Recommendations & Conclusions
12 items
5
Recommendation
Sixteenth Report - Principles of effect…
Not Addressed
Outcomes-based regulation comes with benefits, but also presents challenges for regulators in measuring their influence and compliance by industry. In general, setting goals and facilitating business to meet them can be both a more effective and a less burdensome approach to meeting regulatory objectives than laying down lists of rules. …
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Outcomes-based regulation comes with benefits, but also presents challenges for regulators in measuring their influence and compliance by industry. In general, setting goals and facilitating business to meet them can be both a more effective and a less burdensome approach to meeting regulatory objectives than laying down lists of rules. A focus on outcomes can be important to enable innovation, as seen in the MHRA’s review of vaccines during the COVID-19 pandemic. The regulators’ and the Department’s focus on outcomes is welcome, but where such approaches are used, it is also important for a regulator to be able to measure the outcomes themselves and the extent of its influence over them. A regulator’s influence over the Principles of effective regulation 7 industry it regulates—for example, how well businesses comply with standards— can be difficult to measure, particularly if there are not specific rules that can be easily monitored. It is therefore crucial that regulators identify what data they need, collect this robustly and systematically, use it to monitor progress and have the power to act on it effectively. Recommendation: Government and regulators should work together to build in proper consideration of the right balance between outcomes-based and rules-based regulation in their sectors, to ensure regulatory objectives are not compromised and non-compliance by regulated entities does not go undetected. 8 Principles of effective regulation 1 Responding to challenges in the external environment
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Government response AI summary
The government's response is completely irrelevant to the committee's recommendation regarding outcomes-based regulation and data collection, instead discussing the BBC's audience decline.
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HM Treasury
1
Conclusion
Sixteenth Report - Principles of effect…
Not Addressed
On the basis of a report by the National Audit Office, we took evidence from the Department for Business, Energy and Industrial Strategy (the Department), and from the Environment Agency, the Health and Safety Executive (HSE) and the Office of Communications (Ofcom).1
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On the basis of a report by the National Audit Office, we took evidence from the Department for Business, Energy and Industrial Strategy (the Department), and from the Environment Agency, the Health and Safety Executive (HSE) and the Office of Communications (Ofcom).1
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Government response AI summary
The government's response is an introductory statement that acknowledges the committee's process of taking evidence and publishing its report, serving as an introduction to the government's full response.
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HM Treasury
7
Conclusion
Sixteenth Report - Principles of effect…
Not Addressed
The Government’s 2019 White Paper ‘Regulation for the 4th Industrial Revolution’ found that only 29% of businesses believed that “government’s approach to regulation facilitates innovative products and services being efficiently brought to market”.9 The Department explained that enabling innovation and innovative sectors to grow has been a central plank of …
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The Government’s 2019 White Paper ‘Regulation for the 4th Industrial Revolution’ found that only 29% of businesses believed that “government’s approach to regulation facilitates innovative products and services being efficiently brought to market”.9 The Department explained that enabling innovation and innovative sectors to grow has been a central plank of the work that it has been doing on regulation over the past few years. The Government’s Regulatory Horizons Council focuses on looking at cross-cutting issues and specific sectors, and the Department has established the Regulators’ Pioneer Fund which has made £13m available to regulators so far in individual ring-fenced pockets of funding. The Department cited the Financial Conduct Authority’s (FCA’s) regulatory ‘sandbox’ to encourage and test innovations in financial services that has existed for a number of years and is widely respected.10 The FCA’s regulatory sandbox is a mechanism for firms to test innovations for limited duration with a limited number of customers. To date, the FCA has worked with a defined cohort of firms but is also launching an ‘Always Open’ regulatory sandbox available on a rolling basis. It is open to authorised firms and some other businesses that are looking to deliver innovation in the UK financial services market. The FCA’s sandbox seeks to provide firms with: the ability to test products and services in a controlled environment; reduced time to bring innovations to market, at potentially lower cost; support in identifying appropriate consumer protection safeguards to build into new products and services; and better access to finance. We heard that Ofgem and the Civil Aviation Authority have also more recently launched their own regulatory sandboxes (for example, for the use of drones for freight delivery).11 We were surprised, however, given the importance of innovation to the economy, that the sandbox approach is a not a default model for all or even most regulators.12
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Government response AI summary
The government's response addresses a related recommendation about requiring regulators to adopt innovation-friendly approaches like sandboxes, but does not directly engage with this conclusion expressing surprise that sandboxes are not a default model.
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HM Treasury
8
Conclusion
Sixteenth Report - Principles of effect…
The Department told us that the UK is ranked highly in terms of regulatory policy and competitiveness by international bodies such as the OECD, the World Bank and the World Economic Forum (WEF). We heard that the Department seeks to learn from 5 Q 39 6 Q 40 7 Q …
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The Department told us that the UK is ranked highly in terms of regulatory policy and competitiveness by international bodies such as the OECD, the World Bank and the World Economic Forum (WEF). We heard that the Department seeks to learn from 5 Q 39 6 Q 40 7 Q 65 8 Q 39 9 Regulation for the Fourth Industrial Revolution, CP 111, June 2019. 10 Q 59 11 Written response from Ms Jaee Samant CBE to PAC Chair Meg Hillier, 22 June 2021. 12 Q 60 10 Principles of effective regulation international best practice, and it considers that the Danish Business Authority is very good and provides an interesting model, which provides a one stop-shop (bringing together a number of regulatory functions) for all types of business, particularly emerging technology businesses. The Department also co-chairs a WEF council on regulation that aims to work with other countries to try and ensure that regulation is sensible, proportionate, agile and is focused on emerging technologies.13 There is scope for the UK to continue to learn from other countries on how regulators could cooperate and collaborate more, particularly in the digital space where companies want to know what they should be aware of and who is responsible for regulation.14 Adapting to change
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HM Treasury
9
Conclusion
Sixteenth Report - Principles of effect…
Not Addressed
Rapid technological development is altering traditional business and commerce, the climate emergency is driving changes in business and consumer behaviour, and changing social attitudes are shifting citizens’ expectations of regulators. The UK’s exit from the EU has also created both risks and opportunities, as the UK takes on new regulatory …
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Rapid technological development is altering traditional business and commerce, the climate emergency is driving changes in business and consumer behaviour, and changing social attitudes are shifting citizens’ expectations of regulators. The UK’s exit from the EU has also created both risks and opportunities, as the UK takes on new regulatory roles and responsibilities previously performed at EU level including setting laws and regulations.15
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Government response AI summary
The government's response addresses a related recommendation about ensuring regulatory frameworks are responsive to major changes and post-EU departure opportunities, outlining principles from a consultation, but does not directly engage with this conclusion detailing the drivers of change.
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HM Treasury
10
Conclusion
Sixteenth Report - Principles of effect…
Not Addressed
Ofcom, the Environment Agency and the HSE all stated that mitigating the risks and maximising the opportunities of change in their sectors as a key challenge for them as regulators. For Ofcom, new technology has disrupted traditional business models and it is seeing a growth in the reach and power …
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Ofcom, the Environment Agency and the HSE all stated that mitigating the risks and maximising the opportunities of change in their sectors as a key challenge for them as regulators. For Ofcom, new technology has disrupted traditional business models and it is seeing a growth in the reach and power of some global technology and digital companies across its sectors, raising potential issues with monopolies and risks to competition.16 It is also taking on new responsibilities to regulate online harms and ensure that public telecoms providers are complying with their telecom security duties.17 In the case of the HSE, it has become the UK’s chemicals regulator now that the UK has left the EU and is also taking on new responsibilities in building safety regulation.18 The Environment Agency highlighted the climate emergency as the biggest challenge it faces, alongside ensuring its regulatory objectives keep pace with changing public attitudes.19
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Government response AI summary
The government's response addresses a related recommendation about regulatory frameworks adapting to post-EU changes, outlining principles from a consultation, but does not specifically engage with this conclusion detailing challenges faced by individual regulators.
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HM Treasury
11
Conclusion
Sixteenth Report - Principles of effect…
Not Addressed
To meet these challenges and opportunities, regulators need to recruit and retain the right staff, collaborate effectively both domestically and internationally, and exploit new technology to improve their efficiency and effectiveness. Ofcom has recruited a new chief technology officer from industry and told us that recruiting the right skills was …
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To meet these challenges and opportunities, regulators need to recruit and retain the right staff, collaborate effectively both domestically and internationally, and exploit new technology to improve their efficiency and effectiveness. Ofcom has recruited a new chief technology officer from industry and told us that recruiting the right skills was difficult but that it was confident it could attract and deploy the right skills by working with other regulators and thinking creatively about its approach.20 HSE described plans to establish a data-sharing hub for regulators, which will be a single source of information on business risk and compliance. The HSE hopes this hub will also reduce the need for businesses to provide the same information to multiple regulators.21 The Environment Agency also set out how it is using new technology to improve its data collection, including the use of remote monitoring, satellites and drones.22 13 Q 61 14 Q 62 15 NAO report, page 31 16 Q 28 17 Qq 29–30 18 Qq 31, 36 19 Q 27 20 Qq 29–30, 48 21 Q 41 22 Q 24 Principles of effective regulation 11
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Government response AI summary
The government's response addresses a related recommendation about regulatory frameworks adapting to post-EU changes, outlining principles from a consultation, but does not specifically engage with this conclusion regarding regulator staffing, collaboration, and technology use.
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HM Treasury
12
Conclusion
Sixteenth Report - Principles of effect…
Not Addressed
The Department views its role as supporting coordination and dissemination of best practice across the regulatory system. However, it told us it is the responsibility of individual sponsoring departments to provide appropriate governance of regulatory bodies, including oversight of value for money.23 It also confirmed that government has a role …
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The Department views its role as supporting coordination and dissemination of best practice across the regulatory system. However, it told us it is the responsibility of individual sponsoring departments to provide appropriate governance of regulatory bodies, including oversight of value for money.23 It also confirmed that government has a role to play in setting the strategic and legislative frameworks that enable regulators to do their jobs effectively.24 23 Q 71 24 Q 87 12 Principles of effective regulation 2 Understanding the costs and benefits of regulation Measuring regulatory costs and benefits
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Government response AI summary
The government's response mentions agreeing to an unprovided recommendation, discussing learning from the COVID-19 pandemic and future regulatory reform consultations, but does not directly address this conclusion about the Department's view of its role in regulatory oversight.
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HM Treasury
13
Conclusion
Sixteenth Report - Principles of effect…
Not Addressed
Robust performance measurement and evaluation, including analysis of the costs and benefits of regulatory activity, are essential for effective regulation. They can help evidence value for money, provide insight into unintended outcomes, and help to refine interventions to improve outcomes. Good monitoring and reporting can also support accountability to Parliament …
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Robust performance measurement and evaluation, including analysis of the costs and benefits of regulatory activity, are essential for effective regulation. They can help evidence value for money, provide insight into unintended outcomes, and help to refine interventions to improve outcomes. Good monitoring and reporting can also support accountability to Parliament and the taxpayer.25 In its 2019 report on the actions of Ofwat, Ofgem, Ofcom and the Financial Conduct Authority (FCA) to protect consumers in their sectors, this committee concluded that the regulators did not yet have a good enough understanding of their own impact and effectiveness in protecting consumers.26
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Government response AI summary
The government's response addresses a related recommendation about the Business Impact Target and regulatory cost/benefit analysis, but does not specifically engage with this conclusion regarding the importance of robust performance measurement and evaluation.
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HM Treasury
14
Conclusion
Sixteenth Report - Principles of effect…
Not Addressed
We questioned Ofcom, the Environment Agency and the HSE on the extent to which they are able to capture the cost of their regulations on their sectors. Ofcom told us it is stepping up its efforts to measure its impact since this committee’s 2019 report. But it also set out …
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We questioned Ofcom, the Environment Agency and the HSE on the extent to which they are able to capture the cost of their regulations on their sectors. Ofcom told us it is stepping up its efforts to measure its impact since this committee’s 2019 report. But it also set out the challenges that regulators face in measuring costs and benefits when their focus is often on reducing risk, where it can be difficult to determine what would have happened if the regulator had not acted.27 The Environment Agency does not have a figure for the overall cost to industry of its regulation, but it has a goal to reduce costs year on year and when it makes significant changes to regulations it assesses the cost implications.28 The HSE is able to track the costs of some of its regulatory activity, in cases where costs are charged directly to business. However, more generally, employers have a duty under the Health and Safety at Work Act to ensure, as far as reasonably practicable, the health, safety and welfare at work of their employees. The HSE does not track the costs to businesses of meeting this duty. However, it contended that businesses benefit from ensuring a safe workplace (in terms of increased competitiveness and trust), and that this may outweigh the costs.29
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Government response AI summary
The government's response addresses a related recommendation about the Business Impact Target and regulatory cost/benefit analysis, but does not specifically engage with this conclusion regarding regulator difficulties in capturing costs and benefits.
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HM Treasury
15
Conclusion
Sixteenth Report - Principles of effect…
Not Addressed
The government’s Business Impact Target is set each Parliament and aims to reduce the costs of regulation to business. Regulators must carry out Regulatory Impact Assessments (RIAs) on qualifying regulations to determine their impacts on business. Where these assessments identify an impact of more than £5 million, the analysis underpinning …
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The government’s Business Impact Target is set each Parliament and aims to reduce the costs of regulation to business. Regulators must carry out Regulatory Impact Assessments (RIAs) on qualifying regulations to determine their impacts on business. Where these assessments identify an impact of more than £5 million, the analysis underpinning them is then independently verified by the independent Regulatory Policy Committee.30
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Government response AI summary
The government's response addresses a related recommendation about the Business Impact Target and regulatory cost/benefit analysis, but does not specifically engage with the conclusion provided in this item describing the existing BIT and RIA process.
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HM Treasury
18
Recommendation
Sixteenth Report - Principles of effect…
Not Addressed
An outcomes-focused approach, however, can present a challenge for regulators and policymakers in measuring the influence or impact of regulation and the level of compliance by industry. A regulator’s influence over the industry it regulates—for example, how well businesses comply with standards—can be difficult to measure, particularly if there are …
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An outcomes-focused approach, however, can present a challenge for regulators and policymakers in measuring the influence or impact of regulation and the level of compliance by industry. A regulator’s influence over the industry it regulates—for example, how well businesses comply with standards—can be difficult to measure, particularly if there are not specific rules that can be easily monitored.38 For this reason, it is imperative that regulators identify what data they need, collect this robustly and systematically, use it to monitor progress and have the power to act on it effectively. Failing to collect reliable data, or being unable to act on data effectively, can undermine a regulator’s objectives.39 One London borough submitted evidence to us highlighting how the level of fines on water companies is not sufficient in deterring them from discharging raw sewage into the environment above the levels permitted by the Environment Agency.40 32 Competition and Markets Authority, Regulation and Competition: A Review of the Evidence, January 2020 33 Qq 67–70 34 NAO Report, page 31 35 Q 36 36 Centre for the Study of Existential Risk, University of Cambridge 37 Qq 65, 84 38 Q 46; NAO Report, pages 21 & 26 39 NAO Report, pages 15 & 19 40 London Borough of Hackney 14 Principles of effective regulation
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Government response AI summary
The government provides a generic response about balancing regulatory approaches and referring to an ongoing consultation, but does not specifically address the imperative for regulators to robustly identify, collect, and act on data.
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HM Treasury