Regulatory Policy 2.0: The Next Generation

The 24^th session of the OECD Regulatory Policy Committee started with a roundtable discussing the future of regulatory policy (alternatively known as Better Regulation or regulatory reform). There has been a lot of progress in implementing regulatory management tools since the OECD Council adopted its Recommendation on Regulatory Policy and Governance in 2012. If only a limited number of enthusiasts knew in the 2000’s what is regulatory impact assessment or administrative burdens, nowadays these terms are part of everyday conversations in various level of administrations and even in the (at least specialised) media.

However, the implementation of those tools is still uneven in many jurisdictions and, moreover, their use is often only formal. There is still a long way to go before we can say that Recommendation is adhered to by all OECD countries. At the same time, the world is evolving and was, even before the Covid-19 outbreak, far from being the same as in 2012 when the Recommendations was issued. The question then is, is regulatory policy, its vision and its tools, still valid and, more importantly, is it fit for the future?

Despite the problematic and uneven implementation, regulatory management tools have proven to be useful and contribute to making “better policies for better lives. However, the vision of regulatory policy is still deeply rooted in the circumstances of early 2000s and needs to be updated. Which leads us to the second question. Regulatory policy most likely is fit for the future but there are some changes that need to be made, both to the vision but also to the better regulation toolbox and the way it is used.

Here are some observations from the roundtable discussion without any particular order of importance:

Regulatory management tools have played, even in a simplified form, an important role during the COVID-19 crisis. Despite the fact that all governments had to introduce unprecedented numbers of measures and regulations often in a haste and there was sometimes not enough time for a full-fledged RIA or stakeholder consultations, it was still important to take into account different alternative solutions, think about their costs and benefits as well as potential risks and take into account the view of those that will be affected by the introduced measures.

Ex post evaluation will be crucial once the crisis is over. It is imperative that countries look back and evaluate their actions during the crisis, both to learn what worked and what did not, but also to ensure that appropriate scrutiny is placed on fast-tracked or emergency measures to ensure their effectiveness and efficiency over time.

During the crisis, it became even more important how regulations are being delivered, i.e. implemented, enforced and communicated so high levels of compliance are ensured. The delivery stage of the regulatory governance cycle has been underestimated so far. It is foolish to introduce measures stakeholders do not comply with, for example because they are too complicated so stakeholders do not understand what is required from them, or simply because stakeholders do not understand the purpose and urgency. Regulatory delivery needs to become an important part of the better regulations toolbox in the future even after the crisis.

In connection to this, risk assessment and risk management will probably play a more prominent role in designing and implementing regulations in the future. The crisis has tough us that not all risks can be avoided and that there are inevitable many trade-offs to be taken into account (protecting lives vs saving businesses). While cost-benefit analysis will still be important, risk-risk analysis might be added to the toolbox as well.

What will be the role of regulatory policy in post-pandemic world?

During the pandemic, some regulatory burdens have been reduced or removed either to speed up some administrative processes (vaccine approval) or to compensate businesses for economic losses (reduced requirements for installing restaurant terraces). At the same time, some administrative procedures proved to be extremely burdensome and ineffective, for example, those for obtaining government subsidies for businesses that had to stop operating. Without any doubt, there will be a need to reduce unnecessary regulatory burdens to stimulate the economy.

At the same time, some of the important priorities of governments across the globe will need more new regulations, or at least better regulations. Regulatory policy has rarely been used to its full potential in achieving current priority goals for governments across the globe, such as the Sustainable Development Goals. If governments are to achieve the SDGs, fight against climate change or deal with the negative effects of population ageing, policies and measures adopted by them must be based on the best available evidence, something regulatory management tools can help achieving. For that, regulatory policy needs to be better mainstreamed and aligned with political environment, to increase policy and regulatory coherence.

To regain trust of citizens, governments must improve its stakeholder engagement strategies. Often, well-organized and politically-connected groups have outsized influence in the regulatory process and can shape regulatory policy to benefit their interests at the expense of more diffuse interests. To “democratise” the regulation-making process and make it truly inclusive, views of “willing and unable” but also those that might be “able but unwilling” must be taken into account. Engagement has to start earlier in the regulation-making process and administrations must be more proactive and innovative in reaching to the less represented groups of stakeholders.

Crises aside, emerging technologies are presenting regulatory challenges that will necessitate a paradigm shift in policymaking internationally. More agile and resilient regulatory practices are needed to unlock the potential of these technologies, while upholding protection of health and safety, environment, social justice, and other societal goals. Regulatory policy might become more of a hit-and-miss approach, with more emphasis on experimenting and necessarily more emphasis on continuous evaluation.