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Too Many Laws Spoil the State

This week as the Indian Steel firm Tata, decided to sell its British steel works and the focus switched to Port Talbot, the local Labour MP, Stephen Kinnock, ruled out nationalisation as a long term solution. Nor is EU protection against Chinese steel dumping the answer, as former Chancellor Ken Clarke MP made clear. Rather the industry must concentrate on those parts which can make a profit.

That’s been the key to wider British success. Already Greybull Capital is in talks with Tata about the Scunthorpe plant and across the spectrum of British industry other commerce is going ahead, with investors determined to do business in Britain, not affected by the uncertainties of the Brexit debate. That’s the judgement of the Mail’s City Editor. ‘The message [says Alex Brummer] is crystal clear. Even in the current overheated political atmosphere, commerce is not stopping, the prospects for the City look as bright as ever and all-comers are still arriving. So much for Brexit blight.’

 

This week 250 business leaders announced their support for Brexit in the run up to the June referendum. Reflecting the huge range of British Business talent, from pubs and hotels, to banking, with the HSBC’s former chief executive backing Brexit, the message was clear: John Longworth, head of the British Chambers of Commerce until forced out for supporting Brexit summed up the business assessment. With Britain removed from EU ‘shackles … jobs will be safer, Britain will be able to spend our money on our priorities and we can look forward to faster growth and greater prosperity in the future.’

The damage caused by those shackles will strike a chord with many people who work in the UK’s financial sector. The problem is one of too much bad law.

International investment has been my life’s work with twenty years spent building up GT Management, one of the first truly international investment companies. We always strove to go where the opportunities seemed most promising. This led us to concentrate on North America and the Far East, with over-regulated Europe a distant third. In so doing, we were following the enterprise of four centuries of British traders, and taking advantage of the networks of the Commonwealth, so carefully cherished by Her Majesty the Queen.

However belonging to the EU poses a number of problems to business and the country’s success.
First, it impedes our country’s ability to make new trading alliances, in particular blocking this country’s ability to deal directly with the USA and China. Such world wide trading links are vital to the country’s prosperity.

Then there is the burden of official EU corruption, which casts a shadow over the entire EU. While no state can claim to be corruption-free, the EU has failed to complete a proper audit of its accounts for 21 successive years. Every year several billion Euros seem to go missing, while the unaccountable ‘master bureaucrats’ show resentment at being challenged about the deficiencies.

Next is the huge burden of often unnecessary regulation. The vast legislation factory housed in Brussels each year churns out laws, rules and regulations by the hundred. The ambition appears to be that anything that can be regulated, must be regulated. A current example is a plan to ban fast-boiling kettles, but this seems to have been shelved until after our referendum. Most people have long been aware of instances of pettifogging rule-making; some, like the banning of olive oil jugs from restaurants were eventually dropped due to public ridicule and highlighting the potential cost to small business. But many regulations slip into law without adequate debate, add to the costs of business, to the goods and services produced and make it harder for us to compete.

The financial world, in which I worked, has suffered an enormous increase in red tape, with the result that investment directors and managers now spend an inordinate amount of their time on ‘compliance’, involving excessive record keeping and paper work. As the authors of the regulations have little knowledge of the businesses with which they are interfering, they tend to aim for over-complex solutions. There is another quirk added by British civil servants, who generally have a low opinion of the drafting skills of the Brussels legislators. They respond by clarifying and in effect ‘gold-plating’ the English version of a law, thereby making it more restrictive.

The City of London has always thrived on the inventiveness, ingenuity and entrepreneurship of its people. Its strength lies partly in its diversity, unmatched in Europe. It will not help this country for it to be shackled. Nor will it be wise for leaders in the City to assume that there is a fund of good will for their cause among the EU officials.

Legislators should take heed of Tacitus’s dictum: ‘Corruptissima re publica plurimae leges’. (The more laws the more corrupt the state.) One of the saddest consequences for us is that many of the countries of the old British Commonwealth retain much of the freedom and flexibility that we used to have. Even during the run up to our referendum, ten leading euro zone countries are planning the introduction of a Transaction Tax. If this were to be imposed on the UK, it would do serious damage to the City of London and its Stock Exchange, by inducing much transaction business to migrate elsewhere. If we vote to Remain shall we be able to withstand the pressure to adopt a law entirely contrary to our interests?

 

Thomas Griffin

Founder and former Chairman of GT Management.

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