Regulatory stability and the challenges of re-regulating

Stability can be thought of in narrow and broad senses – as involving either no changes or changes that are tractable in that they are foreseen and amenable to management. Regulators have developed a variety of strategies for effecting regulatory changes at lowest costs.

This report reviews those strategies and argues that we can distinguish between various re-regulation strategies, the potential of which, in a given context, can be evaluated with reference to an identifiable framework of issues, including: the sources of regulatory change and the varieties of costs and benefits that are caused by shifts in regulation (even if they cannot simply be quantified). Its main conclusions are:

• Regulatory change is not a problem, per se, but changes that are low in tractability  tend to be problematic. Even changes that are positive in substance may be effected by re-regulation strategies that are unduly wasteful of resources;
• The main sources of regulatory change can be identified as can the main varieties of re-regulation strategies;
• Many regulators have experience of using re-regulation strategies that will lower the costs of regulatory change – but few regulators approach the issue of re-regulation strategy in a structurally organised manner;
• A challenge for many regulators is that changes are imposed on them from the policy level – the legislature and/or the government. This implies that re-regulation strategies should be put into effect across levels of government;
• Regulated firms can argue with some force that regulators should refrain from introducing regulatory changes without first considering the range of potential re-regulation strategies that can limit costs (or maximise benefits) and without applying the most suitable of these.