IMPROVING
THE
QUALITY
OF
REGULATORY
IMPACT
ASSESSMENTS
Consulting effectively
31. Although knowledgeable in their field, policy
makers are not necessarily experienced in applying regulation,
or expert in the implications of regulation for business, charities
or voluntary organisations. Policy makers need to be sure that
what they are proposing is workable and proportionate, that there
are not significant omissions, and that they understand the implications
for those being regulated. Consultation, and acting appropriately
on the responses, can help them to do this. Consultation is more
likely to add value if it starts early, to help identify and consider
the options before they have been narrowed down too far. Several
bodies complained that some RIAs were developed only as the legislation
was being drafted, and after the strategy had been decided.[28]
32. The Cabinet Office told us that more engagement
with a wider range of stakeholders on the reality of implementing
regulation would enable better assessments of the costs of implementation,
which in their view was of very variable quality although there
were some very good assessments.[29]
Even where the Government had made a prior commitment to a change
there was still scope for considering how that change should be
implemented. For example, consultation had changed the way the
National Minimum Wage had been implemented. There were also examples
of departments consulting potentially affected parties at the
outset, such as on the Motor Salvage provisions of the Vehicles
(Crime) Act and Article 13 of the Employment and Race Directive.[30]
33. Departmental and agency web sites can help make
information on regulation more accessible. The ease with which
RIAs can be accessed from web sites has been variable. For example
not all web sites include RIAs produced at the consultation stage,
and many web sites do not comply with the recommendations of the
National Audit Office's Report "Government on the Web".[31][32]
34. The Cabinet Office did not know what proportion
of RIAs were accessible from departmental web sites but agreed
that not all of them were. Their target was for all RIAs to be
available on departmental web sites but achieving this depended
on individual departments. The Cabinet Office were also setting
up links between the list of RIAs on their web site and the RIAs
held on departmental sites.[33]
Taking account of the impact of regulation on
competitiveness and the delivery of services
35. Regulations are often intended to influence the
way in which markets operate, and as a result may affect competition
and ultimately the consumer. Furthermore, the need to understand
a wide range of regulatory requirements can act as a barrier to
entry to small businesses, and hence inhibit competition. This
would also happen if increased costs due to regulation lead businesses
to leave the market.[34]
36. We asked about the extent to which RIAs consider
the impact on consumers of businesses, charities or voluntary
organisations leaving the market altogether because regulation
increased their costs. The Cabinet Office told us that this would
be a legitimate factor for departments to take into account and
that they expected departments developing regulatory proposals
to do so. If feedback during consultation indicated that the regulatory
proposal would affect the delivery of an important service, the
analysis of costs and benefits should provide quantified data
on the impact of businesses leaving the market and could result
in Ministers re-visiting the policy options. In good RIAs this
analysis would also take into account the impact of additional
regulatory burdens on competition with overseas companies. The
Small Business Service told us, however, that they had not seen
evidence from RIAs of United Kingdom companies being disadvantaged
in this way.[35]
37. As the Office of Fair Trading has particular
responsibilities for competition, we asked how its views were
taken into consideration. The Cabinet Office said that the Office
of Fair Trading's views were currently considered along with the
rest of Whitehall's views. The Office of Fair Trading was, however,
taking on a new role within the RIA process by looking specifically
at the impact on competitiveness of regulatory proposals, so as
to enhance what departments already did in examining the impact
on competitiveness.[36]
Guidance and monitoring
38. Readily understood and comprehensive guidance
for policy makers is important given that the RIA is a relatively
new requirement in Government and there are a considerable number
of policy branches potentially responsible for regulatory measures.
The Cabinet Office provided guidance when RIAs were introduced
and issued revised guidance in August 2000.[37]
The National Audit Office's Report identified ways in which the
Cabinet Office could further strengthen their guidance. In particular,
the Report recommends that the guidance gives vivid examples of
good practice, requires policy makers to consult when in doubt
about the need for a RIA, gives suggestions on how regulation
is to be monitored post-implementation and requires a clear view
of the likely level of compliance.[38]
39. The Cabinet Office told us that they agreed with
the National Audit Office that there was much good practice in
preparing RIAs, but there were various areas in which there was
room for improvement. The revised guidance the Cabinet Office
issued in August 2000 had picked up some of the points on which
the National Audit Office had focussed, such as the need for consultation
to be early and to cover the options fully. The Cabinet Office
acknowledged that there was scope for adding examples of good
practice. They accepted the vast majority of the National Audit
Office's recommendations and proposed to work with the National
Audit Office on further guidance, which they aimed to issue some
time in the middle of 2002.[39]
40. The Cabinet Office also told us that it was part
of the role of the Cabinet Office's Regulatory Impact Unit to
ensure an appropriate balance of the burden of regulation and
that the nature of the regulation was appropriate for the task
in hand.[40] The Unit
has undertaken a rolling programme of seminars and other initiatives
to encourage good practice across departments, and has reviewed
many RIAs with a view to helping departments where appropriate.[41]
The Cabinet Office said that the Unit had not yet developed any
systematic baseline for giving a year-on-year assessment of how
well RIAs complied with guidance. They had a service delivery
agreement target to develop by March 2002 a baseline measure of
the extent of departmental compliance with the RIA process, and
to establish this as a basis for a year-on-year measurable improvement
to ensure full compliance by April 2003.[42]
The experience of the Cabinet Office's counterpart in Australia
was, however, that a qualitative assessment of how well RIAs complied
would not be easy.[43]
41. The Government's Business Manifesto of 2001 said
that the Government would commission periodic evaluations by external
audit, possibly by the National Audit Office, of the content of
RIAs and their use in public consultation.[44]
We asked about the merits of having a more systematic, independent
external review of individual assessments. The Cabinet Office
said there had been discussions on the merits of external evaluations
and the value they could add. No decisions had been made, however,
on how, by whom and when such reviews might be conducted.[45]
Conclusions
42. Effective consultation is important if regulatory
proposals are to reflect accurately the likely impact on businesses,
especially the cost implications, assessment of which is currently
very variable. But there is a perception that consultation takes
place when minds are already made up. The Cabinet Office should
provide more detailed guidance on what constitutes effective consultation
and challenge RIAs where the consultation process includes insufficient
options or does not seek and reflect views on how the implications
of regulation should be costed.
43. The Cabinet Office have been encouraging departments
to improve the accessibility of RIAs on their web sites but the
quality of web sites still varies. In particular not all include
the RIAs which accompany consultation exercises. As improved accessibility
to such RIAs might foster greater participation in consultation,
the Cabinet Office should set a minimum standard for placing RIAs
on departmental web sites in a readily accessible way and monitor
performance against this standard.
44. Regulatory proposals can potentially affect competition
and hence consumers by reducing the number of businesses that
are able to compete in the market place or by placing United Kingdom
businesses at a competitive disadvantage. The Office of Fair Trading
are taking on the role of advising on the implications of new
regulation for competition and the Cabinet Office should challenge
RIAs where departments fail to obtain such advice on proposals
that may impact on competition.
45. The Cabinet Office are considering whether external
evaluation of RIAs and consultation thereon would be of value,
in the context of a proposal to that effect in the Government's
2001 Business Manifesto. Such evaluations, at least of a selection
of RIAs, should encourage departments and agencies to give sufficient
attention to preparing and consulting on RIAs in accordance with
best practice and help to raise confidence in the process. The
National Audit Office would be well placed to take on this task
and the Cabinet Office should work with them to develop a programme
of external evaluation.
1 
