Comments on the report of the Task Force on Innovation, Growth and Regulatory Reform (TIGRR)
The government plans to reform its approach to regulation to ensure that the UK takes advantage of the opportunities offered by our exit from the EU and to ensure that we regulate as effectively as possible, favoring the innovation and growth. The CPP strongly supports these goals. We see our role as helping government deliver better regulation by ensuring that policy properly takes into account the costs, benefits and risks of different regulatory and non-regulatory options.
Regulation and the regulatory policy making process can have a significant impact on individuals and businesses, and it is important to think strategically about how we assess different policy alternatives. The report of the Task Force on Innovation, Growth and Regulatory Reform (TIGRR), released last week, makes a significant contribution to this debate. This note provides comments from the CPR on aspects of this report that relate to regulatory processes and the framework for better regulation.
In the UK we see reform from a position of strength – our current systems are highly regarded internationally – but we definitely have the potential to improve further in the pursuit of regulation that achieves government targets while minimizing burdens on UK business. and civil society. We also recognize that government is not only concerned with the impacts of its policies on business – for example, it must consider the impact on the environment, our health and safety, and economic growth.
The arguments in favor of stronger parliamentary oversight
The TIGRR report pleads in favor of stronger parliamentary scrutiny. We see Parliament as a key ‘client’ for our views and would be happy to focus more on the impact of proposed regulations in Parliament. We would be very happy to discuss how we might complement any enhanced parliamentary oversight role and how we might work with special committees and others to achieve this.
Reducing the impacts of regulation on businesses – One-in, Two-out
The TIGRR report and John Penrose’s recent “Power to the People” report make similar recommendations to introduce a “one-in, two-out” regulatory requirement for all departments (i.e. for each regulation only one ministry wants to introduce and that taxes net for businesses, it would need to introduce a deregulation measure to reduce net costs to businesses twice as much). Such an approach would encourage ministries to pay close attention to and seek to minimize regulatory costs to businesses, and to assess the continued need for existing regulations.
The details of such a system must be carefully considered. In our view, a decision on the usefulness of such a requirement should follow a decision on the measure used to compare impacts. A narrowly targeted measure (for example, only considering direct impacts on businesses or offsetting gains and losses within a market segment), may conflict with other government objectives such as Net Zero, Leveling-Up and new free trade agreements. In particular, we would like to avoid a situation where important policy areas are excluded from the scope of the framework because they involve additional costs for businesses. Therefore, any new mechanism should be flexible enough to allow multiple objectives.
Identification of a minister responsible for regulatory reform
While it is clearly for the Prime Minister to decide how this is to be handled within his government, we support the proposition that these issues be given appropriate priority and strategic oversight at Cabinet level.
Proportionality – recognizing the impact of regulation on small businesses
We support the proposal that departments and regulators should assess whether proposed regulations are likely to have disproportionate impacts on small businesses.
As part of our independent review, we are already able to classify IAs as ‘unsuitable for their purpose’ if there is insufficient analysis of the impacts on small and microenterprises, or a lack of consideration as to whether whether these companies should be exempted or benefit from the measure’s mitigation. As a result of our careful review, departments have adjusted some regulatory proposals to exempt small and micro businesses (for example, providing personal information on consumer bills in a machine-readable format).
Consideration of broader impacts in impact assessments
The TIGRR report recommends that the scrutiny of IAs include consideration of the broader effects of proposed policies on innovation, competition, environment and trade. The report of the Competition and Markets Authority (CMA) “Regulation and competition” also recommends that we be able to reassess IAs as ‘unsuitable for their purpose’ based on their assessment of the impact on competition and innovation, while the Natural capital committee believes that we should be able to reassess the assessment of impacts on the natural environment.
Our opinions already comment on the quality of the evidence and analysis on a range of issues, including impact on competition, environment / net zero, trade, distributive impacts, consumers and innovation. We have recently started to provide an informal assessment of the quality of the analysis of these factors by the implementing agencies in our opinions (rating them as: good, satisfactory, poor or very poor). However, the framework for better regulation does not currently allow us to consider these broader issues in our formal assessment of IAs as green (fit for purpose) or red (not fit for purpose). Given the importance of these broader impacts for government policy, we would be happy to have a discussion on how the framework could be strengthened and extended.
Why is this important now?
We are pleased that the TIGRR report recognizes the value of an independent review of regulatory proposals and recognizes the role that the CPP currently plays, but our effectiveness is limited by the framework in which we operate. The government is about to launch a review of the framework for better regulation. This provides an opportunity to make changes to how the independent review process works and to ensure that it is as effective as possible in providing better policy development and ultimately better policy. We therefore encourage the government to take these comments into account as part of the review and ask stakeholders to support this approach in their responses to the government consultation.
Regulatory Policy Committee July 2021