I wouldn’t swap places with the UK Chancellor of the Exchequer Rachel Reeves at the minute. With a terrible financial inheritance, a rebellious party which has cleaved to the mantra ‘austerity is a choice’ for 14 years and a restless public increasingly impatient to see the promised, if ill-defined, ‘change’ her Government promised before the elections last year, she is in a hole. Desperate to stimulate growth in the economy, last night she announced a bolder, riskier approach to financial regulation at the annual Mansion House speech.

Hold up.

Many of us are old enough to remember the queues outside the Northern Rock Bank that heralded the 2008 financial crash. At the time, the financial sector was driving the UK economy with plentiful tax receipts for the last Labour Government. But much of that appeared to be a mirage. Fiendishly clever financial products with cryptic pseudoscientific names like ‘CDO-squared’ magically repackaged high risk mortgages into low risk debt. Then a sudden and ferocious spike in energy prices forced many mortgage holders to default and the whole balloon burst in a rather spectacular way. Governments across the world moved to prevent this happening again by tightening regulations. Of course there is a chance they overreacted, but do we really want to go back to 2008 again? Tread carefully, Chancellor.

One of the most cited analogies in Sustainability is the Tragedy of the Commons, debated as far back as Aristotle but popularised by controversial ecologist Garrett Hardin in the late 1960s. Before enclosure, much of the UK’s livestock was raised on common land. If everybody respects the limits of the land, this works great. But if one herder introduces more livestock then he gains in the short term, but the land starts to degrade at the expense of everyone. If the others take a “well, if it’s OK for him, why not for me?” attitude, then the carrying capacity of the land could collapse for everyone.

This is where regulation comes in, whether an informal mutual agreement to share common resources, or, more often, enforced by an authority (in reality the Enclosure Acts passed control of most of the land over to the already rich, but that’s another matter). Most (all?) of our environmental problems have arisen because individual bodies have seen natural resources as free to exploit whether through extraction or as a waste disposal facility.

Regulation is there to ensure the system works for everyone. Do we want clean rivers? Then regulate effluent discharges. Clean air? The UK’s Clean Air Act has saved countless lives. A stable environment? Then regulate greenhouse gas emissions and incentivise clean technologies. It is no surprise that the majority of climate change deniers are dyed-in-the-wool free marketeers – the idea of a finite planet blows their ideology out of the water.

‘Ripping up red tape to set the economy free’ is a tempting mantra for politicians. In 2010, the Conservatives promised a ‘bonfire of the quangos’ only to find most of those quangos performed important functions. Donald Trump’s DOGE programme (and its Reform UK facsimile) may well end up costing more than it ‘saved’. And the current Government has blamed the UK’s sluggish growth on concern for “bats and newts” (would they say the same if, say, India ripped up protection for the tiger?)

But there’s another way to look at regulation: an opportunity. One of the original members of my Corporate Sustainability Mastermind Group used to challenge his colleagues to find the business opportunity in every emerging environmental law. Bloomberg recently quantified the business opportunity for the global low carbon economy at $14 trillion – that’s a lot of cake to be split between those ready and willing to innovate. And it will, at least initially, be driven by regulation.

My contacts in the motor industry tell me that they can make the switch from internal combustion engines to electric vehicles, but one of the issues is uncertainty in regulation. PM Boris Johnson introduced the ambitious Zero Emissions Vehicle mandate in 2021, but his successor-but-one Rishi Sunak watered it down in 2023, and the incoming Labour administration loosened it again after lobbying from sections of the industry. This is like another twist on the Tragedy of the Commons – if Governments listen to the pleas of the laggards (just one more sheep!), then they penalise the first-movers and leave everybody else in the limbo of uncertainty. The incentive to change is weakened in favour of those who don’t want to do their bit (I’m looking at you, Aston Martin). Asset-intensive industry like car manufacturing likes certainty.

Well designed regulation is a good and essential thing full stop. Often the problem is politicians being pressurised into undermining it.