The British Chambers of Commerce (BCC) estimate in their ‘Burdens Barometer (2008)’ that the cumulative cost to business of new regulation since 1998 is £65.99 billion. In a 1997 MORI poll of 2,000 businesspeople – “The Rise and Rise of Red Tape” – only 7% of Britain’s top executives identified regulation as a significant problem. By 2003 that had increased to 34%. In the September 2008 Global Financial Centres Index (GFCI 4), regulation-related instrumental factors played a statistically significant role in determining a city’s position for global rankings.
While studies reinforce the finding that the UK regulatory burden is climbing, Z/Yen have been unable to find a methodology that indexes specific regulations against evolving perceptions of their efficacy, value, and impact. Further, with a new UK system of (Regulatory) Impact Assessments RIAs coming into place in 2008, a quantitative baseline index will provide UK businesspeople with additional data and influence when seeking to improve the business environment by engaging with policy-makers.
Introduction to the RBI
The RBI would provide ratings of regulations calculated by a ‘factor assessment model’ built using two distinct sets of input:
When new assessments arrive, or instrumental factors change, the index can be updated, allowing for updates to the RBI to be issued regularly, say half-yearly.
Approach and Methodology
The compliance assessments and instrumental factors are used to build a predictive model of regulatory burden using support vector machine (SVM) mathematics. The SVM used for the building of the RBI would be PropheZy – Z/Yen’s risk/reward prediction system. SVMs are based upon statistical techniques that classify and model complex historic data in order to make predictions on new data. The SVM used for the RBI would provide information about the confidence with which each specific classification is made and the likelihood of other possible classifications. The predictive model provides the overall index by answering questions such as:
If a Birmingham-based executive in manufacturing with over 2,500 employees gives the ‘Working Time Regulations (1999)’ and the ‘Vehicles Excise Duty Regulation (2000)’ certain assessments, then, based on the instrumental factors for ‘Employment’, ‘Transport’ and ‘Audit’, how would that person likely assess the ‘Money Laudering Regulations (2003)’?
Specific functions, capacity, scope, and outputs will depend upon available datasets and volume of survey response.
Z/Yen will identify additional research, ratings/indices, and datasets relevant to identified compliance criteria for UK regulation, and use their rankings further to illuminate and check responses to the RBI. A list of possible factors includes:
Potential sources of additional instrumental factors and other information might include:
At the outset of this project, we would agree a number of guidelines. These guidelines would ensure that assessments and instrumental factors were selected and used in a way that will generate a credible, dynamic rating of regulatory burden. Where indices are already in the public domain, the relevant organisation will be credited as the source of the data. There may also be organisations that have conducted relevant research, but not publish their data, in which case it may be obtained at cost should its quality and applicability be deemed sufficiently valuable.
Creating the RBI would not involve totaling or averaging instrumental factors. An approach involving totaling and averaging would involve a number of difficulties:
The guidelines for assessments by respondents might be: