Regulation

Deregulation in the UK since 2010

This note summarises the principal developments in the area of better regulation and deregulation since the Conservative/LibDem coalition government was elected in May 2010.

The Conservatives' policies had been outlined before the election in their 'Policy Paper on Better Regulation' Regulation in the Post-Bureacratic Age: How to get Rid of Red Tape and Reform Quangos. The paper said that "We believe that the UK has become simultaneously and dangerously under-regulated in some areas (particularly systemic risks in the banking sector) but chronically and severely over-regulated elsewhere. It's clear that some regulation is both necessary and desirable in a modern, liberal democracy - everyone expects the food we eat to be safe, for example - but once we are properly protected from unscrupulous people and hidden dangers, that is where it should stop. Everything else should, wherever possible, be a question of individual choice rather than collective control." An incoming Conservative government would accordingly "... sweep away Labour's ineffective system of bureaucracy and replace it with a post-bureacratic approach to regulation that makes use of new technologies and insights from social psychology and behavioural economics to achieve our policy goals in a less burdensome and intrusive way". This "... will require a fundamental culture shift amongst policy makers in Whitehall and beyond, which will only be made possible through significant structural reforms".

The papers "key policy announcements" were:

• A Conservative government will introduce a powerful new 'Star Chamber' cabinet committee, to be chaired by Ken Clarke, which will enforce a stringent 'One In - One Out' requirement where any new law must include cuts in old laws which, together, produce a net 5% reduction in the regulatory burden. Professor Richard Thaler will be a senior advisor to, and member of, the Star Chamber committee.
• The public will be given the power to nominate the most poorly designed and burdensome regulations, which would be repealed within 12 months unless they were modified or approved by Parliament.
• A Conservative government will apply a 'Sunset clause' to all Regulators. During the first term of a Conservative government all Regulators will be re-assessed and their duties reviewed.
• Parliamentary Accountability for regulators and inspectorates will be strengthened with Select Committees holding the key public service regulators to account. In addition, the appointment process of Chairs of major Regulatory Bodies should be subject to Parliamentary Select Committee approval.
• A Conservative government will publish cost and value comparison measures for local councils that allow the public to see exactly how well their council is delivering on its value for money remit. This will replace the bureaucratic and expensive system of Audit Commission inspections and reports.
• The powers of Government inspectors will be drastically curbed by allowing firms to arrange their own, externally audited inspections and, providing they pass, to refuse entry to official inspectors thereafter. We will also introduce 'MOT style' inspection reports, quoting precisely which section of which law has been broken, to prevent regulatory 'scope creep' where laws are applied too strictly by overzealous inspectors.
• We will consult carefully on changes that may be required to the employment and discrimination tribunals system, to ensure the system offers fast, cheap and accessible justice, and that it is fair to all sides.

Comment: The paper was heavily influenced by Professor Thaler, a prominent US-based behavioural economist. Professor Thaler had previously co-authored Nudge: Improving Decisions About Health, Wealth, and Happiness, an interesting book which discussed how public and private organisations could help people make better choices in their daily lives. "People often make poor choices - and look back at them with bafflement! We do this because as human beings, we all are susceptible to a wide array of routine biases that can lead to an equally wide array of embarrassing blunders in education, personal finance, health care, mortgages and credit cards, happiness, and even the planet itself." Most UK policy makers and regulators were of course already well aware that individual instances of economic behavior could appear to violate traditional microeconomic theory, but somewhat less clear how to design effective policies and behavioural remedies in the light of this knowledge. It was therefore a little sad that Professor Thaler's name did not appear in the incoming government's action plan - see further below - perhaps because the Business Secretary was Vince Cable, a LibDem, rather than a Conservative politician.

The New Government's Action Plan

• We will cut red tape by introducing a 'one-in, one-out' rule whereby no new regulation is brought in without other regulation being cut by a greater amount.
• We will end the culture of 'tick-box' regulation, and instead target inspections on high-risk organisations through co-regulation and improving professional standards.
• We will impose 'sunset clauses' on [new] regulations and regulators to ensure that the need for each regulation is regularly reviewed.

Business Secretary Vince Cable then announced his own regulatory action plan on 2 June 2010, claiming that it would "bring an end to the excessive regulation that is stifling business growth" following the Prime Minister's commitment the previous week to "re-open Britain for business". Oddly enough, the action plan did not include the 'sunset clause' proposals in the coalition agreement - see above - and it was a little less far-reaching than the plan published by the Conservatives before the election - also see above. But it was still quite strong stuff in that it:

• Created a new Cabinet "Star Chamber" that would lead the Government's drive to reduce regulation which is stifling growth. This Reducing Regulation Committee would be chaired by the Business Secretary and would "enforce a new approach to new laws and regulations, ensuring that their costs are being properly addressed across the entire British economy".
• Began an immediate review of all regulation in the pipeline for implementation which had been inherited from the previous Government. The cost of implementing this amounts was claimed to be £5bn annually before April 2011 and £19.1bn per annum thereafter. This was be the first action for the new Cabinet committee.
• Established a new Challenge Group to come up with innovative approaches to achieving social and environmental goals in a non-regulatory way. This team would work with experts including Richard Thaler, the US behavioural economist.
• Introduced a "one-in, one-out" approach, designed to change the culture of government, would make sure that new regulatory burdens on business are only brought in when reductions can be made to existing regulation.
• (The Regulatory Policy Committee, set up by the previous government would continue to give private advice to Ministers - see further below.)

Introducing the package, Vince Cable recognised the tension at the heart of his new policies. On the one hand, he noted that "The deluge of new regulations has been choking off enterprise for too long. We must move away from the view that the only way to solve problems is to regulate." On the other hand, however, he acknowledged that "The Government has wide-ranging social and ecological goals including protecting consumers and protecting the environment. This requires increased social responsibility on the part of businesses and individuals. [The tension between these two objectives] is a real challenge and it will not be easy. We need to reduce regulation and at the same time meet our social and environmental ambitions. This demands a radical change in culture away from the tick box approach to regulation only as a last resort. It's a big task but one worth striving for."

The Young Review

The government that appointed Lord Young of Graffham - a previous Secretary of State for Trade and Industry - to be the Prime Minister's Adviser on Health and Safety Law and Practice. He published his report Common Sense, Common Safety on 15 October 2010. The report examined the UK's perceived compensation culture and the impact of health and safety regulations on businesses and personal freedom.

The government accepted all Lord Young's recommendations and asked him to continue to work across departments to ensure his recommendations were carried through. His aim was to improve the perception of health and safety, to ensure it is taken seriously by employers and the general public, while ensuring the burden on small business is as insignificant as possible. He called for restrictions on advertising for 'no win, no fee' compensation claims and a revolution in the way personal injury claims are handled, as well as an extension to the simplified Road Traffic Accident Personal Injury Scheme to include other personal injury claims. This would provide a simple three-stage procedure for lower value claims, accessible via the internet, with fixed costs for each stage. Lord Young also proposed a common sense approach to educational trips, which currently entailed a plethora of forms to fill in, deterring teachers and others who work with children from arranging any trips at all.

The Regulatory Policy Committee

This committee continued to beaver away after the 2010 General Election, commenting on all new regulatory proposals being submitted to the Cabinet's Reducing Regulation Committee. It is hard to evaluate the effectiveness of the RPC or the RRC because their discussions are confidential and it is not possible to tell what decisions would have been taken had one or both committees not existed. But the power and effectiveness of the RPC was certainly enhanced (a) by the "one in, out out" rule and (b) by RRC Ministers' refusal to consider a proposal for a new regulation if the RPC had given its regulatory impact assessment a red light. But the red light applied only to the quality of the assessment. The RPC could not stop an over-regulatory proposal being put to Ministers if the accompanying RIA was reasonably thorough. Michael Gibbons, Chair of the RPC, certainly sounded somewhat frustrated when he gave an interview to the FT in January 2011 in which he talked of Whitehall remaining far too prone to believing that new regulations are the answer to public policy questions, and said that Government departments had failed to provide sufficient justification for many of the 200 new regulations proposed since the previous September. And there was no sign that the business community had noticed any difference in the flow or impact of government regulation.

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