What is regulation?

What is regulation?

In a legal context, regulations are a type of secondary legislation: law made by a person or body other than parliament within the framework of an enabling Act of parliament. ⁸⁵ Kelly R, Statutory Instruments, House of Commons Library, briefing paper number 06509, 15 December 2016, p. 5, https://researchbriefings.files.parliament.uk/documents/SN06509/SN06509.pdf  Regulations specify detailed requirements or standards developed to implement the principles and objectives set out in primary legislation. 

More broadly defined, regulation is the use of rules, incentives and penalties to change the behaviour of individuals or organisations. ⁸⁶ Bevington M, Rebuilding The Regulatory Ecosystem, Progressive Britain, Paper PBOO6, p. 10, www.progressivebritain.org/wp-content/uploads/2023/07/Rebuilding-the-Regulatory-Ecosystem.pdf  While rules may be set out in law, this is not always the case. Regulation involves not only setting standards, but monitoring performance against them and enforcing compliance. ⁸⁷ Levi-Faur D, ‘Regulation and regulatory governance’, in Levi-Faur D ed, Handbook on the Politics of Regulation, Edward Elgar Publishing, 2011, p. 5; Koop C and Lodge M, ‘What is regulation? An interdisciplinary concept analysis’, in Regulation and Governance, 11:1, 2017, 95–108, https://eprints.lse.ac.uk/62135/1/Lodge_What_is_regulation_2016.pdf

Who can regulate?

Government ministers and departments directly regulate some areas. For example, the transport secretary can approve and amend technical requirements for the design of road vehicles in the UK. ⁸⁸ Motor Vehicles (EC Type Approval) Regulations 1992, www.legislation.gov.uk/uksi/1992/3107/made

Powers to set standards, monitor compliance, or take enforcement action can also be delegated to bodies operating at arm’s length from government, under statutory powers granted by parliament. This can make it easier to develop and maintain the technical expertise necessary to regulate effectively, reduce perceptions of bias in how rules are set and applied, and help ensure regulatory decisions are made consistently over the long term, even in the context of changing political leadership. ⁸⁹ Written evidence from the Institute for Government (UKR0006), House of Lords Industry and Regulators Committee, Inquiry into UK Regulators, retrieved 29 February 2024, https://committees.parliament.uk/writtenevidence/126602/html  The government does not publish a comprehensive list of bodies with a statutory regulatory function, but IfG research listed 116 in March 2024. ⁹⁰ Written evidence from the Institute for Government (UKR0006), House of Lords Industry and Regulators Committee, Inquiry into UK Regulators, retrieved 29 February 2024, https://committees.parliament.uk/writtenevidence/126602/html

Local authorities are often responsible for implementing national regulations at local level. ⁹¹ National Audit Office, Regulation Overview 2019, March 2020, p. 4, www.nao.org.uk/wp-content/uploads/2020/03/Overview-Regulation-2019.pdf  For example, they inspect premises to check that food is stored and prepared safely in line with rules set by the Food Standards Agency, ⁹² National Audit Office, Principles of effective regulation, May 2021, p. 5, www.nao.org.uk/wp-content/uploads/2021/05/Principles-of-effective-regulation-SOff-interactive-accessible.pdf  and enforce national building regulations using powers to force developers to fix non-compliant work. ⁹³ Rankl F, Building regulations and safety, House of Commons Library, 6 June 2023, retrieved 29 February 2024, https://commonslibrary.parliament.uk/research-briefings/cbp-8482  In some cases local authorities can set their own standards – for instance, they license cinemas and can place restrictions on film viewing within their local area. ⁹⁴ British Board of Film Classification, ‘Film Licensing’, retrieved 29 February 2024, www.bbfc.co.uk/education/university-students/legislation/film-licensing

Some regulators are sponsored by parliament and are entirely independent of the government, such as the Electoral Commission. ⁹⁵ Electoral Commission, ‘Our corporate governance framework’, retrieved 29 February 2024, www.electoralcommission.org.uk/about-us/how-we-make-decisions/our-corporate-governance-framework  Additionally, not all regulation is carried out by the state. Some industries and professions self-regulate based on mutually agreed standards for safety, quality or ethics. For example, the Complementary and Natural Healthcare Council, a private company with government funding, operates a voluntary register that requires practitioners to complete an accredited course and hold professional indemnity insurance. ⁹⁶ Complementary and Natural Healthcare Council, retrieved 29 February 2024, www.cnhc.org.uk/#gsc.tab=0

What is regulation used for?

Government uses regulation to influence the behaviour of individuals and organisations beyond its direct control (and sometimes other parts of government) while preserving the benefits of allowing them to operate freely within certain parameters. ⁹⁷ National Audit Office, Principles of effective regulation, p. 4; Bevington M, Rebuilding The Regulatory Ecosystem, p. 10.

It may regulate where it believes private markets do not create optimal outcomes. For example, network effects and economies of scale mean there is little natural competition between providers in the water sector. ⁹⁸ Department for Business, Innovation and Skills, Principles for Economic Regulation, April 2011, p. 1, https://assets.publishing.service.gov.uk/media/5a755c9fed915d6faf2b2669/11-795-principles-for-economic-regulation.pdf  The economic regulator Ofwat aims to protect consumer interests by promoting effective competition, balanced against the need to ensure the resilience of water supply and infrastructure. ⁹⁹ Ofwat, ‘Our duties’, retrieved 29 February 2024, www.ofwat.gov.uk/about-us/our-duties

Government also uses regulation to achieve social, environmental and cultural objectives, such as managing risks to public health and safety (the Office for Nuclear Regulation or the Civil Aviation Authority), safeguarding the environment (the Environment Agency or the Office for Environmental Protection), and upholding standards of governance and ethical conduct (the Financial Reporting Council or the Commissioner for Public Appointments). 

Government’s own activities can be regulated, as can the activities of the wider public sector. For example, the Information Commissioner’s Office regulates freedom of information by public authorities, including government departments, ¹⁰⁰ Information Commissioner’s Office, ‘What is the FOI Act and are we covered?’, retrieved 29 February 2024, https://ico.org.uk/for-organisations/foi/what-is-the-foi-act-and-are-we-covered  and the Care Quality Commission regulates all health and social care services in England, including the NHS. ¹⁰¹ Care Quality Commission, ‘Services we regulate’, 5 April 2023, retrieved 29 February 2024, www.cqc.org.uk/what-we-do/services-we-regulate/services-we-regulate

How is regulation carried out?

Regulation can involve a variety of approaches, often in combination, depending on who and what is being regulated, the objectives of the regime and the nature of the risks it aims to address. 

Standards can be set in a discretionary way – for example, through a voluntary code of practice – or can be mandatory, such as when licensing conditions are imposed or prices are capped. A ‘rules based’ approach to setting standards involves prescriptive requirements, while ‘principles based’ regulation aims to give regulated entities flexibility on how to meet more broadly stated expectations. ¹⁰² Van den Brande T, ‘Rules-based versus principles-based regulation’, Ofcom, retrieved 29 February 2024, www.ofcom.org.uk/news-centre/2021/rules-versus-principles-based-regulation

Methods for monitoring compliance range from encouraging transparency to imposing reporting requirements or undertaking investigations and inspections of regulated entities. These may take on a cyclical basis or regulators may take a risk-based approach, prioritising areas where violations are judged to be most likely or severe. ¹⁰³ OECD, Regulatory Policy Outlook 2021, ‘Risk-based regulation’, retrieved 29 February 2024, https://www.oecd-ilibrary.org/governance/oecd-regulatory-policy-outlook-2021_38b0fdb1-en

Enforcement action may aim to deter and punish non-compliance by naming and shaming those who break rules, imposing financial or legal penalties, or barring offenders from regulated industries or professions. ¹⁰⁴ HM Treasury, Review of enforcement decision-making at the financial services regulators, December 2014, pp. 7–8, https://assets.publishing.service.gov.uk/media/5a7ecd2c40f0b62305b8344a/enforcement_review_response_final.pdf

How is regulation scrutinised?

The Better Regulation Executive within the Department for Business and Trade leads the regulatory reform agenda across government and works with other government departments to monitor regulatory burdens and coordinate their reduction. ¹¹⁷ Better Regulation Executive (BRE), gov.uk, retrieved 29 February 2024, www.gov.uk/government/groups/better-regulation-executive  Civil servants are required to consider alternatives and provide evidence to justify the introduction of any new regulation. ¹¹⁸ Department of Business and Trade, ‘Better Regulation Framework’, 19 September 2023, retrieved 29 February 2024, www.gov.uk/government/publications/better-regulation-framework  New regulations are subject to review by the Regulatory Policy Committee, an independent expert body that assesses the quality of evidence and analysis used to inform government regulatory proposals. ¹¹⁹ Regulatory Policy Committee, ‘About us’, gov.uk, retrieved 29 February 2024, www.gov.uk/government/organisations/regulatory-policy-committee/about

Most statutory regulators are public bodies, subject to corresponding scrutiny and accountability by their boards, government departments, ministers and parliament. They are also subject to the Regulators’ Code, which governs how regulators engage with those they regulate. ¹²⁰ Office for Product Safety and Standards, ‘Regulators’ Code’, gov.uk, 6 April 2014, retrieved 29 February 2024, https://assets.publishing.service.gov.uk/media/5f4e14e2e90e071c745ff2df/14-705-regulators-code.pdf  All regulators must put mechanisms in place to consult those they regulate on the design of their risk assessment framework (the model, scheme or methodology used to target regulatory activities) and the regulatory guidance they produce. ¹²¹ Office for Product Safety and Standards, ‘Regulators’ Code’, pp. 4–5.

A regulatory decision can be overturned through judicial review if a regulator is found to have acted unlawfully by the courts – including by acting outside of its jurisdiction, or acting unreasonably or disproportionately. ¹²² House of Lords, Select Committee on the Constitution, The Regulatory State: Ensuring its Accountability, 6th Report of Session 2003-4, HL Paper 68-I, March 2004, p. 31, https://publications.parliament.uk/pa/ld200304/ldselect/ldconst/68/68.pdf  In some cases, regulated entities can challenge individual regulatory decisions and seek redress through independent appeals bodies and tribunals, which may judge whether the decision was right, not merely whether it was lawful. ¹²³ House of Lords, Select Committee on the Constitution, The Regulatory State: Ensuring its Accountability, pp. 31–4  These bodies have powers to overturn or set aside parts of regulatory decisions and to impose or revoke penalties. ¹²⁴ Knott G, ‘Regulatory appeals: do the UK’s appeal regimes stand up to critical review?’, Oxera, March 2018, p. 4, www.oxera.com/wp-content/uploads/2018/07/Regulatory-appeals-do-the-UK-s-appeal-regimes-stand-up-to-critical-review_1-1.pdf-1.pdf; Competition Appeal Tribunal, ‘About the Tribunal’, retrieved 1 February 2024, www.catribunal.org.uk/about

What are the alternatives to regulation? 

If the government believes the costs of regulation would exceed the benefits, it can choose to pursue its policy objectives in other ways – although it may, of course, decide to do nothing.  

Information and education can help consumers to make more informed decisions and aid industry bodies or professionals in reducing risks. ¹²⁵ Hepburn G, Alternatives to traditional regulation, OECD, retrieved 29 February 2024, https://www.oecd.org/gov/regulatory-policy/42245468.pdf p. 10  For example, the Maritime and Coastguard Agency has reduced accidents at sea through guidance and training. ¹²⁶ National Audit Office, Using alternatives to regulation to achieve policy objectives, June 2014, p. 15, www.nao.org.uk/wp-content/uploads/2014/06/Using-alternatives-to-regulation-to-achieve-policy-objectives1.pdf

Behavioural science can also be used to encourage individuals and organisations to make choices in line with government policy. For instance, the government has used social benchmarking to reduce the over-prescription of antibiotics by GPs. ¹²⁷ OECD, Behavioural Insights and Organisations: Fostering Safety Culture, ‘Overview and guidance for policy makers’, 3 April 2020, retrieved 29 February 2024, https://www.oecd-ilibrary.org/governance/behavioural-insights-and-organisations_e6ef217d-en

Government can also use economic incentives such as taxes and subsidies to achieve some policy objectives. For example, Ofgem administers environmental and social schemes that provide grants for households that switch to heating systems powered by renewables. ¹²⁸ Ofgem, ‘Environmental and social schemes’, retrieved 1 February 2024, www.ofgem.gov.uk/environmental-and-social-schemes