Examination of Witnesses (Questions 1-19)
MR MERLIN
HYMAN AND
MR STEPHEN
BILLINGTON
31 OCTOBER 2006
Q1 Chairman: Welcome. Thank you for coming
in. We are glad to see you again. You were here before one of
our predecessor committees in the last Parliament, I think, discussing
this very issue. Perhaps for people like me, including the members,
who were not on that committee, I wonder if you would like to
say how you think the situation has moved on, if very much, in
the last 18 months.
Mr Hyman: Good morning, Chairman.
Thank you for inviting us along today. We have been working quite
closely with the DTI and Defra's environmental industries unit
to try and improve practices in at least the specific area of
how environmental Regulatory Impact Assessments take account of
the benefits in terms of stimulating new environmental industries.
There are some—I think four or five—examples of RIAs
now which for the first time ever have specifically identified
those issues and how new policy measures have stimulated the environmental
industry. More broadly, however, I think the overall approach
of impact assessments, certainly outside Defra, to environment,
and more broadly sustainable development, has remained pretty
weak and I think that the NAO report which followed on from your
predecessor committee's inquiry reflects that and provides a fairly
accurate estimation. There is lots of work going on and there
have been some significant successes with Trudie Mansfield and
the environmental industries unit in the DTI and Defra, but overall
it is still a pretty painful and slow progress. Stephen, as a
practitioner, do you notice any improvements?
Mr Billington: I would support
Merlin's view on that. Good morning, everybody. I am a Divsional
Managing Director of Enviros, a specialist adviser working in
the area of environmental performance and environmental management
more generally. We are a market leader in that area of provision
of services in the UK and Europe and it is certainly our commercial
experience that, although we get very heavily involved in environmental
impact assessment, strategic environmental assessment is starting
to come in more significantly within the marketplace. When it
comes to the specifics around RIAs, we are certainly not seeing
an awful lot of commitment from the obvious ministerial committees
or the obvious commissioning agencies through the public sector
in the specific areas of development around RIA.
Q2 Tim Farron: The National Audit
Office report says, a quick quote here, that: "RIAs have
[some] potential strength as a means to inform and influence policy
making, and to facilitate the consideration of sustainable development
concerns in new policy", but the briefing also highlights
serious limitations in the RIA process when it comes to sustainable
development, and we were discussing similar points, these limitations.
Do you believe the current RIA system can be built on as it stands
or do you feel that there could be more effective alternatives?
Mr Hyman: Yes. First, in our written
evidence we looked through the history and I took some of it from
our own experience but also from your predecessor committee's
report and since the 1997 assessment of environment impact as
a policy. It is a pretty sorry history when you put it down on
one piece of paper, it even shocked me. There is 100% compliance
with doing RIAs at least and there is a system with a big stick
to make sure people do RIAs, so there must be a big concern that
introducing a separate system alongside RIAs, however well-intentioned
at the start, will fall into disuse. On a practical level, our
instinct at the moment is that we ought to work with the imperfect
tool of RIAs or IAs—as I think the Cabinet Office proposes
to change the name to—rather than try and put in something
else, tempting as that is just because the history of the last
nine or so years tells us there is such a big risk at that it
will be ignored.
Q3 Tim Farron: Do you think they
affect policy outcomes genuinely or are RIAs really used to justify
what was going to happen anyway in your experience?
Mr Hyman: I will bring Stephen
in on that in a minute, but I think today they rarely have an
obvious impact on changing a policy. The evidence and the figures
in them tend to get used within the policy-formation process by
other parts of government. When there is an environmental policy
coming forward, particularly, the figures that come out are used
to influence, say, the UK's negotiating position in Brussels and
the like. I think ministers have been influenced over the years
particularly with the issue of, say, EU directives on the figures
they have seen in front of them, say, this new WEEE Directive
which we are all struggling to implement now. For example, I remember
seeing the Regulatory Impact Assessment of that which suggested
the costs were 100 times the benefits on the basis of some pretty
lamentable assessment, I would have said, of the benefits. I remember
talking to a Foreign Office official who was very clear on the
UK's lobbying line on that and I think those figures must have
had a resonance, so I think the figures do resonate even if an
RIA does not directly change a policy in quite that way. There
are also one or two examples now perhaps, and they are slightly
broader than just IAs. For example, there is a review of the Air
Quality Strategy which is presented very much as a cost-benefit
analysis and there is a lot of similarities to an impact assessment.
That rates all the different policy measures the UK could take
to reduce air quality impact with a traffic-light system based
on a cost-benefit approach. For example, low-emission zones come
out as red in the draft. Again we would question the figures behind
that, but I think it is pretty clear and we have already seen
with some of the decisions DfT has taken that whatever comes out
of the Air Quality Strategy in the red place is very unlikely
to go ahead. The Government is really only going to be looking
at the things that come in green in their traffic-light system,
which is a cost-benefit analysis using much the same principles
of guidance as an impact assessment, if not strictly an impact
assessment.
Mr Billington: Just to come back
to your original question, it is certainly my view that RIAs are
moving a considered approach on and around policy development,
certainly introducing a higher level of objectivity. Given that
we are looking at policy judgments, which are really quite complex
quite often, there is a number of influencing factors and major
uncertainties around some of the influencing factors, and it is
not easy to look at how the implications in one area are going
to impact in another area. Certainly I would advocate anything
that opens up a greater understanding. A degree of transparency
and a greater push on objectivity has got to be a good thing.
I think where we are struggling is in the practice of RIA itself.
It is still emerging. We do not have a lot of good examples around
best practice and that is really what has to be pushed quite hard
now. Certainly from an industry perspective, we are looking for
the evidence that properly thought-out RIA is leading to the right
policy outcomes, and people can point to the reason why certain
policy outcomes have been advocated and advanced. You also touched
on waste regulation and the WEEE experience. Let me very briefly,
if I may, widen out my understanding to where we are at the moment
on the interpretation of material resource flows through the UK
economy at the moment. We have quite a lot of public expenditure
and public support on recycling initiatives, moving the diversion
targets away from landfill. It is quite interesting to reflect
more broadly and we have done some quite early work around the
material resource flows through the economy as a whole on behalf
of EA/Defra. This is quite recent work and what we are finding
is that around 1.6 to 1.7 billion tonnes of waste is generally
arising within the current UK economy currently. That roughly
represents around 10% of the total resource flows through the
UK economy. You have got to wonder, given the commercial pressure
that a lot of manufacturing companies are under, why we are left
in a situation with all the developing advancement around environmental
regulation, with all the understanding that is evolving around
what we need to do to perform better environmentally, why there
is so much slack in the market that allows us to still generate
10% of our resource flows as potentially a waste with no value.
If we were adopting the right approach to RIA, in the areas of
policy development associated with waste one of the first things
that the RIA would look at is what I have just been talking about.
There is very scant evidence that this has been taken account
of previously.
Q4 Chairman: Just on the point you
made about the WEEE Directive. Did you say that the original estimate
was that the cost would outweigh the benefits by 100 times?
Mr Hyman: Yes.
Q5 Chairman: In fact, that assessment
was not borne out?
Mr Hyman: There has not as yet
been a post-assessment. Some of those have been done in other
areas and they have pretty much uniformly found the costs to be
a great deal less than predicted and the benefits to be higher.
There was a good one of the UK Air Quality Strategy a couple of
years ago. Just looking at the original cost benefit analysis,
the benefits were simply worked out by taking the value of the
landfill tax as an estimation of the externality of WEEE waste
and "timesing" that by the amount of WEEE waste taken
out which was, I think, a very narrow perspective on what the
benefits of the Directive were.
Q6 Chairman: You mentioned low emissions
and you said they are coming out similarly badly.
Mr Hyman: The Air Quality Strategy,
as consultation, has put low emissions zones in the rate of not
cost beneficial.
Q7 Chairman: Has anybody told the
Mayor?
Mr Hyman: Yes, he is determinedly
ignoring it. It does show the complexity of these things. It has
taken us several months of ministerial meetings to dig into what
those figures are based on and the costs, for example, of particulate
traps is twice the reality in there. Changing those will produce
very different figures, but what ministers are looking at already
is a red light, low emission zones do not work based on "this
is objective evidence", but you have to dig right down and
look at the detail and you find that it depends on the assumptions
which you put in and those figures can be pretty suspect.
Q8 Chairman: If other countries decide
that low emissions zones are a good idea and we have not had one
here first, is there any way of assessing the benefit that might
accrue your members of being the first to move to advantage and
developing technologies which would be exported to Calcutta or
somewhere?
Mr Hyman: I think that could be
done but it is very rarely done at the moment. It is just emerging.
Work with our unit within Government is pushing departments to
go down that sort of line, but it has never happened previous
to that.
Q9 David Howarth: One of the problems
with Regulatory Impact Assessments has been some uncertainty about
what they are for. In particular, concerns have been expressed
that the origins of Regulatory Impact Assessments in the Better
Regulation Agenda is a problem. Is that your view? Is it possible
to combine the Better Regulation Agenda with putting into effect
sustainable development principles?
Mr Hyman: Regulatory Impact Assessments
grew out of compliance cost assessments in the 1990s when it was
fairly clear what it was for, it was assessing the costs of compliance
and then other factors like sustainable levels of environment
were assessed separately. It has developed into an overarching
tool which various things have been bolted onto including—after
living in various places unsuccessfully—environment and
sustainable development. It is clear that the whole culture of
RIAs and particularly of the Better Regulation Unit, the Better
Regulation Executive in government, is focused around the better
regulation, sometimes straying into the deregulation agenda. The
environment and sustainable development bit of that is by no means
core to the parts of government that run the impact assessments.
I think you only have to look at the consultation out, recently
closed from the Cabinet Office, to find that very, very little
thought has been paid to the environment and sustainable development
within that. There were some incoherent mentions in that and it
was very difficult to understand what was planned with the new
approach but it was pretty clear, in talking to the people involved
in the process, that very little thought had been given to it
despite the fact of a critical NAO report which is a driver in
any review of Regulatory Impact Assessments to recognise the change
needed in that area. That is my view. In terms of can they be
reconciled, I think I would go back to our earlier thought that
in an imperfect world we have to make use of what is there. Setting
up a separate process has not worked in the past and our feeling
is that the practical approach at the moment and the best way
forward is to try and make the existing impact assessment system
work and fit within the better regulation and alongside the Better
Regulation Agenda. I think that would be the least of two evils.
Mr Billington: From an industry
point of view, I would certainly support Merlin's points here.
Again, I think there is quite a bit of evidence to indicate where
companies have been able to take on board the spirit of regulation
early, rather than defending a position and then reluctantly deciding
to commit quite late in the day. There is a lot of evidence to
suggest that early commitment and early implementation, has put
certain companies at significant commercial advantage. Coming
back to your point about how RIA potentially links into sustainable
development, let me take one fairly significant example. Clearly
there is a huge agenda running at the moment between the implications
of climate change and how that fits with the broader sustainability
agenda. It is certainly our experience that despite the increases
in energy costs which `UK PLC' has seen over the last 18 months
or two years, generally in manufacturing energy efficiency improvement
is still seen as a fairly low priority to commit to. When you
draw out the salient aspects of that and think about our positioning
on climate change at the moment, the commitment that we will advance
with around objectives and targets reduce CO2 emission, there
is a very real need to think through at an early stage the implications
of regulation, in this case specific to energy efficiency, and
how that then has a knock-on effect around the broader objectives
as set out with the Government's sustainable development strategy.
I think there are potential linkages that can be drawn out across
a broad area of environmental performance. I think it is still
early days and industry needs to be challenged on this as much
as the regulator, but I am quite optimistic that once we see the
linkages clearly between more effective regulation, the supporting
evidence with RIAs and the policy outcomes, we will see a turnaround
in approach and attitude which will enable us to see clearly that
RIAs going forward underpin a profound commitment to sustainable
development.
Q10 David Howarth: I am quite worried
about this notion of bolt-on.
Mr Billington: Yes.
Q11 David Howarth: You start with
one thing and bolt on something else, and that does raise a question
about whether or not the whole purpose of the system needs to
be recast. Could I read out something from the present guidance.
It says RIAs are to be carried out: "for all policy changes,
whether European or domestic, which could affect the public or
private sectors, charities, the voluntary sector or small businesses",
and the question is whether that is comprehensive enough or comes
from the right angle. We have a memorandum from Anglian Water,
for example, that says the criteria should be widened to include
impact on citizens and the environment just to make it clear what
this is for. It is something different from where it started.
Do you agree with that?
Mr Hyman: I think there is a need
for a cultural change and this consultation on impact assessment,
which the Cabinet Office is running at the moment, has some fairly
major changes and recognises at its start that the system has
a lot of flaws. It is a good opportunity to do that and to drive
through different approaches. I think you are right that it comes
from a certain background, it has a certain culture and approach
and it is taking a long time to shift it, but you could replace
it with something else that gets ignored and put on the shelf.
Q12 Dr Turner: The National Audit
Office has looked at a selection of RIAs and its comment was that:
"few identified all social or environmental impacts that
they might have been expected to cover". Would you agree
with that comment and, if so, why do you think that is?
Mr Hyman: Yes. Certainly, that
is the case in our experience. I think that the root cause comes
from the point we were discussing earlier, in the fact that they
are rooted in compliance cost assessments, the mechanisms and
the guidance come from that background and that aim, and it is
a bit of a bolt-on. It has not been fully integrated into the
system and I remember looking at the response from the Government—I
think I have a copy here—to your predecessor committee's
inquiry. It just said, "Do not worry. Everything is rosy
in the garden. No problems. We just need to carry on working a
bit harder". This shows a lack of commitment from the better
regulation and RIA bit of government to improvement, better guidance,
training on assessing sustainable development impacts, which is
why we have been working with our unit in government with the
idea of getting some best practice and training out there. Those
are the main problems.
Q13 Dr Turner: Do you think it would
improve the situation if it was made an absolute essential requirement
that environmental issues should be addressed in an RIA, irrespective
of the policy topic that RIA is supposed to address?
Mr Hyman: My understanding is
that is, at least in theory, there at the moment.
Q14 Dr Turner: In practice it is
clearly not observed too often?
Mr Hyman: It is done very badly.
There are some genuine difficulties with this area. The area is
developing, expert consultants like Stephen and academics are
developing practice. But there is enough good practice out there
for it to be done a lot better than it is at the moment and there
needs to be clearer signals and clearer guidance as to how that
should happen.
Q15 Dr Turner: One of the clearest
possible signals would be your suggestion, that the RIA should
assess the impact of policies on carbon emissions and this should
be included in the summary sheet and conclusions in the assessment.
Would you like to expand on that?
Mr Hyman: I am pleased to do so.
Against the background that we have today of the Stern Review
it does seem to me incredible that the Cabinet Office could put
forward a change to Regulatory Impact Assessments at the moment
that does not assess the carbon impact of a new policy. That seems
to me completely untenable and indefensible. I cannot see how
that can happen. Yet, I have to say, in putting it to them they
looked at it like it was a new idea—although that suggestion
was also in your predecessor committee's inquiry report.
Q16 Joan Walley: Could I ask you
to describe how circumstances were when you put it to them?
Mr Hyman: Without naming any particular
individuals, I was in a consultation forum and I think the word
"esoteric" was used around the table. It was clearly
a new idea.
Chairman: Some official described the
idea of assessing the impact of carbon as "esoteric"?
Q17 Dr Turner: Name names!
Mr Hyman: My lips are sealed.
Chairman: I have to say on the evidence
we took from the Department for Transport, I am not surprised.
Q18 Dr Turner: It sounds as if one
ought to contemplate going further then and elevating the carbon
impact assessment separately over and above all other potential
environmental impacts. Would you go along with that?
Mr Hyman: The Cabinet Office proposes
a one-page summary sheet for the new system and, to be a little
more serious, they are very concerned about it going over one
page. They want to keep it to one page. It has to have the costs
and the benefits, so they are pretty defensive about having anything
else at the moment.
Q19 Dr Turner: Are you telling us
the officials have as short an attention span as Members of Parliament?
That is the implication of that!
Mr Hyman: It is going to be one
page in theory and at the moment I think it says on it: "Has
this policy been considered against sustainable development principles?",
as the summary and someone says, "Yes", and that is
it. There is no guidance as to what should be behind that. Perhaps
that is due to come later. I do not know. I think, if you were
to put on the one-page summary a figure in terms of carbon, that
would be a very effective driver. I think looking at the carbon
impact, most bad environmental things have a bad carbon impact,
if I can put it very simplistically: burning down rainforests.
Stern highlighted the devastation and terrible carbon impacts
of that. The poor waste management impact, waste of resources,
all of these things will get shown up in a poor carbon balance,
so I think a figure on the front page of the carbon impact of
every policy is eminently achievable and would have a great resonance
and in today's climate is surely pretty much a no-brainer.
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