Increasingly-stretched departments are struggling to carry out proper impact assessments of policy decisions, according to a new report by the government's own regulatory watchdog.
The Regulatory Policy Committee (RPC) was set up in 2009 to provide an independent check on the cases drawn up by departments to justify introducing or scrapping business regulations.
As well as checking up on whether departments are carrying out post-implementation reviews of decisions they have already made, the RPC analyses the quality of initial submissions before departments press ahead with changes.
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It hands them either a green "fit for purpose" rating or asks for more evidence, either by sending departments an "initial review notice" (IRN), or by imposing a more stringent red rating.
But, according to the the RPC's latest report, 2016 saw a marked year-on-year drop in the proportion of submissions that were given the thumbs-up green rating by the committee at first pass, with the watchdog warning that an increased workload and tight resources may be taking their toll on the quality of the analysis provided by departments.
"As available resources have reduced, departments may have chosen to decrease resources committed to the better regulation area" – Regulatory Policy Committee
Less than three quarters (72%) of the 318 first-time submissions the RPC received in 2016 were flagged up as "fit-for-purpose", the report shows, with the remaining 28% subject to either IRNs or red-notices, a figure the committee deems a "cause for concern".
By contrast, between 2012 and 2015, 80% of submissions were rated fit-for-purpose when first passed on to the committee for scrutiny.
The RPC says a number of factors may have contributed to the dip in 2016 performance, including changes to the wider regulatory framework, and the fact that some hard-pressed departments are viewing impact assessments as "a bureaucratic exercise or a post-hoc rationalisation of policy decisions".
"Therefore as available resources have reduced, departments may have chosen to decrease resources committed to the better regulation area," the report warns.
"Furthermore, analysis may be carried out by staff with little experience in writing impact assessments and without sufficient analytical expertise or support. These factors may have contributed to the overall decline in performance."
The report also says that a number of submissions appear to have been produced "under significant time constraints", and it raises concern that the introduction of IRNs in 2015 – intended to put less of a burden on departments – may have in fact "reduced the risks to, and penalties for, departments producing poor quality analysis" and given them the impression that justifying decisions is now a less pressing concern.
"We do not understand this view and will continue to explore the risks with the approach, especially with poorer performing departments. For the poorest performers we will consider removing access to the IRN process."
According to the RPC, over a third of the submissions it deemed non-fit-for-purpose fell short on cost grounds, with departments failing to "identify all the potential costs on business", while a "significant number" failed "to provide sufficient justification for the underlying assumptions" they were based on.
Other common reasons for a non-fit-for-purpose rating include departments failing to include a proper assessment of the impact of changes on small and micro-businesses, and a lack of clarify on "how a proposal will work or how calculations have been made".
The RPC also said it was a "matter of concern" that just 28 post-implementation reviews (PIRs) – intended to help departments learn the lessons of previous policy decisions – had been seen by the watchdog in 2016.
Although 89% of those PIRs were rated fit-for-purpose by the RPC, the committee said those it had reviewed were mostly concerned with "low-impact measures", while major changes – including the coalition government's pensions reforms – were not subject "to appropriate monitoring and evaluation".
"These measures largely drove the coalition government’s success in achieving its One-in, Two-out target over the last parliament, and a clear understanding of the extent to which they have delivered their intended effects is crucial," the report added.
"Disappointed"
The report also finds "significant variation" among departments on the quality of their impact assessments, with some – including the Department for Work and Pensions, Health and Safety Executive and the Department for the Environment, Food and Rural Affairs – praised for their "consistently high performance", while others, such as the Home Office and Treasury are found to have "performed less well over the year".
According to the RPC, a "significant" proportion of Home Office cases scrutinised during the year contained "red-rated issues", with six out of fifteen submissions deemed not-fit-for-purpose when first sent. In one Home Office case, a red rating was handed out even after the submission had been sent back to the department for more work.
Launching the report, the RPC's chairman Michael Gibbons said he was "disappointed" that departments had "not really embraced the opportunity to learn from their experiences of regulation in the last parliament".
He added: "I am heartened, though, that the National Audit Office (NAO) and the House of Commons Committee of Public Accounts (PAC) are joining us in the call for the monitoring and evaluation of bigger measures and that departmental analysis should focus more on societal impacts than at present.
"Although we are concerned that the overall quality of first time submissions has declined, with 28% receiving ‘not fit for purpose’ notices over 2016, there are some strong examples of good practice and some departments that consistently produce excellent assessments such as DWP, HSE, and Defra.
"We are also pleased with the general quality of the small number of submissions we’ve seen from regulators which have only recently come into scope of our scrutiny.”
The findings were also welcomed by a range of business figures, with Adam Marshall, the director general of the British Chambers of Commerce, saying it was "vital that any and all regulatory changes" were "rigorously justified".
He added: "It is disappointing to see that many government departments have slipped backwards, and are not completing impact assessments to the highest standards."
Trades Union Congress general secretary Frances O'Grady echoed that view, describing it as "important that any new regulation should have to be shown to be of benefit", while Martin McTauge of the Federation of Small Businesses warned that departments appeared to be "slipping when measuring the regulatory burden they place on SMEs".