As Policy Exchange set out in Post-Brexit freedoms and opportunities a year ago, regulatory reform is a major post-Brexit opportunity for the UK, and it was a prominent theme of this year’s Queen’s Speech.
The Government confirmed it will introduce a Brexit Freedoms Bill, first announced by the Prime Minister in January 2022. Plans for the Bill were set out in The benefits of Brexit white paper, which outlined the Government’s broad ambition to make the UK the “best regulated economy in the world”. The Bill will remove the supremacy of EU law and make it easier for Ministers to amend, repeal, or replace retained EU law.
Currently, many changes to retained EU law would require primary legislation and therefore significant parliamentary time. So, the Bill will “create new powers to amend retained EU law by way of domestic secondary legislation, where appropriate, to ensure that key industries do not wait decades for simplified, agile regulation.” Critics have accused Ministers of wishing to sideline parliament, but the Government has pledged to “work with Parliament on how to frame such a power and ensure its use has the appropriate levels of parliamentary scrutiny.”
While the Bill promises a vehicle for reforming EU rules, it is less clear which rules the Government plans to tackle. The Government is currently in the process of conducting a review of all retained EU law that will prioritise areas for reform. It has set itself the target of cutting £1bn of costs for UK businesses via removing EU red tape. The target appears relatively unambitious. Or perhaps not. It is worth noting that regulatory costs for business have increased in both the 2017-19 parliament and the current 2019 parliament, despite government commitments to reduce, or at least not add to, them.
There are, however, more detailed plans to reform EU regulation in the financial services sector. Similarly to the Brexit Freedoms Bill, the proposed Financial Services and Markets Bill will make it easier to amend and replace inherited EU financial regulations. Specifically, the Treasury has recently announced plans to simplify capital markets regulation, such as MiFID II, and reform the Solvency II regulation of insurance, in order to unlock greater long-term investment in infrastructure.
The Bill will delegate significant power to the UK’s financial regulators, the Prudential Regulatory Authority (PRA) and Financial Conduct Authority (FCA), to amend and implement inherited EU regulations. The regulators will also be encouraged to focus on growth and international competitiveness via secondary statutory objectives.
This expanded role for the regulators makes the perennial question of who regulates the regulators even more pertinent. Having “taken back control” of regulation from the EU, Parliament must beware of outsourcing more power to regulators without a commensurate increase in democratic scrutiny and accountability. This is one of the fundamental questions that Policy Exchange’s Re-engineering Regulation Project plans to address in a forthcoming report.
