Regulation, red tape, sometimes necessary as Grenfell and BHS prove in different ways

How often have you heard politicians, especially low rent Conservative politicians, banging on about red tape?

If we just took up our scissors and cut through the lot of it then the British economy would surge off into the stratosphere, leaving those of our (former) EU friends in the dust!

We'd be richer and happier as a foggy Asian tiger! Now, if we could just get the flights over there sorted out. Better get Boris Island built in the Thames estuary. With all that extra money we’d surely be able to afford a white elephant like that.

Two recent incidents show just how wrong headed that analysis is, one tragic, one economic.

The tragic one has barely been out of the headlines: It is the Grenfell fire. There are already suggestions that "cutting red tape" was one of the causes of it, and it will be interesting to see what the promised public enquiry has to say about regulations, their enforcement, and how they might have saved a lot of lives had they been followed more closely.

Rules covering health and safety. They're often derided. They're more often essential.

The economic one woke up this week when the Pensions Regulator published its snappily titled, 45-page “regulatory intervention report” into the actions it took over the BHS pension scheme.

The headlines have focussed on the report’s claims about the reasons Sir Philip Green, as the “key decision maker” in matters related to BHS, had for selling the chain to Dominic Chappell, a serial former bankrupt with no prior retail experience.

It says that his aim was to postpone the retailer’s impending insolvency so he didn’t have to pump cash into the pension scheme.

As we know, he ended up doing that anyway after a political storm and amid the threat of enforcement action by the watchdog. He paid in £363m, settling the proceedings in the process.

However, what is more important when it comes to the report, is what it has to say about what the regulator has learned from the affair in the wake of some MPs accusing it of having been "asleep on the job".

The watchdog admits that it should have acted more quickly, and has promised to make changes.

In future it will make it clear to pension trustees and sponsoring firms with schemes in deficit what it wants them to do about that.

More funding has been sought from the Department for Work & Pensions. More staff will be hired. More activity will be undertaken. Firms with under funded pension schemes are about to find life getting more difficult. The Pensions Regulator 2.0 is going to be a lot more interventionist.

Good. Outside of the public sector, final salary pension schemes are becoming a thing of the past. However, where employers have made promises to staff who are in them, they should be kept and if that means their having to pay up, so be it. Investors will just have to put up with lower returns. They can take the hit.

This is one example where more regulation, more red tape if you like, would be a thoroughly good thing. Ditto Grenfell, when it comes to questions of fire safety and cladding.

Regulations, and regulators, will never be popular.

What both these cases prove, in different ways, is that they are frequently necessary, and that the supposed economies reaped through “cutting red tape” are often false. And sadly, of course, economies are sometimes the least of it.