Regulatory Oversight for Better Regulation

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Empowering regulatory oversight bodies can help countries develop regulation that is fit for the future.

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If governments are to deliver on their “better regulation” goals, robust oversight is essential.

In 2012, the Organization for Economic Cooperation and Development (OECD) issued a recommendation on regulatory policy and governance that stressed the importance of establishing the right mechanisms and institutions to oversee, support, and implement regulatory policy, thereby fostering regulatory quality.

Moreover, the OECD’s 2021 Recommendation for Agile Regulatory Governance to Harness Innovation acknowledges the critical role of regulatory oversight in addressing many emerging regulatory challenges. Indeed, if regulatory oversight bodies are endowed with adequate powers, resources, and capacity, they can help ensure that rules are fit for the future. By promoting and helping to implement innovative and forward-looking approaches, regulatory oversight bodies can cope with uncertainty and enhance systemic resilience.

According to the 2021 edition of the OECD’s Regulatory Policy Outlook, countries remain invested in regulatory oversight, as all of OECD members continue to have at least one regulatory oversight body in charge of promoting regulatory policy and monitoring reforms and overall quality.

More than three-quarters of regulatory oversight bodies are located within government, half of which lie at the center of government. This location is preferable for functions where centrality is essential, such as promoting joined up approaches to regulatory quality and guidance to ensure that tools are applied consistently.

The latest available data also confirm the prominent role of non-departmental regulatory oversight bodies. These bodies are often at arm’s length from the government in that they are not subject to the executive government’s direction on individual decisions but may be supported by government officials. In a context where analytical rigor and credibility are paramount, these oversight bodies are valuable sources of advice and scrutiny, and they contribute to policy debates. For example, RegWatchEurope, a network of independent bodies, has issued recommendations for further developing regulatory oversight at the EU level.

Several OECD members have continued to strengthen and institutionalize their existing oversight mechanisms. Since the beginning of 2018, several regulatory oversight bodies have assumed new responsibilities, which may be a sign of governments’ willingness to embed them further into the regulatory policy environment. OECD members are seeking to use regulatory oversight bodies to help address emerging needs and challenges amid increased uncertainty and complexity around decision-making. About 40 percent of jurisdictions report having regulatory oversight bodies that oversee regulatory quality during crises that require emergency rulemaking.

In addition, almost half of member jurisdictions report having an oversight body that focuses on innovation-friendly regulation. Canada, Denmark, Norway, and the UK present valuable examples of regulatory oversight bodies’ innovative practices.

Canada’s Treasury Board, for example, has requested advice from an external advisory committee to ensure that the country’s regulatory system enables investment and innovation. Recommendations to date include strengthening capacity for regulatory experimentation—an area related to the role of regulatory oversight bodies that governments across the OECD will need to define better.

In 2018, Denmark established a secretariat for digital-ready legislation in charge of evaluating whether digitization is considered in rulemaking and providing ministries with guidance and advice on digital-ready legislation.

The Norwegian Better Regulation Council has taken steps to scrutinize whether regulatory proposals are innovation-friendly, and the UK’s Regulatory Policy Committee was tasked with scrutinizing an innovation test to ensure that the impact of legislation on innovation is considered throughout the regulatory cycle.

Despite ongoing improvements such as these, however, governments are not strengthening regulatory oversight speedily enough. Among the four dimensions covered by the OECD composite indicators, oversight and quality control of regulatory management tools is the least developed—and these indicators account for the role and attributions of regulatory oversight bodies and for publicly available evaluations. Over the period from 2014 to 2020, these indicators have continued to show the lowest scores, which highlights the need for stepping up regulatory oversight efforts.

In addition, regulatory oversight bodies can help bolster governments’ ability to reap the benefits of regulatory reform by improving how regulatory management tools’ performance is tracked, measured, and communicated. This assessment is a pivotal element of regulatory policy, but about one third of jurisdictions still do not publish online reports on the performance of their regulatory impact assessment system. Many others only report on an ad hoc basis. Moreover, few OECD members report regularly on the effectiveness of ex post evaluations in improving the regulatory stock or on the performance of consultation practices on draft regulations.

Improving regulatory oversight in the years to come will also involve getting a better understanding of its impact on regulatory policy. Countries such as Australia, Denmark, Mexico, and Norway are already showing the way by deploying considerable efforts to monitor and evaluate the results of regulatory oversight bodies’ work. There are also promising examples of how technology-based solutions and analytical tools can improve understanding of regulatory oversight bodies’ performance and its drivers. By promoting a coordinated and comprehensive approach to regulatory analysis and providing ownership-building advice and support, regulatory oversight bodies can make a difference in improving regulatory quality.

Beyond institutional design and related requirements, enhancing regulatory oversight bodies’ legitimacy, credibility, influence, and ability to elicit buy-in across government and, when appropriate, across borders, will hold the key to the future of regulatory oversight.

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Guillermo Hernández is a policy analyst in the regulatory policy division of the OECD.

This essay is a part of a nine-part series entitled, A Global Regulatory Policy Outlook.

This contribution builds on the publication OECD (2021), OECD Regulatory Policy Outlook 2021, OECD Publishing, Paris, The additional opinions and arguments employed herein are those of the authors and do not necessarily reflect the official views of the OECD or of its Member countries.