Estimating the costs of regulation to British business

There might not always be quite as much factchecking going on in Whitehall as we sometimes wish, however one independent body has been tasked with checking the government's working when it comes to the costs and savings that businesses might see as a result of policy decisions: the Regulatory Policy Committee (RPC).

Today the RPC published its annual report - titled 'Improving the evidence base for regulation' - and its findings make for interesting reading.

Normally, when the government proposes a change to business regulation it submits an impact assessment to the RPC setting out the amounts by which it expects businesses to benefit or lose out by as a result of the policy. The RPC then checks the assumptions and working to see if the government's projections are reasonable.

The RPC found that a quarter of the impact assessments it initially received in support of policy proposals were not "fit for purpose". This was an increase on the 19% that the RPC rejected in 2012.

The RPC suggests a number of possible reasons for this increase, including that departments are having less time to prepare their forecasts. It also notes that there is a good deal of variation between departments, with the best performing seeing 90% of their impact assessments being rated as fit for purpose, while for others closer to 50% are given the all clear initially.

The accuracy of these projections also has an impact on the likely impact on businesses budgets. The RPC calculates that it has corrected errors equivalent to £112 million in the impact assessments it initially received. In most cases, the government was found to have been overly optimistic about the saving for businesses that could be achieved: in total the RPC found that the government had over-estimated the savings from deregulation by £39 million in 2013, and underestimated the cost of new regulation by a further £5 million.