Government consults on overhaul of UK environmental regulation

A government consultation has put forward the return of regulatory offsetting, a ‘more common law-focused approach’ to regulation, and the introduction of a countervailing measure to the precautionary principle.

The consultation, which opened as parliament rose for its summer break on Thursday, is based on the measures set out only a month ago by three MPs, the so-called TIGRR team of Theresa Villiers, Iain Duncan Smith and George Freeman. 

The TIGGR report, which gained an enthusiastic reception from the prime minister on its release, backed the return of the one-in, x-out regime (OIXO) that was abandoned after the Grenfell Tower disaster, and changes to the business impact target (BIT) system.

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The Department for Business, Energy and Industrial Strategy (BEIS) has largely taken TIGRR’s proposals and put them to the public — although the consultation does strike  a note of caution about some of the most radical ideas, indicating that they may not be implemented.

BEIS does not directly recommend that OIXO – whereby introducing new burdens on business is at least balanced by the removal of existing ones – is put back. Instead, it asks stakeholders if it should be, and what advantages and disadvantages doing so would present.

Any successor regime would have to consider competing objectives, offering a plausible quantification of costs and benefits, while also being sufficiently simple and workable, the paper says. It would also have to respond to criticisms from the National Audit Office, among others, that OIXO ignored the wider social, economic and environmental costs and benefits of regulation.

A firmer proposal is to establish the full cost of UK regulation, as some other countries, such as Canada and the Netherlands have done. “While this is a large task, which could take approximately one to two years to complete by a suitable body, leaving the EU and resuming full regulatory autonomy provides an ideal opportunity to undertake this task and reap the benefits in the future,” says the consultation. It might allow the introduction of a “targeted version” of OIXO, it adds.

Another of the MPs’ proposals that has not been immediately accepted is relying more on regulatory decisions than legislation to achieve desired outcomes. It would have “far-reaching consequences” says the paper. On the one hand, this common law approach would allow regulators to adapt frameworks more quickly, through issuing new decisions and guidance, without having to petition central government to change the law.

But the paper identifies serious downsides: “It could ultimately lead to more regulation being created overall, through mechanisms which are less responsive to public scrutiny and democratic accountability. A shift away from prescriptive statutory regimes, leaving regulators to shape the detail in individual regulatory areas, could mean more court time taken with regulated parties defending prosecutions or other sanctions – for example, if the requirements were too vague and uncertain.”

It adds that the degree to which the government would still maintain responsibility for fundamental environmental, consumer and public health protections would need to be considered.

“This is a proposal that will have far-reaching consequences – potentially both positive and negative – so the government will consider it carefully,” it concludes.

The consultation further mentions that the government is considering loosening regulation in this manner for “certain growth and innovation areas”, though these have been left unspecified.

TIGRR said that loosening regulators’ shackles implies that greater accountability and scrutiny is needed. BEIS has responded by suggesting that the government could undertake ‘deep dives’ into regulators’ work, investigating their practices, appraisals and talking to regulated business directly. Regulators would also be asked to seek feedback from businesses on how they can improve.

The paper slams some of the regulatory standards the UK has inherited from the EU for being “based on an overly restrictive interpretation of the precautionary principle”, leading to the stifling of innovation and persistence of “outdated practices that are not in line with more up-to-date scientific thinking or technological advances”. Therefore, in some areas of regulation at least, “bolstering or replacing it with a proportionality principle might be more appropriate”, says BEIS.

The precautionary principle is being set into law through the Environment Act. However, the consultation suggests that the proportionality principle should be put “at the heart of all UK regulation”, to ensure that regulation reflects the level of risk being addressed, and that penalties are proportionate to the harm caused and the culprits’ size and ability to pay.

The BIT system is intended to incentivise policy makers to minimise the burden of new and existing regulation on business. But it has come in for repeated criticism, not least from the National Audit Office and the Commons’ Public Accounts Committee, for excluding social and environmental costs and benefits. The government has been reviewing the regime since the beginning of the year.

BEIS suggests either adjusting, reforming or replacing the scheme. It says that minor changes, such as including indirect costs and benefits, would “still provide a narrow view of the full impact of regulation”, indicating that more fundamental change is favoured.

Instead, adopting a net present value approach, embracing environmental, trade, productivity and other impacts appears more likely. This would be aligned with the assessment methods used in the Treasury’s Green Book.

Alternatively, a “totally new system” could be implemented, including “hard-to-measure considerations such as competition, wellbeing, and innovation”. Its outputs would be reported through a scoreboard, rather than resulting in a simple financial figure.

Phoebe Clay, director of pro-regulation NGO Unchecked UK, was unimpressed with the plans. “If the government is to make good on its stated aim to ‘build back better’, it would do well to place a rethink of its approach to enforcement at the heart of its work,” she told ENDS. Measures such as OIXO, “have delivered little in terms of concrete outcomes, but have often placed greater administrative burdens on both business and public servants. They have also been part of a landscape that has seen significant cuts to the agencies charged enforcement activity - be it with ensuring employers pay the minimum wage, taxes are collected, the air we breathe improves and the products we buy are safe,” she added. 

Responses to the consultation are due by 1 October.

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