The Regulatory Policy Committee (RPC) has added its voice to criticisms of government attempts to cut the true cost of regulation, saying that it needs to do more to focus on the most financially significant measures and to ensure that new requirements do not have a disproportionate impact on small businesses
The independent scrutiny body is tasked with examining the evidence underpinning all new regulatory and deregulatory proposals that have an impact on business and voluntary and community bodies.
In its report for the period May 2015 to May 2016, the RPC says 149 different regulatory provisions have come into force, and it has validated the impacts of 129 of these measures.
The RPC says the overall costs and benefits to business of new regulation continue to be dominated by a relatively small volume of measures, with the national living wage (NLW), the national minimum wage (NMW) and the plastic carrier bags charge accounting for around three-quarters of the total effect of regulation.
These three measures have a combined gross annual impact of £1.7bn with annual impacts on business from all measures totalling £2.15bn.
The RPC points out that the three most significant measures validated so far will not be included in the business impact target account, which is the official measure used by the government to assess whether it is cutting the cost of regulation. This echoes a recent report from the National Audit Office (NAO), which claimed the government was ‘cherry picking’ the regulations included as part of its business impact measure framework in order to ensure it hit its targets.
Conversely, the RPC report found there were 82 measures (64% of the total volume of measures) with an annual net impact of less than £1m, which combined have contributed just £15m gross annual impacts (0.7% of the total).
The RPC says that despite the work of programmes such as the Cutting Red Tape reviews, it has not yet seen many reviews for regulatory reforms from the previous parliament. To date, 13 of the 52 statutory post-implementation reviews that are due during 2016 have so far been submitted to the RPC.
Furthermore, while departments have published plans for their post-implementation reviews, many of these do not include some of the most significant cases previously scrutinised by the RPC. Of the ten most significant regulatory and deregulatory measures from the previous parliament, two changes (the Scrap Metal Dealers Act 2013 and audit exemptions for medium sized firms) are included in departmental plans as post-implementation reviews to be sent to the RPC.
This means that there is unlikely to be sufficient independent oversight of the evidence used in the review and evaluation of the most significant measures from the previous parliament, the report states.
It also says more could be done by departments to quantify the wider effects on society of government proposals. The RPC estimates that during 2014, only one-third of proposals provided a quantified assessment of the effects on society, and says for measures that have come into force in this parliament, that proportion has increased to around 60% (24 out of the 41 measures requiring full impact assessments).
Furthermore, of the 24 measures that did include quantified wider effects, eight were assessed by the department as having a net cost to society, which would suggest that society as a whole is worse off as a result of the government intervention.
The report states: ‘We believe that more could be done to provide assurance that these estimates are robust, and that estimates should be provided in more cases.’
In addition, the RPC is critical of government efforts to minimise the impact of regulatory changes on small businesses, saying that only a small proportion of proposals offer exemptions for this sector. It said: ‘Even where a measure is deregulatory, if the net effects include disproportionate gross costs for smaller businesses, departments should be required to provide an assessment of those costs and consider whether they could be mitigated. Deregulatory measures, in some cases, may have the potential to have significant impacts on smaller businesses, for example where they have significant re-distributional effects between different businesses or markets.’
It also says more could be done to incentivise departments to provide transparent accounts of consultation responses, and how these have been reflected in the final stage analysis and estimates.
Regulatory Overview: The Regulatory Landscape May 2015 to May 2016 is here.
