[Regulators] hold back… galvanise
“It is regulators, rather than the regulated, who have cause to be fearful under the new Labour government as it piles on the pressure to pursue a light touch approach to regulation in its efforts to galvanise growth. As compliant companies are likely to lose out in competitive marketplaces, in the absence of regulatory risk regulated entities need to consider the extent to which principles of responsible business and maintenance of a trusted reputation outweigh immediate commercial imperatives, understanding and weighing the issues and taking a calculated risk-based approach.”
In his speech to the International Investment Summit hosted by the City of London at Guildhall on 14 October 2024, Prime Minister Keir Starmer promised “I am determined to do everything in my power to galvanise growth”.
Recognising the UK as a country “with clear regulatory frameworks and protections” and “a legal system that sets high standards around the globe”, seeking to establish the UK as a country where the rule of law provides a solid foundation for global investment, the Prime Minister made a “pitch for Britain” comprised of 4 planks, the fourth and final of which was regulation.
Rejecting regulation as being either “good or bad”, the Prime Minister instead asserted that “the key test for me on regulation… Is of course – growth”. His questions for the test of regulation were stated to be “Is this going to make our economy more dynamic? Is this going to inhibit or unlock investment? Is it something that enables the builders not the blockers?”
Growth and innovation are relevant factors in determining effective regulation as identified by both the National Audit Office and the Commons Public Accounts Committee, but - unlike the Prime Minister - they also recognise that the maintenance and promotion of standards, ensuring public safety, the protection of the rights and interests of consumers, businesses and the environment, and the promotion of fair competition are also necessary elements.
What is Labour’s promise for the future of regulation? “We’ve also got to look at regulation – across the piece. And where it is needlessly holding back the investment we need to take our country forward… then mark my words – we will get rid of it... it’s time to upgrade the regulatory regime… Maek it fit for the modern age… We will rip out the bureaucracy that blocks investment… We will march through the institutions.. And we will make sure that every regulator in this country… Especially our economic and competition regulators… Takes growth as seriously as this room does”.
While not referenced in the speech, just last week the government launched the Regulatory Innovation Office to “reduce the burden for businesses hoping to bring new products and services to the market in some of the UK’s fastest-growing sectors” which it will achieve by supporting “regulators to update regulation, speeding up approvals, and ensuring different regulatory bodies work together smoothly. It will work to continuously inform the government of regulatory barriers to innovation, set priorities for regulators which align with the government’s broader ambitions and support regulators to develop the capability they need to meet them and grow the economy”. 4 priority growth areas of focus for the RIO were identified as including artificial intelligence (AI) and digital in healthcare and connected and autonomous technology.
All of this gives the impression that regulators will be under pressure from the Labour government to adopt a light-touch regulatory approach, perhaps more focused on information and education rather than ‘command and control’ regulation. Some regulators, such as the Information Commissioner’s Office have already been subject to criticism over their laissez-faire approach to regulation which means that compliance doesn’t pay, and it seems this is only likely to be encouraged and to become more entrenched and that perhaps more interventionist regulators such as the Competition and Markets Authority (CMA) may have their wings clipped, impacting digital markets regulation.
On the application of this approach to artificial intelligence (AI) regulation, the Secretary of State for Science, Innovation and Technology, Peter Kyle, in his interview with the Washington Post last week stated that in his opinion the previous Conservative government was too focused on AI safety and paid insufficient regard to AI opportunities, and that while he wanted to ensure “government has some teeth” the main “the thing I want teeth in most is actually the power to actually compel the release” of pre-release models for testing by the AI Safety Institute by putting the Hiroshima AI Process voluntary Code of Conduct for Organizations Developing Advanced AI Systems, which incudes at action 3 an commitment to “Publicly report advanced AI systems’ capabilities, limitations and domains of appropriate and inappropriate use, to support ensuring sufficient transparency, thereby contributing to increase accountability”, on a statutory footing. Emphasising that the Labour government’s short-term focus on regulation of AI will be narrow, Kyle stated “The AI bill that I'll be bringing in is a very focused piece of legislation on frontier AI”.
In the longer term, Kyle seemed to eschew wider AI legislation, suggesting that “We need to start injecting principles into our regulatory landscape. We need to make sure that safety is there at the outset and companies need to prove safety in a way that's appropriate for them before it starts getting rolled out, and then on the frontier end, we have a specific piece of legislation for it… I'm already thinking carefully about how the regulatory and legislative landscape into the medium term needs to properly adapt so that we don't end up with a situation that harms come crashing into our society… If we can get ahead of the curve, we can reassure the public that we will keep them safe, and we can allow them to safely explore this potential and make sure that harms are mitigated from the outset without having to retrospectively legislate”. Somewhat contrary to that position, however, Kyle went on to insist that “we cannot have people with innovations being bogged down in compliance precisely at the point we need them to be out there commercializing, making safe, getting it out there into society and the economy so it can benefit the health and the economy of the nation”, suggesting that safety and commercialization were activities to be run in parallel in the wild rather than consecutive actions.
Far from regulators being the big bad wolf to be feared by industry, it appears that Keir Starmer is the big bad wolf regulators should fear.
If your organisation requires support in implementing its risk-based approach to compliance, please contact us.
Find out more about our responsible and ethical artificial intelligence (AI) services.
Find out more about our data protection and data privacy services.