A Cabinet Office-backed review of government agencies that carry out regulation has proposed a shift in the way they go about their work, and mooted changes to the way they are funded that could save the public purse more than £500m a year.
The Regulatory Futures Review was commissioned by Matt Hancock when he was Cabinet Office minister.
The report, published this week, says there is “considerable scope” to move many agencies that carry out regulating functions to “regulated self-assurance” and “earned recognition” models.
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It says such a shift would enable greater efficiency in meeting regulatory outcomes among those regulators that rely heavily on inspection, and reduce the burden of duplicate assurance processes on business.
The review, which is the first in a series, also proposes a “default presumption of full-cost recovery for regulatory activities” where self-assurance is feasible, arguing that variations in the current system of charging — and current less-than-cost regimes — act as a disincentive for the adoption of self-assurance models.
“It’s a serious piece of work, and has gone through a good process by drawing on the experience of regulators,” Daniel Thornton, Institute for Government
The report, which was written by regulators — but specifically excluded a range of economic watchdogs — urged quangos and their sponsor departments to set out how quickly they would be able to put the two key proposals into practice.
On regulated self-assurance, the review said the scale of potential cost savings attainable among “inspection-heavy regulators” was judged to be in the region 10% of total costs.
However the report cautioned: “More detailed feasibility work by the regulators in assessing how this concept would apply to them would be needed to verify this estimate.
“There would also be further savings among the regulated through avoiding the direct costs for them of duplicate assurance processes, which we have not included in estimates of the benefits.”
On pricing regulation, the report said that while moving to a full-cost recovery model may not be appropriate for wholly-public-funded bodies, or education providers, significant savings were also possible.
“For those regulators for which we had the required data, around half (£1.37 billion per annum) of the cost of regulation came from government grant,” it said.
“We estimate that introducing a default presumption of full-cost recovery where regulatory self-assurance is feasible, could yield net exchequer savings of at least £500 million per annum.”
"Numbers game"
Institute for Government programme director Daniel Thornton told CSW that the review’s core recommendations were well-thought-out and had been approached in the right way.
“It’s a serious piece of work, and has gone through a good process by drawing on the experience of regulators,” he said.
“It can be contrasted with earlier proposals on the numbers of arm’s length bodies, and the abolition of the Audit Commission, which were fairly ill-conceived.
“It’s sensible not to get into a numbers game, but to think about the right mechanisms for improving regulation.”
The report also called for pilot projects for intelligence sharing on farm inspections and the labour market be taken, with a working group to be set up to report on the “feasibility, scope and funding mechanism” of a new Regulatory Intelligence Hub.
Thornton said he was “a little bit sceptical” about the idea of an “intelligence hub”, as combining core information between different holders was usually more complicated than ministers anticipated.
“It’s quite difficult to create an all-singing, all dancing database, but they’re not saying it must be done, rather that they should look at whether it should be done,” he added.