Time is Money: How Regulators Can Support Growth (Industry and Regulators Committee Report)
(3 days, 16 hours ago)
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Baroness Hayter of Kentish Town
That the Grand Committee takes note of the Report from the Industry and Regulators Committee Time is Money: How Regulators can Support Growth (3rd Report, HL Paper 301, Session 2024–26).
Baroness Hayter of Kentish Town (Lab)
My Lords, in addressing our report I pay tribute to our committee staff, Rhiannon Williams and Dominic Cooper, together with invaluable support from an NAO secondment, Sarah Pearcey, and committee members, including the noble Baronesses, Lady Harding and Lady Valentine, and the noble Lords, Lord Fuller and Lord Udny-Lister, from whom your Lordships will hear today, along with my noble friend Lady Carberry and the noble Lord, Lord Camoys, who are also on the committee and from whom we might hear today. We will also hear from my noble friend Lord Chandos, who was in at the start of the process, although he then escaped for good behaviour.
I start with an apology to my noble friend Lord Smith of Ranmoor for misnaming his former organisation, the FSA—obviously it is the agency, not the authority—in the table on page 11. I have to confess that it was he who spotted that, not me.
I also thank the then relevant Ministers, my noble friend Lord Livermore and Blair McDougall MP— notably and significantly from both the Treasury and the Business Department—for appearing in front of the committee, as did the noble Lord, Lord Willetts, who was of enormous assistance to our work.
The report examines the Government’s attempt to help boost their growth objective via their action plan for regulators—an objective that I am sure the Committee shares. Writing in the Times on Saturday, however, the Chancellor admitted that
“growth cannot be commanded from Whitehall”,
but that it could be helped by removing the barriers that hold back investment and by bringing down costs and bureaucracy, which Ministers judge includes regulation. That led to the question that we asked as to the impact that regulation can have in encouraging or facilitating growth and whether the Government’s action plan will help regulators to achieve this objective.
Done well, regulation can boost consumer confidence, can provide a level playing field that helps competition and can help provide certainty to businesses and investors, whether from here or abroad. Done badly, particularly if it is slow, regulation can cause uncertainty, costs and delays to new products, services and infrastructure and it can harm the economy and disadvantage consumers by denying them cheaper, improved or new products.
While our committee welcomed the intention of the Government’s action plan, it was not always apparent what this meant for individual regulators, whose responsibilities can differ greatly. The Food Standards Agency, for example, wants there to be more nimble and accessible new technologies, but could that conflict with improved agricultural trade with the EU? Other regulators have vital objectives for safety, health and the environment, as well as for consumer protection, so they need to weigh up whether any relaxation on their focus on those important issues could leave workers, shoppers or road users more exposed and carrying more risk themselves. We therefore ask Ministers to provide individual regulators with a more granular picture of what their growth agenda actually meant in practice.
The Government’s response was that they had issued more specific goals to key regulators, although these largely related to specific activities, rather than clarifying how a focus on growth should be balanced with their core objectives. However, just as the Government need to be clearer about their expectation of regulators, so regulators should be clearer as to how businesses should comply with their various demands. We heard from witnesses that too often a lack of early engagement and dialogue and an absence of guidance led to duplication and delay of approvals, which brings us to the question of speed—or pace, as seems to be the in word these days.
Our recommendations here are important for the Government’s agenda but have a resonance beyond this. All regulators should work quicker and smarter than they often do. They are dealing with services and manufacturers, developers, entrepreneurs or innovators in the real world. As the title of our report suggests, time is money. Time can sometimes save lives, when new safety devices, drugs or health breakthroughs could be approved with due checks but without unnecessary red tape. It seems that red tape is indeed the issue sometimes.
Regulators have two tasks: to enforce their actual regulation but also to run an assurance scheme that checks on compliance. We had one question: is the Government’s 25% desired cut on admin the most important measure, or is it the cost to manufacturers of making the adjustment in what they are producing to comply with the rules? The example that we heard was whether it was more expensive for a fridge manufacturer to make sure that the fridge was built to comply with rules or whether it was the paperwork to show the regulator that they had complied with the rules. The Government replied that they had identified £2 billion in admin costs, a third of the £5.6 billion target, although they said that they would also address broader regulation costs to ensure that businesses benefit from reforms. We urge the Government to focus on the wider issue of regulatory compliance, not just red tape, especially as this has lessons for the future.
In this House, as those who have been here a long time will know, we often jib at allowing ministers too much power under secondary legislation, which Parliament therefore cannot influence. But in this report we found that sometimes over-prescriptive rules in primary legislation mean that outdated requirements cannot be quickly altered, even when a regulator wants to do that—so there are lessons for future legislation. Indeed, since this report, our committee has now heard particular examples of legal regulations. The example that we give, looking at the defence industry, is the requirement in law for life jackets on boats. That requirement becomes a little bit meaningless when we are talking about uncrewed vehicles. The regulation cannot be dumped because it is in primary legislation, yet the whole nature of warfare changes as we use autonomous vehicles. That is a lesson for future legislation.
There is another aspect of regulators’ behaviour that is alleged to get in the way, the tendency to risk aversion—and that is easy to understand. When they do something right, nobody notices that the regulators even exist, but one fault, one accident or serious injury, or damage, and the press and Parliament are down on them like a ton of bricks. If the Government want regulators to be bolder in decision-making and less risk-averse, and allow them to see the upsides as well as downsides of new developments, the Government are going to have to provide some political cover for regulators. Each sponsoring Secretary of State must make it clear to their particular regulator that they will honour that.
Indeed, the leadership of regulators is vital in mitigating, rather than avoiding, risk. The appointment of the chair, and often the board, is in the hands of Ministers, as are discussions on their annual reports. Ministers must make their expectations clear and their own tolerance for risk understandable to the regulators, along with the degree to which they are willing to allow consumers to bear any resulting risk if exact regulations are not nailed down and enforced. Ministers are calling for a culture change among regulators, but it will be achieved only if they understand that the level of acceptable risk is a political decision and should be decided by Government, and that they must set out their own risk appetite for regulators and give a clear steer as to when that could be sacrificed to help promote, or at least not stifle, growth. The Government are going to strengthen the growth duty in the regulation for growth Bill and issue steers to guide regulators in applying the new duty, so can my noble friend the Minister let us know when we might expect the Bill?
There is clearly significant room for regulators to improve how they work, especially on the pace of decision-making. Delays increase the cost of borrowing and can make the UK less attractive for investment. Time is money, and speed was the main ask we heard from businesses. While the action plan floated the idea of paid-for fast lanes for approvals, we concluded that allowing some companies to pay for quicker decisions could reduce public trust, disadvantage small or innovative new entrants and remove the incentive for the regulator to speed up all of its processes. All companies need speed, not just the rich ones.
The issue of pace came through strongly, and therefore while we acknowledge the idea of looking for paid-for regulators, it seemed to us that there were other ways to improve things, whether by digitisation, AI, regular and earlier dialogue or a more proportional approach. There are some areas in which companies have to deal with more than one regulator, leading to a government pilot which we welcomed, with a lead environmental regulator. However, that initiative applies only to regulators within the same department, whereas many companies have to deal with more than one department. It also does not allow decision-making to move to the lead body. Can the Minister update us on the work and thinking in that regard?
The committee agrees that the Government are right to turn their attention to the role of regulators, which could make a useful, though not decisive, contribution to the growth objective. Regulators can deter but not actually create growth, but they can certainly facilitate it. However, the Government must take some strategic decisions to fill their scope in this regard. Ministers will have to provide political cover if they want regulators to be less risk-averse, and they must use their role as sponsoring Ministers to ensure regulators up their game in their processes, speed of decision-making and openness to dialogue with the regulated community. Every regulator must maintain a solid focus on their core function, whether that is financial stability, health and safety, consumer protection or fair competition. I commend the Government for their work in this area, and I look forward to seeing the outcome of their action plan in due course. I beg to move.
Lord Willetts (Con)
My Lords, I congratulate the noble Baroness, Lady Hayter, on chairing the committee, which has produced this excellent report, giving a lot of practical advice on how we can ensure that the regulatory regime is improved. I declare an interest: I chair the Regulatory Innovation Office, in which capacity I gave evidence to the committee. Our task is to ensure that regulation does not stand in the way of desirable innovation and new technologies, and we operate under the scrutiny of the noble Baroness, Lady Lloyd of Effra.
I want to pick up on three points from the report. First, there is the growth duty, what it means and how one can promote growth. My view is that it is absolutely right to try to be as explicit as possible about the growth duty, and it is also then legitimate for Ministers, within that legal framework, to specify in letters and communications to regulators how they think the regulators can promote growth within their overall statutory responsibilities. All too often, under successive Governments, we have seen communications from government to regulators which are long lists of desirable things but do not give a sense of priority and are not sufficiently granular to provide action or “political cover”, as the noble Baroness called it, for officials in those regulators. So the more specific those guidelines and letters drawing on the growth duty are, the better. As an example, they should clearly focus on timeliness. Pace is indeed an issue, especially if you are a start-up. If you are trying to do something different and have limited resource or an impatient venture capital fund behind you, you need to get on with things, while the big, moneyed incumbents are much less focused on getting things done quickly. So dealing with things quickly helps new entrants. That is one area that can be looked at.
Regulators inevitably tend to focus on the “day job” and on what they are already familiar with. Getting them to think to about the innovative people coming in from the side who have thought of a different way of doing things and have the staff to engage with them is important. One thing we tried to do at RIO was shift the priorities in a regulator to ensure that innovative technologies coming over the horizon are properly understood and the companies delivering them are engaged with. That is another thing that is clearly pro-growth. There is then the frustration that companies have of concluding with one regulator to be told finally, “And now we’re passing you on to the next regulator”. The more that these processes can be simultaneous and parallel rather than sequential, the better.
Another area where RIO, working with Ministers, tries to make process is in convening groups of regulators to confront them as a group with some new technology, just to work out exactly who is responsible for what and how that can be communicated to innovative companies and the technology community. So there are practical things that can be done on growth.
The second point is on risk aversion. Speaking as a former Member of Parliament who used to face real constituents, I can understand the difficulties of standing in front of one’s voters and saying, “We’ve got this great idea: you’re going to take more risk”. It is not always a palatable message. My view is that we can make a lot of progress by looking at what we mean by risk. Often, the real problem is that the definition of risk is very narrow; it is what encompasses the specific responsibilities of the regulation, and it means that wider benefits are not taken into account. I shall give an example—which is not invidious and it is slightly simplified. There are lots of uses of drones. The CAA, with which we have a good, constructive dialogue, is worried about drones flying beyond line of sight and carrying heavy equipment, particularly electrical equipment, so its instinct is to say, “Our job is airspace and protecting airspace, and these types of drones are potentially risky”.
However, there are wider benefits. If the electrical equipment that the drone is carrying is a defibrillator—this issue was raised by the Welsh Ambulance Service—drones flying defibrillators to help people with heart attacks, which is what happens in Switzerland, is a good overall reduction in risk for British citizens. So we are not saying to British citizens, “You have to take more risks because we’re going to going to regulate drones more lightly”. We are actually saying, “When you’re looking at the risks of that bit of electrical equipment landing on someone because a drone crashes, also bear in mind the wider angle of it being used for a medical purpose”. Often, that wider perspective is not one in the minds of the regulators, but we can put it in the minds of the regulators. In other words, benefit aversion is the problem, not risk aversion.
My third and final point is that there is an important section of the report on the difficulties of overspecific regulation. We see that all the time. There is a great example in the report of the FSA requiring chilled foods to be chilled in storage, not allowing for the fact that the transport itself can be chilling now. There is an awful lot of that. The more we can have broad regulation and then use standards and trusted bodies such as the BSI, the better. Let us face it: this House is sometimes one of the worst culprits in adding detail to regulation. If one message that went out from our debate today to our colleagues was, “Lay off a bit”, that itself would be significant progress.
Baroness Valentine (CB)
I am delighted to follow the noble Lord, Lord Willetts. We did indeed hear some interesting examples about successful sandboxes in our evidence. However, the lessons from those sandboxes did not seem to spread into the wider regulator and its behaviour.
I shall declare some interests. I work as director of place for Business in the Community in cities such as Blackpool, Bradford and Sheffield, and I am chair of Heathrow Southern Railway, which plans to build a railway south from Heathrow to connect with lines to Woking and Waterloo. In both those capacities, the interface with government is fundamental to growth. For instance, Blackpool has just been shortlisted for City of Culture, which would turbocharge its tourism industry, and, post HS2’s northern demise, Bradford needs better rail connectivity to Manchester.
In all the places where I work, youth unemployment is endemic. The Department for Education, the DWP, the business department, local authorities and the Careers & Enterprise Company all have a role, which too often leads to confusion and inaction. For Heathrow Southern Railway, imagine having to make sense of the different ambitions and boundary conditions involving the politics, policy and regulations around the expansion of Heathrow. You have the CAA, as was referred to earlier, the ORR, the DfT, GBR, the Transport Select Committee and the Treasury, to name but a few.
I was delighted to contribute to the committee’s Time is Money report, and I shall focus my remarks today on a few practical examples. Let me start with overlapping regulatory responsibilities. I mentioned the difficulty of getting good careers advice to the young unemployed. Sheffield, however, has created a one-stop shop called See It Be It for schools and businesses involving all the relevant intermediaries, with the result that there are tens of thousands of helpful interventions. One-stop shops are simply a matter of will and good practice. Unfortunately, in our evidence sessions, we heard examples of departments and regulators asking for overlapping but different information or providing conflicting policy advice. Anglian Water told us that in one year it had provided 30 reports on storm overflows to Ofwat, the department for the environment and the Drinking Water Inspectorate. The department for the environment is trialling having a lead regulator, but it does not go as far as sorting out agreed policy and it does not work across to other departments’ regulators. Another positive example is the department for business’s provision of dedicated concierge and front door services for financial services inward investors.
The plethora of regulators and departments around Thames Tideway offers a parallel to Heathrow Southern Railway. The super-sewer was designed to prevent London reaching European pollution limits. The department for the environment and Ofwat were concerned to minimise costs to the consumer, and there was the usual toing and froing about whether this would be on or off the balance sheet. The eventual breakthrough was a senior reference group involving all relevant government parties which established a clear investable pathway and the long-term certainty that investors needed to commit capital. Now that the tunnel is open, I am delighted to say that the Thames has improved from being biologically dead in 1957 to harbouring millions of fish and 4,000 seals.
But this example throws up two common challenges. The first is the tension between keeping prices down for today’s consumer versus investing in the future, and the second is the Treasury. In the 1990s, I had regular conversations about funding London’s transport with three bright young things in the Treasury, namely Ed Balls, Ed Miliband and Shriti Vadera—now the noble Baroness, Lady Vadera. Their view about being on or off balance sheet was that the primary concern was whether the investment was good for UK plc and whether the Government made a good return on any contribution that they made. The simplicity of this view gets lost in worries about ONS classification. Looked at from the perspective of a lowly regulator, on the one hand one has the Treasury saying, “Be less risk averse and more open to innovation”, but on the other, if your project is novel and contentious, the Treasury’s approach will be scepticism and mistrust. These seem like mixed messages.
Where I have less sympathy with the regulators is on efficiency. It should be a given that all regulators are continuously improving their processes and their transparency about timeframes and stages of decision-making. I am delighted that in two of our investigations, into the Building Safety Regulator and the defence industry, timeframes for decision and procurement respectively are being improved, in each case with new leadership. As the title of the report says, time is money.
I finish with two pleas. First, set every regulator a key performance metric on efficiency as one of a small number of priorities. Secondly, advocate “one-stop shop” arrangements to improve user-friendliness and provide clear investable pathways for investors.
Viscount Chandos (Lab)
I am very grateful to my noble friend Lady Hayter of Kentish Town for her incisive introduction to today’s debate and for her leadership of the Industry and Regulators Committee, which has produced this excellent report. As she said, I was a member of the committee for the first few weeks of its inquiry and much regret not overlapping with my noble friend, who has brought a lifetime of focus on consumer interests to her new role. I declare my interests as disclosed in the register, as the director of RSMB, the Theseus Agency and Digbeth Loc. Studios, and as an adviser to the family office, WFO Services.
I welcome and endorse the analysis and conclusions of the report, which shines a light into what it correctly describes as the “mixed picture” of regulators’ roles in encouraging and stimulating economic growth. Successive recent Governments have placed great emphasis on regulators ensuring that they take proper account of growth as an objective. At the risk of being pedantic, I do not think it is right for regulators baldly to “prioritise growth”, which risks a mistaken direction of the industry or the products and services concerned, as well as raising unrealistic expectations for what the regulator can achieve. Language matters.
I wholeheartedly support a direction to regulators to seek, particularly in the light of the rapid innovation which the noble Lord, Lord Willetts, oversees, a better balance between consumer protection and the promotion of growth on the part of the producers of the goods and services being regulated, and hence of the economy as a whole. But that is very different from the rhetoric of prioritising growth. The report accurately identifies the complexity of this issue and the need to make trade-offs between fostering growth and other factors, such as consumer protection and environmental standards. I am not convinced by the Government’s response, shortly before the change of Prime Minister, that the proposed regulating for growth Bill will bring the strategic clarity that is needed to enable widely differing regulators to balance the conflicting objectives that they are having to juggle. I join my noble friend Lady Hayter in asking my noble friend the Minister to indicate the timing of the Bill’s introduction and her current thinking about how to define the judgments and trade-offs that are needed.
The challenges in each regulated industry or sector vary significantly: in financial services, overseen by the Industry and Regulators Committee’s sister committee, there is clear evidence of clumsy and onerous regulation holding back growth in this vital and world-leading service sector without commensurate improvement in consumer protection. In the water industry, under the Conservative Government, short-term and politically influenced focus on holding down consumer prices and lax supervision of corporate behaviour led to serious detriment to the long-term interest of consumers, as well as the undermining of the industry’s financial resilience. The legal services industry is undergoing fundamental changes in ownership and operation as outside capital is introduced through private equity in the stock market, akin to the “big bang” in financial services 40 years ago. The regulation of legal services is currently diffuse, incestuous—dare I say it—and questionably fit for purpose, as these developments change the motivation and behaviour of firms. Can my noble friend the Minister say whether she believes that the regulation of legal services provision strikes the right balance between independence, growth and consumer protection?
The report makes only passing reference to generative AI and AGI, as the committee’s remit was very much focused on existing regulators, but this area poses the starkest challenge in balancing growth and consumer— and, indeed, human—protection at a time when leading companies in this field acknowledge in their initial public offering documentation the non-trivial possibility of devastating systemic harm to mankind. Can my noble friend provide any update on the Government’s intentions for the overarching regulation of AI?
I will end by unashamedly asserting the primacy of consumer protection in regulation, reflecting the asymmetry in power in most cases between consumers and producers and providers. As the report argues, stable, fair consumer protection is a necessary condition for producers and providers’ growth anyway. The most efficient and streamlined application of well-designed regulation is a complementary factor in stimulating that growth. This report gives a compelling summary of the challenges facing the Government in achieving this balance and therefore deserves the closest possible attention and action.
Lord Ashcombe (Con)
My Lords, I declare my interest as an employee of Marsh. I warmly welcome this report and congratulate the noble Baroness, Lady Hayter, and her committee on what is an extremely useful piece of work looking at the cost of regulation. It gets to the heart of the debate we have returned to many times in this House and does so with commendable clarity. This debate has been running for some time. I want to suggest that a clear consensus is emerging around three core pillars. What strikes me about the committee’s report is how powerfully it supports that framework.
The first pillar is sophistication in design and efficiency in implementation. Regulation that is blunt, where it should be precise, or rigid where it should be adaptive, does not merely inconvenience firms; it actively distorts markets and harms the very consumers and stakeholders it was designed to protect. Good regulation is not light regulation but intelligent regulation. The two are not the same, and we should resist any conflation of them. The committee is right to call for regulators to provide clear guidance early and ensure their requirements are unambiguous from the outset. That is not a procedural nicety; it is a prerequisite for any regime that wishes to be taken seriously.
The second pillar is the recognition and removal of fragmentation. The committee identifies directly that additional complications arise from companies where their projects are overseen by multiple regulators. This is, in my view, one of the most underappreciated structural failures in our current regime. When multiple regulators operate across overlapping domains without adequate co-ordination, the result is not merely duplication; it is the creation of blind spots. Firms fall between the gaps, risks go unmonitored and the cumulative compliance burden on those caught across multiple regimes becomes, in practice, prohibitive. I hope that the Government will treat this not as a long-term aspiration but as an immediate operational priority.
The third pillar is transparent decision-making. This is where I really want to linger, because I think that it is the main point; the committee’s call for clear guidance connects directly to it. If regulators must provide clarity early, the logical consequence is that they must also be transparent about how they will respond when things are unclear, contested or novel. Industry can absorb almost anything if it can plan for it; what it cannot absorb is uncertainty and the inability to anticipate how a regulator will behave. When firms face uncertainty, they do not take risks. They over-comply, over-report and over-resource.
The waste embedded in that precautionary behaviour is vast and almost entirely invisible to those who design the system, but—this is the point I do not want us to lose sight of—transparent decision-making cannot be achieved by regulators alone. It requires government to do its part. Regulators cannot be transparent about how they will resolve conflicts between objectives if government has never told them how those conflicts should be prioritised. That is a political responsibility. The strategic guidance and political cover that government provides, or fails to provide, is the foundation on which regulatory transparency either stands or collapses. The committee calls on the Government to play that role, and I believe that that call deserves to be heard very clearly.
I also commend the committee on drawing a distinction that previous reforms have consistently missed: the difference between the cost of paperwork and the cost of compliance. Reducing the administrative burden of form-filling is welcome, but it is a fraction of the real cost that firms bear when the system changes, with the structural adaptations and ongoing operational adjustments that regulation demands. If we focus on paperwork, we are, to use a familiar phrase, looking for our keys under the lamp-post. The committee has pointed us towards where the keys actually are.
I look forward with great interest to hearing from the Minister about how the Government intend to respond. The committee has done its work with rigour and purpose; I commend it on that again. The question now is whether the response will match the ambition of the diagnosis.
Baroness Gill (Lab)
My Lords, I, too, warmly congratulate the noble Baroness, Lady Hayter, and her committee on this exceptional report. Having worked across the public, private, corporate and not-for-profit sectors, I entirely concur with its central premise: time is money. In my experience, unlocking growth is not about a lawless race to the bottom or having less regulation; it is about achieving consistency, interoperability and efficiency, with a confident, not defensive, approach from the regulators. Global investors look for speed and predictability, but, right now, bureaucratic silos and delays are costing the UK lost opportunities.
For me, two specific proposals in the committee’s report highly resonate. The first is the call for a single front door for multiregulator projects. Breakthroughs such as AI medical tools or autonomous delivery drones do not fit into historical boxes. A single portal for concurrent assessment would instantly slash time to the market. The second is the focus on improving the pace of decision-making via fast lanes. If a business has already cleared rigorous regulatory hurdles in a trusted jurisdiction, such as Japan or the European Union, we should offer passported compliance. Reinventing the wheel simply drives innovators overseas. I therefore welcome the draft proposals being discussed presently between the European Union and the UK on agriproducts, which will eliminate lengthy checks at ports. Trade and growth are not just about tariffs but trust and speedy flow of goods. That will lead to growth.
However, to truly support growth in a fast-moving economy, we must also address the compounding weight of legacy rules. I recognise that automated sunset clauses are politically controversial, but I am absolutely not suggesting a blanket eradication of laws. Instead, we should tie sunset clauses directly to digitalisation. As technology evolves, the administrative processes used to enforce regulation become rapidly obsolete. The Government should mandate that digital compliance frameworks and administrative reporting requirements placed on businesses automatically expire after a certain time—maybe five years. This would force the regulators continually to modernise their systems, strip away analogue red tape and transition to leaner, data-driven oversight.
Finally, we must also recognise that opening up digital markets is itself a powerful pro-growth policy. When we properly resource units, such as the CMA’s digital markets unit, to curb the market power of tech monopolies, we create the predictable level playing field that some smaller domestic innovators desperately need to scale up.
I conclude by asking the Minister an overarching question. Given that the IPPR found that 79% of digital-intensive UK firms view big tech dominance as a primary constraint on growth, will the Government commit to a modernised, enforced strategy that pairs aggressive digital market competition with targeted sunset clauses on legacy administrative reporting, ensuring that our regulatory state moves at the same speed as technological innovation?
Lord Black of Brentwood (Con)
My Lords, like others, I warmly welcome this report from the Industry and Regulators Committee. I pay special tribute to the noble Baroness, Lady Hayter, for her exemplary leadership in this area. As I know from other issues on which she and I work, she is a doughty campaigner and we are lucky that she has brought her skills to bear in this vital area of regulation.
The title of the committee’s report, Time is Money, is spot on. Nowhere is this truer than in digital markets, which the noble Baroness just mentioned, where delay and inaction are not neutral. Every day that the unaccountable big tech platforms go unchecked is another day in which they entrench their monopolies further and, frankly, pile up profits on the back of other people’s labours.
The recent issue surrounding Meta, which was raised in our Oral Questions last week, is an excellent case in point. Last month, it told every business with a Facebook or Instagram account that its new terms and conditions would allow it to scrape their websites with impunity. That was a huge threat to news publishers; it was almost existential—I declare my interest as deputy chairman of the Telegraph Media Group. Its message was: “You pay to produce the news, and we’ll harvest it for free”. The CMA deserves real credit for opening an investigation into this under the Competition Act 1998, but the truth is that it should not have to resort to a tool that can take many months to extract binding commitments or—if Meta does not accept that it is in the wrong and offer solutions—years to reach a remedy. As the report says and the noble Baroness powerfully underlined, speed is essential for effective regulation.
The CMA has called Meta a potential candidate for strategic market status designation under the Digital Markets, Competition and Consumers Act, which would allow it to publish tailored, focused, ex ante requirements. However, “potential” is the problem word there. As far back as 2020, the CMA itself concluded that Facebook’s market power warranted this regime, yet Meta is still not designated. Had it been, I doubt it would have attempted anything so brazen as it did last month.
The legislation, if applied, really does work. Because Google was designated under the regime as having strategic market status, publishers can now withhold content from AI overviews without vanishing from search results. That is the DMCC Act at its best: flexible, targeted remedies, built firm by firm on the evidence. I believe this is far preferable to the blunt instrument of news prominence proposed in the Government’s media Green Paper. What use is prominence if publishers have to withdraw their content because the price of admission to a platform is having their content used as AI training material for free? That way lies commercial perdition—and, indeed, the end of a free press, which my noble friend Lord Hunt of Wirral believes so strongly in.
Also relevant to this excellent report, we need to ask why the CMA has not designated Meta or other big tech services that extract excess profits from consumers and crowd out UK start-ups. I do not think the fault lies with the CMA itself, which has done really good work under difficult circumstances; I fear the culprit is the Government’s 2025 strategic steer to put inward investment front and centre. The IPPR report, Bottleneck Britain, found that digital-intensive UK businesses rank big tech’s market power as the second biggest constraint on growth, ahead of finance and talent. The Government’s steer has the priorities backwards, and they should urgently change their direction by expressly backing the CMA to use the powers that we in Parliament gave it and resource it to match. A regulator facing the world’s most valuable companies cannot do the job on a shoestring.
The same question matters for the regulating for growth Bill, which the noble Viscount, Lord Chandos raised. What type of growth will it mandate? I hope it will not be the sugar rush of inward investment announcements of the sort that lets big tech off the hook. It should be growth felt by British businesses and citizens, powered by firms that scale and stay here. The growth duty must never override regulators’ core functions. There is little point in a £500 million sovereign AI fund if the CMA cannot regulate monopolists who swallow up potential UK tech champions. That Bill also risks being lopsided. Ministers propose AI growth labs to exempt AI firms from regulation, potentially with sweeping Henry VIII powers to make those relaxations permanent. Yet where a light-touch rule would unlock massive growth for UK firms, they hold back. AI crawlers harvest content anonymously and ignore the wishes of content creators. The Government should put bot transparency provisions into the regulating for growth Bill.
I would like to press the Minister on a number of points. First, will the Government urgently issue a new strategic steer that backs the CMA to take on big tech with the resources that it needs? Secondly, will they ensure that the regulating for growth Bill focuses on growth that will be felt by UK citizens and businesses? Thirdly, will they put bot transparency provisions into the same legislation? Time is indeed money, and British firms, including our world-class content creators, are paying for every day of delay.
Lord Nagaraju (Lab)
My Lords, I thank the noble Baroness, Lady Hayter of Kentish Town, and the members of the Industry and Regulators Committee for its report. I declare my interests as the director of AI and AI policy companies.
The report makes a compelling point: good regulation can encourage investment and innovation, but unnecessary complexity, uncertainty and delay can hold back economic growth. I want to focus particularly on artificial intelligence, because the committee heard direct evidence of how regulatory barriers can affect innovation in this sector. The committee heard from MyCardium AI, a company developing AI technology to improve heart scans. Its representative explained that the company’s pilots were taking place overseas because establishing an initial pilot or equivalent regulatory sandbox was more difficult in the UK. Importantly, the same company emphasised that clinical safety must remain paramount and welcomed rigorous regulatory scrutiny. This example captures the challenge before us. We should not have to choose between innovation and public protection; we need a regulatory system that delivers both.
Britain has world-class research and considerable technological talent, but scientific breakthroughs must be translated into products and services that improve people’s lives and contribute to economic growth. The committee rightly recommends clearer regulatory guidance, faster decision-making, early engagement with businesses and greater use of regulatory sandboxes. These recommendations are particularly relevant to AI, where technology can develop faster than traditional regulatory processes. The committee also recognises the values of principles-based and outcomes-focused regulation, which can provide certainty while allowing flexibility for innovation. I welcome the Government’s proposal to introduce statutory sandbox powers through the forthcoming regulating for growth Bill, but sandboxes must provide practical results and not simply opportunities for experimentation. They should help regulators to understand new technologies and give businesses clear guidance about the requirements they must meet.
We must also ensure that smaller companies benefit. The committee rightly cautions that paid-for fast lanes could disadvantage businesses unable to afford them. Faster and more predictable regulatory decisions should benefit all applicants. I therefore ask my noble friend the Minister two questions. First, how will the Government ensure that smaller AI innovators can access early regulatory guidance and appropriate sandbox opportunities without compromising safety? Secondly, will the Government establish clear, measurable expectations for regulatory decision-making times so that businesses can invest and plan with greater confidence?
Britain’s challenge is not simply to develop the technologies of tomorrow but to ensure that innovations developed here can be tested, adopted and scaled here. Effective regulation should protect the public while giving responsible innovators the certainty and confidence to succeed. That is how regulation can become an enabler of economic growth.
Baroness Harding of Winscombe (Con)
My Lords, I begin by thanking our chair, the noble Baroness, Lady Hayter, for her excellent introduction. I declare my interest as a member of the committee and my interests in various organisations, which are all regulated, as set out in the register.
The challenge with this topic is that, first, there are multiple types of regulator—at least four different types, as we heard in the inquiry: economic, such as Ofcom; market, such as the CMA; technical health and safety, such as the Building Safety Regulator; and systemic prudential risk regulators, like the PRA. So there are at least four types of regulator and there are multiple types of growth. Are we interested in short-term growth or long-term growth—growth in GDP or growth in personal disposable income?
I am in danger of descending into a sort of Oxbridge exam question rather than a five-minute speech in your Lordships’ Grand Committee. It is very hard to generalise, because when we talk about the relationship between regulators and growth, we have too many of both things that we are trying to match together.
However, I will make one general point—others have alluded to this. With the honourable exception of competition regulators, regulators do not drive growth. Generally, they constrain growth. That does not mean that I am against regulators. It is absolutely clear through history that the absence of all regulation is extremely bad for humanity. Think child labour or the thalidomide crisis; it is not difficult to see why we need regulatory guardrails in every market. But generally, too much regulation leads to lower growth, and the challenge is that well-meaning people—the noble Viscount, Lord Chandos, is absolutely right that we are those people—add complexity and cost in regulation if they are not very careful.
I am extremely supportive of the Government’s 25% reduction in administrative costs, but like other noble Lords, I think that that is the cherry on the cake rather than the cake itself in terms of reducing the costs. I refer noble Lords to one of our witnesses, John Fingleton, who led the review into the costs of our nuclear programme. He said to us that not only are we the most expensive country in the world to build a nuclear power plant but we are the most expensive country in the world to build one mile of road, one mile of rail, one tunnel or one bridge. That is not because of the admin costs. The bat tunnel and the fish disco are not encumbered by admin; it is the fundamental building of them that is the problem. I therefore ask the Minister, as I am sure she will update us on progress on the 25% reduction in admin costs: what is the Government’s target to reduce the overall cost of regulatory compliance? Unless we measure that and then target a reduction in it, I am afraid that, inevitably, regulation is hampering growth and not driving it.
The second point I want to make, which other noble Lords have also explored, is on the overlapping regulation problem. As the noble Lord, Lord Willetts, knows well, most scientific discoveries these days come at the intersection of different branches of science. I think the same is true of truly innovative businesses. They come at the intersection of different sectors and, inevitably, overlapping regulators. We have to find a solution to the multiple regulatory problem, which we heard about in this inquiry. It is encouraging to know that Defra is running a pilot to do that, but I am afraid I have become very old and suspicious. A pilot can go on for a very long time and never turn into something that scales. I would love to hear from the Minister how the Defra pilot is going on, when it will extend to other departments, and when it will extend to regulators from multiple departments, which is the real problem.
The final point I will focus on is the one regulator that does drive growth: competition regulators, which my noble friend Lord Black and the noble Baroness, Lady Gill, commented on. Done well, competition regulation creates the conditions for innovation and for growth. I have absolutely no doubt that the regulation of large, dominant tech firms can unlock growth opportunities for British firms. It can increase choice and can reduce prices for millions of consumers. The problem is, as my noble friend Lord Black said, that the CMA’s strategic steer charges the CMA with prioritising pro-investment alongside pro-growth. I think we have to be quite suspicious of international tech companies promising inward investment in exchange for the absence of regulation. History shows that that does not drive growth; it just entrenches monopolies. Like other noble Lords, I want to ask the Minister when the CMA’s strategic steer will be updated and whether it will be updated to focus more on measures of growth as they affect actual British businesses and British consumers than on announcements of inward investment.
I cannot finish without 30 seconds on AI. I also add my voice to ask the Minister when we will hear from this Government on how they intend to regulate AI. As a general purpose, AI technology touches all four different types of regulation. There is undoubtedly long-tail systemic prudential risk with AI. There is definitely health and safety risk and market competitive risk. Yet we keep being told that it is too early to regulate, which I really challenge. I look forward to hearing the Minister’s answer.
Lord Sikka (Lab)
My Lords, I thank the committee for its report, which is a response to the Government’s deregulation agenda. It lowers the guard-rails on public protection, and even protecting capitalists from themselves, in the chase for economic growth. This project is full of contradictions. The committee is right when it states that:
“Done well, regulation can boost consumer confidence and provide certainty for businesses to invest and innovate”.
The banking crash, Grenfell, the Post Office and numerous other scandals have shown that regulation has not been done well. Instead, the regulators are now hobbled with a growth objective.
The report amplifies the Government’s claim that they want to cut financial costs, but we also need to consider the social cost of not doing proper regulation. Consider the case of HBOS frauds, which date back to 2002-07. Despite overwhelming evidence, the Serious Fraud Office, the Financial Services Authority, the Financial Conduct Authority and the City of London Police refused to investigate. Eventually, the Thames Valley Police and crime commissioner decided to bring a case. In 2017, two former senior bankers and four corporate turnaround specialists were convicted of fraud and received 47 years of prison sentence. That did not prompt regulators to investigate or secure compensation for the victims. Successive Ministers passed the buck to HBOS owner Lloyds Bank. In 2017, Lloyds appointed Dame Linda Dobbs to investigate and prepare a report on the £1 billion-worth of frauds. To this day, there has been no report, despite the promise that it would be published in 2018, and despite numerous questions in this House, Ministers—who are the ultimate regulators—will not give answers. The victims continue to suffer.
There is little empirical evidence to show that regulators can combine public protection and the growth objective. England’s water regulators announce fines for illegal and anti-social practices, and then, to show obedience to the growth objective, they quietly defer or waive the payment. Executives gaining from anti-social practices are neither fined nor prosecuted. This has neither engendered trust nor secured the required investment.
The dash for growth has turned town centres into economic deserts. Private equity has destroyed city centres. Some 30,000 jobs at Poundland and its suppliers could vanish because regulators simply wave through takeovers by private equity; they do not really want to stop them. Big accounting firms routinely deliver dud audits after public exposure and pass the costs to clients in higher fees. The regulator, the Financial Reporting Council, in pursuit of the Government’s growth objective, is now reducing the number of audit-quality inspections and will instead rely on self-certification of audit quality, a model that has been so successful in the water industry. Numerous leaks show that big accounting firms are key nodes in the global flow of illicit finances. Nothing happens to them. Recently, BBC’s “Panorama” programme looked at how Russian billionaire Roman Abramovich dodged taxes and moved his wealth to the British Virgin Islands. I was asked to examine those documents, and they show that Deloitte knowingly helped to falsify documents to hide Abramovich’s wealth and help him evade taxes.
One thing is certain: no UK Government will do anything to any big accounting firm. In the absence of effective regulation, corruption, fraud and illicit financial flows will grow exponentially and harm the legitimate economy. The report raises the question of accountability, but it does not make recommendations that could improve public confidence, such as having consumer-elected directors on the boards of regulatory bodies or giving consumers the right to vote on the pay of directors of regulatory bodies—that would concentrate a few minds, would it not? Currently, we have regulators who are outside the freedom of information net. Regulators of insolvency and auditing are not subject to freedom of information laws. Why is that, Minister? I hope to get some comment on that.
We are now light years away from Cadbury’s Quaker capitalism. In the era of predatory capitalism, too many are willing to make a fast buck without facing any of the consequences. We need robust regulators to promote public confidence, and that should be their only objective. Promoting business growth is a matter for Ministers.
Lord Fuller (Con)
My Lords, it was a great pleasure to serve under the chairmanship of the noble Baroness, Lady Hayter—nearly as much as the displeasure expressed by the noble Lord, Lord Sikka, for financial regulation and regulators.
First, I sat on this committee. I had not previously appreciated the full complexity of our regulatory system, with at least 200 regulators—possibly more—and more being added every week. We heard that, of those, around 61 had a real focus on, or responsibilities relating to, growth, while 20 of them had a real impact on getting the economy moving. Yet around one third of the 61 had not even discussed their shared responsibility to increase the national income at a board level. That shocked me, because it is our role today to remind them of our—and their—shared endeavour: to make the nation richer.
It just so happens that we are not the only ones who think that action is needed. Over the weekend, the Times reported that No. 10 wants to improve regulatory oversight and boost local accountability to tackle “out of control” arm’s-length regulators; they are all “in the firing line”, we hear.
As I listened to the evidence, what struck me was how fragile a regulator’s commitment to growth can be. So much depends on the chief executive or chairman, their connections within government, and how effectively that commitment filters down to the case officers who apply the regulations of the organisation. Warm words at Downing Street growth summits count for nothing if the message does not filter down to the front line. When the leaders are gone, the economic drive from the regulator can perish. It is fragile; that is a problem.
As my noble friend said, we heard about several different types of regulation: economy; market; professional, including for doctors and accountants; the safety ones; the environmental and pollution ones; and social regulations for the caring and educational sectors. It is a broad church. However, in one memorable exchange, a Civil Service witness said that Trinity House was a regulator but had no impact on growth. We are an island nation. All of our trade in goods and services often travels by sea. Safe, navigable waterways are crucial to growth. Every regulator has a part to play, even when its core purpose does not appear to be one for the economy. The football regulator is a case in point: it is on the front line in more ways than one as well.
We spent considerable time discussing how to speed up regulation, not just for speed’s sake but to improve predictability and certainty; those things are probably more important. We heard about the sandboxes, fast lanes, pilots, experiments, distended timescales and unpredictable decisions that increase risk and make projects hard to start, let alone finish. Rather than laying these shortcuts over the system, could we not just give everybody access to a good standard of service? Is that too much to ask?
I regret that we could not examine foreign regulators more closely and compare our approach with those of our competitor nations, but we heard of prospective foreign investors who gave up because, as foreign nationals, they could not open a UK bank account. That is a regulatory failure—good intentions producing harmful results. Once they are introduced for the best of intentions, there is little incentive to prune the regulatory bloat.
I felt that the noble Lord, Lord Willetts, who is in his place, gave huge grounds for optimism, describing the efforts to enable delivery robots, which if I recall correctly were subject to 19th-century horseless carriage regulations that needed to be superseded. His example showed how regulators could harness and enable new technology, including AI, which offers a tantalising prospect of turning a laggard into a leader. However, his example showed why political leadership matters to cut through the obstacles. Delivery robots are just one example of how regulations for a past age need updating. Perhaps universal sunset clauses—mentioned by the noble Baroness, Lady Gill, who is not in her place—might be a useful innovation here so that we always look forward and are not always stuck in the past.
That brings us back to risk, especially political risk. We cannot expect regulators, and case officers in particular, to be flexible or embrace new methods and technology without backing from Whitehall. It is the case officer’s livelihood and pension that are on the line. If Ministers want growth, they must give the regulators the air cover to do things differently. For all the warm words, I did not get the sense that it was a high priority for the Government, yet that is what our nation needs. I was not convinced that the message has sunk in when we listened to the Minister; I saw little drive from the highest levels of government to ensure that the 61 bodies that are referred to as being responsible for growth needed to discuss it at board level, let alone in that wider landscape of over 200 other regulators. It seems to me that it takes more than a No. 10 summit to turn around that “computer says no” culture.
To put it into focus, we all sympathised with our Chair when she had her bank account frozen by a misapplication of PEP rules, which assume that everyone is a criminal. That is no way to build an economy. Of course, I am not saying that the noble Baroness has been exposed to criminal activity, but it is that approach that everyone needs to demonstrate their innocence rather than the presumption the other way around. I am on sticky ground so I am going to move quickly.
We are in the slow lane of the global race. Clear timelines and predictable decisions combined with realism and focus will unlock investment and get the economy moving, and that is going to generate savings, employment and taxes. Let us stop the imposition of new layers that undermine viability so that we do not feel like we are wading through treacle. If our regulators make everything too difficult then too many others will conclude that the safest way to avoid mistakes is to do nothing, and that is going to leave us all poorer.
Lord Bilimoria (CB)
My Lords, the Government have stated that their number one mission is economic growth. Regulation can provide the stability that businesses and the economy need to thrive or it can be a source of roadblocks that inhibit growth. The reality is that current regulation is confusing, time consuming and costly to business. Some 47% of businesses reported in 2024 that regulation was an obstacle to their success, an increase from 45% in 2022. Two in five businesses felt that new post-Brexit regulatory arrangements were more challenging, 93% of businesses use some form of external support to assist in complying with regulation, and the mean amount that business spent on support was £10,745 compared to £6,100 in 2022.
A regulatory system needs to be transparent, consistent and easy to understand. Over time, unnecessary regulatory costs have contributed to a less competitive and less attractive British economy for new investment. This country used to be a magnet for inward investment. Some studies suggest that the impact of red-tape regulatory costs could be as high as 3% to 4% of GDP—we are talking about over £70 billion. A regulatory system needs to encourage new investment and regulate only where necessary and acceptable to keep pace with innovation.
Despite campaigning Brexit as an opportunity to deregulate in the name of freedom and growth, the UK has done relatively little to diverge from EU regulations since. The main reasons are that it would become more difficult to trade with the EU, with a lack of clear strategy of how and when to diverge and the priority of other competing post-Brexit responsibilities. However, there are some exceptions: the banning of live animal exports, establishing new freeports and repealing the bankers’ bonus cap.
In March 2025, the Department for Business and Trade published the regulation action plan, which many noble Lords have spoken about, aiming to overhaul the regulatory system to increase economic growth and cut administrative costs of regulation by 25% by the end of the Parliament. It includes plans to merge or remove regulatory bodies, reform registration and require regulators to increase transparency. Its three main goals are to tackle complexity and burden of regulation; reduce uncertainty across the regulatory system; and challenge excessive risk aversion.
In May 2026, the Industry and Regulators Committee published the report that we are debating, Time is money: How regulators can support growth, in relation to the Government’s action plan. I congratulate the noble Baroness, Lady Hayter, and the members of the committee on the hard work they put into this excellent report. I reiterate, very quickly, the main conclusion of the report that the main contribution for regulators to make in supporting investment and growth is to carry on their duties more efficiently. It is unclear what the broad aim of supporting growth means for individual regulators. The Government have not said whether they want regulators to tolerate more risk or just be more open to innovation. It is the Government’s responsibility—I hope the Minister would agree—to provide strategic guidance with an explicit risk appetite for each regulator, with political cover when government wants a regulator to be more open to risk. Does the Minister agree? It is likely that, to prioritise economic growth, regulators will make trade-offs with other responsibilities, such as consumer, competition or environmental protection. The Government need to clarify the extent to which growth is prioritised, not leave this decision up to the regulators.
The Government may be focusing on the smaller cost of paperwork rather than the larger cost of complying with self-regulation. Cutting administrative costs by 25% could be hit without businesses feeling any change. The committee rightly asked for estimates for the reduction of actual cost compliance.
I am chair of the International Chamber of Commerce in the UK and regional co-ordinator for the ICC in Europe—35 countries. We in the UK and the ICC have been leading the charge on promoting digital trade. Most people do not realise that most trade today is paper-based. If that paper-based trade can be moved to digital, it means that what takes three months takes minutes, and saves billions of dollars or pounds. This is where regulations are coming to help promote this, with the UK as a role model for the rest of the world—does the Minister agree?
Of course, there are different perspectives on regulation. To give an example, the Government are talking about bringing down the costs; the Lib Dems support cutting and consolidating regulation, particularly promoting trade with Europe; and the Conservatives talk about deregulation to encourage growth and repealing regulations surrounding net zero, diversity and inclusion and the Employment Rights Act 2025, which has brought extra regulation. The regulatory culture is far too cautious, according to the Conservatives. The International Chamber of Commerce supports business self-regulation to build trust between businesses, consumers and the public. The CBI—the Confederation of British Industry—of which I was president, supports the recommendations of the small business taskforce on corporate reporting reform, noting
“the test now is delivery … business will want to see that ambition translated quickly into meaningful reductions in the burden they face”.
The CBI recommends an outcomes-based, principle-led approach.
The report has also said, as very well put by the Advertising Standards Authority, that regulation needs to create stable, predictable frameworks that enable businesses to invest and innovate while protecting legitimate public interest. Octopus Energy says very clearly that it is regulation that allowed it, as a new company, to come in not just to gain top market share but to do so by bringing quite a lot of innovative products.
I conclude that the pace of regulation is often a problem, and we need to work on making it faster. Does the Minister agree that this is a primary challenge? AI, which has been brought up, needs to be addressed as well. The only certainty in today’s world is uncertainty. Encouraging investment, innovation and growth is a key part of the vision of the Government’s plan. Most witnesses cited in the report said that regulators need to provide long-term stability and predictability to encourage investment and enable companies to plan ahead.
Lord Udny-Lister (Con)
My Lords, like every other speaker this afternoon, I welcome this debate and thank the noble Baroness, Lady Hayter, for chairing the committee.
Nobody here disputes the need for strong and effective regulation. It is through good regulation that we gain confidence, protect the public and nurture the conditions needed for business to invest and grow. That said, however, what became increasingly apparent throughout the process of our inquiry was the apparent lack of urgency in some regulatory processes and the insufficient appreciation of the very real fiscal consequences that come with delay.
I will deal first with the certainty and timeliness issue. We know, as our chair said, that time is money and that delays cause real economic costs. I therefore suggest that the single most important thing that businesses need from regulators is certainty, and they need it to be delivered in a reasonable and predictable timeframe. We know that up and down the UK, companies are facing lengthy approval processes, as we have heard. That uncertainty and delay are making it near impossible for businesses to commit investment, raise finance and plan expansion, including the recruitment of new staff, when they do not know when, or even if, they will get regulatory approval and, if so, when it will arise. That becomes a critical concern when considering major infrastructure projects, where delays of even the smallest amount can translate into substantial additional financing costs.
I draw the Committee’s attention to the evidence from Hoxton Farms. I find it particularly concerning that a British company indicated that it was likely to launch its products in Singapore or the United States well before the United Kingdom. In part, that is because of a much clearer regulatory timeline abroad. We heard about how Hoxton Farms was kept informed all the time of where its application was, so it knew every day where it was going. The situation here is simply not good enough. The United States and Singapore are well-regulated countries; why, then, are we so inferior in dealing with clarity and pace?
I put it to your Lordships that businesses do not demand immediate or even favourable answers; what they need is a clear process, confidence, and for the timetable to be honoured. I hope that Ministers will take action, given the grave consequences that this is having on holding back much-needed investment and growth.
Our regulatory processes must allow for greater flexibility. Although I appreciate that regulation should and must uphold standards and safeguards, I fear that there is a real danger that we are creating a process that is now so prescriptive that we are becoming void of having sufficient room for sensible human judgments. Times are changing, and in the time of innovation and technical advancement, we must accept that not every business or proposal will fit neatly into an established category. I think back to the evidence that we heard in support of a principles-based approach, in which standards are protected but businesses are given the flexibility to determine how these outcomes are achieved. That is something I fully support. Surely, the question must be about how a proposal meets the necessary standards rather than whether it can follow precisely the same path as everything that has gone before. I would therefore be pleased to hear from the Minister whether the Government are committed to achieve the greater proportionality and pragmatism that business requires.
Turning briefly to innovation, I am concerned that our regulatory structures are lacking the forwardness and resources to keep up with the remarkable pace of change that we are going through. As we have already heard, with AI, emerging industries and advanced tech are creating entirely new business models, and they are developing far faster than our regulatory framework. It was clear from the evidence that regulators have a profound difficulty in dealing with something that is unfamiliar or which does not fit into a previously prescribed process.
Does the Minister agree that innovation, by its very definition, involves something different? If so, how can we ensure that our regulators have the freedom to adapt? My fear is that, if our regulators cannot keep pace with innovation, there is a genuine risk that the investment, and thus the jobs that come with it, will go elsewhere. I am keen to hear how the Government plan to ensure that regulators can keep pace with the speedy and innovative times in which we live.
I conclude by asking the Government to take serious note of the concerns raised by businesses throughout this process and to recognise that we urgently need a culture in which regulatory delay is recognised as a serious economic consequence and a barrier to natural growth, as opposed to simply being an unavoidable feature of rather dated administration.
Lord Smith of Ranmoor (Lab)
I thank my noble friend Lady Hayter for securing this debate and for leading the committee with distinction. I declare my interests as a chairman of Cranswick plc and as a director of Pret. The committee’s report pre-dates my introduction into your Lordships’ House by some months but I hope that my past experience will be useful to your Lordships’ deliberations, now and in the future.
Good regulation can enable growth. The challenge is not to suppose that we have to choose between effective regulation and economic growth; that is a false dichotomy. Regulators need to explicitly incorporate growth into their long-term and medium-term plans. For some, that might mean that the legal framework that established them and set their terms of reference needs to be altered to include that purpose. Regulators often hide their lack of enthusiasm for this topic behind prescriptive legislation. Are some of those pieces of legislation now so out of step with our objectives that they need a fresh look?
How many regulators have publicly reset their strategy since the Government challenged them with the objective of prioritising growth? In that new look at strategy, I suggest that a partnership with the sector being regulated could provide some fresh, innovative ideas—always remembering the regulator’s core purpose. The strategy should be simple, outcomes-based and follow some core principles.
As an ex-regulator, I know that a well-publicised strategic shift will be an empty promise unless followed by a change in the allocation of resources to meet that new objective. The evidence of that would come in revised organisational structures, with realistic budgets to match their aims. Being clear about what will and will not be done would be a bonus. Some regulators would work better, and with the grain of growth and their core purpose, if those organisations contained some or more people with experience in the sector being regulated, working alongside career civil servants.
The delivery of those strategic growth objectives has to be strictly measured and the results reported with a timely, transparent method. Of course, this accountability should include calculations of any consequent new admin burden and, more importantly, of the impact—growth, I hope—on the sector being regulated. This is often nuanced and properly risk-based, but it is the absence of data that frustrates many of those being regulated. Each regulator should be required to provide measures of the growth it has facilitated in a “comply or explain” mandatory framework.
I will say a word or two about pace. Delays are not harmless. One of the phrases that business grows weary of hearing from regulators is, “It takes as long as it takes”. In the time taken for a regulator to review an innovation in this country, an international business has likely exported those jobs and investment elsewhere. Those of us with global business experience will be able to cite other nations that are able to fast-track innovation and investment by taking a proportionate, risk-based approach. An SME in the same situation might simply run out cash.
There are bound to be trade-offs in conflicts between growth and other objectives; I am clear that the regulator is not best placed to resolve them. They need clear political direction. The Government need to set clear priorities, regulators must make timely and proportionate decisions—my shorthand here is: not light touch but right touch—and businesses must have the clarity and confidence to invest and innovate. I look forward positively in the expectation that this work continues to generate change in the attitudes and behaviours of all those involved.
Lord Camoys (Con)
My Lords, I congratulate the noble Baroness, Lady Hayter, and her committee on this excellent and important report. I joined the committee after the report was written, so I cannot claim any credit for it, but I have spent the past few years on the receiving end of the system it describes. I declare my interests as set out in the register, particularly as a founder of Marlow Film Studios.
I am speaking towards the end of this debate, so most of the substantive points have already been made, but I want to mention three things from my own experience of engaging with regulators on the planning system over the past few years. The first is the lack of accountability for delays. My experience has been that deadlines are set, missed and then missed again. As far as I could tell, nothing happened as a result. If a business misses a regulator’s deadline, there are consequences but, when a regulator misses its own, there seem to be none. The Government’s response promises clearer approval targets and ministerial performance reviews, which I welcome, but I am not convinced that publishing targets alone will change very much. What happens when those targets are repeatedly missed? I would be grateful if the Minister could explain how that accountability will work in practice.
The second is the problem of regulators overlapping with one another. I have seen how National Highways, the Environment Agency and Natural England, among others, can each operate to its own timetable and ask its own questions without anyone having the authority to bring them together and get things moving. The Government have seven lead environmental regulator pilots under way, but these remain within Defra’s remit, and the lead regulator can co-ordinate but cannot decide. Will the Government extend this approach beyond Defra, and will the lead regulator actually have the authority to resolve disagreements? A single front door is a fine idea, provided there is somebody behind it with the authority to say yes.
My third point concerns risk. Robert Colvile told the committee that nobody is promoted for approving a company that succeeds and that, if something goes wrong, they may find themselves hauled before a Select Committee. I do not believe that the officials with whom I dealt were deliberately obstructive; they were simply working within the system as it currently operates. Regulators must of course protect the public and the environment, among other things but, as others have said, surely it is for Ministers, rather than individual officials, to decide how those responsibilities should be balanced against economic growth. The Government propose a stronger growth duty and statutory ministerial steers, but will Ministers make clear what level of risk they are prepared to accept and stand behind officials when a decision proves controversial?
The committee has done a valuable job in identifying these problems. The Government have accepted much of what it recommends. What matters now is whether that translates into real change; I hope that the Minister can assure us that it will.
Lord Hunt of Wirral (Con)
My Lords, I start by declaring my interests as a practising solicitor in the City of London and a partner for the past 50 years in the commercial law firm DAC Beachcroft. I join all other Members in congratulating the noble Baroness, Lady Hayter, and thanking her for moving this debate. Few, if any, Members of the House can match her first-hand experience of the world of regulation; that experience is very evident in this excellent report. I also thank her fellow members of the Industry and Regulators Committee, who together crafted a report that is certainly timely, even if it makes uncomfortable reading for His Majesty’s Government.
We have benefited in particular from those members of the committee who have come not only for support but to make their own contributions. The noble Baroness, Lady Valentine, and the noble Viscount, Lord Chandos—although on the committee for just a short period of this inquiry—raised some very important issues affecting AI, to which we will return. My noble friends Lady Harding of Winscombe, Lord Fuller and Lord Udny-Lister not only participated in producing this report but have added to it today. I am pleased to follow my noble friend Lord Camoys, who rightly summarised in the gap the problems that many people have identified, with delays, targets repeatedly being missed and overlapping regulation.
I will not speak for long, because the Minister has so many questions to answer that we have to give her the maximum time. Still, Time is Money is a great title. I do not know who thought it up but it is brilliant because this Government have now had more than two years to deliver the growth that they promised would be their first and overriding message. They spent that time freely but they have delivered remarkably little money in return. The committee’s most striking finding is not merely that regulators have failed to support growth; it is that the Government—and previous Administrations have been guilty of this too—continue to send mixed, confusing and ambiguous signals to regulators about how a commitment to growth is to be balanced against all those other duties.
It is a strange kind of mission whose commanders cannot describe the objective, as the noble Lord, Lord Bilimoria, set out quite well. What is the objective? Ministers may now tell us that the answer is a new, clarified and strengthened growth duty under which designated regulators would actively promote economic growth, but history tells us that economic development—and social development too, for that matter—will require, above all else, innovation.
In the introduction to the report, the committee observes that:
“Done well, regulation can boost consumer confidence and provide certainty for businesses to invest and innovate”.
That is certainly the case, but it is rarely, if ever, in the nature of a regulator actively to promote innovation. As the report notes, the primary statutory duties of regulators are generally linked to safety or consumer protection. I suppose that is inherently risk averse, but the key question is: what is risk? I suppose that, in many ways, as a solicitor specialising in insurance and reinsurance, my whole life has been to identify and deal with risk, but what is it if it is not, as the noble Baroness put it, benefit aversion?
There is a real and present danger that poorly targeted, overzealous or simply inappropriate regulation can serve to dampen, discourage or even stifle vital innovation. As my noble friend Lord Willetts put it—he chairs the Regulatory Innovation Office, so he should know—innovation is very difficult to promote when faced with detailed, overlapping regulation. As my noble friend Lord Udny-Lister put it, we are competing in a world where other jurisdictions are readily embracing our competitors and giving them answers to the questions for which they still await answers from our own regulators. All too often innovation, investment and growth are fostered and encouraged not by regulatory intervention but by its absence. As the report notes,
“it is not clear whether the Government wants regulators to allow greater risks to be borne by consumers and businesses, or merely to be more open-minded about new innovations”.
Many regulators already operate under the growth duty in Section 108 of the Deregulation Act 2015, which requires them to
“have regard to the desirability of promoting economic growth”.
Others, such as the FCA and the PRA—both of which oversee an area of the economy that is vital our economic well-being and place in the world—have growth as a secondary objective, subordinate to concerns around consumer protection. My noble friend Lord Ashcombe made a series of key points about how the situation could be improved by what he described as “intelligent” regulation. Let us hope that the Minister has a clear commitment in that direction.
However, as the report points out, the regulator of regulators, the Competition and Markets Authority, has no formal growth duty. Again, the report says:
“If it wishes to have a more meaningful impact, the Government must provide strategic guidance to regulators that addresses how conflicts between objectives should be prioritised and must provide political cover where the Government wants a regulator to be more open to risk”.
That is spot on; there, in a nutshell, is what we require of the Government. I join my noble friend Lord Black of Brentwood in asking key questions about the Government’s proposed legislation. Is it coming our way? As we will no doubt hear from the Minister, it is apparently called the regulating for growth Bill. It rests on the implicit presumption that growth can be regulated into existence, when the lesson of recent decades is quite the opposite—namely, that innovation and growth can all too easily be regulated out of existence.
What the country needs—this has come through in many of the speeches we have heard—is not more energetic regulation but a serious programme for how to make regulation genuinely proportionate. In stressing, as we all do, the importance of free speech and free content, my noble friend Lord Black made the point that the Competition and Markets Authority has erred in the past by failing to protect those small businesses and start-ups that could grow, expand and become jewels in the crown of this great country but have been swallowed up quickly by large, mainly American, conglomerates. Where is the competition when these very large entities take over the market?
The other key question that has come through in the debate concerns testing the Government’s commitment to reducing the administrative burden of regulation by 25%. My noble friend Lady Harding of Winscombe talked openly about how that target must be reached. First, it must never be forgotten that the administrative burden is by no means the only, or even the greatest, burden that regulators impose on wealth creators. It is important, and reducing it is also important, but regulation goes far beyond the simple costs of ticking boxes and returning forms.
Let us try to look into the future and find a way of attracting the inward investment to which so many speakers referred—but never at the expense of allowing us, in this country, to take advantage of the brilliant brains that we have. I saw those for myself when I was the Cabinet Minister for Science, when a young, 18 year-old undergraduate from Cambridge on the CERN project thought up the world wide web because he had to match and index all the material coming from the Large Hadron Collider.
Let us not forget that we have won more Nobel prizes in this country than the whole of the rest of Europe put together. Let us trust our innovators and set them free from burdensome regulation. I join my noble friend Lord Udny-Lister in saying that we need certainty, clarity and pace; the noble Baroness, Lad Hayter, used that word right at the start of this debate. We want pace, and we need answers—so it is over to you, Minister, to provide those answers now.
The Parliamentary Under-Secretary of State, Department for Business, Innovation, Science and Trade (Baroness Lloyd of Effra) (Lab)
My Lords, I am pleased to respond for the Government. I join others in thanking my noble friend Lady Hayter of Kentish Town for securing today’s debate and for her leadership of the Industry and Regulators Committee’s inquiry. I also thank all of the noble Lords who contributed to the report, as well as all noble Lords who have made contributions today; they have brought the combined expertise of so many here today.
The committee’s report, Time is Money: How Regulators Can Support Growth, provides a thoughtful and constructive examination of how regulation can better support investment, innovation and productivity. We agree with its central message that effective regulation is essential to a strong economy but unnecessary delay, duplication, complexity and uncertainty can deter investment and slow innovation.
As we have heard today, regulation is not inherently a burden. Well-designed regulation protects consumers, workers, communities and the environment. It creates fair markets, builds public confidence and gives businesses the certainty they need to make long-term investments. Therefore, our objective is not simply less regulation but better regulation: regulation that is proportionate, predictable and effective; regulation that keeps pace with technological and economic change; and regulation that supports growth while maintaining essential protections.
The noble Lord, Lord Ashcombe, asked what action we are taking to reflect on the report. The committee rightly called for greater clarity on what supporting growth means for individual regulators. We have acted on that recommendation. We have agreed 54 outcome-focused growth goals with 12 key regulators. These translate the Government’s wider growth mission and industrial strategy into practical priorities that are tailored to each regulator’s remit. The goals are supported by measurable, time-bound results, as well as an explanation of how their delivery is expected to support economic growth.
Growth goals are currently published on the regulator performance dashboard to improve transparency. The goals do not direct individual regulatory decisions or undermine operational independence. The Government set the strategic direction and regulators remain responsible for applying it independently, in accordance with the law and their statutory duties. Through the regulation action plan and the regulator effectiveness and reform programme, we are also tackling delays, duplication, fragmented processes and unclear guidance. We are working to improve digital services and enable businesses to provide information once, rather than repeatedly, to public bodies.
As the noble Lord, Lord Bilimoria, and others have stressed, timeliness is key. The Government and regulators have already made significant progress in speeding up regulatory processes. The Environment Agency has made its permitting service more efficient and transparent. It has cut its permitting queue by 1,000 permits, cleared backlogs in several categories and introduced a tracked service that now supports more than 60 projects. It also hit its target of responding to 95% of planning consultations 21 days ahead of schedule, and has met it consistently since. However, that is clearly not enough, and we need to do more.
Several noble Lords have, understandably, raised the balance between growth and vital protections; my noble friend Lord Chandos put that very clearly. Let me be clear: supporting growth does not mean lowering standards or accepting unacceptable risks to the public. Growth and high standards are not alternatives. Regulators must continue to fulfil their statutory responsibilities, while ensuring that those objectives are delivered proportionately and without unnecessary barriers to investment and innovation.
The forthcoming regulating for growth Bill will strengthen the growth duty for key regulators. This will be supported by statutory ministerial economic growth steers, tailored to different sectors—reflective of the points made today that different sectors regulate very different industries—and reporting requirements to strengthen accountability. This responds to the call by my noble friend Lady Hayter and many others, such as the noble Lord, Lord Bilimoria, and my noble friend Lord Smith of Ranmoor, for us to be clear on the Government’s priorities and risk appetite to allow regulators to make confident decisions, in particular in areas of innovation.
Many noble Lords focused, crucially, on the importance of innovation and on creating a regulatory framework that supports our innovative UK businesses. The Bill will also introduce cross-economy sandbox powers, allowing innovative products, technologies and services to be tested safely where existing legislation creates a barrier. The Regulatory Innovation Office, led so well by the noble Lord, Lord Willetts, has led to many advances in equipping regulators and having discussions with them on how to regulate in this innovative space, and it has provided practical examples which can be taken forward in these formal sandboxes when we are able to legislate for them. The modern world is changing rapidly, and our legislative framework must be able to keep pace with innovation and technological advances, so I agree very much with those noble Lords, for example the noble Lord, Lord Udny-Lister, who exhorted us to update our laws to take account of this. The Bill will provide greater scope to test innovative approaches, using real-world evidence to inform how successful approaches should be implemented more widely.
My noble friends Lady Hayter and Lord Chandos asked about the timing of the Bill. It is set to be introduced in the current Session of Parliament, when parliamentary time allows. At present, when regulators and businesses identify a better approach, existing legislation does not provide the ability to test this in practice. My noble friend Lady Hayter put her finger on this: primary legislation remains the appropriate route for many changes, but it does not offer the flexibility to test and respond at pace.
On the question from the noble Lord, Lord Black, this is a cross-cutting framework Bill, so it will not include any specific technologies or sector regulation. Overall, this is not deregulation by another name: testing will take place under controlled conditions with appropriate safeguard mechanisms, we will suspend or end testing where necessary, and any lasting change will be subject to appropriate scrutiny.
On my noble friend Lord Nagaraju’s observation, we are acutely aware of the needs of smaller innovative AI businesses to access these. That is part of the discussions we have been having with the Regulatory Innovation Office to date, and we will continue to bear it at the front of our mind.
The committee was also right to emphasise that time matters. Low or uncertain regulatory decisions impose real costs: they can delay investment, prevent products from reaching the market and make the United Kingdom a less attractive place in which to do business. We are increasing transparency through the regulator performance dashboard, which brings together performance information for 16 key regulators and is being expanded to cover regulatory approvals.
The noble Baroness, Lady Valentine, asked about KPIs. We are also working with regulators to improve KPIs so that they measure genuine performance, including timeliness, quality, certainty and outcomes, rather than activity alone. We recognise that poorly designed KPIs can give the appearance of progress when there is not.
Many noble Lords, such as the noble Lord, Lord Fuller, stressed the importance of actual change and the importance of this being felt through the whole of the regulator. Performance will be considered through reviews led by the Secretary of State and independent reviews, allowing underperformance to be challenged and targeted action to be agreed. The regulator sponsorship charter also sets out the responsibilities of sponsor departments.
My noble friend Lord Sikka is right that accountability is key. Accountability must extend through regulators, departments and government, and ultimately to Parliament.
The ultimate test will be what businesses experience: whether decisions are faster and more predictable, processes are simpler, duplication is reduced, and whether unnecessary barriers to investment are removed.
A number of noble Lords asked about the lead regulator model. We recognise that there is more to do here and that complex and fragmented regulatory processes can add delay and cost to major infrastructure projects. That is why the lead environmental regulator pilots are testing how environmental regulators can provide clearer and earlier co-ordinated advice to developers, while the wider reforms are focused on improving regulatory approvals and reducing unnecessary duplication. We are committed to learning from these pilots and taking forward their conclusions.
In response to the question from the noble Baroness, Lady Harding, on progress on the administrative burden of regulation, I underline that that is in addition to all the other changes that we are making to improve regulatory decision-making and regulatory transparency to reduce the effect on business. The Government are committed to reducing the annual administrative burden of regulation to business by 25% over this Parliament. That is equivalent to £5.6 billion against a baseline of £22.4 billion. We have delivered or identified £2 billion in net annual administrative burden savings, putting us over one third of the way towards the target. The Chancellor has now also announced up to £640 million in additional gross administrative savings for businesses in the Budget. We recognise that smaller firms feel regulatory complexity particularly acutely. The Small Business Regulatory Taskforce has made 15 practical recommendations, and we have accepted all but one.
Regulation also does not stop at national borders. We will continue to pursue international regulatory co-operation and—going to my noble friend Lady Gill’s point—the benefits of recognition of trusted overseas approvals. Doing so reduces unnecessary friction and benefits UK businesses and consumers, while preserving our ability to regulate in the national interest.
I agree with the noble Lord, Lord Bilimoria, on the importance of digital trade to the United Kingdom, which is a feature of our trade strategy.
Many noble Lords asked about digital markets and AI: the noble Lord, Lord Black, my noble friend Lady Gill and the noble Baroness, Lady Harding. The Government recognise the important role that competitive digital markets play in supporting innovation, investment, productivity and consumer choice in the UK economy. In their strategic steer to the CMA, the Government set out how they expect the CMA to operate the digital markets regime independently, flexibly, proportionately, and collaboratively to effectively unlock opportunities for growth across the UK digital economy and wider economy. The Secretary of State has made it clear that the Government are not issuing a new strategic steer.
To the questions my noble friend Lord Chandos and other noble Lords asked about our AI approach, as my noble friend and others highlighted, this is a general-purpose technology, and the Government’s approach is principally that it is best regulated at the point of use.
The committee’s report has made an important contribution to this agenda. The Government agree that regulators need clearer direction, transparency and stronger accountability if they are to support growth effectively. We will judge success by outcomes: simpler and more predictable regulation, faster decisions, stronger investment and innovation, and continued public confidence in the protections that regulation provides.
I again thank the noble Baroness, Lady Hayter, the members of the committee, and all noble Lords who have contributed today. We will continue to work with Parliament, regulators, businesses and wider stakeholders to deliver a regulatory system that protects the public, commands confidence and supports sustainable economic growth across the United Kingdom.
Baroness Hayter of Kentish Town (Lab)
I will try to do this briefly, as I can see that team B is just arriving.
I thank all the speakers, and I especially thank the Minister for that reply. She ought to take great comfort from how much agreement there was across the Room—although I know that no Liberal Democrats spoke. There has been a very strong commonality in our responses, particularly on the idea that regulation cannot create growth. The comment from the noble Lord, Lord Udny-Lister, about infrastructure pointed to where that could be of advantage more broadly. I am afraid I have been exchanging texts with the staff, and they think that it was the noble Lord who came up with the title, Time is Money. Can we congratulate him on that?
I will not try to repeat everything, except to say three things; I apologise for having said them before. One is that there was commonality around the need for regulators to be able to respond rapidly to innovation and to provide the pace, clarity, certainty and predictability that business needs. The noble Lord, Lord Ashcombe, used the phrase “intelligent regulation”, which may encompass it, but I think that it was the noble Baroness, Lady Harding, who said that all this has to be in the interest of British business and the British public. That is really the core of what we want to do.
There are three points to take away. As my noble friends Lord Chandos and Lord Sikka said, we must not lose sight of the need to protect consumers. These regulations did not grow. We do not have statutory regulation by accident; it is there for a purpose, and we need to continue to protect that.
Secondly, we need political cover if we are going to ask regulators to become a little more chancy and to meet the challenge that we and the Government have sent their way.
We also need to recognise the costs of poor regulation. It will fall to the Government to enable regulators to respond to new technology, but there are certain things that only the Government can do—the single front door, for example. No one regulator can do that or, in the words of my noble friend Lady Gill, deal with legacy rules. That falls to the Government, not to individual regulators.
The other challenge is that the existing growth duty—it is not new—has done very little to change regulators’ risk appetites, because it added another duty. They are going to have to make trade-offs. The Government must respond to that and think about how to change the conflicting demands of their core responsibilities and this, as well as about how to balance these new demands.
There are, therefore, things for the Government to do that individual regulators cannot do. Perhaps we can invite my noble friend the Minister to come to our committee when the Bill is published—I hope that the members of my committee will agree to this—to discuss how we can move forward. With that, I thank everybody for their contributions and I commend this report to the Committee.