The UK Deregulation agenda – Importance of risk management

in design and delivery of regulation

Gordon MaddanProgramme Manager - Business

Outcomes – what regulation is for

•Make it easier to start up and run a business

• Improve the health of communities, and protect workers and the environment

•Support businesses to grow and create new jobs

• Promote fair competition

• Expand markets and trade by improving border controls

Can regulation support growth?

Research suggests three ways that a better approach to

regulation can aid growth-

1. Reducing costs for business• E.g. costs of data returns

2. Improving confidence and control• E.g. Primary Authority

3. Realising wider economic benefits • E.g. The impact of horsemeat

Prosperity and Protection

• ‘Good’ regulation can support growth, as much as ‘poor’ regulation hinders it

• How regulation is delivered (enforcement) matters• Key aspects of delivery include

–Right level regulation-local/regional/national–Listening to the views of business –Businesses to be the ‘customers’ of regulation

Good regulation is:...choosing the right methods to move from

risk to outcomes

Risks OutcomesInterventions

Risk Based Regulation

‘Unless risk assessment is carried through into resource allocations and regulatory practice, it is wasted effort.

Risk assessment needs to be comprehensive, and inform all aspects of the regulatory lifecycle from the selection and development of appropriate regulatory and policy instruments through to regulators’ work including data collection, inspection and prosecution’

Hampton Report, 2005

EU and Ministerial

engagement

Key:BRE leadBRDO leadRPC leadDepartments lead

The Regulatory Policy Cycle: respective roles of BRE,

BRDO and RPC

1. Regulatory Policy

6. Evaluation

2. Problem Identification

3. Developing Options

5. Delivery

Making Whitehall machine

work

Owning the IA process

Providing a forum for business

engagement

Engagement with

Behavioural Insights Team

Encouraging dept

ownership

Alternatives to enforcement

Simplifying regulatory delivery &

PA

Feedback from business & regulators

Landscape/sectoral review

approach

PIRs

BRDO, BRE and RPC

Advice on early testing of options

Business input to Better

Regulation Policy

4. Recommendations

to Ministers

Assessment of IAs, policy

options

Policy advice on delivery

considerations

Engagement with regulators

& business

Risks OutcomesInterventions

• More efficient and effective• Target resources• Reduce burdens on business• More transparent to business

Why use risk based approaches?

Higher Risk

Medium

Lower risk

Risk profiling of businesses

Risk = Hazard x LikelihoodHazard – anything with the potential to cause harmLikelihood – likelihood of a hazard causing harmHarm – scale of adverse impact on individuals, the environment or other businesses

Defining Risk

Risk assessment

Identify the level of hazard

– High– Upper medium– Lower medium– Low

Risk assessment

Identify the likelihood of compliance

– Very high– High– Medium– Low– Very Low

Risk assessment of individual businesses

Identifying the likelihood of compliance– Business track record – Current level of compliance– Knowledge and commitment to compliance– Systems to manage risks

Categories:Very high - High - Medium – Low – Very Low

Risk categories

Very high High Medium Low Very low

High Lower Medium

Upper Medium

Upper Medium

High High

Upper medium Lower

MediumLower

MediumUpper

MediumUpper

MediumHigh

Lower medium Low Lower

MediumLower

MediumUpper

MediumUpper

Medium

Low Low Low Lower Medium

Lower Medium

Upper Medium

Likelihood of compliance

Lev

el o

f h

azar

d

Risk Based Targeting Advice and Inspection

Polic

ies an

d prio

rity s

etting

Educ

ation

Specialist Intervention

GenericAssessment

TSFS

Higher Risk

Medium

Lower Risk

Earned Recognition Reduces Risk

Poor Compliance

Record Increases Risk

Common Risk Framework

Common Assessment

of Likelihood of Compliance

Sector Specific Hazard

X

Leve

l of i

nter

venti

on

How Risk assessment is used in the UK

• Food Hygiene Premises rating system

• Exemption of small low risk premises from liability to Health and Safety Inspections

• Trading Standards intervention model

• EU Rapex product safety assessment

used in the UK

BRDO Priorities 2015• Regulators’ Code – statutory code of practice for

regulators setting out what is expected of them• Growth Duty – statutory duty for regulators to have

regard to growth as they undertake their duties• Data Sharing – identifying ways for regulators to share

data to support business compliance / reduce burdens• Primary Authority – providing reliable advice to support

businesses to comply – extend and simplify• Competency for regulators – improving knowledge, skills,

and attitude at the front line• Improved business dialogue mechanisms – Expert

panels, Better Business for all, Business Reference Panel

Regulators’ Code Sets out what businesses should expect from regulators:

•Regulators should support those they regulate to comply and grow

•Regulators should engage with those they regulate and hear their views

•Regulators should base their regulatory activities on risk •Regulators should share information about compliance and risk

•Regulators should ensure clear information, guidance and advice is available

•Regulators should ensure that their approach to their regulatory activities is transparent

Growth dutyTo emphasise that growth is an important factor to be taken

into account in all regulatory decisions

Amending the legal framework to enable regulators to make improvements to the business experience of regulation and foster a regulatory environment conducive to compliant growth.

• Current Status• Government Response to Consultation published • Deregulation Bill• Going through Parliament • Guidance published

Primary AuthorityTo drive consistency and reconnect businesses with the regulatory system

•Primary Authority allows businesses to form a statutory partnership with one local authority, which then provides robust and reliable advice which other councils have to take into account. Regulatory Enforcement and Sanctions Act 2007

• The scheme enables businesses to benefit from clearer, assured advice and more consistent enforcement.

•Government has extended Primary Authority to (smaller) businesses where they share an approach to compliance. This includes franchises and trade associations. Enterprise and Regulatory Reform Act 2013

• The scheme creates a joined up regulatory system that saves businesses time and money, improves public protection and consumer confidence.

Primary Authority • 433 local authorities

Primary AuthorityCoordinated partnerships

• 33,500 ACS members

Key features of Primary Authority

• Legally entitled to rely on assured advice

• Enforced by block on enforcement action without consent of PA

• Determinations on correctness of advice / enforcement can be sought from BRDO

• BRDO role to agree suitability of partnerships

• Cost effective for both Businesses and Local Authorities – PA’s can recover costs

Participants in Primary Authority

• 6733 Businesses

• 7111 Partnerships

• 5588 Coordinated partnerships

• 85% Small or medium sized enterprises

• 155 Local Authorities

Competency Structure for regulators

Technical Knowledge Sections

Age Restricted Products

Gambling Act 2005

Intellectual Property

Noise

Agriculture Health and

Safety Licensing Act

2003

Petroleum

Animal Health

and Welfare

Generic Skills Sections Pollution

Fair Trading

Core Regulatory Skills

Leadership

Port Health

Fire Safety

Housing

Metrology Primary

Authority

Food

Product Safety

Expert panels To bring together Government policy leads, regulatory experts from business and Local Authority enforcers to resolve issues of sectoral concern as they arise

• Food Standards and Labelling • Food Hygiene• Metrology• Age Restricted Products and Housing• Fire Safety• Supermarkets Primary Authority • Housing• Leisure • Fair Trading

Areas covered by ‘Better Business for All’ regulatory partnershipsAim to bring together business representatives and all regulators local and national operating in an areas to improve coordination and build business support and confidence

The UK Deregulation agenda – Importance of risk management

in design and delivery of regulation

Gordon MaddanProgramme Manager - Business