Out-Law News | 24 Jun 2021 | 3:31 pm | 3 min. read
A group tasked with setting out the UK’s post-Brexit regulatory priorities has released its recommendations, proposing a number of reforms focused on innovation, growth and inward investment.
The UK Taskforce for Innovation, Growth and Regulatory Reform, formed by Conservative MPs Sir Iain Duncan Smith, Theresa Villiers and George Freeman, was set up to identify post-Brexit regulatory reforms.
The taskforce has made recommendations to the prime minister (130 page / 5.15MB PDF) in a range of areas including energy and financial services. For example, it proposed that the government should urgently expand ‘open banking’ to ‘open finance’, by opening up financial data in a wider range of financial products such as pensions, savings, consumer credit and insurance.
Financial services expert Andrew Barber of Pinsent Masons, the law firm behind Out-Law, said open banking had given the UK a head-start on the implementation of account information services as part of the EU’s Payment Services Directive 2.
“However, as the report notes, the UK risks squandering that lead by not expanding from that base to drive open finance in the UK forward. Firms and a number of industry bodies have looked at open finance in the context of their segment of the financial services industry, but without a clear, central steer from government we may not see the developments that could – and should – result. It is therefore good to see the report recognises the need to do more to stimulate open finance innovation, if the UK is to keep up with developments and opportunities being made available in some other jurisdictions,” Barber said.
“The report suggests a principles-based and market-led approach to regulating the evolution of open finance, rather than prescriptive, technical standards. An approach like this will certainly provide industry with a chance of finding the best solutions for customers rather than having it dictated by bureaucrats,” Barber said.
The report also proposed a graduated approach to regulation for challenger banks and accelerating the UK’s exploratory work on a central bank digital currency (CBDC), digital money that would be issued by the Bank of England if a decision is taken to launch a CBDC in the UK, and recommended launching a CBDC pilot in the next 12 to 18 months.
In the energy sector, recommendations included the creation of a ‘smart’ energy grid, including new regulatory standards for smart appliances, an overhaul of energy generation and distribution rules in the drive to ‘net zero’, and the establishment of a new regulatory framework for hydrogen.
Energy law expert Lindsay Edwards of Pinsent Masons said the UK government was working on a number of net zero policies and strategies in the run-up to the 26th UN Climate Change Conference to be held in Glasgow in November.
“This report focuses on the vital role that regulation will play in the achievement of the UK’s net zero targets: a role that is often overlooked. It sets out a number of specific recommendations within its overarching vision of a new, proportionate, outputs-based regulatory framework,” Edwards said.
Edwards said not all the recommendations were new; for example, the Confederation of British Industry recommended updating the Gas Safety Management Regulations to allow greater flexibility for the injection of hydrogen into the gas grid in a July 2020 report.
“In relation to the energy sector the report is right to comment that current regulations were designed in a very different energy landscape. Numerous consultations are currently ongoing in relation to regulations that need to be updated to reflect the rapidly changing energy market, or where there are gaps in the existing regulatory framework,” Edwards said.
“It is hoped that this report acts as a catalyst to drive these changes through at the pace the net zero transition requires, and provides a much needed framework to deliver coordinated regulatory reform,” Edwards said.
The report said UK regulation should be as simple, agile and proportionate as possible, and should be designed to support small businesses and start-ups in navigating regulation wherever possible. The taskforce said government should reform regulators’ statutory objectives to ensure they promote competition and innovation, and should give such objectives to a wider range of regulators than currently have them, and strengthen scrutiny of regulators and regulatory reform proposals.
Other recommendations included a proposal to replace the UK General Data Protection Regulation 2018 with a new UK Framework of Citizen Data Rights so individuals would have more control of how their data is used also resulting in “more meaningful informed consent”.
The taskforce suggested the reform of fiscal incentives such as the Enterprise Investment Scheme (EIS) and the Seed Enterprise Investment Scheme (SEIS) to maximise private equity and venture capital investment in growth industries particularly so those outside London and the South East "benefit equally". It also said the UK’s anti-money laundering requirements should be amended so they no longer apply to account information services and payment initiation services.
The report recommended the delivery of a “world-leading” regulatory framework for the safe deployment of automated vehicles on public roads.
Meanwhile in the life sciences sector, the taskforce proposed a new regulatory regime for UK clinical trials, and a regime to support advancements in digital health.
The taskforce said it believed replacing the EU model of regulation with a new UK regulatory framework, based on the proportionality principle - so design, implementation and cost of regulation is proportionate to the risk, is outcomes based not tick-box compliance with rules, and is accompanied by proportionate remediation - would boost both the country’s economic recovery from the Covid-19 pandemic and its long-term competitiveness.
14 Jan 2021
11 Nov 2020