Response to the Cost Benefit Analysis (CBA) Panel's Interim Annual Report

Corporate documents Published: 04/07/2025 Last updated: 04/07/2025

We welcome the recommendations in the CBA Panel's Interim Annual Report and have issued this stand-alone response.

About our response

The CBA Panel became operational in May 2024 and produced an Interim Annual Report (PDF) for the period May to September 2024 in January 2025. 

We are issuing a stand-alone response to this interim report.

We thank the Panel for its work. It has provided robust independent challenge and expert advice on CBA. We consulted the Panel when we prepared our Statement of Policy on CBA (PDF). And we are taking forward Panel suggestions on developing a Total Economic Value framework and reviewing our approach to discounting, with Panel members providing advice in scoping and developing our projects.

The Panel reviewed and gave advice on our CBAs for changes to the safeguarding regime for payments and e-money firms (PDF) and regulating stablecoins (PDF). The Panel has also given advice in the early stages of development of CBAs that will be published later in the year. 

We welcome the recommendations in the Panel’s Interim Annual Report. The Panel sets out a clear ambition for us to develop a best-practice approach to CBA. An approach which maximises the value of CBAs to our policy making and meets the expectations of our stakeholders and the wider public. We will work with the Panel to continuously improve our CBA methods and make sure our policy making is guided by evidence, and we are transparent about the impacts of our interventions.  

The Panel's recommendations

The Panel set out its thoughts on our use of CBAs and 3 specific strategic areas where it recommends that our CBA policy and practice should be developed. These are set out below, with our response.

Our use of CBA

The Panel recommended that we develop our use of CBA to build from the minimum specification set out in statute towards UK and international best practice. The Panel recommended that we view our statutory requirements as a starting point, and then design and adopt a policy which best enables our use of CBA to improve the quality and credibility of policy making. The Panel believes this will enable us to use the full potential of CBA as a practical tool to make sure it is evidence-based, proportionate, and accountable to stakeholders.

Our response

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

Using CBA at earlier and later stages of policy development

The Panel recommends that we consider how we might use CBA more systematically, both at the initial stages of policy making and in our monitoring and evaluation of policies. 

Our response

As part of our drive to be a smarter regulator, we want to make sure we are proportionate and efficient. When making policy, we consider the options available and assess their relative merits before developing our preferred proposal for consultation. Where there are 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, we would not want to delay the policy process and burden firms with data requests to explore options that are unlikely to be taken forward. 

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

We will continue to develop this in our CBAs.

We have evaluated the costs and benefits of our interventions in a number of our impact evaluations to date. These include:

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

Expanding the scope of CBA in our appraisal of proposed policy

The Panel recommends that we consider how we might expand the scope of our use of CBA in policy making in particular: 

  1. To evaluate the cumulative impact of proposed policies.
  2. To apply CBA to all changes of policy expected to have a sizeable impact on markets and consumers even if not statutorily required.

Our response

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, we want a regulatory system which is easier to navigate for businesses and reduces duplication. We are exploring how we can better understand the true cumulative impact of regulations on businesses and how we can streamline our regulatory approach. This will involve both the way we assess regulatory impacts in our CBAs and how we assess and reduce the cost of engaging with our systems.

Our statutory requirement to conduct CBA applies to rulemaking interventions. In our Statement of Policy on CBA (PDF), 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: 

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. 

How CBAs relate to our statutory objectives

The Panel recommends that we develop a clear policy on how our use of CBA takes into account our specific statutory objectives and regulatory principles, drawing on UK and international best practice. The Panel recommends that this policy is included in the next iteration of our Statement of CBA Policy.

Our response

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.