Getting rid of inefficient and ineffective regulations sounds like a good idea. So does stopping the proliferation of inefficient or ineffective new regulations. The problem is, of course, that views on what constitutes inefficient or ineffective regulation differ sharply.

The Coalition agreement, in its section on supporting business, made a number of proposals relating to curbing regulation. This is one area in which, one might suppose, there is scope for Conservatives and Liberal Democrats to unite in common cause. Economic liberals tend to be even more averse to overenthusiastic and over-detailed state regulation than Tories. Vince Cable’s chapter in The Orange Book puts the case very well.

It is, however, transparently clear that there are sharp differences within the Coalition about regulation and, more specifically, deregulation. Cable’s speech last week on the reform of employment law is fascinating in this regard. Adrian Beecroft’s report advocating that employers be allowed a much freer hand in dismissing staff is already widely known. And there are no doubt those at the other end of the spectrum who would see any change to the status quo, however minor, as constituting a significant erosion of workers’ rights. Cable’s carefully crafted speech tries to chart a course between these two extremes.

Cable’s comments were primarily directed at pouring cold water on what might be dubbed the Beecroft tendency.  Cable observed, rightly, that the UK already has one of the most lightly regulated labour markets in the world and noted that competitor countries are doing rather better than the UK even within a more restrictive framework of labour law. He invites the submission of evidence to demonstrate that strengthening employers’ rights to dismiss employees would enhance economic efficiency. Only then will decisions be taken. One gets the sense that he isn’t expecting much robust evidence to be forthcoming. So this is tantamount to kicking the issue into the long grass.

Cable’s stance draws support from a frank recent speech by Michael Heseltine, who notes that German economic success, in particular, has not relied on deregulation. Jim Pickard at the Financial Times reports Heseltine as saying:

There have been many deregulation initiatives but I can’t think of one – including mine – that has achieved significant success.

Heseltine goes on to state that he thinks it is a good idea to get rid of “outdated red tape”. He endorses the Government’s one-in, one-out initiative. This is where we need to understand more clearly what is happening. Continue Reading →