The emergence of regulatory policies to promote better regulation has been an important development for public governance in the OECD, and beyond, over the past thirty years. Why should governments have a regulatory policy? What contribution can effective regulatory governance make to the public policy challenges which now face governments, such as unemployment, ageing populations and climate change? How can regulatory policy help economies and societies find the path to sustainable growth?
Regulations are indispensible to the proper function of economies and societies. They create the "rules of the game" for citizens, business, government and civil society. They underpin markets, protect the rights and safety of citizens and ensure the delivery of public goods and services. At the same time, regulations are not costless. Businesses complain that red tape holds back competitiveness while citizens complain about the time that it takes to fill out government paperwork. Moreover, designing and enforcing regulations also requires resources for government and public administrations. Regulations can also have unintended costs, when they become outdated or inconsistent with the achievement of policy objectives. The 2008 financial crisis – which resulted in part from poorly designed regulatory regimes and the uneven enforcement of existing regulations – and the ensuing and ongoing economic downturn starkly illustrate the potential consequences of regulatory failure.
Modern economies and societies need effective regulations for growth, investment, innovation, market openness, to support the rule of law and to promote better lives. A poor regulatory environment undermines business competitiveness and citizens' trust in government, and it encourages corruption in public governance.
Setting the scene: The importance of regulatory policy
Regulation is of critical importance in shaping the welfare of economies and society. The objective of regulatory policy is to ensure that regulation works effectively, and is in the public interest. Regulatory policy, a comparatively young discipline, is taking shape in different ways across OECD members and beyond. Different pathways, however, are tending towards common objectives. Many OECD countries did not have a regulatory policy ten years ago; nearly all do now. There is growing interest in using regulatory policy to address broad societal concerns such as distributional equity and sustainable development. There is no room for complacency for the work which lies ahead to transform regulatory policy into a truly effective support for meeting public policy goals.
The achievements of regulatory policy
Regulatory policy has already made a significant contribution to economic development and societal well-being. Economic growth and development have been promoted through the contribution of regulatory policy to structural reforms, liberalisation of product markets, international market openness, and a less constricted business environment. Regulatory policy has also supported the rule of law through initiatives to simplify the law and improve access to it and through improvements to appeal systems. Increasingly, it supports quality of life, social cohesion and the rule of law, through enhanced transparency which seeks out the views of the regulated and through programmes to reduce red tape for citizens.
Challenges for the future
Governments face a range of challenges as they emerge from the crisis. They need to put their economies back on the path to sustainable growth, find ways to handle complex and interrelated policy areas, anticipate and manage risks more effectively, and regain the trust of their citizens. Effective regulation can provide strong support for meeting these challenges. Ineffective regulation, conversely, will slow recovery, brake growth, undermine efforts to address complex issues such as climate change, and reinforce citizens’ scepticism of government. Challenges for regulatory policy include the need to strengthen impact assessment and institutional capacities to identify and drive reform priorities, as well as greater attention to the voice of users who need to be part of the regulatory development process.
The need for stronger regulatory governance
Effective regulation to help meet the challenges facing governments will only be achieved through stronger regulatory governance, closing the loop between regulatory design and evaluation of outcomes. This draws attention to a range of issues, including institutional leadership and oversight; reviewing the role of regulatory agencies and the balance between private and public responsibilities for regulation with a view to securing accountability and avoiding capture; a renewed emphasis on consultation, communication, co-operation and co-ordination across all levels of government and beyond, including not least the international arena; and strengthening capacities for regulatory management within the public service.
Drawing a roadmap for regulatory policy
Developments in regulatory policy over the past ten years reveal convergence on the paths of regulatory policy across OECD. Despite progress, there remains considerable potential to improve the process of rule making and the functioning of regulation to contribute to sustainable growth across the OECD. This will require collective and individual effort by countries. A roadmap can set out the important collective goals for governments and guide the development of the regulatory policy agenda for the immediate future. The road map should usefully provide avenues for countries to develop their own practices in different cultural contexts, but shared principles are necessary to assist countries to learn from the experiences of others and to guide the development of regulatory policy and governance as a field of its own. A starting point is a consideration of how elements of the OECD’s 2005 Guiding Principles for Regulatory Quality and Performance can be refocused to crystallise a better framework for regulatory policy and governance, and provide a basis for developing a benchmark against which countries can measure their efforts.
Findings of the EU 15 country reviews
This annex summarises the findings of the EU 15 country reviews. The discussion of each topic concludes by succinctly identifying the relevant issues to be considered by countries when implementing regulatory policy.
Landmarks in the development of regulatory policy
OECD Guiding Principles for Regulatory Quality and Performance
The goal of regulatory reform is to improve national economies and enhance their ability to adapt to change. Better regulation and structural reforms are necessary complements to sound fiscal and macroeconomic policies. Continual and far-reaching social, economic and technological changes require governments to consider the cumulative and inter-related impacts of regulatory regimes, to ensure that their regulatory structures and processes are relevant and robust, transparent, accountable and forwardlooking. Regulatory reform is not a one-off effort but a dynamic, long-term, multidisciplinary process.
APEC-OECD integrated checklist
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