Shortly before the July 2024 general election was called, the Conservative Government published a White Paper on its approach to regulatory reform.  Intended to ensure the UK’s regulatory landscape delivered “a world-class service”, Smarter Regulation: Delivering a Regulatory Environment for Innovation, Investment and Growth included a number of proposals to streamline regulation, including a one-stop shop and portal to access regulations, an enhanced role for the Regulatory Policy Committee in scrutinising options and impact assessments for legislation, and a framework to measure progress by regulators caught by the Growth Duty established under s. 108 of the Deregulation Act 2015 and now subject to new statutory guidance issued a few days after the White Paper was published.

One of the proposals in the White Paper was a set of ten new regulatory principles (which I will call “the Newer Principles”) that government and regulators would be expected to adopt to advance a “service mindset”.  Different from the seven drivers and seven behaviours of smarter regulation contained in the new Growth Duty: Statutory Guidance Refresh (though with some overlap), these principles appear to sit alongside the five new regulatory principles included in the Benefits of Brexit report from January 2022 (referred to in this post as “the New Principles”), which themselves had an opaque relationship with the five principles of Better Regulation espoused by Tony Blair in 1997 (“the Earlier Principles”, again my label).

Before a set of “even newer principles” emerges from the inevitable review of the White Paper by the incoming Government, it is timely to reflect on the unpredictability engendered by this proliferation of regulatory principles.  If, as this post explores, they could have legal status rather than mere political traction, their meaning and interrelationship needs to be clarified to avoid unnecessary tensions, prevent their dilution and improve their enforceability.  If they are not intended to have legal meaning, this should be made plain.

Context for the New and Newer Principles

The New and Newer Principles emerged from the Johnson / Truss / Sunak Governments’ review of the UK’s approach to regulatory policy encouraged by the increased freedom resulting from Brexit.  The Retained EU Law (Revocation and Reform) Act 2023, originally hailed as the ‘Brexit Freedoms Bill’, not only changed the status of retained EU law, now ‘assimilated law’, but also included legislative mechanisms to facilitate re-regulation or de-regulation.  This was a process which, notwithstanding the removal of the original sunsetting of all EU-derived regulation, the Johnson / Truss / Sunak Governments remained keen to complete expeditiously.  Some red tape was clearly outdated or irrelevant in the post-Brexit era – newspaper articles referred to rules on Japanese carnations and Polish canal boats – but, as mentioned in a previous post, not all EU-derived regulation was egregious. Consideration of the optimum regime for each policy area was, and is, needed, and this required, and still requires, a deeper question to be addressed: what principles should be engaged when determining the approach to what is assimilated, restated or revoked?  In the same vein, with the UK now fully responsible for its own regulatory trajectory, it was, and is, pertinent to ask what principles should underpin future regulatory decisions, be those taken by Government policy-makers or regulators?

According to the Benefits of Brexit report from January 2022, the Government’s answer to the first question appeared to be: (i) a sovereign approach, (ii) leading from the front, (iii) proportionality, (iv) recognising what works, and (v) setting high standards at home and globally, principles that were doubled down on in a policy paper from May 2023, Smarter Regulation to Grow the Economy.  At one level, these New Principles appeared to be mere political soundbites designed to produce catchy headlines and to inform regulatory policy decisions that the Government could be questioned about in Parliament and judged on at the next election.  As such, they were unremarkable.  What is not to like about a pledge to “use our new freedoms to follow a distinctive approach based on UK law, protected by independent regulators and designed to strengthen UK markets” or a focus on “the future, shaping and supporting the development of new technologies and creating new markets”?  A Government commitment to “thoroughly analyse [its] interventions based on the outcomes they produce in the real world” is uncontroversial. But because the New Principles were also redolent of the Earlier Principles developed by the Blair Government, and because those Earlier Principles were embedded more formally in the regulatory framework (as discussed below), there was scope for confusion about the legal status of the New Principles.

Fast forward to the White Paper from May 2024 and, in answer to the second question, the New Principles seem to be being joined (or perhaps replaced) by ten Newer Principles aimed at ensuring “a well-functioning landscape of regulators”.  According to that White Paper, the following principles should be adopted by Government departments and should serve as a pre-action checklist for regulators:

• Clear guidance, transparency and accountability;
• International recognition and awareness of best practice;
• Avoid unnecessary risk aversion;
• Always act proportionately;
• Be pro-innovation in regulatory approach;
• Collaborate and join up with fellow-regulators;
• Be collaborative and responsive when engaging with businesses;
• Permissiveness and self-certification;
• Ensure a skilled and capable workforce; and
• Understand how regulation is applied at local levels and felt by business and consumers.

As a sign of its commitment to these Newer Principles, the Government pledged to write to regulators who were not complying, though the recommendation in the White Paper did concede that the circumstances in which such a letter would be appropriate would vary according to the degree of policy and operational independence of the regulator in question.  Hence, it seems that the Newer Principles were envisaged as something central Government could use to guide and judge the performance of regulators, with some consequences for non-compliance.  Whether they were also intended to set enforceable expectations for the regulated is less clear.  Again, though, because they were reminiscent of the Blair Government’s Earlier Principles, their status needs clarification.  To explain why, the post will now turn to the context for those Earlier Principles. 

Context for the Earlier Principles

Whilst Brexit and the opportunity to review assimilated law was the catalyst for the New and the Newer Principles, a desire to regulate well to promote innovation and growth was not new.  Ever since Margaret Thatcher’s Government came to power in 1979 – pledging to “defeat Socialism” and reverse the “anti-enterprise climate” that included, to quote from Keith Joseph’s speech “Monetarism is not Enough”, a “remorseless flood of regulations and legislation” which “shrivelled the impulse to expand and throttled enterprise” – there have been bodies at the heart of the UK Government mandated to consider optimum regulatory strategies.

In 1997, as part of the quest for what was then branded “Better Regulation”, Tony Blair’s Government came up with five principles, namely accountability, consistency, proportionality, targeting, and transparency, that were used as a yardstick for regulatory reform by the Better Regulation Task Force and Better Regulation Commission in the late 1990s and early 2000s.  They were used to write sectoral and topical reports on areas ranging from long-term care to hotels and restaurants, and from better redress to avoiding regulatory creep.  The go-to document for an explanation of the meaning of the Earlier Principles is the 2003 leaflet, Principles of Good Regulation.  In common with the New and Newer Principles, the definitions are somewhat fuzzy, though the headline principles themselves benefit from being relatively succinct and easy to reference.  In addition, the Earlier Principles have endured for some time.  That means that not only is there at least some familiarity with their meaning amongst regulators and the regulated, but also that they have acquired a legal status via an evolving statutory framework.

Legal Status

Importantly for this post, the Earlier Principles not only litter Explanatory Notes to legislation, Explanatory Memoranda associated with Statutory Instruments, impact assessments and consultative documents from Ministerial Departments and regulators as policy justifications.  They are also frequently found in legislation itself, both to frame the duties of regulators and to reflect the scope of regulatory obligations more generally.

Some examples may assist.  The Earlier Principles are the trigger for a Legislative Reform Order under s. 2 of the Legislative and Regulatory Reform Act 2006.  A Minister can make an order to secure that regulatory functions are exercised to comply with them.  Similarly, regulators exercising any function to which s. 21 of that Act applies must have regard to the Earlier Principles, as well as to the Regulators’ Code issued under s. 22, the current version of which was designed to “promote proportionate, consistent and targeted regulatory activity” and thus aligns with the Earlier Principles.  The regulators and functions caught by this regime are set out in Legislative and Regulatory Reform (Functions) Order 2007 (as amended), and the list is not short.  As a result, the Earlier Principles underpin the activities of many regulators in the UK from the Charity Commission to the Pensions Regulator, from the Financial Services Authority to the Food Standards Agency and from the HSE to the Hearing Aid Council, and the regulatory activities of Government ministers under a wide range of statutes.  In addition, when taking certain enforcement action, the requirement to follow the Earlier Principles is underpinned by the regime set out in the Regulatory Enforcement and Sanctions Act 2008.  In order to bestow power on a regulator to issue civil sanctions, shorthand for the power to issue fixed monetary penalties, discretionary requirements, stop notices and enforcement undertakings linked to the Macrory Report, the relevant authority must be satisfied, under s. 66, that the regulator will comply with the Earlier Principles as set out in s. 5(2) of that Act.  Hence, the Earlier Principles form part of a generally coherent meta-regulatory framework, but it is not clear how the New and Newer Principles are intended to fit into this regime.  Are they additional considerations for policy-makers and regulators?  Or are they intended to replace the Earlier Principles?    

The Earlier Principles also appear in Acts relating to specific regulatory regimes, and here the scope for confusion is greater because the New and Newer Principles may also come into play deliberately or inadvertently.  Take Ofcom’s duties under the Communications Act 2003.  Section 3(3) provides that:

“In performing their duties under subsection (1), OFCOM must have regard, in all cases, to—

(a) the principles under which regulatory activities should be transparent, accountable, proportionate, consistent and targeted only at cases in which action is needed; and

(b) any other principles appearing to OFCOM to represent the best regulatory practice.”

It is not clear whether s. 3(3)(b) therefore incorporates the New and Newer Principles into the statutory regime.  Is it now suggested that OFCOM can be legally challenged if it does not take regulatory decisions in such a way as to ensure it is “leading from the front” or being “pro-innovative”?

In R (Gallaher) v The CMA [2018] UKSC 25, [50], Lord Sumption warned of the importance of not unnecessarily multiplying categories of public law and, citing Lord Hoffmann in Matadeen v Pointu [1999] 1 AC 98, he referred to a requirement for consistency, being the relevant principle at issue in that case, as a “general axiom of rational behaviour”.  Indeed, it might be possible to fit a failure to follow some of the Earlier, New and Newer Principles into a rationality analysis.  Perhaps a regulator who was unnecessarily risk adverse, or who took a decision in ignorance of international best practice, would, in the words of Lord Diplock in the GCHQ case ([1985] AC 374), be taking a decision that is “so outrageous in its defiance of logic or accepted moral standards that no sensible person who had applied his mind to the question to be decided could have arrived at it.”  But rationality is a high bar, and it is notable that whether it is Wednesbury unreasonable to act disproportionately or whether proportionality should be adopted as a distinct ground of judicial review is a vexed question.  It might also be possible to fit some elements of transparency and perhaps “being collaborative and responsive when engaging with businesses” and “understanding how regulation is applied at local levels and felt by business and consumers” into grounds traditionally falling under the heading of procedural impropriety.  However, it is at least arguable that certain regulators caught by s. 21 of the Legislative and Regulatory Reform Act could be acting ultra vires if they were to act disproportionately, inconsistently, un-transparently etc. The OFT was not subject to that section for regulatory functions under competition and merger law and so the issue did not arise in the Gallaher case. It is also arguable that those operating under legislative frameworks equivalent to the Communications Act could find their legal obligations extend further. Of course, for judicial review, it would need to be “highly likely that the outcome for the applicant would not have been substantially different if the content complained of had not occurred” under s. 31(2A) of the Senior Courts Act 1981, but that is not impossible, especially in areas around international best practice and innovation.  For statutory appeals mechanisms, the wording of the relevant Act and associated appeals regime would need to be considered.  However, the potential for a decision to be wrong in law because a principle has been ignored or misapplied remains.  Greater clarity of the applicability of the New and Newer Principles, their interrelationship and their relationship with the existing regime is needed.

Conclusion

It is important to take stock of the regulatory landscape in the UK post Brexit and to reflect on the appropriate rationale for regulatory intervention by central Government and regulatory bodies.  It is not the intention of this post to argue for a particular rationale to be adopted.  That is a political decision for the newly elected Government to determine.  However, it is key to be clear what legal status and meaning is attributable to any guiding principles that emerge from a review of this area and to ensure a coherent regime results.  Currently, the potential for uncertainty about the meaning, applicability and legal status of the New and Newer Principles risks being detrimental to the goal of smarter regulation.

With thanks to Mike Gordon, Paul Scott and Se-shauna Wheatle for their helpful comments on an earlier draft. 

Kate Ollerenshaw is a Lecturer at the University of Hertfordshire

(Suggested citation: K. Ollerenshaw, ‘Smarter Regulation: A Proliferation of Principles’, U.K. Const. L. Blog (17th July 2024) (available at https://ukconstitutionallaw.org/))