Plans to roll back regulations means the government has missed a golden opportunity to reduce greenwashing and support responsible businesses. By Nick Hughes.
On May 10th the government announced that a new Brexit Freedoms Bill would repeal and reform regulations on businesses and cut £1bn of “burdensome EU red tape”.
Eight days later, the chair of M&S, Archie Norman, told the BBC’s Today programme that some food exported to the Republic of Ireland now requires 700 pages of customs documents, partly written in Latin.
This contradiction is what one might term the ‘Brexit paradox’: the more the UK government diverges from EU regulations the more bureaucracy it creates for businesses trading with our closest and largest single market.
The latest government war on red tape – as I explored last week – is likely to be more successful than previous efforts if the ultimate aim is to remove disliked rules from the statute book.
But the idea that businesses could at any time soon see a net financial benefit from the UK leaving the EU’s legal sphere seems for the birds.
Norman – who it should be noted apportioned significant blame to the EU for the added border bureaucracy – went on to explain that delivering food south of the Irish border takes 30% more driver time and has required M&S to employ 13 vets in Motherwell, Scotland, to oversee the necessary checks and paperwork, costing the business an additional £30m to-date.
These costs purely relate to exported goods. The UK has yet to implement reciprocal checks on foods imported from the EU which will add to the cost and bureaucratic burden facing businesses.
Full border checks – designed to assure the safety and biosecurity of high-risk food imports – were recently delayed for a fourth time until the end of 2023 at the earliest. On a visit to Eurotunnel's HQ in Folkestone, the newly appointed minister for Brexit opportunities Jacob Rees-Mogg declared, without a trace of irony, that it would have been an act of “self-harm” to impose controls (directly resulting from the decision to leave the EU customs union) at a time when the government was trying to reduce costs to businesses and consumers.
One suspects those £1bn in red tape savings – if indeed they do materialise – will come as little consolation to port owners that have invested millions of pounds in new border control posts and recruited staff to carry out checks that won’t now take place for at least 18 months.
That’s not to suggest there is no fat that can be trimmed from the body of law copied over from the EU. There are many hundreds of rules relating to food covering everything from the font size required for ingredients listed on packaged goods to the percentage of fat permissible in lean beef. It’s possible some of these will be expungable at no discernible cost to businesses or the public.
The problem is less with a desire to ensure inherited rules are fit for purpose and more with an ideology among many cabinet members that sees a direct correlation between deregulation and public or business benefit.
Even leaving Brexit aside, this position just doesn’t stand up to serious scrutiny. Take the recent decision to renege on government plans to ban “buy one get one free” deals on unhealthy snacks due to fears it will add cost to shopping bills (despite evidence showing volume promotions do not save people money). Two of the UK’s largest supermarkets, Tesco and Sainsbury’s, have since pledged to implement the ban regardless (Morrisons, by contrast, will continue offering volume deals). In Tesco’s case, it cites an internal target to boost sales of healthy products to 65% by 2025.
Axing the new rules doesn’t benefit Tesco; on the contrary they would have cemented the business case to adopt a course of action the grocer had already settled on as the right thing to do for its customers (and its investors).
The same can be said of the recent decision by ministers to withdraw plans to force large companies to disclose their environmental impact from the Queen’s Speech. The sustainability disclosure requirements, announced by Chancellor Rishi Sunak in October, would have forced companies to set out transition plans to help meet Britain’s target of becoming net-zero carbon by 2050.
Progressive businesses are already doing just that. Nestlé’s net-zero roadmap runs to 49 pages and sets out current emissions and plans to reduce them in granular detail (and yet has still faced criticism from some experts). The requirement for listed companies to publish net-zero transition plans presented an opportunity for the government to develop a gold standard and reduce the risk of greenwashing.
The FT reported that the decision to withdraw the plans was part of a wider retreat by the government from tightening corporate governance. But if you’ve decided that the long-term viability of your business is dependent on your alignment with a net-zero future then this kind of good governance should not been seen as an added cost but a critical investment.
The businesses that reap short-term benefit when governments dither and delay over regulations or disclosure requirements are the laggards who will happily continue to make money from high-carbon activities or unhealthy products until such point they are forced to desist.
So a message to policy makers: by all means look at where regulation can be improved, but let’s not pretend the pejorative characterisation of ‘burdensome red tape’ reflects the views of all businesses nor the real world reality.
Responsible businesses want good regulation; not deregulation at any cost.