Seize the opportunity of Brexit to reorganize the bureaucracy

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As the global economy recovers from the pandemic, absorbs the impact of Russia’s invasion of Ukraine and battles inflation, the UK faces the added challenge of the Brexit transition. Whatever the future direction of macro-fiscal and monetary policy, reshaping the supply-side micro-economy is vital to the growth, productivity, and competitiveness on which our future prosperity depends. The UK’s regulatory regime isn’t as catchy a topic as debates over tax, spending and interest rates, but getting it right is at the heart of Britain’s long-term economic growth. Brittany in the post-Brexit world.

Brexit saw regulatory authority return to the UK. So far, however, we have largely maintained the system inherited from the EU. It is time to act, not to set fire to all regulations. Why? Smart and agile regulation must be part of Britain’s post-Brexit competitive advantage, while maintaining the economic, social and environmental standards demanded by our citizens and which are at the heart of modern free trade agreements.

That said, existing regulatory regimes often reinforce risk aversion and bureaucracy for both regulators and regulated. To avoid being blamed if something goes wrong, regulators are encouraged to add precautionary procedures to legislation and regulation and, to avoid being caught off guard, compliance teams within companies and the industry public add another layer. Large companies can afford this regulatory tax. SMEs and public services cannot.

Too often, regulation harasses the compliant in the bureaucracy without addressing the real abuses. Public sector professionals like nurses, teachers and police officers complain of being diverted from the front line by bureaucracy, compromising service to citizens and harming their professional well-being. Businesses say the same thing.

Nor is it a level playing field between regulators. Some have magisterial authority and can intervene flexibly in their areas as new issues arise. Others clash with each other and struggle to react to changing circumstances. Elsewhere, rapid technological change brings with it the challenge of how to regulate new sectors, such as artificial intelligence and machine learning, while providing opportunities to modernize regulatory oversight and compliance to reduce burdens on those they regulate. This is a good thing. And we already know how, because our response to the pandemic has offered a glimpse of a less bureaucratic model for many public sector actors.

Over the past few months, I have assembled a panel of professionals who have worked with the Policy Exchange think tank to develop the reforms needed to address these challenges. The main proposals could – and should – be adopted by governments of all political persuasions.

Britain needs fewer and more authoritative regulators, with clear mandates from government and accountable to Parliament, to promote health as well as ensure the hygiene of their sectors, judged on impact, not on process. The performance of regulators should also be subject to regular independent review by the National Audit Office.

Regulators should be required to collaborate with each other and with their international counterparts to triage their interventions, minimize the burden on compliant individuals and institutions, support those in need of help, while working to combat willful abuses.

Regulators must be dynamic and responsive. This means establishing internal feedback loops and challenge functions, drawing on data analytics and behavioral science, as well as the experience of officials at the pointed end and citizens and businesses at the receiving end of the regulation. This should ensure that regulatory regimes and interventions are the minimum necessary to ensure public safety and confidence.

These reform proposals will only succeed if they are underpinned by the right incentives and the right culture throughout the regulatory system, in regulated businesses and institutions, with government and parliamentary oversight. Regulators need to be convinced that ministers have their backs. Regulated institutions and individuals must be convinced that regulators want them to succeed.

The UK has the opportunity to both streamline regulation and modernize it to deliver the high environmental and social standards our citizens want, as well as the competitive advantage the post-Brexit economy demands. It is now up to the Government and Parliament to take action.


Lord Sedwill chaired the Advisory Board for Policy Exchange’s ‘Regulatory Reengineering Project’

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