The rise of government intervention - and why you should worry

Firms have to accept that the state will be more active than in the past, but they don't have to take it lying down.

by Stuart Thomson
Last Updated: 11 Jun 2018

The government’s inclination to intervene directly when it sees a problem continues to grow. This increases the risks and uncertainty that all businesses now face. And it will only get worse.

There has been an increasing tendency for the government to reach for new regulations or even the threat of new legislation to deal with social or economic problems. The onus on businesses themselves to solve such ills increasingly means more regulation, more responsibility, more costs and more, even personal, liabilities.

Just consider some of the recent examples:

  • Landlords and the checking process for tenants
  • Social media companies patrolling behaviour as well as content
  • Energy price caps
  • Numerous public health changes that often impact shop keepers
  • Promised intervention and retaliation on rail companies that fail to deliver
  • Increased reporting requirements for companies
  • Action to deliver more housing
  • The introduction of the National Living Wage

The list could easily be extended and says nothing of the deeply unpopular and, by many accounts, counterproductive apprenticeship levy which the government imposed to try to hit its arbitrary target of the number of apprenticeships created.

All this, at least in part, is down to a need to keep the media on board during the Brexit negotiations.  The calls of ‘something must be done’ are heeded and reacted to with the promise of action.

Lord Heseltine: An industrial strategy is 'urgent and unavoidable'

It is also a reaction to the promised repatriation of powers from the EU. It is widely assumed that the vote was one to ‘take back control’. If this is the case then the clear implication is that it was also a vote for the UK government itself to exercise control and authority. When those powers do come back, we can expect more muscular government, whether the party in government is from the left or the right.

What is also lacking is any government defence of businesses or the free market. Especially for a party of the right, the failure to offer such a defence should worry its advocates. Mind you the state sector is not immune to more requirements as well – from local authorities taking a role in the war of terror through to school teachers identifying potential radicalisation.

That is not to say that the changes being implemented by the government are not needed or welcome, but they do represent a new way of doing government.

And it will continue in a similar vein.

For all the talk of not ‘picking winners’, the much-vaunted Industrial Strategy could lead to more direction from central government and less free market initiative. The early years of austerity focused on reducing the role of the public sector so that it didn’t crowd out the private sector. Now it seems that government believes that, at the very least, the private sector requires some direction.

Once Brexit becomes a reality, government will go through an almost never ending process of considering former EU regulations and whether we still want them or not. The future landscape is far from clear and uncertainty abounds.

The actions of some companies have certainly given government the excuse to take action – the collapse of Carillion, the apparent mis-use of personal data, failing rail franchises, and bank IT failures being some of the most prominent.

The reality of government intervention and, quite possibly more public sector provision, has to be the recognised hallmark of the new environment. Especially, post-Brexit, UK governments will need to demonstrate that they really are in control.

With this in mind, companies need to step-up their government and political engagement strategies to try to educate audiences but then react quickly, if necessary. This should include the civil service (the real brains behind the government), MPs (especially constituency ones) and those across Parliament with an interest in your issues.

A network of friends and allies could be critical. Announcements made by government should never be seen as the final word on an issue. There is always room for engagement but businesses shouldn’t wait to be asked. They need to make the opinions known – loud and clear.

Stuart Thomson is head of public affairs, government and infrastructure at Bircham Dyson Bell LLP.

Image credit: punghi/Shutterstock


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