The RPC has submitted its response to the Government consultation on reforming the framework for better regulation. This article summarises the key points.
There is potential to improve the UK Better Regulation Framework
The existing Better Regulation Framework in the UK is highly regarded internationally, but we support the Government’s aim to look for ways to improve it further. The UK’s future approach should continue to be evidence-based and draw on the sound and tested analytical principles set out in the HM Treasury “Green Book”.
Assessment of individual policy proposals
The fundamental role of the current Better Regulation Framework is to ensure that decisions on the best approach to achieving a particular policy objective are supported by robust, unbiased and relevant evidence and analysis, and that this assessment is transparent and open to challenge in Parliament and by stakeholders. This approach should remain the focus of a future framework.
The following points draw on our experience and would allow Better Regulation to be delivered even more effectively in the future:
- Independent scrutiny – we strongly believe that the process will be more robust if it includes an enhanced role for an independent scrutiny body (ISB) like the RPC. An ISB offers an expert, unbiased perspective to assure Ministers and external stakeholders that policy proposals and decisions are based on robust evidence and sound analysis.
- Earlier scrutiny – we support the consultation document’s proposal that departments should give more serious consideration to non-regulatory options by focusing on this issue from the outset. Early independent scrutiny of evidence on the impacts of a range of regulatory and non-regulatory options would support this approach, help streamline the process, and ensure that regulation is introduced only where absolutely necessary. It would also allow the department to take account of the ISB’s comments during the remainder of the policy development process to ensure that the final IA is fit for purpose.
- Better evaluation – similarly we support a robust process that ensures post-implementation review (PIR) as soon as appropriate following the coming into force of regulations, and that Ministers give a higher priority to taking account of and acting on the findings of the PIR. Independent scrutiny of monitoring and evaluation plans in impact assessments would help to ensure rigorous, useful and proportionate arrangements are in place to track the outcome of the regulations and to support evaluation of their effectiveness.
- Wider impacts – the consultation asks whether IAs should consider wider impacts of regulations on, for example: innovation, trade and investment, competition and the environment. The wider impacts that are relevant to a policy decision vary from measure to measure, therefore we believe that the BRF should ensure that the wider impacts that are relevant to the particular regulatory proposal are considered in the IA associated with that proposal, rather than focusing on a pre-set list of impacts.
- Streamlined IAs and scrutiny – we support the desire to streamline the IA process. In fact, we think that streamlining can help to ensure that relevant evidence is available when needed to support decision making. The process should focus on the evidence appropriate at different decision points: the impacts of options at the pre-consultation stage, and the costs and benefits of the selected option and plans for monitoring and evaluation at the pre-implementation stage. This should lead to better PIRs that properly assess the effectiveness of the measure. Giving the ISB the ability to ‘red rate’ on the assessments produced at each of these stages would reinforce this process and reassure both ministers and external stakeholders.
- Civil Society Organisations (CSOs) – the current consultation does not expressly address the use of the BRF for evaluating regulatory impacts on CSOs. Because impacts on CSOs can differ significantly from those on business, we believe more consideration should be given to improving departments’ analysis of the impacts on them, and that the BRF could be improved to better support them in doing so.
Tracking the cumulative impact of regulation and minimising unnecessary burdens
As well as assessing the impacts of individual regulatory proposals to ensure that they attain their specific objectives in the best way, a broader view of the cumulative impact of regulation is needed to ensure that the Government’s more general objectives are consistently factored into proposals for new regulatory measures. One such general objective is the desire to reduce unnecessary regulatory burdens on business.
There have been a number of calls for an offsetting approach such as “One In, Two Out” (OITO) to replace the current business impact target (BIT) which has not been effective at controlling the regulatory burden on business. Our response highlights the following aspects of this approach:
- Measuring business impacts – we support the measurement of the incremental costs and benefits of regulation in order to identify and eliminate unnecessary or counterproductive regulatory burdens. We are in favour of doing so in a way that both builds on the current EANDCB (equivalent annual net direct cost to business) and recognises the uncertainty inherent in any ex-ante measure of impacts. Experience suggests a more comprehensive single measure (such as bNPV or NPSV) would be difficult to construct and risks creating perverse incentives. Unlike broader measures, EANDCB is sufficiently well-defined to be relatively easily and consistently measured across a wide range of policy areas.
- Scorecard approach – an alternative to using a single metric would be to use a scorecard approach. This would include the EANDCB alongside qualitative or quantitative assessments of other distinct and significant impacts, such as on the environment or trade. This would aid transparency of decision making for measures that impose costs on business and CSOs, but generate significant wider societal benefits – as is likely to be the case for Net Zero.
- One In, Two Out regulatory offsetting – it is for the Government to decide whether it wants to set itself a target to reduce or minimise the impacts of its regulatory activity. Offsetting metrics like OITO can have a powerful and positive impact on government choices and force hard decisions to reduce the regulatory burden on business. However, any such mechanism should recognise that delivery of other Government commitments (such as Net Zero) is likely to necessitate action that increases costs on business. Any control mechanism needs to recognise and plan to deal with this conflict or it will not work – there will be pressure to introduce exemptions and exclusions that undermine its intent, specific ministers will focus on the objectives associated with their brief, or other urgent objectives will be prioritised and it will be ignored (as the BIT appears to have been in recent years).
We believe that by taking account of our comments, the BRF can provide an improved process for robustly evaluating the costs, benefits and wider impacts of new regulations, support the development of better regulation and contribute to the delivery of wider government objectives. We look forward to hearing the Government’s decisions on the issues raised in the consultation and to working with Ministers and others to implement them as effectively as possible.