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To crack Britain’s economic malaise, Sir Keir Starmer plans to draw on the experience of the country’s last major crisis: the pandemic.
Faced with a planning system that bogs down projects and regulators whose meddling has been blamed for stifling growth, Starmer’s government wants to revive some of the crisis-era urgency that led to vaccine development being steamrolled through processes that normally take years.
“If there is an innovation which can benefit the health of the nation, can contribute to economic growth, why do we just let it get mired down,” science minister Peter Kyle said last week. “Let’s take the learning from a crisis time and apply it to normal times so that those priorities we can expedite through the regulatory landscape.”
Part of Starmer’s solution is the unglamorously-named Regulatory Innovation Office, or RIO.
It is modelled on the UK’s Covid Vaccine Taskforce, the body led by venture capitalist Kate Bingham whose early financial bets on a range of vaccines enabled the British government to procure millions of doses ahead of other nations.
Currently, it could take three years for a new health or tech innovation to cross the “regulatory minefield” needed to reach the public, Kyle added.
The ambition is for RIO to inform the government of regulatory barriers to innovation and set new priorities for watchdogs. It will then help those bodies update regulation, speed up approvals and work more closely together.
Radical changes to regulatory systems are not risk free. Former prime minister Gordon Brown admitted in 2011 that he made a “big mistake” by creating the Financial Services Authority, a now-defunct City regulator that was accused of being “asleep at the wheel” in the run-up to the 2008 financial crash.
Work reforming the current crop of regulators was already under way before Starmer came to power in July of this year.
The previous Conservative government gave the Financial Conduct Authority (FCA) and several other regulators including the Bank of England’s Prudential Regulation Authority (PRA) an explicit objective to promote growth — though the Labour administration says many of these targets were never fully put into practice.
Starmer has taken up that mantle since moving into Downing Street.
“We will make sure that every regulator in this country, especially our economic and competition regulators, takes growth as seriously as this room does,” the prime minister told a room of about 200 executives including BlackRock’s Larry Fink and Brookfield’s Bruce Flatt this week.
Delays to crucial projects such as the construction of new wind farms as a result of planning delays were “the biggest supply-side problem we have in our country”, Starmer told the international investment summit on Monday.
The prime minister’s pledge to hack away regulatory excess was delivered in the presence of some of the UK’s top regulators. Nikhil Rathi, head of the FCA, Marcus Bokkerink, chair of the Competition and Markets Authority; and Andrew Bailey, governor of the Bank of England were all in attendance.
Starmer insisted that he was not anti-regulation. It was “simplistic to see regulation as ‘good or bad’,” he told executives — pointing to how better building and fire regulations could have prevented the Grenfell tower disaster.
“The key test for me on regulation is growth,” he said. “Is this going to inhibit or unlock investment?”
The CMA, the UK’s merger regulator, was name-checked by Downing Street this week as needing “to prioritise growth, investment, and innovation”.
Tom Smith, a partner at law firm Geradin Partners and former legal director at the CMA, said the government’s rhetoric on the competition watchdog clearly referred to “merger blocking”.
He said the government was prioritising longer-term investment commitments over what would inevitably be short-term price rises as a result of mergers.
He pointed to the recent tie-up between telecoms groups Vodafone UK and Three UK. In that case, the CMA concluded that the merger could lead to price increases for tens of millions of mobile customers, but it was expected to wave it through anyway, he added.
Smith said the CMA “is more aggressive than it used to be”, adding that the regulator’s slow decision-making could cause delays that had an economic impact, though he was sceptical that it severely hampered investor sentiment or transactions.
Martin Coleman, a CMA non-executive director, was asked at a recent event in London whether the regulator took the government’s strategic steer into account in merger investigations, according to a person who attended. Coleman said it did not.
Asked about the comments, the CMA said it followed the mandate given to it by parliament. “Though government doesn’t steer our decisions on individual cases, we take into account the strategic steer both at a policy level and in relevant aspects of our individual cases, subject to the statutory framework,” it said.
Both the FCA and the PRA are eager to highlight recent decisions that reflect a greater focus on supporting growth. The FCA points to this year’s reform of London listing rules and its call for suggestions of how to simplify its 10,000-page rule book by removing overlapping requirements.
The PRA said its growth objective influenced its decision last month to water down initial proposals for applying the Basel capital rules to British lenders, and to introduce a simpler set of rules for smaller lenders. It is also likely to weigh on the PRA’s plans to reform rules on how long bankers must defer their bonuses.
But it is clear the government wants more.
Speaking at the investment summit, UK business secretary Jonathan Reynolds said: “I wouldn’t call it a bonfire [of regulation]I’d call it recognition that we’ve got real problems.” The current regulatory system “is not delivering the infrastructure we need, the homes that we need, it’s not also attracting the capital that we need”, he added.
Echoing Starmer’s stance that regulation can be a force for good, Reynolds said companies held the UK’s watchdogs in “high esteem”.
But he added: “If you have the kind of ambitions that we have, you’ve simply got to consider the regulatory environment as a key part of the tools available for the economy to perform better and for investment to increase.”