Life under Labour: UK regulation on the rise?

Barring a shock collective failure from the polling industry, the opposition Labour Party will form the UK's new administration on Thursday's (4 July) general election.

This breakthrough comes despite the common refrain that Labour has reached the cusp of power while keeping its cards in terms of policies extremely close to its chest. But while detailed commitments remain thin on the ground, a key theme running through the Labour manifesto is that the new government will have an increased focus on regulation.

That relates principally to specific sectors - including energy and water, which have taken much of the focus - but the manifesto also contains other related proposals, such as the introduction of a new Regulatory Innovation Office. In this post, we examine what the new landscape could look like under Labour and the actions that businesses should be considering in preparation.

Tougher sectoral regulation:

Labour's manifesto includes a range of commitments for heightened sector-specific regulation.

Some of the most striking proposals concern the water sector, where the measures include planned new powers for the regulator to block the payment of bonuses to executives and significant fines for water companies guilty of illegal sewage discharges. There are also plans to ensure independent monitoring of every water outlet.

Similarly, in the energy sector, Labour is proposing a "much tougher" regulatory system. While the manifesto does not contain many related specific commitments, there is a proposal to tackle standing charges where Labour plans to "work with the regulator" to reduce them. More generally, there is a commitment to "strengthen the regulator" to hold companies to account, require higher standards of performance and give customers "automatic" compensation for failure.

Looking more widely, policies across the manifesto include plans to reform gambling regulation, introduce a new independent regulator for football, overhaul the regulation of the private rental sector and more tightly control certain consumer products.

Proposed cross-sector measures:

There are also proposals with potential cross-sector impact, including on AI (for more information on the current regulatory environment please see our blog here), and a high-level suggestion of the role that regulation will play in protecting the UK's natural environment and improving resilience to climate change-related risks. This also links to a plan set out in the manifesto to mandate UK-regulated financial institutions to develop and implement credible transition plans that align with Paris Agreement targets to limit global warming.

Another measure with cross-sector impact is the proposed introduction of a Regulatory Innovation Office (RIO). The intention is the new agency will bring together existing functions across government with a view to helping regulators update rulebooks, speed up approval timelines and co-ordinate issues that span existing boundaries between sectors and regulators.

What can businesses do now?

As with any proposed regulatory changes, it is critical that those who may be affected by any of the proposals engage actively with government and regulators at the policy development-stage. This could be through responding to formal consultations, informal stakeholder engagement processes, or proactive bilateral engagement with the relevant public bodies. Trade associations can be useful mechanisms through which points can be articulated but often there is no substitute for those who might be affected making their own voice heard directly too.

However, it is done, the key point is that, where there is a concern that a regulatory change may be detrimental, those affected should get key information in front of government or the regulators before decisions are made. That can be the best way to avoid the adoption of a policy which is poorly thought through, disproportionate, or which might have unintended consequences. It will also put those affected in the best possible position should they need to look at a legal challenge in due course.

For more information and some key tips on these issues, please see our two-part podcast series on shaping and challenging policy (here and here).

For those concerned that they may be faced with enforcement action under a tougher regulatory regime, it will be important to get things in order now so that they are prepared to respond quickly to regulators, while also protecting the business's position where possible. Early actions which can help include housekeeping points (such as document management) and thinking strategically about outcomes and the application of the relevant legal framework. As with regulatory changes, there may also be the possibility of appeals or other legal challenges should enforcement decisions be unfavourable.  

What to expect next?

While the manifesto has provided some insight into the potential regulatory landscape that could emerge under a Labour Government, the details remain limited. How long until each of these policies takes real shape will depend on a new Labour Government's immediate priorities if it comes into power. But with the UK's first full change in administration in 14 years now looming, the smart money says that change is coming.