Most financial benefits of UK government's deregulation drive came from just 15 measures, auditors find

The Regulatory Policy Committee (RPC), which audits the impact of regulation on companies, found that just 15 significant measures generated over 90% of the costs and savings to businesses during the 2010-2015 parliament. Two of the largest of these, the EU's Alternative Investment Fund Managers Directive (AIFMD) and Bank and Recovery Resolution Directive imposed a combined total of £1.6 billion per year on businesses.

The RPC scrutinised over 1,200 proposals over the course of the current parliament, of which 951 become law, according to its report. Taken together, these measures saved businesses £2.2bn per year; £505 million less than the figure originally claimed by the government.

"Our report demonstrates that independent scrutiny is vital to ensure that regulatory reforms are supported by robust evidence and to provide a validated, credible account of their impact," said RPC chair Michael Gibbons. "Without RPC scrutiny, the net savings to business claimed by the government from its regulatory reforms would be £505m higher than the final validated figure of £2.2bn per year currently."

"Furthermore, for maximum credibility it's crucial that such scrutiny, and the validation of the impact of regulation, is extended to the fullest range of measures that have an impact on business and civil society," he said.

In 2010, the incoming UK government set a target of being the first in modern history to end a parliamentary term with the burden of regulation being lower than at the start. As part of this it has introduced a 'one-in, one-out' policy on new regulation, as well as conducting a 'red tape challenge' review of existing regulation with a view to removing regulations by default unless their continuation could be justified.

In its report, the RPC found that a "significant volume" of new regulation was outside the scope of the one-in, one out policy. Not including the AIFMD and Bank and Recovery Resolution Directive, these measures would impose £467m per year in net costs on UK businesses, according to the report. Other EU measures introduced in 2013 would impose an additional £730m per year in net costs, according to the report.

The RPC praised the government for the number of improvements it had made to the framework for better regulation since coming into power, including increased scrutiny of proposals by the RPC and increased transparency in relation to significant EU regulatory measures. However, other changes had "weakened" this framework, including "unpublished changes to the methodology for determining the scope of one-in, one-out", the RPC said.

The Small Business, Enterprise and Employment Bill, which is currently before parliament, "represents one of the most significant steps in embedding better regulation into government lawmaking", according to the RPC. The bill, which is expected to become law before the general election, includes proposals that will place future governments under an obligation to publish a target for the economic impact of new regulation on businesses, and to report regularly on performance against that target, the RPC said.

However, the RPC said that when implementing these changes the incoming parliament would have to "ensure that the better regulation framework does not become overly complex and bureaucratic". Any future targets should also provide the right incentives to departments to encourage them to minimise the costs of regulation, it said.

Government departments should also do more to consider how the impact of regulation on smaller businesses could be reduced, the RPC said. According to its report, two thirds of new regulations affecting businesses published in 2014 did not include measures to mitigate their impact on small and 'micro' businesses. Only three out of 83 included a full exemption, while a further 10 included a partial exemption, it said.