The Starmer Government
The 2024 General Election put the previous government out of its misery and installed Prime Minister Kier Starmer. He and his ministers faced pressure to toughen environmental regulation and introduce further regulations to improve workers' rights. But they also had a 'growth agenda' which would appear to require deregulation. Sir Kier told potential inward investors in November 2024 that he wanted to "back the builders, not the blockers".
The Times' Dominic O'Connell shortly afterwards published this perceptive review of the recent history and future prospects of regulation/deregulation state of play at this time:
Chief executives’ favourite pastime, aside from rising at 4am for 30 minutes of meditation, an hour in the gym and a cleansing herbal tea, is bitching about red tape. At a dinner last week two property bosses complained to me about the impossibility of getting developments through planning, the susceptibility of the process to any nimby attack and the shortage of people at every stage, from council officials through to the fire-safety experts needed to put together new post-Grenfell risk assessments.
This was the audience Sir Keir Starmer was trying to address at this week’s innovation conference, when he said he wanted regulation that would “back the builders not the blockers”. It remains to be seen whether the prime minister’s zeal will percolate all the way down to the officials who actually deal with new developments, but it struck me that there had already been plenty of deregulation in the past few years.
Many seem to have forgotten that the previous government made big changes to stock-market listing rules, City bonuses, audit reform and directors’ duties. There is more to come too, with an important change expected next year on the rules governing when listed companies need to produce a prospectus. The red tape might be piling up in drifts around physical infrastructure but in capital markets and corporate governance it is being stripped away.
The largest of these changes were by omission rather than commission and resulted from a Conservative leader spiking the carefully laid plans of one of his predecessors. It seems lost in the mists of time now — it was in fact only eight years ago — but Theresa May came to power promising a crackdown on corporate bad behaviour. She was reacting to a public mood soured by a string of corporate scandals, notably the collapses of Carillion and Patisserie Valerie and the chaotic demise of BHS. Her speech to the CBI in 2016 spelt it out. “The behaviour of a limited few has damaged the reputation of the many … it is clear that something has to change. For when a small minority of businesses and business figures appear to game the system and work to a different set of rules, we have to recognise that the social contract between business and society fails and the reputation of business as a whole is undermined.”
This set in motion the full machinery of government reform. There were inquiries into the different scandals and expert reports on reform of some basic business plumbing. Sir Donald Brydon, the plain-speaking former chairman of London Stock Exchange Group and Royal Mail, was enlisted to rewrite the rules on company audits and auditors themselves. Sir John Kingman, one of the key Treasury officials during the 2007 banking crisis, devised a wholesale reform of the accounting regulator, the Financial Reporting Council. There were also inquiries and recommendations for change from the Insolvency Service, the business and pensions select committees and the Financial Conduct Authority (FCA).
This burst of reforming zeal was wrapped up into a set of new regulations that would have completely changed the nature of audits and put hefty new duties on directors to make sure that company accounts were not works of fiction. Uncontroversial stuff, you might think, but the whole thing was tossed out of the window by Rishi Sunak. A year ago the Companies (Strategic Report and Directors’ Report) (Amendment) Regulations were dropped. The press release that marked the decision dismissed them as “burdensome legislation withdrawn in the latest move to cut red tape for businesses”.
That was one big deregulatory step and there were more to come.Anguish about the sluggish performance of the London stock market led to a relaxation of the listing rules. The ban on dual-class share structures has been dropped (to permit charismatic and dynamic founders to take their companies public but still retain control) as has the need for shareholder approval of large transactions. These changes have been cheered to the rafters by those who benefit from more listings — the exchange and the army of lawyers, bankers and accountants who feed on the fees — but given the raspberry by some investors. As my colleague Patrick Hosking reported recently, the group that represents council pensions thinks that they are a big backward step and risk “ ‘poisoning the well’, making the UK an unfavourable place to allocate capital”.
There is another change in the works that may provoke fresh rage among pension investors. The FCA consultation on changes to the prospectus regime closed on Friday. There are some amendments to the rules on float documents, when a company is selling shares on a public market for the first time, but the big one is on capital raises by companies already on the market. At present if you want to sell new shares worth more than 20 per cent of your market value you must issue a prospectus. That is expensive, time consuming and potentially embarrassing. Prospectuses often reveal more about the murky inner workings of a company than the management would like. The proposed new rule lifts the threshold to 75 per cent. If that is carried into law, almost all fundraisings by listed companies will no longer require a prospectus.
That is almost a red-tape bonfire in its own right, one you could keep burning with the scrapping of the cap on bankers’ bonuses and, as we revealed on Friday, the proposal to cut the deferral period on those bonuses from eight to five years. If you fear running out of fuel there is also the mooted watering down of the banking ringfence, the biggest single measure to emerge from the post-mortem examination of the 2007-08 banking crisis.
None of this, of course, will in any way ease my chief executives’ complaints about the difficulties in building stuff. Compared with clearing the way for railway lines or housing developments, opening up capital markets and financial regulation is easy. It is also the kind of deregulation that comes with big risks. It opens the doors to another round of corporate scandals: a repeat of the ones that created the rules in the first place. It can also, as the council pension funds argue, create markets that are less attractive to investors, not more. Starmer needs to ensure that he is backing actual builders, not just people pretending.
The Prime Minister returned to Deregulation and the growth agenda in this Times article in January 2025.
Growth is the defining mission of this government. It is the only way to deliver our Plan for Change and put more money in people’s pockets. The only cure for the sickness of stagnation and decline. ...
But as the chancellor will set out in her speech on Wednesday, we can go further and faster. Because there is a morass of regulation that effectively bans billions of pounds more of investment from flowing into Britain. Thickets of red tape that, for all the Tories talked a good game, was allowed to spread through the British economy like Japanese knotweed. Our pledge today is that this government will do what they could not. We will kick down the barriers to building, clear out the regulatory weeds and allow a new era of British growth to bloom.
This may seem like an unusual goal for Labour politicians. But deregulation is now essential for realising Labour ambitions in this era — a crucial component of my Plan for Change. If we don’t deregulate the planning system, then we cannot spread the security of home ownership to the next generation. If we don’t simplify environmental protections, then we cannot decarbonise our electricity grid and generate cheaper, homegrown energy. And if we don’t curb regulator overreach, then we won’t unlock the investment needed for a more prosperous future.
Time and again, my conversations with leading CEOs come back to this. Blue chip companies who are excited to do business in Britain. Shovel-ready projects ready to go. But then come the objections. Then come the vexatious legal challenges. The endless consultations with a myriad of government regulators.
This is exactly what happened in the now-infamous case of the £100 million HS2 bat tunnel. Taxpayer money spent on a ludicrous conclusion, enforced by regulation. Yet, for many investors, it is often easier to quietly shelve their ambitions and look elsewhere. An anatomy of decline that adds up to the bigger story. A British economy that does not invest to anything like the levels of our competitors. And so finds itself, in the middle of a generational global race on artificial intelligence, at risk of being left behind.
We are determined to change this. After all, growth is a partnership. And as I made clear going into the election, Labour is the party of wealth creation. Our job is to work with businesses to create the environment that best allows them to thrive. Last year, our priority was dealing with the nightmarish inheritance left by the previous government. It is simply not possible for Britain to face down the challenges of our volatile world without a strong foundation of economic stability. And it is not possible for working people to realise their aspirations without the security good public services provide. Fixing this foundation was the right approach for the national interest. Moreover, economic stability helps attract long-term investment and this is now bearing fruit. Already, business investment is at its highest level for nineteen years.
But with that vital work done, this year we have shifted gears with a raft of pro-growth deregulation policies. We will streamline environmental obligations. We will limit the cynical legal challenges that block major infrastructure projects. We will strip away the years of consultation that drown builders. We will cut the number of statutory consultees who can slow or veto projects. We will intensify development in urban areas and around key transport hubs — like train stations — with a presumption in favour of quality building. Every state regulator will be given an explicit duty to consider growth. Artificial intelligence will be placed at the heart of our new industrial strategy. The untapped wealth of defined benefit pension schemes will be unlocked to back British business. We will finally grasp the nettle on major national infrastructure projects and speed up decision-making. And we will keep our foot firmly on the accelerator when it comes to planning reform. A “big build” that will create new homes, warehouses and data centres, the length and breadth of our country.
Because ultimately, this is how every new era of growth starts. A change in the economic weather can only ever come from a supply-side expansion of the nation’s productive power. In the 1980s, the Thatcher government deregulated finance capital. In the New Labour era, globalisation increased the opportunities for trade. This is our equivalent. For too long regulation has stopped Britain building its future. On Wednesday, the chancellor will show how this government will sweep it away. And working people will benefit.