IoD: Government must ensure proper scrutiny of new regulation

The Institute of Directors has responded to a recent report from the Regulatory Policy Committee (RPC), which rates the government’s impact assessment of the Employment Rights Bill as ‘not fit for purpose’.

The Better Regulation Framework is the system government uses to ensure that proposed regulation is fit for purpose. The independent RPC plays a crucial role in this process, by assessing the case for regulation and ensuring that its impacts have been properly evaluated.

Responding to the RPC’s report, Dr. Roger Barker, Director of Policy at the Institute of Directors, said:

“It is concerning that the RPC has deemed the government’s impact assessment of the Employment Rights Bill as ‘not fit for purpose’. This underlies the fact that, before introducing this Bill, the government should have undertaken a less hurried analysis of its impact on employment, wages and output, particularly with regard to small and micro business.

“The government also failed to adequately assess the extent to which higher employer costs will simply be passed through to employees through lower wages or benefit reductions.  Alternative policy options were not identified and assessed, and the government should have articulated a clearer justification of the need for intervention.

“Crucially, the impact assessments that were produced were only made available for RPC scrutiny after the Bill had already been introduced into Parliament – too late to inform timely accountability by parliamentarians and stakeholders.

“The RPC report also raises major doubts about the overall cost to business of the package. According to the government, these costs will not exceed £5bn per year. However, the RPC suggests that they could be much higher than this.

“It is clear that the government views the Employment Rights Bill as a core component of its electoral mandate. However, this does not obviate the need to carry out a proper assessment of the impact on business, especially at a time when business confidence is depressed, and economic prospects are uncertain.

“Combined with the measures announced in the Chancellor’s recent Budget, the greater regulatory burden introduced by the Bill may threaten the ability of business to deliver the growth outcome that the UK so desperately needs.

“Going forward, the government should reaffirm its commitment to the principles of good regulatory governance, as defined in the Better Regulation Framework. Without the robust application of such a framework, there is a material risk of bad legislation and unintended consequences, with negative implications for the UK’s future growth prospects