This paragraph from a good posting by Victor Davis Hanson, at the National Review’s Corner blog, applies not just to the US, but also to the UK:
“The strangest thing about the current paradox of cash-flush companies and little or no economic growth is the administration’s puzzlement over the lethargy — as if no one outside Washington ever listened to what the administration has said or noticed what they have done the last three years.”
Exactly. I’d also add to VDH’s list of things that have stymied recovery: the still-lingering and damaging impact of the Sarbanes-Oxley law on things such as initial public offerings and the foolish FASB tampering with share option payments that have crimped venture capital startup businesses. (I can, by the way, recommend this book by Dale Halling about why US entrepreneurship is stalling – it controversially argues that a key problem has been the erosion of patent law in the US, an argument that is bound to get some libertarian opponents of IP excited).
VDH’s points apply in Britain, too, such as what he says about demonisation of some businesses, as well as things like bailouts, Green regulations and so on. Of course, a key problem here is the European Union and all the red tape that comes from that.
Regime uncertainty, if I can use that term, is a big problem. We have a tax authority (HMRC), given the power to decide, as it goes along, what constitutes tax “avoidance”, so that avoidance is now seen as wrong, as is tax evasion. This relates to a wider problem of uncertainty. Even the daftest tax laws are more tolerable if they are predictable. The problems get even worse, though, if officials have the ability to retrospectively decide that this or that business practice is wrong and should be shut down. Our tax code remains one of the longest and most complex in the world.
We need far fewer laws, and those that remain should be simple, easy to understand and enforce. Sometimes though, doing things the simple way seems to be so hard.