rules about things that have nothing to do with profit-making or the stability of our financial system.

For example, publicly traded companies must have, or must “explain to the regulator” why they don’t have, an ethnic minority board member, and a minimum of 40 percent women on their board of directors.

It is absurd that our financial regulator cares more about whether you have enough women on your board than if you actually make any money. Unsurprisingly, businesses have simply decided not to list themselves in Britain – with CRH, a building materials firm valued at £50 billion, ditching London altogether this week.

The Shadow Chancellor was absolutely right to say at Party Conference last year that we must scrap these absurd rules. Whenever we’ve let people take risks, and allowed people to hire on the basis of merit and ability, this country has succeeded. Whenever countries have tried to interfere with the market economy in the name of secondary social outcomes, they’ve failed.

We must not let Britain become the latest in a long line of economic basket-cases which have endlessly, and fruitlessly, tried to legislate their way to prosperity. Instead, as ever, we must trust in the entrepreneurial spirit of the British people.