On 8 March 2013, the Better Regulation Delivery Office (the "BRDO") of the Department for Business Innovation and Skills ("BIS") released two consultation papers regarding its proposals to: (1) amend the Regulators' Compliance Code (the "RCC") which applies to the exercise of regulatory functions by non-economic regulators ; and (2) implement a statutory duty for non-economic regulators to have regard to growth when performing their functions.
- Key Points
- The consultations follow the BRDO's post implementation review of the RCC in 2012 as well as BIS' Focus on Enforcement Initiative campaign.
- The post implementation review found that while there were positive actions taken by regulators, more was required to make the RCC visible to businesses, regulated bodies and "front line regulators" and to strengthen the focus on supporting business compliance and growth.
- BIS is therefore proposing to replace the RCC with a revamped and simplified code called the "Regulators' Code" which will be based around five principles to: (1) carry out activities to help regulated entities comply and grow; (2) provide simple and straightforward ways to communicate with regulated entities; (3) base regulatory activities on risk; (4) share compliance and risk information with other regulators; and (5) provide advice and guidance to help regulated entities meet their legal obligations.
- In the second consultation, BIS is seeking views on implementing a statutory duty to require non-economic regulators to have regard to the impact of their actions on growth. While this statutory duty does not currently exist under the Legislative and Regulatory Reform Act 2006 (the "LRRA") or elsewhere, regulators should already consider the impact their regulatory interventions will have on economic progress under the RCC.
Consultation Paper 1: Amending the RCC
The RCC is a statutory code of practice which was published pursuant to section 23 of the LRRA. The RCC concerns the exercise of regulatory functions by non-economic regulators and local authorities identified in Parts 1 and 2 of the Legislative and Regulatory Reform (Regulatory Functions) Order 2007. The Regulators' Code is intended to replace the RCC and have statutory force under the LRRA. A summary of the proposals is set out below:
BIS envisages simplifying the RCC's content by replacing the RCC's combination of principles, duties and statements with a clear set of requirements structured around the following principles. Regulators should:
- carry out their activities in a way that helps businesses and bodies to comply and grow. In practice this means that regulators should avoid creating unnecessary regulatory burdens and consider how best to reduce business costs, design simple and cost-effective compliance solutions and secure wider economic benefits to society. This principle is intended to complement BIS' proposal for a statutory growth duty.
- provide simple and straightforward ways to communicate with the entities they regulate and resolve disputes (including offering an open, independent and transparent appeals procedure). BIS is also proposing that regulators should publish at least annually data on the number of complaints or appeals against them/their decisions and the proportion that are upheld. Regulators will be expected to regularly carry out customer satisfaction surveys and publish the results annually. Lastly, regulators will be asked to publish information on their fees and charges (including the basis for calculation).
- base their regulatory activities on risk, including the use of alternatives to enforcement, at every stage of their decision making process. This means implementing mechanisms of consultation about risk assessment and risk rating approaches. This principle would also involve publishing risk assessment methodologies and risk ratings (although the requirement to publish methodologies already exists under the RCC) as well as details of the regulators' approach to checks on compliance.
- share compliance and risk information with other regulators (although the RCC already contains a requirement that regulators should share information about good practice).
- provide advice and guidance to help businesses and other regulated bodies satisfy their legal obligations.
- BIS is also seeking views on its proposal to make the Regulators' Code more accessible to businesses and regulated bodies.
- BIS is proposing to require regulators to publish clear and detailed service standards, including a compliance and enforcement policy, on an annual basis (although requirements to publish an enforcement policy and standards and targets for service and performance already exist under the RCC). The Government intends to monitor these published service standards and will challenge them where there is evidence that service standards fall below the Regulators' Code's requirements.
- Finally, BIS is looking to ensure that businesses, regulated bodies and citizens can hold regulators to account.
If the Regulators' Code is implemented as proposed, it is evident that more publishing and/or reporting requirements will be required of regulators (and local authorities when exercising regulatory functions) to ensure that their actions are held to account.
Consultation paper 2: Duty to have Regard to Growth
BIS has also published a consultation document seeking views on its proposal to introduce a statutory duty for non-economic regulators to take account of economic growth. The consultation paper notes that there are more than 50 non-economic regulators in the UK with a combined budget of around £4 billion and 55,000 employees. However, these regulators are not achieving protection and prosperity in the way they operate and lack the tools necessary to support growth.
Accordingly, BIS is proposing to introduce a statutory duty to consider growth in primary legislation in order to achieve the key objectives of: (1) providing a legal basis for regulators to consider the economic impact of their actions; and (2) enabling regulators to see themselves as supporting prosperity and protection. Among BIS' reasons for proposing such a duty include the belief that:
- a statutory duty would remove any uncertainty over whether regulators are able to take account of economic considerations;
- regulators can and should be mindful of the economic consequences of their actions;
- compliant growth should be the objective;
- regulators should be seen as supporting business growth proactively; and
- the duty would encourage a partnership-based approach between the regulator and the business.
The proposal is intended to apply to the same regulators to which the RCC currently applies but not to local authorities in their regulatory roles.
Although the extent of the growth duty has not yet been determined, BIS is envisaging that its operation should be measured in order to provide assurance that it is working. In particular, BIS has proposed to incorporate reporting on this issue into the reporting mechanisms for the Regulators' Code. The Government would also undertake a post-implementation review of the duty after two years of operation.
Most noteworthy of BIS' proposals in the first consultation is its intention to impose various publishing and reporting requirements on regulators (although some requirements to publish methodologies, an enforcement policy and standards and targets of their performance as well as to give reasons already exist under the RCC). Although satisfying these requirements will no doubt be onerous, regulators will have to be careful to adhere to such requirements to avoid adverse scrutiny by both the Government and regulated entities (which could end up with a challenge by way of judicial review).
With respect to the second consultation, the introduction of a statutory duty to have regard to growth could give rise to a situation of competing duties whereby a regulator ends up prioritising growth over its other regulatory requirements to the detriment of the regulatory process as a whole. This could happen irrespective of whether the proposed duty is intended to "complement" rather than override regulators' existing requirements. Additionally, the statutory duty may end up adding further cost to the regulatory process in instances where regulators are being made to record how they have complied with their statutory obligation. Finally, there is also a risk of more challenges being raised where businesses find that their regulator has failed to comply with its statutory growth duty.
The deadline for submitting responses in respect of the first consultation is 3 May 2013 and 19 April 2013 for the second. The consultations can be found at: