On Regulation
Predictably, members of the Labour Party have begun to use the failure of the regulatory system in preventing the collapse of the UK banking system to launch a wider attack on a Conservative deregulation agenda. Bob Piper describes himself as “shocked and amazed” that
Having spent years complaining about too much regulation, excessive red tape and bureaucracy stifling innovation, some Tories have now got the brass neck to complain that there wasn’t enough regulation!!!
The question is not a case of more or less regulation per se but of better regulation. Nobody seriously disputes that regulatory frameworks are necessary for the efficient, free and fair operation of a market. The objection is the way in which those regulations were implemented. One can have the best system of rules in the world, but if they are not supervised and implemented properly, then they are useless. The Conservative objection has been to the tripartite framework that ultimately hampered our ability to effectively regulate the finance system. Tripartition slowed down decision-making processes, restricted the flow of information to the right people at the right time, and promoted a diffusion of responsibility that created unnecessary gaps in the regulatory structure. The problem was identified over a year ago, and the government failed to do anything about it.
What this misses though is that the conservative opposition to regulation is not an argument primarily related to the financial services sphere, but to a different sort of regulation. It is an argument about the excessive and burdensome level of regulation that has permeated throughout society. The sort of asinine and petty rules that discipline firemen for using their own sleeping bags, or that a computer cannot be carried 200m without appropriate training. Leaving aside the social arguments against this arbitrary extension of state power (which the previous link addresses), the conservative economic argument is that these rules ultimately restrict the ability of businesses to operate efficiently in return for dubious benefit. I invite anyone who seriously believes that all these regulations are necessary to look through the following list of risk assessments and suppress their laughter or groans. Imposing the levels of regulation and paperwork on businesses ultimately distracts them from performing their primary functions: making money and providing jobs. In so doing they limit the growth of the economy.
Paranoid “Health and Safety” regulations are not the same thing as the rules on which the financial system operates, and it is a specious argument to suggest that they are.
