Financial service regulators should merge, says think tank

Coming as part of its Re-engineering Regulation paper, the centre-right think tank - co-founded by, amongst others, former Conservative cabinet minister Michael Gove - has called for “fewer, bigger regulators in key areas”, adding that there should be a “presumption against” the creation of new regulators. 

It said the sheer number of regulators operating in certain sectors brings challenges in managing the risk of overlaps, duplication or inconsistency in regulation, adding that meeting the demands of the UK’s multiple financial regulators can be a “major barrier” to innovation and new market entrants. 

As such, it believes consolidating the number of regulators in individual sectors would subject the leaders of these regulators to greater scrutiny and accountability. Therefore, there should be a “presumption against” the creation of new regulators and the government should explore opportunities to consolidate the number of regulators in any given sector. 

The think tank has also called on ministers to make greater use of powers to issue strategic guidance to regulators - particularly where such guidance can ensure effective coordination across sectors. In addition to this, it says the government and parliament should hold regulators to account for the “hygiene and health” of their sectors. 

Alongside this, the government should establish a new “Regulatory Reform Unit” within the cabinet office and appoint a dedicated minister for regulatory reform, while policymakers should consider alternatives to statutory regulation - such as education and information. 

It also believes the National Audit Office should be “empowered and resourced” to conduct and publish regular audits for scrutiny by parliament. Additionally, each regulator should ringfence some of their budgets to fund an internal challenge function.