The economic growth duty came into force on 29 March 2017 under the Deregulation Act 2015 (the “DA 2015”) and requires many regulators in England and Wales to have regard to the “desirability of promoting economic growth”, alongside the delivery of protections set out in relevant legislation. The regulators to which it applies are set out in the Economic Growth (Regulatory Functions) Order 2017, and include key bodies such as the Environment Agency (“EA”) and the Health & Safety Executive (“HSE”) but perhaps surprisingly, not local authorities.

The Department for Business, Energy & Industrial Strategy (“BEIS”) has produced statutory guidance to “assist regulators in fulfilling their new responsibilities… including the proper consideration that must be made before allocating resources, setting enforcement policies, and making sanctioning decisions“.

Under the new growth duty, regulators must have regard to the desirability of promoting economic growth, alongside their roles in protecting the environment or the public. In particular, they should consider the importance of ensuring that any regulatory action they take is necessary and proportionate (section 108, DA 2015).

The Duty – How Is It Achieved?

Regulators have a duty to consider the statutory guidance when determining how to exercise their regulatory functions.  If they conclude that a provision is not relevant in a certain case or is outweighed by other considerations, they are not bound to follow that provision, but must record their reasoning.  The statutory guidance sets out in full how a regulator can discharge its economic growth duty and ensure its interventions are proportionate.  A few key examples of how this should be achieved are:

• Understanding the current and developing business environment in which it regulates, including a detailed understanding of the business community, by:
  • incorporating the understanding of business into early training, induction programmes and recruitment considerations; and
  • having regard to the individual business and taking into account relevant factors, for example, the stage the business is at in the business lifecycle.
• Considering how it will ensure at all levels that its regulatory action is taken only where needed, by not creating any unnecessary regulatory burdens, particularly associated with authorisations, permits and licences, for example, streamlining processes and minimising fees.
• Ensuring that their actions and decisions are proportionate, by:
  • including appropriate recognition of self-regulatory and third party assurance programmes to reduce duplication; and
  • speaking to businesses about non-compliance and possible sustainable solutions.
• Being transparent, by:
  • explaining their approach to promoting economic growth and considering incorporating this into published information such as annual reports; and
  • consulting publically where appropriate on proposed policy changes, and publishing the results of any consultations.

The Enterprise Act 2016 extended the DA 2015, requiring regulators to formally report on the effect that the growth duty has on the way they exercise their regulatory functions and the impacts of this on business.  This additional obligation is not yet in force, and BEIS plans to consult with regulators before it is introduced.

The Effect

Although there has been criticism of the DA and the Enterprise Act for putting a potentially conflicting duty on regulators with the risk that their regulatory duties are overshadowed by economic concerns, supporters of the changes have argued that regulators should be put under more scrutiny when decision making.  Following the implementation of the economic growth duty, regulators will be subject to greater scrutiny and challenge.  The new requirements mean that they will need to be transparent with decision making; maintaining a clear audit trail and a written record of decisions.

While the duty is expected to impose one-off implementation costs of an estimated £219,000 on regulators, the UK Government predicts a reduction in the amount of resource required for regulators to deal with administrative processes.  A reduction in enforcement costs can also be expected following amendments to enforcement policies by the regulators in favour of a more proportionate approach.

The UK Government envisages that the duty should help businesses and regulators work more closely, with businesses feeling that regulators are supportive of their success and understand the need for business growth.  It is expected that businesses should experience more proportionate decision making and see a reduction in administrative burdens, such as inspection costs, duplication of information and inspections, and reliance on external contractors.