Memorandum submitted by Friends of the
Earth
We welcome the opportunity to respond to this
inquiry. We focus our response on the Committee's first two questions.
INQUIRY QUESTION
1
Should RIAs continue to be seen as the key vehicle
for appraising policies against sustainable development principles,
given the serious weaknesses that the National Audit Office review
highlights? Is there a better way to ensure environmental, social
and economic impacts are incorporated into policy-making?
Our understanding is that Government intends
to make RIAs a more important factor in decision-making. In that
context, it appears that RIAs would be, in theory, the most important
place for implementing sustainable development principles. Separate
assessments of impacts are in future likely to be accorded even
less weight than they are at present and this makes it all the
more urgent that the deficiencies highlighted by the NAO are addressed.
INQUIRY QUESTION
2
If RIAs are seen as the best solution, what steps
are being taken to address these weaknesses, including:
— the weak link between the structure
of RIAs (and accompanying guidance) and the principles and priorities
set out in the UK's Sustainable Development Strategy;
— the difficulty of ensuring that
environmental and social impacts which are difficult to quantify
in monetary terms are fully taken into account;
— the variable quality of presentation
of RIAs, which can inhibit their ability to allow trade-offs between
environmental, social and economic impacts to be readily assessed;
and
— poor co-ordination with other
policy appraisal processes, such as European Impact Assessments
and Strategic Environmental Assessments.
We agree with the committee and the NAO that
these are key weaknesses to the existing RIA process. We are concerned
that the changes proposed by the Better Regulation Executive's
current consultation document will to a large degree make these
problems worse, and subsequently lead to worse policy outcomes.
We understand the BRE's desire to simplify the RIA process, but
believe the manner in which they are pursuing this will lead to
worse not better regulation. Clear guidance is essential, but
achieving integrated outcomes based on assessments which are always
going to have both quantified and non-quantified impacts is an
inherently complex process, which is already largely ignored.
If simplification of the guidance hides this complexity even further,
then even worse policy outcomes will follow.
Below we set out our four main concerns with
the Better Regulation Executive's proposals, and suggest some
ways of addressing them.
— We welcome the intention that RIA's
assess the "full range of impacts", but suggest that
guidance will need to be clearer to ensure that this happens.
We cite below examples of where this important.
— We are concerned that the stronger
proposed focus on monetisation will further downplay the importance
of environmental and social concerns, and increase the likelihood
of "trade-off" rather than integration of policy objectives,
in opposition with the Government's stated aims in its Sustainable
Development Strategy. To prevent this, we suggest that guidance
provides more clarity over how to deal with non-quantifiable impacts,
and we give examples below of how this could be done.
— We welcome the intention that RIA's
have a stronger, earlier role informing the policy making process,
rather than be a justification for policy already decided. However
the two above points are central to determining whether the RIA
gives decision-makers adequate information to be able to make
sustainable, integrated decisions. If these two issues are not
adequately dealt with, then giving more weight to the RIA process
will lead to worse outcomes.
— Although the consultation is clear
in one or two places that RIA will be about all policies (not
just "regulations") there is still a hang-over in many
places that this agenda is solely about regulation, and indeed
a sense that regulation is in itself "bad". The clear
purpose of RIAs is to get the best policies, whether through regulations,
taxes or other market mechanisms. In this light we suggest removing
text such as "the new impact assessment is aimed at focussing
on whether regulation will impose an unnecessary burden on the
private, public or third sectors"(p 15), and replacing
it with text stating that the aim of RIA is to deliver best policies,
defined by the Government's commitment to sustainable development.
On the first two of these points, we set out
more detail below:
FULL RANGE
OF IMPACTS
We welcome the commitment to assess the "full
range of impacts". However we agree with the NAO's conclusion
(NAO 2006, p3) that the current process is "dominated
by economic and quantifiable impacts". The guidance needs
to be more explicit that full social and environmental impacts
must be considered, in line with the Government's Sustainable
Development Strategy (SDS 2005), and the BRE charged with ensuring
that this happens.
We are concerned about the lack of clarity over
how the consultation proposes treating non-quantifiable impacts
(and indeed, non-monetised quantified impacts). For example, it
is not clear what part of "environmental assessment"
it is that the Consultation is proposing should be decoupled from
the main RIA when it says "... including decoupling of...
assessments of environmental impacts" (Box G, p 17).
On one hand, the RIA is clear that "all costs and benefits
will continue to be represented in the Impact Assessment"
(section 43), but on the other it says that " [for] areas
such as sustainable development... costs and benefits are difficult
to quantify and are normally addressed through a descriptive approach...
this contributes to the RIA... being seen as a descriptive rather
than analytical tool... they [eg sustainable development] should
in future be free-standing rather than form part of the new Impact
Assessment".
We argue strongly that non-quantifiable and
non-monetised impacts must remain part of the main RIA. This is
because, particularly for environmental impacts, there are often
grave difficulties in quantifying impacts, and so not including
them would heavily skew the decision-making process. A major reason
for this difficulty is the treatment of uncertainty—we do
not know for example the health effects of endocrine disrupting
chemicals in water and food supplies, or the effect of climate
change on the Gulf Stream. There are also grave difficulties in
monetising impacts—as the NAO states: "amongst experts,
both academics and practitioners in the field, there is disagreement
on whether environmental and social costs and benefits can be,
or indeed, should be, quantified and monetised" (p 10).
Within the guidance we suggest there are four
areas which will need strengthening:
— Clearer, stronger guidance is needed
that non-monetised and non-quantified and uncertain impacts must
be set out in the summary RIA, alongside quantified and monetised
impacts.
— Full coverage of distribution of
impacts. The commitment to consider all impacts on "the private,
public or third sectors" is welcome, but some of these sectors
are very broad indeed. Guidance will need to be clear that distributional
analysis of impacts on (for example) future generations, people
in other countries, and different sections of society within the
UK all need to be assessed. Current RIAs are often very weak on
distributional analysis—for example the Aviation White Paper
RIA states "other than airports, there are no groups likely
to be disproportionately affected"—this ignores
evidence that the White Paper would be deeply regressive: with
economic benefits mainly to richer UK consumers from cheaper flights,
and costs largely borne by people in future generations and poorer
countries from exacerbated climate change.
— We are also concerned about how decisions
are made as to what counts as a benefit. For example a policy
proposal imposing £50 million costs on an industry for pollution-abatement,
for £50 million benefits to society overall may seem to be
a zero-sum game from a CBA perspective, however is fully justified
under the Government's policy of implementing the polluter-pays
principle. As a further example of confusion as to what is a cost
or benefit, the RIA for the Aviation White Paper cites more expensive
fares from not expanding airport capacity solely as a cost to
consumers, when these same higher fares would be a benefit to
the aviation industry. This is a zero-sum game presented as a
benefit, as only one part of the sum is counted.
— Consideration of broader economic
impacts. Traditionally RIAs look at the economic impact only on
the directly affected sector. But there are wider impacts on business.
For example, the Aldersgate Group of business, regulators and
NGOs urges the Government to consider the economic benefits of
regulation to other business sectors, as well as any economic
costs of that regulation to the directly affected sector, and
to consider the impact of for example environmental regulations
benefiting the overall economy by increasing competitiveness through
increased productivity and stimulating innovation[1].
— Clearer caveats around the use of
the Social Cost of Carbon (SCC). The Government frequently uses
a figure of £70 t/C in monetising climate change impacts.
However, this figure (or a range of £35-140 t/C) is a gross
underestimate. The 2005 review for DEFRA is clear that this figure
(or the range) only considers a tiny proportion of the full economic,
environmental and social impacts of climate change. To use a figure
of £70 t/C leads to wildly distorted policy outcomes.
We note that it is difficult for respondents
to suggest how this guidance could be made stronger, because the
Annex B "draft impact assessment guidance" makes repeated
reference to a further "Impact Assessment Toolkit"—however
this Toolkit is not available with the consultation.
MONETISATION AND
INTEGRATION
We are also concerned that the Guidance is not
presently clear on how quantified and non-quantified impacts,
or monetised and non-monetised impacts should be treated together.
There is a strong sense that at the moment "what gets measured
counts", and that the predominance (and proposed further
dominance) of cost-benefit analysis will mean that the overwhelming
focus will remain on determining "net present values",
thereby institutionalising trade-offs, at odds with the Government's
repeated commitment to policy integration.
We advocate that the guidance and summary RIAs
should use tools such as DEFRA's "stretching the web"
(see NAO, p 14), with the aim of using RIAs to mitigate negative
impacts and increase positive impacts, as opposed to a strategy
of ensuring benefits outweigh costs. Such tools can also help
ensure that policy better integrates with other core aspects of
the Government's sustainable development strategy, such as the
precautionary and polluter pays principles.
In conclusion we are very concerned that as
they stand, the proposed new RIA process will lead to worse policy
outcomes, and that is a major opportunity missed. We are concerned
that this process is occurring without a great deal of public
scrutiny, and strongly welcome the Committee's decision to hold
an inquiry into this process.
October 2006
http://www.ieep.org.uk/publications/pdfs/2006/AGR.pdf
1 The Aldersgate Group, 2006. Green Foundations: Better
regulation and a healthy environment for growth and jobs. Back
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