Source · Select Committees · Public Accounts Committee
Recommendation 4
4
Regulatory bodies do not have a good enough understanding of the costs and benefits of...
Conclusion
Regulatory bodies do not have a good enough understanding of the costs and benefits of regulation, risking value for money. Robust analysis of the costs and benefits of regulatory activity is essential for effective regulation, value for money and accountability. The regulators we questioned were not able to put a full monetary cost on their regulatory activity, including the wider costs to industry of complying with regulations. They face challenges 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. The government’s Business Impact Target aims to reduce the costs of regulation to business, but the Regulatory Impact Assessments (RIAs) that underpin this target currently consider the costs of regulations without an adequate assessment of the benefits. For example, the costs of gambling regulations for gambling companies are captured, but the benefits of those regulations in reducing crime or harm are not. The Competition and Markets Authority has also criticised RIAs for not giving enough consideration to the impact of regulation on competition and innovation. The government has committed to a review of the Business Impact Target and the Department is preparing to launch a consultation later this year. Recommendation: In its review of the Business Impact Target, the Department should consult with regulatory bodies and wider stakeholders on how to ensure robust analysis of regulatory costs and benefits is built into regulatory policy design and evaluation. Furthermore it should include proposals to better reflect the impact of regulation in promoting competition and innovation.
Government Response
Not Addressed
HM Government
Not Addressed
4: PAC conclusion: Regulatory bodies do not have a good enough understanding of the costs and benefits of regulation, risking value for money. 4: PAC recommendation: In its review of the Business Impact Target, the Department should consult with regulatory bodies and wider stakeholders on how to ensure robust analysis of regulatory costs and benefits is built into regulatory policy design and evaluation. Furthermore it should include proposals to better reflect the impact of regulation in promoting competition and innovation. 4.1 The government agrees with the Committee’s recommendation. Target implementation date: Winter 2021 4.2 This work is already underway and reforming the Business Impact Target to accurately capture the impacts of regulation is a fundamental part of the “Reforming the framework for better regulation” consultation, which was open to the public to provide responses from 22 July 2021 until 1 October 2021. 4.3 The current BIT framework allows for the financial impacts of regulation to be captured accurately. It does not lend itself, though, to capturing the wider impacts of regulation, such as its impact on innovation. The consultation therefore invites views on how to capture better the regulatory costs and benefits. The consultation provides four options with regard to the metric – adjust the current system, change it, replace it or remove it. The choice of metrics used (and which of the four options of adjust the current system, change it, replace it or remove it is chosen) will impact upon the ability to measure less clearly defined concepts such as innovation, competition, wellbeing, and security. 4.4 The government’s proposals to improve the analysis of regulatory costs and benefits will be set out in the consultation response. The response will also consider regulators’ role in the promotion of competition and innovation and whether to revise existing guidance and statutory objectives.