Report

Graphic content

This report from UK think tank the Institute of Economic Affairs looks at how red tape is fuelling the cost of living crisis.

Red tape significantly contributes to the higher cost of living in the United Kingdom. The Consumer Price Index increased by 80% between 2000 and 2023.

However, there is significant price variability across sectors, with prices of many goods having decreased due to competitive markets and innovation. Sectors with extensive state intervention, such as electricity, housing, and childcare, have seen the most rapid price increases due in part to excessive regulation and distortionary subsidies. Overregulation can hinder innovation, damage economic growth, and disproportionately affect lower-income households, contributing to increased poverty rates and inequality.

Factors beyond regulation, like international trade dynamics and Baumol’s cost disease, also influence price changes but don’t fully explain the scale of price increases in certain sectors. Reducing regulatory burdens in areas like housing, energy, and financial services could lower business costs, increase supply, and ultimately reduce consumer prices.