Red tape: Another Brexit red herring

As soon as the EU referendum was called, it was inevitable that someone would start banging on about red tape. It costs £8.6 billion, no, £18 billion, no, £33 billion, no, £80 billion. Oh well, it’s loads and loads anyway. Getting rid of it would, apparently, free Britain up to become a super-competitive world-beating economy.

The trouble with all this, though, is that the UK is already one of the least regulated countries in the world. The OECD’s product market regulation index rates the UK as the second least regulated economy in the developed world (or perhaps the third least as the US didn’t participate in the most recent study).

When it comes to employment legislation, the picture is very similar, for both permanent and temporary workers.

Charts via OECD Employment Outlook 2013

Even this isn’t the whole story, though, as it has become much more difficult in the UK for workers to enforce any employment law. The introduction of employment tribunal fees has seen a sharp drop in the number of cases being brought. As an employer in the UK there isn’t much employment law to fall foul of but, even if you do, the chances of being prosecuted for it are pretty remote.

Chart via Wonky

Whatever measure you use, compared to most other countries the UK is lightly regulated. As the Economist pointed out last week, the UK is 6th on the World Bank’s ease of doing business index, 10th on the World Economic Forum’s competitiveness index and 10th on the Wall Street Journal & Heritage Foundation index of economic freedom. In all three cases, some of those countries ahead of the UK are EU members and therefore bound by the same rules.

As BlackRock said last week, in its assessment of the risks of Brexit:

Optimistic Brexit scenarios also assume the UK abolishes swathes of EU regulations – and emerges as a Hong Kong-style provider of valued-added goods and services to the rest of the world. Again, we are sceptical. The UK already ranks among the world’s least regulated economies. And its overall export  to China and India lags that of supposedly overregulated Germany.

It’s interesting to look at the attitude to red tape in the few countries that are less regulated than the UK. What do business leaders in the US and New Zealand say about regulation? Why, they moan like hell about it, of course.

Everywhere has some regulation. Markets have been regulated almost from the moment they appeared. If Britain leaves the EU it would have to write a whole new set of regulations to replace the EU ones. Some of it will have to be kept if we want to export manufactured goods to the rest of the EU. Jon Worth gave a good example of this last year.  If we export construction vehicles to the EU then they will need to comply with EU regulations. There would be no point in making a separate version for the UK so, even after Brexit, these vehicles would still be manufactured subject to EU rules. Deciding what regulations we need to keep, what needs to be replaced and what rules can be dumped would be a colossal task. As Alex Barker said in the FT, the post Brexit To Do list would be daunting. It would certainly put a stop to the government’s planned staff reductions. Brexit would provide lots of work for civil servants well into the next decade.

No-one likes red tape. It’s annoying and gets in the way of day-to-day business. But in already lightly regulated economies like the UK, it is unlikely that taking away what little regulation there is will make much difference. Some people will complain about red-tape no matter how little of it there is. If the government repealed every employment law enacted since 1900 they still wouldn’t be satisfied. But just because people are a bit cross about something doesn’t mean that it’s the cause of the country’s economic problems. Compared to much of the world, regulation isn’t a big deal in the UK. Leaving the EU to avoid it would be like burning off an irritating spot with a blowtorch.