In a report today the Public Accounts Committee says UK
regulators are “struggling to recruit and retain the skills they
need to regulate effectively” in their new and expanded roles
post EU exit. Progress on developing long-term regulatory
strategies post-EU Exit has been slow, and the future direction
of UK regulation still unclear.
There are particular shortages of vets to monitor food safety and
animal welfare in abattoirs and toxicologists to assess food
risks and chemical safety, and lawyers and economists to enforce
competition law. All these increase risks for UK consumers. If
new requirements on all three regulators (along with the rest of
government) to make headcount reductions of up to 40% are carried
out it will “make the current regulatory models unsustainable”
without “legislative change and fundamental reform”.
The Committee finds that there are opportunities from adopting
more agile regulatory approaches outside of the EU that could
deliver benefits in driving innovation and growth. But “the loss
of access to EU systems and lack of progress in taking forward
the regulatory cooperation provisions set out in the Trade and
Cooperation Agreement” – despite the regulators’ willingness to
do so – is increasing regulatory risks and costs.
Regulatory divergence between the EU and UK, and within the UK
internal market offers opportunities but may make regulation less
efficient and more costly for regulators, consumers, and
businesses, depending on the approach taken. There is a risk that
these costs could have a disproportionate impact on smaller
businesses which are least able to afford them.
PAC report conclusions and recommendations
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Progress on developing long-term regulatory strategies
post-EU Exit has been slow and the future direction remains
unclear. It is clear it will take some time for the
regulators to fully embed their new and expanded
responsibilities as a result of EU Exit. For example: CMA
expects the Subsidy Advice Unit to become operational in the
autumn of 2022; it will be two years before the programme the
HSE has put in place to transform its IT infrastructure and
processes is completed; and FSA will not have full import
checks on high-risk food imported from the EU until the end of
2023. The regulators have identified some areas of potential
reform and opportunities to regulate more efficiently, for
example, in FSA’s approach to regulated products; and HSE’s
biocide and plant protection product regulations. However, in
many instances, these reforms will require primary legislation,
and the scope and timetables for this remain unclear. Progress
may also be delayed by: uncertainty over the appetite amongst
stakeholders for reform; the resources available both in the
regulators and policy departments to progress reform quickly;
and the implications of regulatory divergence for trade with
the European Union.
Recommendation: The regulators should write to the
Committee in six months setting out progress in developing
long-term strategies with relevant policy departments (including
which reforms would require primary legislation and estimated
timescales for implementation).
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The regulators are struggling to recruit and retain the
skills they need to regulate effectively after EU
Exit. Having left the EU, the regulators need
additional staff to deliver their new and expanded
responsibilities. CMA is competing with the private sector to
recruit and retain competition lawyers and economists, while
both FSA and HSE are struggling to recruit experienced
toxicologists in sufficient numbers. A shortage of
veterinarians to assure food safety and animal welfare in
abattoirs is also a key risk for FSA, which in autumn 2021 had
to put temporary measures in place to ensure it had enough
veterinarians to deliver this critical role. The regulators are
taking action to try to address these shortages, for example,
investing in staff training in HSE, and reviewing the pay and
conditions of veterinarians at FSA to make the career more
attractive. However, the ability to recruit and retain the
skilled staff they need remains a key risk to the future
effectiveness of all three regulators.
Recommendation: The regulators should work together to
identify common skills shortages, and develop long-term
strategies for recruiting, retaining, and training staff to
ensure they have the skills they need in the future.
Recommendation: The FSA should work with the Department
for Education and relevant professional bodies to address the
shortage in qualified veterinarians.
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Potential large-scale reductions in staffing levels in
regulators will not be achieved without fundamental changes in
regulatory approaches. In the Spending Review 2021,
the regulators received funding settlements they believed were
sufficient to enable them to fulfil their post-EU Exit
regulatory responsibilities. Since then, they have been asked
(along with the rest of government) to model headcount
reductions of 20%, 30% and 40%. Although it is not clear what
cuts they may eventually be asked to make, all three regulators
are clear that delivering their expanded responsibilities with
headcount reductions on this scale will be extremely
challenging. For example, FSA’s SR21 settlement provided for a
growth in staff numbers to fulfil its new responsibilities
after EU Exit and to directly employ veterinarians. Any future
requirement to reduce its number of veterinarians would have a
significant impact on the meat industry which, under current
regulations, cannot place meat on the market in the UK or
export it without veterinary oversight. Regulatory reform to
adopt a more risk-based approach could reduce the need for
veterinarians, but this would require legislative
change.
Recommendation: The regulators and policy departments
should identify the impact of potential cuts on regulatory risk
and set out where significant changes in the regulatory model
would be needed to balance the two.
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The loss of access to EU systems and lack of progress
in taking forward the regulatory cooperation provisions set out
in the Trade and Cooperation Agreement increase regulatory
risks and costs. On leaving the EU, the regulators
lost access to EU data sharing and cooperation arrangements.
CMA can no longer share confidential information with the
European Commission or member states in merger, competition or
consumer enforcement cases, impacting its ability to
effectively enforce competition law. FSA has also lost full
access to the EU’s Rapid Alert System on Food and Feed (RASFF)
which provides member states with information on food safety
incidents, increasing the time and effort it takes to deal with
food safety incidents. HSE no longer has access to the chemical
safety data underpinning the EU’s Registration, Evaluation,
Authorisation and Restriction of Chemicals (REACH) regulations.
Industry has estimated it will cost £800 million to replicate
this data in the UK REACH system. The regulators are taking
action to mitigate these issues, but in some instances the
alternatives are more time consuming and are likely to increase
costs over time. The EU-UK Trade and Cooperation Agreement
(TCA) recognises the value of voluntary cooperation on chemical
regulation and includes provisions to establish a separate
agreement on competition enforcement cooperation (including the
sharing of confidential data). We are disappointed that no
progress has been made in taking these issues forward, despite
the regulators willingness to do so.
Recommendation: The regulators should work together to
share good practice on mitigations to address the loss of
regulatory cooperation arrangements with the EU and write to the
Committee in six months setting out progress in taking forward
the cooperation arrangements set out in the Trade and Cooperation
Agreement.
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Regulatory divergence between the UK and the EU and
within the UK internal market risks increasing costs for
businesses, but also offers opportunities depending on the
approach taken. Following EU Exit there is already
some divergence in regulatory approach between the UK and EU.
For example, the EU recently banned titanium dioxide as a food
additive, while the UK has not introduced a ban and FSA is
carrying out its own risk assessment. There will also be
divergence because regulatory decisions are made at different
times and will take into consideration UK risk profiles and
usage, for example, in the authorisation of specific chemicals
or regulated food products. Outside the EU single market, there
is also greater scope for England, Wales and Scotland to reach
different regulatory decisions in areas of devolved competence.
The regulators are working with the devolved administrations
under a set of ‘common frameworks’ to reach an agreed way
forward where possible and coordinate the timing of regulatory
decisions and their implementation. However, in areas like gene
editing for example, it is not yet clear whether a common
approach will be agreed. There is a risk that over time
regulatory divergence (both between the UK and the EU and
between the four nations of the UK) may lead to increased costs
for business and consumers through administrative burden and
regulatory costs. We are concerned that these costs may have a
disproportionate impact on smaller businesses.
Recommendation: The regulators should put in place robust
monitoring to keep track of regulatory divergence and its
implications, particularly for small businesses.
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It will be vital for regulators to continue to develop
their engagement on the world stage. Outside the
European Union, the regulators have taken steps to increase
their international influence and engagement, recognising the
importance of sharing good practice, increasing cooperation in
the global marketplace, and working to improve standards
worldwide. For example, CMA has both continued its engagement
with the International Competition Network and the
International Consumer Protection and Enforcement Network, and
also agreed a new mutual assistance and cooperation framework
with the competition authorities in the United States, Canada,
New Zealand and Australia. FSA is strengthening its engagement
with Codex Alimentarius, the international standard-setting
body for food and feed, and it is investing in its work with
the International Food Safety Authorities Network (INFOSAN)
that supports international cooperation on the management of
food safety incidents. HSE is also representing the UK at the
UN globally harmonised system of classification and labelling
of chemicals.
Recommendation: The regulators should write to the
Committee in six months setting out their plans for further
international engagement including their objectives and
timescales for action
