Red Tape and Beige Tape: Is Regulation a Dead Weight on the Economy?

How do we define red tape when talking about regulation? Have you ever heard of beige or grey tape? I spoke about these terms, as well as whether regulation is a burden or a benefit with Chris Webb, Executive Director Regulatory Practice and Strategy at the Environment Protection Authority (EPA), Victoria.

Eliminating red tape

How do regulators—that arm of government that hands out obligations on behalf of the community—apply laws effectively, without undermining the outcome they were put there to deliver?

As Chris explains, regulations are normally created to ‘correct something that’s going wrong in society or in an economy. Something is not working the way that it was intended and bad things are happening as a result.

‘So you intervene with some form of rules and then somebody executes those rules and hopefully removes the risk of something going bad. And so the intent of regulation is always to unburden systems. But even the best regulatory frameworks, poorly executed, create an unnecessary burden. And over the years that’s become branded as red tape.’

So red tape tends to come from poorly designed legislation, but even good legislation poorly executed, can create unnecessary complications.

‘Rules that are doing the job they’re meant to, and therefore affording the protections they’re supposed to, shouldn’t be seen as a burden’, Chris says. ‘They should be seen as a benefit.

‘But rules that are no longer needed or were excessive in the first place, or that didn’t really address the problem effectively, that’s all red tape. And absolutely there should be a push to remove those rules.

‘Any rules that get put in place these days have actually gone through quite a considered process to not be an unnecessary burden. But you then have to execute them appropriately because you can still create headaches.

‘But there are a lot of statutes still on the books that may not have gone through that same process. When you set those rules up, the idea is to deal with the harm. And the regulator’s job should be not just simply to administer those laws every day of the week and throughout the years; it’s to try to remove the problem. It’s to ask have we still got a problem? Because the regulators should be really creating the situation where those rules are no longer needed.’

Unfortunately, though, the rules just tend to pile up. There’s no real drive for the regulator to ultimately fix them. For example, in the UK back in the early 80s there was a very popular TV show which featured a stage hypnotist, who hypnotised audience members into clucking like chickens and taking their clothes off. This created a panic that half the people in the UK would end up walking the streets, clucking like chickens and undressing!

So UK law makers decided hypnotists had to have a permit. That whole thing was just a storm in a teacup. It was never a problem in the first place. But the regulation is still on the books, so if you want to be a hypnotist in the UK, you still have to get a permit.

But often regulators don’t see regulatory review as their job. Or they’re even instructed to stay out of the rule-making process and just do the administration. But regulators need to see that it’s actually part of their responsibility to determine whether the harm the regulations were created to prevent is still present.

What is beige, or grey, tape?

So if red tape is poor or dated legislation leading to unnecessary burden or no longer relevant outcomes, beige tape is when you create the same situation through ineffective application of the law by the regulator.

In these scenarios, the regulator can be the villain, where a good piece of legislation is crippled by poor regulatory execution; where the regulator doesn’t understand its purpose or the regulatory outcomes it’s trying to achieve.

The latter case is probably the more difficult, when the problem isn’t with the rules but with the way they are being administered. Chris says these examples are hard to discern unless you go looking for them. That’s why he calls them ‘beige’. Because they don’t stand out.

Chris points to the excessive use of sanctions, such as parking fines, where people complain it’s done to raise revenue rather than reduce harm. You see excessive use of fines without any discernible improvement in the behavior. The fines are meant to dissuade people from parking illegally, yet everyone is still doing it. So maybe another approach is needed.

There are regulators I engage with, observe or read reviews of where the connection between their activity and the regulatory outcomes they’re aspiring to isn’t always clear. So they’re doing a heap of activity, often reasonably well, but it’s not necessarily translating to the outcomes that they were originally put there to get. Over time, we lose sight of the problem and get lost in the ‘what’ and forget the ‘why’.

Which colour tape should regulators focus on?

From the turn of the century regulators in the UK and Australia have made great strides in eliminating red tape.

So Chris believes most regulators will now get a far greater bang for their buck if they focus on their own practices, or about administering laws whose purpose may no longer be known.

‘I do think the red tape is still important to protect against. But I reckon all the easy stuff has been done. I think the best indicator is if you ask the regulator, why exactly have we got the law? What problem is it trying to solve? And if they can’t answer, then that’s a good place to start digging. So, for example, you look at commissioning frameworks, a lot of regulators have licensing or registrations. But when you probe and say, well, what’s the purpose of the licence, you’ll often get something along the lines of it gives us something to regulate against. Okay, that’s correct. That’s the nature of those frameworks. But why is it the right solution to this problem? And quite often you’ll get a blank stare.’

The same is true for sanctions. If you don’t really understand the purpose of a sanction, then you’re likely to just go and start using it all over the place to do things that it was never designed to do. Sanctions should form part of your regulatory strategy and seek to reinforce the powers you have, the harms you care about, remind the good actors to keep being good and deter bad actors from breaking the law.

No tape

Regulation doesn’t have to be a dead weight on the economy. Bringing the regulator into the fold, into the conversation without handing them the pen is more likely to get more effective regulation.

So the regulation becomes effectively part of those bits of the economy to protect good performance. But if you want to make regulation more effective, you can’t just look at the law. You need to look at the regulators that are applying the law. A good regulator can be the difference between red tape and beige tape, or between beige tape and no tape.