Sunday, May 22, 2016
We hate EU red tape - but others are tied up more than we are, and there'll be no bonfire of it
Posted by David Smith at 09:00 AM
Category: David Smith's other articles

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My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

A few weeks ago I came across a woman who told me that she was voting to leave the European Union because it had stopped her buying traditional light bulbs. She was, pun intended, incandescent.

I suggested that this was not a very sensible basis on which to base a decision but she was having none of it. The EU had gone too far. I tell the story because it illustrates a wider theme, the perception that Brussels is foisting things on us that, were we to leave, we would no longer have to do; that it is strangling us in its unnecessary red tape.

In the case of incandescent light bulbs, the position is clear and entirely the opposite of that perception. Hilary Benn, environment secretary in the Labour government, announced in 2007 an agreement with retailers to phase out the sale of incandescent light bulbs by 2011. Britain, he said, was “leading the way”.

His initiative came two years before an EU agreement to phase out the bulbs. In this, as in many things, the EU was going with the flow. Most countries have plans in place to phase out old-fashioned energy-inefficient bulbs. In Britain, I should say, nearly a decade after Benn led the way in banning them you can still buy them if you know where to go.

It would be unfair to blame my light bulb lady. For years, blaming Brussels for most things has been the default position of a significant proportion of the media and, it should be said, quite a lot of politicians. The EU provides good cover.

Nor will this stop. The Arthur Daleys abound in the referendum debate. I heard one the other day giving a ludicrous figure for the cost of EU regulation, repeat the now discredited £350m a week figure we “send” to Brussels and claim most businesses in Britain favour Brexit. They don’t. Every credible business survey, covering firms from the large to the very small, show a net position in favour of staying in the EU, apparently in spite of all that red tape.

Red tape is an important issue. None of us like it and for some firms it goes beyond being a mere irritation. There is often a sense among firms I talk to that Britain obeys the rules, and even “goldplates” them, while other EU countries adopt a more relaxed attitude.

But it is also important to be realistic. Some red tape simply represents the fact that things that were acceptable on health and safety or other grounds in the past no longer are. Like lower-energy light bulbs, they have would have happened whether or not we were in the EU. Some may yearn for the days when every new electrical appliance was supplied with bare wires, for the householder to fit the plug – not always successfully – but those days are not coming back.

Not only that, but much red tape is home-grown. Her Majesty’s Revenue & Customs has been trying to reduce the administrative burden on business – hard when you have had successive chancellors addicted to tinkering with the tax system – but it is still a work in progress.

It is also the case that, far from EU rules being foisted on an unwilling Britain, successive governments have often initiated them - as we initiated the single market – or been perfectly happy to go along with them. In Facts, a group which seeks to promote accuracy in the referendum debate, points out that of nearly 2,600 EU votes since 1999, Britain has voted no only 56 times and abstained 70 times. On more than 95% of occasions, in other words, we have been quite happy.

Just because ministers are happy does not, of course, mean business is happy but there are two essential points in this debate. The first is that, however bad it may seem, Britain is less regulated than our EU competitors. This is not that surprising; it is one reason why inward investors have favoured Britain as their location of preference within the EU single market. It is confirmed by Britain’s high ratings in the World Economic Forum’s international competitiveness league table and the World Bank’s “ease of doing business” rankings.

It is quantified in successive studies from the Organisation for Economic Co-operation and Development (OECD). These have the virtue of showing, not only that some EU countries are more regulated than others – look at the French, German, Italian, Dutch and Belgian labour markets – but also that Britain is among the least regulated advanced economies, in or out of the EU.

For product market regulation, Britain is the second least regulated of 34 OECD countries, and marginally less regulated than America. For employment legislation, Britain is the fourth least regulated. However bad the red tape burden seems, it could be a lot worse. The think tank Open Europe points out that even at EU level there has been some progress in reducing red tape over the past two years.

In a letter last week organised by Vote Leave, some 300 business people said that “Britain’s competitiveness is being undermined by our membership of a failing EU”. Now, there are many reasons why Britain is not more competitive, ranging from shortcomings in education and skills, low productivity, a failure to invest enough, including in infrastructure, and lack of innovation is some sectors.

Blaming it on the EU, however, seems to me to be the worst kind of bleating, given that our regulatory burden is lower than the vast majority of our competitors. When we look for failings, we should look in the mirror.

This brings me to me second point. Would there be a bonfire of red tape if Britain left the EU? Open Europe, which is strong in this area, estimates the annual cost of EU red tape to be £33bn a year. There is, it should be said, a parallel estimate of the benefits to Britain of EU regulations of £58.6bn a year, also based on official impact assessments.

How can there be benefits of red tape? The Treasury, in its assessment of the costs and benefits of EU membership, lists some of them, such as the fact that a single testing regime for cosmetics reduces costs, that there have been significant gains to both operators and consumers in the transport sector, and so on. The public benefits from measures to protect the environment while, in the field of labour market regulation, one firm’s burden is its employees’ workplace protection. Estimates of the benefits of EU regulation, to be fair, include those from rules not yet fully enacted.

Staying with the costs, however, Open Europe calculates that a politically feasible maximum for the amount of red tape that could be reduced is £12.8bn out of £33bn, most coming from scrapping some labour market and environmental regulation, some from easier regulation of financial services.

It is a reasonable stab, but I think it is likely to be a significant overestimate. Think of the climate that we have been in, in which a majority Conservative government has had to backtrack on plans to cut tax credits and disability benefits. Think too of the continued debate over zero hours contracts and claimed exploitation of workers, or of the row over diesel emissions, where EU regulations have been attacked for being too lax, rather than too tight.

The idea that a post-Brexit Tory government, facing significant opposition from within its own side as well as from Labour and the Scottish Nationalists, could push through a programme of scrapping workers’ rights, reducing environmental legislation and adopting a softer-touch regulatory regime for the City, seems to me entirely unrealistic.

There is v ery unlikely to be any bonfire of red tape. Given that that has been a significant plank in the case for leaving the EU, this is a big flaw in that case.