Source · Select Committees · Public Accounts Committee
Recommendation 7
7
The Government’s 2019 White Paper ‘Regulation for the 4th Industrial Revolution’ found that only 29%...
Conclusion
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
Government Response
Not Addressed
HM Government
Not Addressed
2: PAC conclusion: The Department and regulators have been slow to follow best practice in facilitating innovation. 2: PAC recommendation: Government should require regulators to engage meaningfully with businesses to explore potential new ideas and innovations and adopt regulatory sandbox type approaches, in a way that does not hinder regulatory objectives or create undue risk. 2.1 The government agrees with the Committee’s recommendation. Target implementation date: Winter 2021 2.2 As noted in the Committee's report, the government already encourages innovation friendly regulation, including sandboxes, through work such as the Regulatory Horizons Council and the Regulators’ Pioneer Fund. 2.3 The government also encourages regulators to adopt more innovative approaches in their delivery of regulation and are considering how this could be built upon. The department’s current consultation is seeking views on the effectiveness of creating statutory duties for regulators to promote innovation and competition. The consultation ended on 1 October 2021 and the government will respond in due course.