Regulatory Lessons From The United Kingdom (Continued)

Overview of the Red Tape Challenge

In early 2011, the UK started the Red Tape Challenge to gather ideas as to how it could improve its regulatory state. Every few weeks, the UK government publishes regulations relating to a specific “theme” on this government website. People and businessmen alike can then comment as to which regulations are unnecessary or overly-burdensome in any given theme. Furthermore, people can recommend how regulations can be fixed, or recommend that a regulation be eliminated.

The relevant department that administers a regulation then collects these thoughts and makes regulatory policy proposals using the “evidence” obtained in the comments section of the Red Tape Challenge website. Department ministers have three months to justify the existence of a regulation and are “challenged” by relevant stakeholders.

The “Star Chamber,” which consists of Cabinet Office members and various ministers, then decides if a regulation is justified. If a regulation is not justified, the Star Chamber makes a regulatory policy recommendation to the relevant department. The relevant department responds to this recommendation in a proposal.

The “Reducing Regulation Committee” and other Cabinet sub-committees then consider the Star Chamber’s proposal against the relevant department’s proposal. These committees ultimately decide which proposal to accept and their decision is then implemented.

Results of the Red Tape Challenge

Of the 2,500+ regulations reviewed thus far, 51 percent will be scrapped or improved as the UK seeks to meet its goal of abolishing or reducing at least 3,000 of the 6,500 regulations under review.

As an example, a Red Tape Challenge Update report from the Department for Business Innovation and Skills (BIS) shows that for the “retail” regulation theme, the BIS scrapped 44 percent of regulations under consideration, and improved 16 percent.

In just under two years, the UK’s Red Tape Challenge has helped business to save over £155 million (or $233m) per year. This equates to less than 0.2 percent of the £80 billion that UK regulations cost annually. Since U.S. regulations cost about $1.8 trillion per year, if we also saved 0.2 percent of regulatory costs, the U.S. would be saving about $360 billion annually.

As a specific regulatory reform example, one regulation that required a business car insurance certificate is set to be eliminated for 1 million at-home workers. This will save businesses £33.5m per year.

Lessons from the UK

Listening to the people can help the government to know which regulations are cost-effective and which ones are not. As Hayek wrote in “The Use of Knowledge in Society,” information is spread throughout society; thus, the government cannot possibly know all relevant information when it comes to regulatory costs and burdens.

Allowing the people to voice their comments on certain regulations increases the government’s knowledge of regulations, which helps with regulatory reform efforts as the government decides which regulations are worthwhile.

Furthermore, online pressure from the people and relevant stakeholders causes departments to reconsider thousands of regulations, thereby saving hundreds of millions of dollars annually. Giving the people a greater voice in the regulatory decision-making process acts as an effective check on regulatory agencies.

Lastly, forcing departments to justify regulations puts added pressure on agencies to end frivolous or unnecessary regulations. Essentially, this process ensures that regulations exist for a reason — not just to give government agencies increased power.

Through the comments of the masses and the forcing of departments to justify regulations, the U.S. too can save hundreds of millions of dollars and improve the economy along with our regulatory state.

To see the previous post in this series on regulatory reform, please read Lessons on Regulatory Reform: Texas