Government consultation on creating regulatory budgets

Government consultation (60 pages, PDF and 21 pages, PDF) on a proposal to introduce a “system of regulatory budgets”.

This would prevent departments from introducing regulatory measures if they would increase the estimated costs of regulation above a pre-set three-year limit for each department (excluding some “particularly costly regulations” which would be identified separately).

The economic regulators and competition authorities would be excluded from the scheme:

4.7 ... the Government would not intend to include competition functions and case specific remedies within the scope of regulatory budgets.

4.8 The Government also proposes to exclude functions of economic regulators. The economic regulators have been established by statute with the explicit role of regulating a sector characterised by monopoly structures and market power. Their regulation acts as either a proxy for competition or as market opening and their independence from detailed political oversight is a key and proven element of the UK model of economic regulation.

4.11 For practical reasons, the Government is inclined not to include the non-economic regulation functions of Civil Aviation Authority (CAA), Ofcom, Ofgem and Office of Rail Regulation (ORR) as dividing up a regulator’s business in this way is unlikely to be practical, but has not yet taken a final view and will continue to explore this with the relevant regulators.

The costs of regulation in question would be intended to capture, insofar as they can be monetised, all the “direct and indirect costs ... including possible unintended effects”, “across all sectors of the economy” except “regulation solely affecting public services”.

The main proposal is that estimated benefits would not be deducted from costs for this purpose, but the Government is consulting on the alternative of a net measure (presumably not including all benefits as one might expect the total estimated net cost of Government action to be negative). But simpliification measures might be offset against the budget.

Responses by Wednesday 12 November 2008.

For further information or advice please contact Franck Latrémolière.

Filed under DTI/BERR, Regulators.

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