Regulators can promote economic growth and protect the public
When I was a special adviser to the Deregulation Minister during the Coalition years, Liberal Democrats used to sneer about “saloon bar supply-siders” who wanted to remove unnecessary regulation.
They didn’t share the Conservative Party’s enthusiasm for cutting the regulation holding back businesses from innovating, growing, and creating jobs. Initiatives such as the Red Tape Challenge, regulatory budgets and a One in, Two out approach to rules, and a growth duty on regulators were introduced to successfully remove the thicket of bureaucracy Labour had introduced in government when they used regulation as a proxy for taxation to control business.
A decade on there is a need for a renewed focus on the huge influence regulators wield in the economy and role of regulation in promoting long-term growth, competition, innovation, and increasing productivity.
As a member of the Regulatory Reform Group of MPs and peers, I’m pleased to be at the Conservative Party Conference making the case for such reform. That case is necessary and timely given the opportunities Brexit provides to adopt a more agile outcomes-based approach, the development of sectors vital to future growth such as digital, life sciences, and green technology, and the pace of technological advances such as AI or quantum computing.
Through our research we have identified a fragmented regulatory landscape with a lack of consumer focus, a lack of strategic direction, an unresponsiveness to change, poor post-decision scrutiny, regulatory capture, silos within and between regulators, and fundamentally a lack of democratic accountability. With over 90 regulators and their budgets totalling almost £5 billion a year, not including local authorities, covering everything from financial services, transport and communications, to utilities, environment and healthcare, there needs to be more focus on addressing systemic regulatory underperformance.
As a first step, regulators must be more accountable to deliver better outcomes for consumers and the economy. That’s why we have proposed enhanced scrutiny through a powerful new parliamentary oversight committee and a new Regulator Accountability Index focused on issues including consumer impact and international competitiveness. This will demonstrate whether regulators have the right objectives and are delivering benefits for consumers, businesses, and the UK economy. But importantly greater accountability is not about creating a platform for calls for knee-jerk regulation and “something must be done” when an issue hits the front pages.
Improving performance also requires government to provide greater strategic direction. Regulators often have multiple duties and it is legitimate and essential that government provides a clear steer on how regulators should approach their work. That has happened with the Department of Business and Trade setting out what it expects the Competition and Markets Authority to focus on and with Defra’s strategic policy statement to Ofwat (addressing a concern that for too long Ofwat focused on keeping bills down rather than requiring companies to invest more in infrastructure).
Improving performance also requires government to provide greater strategic direction.
It is encouraging that ministers are embracing this agenda through its Smarter Regulation programme to address the stock of regulation, changing the culture away from regulation being the default option, and focusing on how regulators promote growth. In particular, I welcome proposals to extend the existing growth and competitiveness duty to all major economic regulators, greater focus on consumers, and a pro-innovation regulation of technologies review. With emerging technologies, regulators should be adopting an enabling mindset and outcomes-based approach.
A dynamic and successful economy depends on competition, innovation, and investment and regulators have an important role in setting the conditions for that whether in financial services or other sectors. Competitive markets drive consumer benefits and by improving accountability, transparency, and effectiveness, regulators can help businesses thrive while having measures in place to manage risk.
This first appeared in The Times’ Comment Central, October 2023
