Starmer’s Tory-style plan to slash red tape and make you richer

The new year has begun with Britain on a trajectory of zero GDP growth and rising inflation, both bad omens for the first and most important of Labour’s five “missions” for government – boosting the economy.

The UK’s long-term borrowing costs have also hit their highest level since 1998, amid fears the country is set to enter a period of so-called stagflation, where the Bank of England is constrained from cutting rates to support the economy.

In a bid to kickstart economic dynamism, Sir Keir Starmer has taken the step – unusually for a Labour leader – of announcing an agenda of deregulation.

On Christmas Eve, the Prime Minister wrote to Britain’s largest regulators asking them to come up with ways to be “more pro-growth and pro-investment” – and he will place further emphasis on this in the following weeks and months.

Ultimately boosting the economy and growth would help Starmer to put more money in people’s pockets – something he has pinned his political fortunes to before the next election.

He began thinking seriously about how to lower the regulatory burden when he was preparing for the Government’s investment summit in October, according to allies.

It was Rachel Reeves who made the first move, telling City bosses that financial rules imposed after the 2008 crisis had “gone too far” and led to “a system which sought to eliminate risk-taking”.

But the Prime Minister is understood to be taking the lead in planning the next steps. A Downing Street source told The i Paper: “The PM himself is really motivated by it.”

Successive Tory-led governments pushed a deregulation agenda, particularly David Cameron, who in the coalition years imposed a ‘one in, one out’ rule meaning that for every new regulation introduced, ministers were told to find another which they could get rid of.

Starmer’s government has faced warnings that deregulating the City could threaten the UK’s financial stability and even jeopardise growth.

And he has been urged not to deregulate at the expense of protections for consumers.

On the other hand, business groups have broadly welcomed the new focus.

Jordan Cummins, of the Confederation of British Industry, said: “The Government has an opportunity to boost UK competitiveness using smart, proportionate regulation.

“Correctly implemented regulation, and the work and independence of regulators, is critical to the UK economy – as well as safeguarding the interests of consumers and enabling good business practice.”

And Jonny Haseldine, from the British Chambers of Commerce, added: “Businesses of all shapes and sizes will be pleased to see any unnecessary regulation and barriers to growth removed.”

But he warned that some measures already taken by ministers are increasing rather than reducing the burdens on firms – including the Employment Rights Bill currently passing through Parliament, which will strengthen the rights of workers.

Successive governments, particularly Conservative ones, have promised a “bonfire of red tape” to boost growth. But Robert Colvile, of the centre-right Centre for Policy Studies, warned that, in reality, regulation has not always had the sustained attention that it deserves.

“No one in government really historically has taken regulation seriously,” he said. “They haven’t taken it as seriously as taxation. In both cases you are imposing a cost, you are dictating how businesses can operate and reshaping their cost base. But tax and spend gets infinitely more attention than regulation. We should be doing much more to evaluate the costs of government decisions in advance.”

But he admitted that there were often political constraints on how far ministers can go to remove regulations, given the risk of being seen as avoiding action against society’s ills – pointing to the example of “nutrient neutrality” rules which the Tories tried to scrap in order to make it easier to build new homes, before backing down in the face of accusations they were allowing polluters free reign.

Colvile added: “When you have things like Grenfell or the state of the rivers, things that people get justifiably upset about, you don’t want to be the guy saying, ‘Yes but won’t someone think of the poor companies?’ How you frame a narrative on this is really, really hard.”

In the final report into the Grenfell inquiry, the inquiry chair Sir Martin Moore-Bick warned that the deregulation agenda under Cameron’s coalition government had “dominated” thinking to the point where safety matters were “ignored, delayed or disregarded”.

Already, critics from the left are warning Starmer against going too far too quickly in cutting regulation.

John McDonnell, the former shadow chancellor, told The i Paper: “Have we learnt nothing from our experience over decades of deregulation drives and the resultant scandals?

“Deregulation in the finance sector brought our whole economy to its knees in 2008. Failures of proper regulation of big pharma have caused scandal after scandal from thalidomide to Primodos. In the workplace, inadequate regulatory protection resulted in P&O sacking by video 800 workers and resulted in blood on the tracks as a result of regulation failures under rail privatisation.

“Stripping basic consumer protections creates a rip-off culture of higher prices for poorer services and increases safety risks. There is a difference between creating a stable economic climate to engender growth, and creating short-term profiteering opportunities causing greater risk for consumers, workers and society overall.”

Pranesh Narayanan of the left-leaning IPPR said it was a good idea to “tap in” to the expertise of regulators by asking them for ideas on growth and suggested that changing the way energy markets work, as well as reforming the planning system, could have a positive impact.

But he added: “I am a little sceptical that blanket deregulation is the driver of growth, or the lever that government should be pulling for growth.

“Governments have been looking to cut red tape for as long as they have been around – a lot of the low-hanging fruit has already been picked. And you think about why regulations exist in the first place, a lot of the time they do exist for a good reason and a lot of people take them for granted in terms of how they offer protection to consumers.”

Banking regulations were a particular danger, he warned: “If you are trying to achieve growth through financial sector reform, you are opening up the risks of another 2008 and you are also potentially focussing on the wrong part of the economy in my opinion.”

Last month, 50 economists and policy experts issued a warning to Reeves, telling her that deregulation and allowing the financial services sector to expand risked “undermining the government’s efforts to grow the economy” and posed “particular risks to the government’s wider industrial strategy and missions”.

They said that “the financial sector can only continue to grow by taking excessive risks and increasing the economy’s debt burden until the inevitable collapse”.

Even some businesses have emphasised that in some areas, tighter rather than looser regulation could be the answer to promoting growth.

Tina McKenzie of the Federation of Small Businesses said: “Regulating for growth does not always mean deregulation – sometimes it means better protections for small firms as consumers.”

She suggested greater protection for company directors guaranteeing business loans, and a mandatory cooling-off period when firms sign up to a new energy provider, as areas where beefing up the existing rules could be economically helpful.

The regulators contacted by the Prime Minister last month are expecting to respond over the winter and spring. While most regulators declined to comment, they insisted they are already aware of the need to boost growth and working on ways to simplify their rules to make it easier for businesses to comply.