Powerful regulators operating “largely unchecked” are holding back the UK economy, a group of Tory MPs has said.

Members of the backbench Regulatory Reform Group (RRG) have called for more parliamentary oversight of the UK’s regulators to ensure they are working effectively for consumers and contributing to the Government’s priorities.

Hitchin and Harpenden MP Bim Afolami, who founded the group in November 2022, said: “Unaccountable regulators are directly hindering the UK’s growth prospects.

“Regulators have the potential to be key drivers of the Government’s long-term ambitions for the UK, not to mention enablers of economic growth, but without adequate oversight from Parliament, this potential has been lost.”

In a report published on Tuesday, the nine-strong group said regulators now wielded huge power and influence over the UK’s economy and society, but faced little democratic scrutiny of their decisions.

Lord Tyrie, the former chair of the Competition and Markets Authority, said: “Too many decisions – taken by powerful, anonymous quangos, and affecting millions of people – go scarcely scrutinised and inadequately explained.”

The group said regulators suffered from a “culture of fear”, making them too risk averse when they should be enabling innovation, and lacked strategic direction, making them underprepared for “fast-moving and profound mega-trends such as an ageing population, climate change, or technological breakthroughs”.

The RRG report also found regulatory objectives often differed from the Government’s aims, giving the example of the planning system working against levelling up priorities and the aim of building 300,000 homes a year.

The group was keen to stress that it was not arguing for “deregulation for the sake of deregulation”, but for a smarter, more accountable regulatory system.

Sir Robert Buckland, the former justice secretary and a member of the RRG, said: “It is important to note that this project is by no means an ideological ‘race to the bottom’ in terms of regulation. All we are seeking is a more transparent and proportionate approach to regulation where, crucially, regulators are held accountable against the objectives they are mandated to deliver.”

As well as a joint committee of MPs and peers to oversee regulators, the RRG called for more dialogue between the Government and regulators, and “accountability framework” to measure regulators’ performance and an “outcomes-based” approach to future regulation, allowing further innovation while protecting the rights of consumers.

They also said regulators needed to be properly staffed and resourced, but acknowledged this was difficult given restraints on pay.

City minister Andrew Griffith welcomed the report, saying: “This is a timely report which clearly sets out the opportunities from getting regulatory systems right.

“In financial services, the Government is – via the Financial Services & Markets Bill – already taking steps to align regulators objectives, improve their accountability and to focus more on outcomes.

“The authors rightly remind us that for the economy to succeed, wider culture needs to acknowledge that risk has to be sensibly managed rather than avoided.”