Rocio says: What impact does regulation have on economic growth? Given years of stagnant growth and future growth predictions looking less-than-optimal, it’s sensible to ask this question. Indeed, just last week the Chancellor hauled in regulators in an array of sectors for discussions on how they can contribute more to the growth agenda.
Again, here it helps to look back through history, where there are cautionary tales. Looser mortgage lending in the run-up to the financial crisis of 2008, and exorbitant levels of interest on ‘payday loans’ in the aftermath, disproportionately affecting the most vulnerable consumers in society, are both examples of the more pernicious effects of laxer regulation. (Indeed, it is thanks to tighter regulation that payday loans are much less of an issue now).
To hear a firm in the Square Mile rally against what they believe to be suffocating red tape might be par for the course. But when Jonathan Reynolds said that, in a discussion with an insurer, the cost of being compliant was considered money that could be better spent on investment, and that the Duty was the ‘biggest thing’ that comes up in chats with businesses, we should all be sitting up.
Nor should it be interpreted as a paean to the Consumer Duty. There is much to admire about the Duty and its commitment to ensuring businesses deliver good outcomes for consumers, but a lack of enforcement action from the regulator against firms failing to deliver – especially in the insurance sector, where our research has uncovered a litany of concerns – risks giving the impression that the FCA is toothless in the face of wrongdoing.
A recent Which? survey of 1,000 UK businesses, carried out by YouGov, found that excessive regulation didn’t even make it into the top seven areas of concern for companies. Fewer than one in five saw it as a top issue.
Which? would never stand in the way of regulation that doesn’t work – for businesses or for consumers. But regulation, well-implemented and proportionate, creates better conditions for dynamic competition between businesses, provides certainty for international investors and protects consumers from being ripped off. In going for growth, the government must not lose sight of that.
Rocio Concha is director of policy and advocacy at Which? To have your questions featured on this page, email business@theipaper.com
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