Let’s attend an imaginary meeting. It is at the Marylebone Cricket Club (MCC) in St John’s Wood. Several umpires are marched through the venerable long room to stand before a large antique desk specially brought in for the purpose.
Behind the desk sits the MCC president, Mervyn King, who as Bank of England Governor once moved economies with the flick on a pen. He’s polite, but has a face like thunder, and this is definitely a meeting without cucumber sandwiches.
‘Well,’ says King, ‘you know why you’re here. Takings at the gate are not what they should be. People are not excited. And I know the reason. Batsmen want to score more runs, but you lot keep giving them “out”. It’s all “stumped this… caught that”. WG Grace had it right,’ King continues, gazing out a window at the hallowed turf beyond. ‘The crowd come to see the players play cricket. Not to see you umpire. You’re just a bunch of anti-scoring overheads. I want to know what you’re going to do to create more runs, or you’re out.’
Now let’s get on the Jubilee Line and ride four stops south to Westminster, where a no less ridiculous meeting took place this week, when the chancellor Rachel Reeves summoned regulators to a meeting in Downing Street to demand they do more to support growth.
In pre-briefings, Reeves praised the Prudential Regulation Authority for delaying the implementation of Basel III framework. The head of the Competition and Markets Authority quit in January, reportedly because he was not aligned with Reeves’ ‘strategic direction’ (too curious about proposed mergers, some say).
The chancellor’s journey from her neo-Keynesian October Budget to spouting Trumpian tropes about regulation inhibiting growth has been breathtakingly fast.
And it is very unclear how Reeves 2.0’s attack on the legal and regulatory frameworks that govern business conduct will help growth.
Take competition law and the competition principles it upholds. It is an article of faith among economists that competition between businesses is good. It drives innovation, improvements in service, keeps prices lower and gives consumers choice.
Holding a monopoly (or ‘dominant market position’) is a relaxing position to be in by comparison with such cut and thrust. And for a dominant player, achieving such a position may increase their profits.
But increased profits in this context isn’t ‘growth’. It’s just taking more money off consumers because they can – and getting rich by holding back competitors by a variety of means. Hence we regulate to uphold competition.
Or not. Or maybe, the government seems to wonder, ‘AI’ could do it.
And what about the PRA delaying the requirements of Basel III (whoop, whoop)? Let’s remind ourselves what Basel III is – a framework with its roots in the 2007-08 financial crisis that aims to strengthen the banking sector’s resilience and stability.
Of course there are bankers who argue they could make bigger profits if such bourgeois concerns were dispensed with. And they got their way before the crash, enjoying dazzling bonuses.
The crash, though, was pretty bad for growth. And expensive for government and the public.
Predictable fairness is good for most businesses and investors, even as the public affairs teams of would be monopolists and unsafe bankers argue against the regimes that enforce this fairness by restricting them. It is of a piece with the UK being a jurisdiction where businesses can get a fair result by going to court, where they are heard by an independent judiciary.
Jenner & Block partner Joanna Ludlam sets out the worries many feel about the impact of Reeves’ approach on the quality of decisions. ‘While proposed measures to cut regulatory red tape might be understandable in the context of the UK government's objective to cut costs and drive economic growth, there is a real risk that this will reduce the quality of administrative decision-making in the UK,’ she says.
Regulators striving to improve response times and meet targets, Ludlam points out, will be under pressure to cut corners in their decision-making processes ‘which could become automated’.
In her assessment: ‘A greater reliance on AI in decision-making, coupled with increased pressure to take decisions more quickly, is bound to increase the risk of a failure to comply with the requirements of public law and, in consequence, a greater risk that decisions will be challenged by way of judicial review.’
This could ironically lead to the delays and hurdles that the government is so keen to eliminate.
In other words, fair, independent umpires with experience and good judgement are an advantage in a competitive business as they are in sport.
With that in place, it’s very much up to the players to score runs, take wickets, and grow the crowd. And it’s up to the club to market the match.
As a closing thought, one thing that would give regulatory and enforcement authorities the ability to respond and reach determinations more quickly – thereby giving businesses more speed and certainty on their position.
That would be to resource them adequately. Some manage, proportionately, on a fraction of the resources of their US counterparts. This doesn’t seem to be on the cards.
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