Good regulations can boost growth, says OECD

28 Oct 15

More effective regulation can act as a lever for economic growth, according to the OECD.

The OECD Regulatory Policy Outlook 2015 found that even small efforts to fix regulatory shortcomings can have a tangible positive impact on economic activity and well-being, and encouraged governments to further improve their law-making.

Angel Gurría, OECD secretary general, said: “Governments tend to focus their energy on getting their tax and spending policies right and often overlook a third lever that can support economic growth ‒ regulation.”

The report argues that making regulations more accountable and evidence-based pays dividends. It cited cases such as Australia, where reduced regulatory costs increased gross domestic product by 1.3%.

Cutting red tape in the UK had saved businesses £10bn over four years, while simplified regulation delivered savings of €1.25bn in Belgium, it said.

OECD governments and industries save €153m a year through regulatory cooperation that reduces chemical testing and uses harmonised formats and work sharing, it added.

The report argues that international cooperation in law making is essential for creating global rules and standards, addressing trade frictions and environmental risks and reducing the risk of regulatory failures such as the 2008 financial crisis or the recent VW emissions test scandal.

In tracking how OECD countries develop, implement and review their laws and regulations it found that only a third of the 34 nations have a clear policy for international regulatory cooperation.

One third have no policy at all on regulatory compliance and enforcement, while two-thirds have no system for evaluating laws once they are implemented.

Such poor coordination on regulation between countries hampers business and trade, the OECD said.

“Governments trying to shake off anaemic growth must address shortcomings in regulation and ensure laws work as well in practice as they do on paper. Laws need to be not just well designed, but well implemented, properly evaluated and consistently applied across sectors, jurisdictions and borders,” Gurría said. 

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