Examination of Witnesses (Questions 1
- 19)
MONDAY 26 NOVEMBER 2001
MR TIM
BURR, MR
BRIAN GLICKSMAN,
MAVIS MCDONALD,
CB AND MR
DAVID ANDREWS
Chairman
1. Good afternoon and welcome to the Committee
of Public Accounts. This afternoon we welcome Mavis McDonald,
the Permanent Secretary to the Cabinet Office. We shall be talking
about the regulatory impact assessments (RIAs). We obviously have
a good story here as there is room for improvement. Welcome to
our Committee. Would you like to introduce your colleague?
(Mavis McDonald) I have with me David
Andrews who is David Irwin's deputy at the Small Business Service.
We thought it would be helpful to the Committee to have someone
who is an expert in the operations of the Small Business Service
alongside me today.
2. May I start with paragraph 2.1 which emphasises
the importance of starting early, consulting effectively and costing
appropriately. To what extent do you think these characteristics
are reflected in assessments being done at the present time?
(Mavis McDonald) Our view is very much the view which
the NAO set out in their own report that there is a lot of good
practice going on in departments but there are various areas in
which we both agree there is room for improvement. A lot of the
material in the new guidance we published in August 2000 does
pick up some of the points the NAO focus on, like early consultation
and the need to consult fully on proper options. We do accept
that there is room for extending examples of best practice, working
further with departments. We are proposing to revise that guidance
itself and are happy to work with the NAO in taking forward the
recommendations in their report on how we improve practice over
the next few months, consulting external stakeholders where necessary.
3. Paragraph 2.3 is an important paragraph.
It says that several organisations consulted by the NAO complained
that departments had already made their minds up before preparing
their assessments. What are you doing to change this attitude?
(Mavis McDonald) The guidance we have already suggests
that there is not much point in just thinking about only one option
for taking forward any proposal for regulation, and that the consultation
we encourage people to follow through should engage with a number
of options. We have some very good examples of where regulatory
impact assessments, when they are at their partial stage, have
included a number of options. I might quote one I was involved
in myself which was the Countryside Bill on access to the countryside
where a lot of work was done on different kinds of options including
getting some consultancy support and where the actual legislation
then pursued several different approaches as a result of that
consultation. We acknowledge that this is not consistently as
good across all RIAs and there is room for encouraging departments
to improve their practice there.
4. You can see the sort of attitude that might
be prevalent, particularly in the business sector, that this whole
process is a bit of a charade really and the department has made
its mind up. Are you prepared to intervene specifically? You obviously
have the power, but are you prepared to intervene, keep an eye
on what is going on and ensure this is a proper process in the
meantime?
(Mavis McDonald) We do have machinery which enables
us to work with departments as they develop regulatory impact
assessments from the initial seeking of policy approval through
the various stages of full public consultation. We have a group
of units called departmental regulatory impact units (DRIUs),
where we have regular meetings between the central team and the
Cabinet Office; we are exchanging good practice on what works
and what does not work all the time. We also ourselves run a series
of seminars and workshops to try to encourage people to learn
the best from each other. I do think that it is important to distinguish
a point which comes through clearly in the report where the NAO
talk about the distinction between the policy cost and the administrative
cost of implementing regulation. There are some cases where a
government will have made a prior commitment to make a change,
having already stated why it wants to make that change, but that
does not mean there is not frequently room for talking about how
that change is implemented. There are examples in the report,
like the minimum wage itself, where consultation has changed the
way in which the implementation has been carried through which
has resulted in reduced cost to business and had particularly
good impacts on small companies.
5. I shall return to small businesses in a moment;
it is a very important point. Do you think there would be benefit
in having a more systematic, independent external review of individual
assessments?
(Mavis McDonald) As you would expect, this is something
on which we have had some discussion amongst ourselves. Our view
is that having an external assessment of what is going on can
always be a good thing, but a formal process, where you are actually
quite frequently developing primary legislation or working to
tight timetables on statutory legislation, could be very much
held up by having to go to an independent body. It is not clear
what gains would be got from that process that we could not already
seek by an improvement of the very open process which we currently
run. We have within the process the capacity for business or charities
and the voluntary sector to challenge what has been done at any
stage, if they think it is inappropriate. A lot of this activity
is in the public —
6. The answer there appears to be no. I am not
sure it is for me to mention, but I am advised that it was a commitment
in the Labour Party's business manifesto that there would be some
sort of external audit. Are you saying that you would not therefore
view in a positive way the National Audit Office being able to
have greater audit power over these impact assessments?
(Mavis McDonald) There is a difference between audit
and intervention. Some degree of external evaluation, whatever
it might be, could add value and indeed the current process does
require people when publishing the full regulatory impact assessment
to say how they propose that a new regulation should be evaluated.
We have been discussing with Ministers how they would want to
look at their commitment to evaluate regularly within three years,
and they are minded to wait and see what comes out of the NAO
study and some other work the OECD are taking forward on the way
our system compares with other systems which they have been looking
at, to decide exactly how to do that. There are several ways in
which you might do it. You might work more closely with the NAO
in the way in which they audit particular departments and we have
had some discussions with our colleagues at official level about
ways in which we might or might not take that forward. You might
do a much fuller assessment, the normal academic assessment of
what has worked well and what has not worked well in particular
areas. In some cases we already have commitments that other bodies
should look particularly at the impact of assessments.
7. We might come back to that, particularly
the point about the NAO, in which we are particularly interested.
Another important point is paragraph 2.26. This is the skills
your own civil servants have in Whitehall, where they are being
moved around different departments and these are really quite
complicated things to do and to prepare. What are you doing at
the Cabinet Office to equip policy makers with the necessary skills
and knowledge both to prepare assessments and to draw on the expertise
of others?
(Mavis McDonald) I should like to answer this question
in two halves. There is the general need for people who are largely
leading on policy development to understand the process and the
kind of skills which others might need to bring to bear in developing
it. As the report itself says, the RIA in itself can add value
to the policy development process. At one level we would look
to be developing more generally the senior civil service competencies
and skills to improve the `intelligent customer capacity' of the
senior civil service more generally and in this report and in
the report which was published at the beginning of November by
the NAO on modern policy making there are references to the kinds
of skills and capacity to build up our general know-how on things
like risk management and risk assessment which are relevant to
this. On particular individual RIAs, where you may have a team
who have not done one before, then we would hope that the DRIUs,
the departmental expertise, could provide extra advice to the
particular team. We would expect everybody to have the capacity
of economists or other professional groups who are well versed
in things like cost benefit analysis and to go and take extra
advice on particular aspect of RIAs where necessary.
8. I now come to a very important point, which
I am sure other colleagues will want to cover in more detail,
which is the impact on the small business sector. I see that the
Small Business Service has since nearly the beginning of 2000
been preparing guidance to address the problems outlined in paragraph
2.17 of obtaining the opinion of small businesses on the impact
of regulatory proposals. What I am very disturbed to read is that
despite the fact that this is a very important subject and they
have been working on it a long time, this guidance is still not
available. Am I wrong in thinking that?
(Mr Andrews) No, you are not wrong at all. This is
a very big gap in the battle against inappropriate regulation,
but we have not been inactive in this area. When the Small Business
Service was set up in April 2000, we established a new team to
look at the impact of regulation and to argue for better regulation
of small businesses. Since then we have expanded that team and
we have experimented with a number of different ways of establishing
very clearly the small business interest in regulation. We have
looked very carefully at the way in which the overall burden of
regulation affects small companies and we have experimented throughout
the last year in a variety of different ways on consulting small
businesses effectively. We have in a sense the checklist. We produced
our little aide mémoire which departments can use
to assess impact. The Cabinet Office guidance itself includes
a lot of best practice on the way in which departments should
be consulted. I am quite sure that any future proposals we make
will build on that. We have discovered during the course of the
last 18 months that it is very easy simply to tick boxes, it is
very easy to phone up a random selection of small businesses and
ask the questions guaranteed to give you the answers you are looking
for. It is incredibly difficult to undertake a really meaningful
in depth consultation. Small businesses by their very nature are
diverse, they often find that they need to examine issues quite
carefully before they can give a view. We have found that there
is no easy answer to this question, there is no easy route through
to the true views of small businesses. It is going to take us
a bit longer.
9. How much longer?
(Mr Andrews) We are hoping that by early next year,
certainly by January/February, we shall be able to agree not only
with departments but also with some of the key representative
bodies a way forward on the so-called small firms litmus test.
We are very keen that we get the views of informed outsiders.
We want the views of the CBI, the Institute of Directors, the
British Chambers of Commerce, the Federation of Small Businesses,
the Forum of Private Business, the Engineering Employers' Federation
and a variety of others on the mechanisms we propose. Unless we
have that buy-in we are not going to end up with something sufficiently
rigorous.
10. When will this guidance be issued?
(Mr Andrews) I assume it will be issued at the same
time as the revised Cabinet Office guidance.
11. Remind me again when that will be.
(Mavis McDonald) We are aiming for some time in the
middle of the year, partly depending on when the OECD finishes
its work.
12. So that will be over two years since your
service was set up.
(Mr Andrews) We do have interim guidance; there is
guidance available to departments. We do strongly promote the
importance of effective consultation. There was the `Think Small
First' document published in January of this year, which urged
departments to look very carefully at alternatives to regulation,
to consider very carefully consultation with small business. It
will take us a little longer I fear to put the really rigorous
guidance in place.
13. Others may want to come back on that. Paragraph
3.22 says, "The idea persists that anything less than direct
Government regulation is in fact less effective than such regulation".
This is an idea which is prevalent in Whitehall traditionally,
that Government regulation is what works. What are you doing to
change this sort of attitude?
(Mavis McDonald) The guidance itself does already
encourage departments to think about alternatives to regulation.
The general proposition that the earlier you start to think about
the regulatory aspects of a policy development, the more likely
you are to look at a wider range of options, holds true. We agree
with the NAO that there is more we can do to help departments
by giving other kinds of options and best practice to them in
this particular area. In the Better Regulation Task Force principles
of better regulation we also have examples where it is a good
idea not necessarily just to go to formal regulation but to think
about things like self-regulation through the ABTA model or other
kinds of regulation like codes of practice backing up the status
of professional bodies. There is more we can do to find examples
which have really worked as alternatives within the RIA cohort
we are building up.
14. There were 283 new regulatory proposals
in the two years since December 2000. It is Government policy
to reduce the regulatory burden on business, but there is a perception
by business that regulation under every Government gets worse
and worse every year. Would you like to comment on that?
(Mavis McDonald) It is very difficult when discussing
with business to distinguish between regulations and the sources
from which they come, those which are the result of policy commitment
and those which follow from the way in which policy is implemented.
Ministers have discussed with the CBI the way in which the CBI,
for example, account for the regulatory burden and the way in
which Ministers see that from their own perspective. It is part
of the role of the regulatory impact unit to ensure that the balance
of the burden of regulation is appropriate and the nature of the
regulation is appropriate for the task in hand. That does not
mean that there is not going to be any more regulation.
15. Obviously this is a vast area and other
members can come back. Various recommendations are made by the
NAO here. Do you accept these recommendations? If you do accept
them, when and how do you propose to implement them?
(Mavis McDonald) We have worked closely with the NAO
on this report. We have no difficulty with the vast majority of
the recommendations. What we would propose is that we should work
with the NAO jointly as we work up the consultation package for
the guidance so that we can pool together our developing thinking
with the recommendations in this report and go out with what hopefully
is an agreed package when we do go out to consultation with the
wider stakeholders.
Mr Gardiner
16. I welcome the whole basis on which the regulatory
impact unit works. It seems to me that you have made a correct
distinction between the policy level and then the consequences
of the implementation. What I am keen to do is to see ways in
which the impact of the implementation side of it can be really
tightened up. We have had complaints made to the Committee by
the European Policy Forum. May I put that to you and give you
the opportunity to address one of those? It would be that under
the 2000 guidelines ". . . departments are advised to consult
affected parties at the outset on the most appropriate data collection
and impact assessment methodology". They complain that is
not happening. Can you give the Committee three unambiguous cases
to show that it is?
(Mavis McDonald) May I go back to the one I referred
to earlier, the Countryside Act? We had a lot of discussion there
with people about what we knew about the difficulties of doing
cost benefit analysis in a largely untrammelled area and agreed
to go out and get professional advice on how you might actually
do that analysis. That is one particular one. I could also refer
to some of the examples the NAO themselves give in the report
where people have adopted techniques like using questionnaires
with their consultation to make sure they elucidate the right
kind of response to the consultation, so that you get meaningful
answers to the questions you put. I can also certainly let you
have a note which would give you more precise examples in response
to your question than I am able to give you off the top of my
head, if that would be helpful.[1]
17. That would be extremely helpful to the Committee.
It is important for us to be able to judge just what substance
there is to the complaint. May I refer you to paragraph 3.11?
In Australia there is the equivalent of—I love this; I call
you CORI Unit and have visions of you sitting there watching soaps
endlessly—the Cabinet Office Regulatory Impact Unit which
reports annually on compliance to Parliament. How would we best
establish that sort of accountability in the UK?
(Mavis McDonald) We do give Parliament information
on what we are doing and the basic process requires the full regulatory
impact assessments to be published with legislation as it is brought
forward. We have one route through there. In terms of the underlying
question about how everybody is complying with the guidance, we
have not as yet developed any kind of systematic base line against
which to be able to give a year-on-year assessment. It is something
we are working on. We have been looking at the Australian experience
to help us see whether we can work something through. The difficulty
they have found, from our understanding of what they do, is that
the numerical bit is relatively easy, the qualitative assessment
is slightly more difficult across a whole range of things that
are going on. It is something we are trying to do and we shall
let the Committee know when we have developed any proposals which
we wish to run with.
18. You will get back to us on that as well?
(Mavis McDonald) Yes. It is one of our published underlying
targets, not the PSA but an SDA target.[2]
19. May I refer you to paragraphs 1.15 and 1.19?
Has the Cabinet Office or the SBS ever pulled a regulatory proposal
because the RIA was either poor or non-existent? Can you give
me an example where you have pulled a proposal on that basis?
(Mavis McDonald) I do not know the answer to that
immediately. May I consult? Our answer to that is no, but we are
in a process of general discussion with departments on the policy
clearance process. It is not just a matter of "this goes"
or "this does not go". There is scope for exchanges
at both ministerial and official level before a proposal gets
its final exposure to the whole world.
1 Ev, Appendix 1, p 22. Back
2
Ev, Appendix 1, p 22. Back
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