James Wild: If we want to drive grow, we must take regulation as seriously as spending and taxation

James Wild is Shadow Exchequer Secretary to the Treasury and Member of Parliament for North West Norfolk.

If we want more growth in the economy, we need to dismantle the regulatory state and remove the incentives to impose more and more rules. The case is clear – every pound of red tape costs imposed on business has the same impact on growth, jobs, and investment as a pound taken in taxes.

 Yet despite warm words, this Labour government is repeating the playbook of the last time it was in office and using regulation as a proxy for taxation to control business and impose additional costs. Worse, this time not only are they loading up the regulatory burden, but they are openly hiking national insurance, business rates, and other taxes with more to come.

 Stopping the regulatory flow is not easy. A decade ago, I worked for the then Deregulation minister on action to remove the thicket of regulation the last Labour government had introduced. 

But even in a Conservative-led government, ministers in other departments too often tried to bring forward measures that made businesses less competitive.

 Regulation has been estimated to cost the UK economy 3-4 percent of GDP – around £70 billion. The major regulators have 36,000 employees with annual expenditure of £5.4bn. Business dynamism in the UK has slowed and a precautionary and compliance culture inhibits risk-taking leading to a less competitive and innovative economy. Any credible reform programme must therefore deliver substantial, quantifiable relief to businesses.

 Of course, Labour ministers talk a good game. The Prime Minister has repeatedly vowed to scrap regulation and regulators that hold back economic growth. Although more bizarrely he promises to regulate for growth – you can no more regulate your way to growth than tax your way to growth. Sadly, these painful lessons are playing out in real time economic data. 

 So when the Government published their policy paper ‘New approach to ensure regulators and regulation support growth’ I looked with interest as a Shadow Treasury Minister responsible for regulation and growth at how these plans would support businesses to grow.

 On paper, these reforms appear sensible; they apply to all bodies exercising regulatory powers and are aimed at tackling complexity, reducing uncertainty and challenging risk aversion. What’s not to like?

 A commitment to cut administrative costs for business by 25 per cent by the end of the Parliament, a 21‑day planning response guarantee from the Environment Agency, and the Financial Conduct Authority pledging 50 percent more dedicated supervisors for early‑stage and high‑growth firms, all appear welcome.

 Sadly, digging a bit deeper through parliamentary questions revealed the gap between rhetoric and reality.

The government is yet to set a baseline for their 25 per cent cut in costs and ministers confirmed no independent assessment has been commissioned for this work. How can anyone judge success if they aren’t measuring it?

On quangos, ministers point to scrapping NHS England, Ofwat and the Valuation Office Agency as evidence of decisive action. Yet for each body it abolishes, more new ones emerge: GB Energy, Great British Railways, Skills England, a football regulator, Fair Work Agency, and the reinstatement of the previously abolished School Support Staff Negotiating Body. Each new quango acts as a drag on growth with its own costs, governance structures and potential for mission creep.

Some measures concern bodies so trivial they barely register; the British Hallmarking Council review, for instance, fixes its sights on an organisation staffed by a single part‑time official. The much‑feted “scrapping” of the Valuation Office Agency is simply a long‑planned administrative merger into HMRC. Similarly, ministers now concede the proposed merger of the Community Interest Companies regulator into Companies House will yield no direct savings.

This lack of real action is causing economic harm. We need a proper Conservative focus on curbing the huge influence regulators wield in the economy and reversing the impact of regulation on long-term growth, competition, innovation, and productivity.

That means urgently establishing a baseline for the regulatory burden with a target to reduce costs. Changing the culture away from regulating as the default. Ensure regulation is properly scrutinised for its impact on competition and innovation. Rules sunsetting automatically. Restoring democratic control with ministers setting the strategic direction for how regulators such as the CMA should approach their work. And providing greater accountability for regulators’ performance.

A dynamic economy depends on competition, innovation, and investment. By taking regulation as seriously as spending and taxation, it is possible to unleash the dynamism to drive growth and deliver consumer benefits.