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Sharing economy regulation should start from scratch

The sharing economy, collaborative consumption, or whatever you want to call it, is the latest big digital trend to attract serious policy interest. And rightly so.

It offers a massive opportunity to unlock dead assets – PWC estimates it could be worth £9 billion to the UK economy, while Nesta research shows 25% of Brits already use it in some way. The sharing economy can provide a more efficient and often more environmentally-friendly allocation of resources, new ways for consumers to access goods and services often at lower cost, and opportunities for micro-entrepreneurship.

But it also poses interesting policy challenges. For example, it can blur the line between commercial and private activities – giving your friend some petrol money when you share a journey is currently not regulated, but if you did essentially the same thing on a ridesharing platform you might run into problems. Licensing, insurance and tax are just three of the issues that you’d encounter.

At the recent Conservative Party Conference, BIS minister Matthew Hancock announced a review into the sharing economy. This was one of the recommendations of Coadec’s Startup Manifesto and is certainly welcome.

I’m going to put in a submission on behalf of Coadec, and here are some initial thoughts:

Trust mechanisms can (sometimes) replace licensing and regulation

When I stay in an Airbnb property, the host reads reviews about me and knows that it’s really me – the platform has seen my driving license and verified my email address and phone number. The same works the other way round.

In other words technology helps establish trust between strangers to the degree that we’re confident sharing possessions and property. This is the natural evolution from eBay’s user rating system, and will continue to improve as companies innovate.

This has important implications from a regulatory standpoint as it can help reduce or even remove the need for the state to provide that trust mechanism through inspections, regulation and licensing. While obviously there will still be cases where the risks to consumer safety are so great as to warrant strict regulation, that won’t be the case everywhere.

It is ludicrous to me that the legal dispute between Uber and black cabs hinges on whether or not an app is the same thing as a taxi-meter. This is simply the wrong question from the point of view of public policy.  Whether or not it is equivalent to a meter is irrelevant – we should be asking what regulation is needed to protect consumers in the context of current technology.

In the same way as a zero-based spending review looks at each spending item from scratch and tries to justify it, we should take a similar approach to regulation in the sharing economy.

Make it easy for consumers and producers to do the right thing

One of the great by-products of the sharing economy is that it brings previously informal economic activity into the formal economy where they can be tracked, regulated, and taxed. But whether it is paying tax on additional income or registering with a regulator, these processes should be as light-touch as possible.

For example on tax, I support the Policy Exchange suggestion that the ‘Rent a room’ be extended to income from sharing activities. This would mean that unless someone earned above a certain threshold from sharing activities, they wouldn’t have to pay tax or even file a tax return.

Regulatory barriers will often be sector-specific

The regulatory barriers that are holding back the growth of the sharing economy will often be in arcane places, and very specific to the sector in question.

Just look at Section 25 of the 1973 Greater London Powers Act. It says that anyone in London wanting to rent out their home for less than 3 months has to seek planning permission – something that would make it much harder to use a property sharing platform. Thankfully this is being fixed by the government in the Deregulation Bill currently working its way through Parliament.

Identifying similar barriers across other sectors will take a lot of work and needs significant input from platforms and users.

Get involved

This stuff matters. The UK can be a leader on the sharing economy, with home grown startups like LoveHomeSwap, OneFineStay and Just Park leading the way.

But we need to get the regulation right. There are only a couple of weeks left of the consultation – so whether you’re a user, work in the sector, or just have an interest, do feed in your views.

Tech City News is hosting a roundtable on the sharing economy in association with PwC – look out for the corresponding report in the December edition of our Print Magazine.