Going for growth is a game of risk that ministers must embrace
In the words of the Lord Mayor of London, “the only way you get growth is via risk.”
Alastair King made this observation early in November last year, before it was fashionable. These days, it seems everyone’s discovering their appetite for risk.
The notion that professional regulators could magic up some pro-growth policies has attracted some mild derision in recent weeks, including – it must be said – in the pages of City PM. To be clear, our mockery was aimed more at ministers outsourcing the search for growth than it was at the regulators who must now build growth (risk) into a mandate that traditionally puts consumer protection (safety) above all else.
In the case of the Financial Conduct Authority, their response to the government’s request for pro-growth regulatory reforms strikes a perfectly sensible and important tone. As the FCA’s chair, Ashley Alder, says in today’s City PM, regulators “will have to make decisive trade-offs.”
Rules can be loosened, new approaches can be tried, remits can be rewritten, but, as Alder goes on to make clear, what matters more is a cultural shift that answers a vital question: what is our collective tolerance for failure?
How many times in recent years have we heard advocates of a particular law or proposed regulatory initiative make the claim that “if it can save just one life…” it is somehow impossible to argue against?
This is a mindset that has taken hold in our country, powered by liability fears and the infantilising instincts of politicians and bureaucrats. It’s the reason why the underground is plastered in posters urging us all to slow down and hold the handrail, and it’s the reason why regulators – including those at the FCA – are now preempting the inevitable criticism that will be directed at them the next time someone claims that the state could have done more to protect them.
As Alder says, pivoting – even moderately – to a growth mandate means the regulator “won’t stop all harm, and some failures are likely.” City PM readers might think this is an obvious point, but the question is: do ministers understand these trade-offs? Are they truly comfortable with the potential consequences of a regulatory recalibration, and the trade-offs it entails?
There is a difference between tolerating risk and celebrating it. True growth is only likely to return when ministers – and the country – understand the distinction.