Cutting ‘red tape’ is nothing but a red herring – and arguably counterproductive

B efore becoming prime minister, Andy Burnham pledged to “end 40 years of neoliberalism”. But as he prepares for his first budget on Wednesday, his government is yet to let go of one of its most tedious cliches: red tape. In the run-up to the chancellor John Healey’s high-stakes Commons address, the government issued a press release last week promising his plans would include measures to “slash the red tape choking firms”. Named after the tape once used to tie up government bills, and popularised by the historian Thomas Carlyle, the phrase is straight from the neoliberal playbook and has long outlived its usefulness.

Getting the interfering state out of the way of the wealth creators was a trope of Thatcher and Reaganite economics, and on this side of the pond it has been repeated ad nauseam by every government since. Thatcher unleashed the City with her “ big bang ” deregulation drive, and her successor John Major was enthusiastic about “hacking back the jungle of red tape”. It was the man he appointed for the job – Michael Heseltine – who coined what has become the most hackneyed description of this particular approach: the “bonfire of red tape”.

With Labour back in power, Gordon Brown celebrated a light-tough regulatory regime for the UK’s hard-driving financial sector – until the Treasury had to bail out the banks after the 2008 financial crisis. Boris Johnson wanted to unfetter Britain’s businesses from “Brussels bureaucracy” and waffled on during the Brexit campaign about bendy bananas. Yet, after Brexit, business groups said their members would rather comply with longstanding EU standards in many areas than adopt an entirely new UK regime.

And bananas are no more or less bendy than before. Rachel Reeves had a more unpleasantly graphic way of making a similar point, referring to regulation as a “boot on the neck” of British business. There is nothing wrong with ensuring the interaction between business and the state is smooth. But even during the early years of neoliberalism, the free market good, regulation bad dichotomy was always unhelpful, for several reasons. First, good regulation – a robust competition regime, for example – is essential to make markets work well.

And even most enthusiasts for a laissez-faire approach would acknowledge the need for some basic quality standards – for food and medicines, for example. When it comes to the labour market, Labour has unashamedly adopted a pro-regulation stance. Its Employment Rights Act is the most significant increase in workers’ rights in a generation – but it inevitably, and deliberately, increases the rules firms must follow. That is to the benefit, ministers rightly argue, of low-paid employees trapped in insecure work.

But a bonfire of red tape it is not. Labour posing as a champion of deregulation will seem unconvincing, given that context. Second, and ironically, the march of neoliberalism itself is a reason regulation has mushroomed in recent decades. As the Labour MP Yuan Yang argued in a recent lecture for the journal Renewal, as the state retreated from providing important services, watchdog institutions to oversee the private sector became necessary.

As she put it: “The neoliberal illusion, that privatisation liberated markets from state interference, obscures the reality that the state already significantly controls our privatised utilities, but through a maze of arm’s length regulatory agencies which operate outside democratic influence.” For the water sector, privatised in 1989, these include Ofwat, which sets bills (with the Competition and Markets Authority acting as an appeals body in the event of a dispute); the Drinking Water Inspectorate; the Environment Agency; and the Consumer Council for Water.

Yet, as Yang points out, none are responsible for drawing up a coherent plan for the sector as a whole. “Everyone knows how this story ends: with our rivers polluted and our water infrastructure dangerously lacking.” skip past newsletter promotion Free newsletter | Every weekday Sign up to Business Today Get set for the working day – we'll point you to all the business news and analysis you need every morning Enter your email Sign up after newsletter promotion Hacking away at the regulatory thicket fails to deal with the structural features of the economy that make the rules necessary in the first place.

Mat Lawrence, the director of the thinktank Common Wealth and author of The Productive State, a policy paper influential among those close to Burnham, calls this “the regulatory state”. He cites affordable housing targets for private developers as another example of regulation taking the place of stuff the state once did itself. The third reason the endless red tape discourse is unhelpful is one raised by Mike Clancy, the general secretary of the Prospect union, which represents workers at many of the regulators.

He has urged the government to lay off these often not lavishly paid staff, who are trying to do their jobs with stretched resources. “Regulators continue to be labelled as ‘blockers’ despite the vital work they do keeping us safe and protecting our natural environment,” he said. Prospect has been urging the government to ditch a promise to “cut the administrative burden” of regulation by 25% by the end of the parliament, arguing it is arbitrary and potentially counterproductive.

Finally, we would all benefit from some over-mighty businesses being reined in by regulation, not least the tech firms, which insouciantly concede that their AI agents have been busting through safety controls and may be about to start spawning spontaneously . Embracing the tired idea that red tape is “choking” business is hardly likely to help the government make the case for the more stringent approach that is clearly necessary. As it happens, Bonfire Night is almost upon us.

If Burnham really wants to embrace a different approach to the economy, he could start by consigning the phrase “red tape” to the flames. Explore more on these topics Economics Economics viewpoint Regulators Economic policy Privatisation John Healey Labour comment Share Reuse this content