The chancellor has turned to the obvious people to really get growth going: pencil-pushers.
LONDON — As the U.K. economy flounders, Rachel Reeves has a clear message for the country’s regulators: Could you please, please just regulate less?
After a week of torrid headlines for the chancellor, with bond markets in a tailspin, and even her own job at risk, Reeves has turned to the obvious people to really get growth going: pencil-pushers.
The chancellor hauled in a first batch of watchdogs on Thursday and demanded they unveil their very best ideas — no fewer than five each — to unshackle the economy from their own red tape.
“Every regulator, no matter what sector, has a part to play by tearing down the regulatory barriers that hold back growth,” Reeves said after the meeting.
The regulators, operating under the illusion that their job was to erect those same regulatory barriers, said that might, well, contradict some of their legal responsibilities.
But Reeves was undeterred. She told the gathered chief executives of the country’s energy, rail, water and competition watchdogs that there needs to be a “mindset shift on regulation.”
“I want to see this mission woven into the very fabric of our regulators through a cultural shift from excessively focusing on risk to helping drive growth,” she said.
And the chancellor warned watchdogs that, while they’d come up with a few good thoughts on ripping up their own rulebooks, she expected “greater ambition and urgency” and “fresh ideas” from them.
Yet while faceless bureaucrats make useful whipping boys, the tough stance has also offered the opposition Conservative Party an easy stick with which to hit the government.
“Rachel Reeves begging regulators for growth ideas smacks of desperation,” said Andrew Griffith, the Tory shadow business secretary. “She is out of ideas and out of her depth.”
Drones and contactless payments
But the regulators aren’t exactly brimming with original ideas, with more drones at the top of one brainstorming list.
After Thursday’s meeting, the Treasury said one of the proposals it had actually liked was “innovative drone solutions which would unlock growth in the public sector.”
Other options on the table include the U.K. City watchdog’s suggestion to cut the limit for contactless card payments, even though many consumers already use apps without thresholds.
Or, Reeves could opt for a housing bubble.
The Financial Conduct Authority also floated the idea of relaxing the rules on mortgages for first-time buyers, allowing banks to issue more loans to borrowers with smaller deposits.
But loosening lending standards is dangerous territory for any government as easy-to-come-by mortgages have fueled economic crises in the past.
She could instead turn to energy watchdog Ofgem’s plans to lower the fixed fee included in energy bills, known as the standing charge — something the industry has rejected as being counterproductive by hiking costs for suppliers and therefore stifling growth.
“Regulators are generally considered more expert in creating new burdens rather than getting rid of them,” said Bill Bullen, chief executive of challenger supplier Utilita Energy.
“To drive growth the government needs to cut the burden on businesses, including regulatory red tape where it is not in the best interests of consumers.”
And there’s always giving Big Tech what it wants.
Google has urged the U.K.’s Competition and Markets Authority to tread carefully in its probe into the firm’s dominance if it’s really serious about growth.
Deep state playbook
But it’s not the first time U.K. watchdogs have been on the receiving end of a kicking from the government.
Politicians historically tend to have a go when authorities fail to stop a major scandal or protect consumers from predatory companies.
Now, in the era of Donald Trump and deep-state conspiracies, they’re becoming an easy scapegoat for keeping their hand too firmly on the tiller.
So it’s not just the U.K. following what is increasingly becoming a global trend. In Brussels European Commission President Ursula von der Leyen signaled a similar gear shift for Europe with a red-tape-slashing agenda planned for her second five-year term.
In the U.K., it’s a playbook the center-left Labour party has lifted directly from the right of the Conservative party.
Former Tory Prime Minister Liz Truss spent the months since leaving office blaming a shadowy “economic establishment” for her downfall.
And while Truss has become a useful bogeyman herself for Labour, the party has been been quite happy to take up her attacks on a slow-moving bureaucratic machine.
Prime Minister Keir Starmer accused civil servants in December, for instance, of being “comfortable in the tepid bath of managed decline.”
Watch the watchdogs
Now, it’s very much U.K. rule-setters in the firing line.
And nowhere is that pressure more pronounced than in Labour’s approach to the U.K.’s financial watchdogs.
Under the previous Conservative government, the FCA and Prudential Regulation Authority were handed new objectives to promote growth and competitiveness after Brexit.
But since taking office, Labour has only upped the intensity, with Reeves insisting the financial rulebook has “gone too far following the global financial crisis,” to the delight of the City of London.
Sam Woods, chief executive of the PRA, the U.K.’s banking and insurance cop, has questioned the premise that financial safeguards stifle growth.
Meanwhile, Nikhil Rathi, boss of the FCA, has described the new growth objective as “liberating” — but only if the government accepts more firms may fail.
If that’s not a palatable trade-off for Labour, it might have to look beyond the country’s watchdogs and get back to the drawing board. Or, there are always drones.
Nick Earl and Tom Bristow contributed to this report.