Faced with a stagnating economy, the government is coming up with some whizzy ideas for stimulating economic growth, such as letting people drive at 80 mph and extending the threshold for unfair dismissal claims to two years’ service. Today, the IoD has chimed in with its Route Back to Growth report which, among other things, demands further deregulation as a prerequisite for economic growth.
All of this would be funny if it didn’t look so desperate. There are all sorts of reasons why the UK’s economy is sluggish but regulation is the least of our worries. We already have some of the least onerous employment laws in the world. According to the OECD, among the world’s developed economies, only Canada and the USA have lower levels of employment protection and workers rights than the UK.
Employment Protection in 2008 in OECD and selected non-OECD countries
Scale from 0 (least stringent) to 6 (most restrictive)
Many of those countries with tougher employment laws and high levels of union membership are growing faster than the UK.
The same is true of business regulation generally. Again, the OECD rates the UK one of the least restrictive of its member states.
OECD index of market regulation
Index scale of 0-6 from least to most restrictive
And, again, despite having more regulation, many of these countries are performing better than we are.
The UK is already one of the least regulated countries in the world. Our economy is on the floor not because of regulation but in despite the lack of it. Or, to put it another way, our economy is so weak that even low regulation isn’t making a difference.
Many of us don’t like regulation and, in some respects, that’s understandable. Regulations are awkward and can take up a frustrating amount of time. But, whatever is wrong with our economy, regulation and employment protection are minor issues. Most other countries have more of both than we do and many manage better economic performance in spite of it.
Stopping bonuses for people on maternity leave, increasing the unfair dismissal threshold and tougher laws against strike action will make about as much difference to the economy as raising the speed limit to 80 mph. Absolutely sod all!
Update: Ben Chu puts the IoD’s demands for lower corporation tax in context.
Flip Chart Fairy Tales 
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Well said. Red tape doesn’t take up a huge amount of time for a business as long as they take care to understand and follow the regulations. The time consuming bit is when employers don’t cover off or protect against employment law issues when dealing with their staff and it end ups in court. Like most businesses need an accountant, if a company doesn’t fully understand employment law then they need to outsource to a body that does. I suspect that creating more of de-regulated Hire’em and Fire’em business culture will lead to less productivity through strikes and dis-gruntled employees but more importantly will not increase wages and allow people to buy more stuff, which is needed to get the economy moving. Having said that though, we may have to adapt to a world with zero growth in the very near future , which will require a few changes.
On a slightly tongue in cheek note, I think the 80mph concept is a great way to increase tax revenue. A chap on the Subaru forum increased consumption by 12% at 80mph over 70mph so a reasonable uplift in tax would be gained. The full post can be read here http://bbs.scoobynet.com/scoobynet-general-1/875584-70mph-vs-80mph-fuel-consumption-test.html
As a driver of a ‘Ford Asbo’ I’m in no position to lecture anyone. 😉
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