If corporations were ethical and responsible, we wouldn’t need detailed regulations, but they are not.
Today
Under the influence of corporate gifts, hospitality, political donations and lucrative consultancy contracts for legislators, the UK major parties are competing to see who can slash people’s rights and protections the most. The deadly game is called deregulation and its aim is to enhance corporate power and profits.
Many of the social tragedies are rooted in deregulation and associated power of corporations, which pays no attention to human consequences. Some 30,000 NHS patients were given blood transfusions, or treatments made using blood products, contaminated with hepatitis C or HIV. Over 3,000 people have since died, and thousands more live with health conditions. Was lack of regulation worth it? 72 people died in the Grenfell fire tragedy because the government was content to let housebuilders use combustible foam insulation. 97 people died and 766 were seriously injured in the Hillsborough Stadium disaster. Left to themselves, most entrepreneurs do nothing or as a little as possible. Therefore, in democratic societies people expect the state to intervene.
Regulation is created for good reasons. Would you drive a car, ride an aeroplane, visit a restaurant, and consume food, medicine and water without assurance that they meet some standards of safety? Would you not like environmental laws that prevent pollution of air, rivers, seas and lakes, and prevent diseases? No one wants to be subjected to gangster capitalism which denies decent wages and working conditions to staff. No one would hand their savings and pensions to third parties without some assurance that they can be trusted. No one wants to be subjected to age, race, gender, religion and other forms of discriminations and be prevented from living a fulfilling life. People expect to be protected from monopolies extorting excessive profits.
Good regulation when enforced engenders trust, a vital ingredient in managing daily transactions with faceless corporations. It sets benchmarks for business and individual practices. It protects people from exploitation and discrimination. It regularises patterns of behaviour and minimises transaction costs. It addresses market failures and encourages innovation – for example, food with lower salt and sugar content, safer transport and lower carbon emissions. Yet there is a concerted effort by corporations to eliminate regulation and hard-won social rights. Google’s CEO claims red tape is “killing” Britain” as he seeks to dilute social responsibility of social media platforms. Prime Minister Sir Keir Starmer sucked-up to big business by adding that he wants a “bonfire of red tape”, whilst remaining silent on social costs.
Labour government is diluting financial regulation. Chancellor Reeves said that she supported the Conservatives’ decision to introduce a secondary objective for the Financial Conduct Authority and the Prudential Regulation Authority. This states that the regulators must “facilitate the international competitiveness of the UK economy … and its medium to long-term growth”. Protecting customers and financial system is no longer the sole duty of regulators.
Ring-fencing speculative banking from retail was a major step in controlling the contagion effects of 2007-08 financial crash. The government will let banks amass £35bn, increase from £25bn, of customer deposits before needing to ring-fence retail banking from riskier investment operations. The maximum amount that banks will have to refund to fraud victims is to be slashed from £415,000 to £85,000. The $63.2 trillion shadow banking industry is already unregulated and hedge funds and private equity is running amok. Banks and insurance companies are pushing for lower capital adequacy requirements. After the 2007-08 crash the state provided £1,162bn of cash and guarantees (£133bn cash + £1,029bn of guarantees) to bailout ailing banks. Another £895bn of quantitative easing was provided to prop up corporate bonds and securities market. The post-crash cap on bankers’ bonus, which was designed to curb reckless risk-taking, has been scrapped and bankers are free to act recklessly to enrich themselves with the full knowledge that they will be bailed out.
The government is to bulldoze planning regulations to enable builders to build new houses. Environmental laws are local objections are particularly targeted. How many more will end up in flood plains? People will find it hard to object to the building of toxic incinerators or electricity pylons in their neighbourhood. It will be boom time for builders and landlords as with pre-tax annual median wage of £28,764, not many will be able to afford to buy a house. Letting local councils build affordable housing remains a taboo. We have seen housebuilding deregulation before. In 2013, the Conservative and Liberal Democrats coalition government extended “permitted development rights” to facilitate conversion of empty offices, shops, agriculture buildings and warehouses into residential properties without full planning permission. Councils could not compel developers to provide affordable housing. A study for the London Assembly noted that many homes are smaller than the minimum space standards and of poor quality
Richer councils used the law for social cleansing. They bought up property in poorer areas and dumped the low paid, elderly and unemployed in those areas. Social dumping has put extra pressure on transport, congestion and pollution. Many new arrivals struggle to find family-doctors. Local schools end up with higher staff-pupil ratios and hospitals are barley managing. Yet none of these aspects are considered in the rush to deregulation.
In opposition, Labour promised significant improvements in worker and trade union rights, but the Employment Rights Bill retains large part of the oppressive Tory fire and rehire on lower wages and zero-hour contracts. It lets employers violate laws. In March 2022, P&O Ferries sacked 800 workers and replaced them with cheaper agency workers. Its CEO told parliamentary committee that the company knowingly broke UK employment law because that was profitable The Prime Minister said that the government would “take them to court”, but did nothing. Under the Employment Rights Bill employers will remain free to “break the law on redundancy or fire-and-rehire consultation or refuse to reinstate an unfairly dismissed worker. Employers will remain free to choose whether to obey the law, and to buy themselves out of trouble if they decide not to do so”.
Tories have long targeted workers and are aiming for further deregulation. Senior Tory Kemi Badenoch says statutory minimum wage is harming businesses and also wants to roll-back women’s right to maternity pay even though some 12m people, including 4.3m children, live in poverty. Other senior Conservatives want to sack striking workers, have longer working week; end the workers’ right to paid holidays, rest breaks and rights for time off if you’ve got kids and your kids are unwell and lower pay in regions outside London and South East England.
The government is pandering to corporations who always welcome regulations that benefit them. They welcome bailout of banks and energy companies, billions in subsidies and tax reliefs. They like regulations which create monopolies and enact barriers to entry. Consider the case of external audits. It is a market created by the state requiring companies, universities, hospitals, trade unions, public bodies, local councils and others to submit to an annual audit. The market is reserved for members of select few accountancy trade associations even though they routinely deliver dud audits. Just four accounting firms Deloitte, KPMG, PwC and EY conduct 96% of FTSE 350 and collect vast amounts in fees. Between 2010 and 2022, some 250 listed companies collapsed. Despite public evidence of financial problems, auditors did not raise any ‘red flags’. It is hard to think of any instance when auditors drew attention to financial misconduct. At BHS, the PwC audit partner spent just two hours on audit and thirty-one hours on consultancy. To appease BHS directors, the audit report was backdated. When regulators began investigating KPMG’s dud audits of Carillion, the firm submitted false files and documentation. Yet, no major firm is shut-down and none ever calls for deregulation of their jurisdiction or tougher regulation.
The headlong rush to deregulation will create more social problems. It seeks to appease corporations who have no loyalty to any place, people, product or country. It is eliminating people’s rights secured after decades of struggles. The absence of public regulation does not mean that the regulatory space remains vacant. Instead it is filled by private actors who make unfair rules. Note how private car parking operators exploit motorists. Insurance and credit card contracts written in obscure language bamboozle people and the law is always playing catch-up. If corporations were ethical and responsible, we wouldn’t need detailed regulations, but they are not.
Prem Sikka is an Emeritus Professor of Accounting at the University of Essex and the University of Sheffield, a Labour member of the House of Lords, and Contributing Editor at Left Foot Forward.
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