Ambiguity is not a flaw – it’s a design feature
Alan Hibben CPA CFA
In the last few months, it’s been hard to miss headlines about the regulatory system in the United States being wielded against political opponents—and sometimes even against comedians. It’s tempting for those of us in Canada and the UK to dismiss all this as a distinctly American affliction, an aberration bred in Washington that couldn’t possibly drift across the Atlantic or up to Ottawa. Yet, such confidence is misplaced. The massive expansion of the regulatory state in both Canada and the UK over recent decades has unleashed hidden costs and risks—no less consequential, if more subtly delivered, than what we’re now seeing in the U.S. And crucially, these are not bugs in the system. Increasingly, regulatory ambiguity is an intentional feature, not an accidental flaw.
Regulation itself is almost as old as civilization. The Code of Ur-Nammu, etched out four millennia ago, tried to keep bakers and brewers in line with direct fines in silver for underweight bread or poor ale. By the time Hammurabi’s much more detailed code arrived, producers could predict with confidence what was allowed—and what would cost them dearly, sometimes a payment in silver, sometimes even the loss of a hand. Effective and predictable regulation provided a cornerstone for the growth of stable societies. People could settle disputes without recourse to violence because everyone, from tavern keepers to consumers, knew the rules of the game.
Over the centuries, the reach of regulation has ebbed and flowed, but the overall trajectory has been up. Politicians and their constituents seem always eager to regulate one more thing. In Rome, Lex Oppia dictated the allowable quantity of dormice and pheasant tongues at banquets. Of course, in more practical periods (i.e., those not in the throes of famine or war), impractical or overbearing rules tended to be quietly abandoned. Historical overreach was eventually corrected by the realities of enforcement and economic necessity.
All of which brings us to our modern predicament. As we fast-forward through the 20th century, regulation reaches an entirely new level of activism and persistence. Take, for example, Canada’s Income Tax Act—an 11-page slip in 1917, bloated today to well over 2,000 pages. Or the UK’s regulatory sprawl: the Better Regulation Executive recently estimated the country enacts some 3.7 million words of new regulation in a single year. Industry, legal, and economic commentators have long lamented the sheer impossibility of understanding—let alone complying with—this avalanche of rules, and the administrative dead weight now imposed on productive enterprise. Legislative efforts like Canada’s Red Tape Reduction Act (2015) and the UK’s own “Better Regulation” initiative have barely slowed the growth.
But these burdens, as real as they are, miss a more insidious cost: the degree to which regulatory uncertainty, fuelled by persistent ambiguity, now permeates the process. Ambiguity has become a tool—something only decipherable by ministers, bureaucrats, or, in the UK, one of many semi-autonomous quangos. Increasingly, the real question is not what the law says, but how, when, and by whom it might be “interpreted” or reinterpreted—sometimes years into a project, when all the money has been spent.
Consider a few real-world cases. In the UK, Section 77 of the Town and Country Planning Act (1990) gave Michael Gove, in his role as Secretary of State for Levelling Up, Housing and Communities, the authority to overrule a planning inspector’s approval of a 165-home scheme in Kent (2023). Gove did just that—arguing the development was “generic,” its aesthetic and design not worthy of its location. In a word, it was turned down by the Minister because it was “ugly.” For the project’s backers, there was simply no way to predict that after years (and millions of pounds) of compliance, a single minister’s subjective opinion on “beauty” would be all that mattered.
In technology, the UK government ordered Nexperia, a Dutch subsidiary of Wingtech (itself Chinese-owned), to divest its stake in Newport Wafer Fab in 2022, citing national security risks—even after due diligence and public assurances on jobs and supply. The official rationale remained vague; critics, including industry commentators, noted that neither strategic logic nor due process appeared to carry much weight against political discretion.
On the Canadian side, the saga of Énergie Saguenay LNG stands as a cautionary tale. After years of reviews and over a billion dollars in sunk cost, the project was finally rejected in 2022—Minister Steven Guilbeault’s rationale cited both climate impacts and the potential risk to (I’m sure very cute) “beluga whales.” Sunk costs, regulatory diligence, and pre-emptive adaptation counted for nothing. A similar dynamic played out in Nova Scotia, where the Vista coal mine expansion was delayed and thrown into legal limbo by a late-stage federal assessment, despite existing agreements with certain Indigenous partners, after other groups—backed by environmental organisations—demanded more rigorous scrutiny.
These aren’t outliers. They typify a regulatory environment where neither rational analysis nor diligent preparation guarantees outcome. The power to intervene late, unpredictably, and with ambiguous justification has become embedded in the very structure of modern regulation.
In the UK, we used to rely on “good chaps” to avoid too much regulatory uncertainty. As constitutional historian Peter Hennessy put it, the British system “presumes more boldly than any other the good sense and good faith of those who work it.” Put simply: public life assumes its leaders will be “good chaps”—they will know the rules, respect boundaries, and not push the system to its limits for political gain. It is unclear whatever happened to all the “good chaps.”
Why is this happening? The expansion of regulatory ambiguity serves clear purposes:
- Flexibility and Discretion. Vague wording and broad ministerial powers are justified as tools for addressing complex, evolving challenges, public outcry, or emergent risks. The threat of late-stage intervention keeps everyone guessing—and government options open.
- Political Accountability Dodging. Ambiguity ensures hard decisions, especially unpopular ones, become no one’s responsibility. Ministers claim to be “just following the rules,” while reserving the ability to take credit for successes.
- Managing Complexity. As economies and societies outgrow slow-moving statutes, ambiguous rules enable regulators to improvise without frequent parliamentary debate or amendment.
- Strategic Uncertainty. Keeping regulated parties guessing is sometimes seen as an asset—discouraging borderline behaviour or at least forcing greater engagement from stakeholders hoping to stay in the good graces of decision-makers.
It is difficult to calculate the full cost of all this. What’s visible is only the tip of the iceberg: projects cancelled after years of work, or factories shuttered when approval is abruptly withdrawn. But just as significant are all the ideas never pursued, investments quietly shelved, and innovations abandoned before birth because the climate for risk-taking has become so uncertain.
Aggregate numbers bear out these effects. In the UK, Gross Fixed Capital Formation has trailed peers for decades. Investment in productivity-enhancing equipment and ICT has shrunk from about a third of all investment in the 1980s, to less than one-sixth today. Manufacturing and finance are particularly weak spots—investment overwhelmingly favours real estate instead. Canada’s trajectory looks similar; the capital stock for industrial machinery fell by 19%, and computers and electronics by 10%, relative to GDP in the decade to 2023, with only software showing robust growth.
International comparisons underscore the point. The U.S. invests 11% of GDP annually in machinery, equipment, and IP; Canada, just 8%. In both countries, capital stock is shrinking relative to GDP in most sectors, with some even seeing outright decline after depreciation is counted. Survey after survey reinforces these themes. In Canada, 11% of investors cite regulatory uncertainty as a leading concern, ranking just behind economic volatility and the rising cost of living. A third name regulatory and tax barriers as the biggest deterrent to international expansion, and in the Fraser Institute’s annual mining survey, policy uncertainty is almost always the top factor discouraging new investment. In the risk registers of the companies where I have been on the Board, political risk regularly tops the concerns of the Board.
The narrative is echoed globally. OECD and UNCTAD indices consistently place Canada among the most restrictive G7 economies for foreign investment, driven as much by perceived instability as by explicit regulatory obstacles. For the UK, global infrastructure investor surveys attribute poor capital inflows to regulatory unpredictability. Major international reports increasingly single out these countries—once magnets for long-term investment—as places where risk aversion now reigns.
Ultimately, what’s at stake goes beyond economic efficiency. Regulatory ambiguity doesn’t just create more paperwork or slow down a handful of high-profile projects: it saps risk appetite, stifles private initiative, and quietly undermines whole sectors of the economy. And while efforts at regulatory reform—such as one-in, two-out bureaucratic rules—may help lighten the administrative load, without a renewed focus on predictability and transparency, the deeper problems will persist. There are likely many reasons why the trading multiples of LSE listed companies lag their peers in the NYSE and NASDAQ, but I believe the risk premium attached to the cost of capital for UK companies plays a substantial part. When combined with a lower growth outlook due to lack of productivity enhancing investments, the LSE is likely priced where it deserves to be.
In Mesopotamia, a weak beer got you a lost hand—harsh, but at least predictable. Today’s systems subject those same bakers and builders to a decade of second-guessing, sunk cost, and a final minister’s letter of refusal—just as final, but with the damage disguised as process. For Canada and the UK, claiming leadership in innovation or productivity will remain rhetorical until regulatory clarity—not just volume—is restored as a fundamental principle of governance. Only with a predictable and apolitical set of processes will risk premiums reduce and give Canada and the UK a chance to restore growth and productivity. Clearly a bonfire of regulation would also help, but until then, reducing regulatory ambiguity could be a goal of the current or next governments.
Huby, Leeds October 5, 2025
Ambiguity is not a flaw – it’s a design feature
Alan Hibben CPA CFA
In the last few months, it’s been hard to miss headlines about the regulatory system in the United States being wielded against political opponents—and sometimes even against comedians. It’s tempting for those of us in Canada and the UK to dismiss all this as a distinctly American affliction, an aberration bred in Washington that couldn’t possibly drift across the Atlantic or up to Ottawa. Yet, such confidence is misplaced. The massive expansion of the regulatory state in both Canada and the UK over recent decades has unleashed hidden costs and risks—no less consequential, if more subtly delivered, than what we’re now seeing in the U.S. And crucially, these are not bugs in the system. Increasingly, regulatory ambiguity is an intentional feature, not an accidental flaw.
Regulation itself is almost as old as civilization. The Code of Ur-Nammu, etched out four millennia ago, tried to keep bakers and brewers in line with direct fines in silver for underweight bread or poor ale. By the time Hammurabi’s much more detailed code arrived, producers could predict with confidence what was allowed—and what would cost them dearly, sometimes a payment in silver, sometimes even the loss of a hand. Effective and predictable regulation provided a cornerstone for the growth of stable societies. People could settle disputes without recourse to violence because everyone, from tavern keepers to consumers, knew the rules of the game.
Over the centuries, the reach of regulation has ebbed and flowed, but the overall trajectory has been up. Politicians and their constituents seem always eager to regulate one more thing. In Rome, Lex Oppia dictated the allowable quantity of dormice and pheasant tongues at banquets. Of course, in more practical periods (i.e., those not in the throes of famine or war), impractical or overbearing rules tended to be quietly abandoned. Historical overreach was eventually corrected by the realities of enforcement and economic necessity.
All of which brings us to our modern predicament. As we fast-forward through the 20th century, regulation reaches an entirely new level of activism and persistence. Take, for example, Canada’s Income Tax Act—an 11-page slip in 1917, bloated today to well over 2,000 pages. Or the UK’s regulatory sprawl: the Better Regulation Executive recently estimated the country enacts some 3.7 million words of new regulation in a single year. Industry, legal, and economic commentators have long lamented the sheer impossibility of understanding—let alone complying with—this avalanche of rules, and the administrative dead weight now imposed on productive enterprise. Legislative efforts like Canada’s Red Tape Reduction Act (2015) and the UK’s own “Better Regulation” initiative have barely slowed the growth.
But these burdens, as real as they are, miss a more insidious cost: the degree to which regulatory uncertainty, fuelled by persistent ambiguity, now permeates the process. Ambiguity has become a tool—something only decipherable by ministers, bureaucrats, or, in the UK, one of many semi-autonomous quangos. Increasingly, the real question is not what the law says, but how, when, and by whom it might be “interpreted” or reinterpreted—sometimes years into a project, when all the money has been spent.
Consider a few real-world cases. In the UK, Section 77 of the Town and Country Planning Act (1990) gave Michael Gove, in his role as Secretary of State for Levelling Up, Housing and Communities, the authority to overrule a planning inspector’s approval of a 165-home scheme in Kent (2023). Gove did just that—arguing the development was “generic,” its aesthetic and design not worthy of its location. In a word, it was turned down by the Minister because it was “ugly.” For the project’s backers, there was simply no way to predict that after years (and millions of pounds) of compliance, a single minister’s subjective opinion on “beauty” would be all that mattered.
In technology, the UK government ordered Nexperia, a Dutch subsidiary of Wingtech (itself Chinese-owned), to divest its stake in Newport Wafer Fab in 2022, citing national security risks—even after due diligence and public assurances on jobs and supply. The official rationale remained vague; critics, including industry commentators, noted that neither strategic logic nor due process appeared to carry much weight against political discretion.
On the Canadian side, the saga of Énergie Saguenay LNG stands as a cautionary tale. After years of reviews and over a billion dollars in sunk cost, the project was finally rejected in 2022—Minister Steven Guilbeault’s rationale cited both climate impacts and the potential risk to (I’m sure very cute) “beluga whales.” Sunk costs, regulatory diligence, and pre-emptive adaptation counted for nothing. A similar dynamic played out in Nova Scotia, where the Vista coal mine expansion was delayed and thrown into legal limbo by a late-stage federal assessment, despite existing agreements with certain Indigenous partners, after other groups—backed by environmental organisations—demanded more rigorous scrutiny.
These aren’t outliers. They typify a regulatory environment where neither rational analysis nor diligent preparation guarantees outcome. The power to intervene late, unpredictably, and with ambiguous justification has become embedded in the very structure of modern regulation.
In the UK, we used to rely on “good chaps” to avoid too much regulatory uncertainty. As constitutional historian Peter Hennessy put it, the British system “presumes more boldly than any other the good sense and good faith of those who work it.” Put simply: public life assumes its leaders will be “good chaps”—they will know the rules, respect boundaries, and not push the system to its limits for political gain. It is unclear whatever happened to all the “good chaps.”
Why is this happening? The expansion of regulatory ambiguity serves clear purposes:
It is difficult to calculate the full cost of all this. What’s visible is only the tip of the iceberg: projects cancelled after years of work, or factories shuttered when approval is abruptly withdrawn. But just as significant are all the ideas never pursued, investments quietly shelved, and innovations abandoned before birth because the climate for risk-taking has become so uncertain.
Aggregate numbers bear out these effects. In the UK, Gross Fixed Capital Formation has trailed peers for decades. Investment in productivity-enhancing equipment and ICT has shrunk from about a third of all investment in the 1980s, to less than one-sixth today. Manufacturing and finance are particularly weak spots—investment overwhelmingly favours real estate instead. Canada’s trajectory looks similar; the capital stock for industrial machinery fell by 19%, and computers and electronics by 10%, relative to GDP in the decade to 2023, with only software showing robust growth.
International comparisons underscore the point. The U.S. invests 11% of GDP annually in machinery, equipment, and IP; Canada, just 8%. In both countries, capital stock is shrinking relative to GDP in most sectors, with some even seeing outright decline after depreciation is counted. Survey after survey reinforces these themes. In Canada, 11% of investors cite regulatory uncertainty as a leading concern, ranking just behind economic volatility and the rising cost of living. A third name regulatory and tax barriers as the biggest deterrent to international expansion, and in the Fraser Institute’s annual mining survey, policy uncertainty is almost always the top factor discouraging new investment. In the risk registers of the companies where I have been on the Board, political risk regularly tops the concerns of the Board.
The narrative is echoed globally. OECD and UNCTAD indices consistently place Canada among the most restrictive G7 economies for foreign investment, driven as much by perceived instability as by explicit regulatory obstacles. For the UK, global infrastructure investor surveys attribute poor capital inflows to regulatory unpredictability. Major international reports increasingly single out these countries—once magnets for long-term investment—as places where risk aversion now reigns.
Ultimately, what’s at stake goes beyond economic efficiency. Regulatory ambiguity doesn’t just create more paperwork or slow down a handful of high-profile projects: it saps risk appetite, stifles private initiative, and quietly undermines whole sectors of the economy. And while efforts at regulatory reform—such as one-in, two-out bureaucratic rules—may help lighten the administrative load, without a renewed focus on predictability and transparency, the deeper problems will persist. There are likely many reasons why the trading multiples of LSE listed companies lag their peers in the NYSE and NASDAQ, but I believe the risk premium attached to the cost of capital for UK companies plays a substantial part. When combined with a lower growth outlook due to lack of productivity enhancing investments, the LSE is likely priced where it deserves to be.
In Mesopotamia, a weak beer got you a lost hand—harsh, but at least predictable. Today’s systems subject those same bakers and builders to a decade of second-guessing, sunk cost, and a final minister’s letter of refusal—just as final, but with the damage disguised as process. For Canada and the UK, claiming leadership in innovation or productivity will remain rhetorical until regulatory clarity—not just volume—is restored as a fundamental principle of governance. Only with a predictable and apolitical set of processes will risk premiums reduce and give Canada and the UK a chance to restore growth and productivity. Clearly a bonfire of regulation would also help, but until then, reducing regulatory ambiguity could be a goal of the current or next governments.
Huby, Leeds October 5, 2025