A Government drive to cut red tape is set to make it easier to get on the housing ladder, switch to a cheaper mortgage and reduce household energy bills, ministers hope.
The move is a key component of the plan for growth, that Chancellor, Rachel Reeves, will lay out during her Spring Statement today.
Sir Keir Starmer has ordered Whitehall departments to draw up plans to cut the overall burden of business regulation by 25 per cent over the coming years as part of the Government’s push to speed up sluggish economic growth.
But independent experts have warned that while deregulation can boost the economy, it also raises the risk of catastrophic outcomes, such as a repeat of the 2008 financial crash.
And even those who welcome the push for fewer rules point out that some of the Government’s actions – such as introducing a new package of workers’ rights – are pointing in the opposite direction.
The Financial Conduct Authority (FCA), which is the largest economic regulator, has mostly focused in the past on stopping banks from taking on too much risk and protecting consumers.
But it is now under orders from Reeves, to pay more heed to the need to boost economic growth – even if that means relaxing the existing safeguards.
Speaking to MPs this week, FCA boss Nikhil Rathi insisted that as well as helping GDP to grow, the body’s reforms would directly benefit those looking to own their own home.
He told the Commons Treasury committee: “We know that rents are very high in many parts of the country, and people may be demonstrably able to pay those high rents and they sustain their finances in doing so, and yet if their monthly mortgage payment is somewhat lower than that rent that might still not meet some of the affordability tests that are there.
“We have to ask the question, is that a sensible position to be in or do we need to show a little bit more flexibility in that area?”
Rathi added that “as house prices have increased, more people need to borrow potentially right up to retirement or beyond retirement” and promised to look at ways that mortgage providers might be allowed to be more “flexible” in extending loans to people who would not be able to repay within the span of their own career.
Government sources said that another measure being prepared by the FCA would give borrowers greater flexibility to renegotiate their mortgage before their existing deal has expired, in order to take advantage of falling interest rates, as well as repaying early without incurring large penalties.
Cutting energy costs
With energy prices still around 70 per cent higher than their pre-pandemic level, ministers are keen to find ways to help consumers reduce their bills.
One idea being worked on by Ofgem, with further details set to be announced this year, will make it easier to “reward consumer-led flexibility” – bringing to the market more tariffs which include dramatically lower prices at times when demand is low, such as the middle of the night, or when supply is high because stiff winds or consistent sunshine produce more renewable electricity.
This is designed to be particularly helpful for people with modern technology such as a heat pump or an electric car, and who are happy to allow their energy provider to decide when the devices are charged or turned on in order to minimise their bills.
The energy regulator has also hinted at changes to the existing blanket price cap on gas and electricity, promising “more options for consumers to take advantage of different pricing and to flex their usage accordingly”.
Cutting the burden of regulation on businesses could be an effective way to speed up economic growth, according to Stephen Millard of the National Institute of Economic and Social Research.
He told The i Paper: “As always with these things, the devil is in the detail, but you get a sense from businesses that there are regulations that are holding them back from expanding in the ways they would like.”
Millard pointed specifically to red tape on housebuilding and financial services as possible obstacles to growth, and said there were definite upsides to the Government’s aggressive rhetoric around the topic: “If you want to want to achieve something, you have to be serious about it. One thing that does not work is tinkering at the edges – so in that sense, going great guns is probably the right way to go. But the danger is that it starts looking as if it is political.”
He also warned that weakening restrictions on the economy could increase the danger of catastrophic outcomes such as those seen during the global financial crisis.
“There are negatives to the whole deregulation agenda, and the easiest way to think about that is to ask why were these regulations put in in the first place,” Millard said. “You need to be sure you are doing more good than bad.”
Ministers accused of inconsistency
Jamie Booth of the Jobs Foundation, which campaigns for policies designed to boost employment, said that making it easier for companies to grow would be a welcome development, adding: “It is something that we would have liked to see from previous governments.”
But he accused the Government of not being consistent in its approach – pointing out that some other policies, in particular on workers’ rights, have imposed additional rules on businesses.
Booth told The i Paper: “It is all very welcome rhetoric, but especially when it comes to employment it very much goes against their action on things like the Employment Rights Bill. If you are building a wall up on one side of the room, but trying to knock it down from the other side, you are in the same place as before.”
Starmer said last week: “Infrastructure that needs planning documents longer than the works of Shakespeare. Homes held up and communities let down. You can’t justify it. By freeing businesses from the shackles of regulation, we will boost investment, create jobs and put more money in your pocket.”
And Reeves told regulators in a meeting: “You know that the number one mission of this Government is to grow the economy. There are a number of things over the last decade or so that have held back growth, and one of them, if we are honest – and you know better than anyone – is the regulatory landscape.”
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