Towards better regulation
ICAEW's approach to better regulation and an overview of some of its comprehensive work.
Regulation: cost vs benefit
Regulation must seek to balance two conflicting objectives:
- Empowerment and enabling of markets to trade for society's benefit through, for example, facilitation of competition and the promotion of a stable infrastructure.
- Within the overall market system, providing safeguards against market abuse through misleading the public, or from misuse of power through knowledge or monopoly.
However, regulation introduces cost and inefficiency. Therefore, within a market-based framework, there must be a presumption that regulation is unnecessary, except where the cost of the regulation is outweighed by the benefit gained.
Regulation - a strain on companies
The ICAEW Enterprise Survey 2007 showed that regulation remains a major strain on companies. According to those who responded, the total annual cost to business of implementing new legislation stands at £10.2billion.
Over a third (36%) of businesses believed that the imbalance between the needs of regulation and the growth of enterprise has deteriorated in the last year.
5 principles of good regulation
The Better Regulation Executive of the cabinet office, has set out five principles of good regulation which we support:
However, ICAEW believes there are other issues to be taken into account. Our approach to the better regulation agenda is predicated on a number of beliefs based upon our member research and the expertise of our members and staff:
- Reducing the annual cost of new regulation impacting on business should be a priority of the better regulation agenda
- Reducing the impact on the smallest businesses should be the primary focus within that priority in order to tackle the regressive impact of regulation
- Better regulation for small business will also invariably lead to better regulation for other sizes of business
- The flux of new regulation is often more troubling for a business than the stock of old regulation as they will already have coping strategies for old regulation
- Efforts to examine the administration and policy costs of the stock of regulation are necessary for both continued monitoring and evaluation and to encourage appreciation of responsibility for impact.
ICAEW campaigning with government
Government is of course the source of most business regulation, directly or indirectly, and ICAEW has engaged frequently with government departments and offices to push the case for greater analysis of the potential impact of regulation before and after it has been introduced. Some of the key submissions are set out below:
- Hampton Review: ICAEW submission HM Treasury February 2005, relating to reduction of the administrative burden by government.
- The Tools to Deliver Better Regulation (Better regulation executive): ICAEW submission October 2006, relating to revising the Regulatory Impact Assessment process that government should use when considering new regulation.
- Effective Consultation (Better regulation executive): ICAEW submission September 2007, relating to ensuring the government consults properly on any proposals.
- A Simplified Business Environment (The European Commission): ICAEW submission November 2007, relating to European Union proposals to simplify regulation for smaller businesses.
Our submissions and representations have gone on to make a difference: one example of this is shown in our following up on the recommendations we made in the Tools to Deliver Better Regulation submission (item 2 above).
The impact of our recommendations, their incorporation into governmental guidance and our overall success therefore is shown here - ICAEW Proposals for Improving Regulatory Impact. Assessments
Regulation in the marketplace: An economic literature review
ICAEW has published this report which reviews the economics literature on the impact of regulation on the economy, both from a microeconomic and macroeconomic perspective.
The report looks in detail at the effect of regulation on business start-ups and recent comparative UK performance on regulatory issues, as measured in international surveys.
The report takes forward ICAEW's Market Foundations work understanding the nature of market foundations. It is particularly insightful in the lessons which can be learned to enhance market effectiveness and efficiency further and promote economic effectiveness and points to the unintended consequences of regulation and its effect on competition.
Have your say
We welcome input and discussion. If you would like to comment on the points raised in this report or contribute to ICAEW's work in this area please email: firstname.lastname@example.org