The Purpose and Role of RIAs
10. In its briefing document to us NAO suggested
for consideration the question of whether RIAs should continue
to be used as the key mechanism for incorporating sustainable
development into policy appraisal.[6]
It is certainly the case that the RIA process suffers from a number
of flaws which are, at present, restricting adequate consideration
of sustainable development issues. It would, however, be mistaken
to disregard the potential strengths of the RIA process. Whatever
its shortcomings, the system is well established within central
government and departmental compliance is high. As such, RIAs
offer a uniquely viable platform from which coordinated and widespread
integration of sustainable development principles could be achieved.
Although a freshly conceived separate environmental assessment
might be less restricted by the limitations of structure and origin
currently afflicting RIAs, its very existence separate from the
established RIA procedure would risk the marginalisation of environmental
issues from the core decision-making process. Even if a decoupled
assessment were explicitly referenced in an RIA, such a system
would prevent the direct consideration of environmental concerns
against social and economic impacts which is so crucial for effective
sustainable policy-making in the long-term.
11. In the absence of a viable alternative to
Regulatory Impact Assessments (RIAs), the RIA process must be
regarded as an appropriate, if far from ideal, platform for integrating
sustainable development into policy decisions. However, if the
RIA system is to prove an effective tool for achieving the aim
of fully integrated consideration of environmental impacts a number
of key changes will be required, not least to its structure and
purpose.
12. Our report examines several aspects preventing
the effective consideration within RIAs of environmental concerns,
such as guidance, scrutiny, and the difficulties of recognising
and measuring environmental impacts. However, there are other
matters even more fundamental to the RIA process which are in
need of reappraisal. Crucially, the RIA process often fails to
influence policy decisions, on environmental terms or otherwise.
The latest review of RIAs carried out by the NAO found that:
"RIAs are often not used in the right way. The
purpose of RIAs is not always understood; there is a lack of clarity
in the presentation of the analysis; and persistent weaknesses
in the assessments.[…] As a result, RIAs are only occasionally
used to challenge the need for regulation and influence policy
decisions - although they can still serve a valuable communications
role, improving the transparency of departmental decision-making."[7]
13. Among the more specific factors contributing
to this frequent marginalisation of the RIA system, the NAO identifies
some policy makers' interpretation of the RIA process as a purely
bureaucratic exercise, which is completed out of necessity, rather
than as an integral part of policy making. In particular, the
NAO's briefing for us on sustainable development in RIAs found
that "too often RIAs are used to justify decisions already
made rather than an ex ante appraisal of policy impacts."[8]
14. Any strengthening of the environmental aspect
of the assessment will only be worthwhile if it forms part of
a system that directly informs and influences policy decisions.
Though a valuable part of their role, the fact that RIAs contribute
to improved communication and transparency in policy-making is
not enough unless the information presented in the assessment
is actually considered when the relevant decision is made.
The problems and limitations set out by the National Audit Office
(NAO) in its briefing document to the Committee need to be resolved
and the RIA recognised as a valuable and necessary input into
the decision-making process. This will only be achieved through
a concerted commitment from above to establish RIAs as an essential
factor in considering policy, complemented by improved training
and guidance to facilitate the production of RIAs, improve their
quality and promote the process amongst officials. This remedy,
like many of the other more specific steps suggested by the NAO
in its 2005-06 review of RIAs, is directly related to the actions
required to promote and reinforce the consideration of sustainable
development within the RIA process itself.
15. The previous EAC report on this matter also questioned
the underlying structure of RIAs, describing them as "ill-suited"
to the balancing of environmental impacts against social and economic
concerns given the historical origins of the process in minimising
the impact of regulations.[9]
Minimising regulation remains a key objective of the central RIA
structure. The 'overview' section of the online guidance for policy-makers,
gives the following definition for a Regulatory Impact Assessment:
"The RIA is a key tool in delivering
better regulation.
This supports the government's
aim of only regulating when necessary and, when it is, to do so
in a way that is proportionate
to the risk being addressed,
and to deregulate and simplify wherever possible."[10]
The recent Cabinet Office consultation on RIAs maintained
a similar focus on minimising the regulatory burden, as expressed
in the consultation document:
"The new Impact Assessment is aimed at focusing
on whether regulation will impose an unnecessary burden on the
private, public or third sectors."[11]
Although certain aspects of the consultation document,
notably the approach towards sustainable development (see Chapter
8) are somewhat ambiguous, this statement is unequivocal in its
meaning, and demonstrates that—for the purposes of the consultation
at least - the focus of RIAs remains unchanged.
16. We believe that the fundamental purpose of RIAs
needs to be directed away from this focus on minimising regulation.
We are not opposing the principle of Better Regulation - the pursuit
of clearer and better formulated regulation is undoubtedly necessary
- but we are concerned that this venture too frequently focuses
on reducing the regulatory burden at the expense of promoting
rigorous analysis and harnessing the potential of well-conceived
and effective regulation as a means to successfully implementing
good policy. The RIA system, as it absorbs impact assessments
of all kinds, has evolved far beyond its original role, yet in
many instances it still remains wedded to its initial purpose
of assessing regulatory burden. The development of RIAs into the
Government's central and wide-ranging assessment tool not only
demands a wider purpose, but also provides the opportunity to
influence policy-making in line with broader strategic aims.
We strongly believe that RIAs should be used as a tool for ensuring
policies meet objectives that stretch beyond the economic sphere
to embrace environmental concerns. The RIA process must be directly
engaged in transferring the principles of sustainable development
and integrated decision-making from rhetoric to reality, principles
which are currently often neglected by the focus on minimising
regulation. We believe that the changes proposed in this report
would assist in achieving this aim.
17. An overall improvement in the quality and use
of impact assessments, along with a greater consideration of environmental
issues will benefit not only the environment but industry itself.
In evidence sessions both the EIC and Anglian Water expressed
their keen interest in seeing an improvement made to the current
system. More rigorous impact assessments in general will benefit
industry by ultimately improving the quality of regulation and
ensuring that regulation is established to meet a justified need.
In oral evidence Anglian Water discussed several instances where
regulation generated additional monetary and environmental costs
because impacts had not been identified or properly analysed during
the decision-making process. Paul Gibbs, Director of Wastewater
at Anglian Water concluded that "with good regulation in
place and the right regulation, it can actually lead to a longer-term
reduction in costs."[12]
18. Even more urgent, following the Stern Review,
is the need for industry and the economy to react to the challenges
of climate change; not only to safeguard the environment but also
to avert the massive economic consequences of inaction. Businesses
like Anglian Water, in sectors which will be at the forefront
of those affected by climate change, require comprehensive and
supported environmental assessment throughout the policy-making
process to minimise the need for costly adaptation to climate
change in the future, as well as regulation for their industry
which actively encourages sustainable action now. The Stern Report
called for regulation to play its part in directing policy towards
achieving overarching environmental objectives:
"the existence of market failures and barriers
[…] mean that there are circumstances in which standards
and regulations have an important role to play."[13]
19. On this topic, Jean Spencer, Regulation Director
at Anglian Water, described to us her company's sustainable strategy
for disposing of biosolid sludge, but explained that the scheme
is currently sustained only through a voluntary code, and that
regulation would be required to maintain and secure this sustainable
route.[14] Strong and
accurate environmental assessment is an essential factor in ensuring
that regulation is developed which demands and supports sustainable
actions, and which, by reducing environmental damage, lowers environmental
costs to industry in the long-term.
20. We also believe that regulation and impact assessment
must take note of the need to support the environmental industries.
The Stern Review identifies a number of key areas where regulatory
measures can be more effective than relying on tax and trading
instruments, among them to:
"…stimulate competition and innovation,
by signalling policy intentions, reducing uncertainty and increasing
scale in markets for outputs of technological innovation".[15]
However, in oral evidence to us Merlin Hyman, Director
of the Environmental Industries Commission, reiterated the views
expressed by Adrian Wilkes representing the EIC to our predecessor
Committee's inquiry: that the environmental industries sector,
reliant on regulation to create a sure market for its technology
and services, is not receiving adequate attention within impact
assessments. Although the sector is a growing one, employing approximately
400,000 people across 17,000 companies,[16]
and crucial to the UK's environmental aspirations, it would seem
that the previous EAC conclusion that RIAs "must adequately
recognise the contribution which the creation of thriving environmental
industries can make" remains a concern.[17]
Although Mr Hyman acknowledged that a small number of RIAs had
begun explicitly to mention the impact on the sector, it is clear
that the question of a policy's impact on environmental industry
is rarely accorded adequate attention or weight.
21. Mr Hyman communicated to us the example of the
partial RIA for the Environmental Liability Directive, which includes
only a limited assessment of the benefit to the environmental
industries sector, and neglects the positive environmental effects
this could achieve. The RIA states:
"A large proportion of the costs identified
in this assessment will in turn be revenue for the environmental
industry […] there is unlikely to be a net gain to the economy
[…] These expenditures are transfer payments from one sector
to another. If there are external benefits in terms of technological
development, then these could be considered as economic benefits
of ELD but to the extent that this effect exists it is not quantified
in this assessment."[18]
It is disappointing, especially for a Directive with
such a clear environmental role, that the impact assessment fails
to adequately acknowledge the long-term benefits (both economic
and environmental) from a thriving environmental industry
and any consequent technological development. If this attitude
is mirrored in other RIAs then this represents a missed opportunity
for a comprehensive environmental strategy.
22. In the wake of the Stern Review, and the
very real economic costs of inaction which it highlights, it is
no longer viable to view environmentally-minded regulation as
a straitjacket to industry. Especially in the case of the environmental
technology and services industries, regulation can play a crucial
supporting role. We reiterate the call made in our predecessor
Committee's report for RIA guidance to be strengthened in order
to ensure that RIAs adequately recognise and consider the contribution
that would be made by a flourishing environmental industries sector.
6 National Audit Office, Regulatory Impact Assessments
and Sustainable Development - Briefing for the Environmental Audit
Committee, May 2006, paragraph 7. Back
7
National Audit Office, Evaluation of Regulatory Impact Assessments
2005-06, HC 1305 of session 2005-2006 paragraph 6. Back
8
National Audit Office, Regulatory Impact Assessments and Sustainable
Development - Briefing for the Environmental Audit Committee,
May 2006, paragraph 5. Back
9
Environmental Audit Committee, Pre-Budget 2004 and Budget 2005:
Tax, Appraisal and the Environment, paragraph 54. Back
10
Better Regulation Executive Guidance for officials carrying out
RIAs, RIA Overview. http://www.cabinetoffice.gov.uk/regulation/ria/overview/index.asp
Back
11
Better Regulation Executive, The Tools to Deliver Better Regulation
- A Consultation Document, p15. http://www.cabinetoffice.gov.uk/regulation/documents/ria/pdf/consultation.pdf
Back
12
Q 43 [Mr Gibbs] Back
13
The Stern Review Report on the Economics of Climate Change-
Part IV: Policy Responses for Mitigation, section 17.3 (p381).
Back
14
Q 43 [Ms Spencer] Back
15
The Stern Review Report on the Economics of Climate Change-
Part IV: Policy Responses for Mitigation, section 17.3 (p381).
Back
16
This is the figure provided by the DTI/DEFRA Environmental Industries
Unit: http://www.dti.gov.uk/sectors/environmental/index.html Back
17
Environmental Audit Committee, Pre-Budget 2004 and Budget 2005:
Tax, Appraisal and the Environment, paragraph 64. Back
18
The partial RIA for the Environmental Liability Directive can
be found on pp.106-281 of the Consultation document on the implementation
of the Directive produced by DEFRA in November 2006, available
at http://www.defra.gov.uk/corporate/consult/env-liability/consultation.pdf
The Directive is intended togive effect
to the 'polluter pays' principle by imposing liability for the
prevention and remediation of environmental damage. The particular
reference to environmental industries can be found in paragraphs
E.66-E.67 on p140 of the document. Back
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