The government wants regulators to step up and look to promote economic growth when setting policy and carrying out their various functions.
Alongside the Autumn Statement yesterday (November 23), the government published a consultation titled Smarter Regulation: Regulating for Growth, where it outlined the regulators' role in the promotion of economic growth.
“It applies whenever regulators exercise their specified regulatory functions, from the setting of policy to the individual actions of officers,” it said.
“Economic growth delivers better outcomes for all of society: it helps to address the challenges of the cost-of-living crisis, ensure businesses continue to start, grow and thrive and continue the UK’s role as a world leader.”
Most non-economic regulators currently have a duty to have regard to growth when carrying out their core functions, known as the ‘growth duty’.
A previous consultation in this area looked to extend the growth duty to the economic regulators (Ofwat, Ofcom, Ofgem).
One proposed change in the consultation announced as part of the Autumn Statement is to provide clarity around what is meant by economic growth.
Within the July 2023 consultation to the economic regulators, the government received multiple calls for clarity around what type of growth the growth duty guidance is setting out.
Therefore, the government is proposing that the statutory guidance frames growth as ‘sustainable economic growth’.
It said this definition encompasses the desirability of economic growth within the economy of the United Kingdom in the medium to long term.
Proposals and changes
The updated guidance sets out that an effective regulator will set a strategy that “strikes the right balance” between their various pressures or duties, informed by an understanding of what approach might best foster growth.
The government said it understands that regulators have other duties or objectives and that the balancing of duties will be determined by a regulator considering growth alongside, or as part of, other duties and objectives.
“In many cases, when regulators act to protect consumers, employees and the environment using well-designed proportionate regulation in line with their duties, this ensures sustainable economic growth,” it said.
“Usually, a well-protected and healthy population and environment leads to higher productivity and growth, and there is no tension between duties.
“In situations where there may be tension, the government is aware that in some cases, other duties or objectives may take precedence to growth and understands that regulators are independent and are experienced and best placed to balance their own decision-making on duties.”
As a result, the government said it does not intend to introduce a hierarchy of duties relating to the growth duty.
It reiterated within the statutory guidance that the growth duty does not mean non-compliance with other duties or objectives.
Meanwhile, the government said regulators can also affect growth through their approach to how they regulate.
“Higher economic growth can be achieved in sectors where the behaviour of the regulator itself is pro-growth,” it said.
“Regulators can approach regulation in a pro-growth way in many forms, but this could include adopting best practice on how to support innovation, or minimising compliance burdens.
“Regulators who use a pro-growth approach to regulation facilitate a good regulatory environment that creates the conditions for business confidence and investment, sensible risktaking and innovation.”
Agility and fast track
It pointed out that regulators often having differing processes and regulatory decision-making timelines.
There can be complexity in authorisations if there are several regulatory bodies involved in a decision, and it can also depend on the product or service that is being authorised.
There may also be instances which are out of the regulator’s control such as business preparedness, which can also impact the time taken to authorisation.
“The speed of decisions can have significant impacts upon businesses and their ability to operate,” it said.
“Therefore, the government is seeking views on an international fast track, and the development of clear regulatory service timelines.”
It said businesses “need and deserve” the fastest possible times when applying for regulatory approvals, therefore the government is exploring whether an expedited regulatory approvals process could be introduced in instances when a product or service has already been authorised by another regulatory body.
“This fast track would provide an applicant with the ability to opt for a premium regulatory approvals service, which would deliver an expedited decision process at the cost of a higher application fee that reflects the full cost of an expedited process,” it said.
“Within this fast track, the applicant would meet the entirety of the cost borne by the regulator of expediting their application.”
The government said it considers that any premium service should have no impact on the outcome of regulatory decisions and would only impact the time for the decision to be reached.
It urged that regulators should monitor and record their percentage delivery against targets, and publicly report on these to ensure transparency and accountability.
Regulators, like businesses, should be continually striving to deliver a better and more efficient service to its customers, the government explained.
“In the same way that businesses modernise their systems and processes, regulators too should embrace performance improvements using regtech and other efficiencies without sacrificing the robustness of the approval decision,” it added.
“Hence government would also strongly encourage regulators to adopt a 'productivity lock' approach to their published approval time targets, or equivalent metrics.”
sonia.rach@ft.com
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