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News analysis: Regulating the regulators

Hidden away among the Budget-linked announcements last week was a report with the potential to give rise to a whole new field of law.

Philip Hampton’s report, Reducing administrative burdens: effective inspection and enforcement , reviewed the operations of a large percentage of the regulators in this country - including the Environment Agency and the Health & Safety Executive.

It will come as no surprise to readers of this magazine that the regulators within the scope of the review carry out more than 3 million inspections each year.

The national regulators covered send out 2.6m forms for businesses to complete every year, they employ 61,000 people within 674 regulatory bodies, and have an aggregate budget of £4 billion.

Despite these statistics, the UK is, according to a KPMG survey, the most competitive country in Europe with regard to regulatory costs, and the third most competitive in the world. It came as a surprise to me too.

The report concluded that, despite having noted some good practice, “the system as a whole is uncoordinated and good practice is not uniform”.

It adds: “There are overlaps in regulators’ responsibilities and enforcement activities. There are too many forms and too many duplicated information requests. Businesses are subject to competing or confusing demands.”

It was also noted by the report that the burdens of regulation were felt disproportionately by smaller businesses.

For example, a NatWest survey had claimed that businesses with two employees spend six hours per month per employee on red tape, compared with a business having more than 50 employees having to spend only two hours per month per employee.

Well, so far so good. There is a problem with an excessive number of regulators carrying out too many inspections and asking us all to fill in too many forms.

The report noted that all of this regulatory activity was not necessarily performing the function intended. It referred to cases where as a result of breaches of law, prosecutions followed, the outcomes of which were less than satisfactory.

For example, a man who paid £60,000 to dump toxic waste, which when recovered cost £167,000 to incinerate, was fined £30,000.

And a company that evaded waste licensing requirements for two years, saving £250,000, was fined £25,000.

These are obviously unsatisfactory outcomes. The penalties of breach must, at the very least, mean that when caught, the offender will not retain any benefit from his offence. Otherwise we are all encouraged to ignore and evade the law.

Hampton’s recommendations include the following:

* Regulatory activity and enforcement based on risk assessment

* Less inspection and more advice

* Fewer and simpler forms

* Regulators should share information

* Fewer and larger regulatory bodies

* Penalties have to hurt

With regard to the idea of penalties hurting, while the report held back from recommending that the cost of regulation should be paid by those who refuse, or fail, to comply with the regulations, the idea is implicit.

I fear that the day when inspectors will be paid by reference to the fines raised may be in sight.

The suggestion, put forward by business, that any one firm should have to deal with only a single inspector, who would deal with the whole panoply of regulation affecting that business, was re

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