A lack of democratic oversight of regulators is holding back productivity and economic growth, the Regulatory Reform Group (RRG) has argued, suggesting that a new cross-parliamentary committee should be established to oversee the performance of regulators.

The group's report, which received input from a cross-sectoral Business Advisory Council, included a systematic appraisal of the UK’s regulators, covering key economic sectors including energy, housing, and financial services.

In particular, the report identified a number of system issues, separating these into four main categories: a lack of strategic direction to and by the regulators; strained regulatory relationships; incomplete lines of accountability around the objectives set for regulators and the measurement of regulatory performance; and the need to build up greater skills and knowledge within regulators and support them with sufficient resourcing.

The report also highlighted a number of specific examples as to the potential impact that poor regulation can have, warning that poor practice has "serious implications" for the health of the economy.

For instance, the report said that regulators did not spot the liability-driven investment (LDI) crisis coming, noting that while accounting standards, investment consultants and pension scheme trustees have all been identified as shouldering some of the blame, regulators have also been found "to have been slow to recognise the systemic risks".

In addition to this, the group argued the collapse of Carillion had “exposed terrible failures of regulation”, with a previous report from MPs concluding that “substantial cultural change” was required.

In light of these issues, the RRG argued that lines of parliamentary accountability across the regulators are "essential" in order for the UK to realise its long-term growth ambitions.

The report therefore outlines a new blueprint for regulatory oversight that deals with the immediate issues faced by consumers as well as long-term aims for the UK, such as boosting prosperity and tacking challenges such as international competitiveness.

The RRG clarified that it is not promoting "slash and burn deregulation", but rather a smarter, and more democratically accountable approach to overseeing regulators to deliver better outcomes.

In particular, a primary recommendation is the establishment of a new committee across both Houses of Parliament, dedicated to standing scrutiny of the UK’s regulators.

Rather than duplicate the work of existing select committees, the RRG suggested that this committee would “take a holistic view of the regulatory environment and understand the impact of regulatory performance on a series of overarching goals including consumer protection, growth and competitiveness, environmental, social and governance (ESG), market stability and risk.”

RRG chair, MP Bim Afolami, commented: “Unaccountable regulators are directly hindering the UK’s growth prospects.

"Regulators have the potential to be key drivers of the government’s long-term ambitions for the UK, not to mention enablers of economic growth, but without adequate oversight from Parliament, this potential has been lost.

"This report is not proposing that regulatory reform holds all the answers to unlocking growth in the UK, but it is certainly a start.”

Adding to this, Pension Insurance Corporation CEO and RRG Business Advisory Council chair, Tracy Blackwell, said: “We need to be smarter about how our regulatory regime can best benefit the economy, communities, households, and individuals across the country.

"As businesses we really do need to ensure stability and growth across the entire economic cycle."

Commenting in response to the report, a spokesperson for The Pensions Regulator stated: “While our statutory objectives are set by government, our focus remains on protecting savers money, promoting a well-functioning system that delivers value for money and driving innovation.”

The RRG is a caucus of Conservative MPs and peers, and includes Bim Afolami, Lord Andrew Tyrie, Richard Fuller, Vicky Ford, Alun Cairns, Stephen Hammond, James Wild, Sir Robert Buckland and Mark Garnier

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