How do we just get the regulations we need?
Back in February, the Prime Minister asked three senior MPs, Sir Iain Duncan Smith, Theresa Villers and George Freeman to “identify and develop proposals across a range of areas that will drive innovation and competitiveness, reduce barriers to start-ups and scale-ups, create opportunities for innovation to make the most of cutting-edge technologies, and support growth and dynamism right across the UK economy.” In other words, the brief was to recommend how the UK economy could be grown. Their June 130 page report opens with a letter to the Prime Minister starting “You asked us to look at ways to refresh the UK’s approach to regulation now that we have left the EU, and to seek out opportunities to take advantage of our new-found regulatory freedom, to support innovation and growth.” One might argue they got off on the wrong foot, but I think the Taskforce was absolutely right. Innovation and growth result from making new things happen whereas regulation is all about stopping new things happening. Government needs to encourage the former but engage in the latter. That is where the Taskforce was right to focus.
Of the report’s 94 recommendations, 73 percent concerned regulation. Since regulation stunts innovation and growth, government should minimise it. Madsen Pirie has reminded us of three ways to do that. Sunset clauses automatically remove regulations after they have served their purpose of, like braces for teeth, straightening out business malpractice. Secondly, government can insist departments find two old regulations to cancel for every one they bring in. The first recommendation of the Taskforce is “Reimpose the ‘one in, two out’ regulatory duty on all government departments.” Quite right too but it used to be one in, three out until discipline, or memories, lapsed. Thirdly, some review committees, like the 1989 Committee for Competitiveness in the US, can challenge proposed regulations and reject those that bring more burden than benefit.
There are more draconian methods. Perhaps the best example is the major deregulatory activity in New Zealand during the 1980s. Their then new government was frustrated by civil service obstruction of piecemeal deregulation and opted instead for deregulation en bloc giving the civil servants 12 months to rescue such regulations as were deemed essential. Proceeding one department at a time, the cull was easily managed despite the Sir Humphreys saying it was not. [1]
Sunset clauses are not included by the Taskforce. 20 years ago, Francis Chittenden and I, on behalf of the British Chambers of Commerce, persuaded the Cabinet Office that sunset clauses would be good and they promoted them to departments. Very few have been adopted, mostly for coronavirus, terrorism and emergencies legislation, typically requiring a review after two years. The reason is simple: civil servants love to regulate like professional singers love to sing. It is what they do. They cannot envisage their precious new regulations fading into the twilight even though, once the habits of the regulated have been reformed, the regulatory job has been done. Sunset clauses should be the rule, not the exception.
There are four areas of possible concern with the report: Statutory Instruments (SIs), very few individual regulations are singled out for repeal, regulators and regulatory committees.
Regulation through secondary legislation (SIs) needs to be distinguished from the rules set by regulators because they need quite different reforms. One of the best suggestions in the report is to have Select Committees monitor the regulations arising from their corresponding departments.
Parliament has always had the power to scrutinise regulations using three committees: The Joint Committee on Statutory Instruments, The Select Committee on Statutory Instruments (Commons) and The Secondary Legislation Scrutiny Committee (Lords). There were about 3,000 SIs p.a. from 1990 to 2015 but since then the numbers halved until the pandemic when 457 Coronavirus-related SIs appeared. The three committees must find scrutinising all these SIs immensely boring, not least because few of them will relate to their normal fields of interest. The SI procedure is immensely complicated but falls into two procedures: affirmative and negative. The scrutiny committees cannot reject or revise anything; the most they can do is to have a SI debate in the main chamber of the house. The last time that happened was 1978 in the case of the affirmative process and 1979 for the negative. SIs are simply being rubber-stamped and that is a waste of everyone’s time.
What should happen is that all SIs which are not genuine national regulations, e.g. road closures, should be devolved to local authorities and the remainder should go only, as the Taskforce report suggests, to the relevant Select Committees. They at least should be interested in the topics. Select Committees should have the power to refer SIs back to the originating departments if they have been insufficiently justified in the Impact Assessments.
Secondly it would have been good to have more than the seven regulations recommended for repeal (5.3, 6.1, 6.2, 6.3, 10.5, 13.10, 17.3), VI-1 forms for wine imports for example. There must be hundreds, if not thousands. The report makes many calls for regulatory frameworks to be up-dated. Whilst no one would argue with that, perhaps a more focused approach might have been considered.
Thirdly, regulators should be reduced in number, not increased. Rather than add two more for hydrogen and digital health (recommendations 9.6 and 12.1), why not abolish all government regulators save the admirable Competition and Markets Authority which is needed to keep watch overall?
We all know markets need discipline to keep them honest. Professional organisations do that without government help and so do some commercial sectors, advertising for example. Though the roots are earlier, regulators are relatively new: they were created by Margaret Thatcher’s privatisation of phone communications (Oftel) in 1984.Regulators were seen to be needed to transition state monopolies into competitive markets. When competition was achieved, regulators were supposed to emulate Cheshire cats. Well of course, they found new ways of being useful to government departments, such as taking the blame for the 2020 A level confusion. Regulators are supposedly independent of their departments and their terms of reference and performance metrics are far from clear. It seems they can do what they like and make up the rules as they go along. The Taskforce recommendation to strengthen the Select Committees’ involvement would be enhanced by making regulators accountable to them. That should include plans, with dates, to phase themselves out.
Fourthly, there may be a little confusion over three other regulatory committees: the Better Regulation Executive (BRE), the Regulatory Reform Committee and The Regulatory Policy Committee.
The Better Regulation Executive (BRE) is not mentioned in the report but, apparently, it “leads the regulatory reform agenda across government.” Its annual report shows the additional net business burden from regulation versus the business impact target. In 2019/20 that amounted to £5.7bn. of which regulators contributed £5.6bn“Under the Small Business, Enterprise and Employment Act 2015, a new government must set a target for the economic impact on business of qualifying regulatory provisions made during the course of the Parliament. This is the business impact target (BIT). The Enterprise Act 2016 brought the actions of regulators into the government’s deregulation target.” The government has been too busy of late to set these targets so the BRE has to assume they are zero – not that it matters.
Para 95 of the Taskforce report suggests “that the remit of the Regulatory Reform Committee is expanded to enable the committee to potentially scrutinise any regulatory reform proposal across government, including a requirement that the relevant Minister provide an Explanatory Memorandum16 (EM) on the proposal for the committee to assess.” Unfortunately, that committee now resembles a dead parrot: “The Regulatory Reform Committee ceased to exist on 20 May 2021. The Committee is no longer operating.”That is rather a shame as the report mentions it nine times and recommendation 1.9 reads: “Give the Regulatory Reform Committee a remit to scrutinise all regulators and regulatory reform proposals. Bolster its resources, including with seconded experts, to carry out this expanded function.”
Under these circumstances, the Regulatory Policy Committee (RPC) might take a more important role than the report indicates. This is an independent body made up of non-civil servant experts and the British Chambers of Commerce (BCC). At the March meeting, Dr Marshall (CEO of BCC) described the RPC as a “bulwark against poor and overly politicised regulation” but then went on to complain of lack of discipline, thoughtfulness and joined-up thinking that could have been said 20 years ago. One does not get the impression that the RPC makes much impact on hard-pressed civil servants, even if they have heard of it. On the other hand, the BRE and the RPC need each other and should probably be merged, given more teeth to reject the unjustified ones and report to the Business, Energy and Industrial Strategy Committee. As the report recommends, the unit might need beefing up to some extent.
Where does all this leave us? The Taskforce report has some issues but it is a valuable and important document. Perhaps it adds complication rather than the simplification this area needs but it is a major stepping stone and provides a long list of matters that need consideration.
[1] David Osborne and Peter Plastrik (1998), Banishing Bureaucracy, Chapter 4, Plume (Penguin) Middlesex, 75-90.