MPs suggest government shouldn’t protect industries from Uber and Airbnb

Derek du Preez Profile picture for user ddpreez July 18, 2016
Summary:
A report released this week from the Business, Innovation and Skills Committee also calls on the government to explain how the EU referendum will impact digital skills.

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The Business, Innovation and Skills Committee has suggested in its latest report on the UK’s digital economy that the government should not use regulation to protect industries that are being disrupted by companies such as Uber and Airbnb.

MPs on the Committee agree with the government’s approach to date, that it should help fast growing businesses that give the consumer greater choice thrive - rather than using regulation to protect existing industries.

The report also calls into question the government’s delayed Digital Strategy, which is now six months overdue, stating that when its released it should also draw on the impact of the EU referendum result. In particular, it questions the impact a Brexit is likely to have on technology skills in the UK.

Iain Wright MP, Chair of the Business, Innovation and Skills Committee, said:

Britain’s digital economy is a success story that makes a huge contribution to the country’s competitiveness and wealth-creation capacity and the Committee recognises the Government’s support in this area.

We look forward to publication of the Digital Strategy and urge the Government to set out how it plans to build on Britain’s digital success post-Brexit. This includes urgently addressing the concerns of tech companies who rely on the single market and high-skilled migrants from the EU.

Technology is revolutionising business, transforming virtually all aspects of the economy and society. Digital advances have brought considerable benefits to consumers but they have also pushed at the limits of current regulation, creating a tension between so-called disruptors and those businesses being disrupted.

The Government needs to clarify regulation to ensure fair competition while enabling digital businesses to thrive and grow to the benefit of consumers and the UK economy.

Disruptors

Interestingly, MPs on the BIS Committee noted that the tension between the so-called ‘disruptors’ and ‘disruptees’ is often keenly felt when it comes to regulation. This is because the digital disruptors (such as those seen in the sharing economy) dot not have to follow the same regulation and compliance as incumbent businesses. For example, Airbnb providers are not bound by the same health and safety regulations as hotels.

However, the Committee doesn’t seem to believe that this is enough of a reason to restrain said disruptors. It states that regulation should be based on agreed principles, but also flexible enough to adjust to disruption. The report states:

[Regulation should] in our view, put the interests—in terms of quality, choice, cost and safety—of the consumer first, although not at the expense of employment rights. It should encourage innovation, new and existing players, choice and competition, in different sectors of the economy, regardless of the means of delivery or the infrastructure.

It goes on to say that there is a perception that regulation lags behind technology and that it “should not seek to inhibit innovation or try to protect business models that might be challenged by disruptive technologies or by digital business models”.

MPs said it would be “ludicrous” to try to hold back the tide of technology, stating that this is both impossible and could undermine the country’s future competitiveness and wealth-creation capacity.

The report also picks up on the fact that some of the consumers operating in the sharing economy are touting flouting the rules that have bene imposed by government. For example, it is believed that 40% of listings on Airbnb at the moment are professional landlords operating multiple properties, rather than home owners offering a short let - as dictated by short letting regulations.

The Committee believes that the platforms themselves could become key players in the regulatory framework, ensuring tag their users are complying with the current regulations, in order to reduce risks posted to the public.

How would a government keep checks on provide companies enforcing regulations with consumers? That’s up for debate.

Digital Strategy

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The Committee also calls into question the government’s much delayed (over six months) digital strategy - and mostly asks that when it is published that it addresses concerns over the result of the EU referendum and the likely Brexit.

The concern about a Brexit relates specifically to the booming Finch sector and the demand for technology skills from Europe for companies in the UK. The report states:

We look forward to the publication of the Government’s Digital Strategy, in the summer of 2016 (six months later than expected), which should explain how the Government will build on its success. We regret this delay, and call on the Government to explain the reasons for it, and why they initiated a three-week consultation over the Christmas break on what the Government should include in the strategy.

The Government must also explain how the Digital Strategy will be affected by the referendum result. It should also set out in its reply and in the Digital Strategy a list of specific, current EU negotiations relating to the digital economy.

The United Kingdom is a world leader in Fintech, with the sector estimated to be worth £20 billion in annual revenues. This position could now be at risk as firms will want to be part of the single market of financial regulation. The Government needs to set out with urgency how it will address this, to avoid our strengths in fintech being eroded.

While we recognise that the provision of digital skills may never keep pace with the speed of innovation, there must be a bedrock of core skills that people need to acquire, so that they can build on, extend and then adapt to meet the needs of changing technology….the Government needs to state in its reply how tech firms that employ EU nationals will be affected in the short, medium and long term. The Government needs to provide clarity surrounding skills, post referendum, otherwise skills and talent will be lost to other countries.

My take

The sooner the government publishes its digital strategy the better. There has been significant disruption in Whitehall over the past six months and clarity needs to be provided on how the government is going to progress in its digital ambitions. We need the document to hold the Government Digital Service to account and clarify its progress.

With regards to regulation and the sharing economy, it’s interesting that MPs are recommending that the government hand over some responsibility to privately owned platforms for enforcing regulations with the consumer.

My initial reaction was - how could that be enforce? However, it was pointed to two documents on how the use of data infrastructure could be used to make this easier. For example, sharing economy platforms could provide government with regular datasets via API on how their platforms are being used, so as to ensure that consumers are abiding by regulations. You can find links to those articles here and here.

Image credit - digital pixel EKG electrocardiogram blue background © ninog - Fotolia.com.

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