The idea that ‘freeing the UK from EU red tape’ is an argument for Brexit is spurious.
There are strong arguments for improving EU regulation, something that the UK was rather good at doing when it had influence in the EU institutions. But there are no strong economic arguments for exiting from it. And even the sovereignty arguments are largely illusory.
The Brexit government often cites astronomical costs of EU regulation. But all regulation has a cost (though often less than the cost of non-regulation). And the Brexit government often leave out the enormous benefits of deciding on common regulation at EU level, for example:
- If the rules are the same everywhere within a market of 450m people, there is no need for red tape and border checks, with the related delays and costs for businesses ultimately hitting consumers - that we are seeing now that the UK is outside. A 4-5% hit to GDP is predicted by several respected analysts, including the government’s own Office for Budget Responsibility);
- Having such a large single market gives the EU enormous clout in trade negotiations with other jurisdictions. The UK has now lost that clout, hence its bad deals with for example Australia and New Zealand, which will damage UK farmers.
In addition, the vast majority of EU regulation is consensual and uncontroversial, with technical standards based on science and on wide consultation with business and NGOs across the EU. Where there is controversy, a process of negotiation and give and take invariably leads to compromise where the value of having common rules outweighs for each member the concessions made to achieve agreement. Moreover, all EU legislation is kept under regular review.
Many advocates of extreme deregulation also fail to take into account:
- Inadequate environmental legislation puts both the planet and local quality of life at risk;
- Inadequate employment and product regulation facilitates exploitation and fraud, puts health at risk and undermines consumer interests. For example, regulating toys costs money – but unsafe, unregulated toys cost children’s lives;
- The financial cost of non-regulation: inadequately regulated employment and product markets lead to accidents and long-term health damage, which are disastrous for individuals and carry major economic costs. Inadequate regulation also leads to loss of consumer confidence at home and abroad and therefore to lost sales, exports and jobs;
- Businesses of all sizes welcome proportionate regulation – they want certainty and market access, which single market regulation provides on a historically unprecedented scale.
While it is true that EU regulation involves some pooling of sovereignty, the regulatory sovereignty of a medium-sized jurisdiction is in practice very limited, in the face of the three big blocs: the EU, the US and China, who have huge clout in global level regulation and whose examples are often simply followed by others, because:
- manufacturers will either not make products to the sole specification of smaller jurisdictions at all, or will charge much more for them;
- in the increasingly global and digital world of services, it is very difficult for smaller jurisdictions to make regulation – e.g., of big tech companies – stick.
