Advanced Regulatory PracticesRisk & Regulation

Julie Monk

Deputy Director

Public Governance in Russia: The Present & the Future

22-23 March 2012

Outline for next 25 mins

•History & Context of risk based regulation in the UK.

•Future Strategy & advanced regulatory practices.

•Examples & case studies of good practice.

•Where next?

•Questions / Discussion.

Who’s who in Government regulationEU

Business, Voluntary Sector, Public Sector Front Line, Citizens

Regulators & Inspectorates (122)

Local Authorities

(460)

Parliament

Government Departments(24)

Who’s who in Government Regulation

Devolved Administrations (3)

History & ContextGovernment accepts 2 key reports in the Budget of 2005:

Reducing administrative Burdens: Effective inspection and Enforcement Sir Philip Hampton

Less is more: Reducing Burdens, improving outcomes Better Regulation Task Force

Established the 5 principles of better regulation which are still very relevant in the UK:-

– Proportionality– Accountability– Consistency– Transparency– Targeted: (The Hampton Principles)

Hampton PrinciplesFramework and criteria upon which to judge performance of regulators included:-

• comprehensive risk assessment to concentrate resources where most needed;

• accountability for the efficiency & effectiveness of their activities;

• no inspection should take place without a reason;• business should not have to give unnecessary

information• provision of authoritative, accessible advice easily &

cheaply; and• recognition to allow, or encourage economic progress.

Hampton ReviewsReviews took place between 2007-2010

•36 National Regulators

•Peer review

•Published recommendations

•Action plans for improvement http://www.berr.gov.uk/whatwedo/bre/inspection enforcement/implementing-principles/reviewing-regulators/page44054.html

Common high level problems with risk • Lack of transparency of different risk models.

• Regulators working outside of their respective fields needed to share risk models and good practice.

• Some overly prescriptive legislation hampers the regulators ability to be truly risk based.

• Resources are not always efficiently aligned to risk.

• Lack of evidence that the regulatory activity affects the risk or delivers outcomes.

• Reliance on inspection reducing risk.

Hampton Reviews Results:

Simple problems with risk models

Over regulation•Too great an emphasis placed on the Hazard and not the likelihood.

•Evidence base weak showing link between hazard and severity.

Under regulation•Hazard not identified or ignored.

•Not Reviewed or adjusted to adapt to a changing environment or market.

Risk Models:

Future strategy & advanced regulatory practice:

Transforming Regulatory Enforcement: Freeing up business growth - Discussion Paper June 2011http://www.bis.gov.uk/Consultations/transforming-regulatory-enforcement-discussion?cat=closedawaitingresponse

Government Response December 2011http://www.bis.gov.uk/assets/biscore/better-regulation/docs/t/11-1408-transforming-regulatory-enforcement-government-response.pdf

Co-regulation – transfer of risk

Transfer more responsibility for managing the risk from the state to the private sector e.g. Accreditation for the welfare of greyhounds at racing stadia in UK.

Works because it is proportionate to the problem. UKAS set standards and provide independence/credibility to the system to avoid conflicts of interest, regulatory capture.

Practical case studies:

Earned Recognition – recognising & rewarding low risk

The state recognises business efforts to comply by reducing the level of enforcement activity e.g. in UK the Pig & Poultry farm assurance scheme applies to 1000 farms. British Columbia Safety Authority inspect companies less if they have better compliance. If they fail, sanctions are much higher 1

Works because it is proportionate to the problem for low risk businesses. Accreditation bodies set standards and provide assurance to the regulator which prevents duplication of effort, saving the state money.1 García Villarreal, J. P. (2010), “Successful Practices and Policies to Promote Regulatory Reform and Entrepreneurship at the Sub-national Level”, OECDWorking Papers on Public Governance, No. 18, OECD Publishing.doi: 10.1787/5kmh2r7qpstj-en

Practical case studies:

Working with the grain of the market – driving down risk

Use the existing market to drive improvements in standards and reduce risk e.g. ‘Scores on the doors’ scheme for 600,000 food businesses in UK.Regulator has a national database of inspection ratings (food.gov.uk/ratings) Equivalent systems in Canada & Netherlands.Works because it is transparent and deals with information asymmetry. Consumers shop with their feet and stimulate competition for higher standards in the market rather than the state.

Practical case studies:

Increasing the Efficiency of the state – consistency in handling risk

Primary Authority principle where one local authority co-ordinates the enforcement activity of 450 other local authorities for one business with many outlets across the country (pa@lbro.org.uk). In Jalisco Mexico there is a multi task inspection unit which forms a single body of inspectors to reduce inconsistency1. Works because it increases consistency across the country for handling risk – collective agreement on what is a risk and how to deal with it. Appeal and arbitration mechanism provides challenge to the process

Practical case studies:

What Next?Reviews of all regulators •Based on the good work of Hampton moving towards a sector specific approach from the business perspective.•Based on the principles within the strategy (transparency) and regulatory practices. Are they using co-regulation, earned recognition or alternative models to traditional command & control approach Is there a shift from state to private sector?.•Public website for regulators their size, remit, level of regulatory activity etc.

Strengthened role for Primary Authority•To benefit small businesses (through trade associations).•Extend the scope to include joining up inspection plans of Local Authorities and to cover more legislation: Fire & underage sales.

Thank You.

Questions Discussion?