House of Commons - Regulatory Reform

Select Committee on Regulatory Reform First Special Report

1 Introduction

1. The Regulatory Reform Act (RRA) 2001 repealed the deregulation provisions of the Deregulation and Contracting-Out Act 1994[1] and laid down the procedures for making Regulatory Reform Orders (RROs). RROs provide the Government with an effective vehicle for reforming primary legislation where redundant regulation needs removing or regulatory provisions need to be re-focussed. Despite their attractions, the true potential of RROs has not yet been fully realised, not least because the process seems to be poorly understood across many Government Departments.

2. RROs should be seen within the context of the Government's better regulation agenda, which in turn is aimed at simplifying necessary burdens and reducing unnecessary bureaucracy. The Government sets out its general approach in its Regulatory Reform Action Plan (RRAP). The original RRAP, which was published in February 2002, contained 250 reforms.[2] An update, which was published in December 2003, contained over 600 deregulatory and simplification measures that covered the whole of Government.[3] According to the Government, by September 2004 over 300 of these measures had already been delivered.[4] The RRAP identifies various methods for achieving its aims, including primary legislation, statutory instruments, administrative changes and RROs. According to Ruth Kelly, who until recently was the Cabinet Office Minister with responsibility for Regulatory Reform, RROs are "potentially an incredibly important part of the process".[5] This importance was underlined by the inclusion of RROs in the 2003 Queen's Speech. As the Minister made clear, however, the desired outcome of better regulation does not necessarily need to be delivered via an RRO.[6] Alternative methods of achieving the desired aims may in some circumstances be more appropriate.

3. The better regulation agenda attracts high level support, as evidenced by the strong support from both the Prime Minister and Chancellor.[7] For example, the Prime Minister's Panel of Regulatory Accountability (PMPRA), which is chaired by the Prime Minister, acts

as a powerful way of scrutinising the performance of an individual Department, scrutinising directly the Cabinet Minister, and trying to identify proposals which should be streamlined where deregulatory impact should be maximised, and where outdated regulations should just go […] or new regulations not be brought forward..[8]

4. Another example of the Government's commitment to the reform agenda was provided by the Prime Minister's speech at the Confederation of British Industry (CBI) Conference in Birmingham on 18 October 2004, just before we took oral evidence from Ruth Kelly. In his speech, the Prime Minister mentioned, amongst other things, that he was prepared to amend the Regulatory Reform Act to make it easier to get rid of redundant regulation.[9]

Number of RROs

5. Since 2001, 20 Regulatory Reform Orders have been made, and a further eight proposals have been laid for parliamentary scrutiny.[10] The number and scope of the RROs that have been made under the RRA are set out in annex 1. The total number of RROs continues to be significantly below the Cabinet Office's PSA targets. Initially, the Government's projections were for 40 RROs to be delivered by the end of 2003.[11] In 2002, the PSA targets included a specific commitment to deliver over 60 RROs by the end of 2005.[12] This target has been re-affirmed in successive Cabinet Office Departmental Annual Reports.[13] In last year's Spending Review, the Cabinet Office and Treasury agreed a new target of 75 Orders by March 2008.[14] This Spending Review 2004 PSA target essentially rolls forward the 2002 PSA target.

Progress in meeting target

6. The total number of RROs that have been laid, including those still in their first stage of parliamentary scrutiny, is considerably lower than the Government's target of 60 RROs "to be made by 2005". In oral evidence taken in mid November 2004, Ruth Kelly told us that on current trends, it was highly unlikely that the Cabinet Office PSA target of 60 RROs by the end of 2005 would be achieved.[15] In fact, over successive years the Cabinet Office has never achieved its self-declared target on the number of RROs to be made. Table 1 shows the annual and cummulative numbers of RROs made each year since 2001 alongside the relevant PSA target as agreed with the Treasury.

Annex 1 Table 1: RRO performance against successive PSA targets

Financial year ending Target announced Actual and cumulative number of RROs

2001 40 (by end of 2003 calendar year) 1 (1)

2002 60 ("by end of 2005") 7 (8)

2003 60 ("by end of 2005") 8 (16)

2004 75 ("by March 2008") 4 (20)

Notes: As at 31 December 2004 Source: HC 8 Dec 2004 : Column 578W

7. Despite persistently missing its target for the number of RROs, the Cabinet Office was confidently claiming, even in March 2004, that it was "on course" to reach its target of 60 by 2005.[16] When questioned about this claim in oral evidence, the previous Minister said that the target of 60 by 2005 was "very challenging", that a target was only one aspect of delivering better regulatory reform and that the Government should be judged on whether it delivered better regulatory outcomes rather than on the process it followed.[17] She added that a number of proposals which had previously been identified as potential RROs had been pursued by other means, in part because of some of the barriers that related to the operation of the RRA, and that three proposals had actually been dropped.[18]

8. Since the targets and their deadlines are set by the Cabinet Office in agreement with the Treasury, it is reasonable to assume that they are serious indicators of regulatory reform, or at the very least the number of RROs the Government plans to be laid. Unfortunately, the Cabinet Office causes some ambiguity over the date for meeting its targets by using the shorthand phrase: "by 2005" to refer to the end of the 2005 financial year. As the Minister pointed out, departments in 2004 for the first time were required to report on their performance on the better regulation agenda in their departmental annual reports.[19] It is important that this information is reported without such ambiguities.

9. Our second comment on the number of RROs relates to the Cabinet Office's failure to keep us informed about its progress against the targets. As we mentioned above, when it published its Departmental Report 2004 in March 2004, it reported that it was "on course" to meet the target of "over 60 Regulatory Reform Orders by 2005" (by which it means the end of the 2005-06 financial year, April 2006). But in our view it should have been obvious, even in March 2004, that as in previous years the PSA target would be missed. Previously, the Cabinet Office had promised to keep us informed on the results of updates, including the number, scope and timetable for new RROs. While the Cabinet Office provides information on forthcoming RROs for the coming two or three weeks, we consider that the Cabinet Office should ensure that we are informed if there a substantial risk that it will miss its PSA target.

How meaningful is the RRO target?

10. The reliance on numerical targets, rather than improved outcomes, and the Cabinet office's successive failure to meet its target for the number of RROs made, inevitably raises the question whether such targets are meaningful. On the one hand, as the Minister argued, the setting of such a target may provide a departmental focus.[20] For our part, we continue to have doubts about the benefit of setting such arbitrary targets for the number of RROs, or even measuring regulatory reform by the number of RROs. We are not convinced that such a mechanical method has any sensible relationship with the progress in making beneficial reforms, especially given the varying size of RROs. To some extent, Ruth Kelly seemed to have shared our concerns. She told us:

I understand that the target is one of a series of indicators of whether the Regulatory Reform Agenda is working. I must say, I would prefer to concentrate on the outcomes rather than meeting an arbitrary target. It should probably be seen as an aspiration rather than a target, because of this point that we really are trying to focus here on outcomes.[21]

11. We urge the Cabinet Office and the Treasury to explore more meaningful ways of measuring how successfully it delivers regulatory reform than the gross numbers of RROs.

Government review of the 2001 Act

12. During the passage of the Regulatory Reform Bill through the House of Lords the Government gave a commitment to review the working of the 2001 Act after three years of operation. Clearly, if the Government had met this initial commitment, then we would have benefited from its published findings into the workings of the 2001 Act. Instead the Government decided not to conduct its review on the grounds that an insufficient number of RROs had been progressed. In 2003 the Government told us that the April 2004 review would be more limited in scope and that a more wide-reaching review might begin in the summer of 2005 provided that some larger RROs had completed the process.[22] In oral evidence, the Minister mentioned that the review would also consider the staffing of Parliamentary Counsel's Office.[23] In the event, the so-called limited review undertaken in 2004 amounted to little more than a list of Departmental suggestions for amending the 2001 Act. In her letter dated 13 September, Ruth Kelly told us it

is too early to undertake a fundamental review of the Act. We will need more evidence and examples before such a review can be carried out.[24]

13. In oral evidence, Ruth Kelly agreed that a proper review of the Act should take place at some point and she added that exploratory discussions had taken place with Departments about the operation of the Act, which had informed her letter (dated 13 September 2004).[25] In her view a proper review of the Act should probably wait until a major proposal had fully passed through this Committee and reached its final stage. Although we have reported on the Government's first-stage proposals on fire safety and on civil registration, it is unclear when the process on either of these RROs will be finally completed.

1 Those provisions continue to apply in Scotland as regards matters falling within the competence of the Scottish Executive (see section 12(1) of the RRA) Back

2 Regulatory Reform: The Government's Action Plan, December 2003, Cabinet Office, page 3 Back

3 Autumn Performance Report 2004, Cabinet Office , page 8 Back

4 Regulatory Reform: The Government's Action Plan, December 2003, Cabinet Office, page 3 Back

5 Q3 Back

6 Q3 Back

7 Q1 Back

8 Q31 Back

9 Prime Minister's speech to the CBI , 18 October 2004 Back

10 The list of RROs made under the Act is set out in annex 1. Back

11 Regulatory Reform Committee First Special Report of the Session 2002-03 The operation of the Regulatory Reform Act 2001:a progress report HC 908, Ev 18 Back

12 ibid Back