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Better use of data can help policy makers justify regulatory decisions, says expert


Policy makers should make more use of data to inform legislative or regulatory interventions, an expert has said.

Technology law specialist Luke Scanlon of Pinsent Masons, the law firm behind Out-Law.com, said that information is being generated in ever increasing volumes and that the latest analytics tools allow organisations to glean insights from that data. By exploiting public and private sector data, government departments, local authorities and regulators would be able to better justify the decisions they take, he said.

"Data can be a powerful tool and with so much of it now being generated there is an opportunity for it to be used more effectively to inform changes in legislation or decisions by regulators," Scanlon said.

"For example, in the financial advice market, where there is a continuing debate over what information tools and features constitute regulated financial advice and which ones merely amount to guidance, greater uses of data could help the regulator provide more insight on the extent to which tools influence investors' understanding of their options and decision-making and draw a clearer distinction on where the line between advice and guidance should be," he said.

Scanlon said that it was welcome to see the Financial Conduct Authority (FCA) highlight the potential for data to better inform regulation in a new paper entitled 'Economics for Effective Regulation' (63-page / 1.05MB PDF).

The paper said: "Some recent advances in research methodologies, high-performance computing and data availability can provide tools for reducing uncertainty more than was possible in the past. For example, experiments or field trials can help pin down the types of consumers’ biases that give rise to behaviour distortions in a particular context; or highly granular data on behaviour in the market (e.g. transaction reports or order book data in wholesale financial markets) can shed new light on the strategies of, and interactions between, different kinds of market participants."

Scanlon's comments also follow the publication of an independent review of UK economic statistics (259-page / 5.38MB PDF) carried out by former deputy governor of the Bank of England Sir Charlie Bean.

According to the review, the UK "significantly lags many other advanced economies in its exploitation of administrative data". Sir Charlie, now professor of economics at the London School of Economics, said that "all publicly-held data" should be accessible by the Office for National Statistics (ONS) "except where there is a strong reason not to, for example for reasons of national security". He also called on the ONS to "investigate the scope for using similar data held by the private sector, for instance on payments".

"[The ONS] should also explore the potential for using new techniques of collecting and analysing big data, such as web scraping, text-mining and machine learning," Sir Charlie said in his final report. "Although these may not always be suitable as core data sources for regularly produced economic statistics, they may also be valuable for cross-checking data, filling in temporary gaps (‘nowcasting’), and exploring the significance of new economic phenomena prior to undertaking more systematic measurement."

"Greater use of this data simultaneously holds out the prospect of more timely and accurate economic statistics, and a reduction in the reporting burdens on businesses and households. Unlocking this trove of information can extend statistical samples to near-census size, increasing their accuracy and allowing statistics, such as regional data, to be finely stratified to match individual user needs," he said.

Sir Charlie said that the ONS needs to upgrade its IT systems and recruit more data scientist to help it exploit information that is available and that it should also work with "relevant partners – in academia, the private and public sectors, and internationally" to embrace "active learning and experimentation" in the field of data science.

The UK government recently outlined plans to change the law to make it easier for public sector organisations to share citizen data, subject to privacy safeguards.

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