There is little appreciation that rights and protections embodied in regulation are the outcome of generations of struggles to safeguards lives, homes, jobs, savings, property rights, dignity, and freedom from discrimination.
Prem Sikka is an Emeritus Professor of Accounting at the University of Essex and the University of Sheffield, a Labour member of the House of Lords, and Contributing Editor at Left Foot Forward.
The UK’s regulatory apparatus has failed.
The government protects financial institutions engaged in “criminal conduct.” Emboldened banks forge customers’ signatures to repossess homes and businesses, but face no sanctions. Water companies dump tons of raw sewage in rivers. Due to poor building regulations, people have been burnt alive in their homes. Accounting firms forge audit files. Companies deny statutory minimum wage to thousands of workers. Companies fire employees without the required statutory consultation. 99% of care homes in
England abuse vulnerable people. Puny fines don’t provide effective deterrence and corporate elites are rarely prosecuted; a kind of lawlessness prevails.
The government’s response is to abolish swathes of regulation. In its ideological war, it labels regulation as ‘red tape’, a danger to economic growth and corporate profits which must somehow be eradicated. There is little appreciation that rights and protections embodied in regulation are the outcome of generations of struggles to safeguards lives, homes, jobs, savings, property rights, dignity, and freedom from discrimination.
The government will exempt businesses with up to 500 employees “from reporting requirements and other regulations in the future”. This is not just about extending auditing and accounting filing exemptions currently enjoyed by small and medium-size companies with up to 250 employees even though that is disastrous. In the absence of publicly available information, many small companies produce fictitious accounts and have become fronts for financial crimes.
The government’s plan refers to “other regulations”. A Treasury Minister stated that “no business under 500 employees gets subject to business regulation and in due course this will be extend to businesses with up to 1,000 employees.”
The UK has some 5.5 million registered businesses. Of these, 2,700 have between 500-999 employees and 2,800 have more than 1,000 employees. So government would exempt most of the businesses from regulation. Entities engaged in food, medicines, water, railways, buses, dentists, hairdressing, social care, healthcare, restaurants, house building, fracking, taxis, ferries, ships and handling toxic material would not be subjected to health and safety, planning, environmental, equality and other laws.
A think-tank associated with the government states that deregulation would involve scrapping free childcare hours, releasing green belt land for housing, abolishing corporation tax, dropping teacher training qualifications for graduates. The Equalities Act would be amended so that white working-class boys are treated as special cases. It wants to treat a married woman’s income as part of her husband’s, something the feminist movement had fought against for years.
Business Secretary Jacob Rees-Mogg was asked whether he supported ‘paid holidays, paid rest breaks, rights for time off if you’ve got kids and your kids are unwell, protection from discrimination when you’re pregnant.’ He replied: “I don’t support all these employment rights that come from Europe” [and] “It is hard to believe that the right to paid holiday is an absolute moral right.”
The Financial Services and Markets Bill will roll-back many of the post-2008 banking crash reforms, including the Solvency II rules which provide minimum capital threshold requirements. This is expected to release £95bn which will increase shareholder returns. The regulator would be required to ensure that the industry is internationally competitive, which is a recipe for race-to-the-bottom.
The government’s onslaught neglects the positive role of regulation. Regulation in the form of rules and practices establishes norms, benchmarks and social order. When effectively designed and applied, regulation can promote long-term social interests, by empowering stakeholders and citizens.
Much of the twentieth century has been marked by a clash between the interests of corporations and citizens, resulting in a raft of laws on product safety, consumer and employment protection, and making corporations accountable to the people.
Regulation can give people a decent wage, healthcare and education. Rules, procedures and policies exist to address market failures, especially when private interest were unwilling to invest, take long-term risks or protect people.
Regulation has been used to prohibit damaging practices. The tobacco and alcohol industries did not voluntarily restrict the sale of their products, even though they can cause premature death. A company manufacturing automobiles produces profits for shareholders but those activities have a negative effect on air quality resulting in respiratory problems for citizens who are not a direct party to the transaction. In such cases, regulation serves to reduce the externalities and/or impose taxes, or other measures to remedy the situation. The 2007-2008 banking crash showed how poor regulation and enforcement can have serious consequences for the stability of the economy.
The government plan is taking the UK back to an era of squalor and exclusion that blighted the lives of million. It will use its huge majority in the House of Commons to push through its ideological obsessions, but resistance will come in the streets.
Under pressure, it may opt for voluntary rather than public regulation, but such regulation does not give people enforceable rights, and is not conducive to international trade. How many countries would buy British food or cars without knowing how they are produced? How many people would go a restaurant that voluntarily proclaims excellence or hand their savings to an attorney or a pension provider without effective regulation? The government’s deregulation plan is a recipe for social strife and will do immense damage to business and society.
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