From the TUC

Wholesale deregulation dressed up as defending national sovereignty

14 Jan 2014, by in International

It’s hard to know where to start with what’s wrong about the new report from Business for Britain (sic) called Setting out the British Option: liberating 95% of UK businesses from EU red tape. Taken at face value, it’s so impracticable, unworkable and unrealistic that it’s not just economically illiterate, it’s three stops beyond Barking. But underneath the questionable statistics, the bizarre assumptions, and the imaginary politics, there is a naked attempt to justify wholesale deregulation of standards covering health and safety, workers’ rights, consumer protection and the environment. All dressed up as defending national sovereignty and competitiveness.

Deep within the paper, the real agenda becomes clear: a radical reinterpretation of the traditional neoliberal policy of Export Processing Zones where businesses can operate unrestrained by social justice or consumer safety. Except for Business for Britain’s self-interested ideologues, the law-free area should be every bit of the country that doesn’t export to the rest of Europe! And the main targets in their sights are, as usual, the Working Time Directive and the Temporary Agency Workers Directive.

This may all seem a bit apocalyptic, but you have to read the whole report to get the complete picture. I have, and it made me feel slightly dirty. The main proposal that it makes is that businesses which don’t export to the rest of the EU should not have to comply with EU single market regulation (there are various other Eurosceptic favourites dotted around as well, such as cutting our contributions to the EU unilaterally, and spending the money on UK trade missions in other parts of the world. Where to start?

The 5% of businesses that don’t trade with Europe pretty soon gets redefined as those businesses that don’t export anything to the rest of Europe, and it’s fairly clear this percentage is arrived at by guesstimate rather than detailed research. It admits that while we can be reasonably certain how many businesses export goods to the rest of the EU, it is difficult to assess how many businesses export services. And they do accept that UK exports to the rest of the EU (however they have calculated this figure) are worth 14% of GDP, not least because the 5% of firms exporting to the rest of the EU are, of course, more likely to be big firms. And that’s just the value of the exports of those 5% of firms: it isn’t a representation of the total contribution of those 5% of firms to the overall UK economy, which is likely to be considerably (probably at least twice or three times) larger. Their proposals would only exempt firms trading to the rest of the EU, not just the goods they trade there.

And of course these figures don’t include all those companies whose business depends on importing goods from the rest of the EU (as we run a deficit, that would be more than 14% of GDP, on top of the Business for Britain figure), or are producing goods and services in competition – even if only domestically – with EU imports. They argue that the British government should negotiate with the rest of the EU an arrangement whereby companies making goods solely for the UK market (say, beef lasagne) would be exempt from EU single market rules (say, food standards) while a company in Italy exporting a product to the UK (say, Italian beef lasagne) would not. So if you’re producing solely for the domestic market you can put as much scabby horse in your lasagne as you like, but the imported ones will have to be made of cow. It’s not likely British businesses will benefit for long under such rules, is it? And it’s not really likely that the rest of the EU would even let us try!

They make an attempt to address the issue of whether their rules would be a barrier to companies developing from purely domestic markets to trade with the rest of Europe, by suggesting that the new rules they would need to comply with currently apply to anyone starting a business, ie they’re just moving the point at which the rules would apply. This ignores the fact that actually it would require companies to change from one set of rules to incorporate another, different set of rules (unless… see “fourthly”, below) and it also ignores the fact that business isn’t like that. When the phone rings and it’s a Parisian buyer on the phone, does a British-only firm just slam the phone down on a potentially lucrative order, or completely rewrite its operating rules overnight because they are now a (drum-roll) company that trades with the rest of the EU? And I can’t wait till small firms on the Irish/Northern Ireland border hear about this idea, where cross-border trade is in walking distance!

I should say that I think many of their facts and figures are either wild guesstimates or worse: most of the footnotes in the report merely refer to the scribblings of other Eurosceptic think-tanks or politicians. But I’m really not interested in designing a better way to rob our members of their rights at work, so I’m taking most of their claims at face value. It’s bad enough even then.

So what exactly is their problem with EU rules? They give three main examples, although the main reason is pretty well hidden if mentioned at all.

  • First, they complain about the volume of EU rules and regulations, which they say would require anyone running  business 31 days a year just to stay on top of. There are at least two obvious problems with this. One of the examples they give is Regulation 1015/2010 on ecodesign requirements for household washing machines – and not all businesses will need to read that, only the ones making household washing machines. It is, in fact, merely the industry standard across Europe, and if, as with most EU legislation, it only applied to firms making goods for export, a completely different set of regulations would be needed to do exactly the same job for the domestic market (unless… see “fourthly” below.) So, far from reducing the volume of regulations, Business for Britain are probably proposing to double the amount of business regulation, and require some of it to be incorporated in businesses’ practices overnight!
  • Second, they complain about the cost burden of such regulation, which they say costs British business £9.5bn a year (it’s a contested figure, but even their claim is considerably less than 1% of GDP, although they don’t themselves quite that percentage, keen though they are elsewhere to stress proportions and relative values!) They actually admit that the vast majority of these costs derive from social legislation (workers’ rights) and of course everyone knows that the main quantifiable cost to business from EU single market regulation is the requirement to give people paid annual leave under the Working Time Directive. So, unless Business for Britain (and the Prime Minister, don’t forget) are actually planning to rip up your right to paid holidays, that cost burden won’t be significantly reduced. And of course if all EU regulations get replaced by UK regulations, then those ‘cost burdens’ will remain.
  • Third, national sovereignty: they complain that EU rules are made by the collective wills of all 28 Governments in the EU, rather than being decided by the British Parliament alone (again, that’s not quite how they put it – the British contribution to those rules, which given our economic and political weight in practice is considerably more than one in 28, is actually ignored almost completely.) This attempt to wrap themselves in the Union Jack is actually the most hypocritical of the lot, because, while vehemently opposing the imposition of EU single market rules on the whole UK economy, they welcome enthusiastically the negotiation of free trade agreements like the Transatlantic Trade and Investment Partnership (TTIP). As today’s Independent front page says, if that contains an Investor State Dispute Settlement (ISDS) process, it will represent the wholesale transfer of economic sovereignty not just to a wider, democratic institution like the EU in which voters have a say (albeit maybe not enough of a say), but to unelected tribunals whose purpose is to impose the will of transnational businesses over the wishes of electorates. But not a peep of opposition to that loss of national sovereignty from Business for Britain!
  • Fourthly, they’d like the majority of businesses in Britain to be completely deregulated – free of all standards, rules and regulations: food safety, working hours, health and safety, equality legislation, environmental protections…. (oh, hang on, they don’t say that. But it’s pretty much the only conclusion that you can draw, assuming they mean what they say about the problems above.)

I included that fourth one not just for laughs, but because it is quite clearly the ultimate objective of Business for Britain to relieve the well-remunerated business leaders who fund it of as much regulation and control as they can get away with. Their plan is not just impracticable and unworkable, but wholly unjust, and it is worth reminding them of what the (slightly unfairly canonised) patron saint of the free market, Adam Smith, said of such people:

“People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public.”

The Wealth Of Nations, Book IV Chapter VIII

2 Responses to Wholesale deregulation dressed up as defending national sovereignty

  1. Peter van Leeuwen
    Jan 14th 2014, 2:32 pm

    It is ok with me that there are export-averse SMEs in Britain, but we on the continent may still want to compete with those SMEs on their territory and then there is no level playing field, because we would still have to comply with EU rules. That is a clear distortion of the Single Market.

    Does regulated continental cheese have to compete with unregulated British cheeses if these are made on a SME cheese farm with no intent to export cheese? That is not a level playing field. That is not a Single Market.

  2. Owen Tudor

    Owen Tudor
    Jan 14th 2014, 7:57 pm

    Peter, you have characterised their proposal precisely. I really don’t know whether the authors of the report actually understand what a ‘single market’ means, because they seem to think it consists only of goods and services exported from Britain to the rest of the EU.