John Oxley: Dodgy high-street shops are emblems of our backwards approach to enforcing the law

John Oxley is a consultant, writer, and broadcaster. His SubStack is Joxley Writes.

Unless you live in the most genteel bits of Britain, chances are there’s at least a handful of shops in your town that everyone seems to have questions about. They might be barbershops or vape stores, or some other low-value business that appears to be doing quite nicely despite having barely any customers or meeting any real need.

Often, they seem to be prospering while other well-run and popular companies are squeezed into insolvency by rising wages, rents, and taxes. It is almost natural to assume that something illicit is going on.

Even on the nation’s biggest high streets, these dubious shops have a presence. A recent investigation by London Centric revealed that a combination of souvenir and sweet shops generates a surprisingly robust trade, yet costs the public purse millions in lost taxes. Other reports have exposed illegal cigarette sales and similar nefarious activity. Some are probably indulging in good, old-fashioned money laundering.

The obvious criminality operating on these high streets is dispiriting. It shows a state that is failing to enforce the law correctly. It is not just the police that are missing these things, but other parts of the system as well. HMRC, Trading Standards, Companies House… all seem to lack the wherewithal to go against these gangs. As you wander down our high street, they seem to operate with depressing impunity.

More than that, however, it points towards where we are going wrong with our regularity state, and how it is failing everyone. Britain is not short of rules – but has a paucity of enforcement. This is perhaps the worst possible arrangement, short of absolute anarchy.

Anyone who has spent time in business is familiar with the burdens of these regulations. Compliance with reporting rules takes time, and, of course, paying proper taxes, from VAT to rates, is a significant expense for businesses. While honest companies may grumble about paying the money over or question how well it is spent, they do comply – it is part of being a respectable company.

Yet when others are obviously getting away with it, that starts to make you feel like a mug. Just as we have seen with issues of fare dodging, the laxness of enforcement doesn’t just mean that the state is missing out on money; it also discourages the honest. Knowing those around you are getting away with it while you take pains to comply erodes your respect for institutions; doubly so if you are a business struggling on the high street, while those flouting the rules succeed. It is galling and only serves to further disillusionment with the state.

It gives the impression that UK regulations are primarily concerned with performance, rather than practical outcomes. Those who care go through everything that is expected of them, ready to be called to account. But those who are intent on villainy prosper for years without being checked.

I’ve seen this in professional services firms, which dedicated staff and processes to meeting every requirement, in the full knowledge that it was all inadequate to deal with some of the rogue operators in their profession.

What is needed is a more proactive approach to cracking down on these things – and less risk-averse enforcement. Technology should now allow us to keep track of people and addresses that are routinely involved in rogue companies. Yet Companies House seems unable to stop even the most absurd fakes that seem to pop up. Only a little bit of gumption and automation would make it easy to weed things like this out, not just preventing crime but removing the idea that Britain is becoming a soft touch.

Elsewhere, there is a need for resources – but also to use them with guile. It seems like HMRC is often focused too much on big companies, rather than the SMEs where the major tax gap is. Additionally, they are too slow and cautious with companies that can evaporate, taking millions with them before anyone has clamped down on them.

When it comes to illegal migration and working, we have evolved a hostile environment which has tried to make it difficult to bend the rules. Responsibility for enforcement has been passed on to landlords and employers by making them liable. This has been supported by increased involvement, with more raids and more fines. Now the Home Office hands out more than £1 million in fines a month to rogue employers in London alone. There is a clear signal emerging: break the rules and we will make it hard for you to do business.

The same should be true for tax cheats and dubious phoenix companies. Aggressive enforcement might not increase prosecutions, but it could help drive up the costs and hassle of running dodgy businesses. Presently, too many are secure in the thought that by the time the wheels of bureaucracy get to them, they will have already pocketed the cash.

Just as regular patrols are designed to disrupt petty crime, routine investigations might drive up the price and the risk of committing white collar crime. Legislating to allow prosecutions of those, such as landlords, who negligently enable rogue companies could also help make their lives harder.

There is little more degrading of the social fabric than the obvious and unpunished flouting of the law. Our high streets, even our most famous and central ones, being marked by companies that everyone can tell aren’t on the level, is terrible for national morale. It is also a slap in the face for those who do play fair.

Most of all, it is an indictment of our system, which piles regulations on the obedient without the capacity to impose them on the unwilling. It speaks of a system which can only make laws, but not enforce them.

Governments need to get serious about this. High-profile campaigns of coordinated resources, drawing in councils, police and HMRC, need to counteract the narrative that these companies can get away with it; tere should be news of them shuttering, their businesses being disrupted, and a sense they can’t get away with it forever. The Government needs to re-establish a sense that these companies will face consequences, both to deter them from operating and to reaffirm the support of those who act in good faith.

Even those of us who believe in fewer regulations and lower taxes accept that there needs to be some. When they do exist, they need to be fair and properly enforced. Too often, it appears, in Britain, laxness on the latter is creating a rogues’ paradise. That diminishes respect for our institutions.

Worst of all, it penalises the honest more than it impedes the bad. The dodgy shops on our streets are emblematic of that – and a concerted effort to clean them up could reap dividends that go beyond the millions in unpaid taxes.