Response to the Cost Benefit Analysis (CBA) Panel's Annual Report 2024/25

We believe, based on discussions with international counterparts, that our current CBA processes, and the transparency of our policy-making process, reflects international best practice. 

When conducting CBA, we must balance the requirement to be robust and transparent with the need to be proportionate. We often need to act quickly to address ongoing harm and create certainty in the markets we regulate.

Sometimes we are required to act to deliver government legislative intent, such as bringing Buy Now Pay Later into our remit. So, we need to make sure all our processes, including CBA, are sufficiently agile and streamlined.

Good quality data and evidence are needed to support CBAs and inform policy-making. When we gather evidence, there is often a cost to firms and consumers. 

The detailed quantitative evidence in our CBA analysis is usually based on data obtained through specific data collection surveys – and we recognise that this comes with a cost to industry and firm burden.

We are mindful of the impact of data requests on firms and need to retain our ability to gather evidence in a proportionate way.

In the last year we have significantly accelerated our policy-making processes, in order that we can deliver against our strategy at pace. This is in particular on areas of regulatory reform which support growth.

We increasingly use policy sprints, bringing together external stakeholders at an early stage to consider (and discount) policy options and proposals, before formal consultation on our rules. This early engagement, with interrogation of different policy options, has enabled us to deliver our ambitious agenda at pace.

Where there remain a number of feasible options to address an issue, we seek to consider the CBA of the various options in an effective way. However, where feasible options are limited, and where we have already undertaken engagement on different policy options with external stakeholders, we would not want to delay the policy process by being required to carry out full CBAs on each discounted policy option. 

Doing so would lengthen our timelines and likely result in burden to firms as we would need to implement numerous data requests to explore options that are unlikely to be taken forward. Feedback from industry has frequently been that the burden created by data requests is not proportionate, and we do not want to increase that burden unnecessarily.

Examples of where we have provided summary information of our early options analysis in our CBAs or consultation papers include:

• CP24/28: Operational Incident and Third Party Reporting[6].
• CP19/28: Motor finance discretionary commission models and consumer credit commission disclosure[7].
• CP21/30: Debt packagers: proposals for new rules[8].

We will continue to develop this in our CBAs, but we do not intend to routinely carry out detailed CBAs for discounted policy options.

We recognise the importance of regular evaluation and have evaluated the costs and benefits of our interventions in a number of our impact evaluations[9] to date. These include:

• EP18/1: Guaranteed asset protection[10].
• EP19/1: General insurance renewal transparency intervention[11].
• EP25/1: Ban on contingent charging and other remedies[12].
• EP25/2: An evaluation of our General Insurance Pricing Practices (GIPP) remedies[13].

We will continue to revisit our CBA estimates in future evaluations and post-implementation reviews. 

The Panel noted in its report that it is hard to capture the cumulative impact of policy in the CBA of individual proposed rules alone. This may miss interactive effects such as vicious circles of compliance costs to firms.

In line with the Government’s new approach to regulation[14], we want a regulatory system which is easier to navigate for businesses and reduces duplication.

We report annually on the total value of the Equivalent Annual Net Direct Cost to Business across all CBAs for Policy Statements published in the previous year (Metric RI-M01[15]). In 2024/25, this was £51.2m.

Our statutory requirement to conduct CBA applies to rulemaking interventions. In our Statement of Policy on CBA[3], we set out that we will also produce a CBA when we issue new guidance that may result in significant costs being incurred. We did this for our: 

• Guidance on the trading venue perimeter[16].
• Payment systems and electronic money[17].
• Fair treatment for vulnerable consumers[18]. 

There may be other types of intervention that could significantly affect markets and consumers. So, for additional transparency, we may produce an analysis of the expected impacts of an intervention even when not statutorily required.

When deciding whether to do so we will balance the expected impact of our intervention against the time it will add to our process and the administrative burden to stakeholders of gathering relevant evidence.

We are exploring how we will include this in the next iteration of our Statement of Policy on CBA.

When we make rules, we are required, as far as is reasonably possible, to:

• Act in a way that is compatible with our strategic objective and advances one or more of our operational objectives.
• Advances our secondary international competitiveness and growth objective and has regard to our regulatory principles. When we use our general rule making power, the rules must appear necessary or expedient for the purpose of advancing our operational objectives.

Our CBAs set out the expected economic costs and benefits of a policy proposal. A CBA does not on its own provide a justification for our intervention.

In our consultations we include a compatibility statement which sets out how our intervention is consistent with our legal requirements. 

However, certain economic impacts have direct relevance to our objectives and these will be set out in the CBA.  

Impacts on consumers such as price changes, wellbeing, value of time, debt or arrears or consumer detriment, can show how an intervention advances our consumer protection objective.

Impacts on the number of suppliers in a market or the availability of information to allow consumers or investors to compare market offers and switch between providers, are relevant to our competition objective. 

Other economic impacts, which may be harder to quantify, are relevant to our market integrity objective or our secondary competitiveness and growth objective.

These include impacts on trust and confidence in the integrity of markets and the willingness of consumers or investors to participate, or the extent to which we expect an intervention to affect innovation or productivity.

Our CBAs also include an assessment of the expected cost to business, which relates to firms’ competitiveness.

By providing transparency about these expected impacts, our CBAs help show how our proposals are consistent with our statutory objectives and regulatory principles.