PAC calls for regulatory clarity to help bamboozled businesses grow

(by Karma Loveday)

The Public Accounts Committee (PAC) has urged that further regulatory mergers be considered to help businesses that currently struggle navigating a complex and burdensome regulatory landscape.

In a cross-sector report, Regulating for growth, the Committee cited regulatory uncertainty adding to costs and delays for business through unpredictable timelines, unclear interpretations of rules and opaque enforcement thresholds. It highlighted that in areas such as environmental regulation, businesses have to navigate between different regulators, which can result in delays, inconsistencies, and gaps in oversight.

The report was also highly critical of the Government’s definition of economic growth, arguing this “amounts to an ambiguous objective, the success of which is impossible to measure, given a lack of clarity about what growth it is seeking to deliver and when”. It said the Government had urged watchdogs to regulate for growth, but “HM Treasury does not know what risks it expects regulators to take. Nor how this would lead to growth, which it has not defined in any detail beyond an increase in GDP with no intended timeframe or targets around this set.”

The PAC recommended: 

• The Department for Business and Trade (DBT) and HM Treasury should set out how they will support departments to provide strategic policy steers to regulators that clarify their risk appetites. These should acknowledge the trade-offs regulators face, and articulate how regulatory actions are expected to contribute to growth in their respective sectors. 

• HM Treasury should establish a time horizon for growth targeted by the March 2025 Action Plan, including supplementary indicators (such as investment, the costs associated with investment in different sectors, and productivity). This would establish if the Action Plan is influencing factors that increase GDP and by how much. 

• DBT should put in place arrangements to review how effective the different regulatory delivery models are, using the findings to improve the wider UK regulatory landscape and inform consideration of merging regulators. Such arrangements must include feedback from industrial sectors and consumer groups.

• This Autumn the DBT-HM Treasury joint unit (the Unit), set up to deliver the Action Plan, should publish a table of the interventions each department will prioritise to achieve the annual administrative burden reduction target and the expected reduction. It should then update it annually. 

• The Unit should introduce milestones and regular progress reporting, to hold departments to account, and report annually to Parliament. Cost savings should be independently validated. The Unit should also monitor expected increases in the administrative burden arising from new legislation. This should be published, by department, and updated annually. This would enable transparency as to whether the Government is on track to meet its net reduction target of £5.6bn. Midway through the programme, if the Unit deems the programme to be off track, it must allocate administrative burden targets to departments.