The Christmas-to-New Year holiday was a bad period for those of us who believe in deregulation. A minimum price for alcohol was proposed; a massive extension of state funding and regulation of social care and its integration with the NHS monolith looks to be on the cards; there were various announcements made about regulating high pay; and it was announced that the moratorium on small business regulation would only affect one irrelevant regulation when it comes in to place in April. Unfortunately, the end of the Christmas season has not brought to an end the desire of government ministers to regulate every aspect of our lives to an ever-increasing degree.
Today, the government announced that it was minded to regulate the scrap metal industry to deal with the problem of theft. The proposals being mooted seem exactly analogous to the approach to money laundering. In that case, some money comes from illegal sources so, when somebody deposits money, they have to take two forms of identity to prove who they are and cash transactions are looked upon with particular suspicion. This creates huge costs for consumers. I was once in the position, having sold a house and spending four months in rented property, of being prevented from depositing a six figure sum anywhere except into the current account into which it was paid because no bank would accept a deposit from somebody who had moved house so recently and had no utility bills. Even when cleared funds that have already been checked for money laundering are moved from one UK bank to another UK bank, checks have to be made again. Indeed, the British Transport Police have used the existence of money laundering regulation as a justification for scrap metal sales regulation.
The government is considering requiring those who sell scrap metal to do so without using cash and after providing proof of identity. Clearly, there is a serious problem of theft as a result of the downturn in the economy and the high level of commodity prices. But high commodity prices should promote economy and recycling – the industry has an important function. The scrap metal industry is a huge private enterprise, environmentally-friendly recycling business. All sorts of people use the industry to make small amounts of cash by recycling building materials and so on. The unforeseen consequence (at least, unforeseen by government) of this sort of regulation will be a reduction in environmentally-friendly economic activity.
The British Transport Police go on to say: “My serious belief is that if you put those measures in place, Johnny in the white van isn't going to want to turn up, produce his passport or his driving licence and proof of where he lives so we can then very quickly check where [his metal] comes from." Precisely (though see below). This will be the case whether Johnny in the white van is a builder or a criminal – the two will be treated exactly the same.
The naivity of the proposals is stunning. Already, about ten per cent of economic activity in developed countries takes place in the shadow economy and serious work suggests that regulation and taxation are a major cause of this. Whilst Johnny Plumber in the white van may just decide to dump his scrap in landfill rather than have it recycled, Johnny Criminal will turn to the black market which will thrive. Indeed, Johnny Plumber may decide to become a criminal himself and use the black market.
So, as ever, well-meaning measures lead to more stress on the natural environment, more business costs, more criminality and the people who it is designed to hit will just carry on as normal in a thriving criminal world.
This approach all arises from a serious underlying problem with policing in Britain. Because we find policing so difficult, we change tack. Instead of using intelligence and policing methods to track down criminals, we monitor every single economic transaction instead in the hope that the monitoring will put off or uncover the criminals. In fact, the monitoring puts off the non-criminals too. But, the criminals can carry on as normal, of course. After all, they are criminals. If people are willing to extract signal cables from a railway, it does not take the criminal brain much effort to find somewhere to sell the stuff outside the newly regulated market. Everybody suffers except for the criminal.