House of Commons - Regulatory Reform

Select Committee on Regulatory Reform Fifth Report

4 BRE's operational approach, and relations with other bodies

36. The BRE's management and staff were well regarded by our witnesses. The TUC described BRE as well organised and well managed, and the NCC said that it was impressed with the quality of the BRE's people.[68] There was good feedback on the performance of both the Executive Chair and the Chief Executive of the BRE. On our visit to the BRE on 10 June 2008, we were impressed with the professionalism and enthusiasm of those we met, even allowing for the "school inspection" factor that might be assumed to have preceded our arrival.

37. The BRE has a deliberate policy of recruiting staff on short-term contracts and/or secondments. That has the advantages of introducing cross-fertilisation of ideas both from and to other sectors, and from that point of view we would encourage the policy to continue. However, some of our contact with the BRE suggested that the policy could lead to newcomers being expected to have more familiarity with working practices and outside organisations than is possible, which might create a bad impression with such organisations and bodies, as well as being procedurally inefficient. When we put this point to Sir William Sargent, he told us that the BRE's recruitment policy allows it to obtain the benefit of absorbing information from a cross-section of staff backgrounds.[69] We appreciate that that is a likely benefit of the policy, but the point remains that high staff turnover creates the need for efficient handover and information sharing procedures.

38. We recommend that the BRE consider whether its procedures and practices for retaining and sharing institutional knowledge are adequate in light of the policy of relatively high staff turnover. We further recommend that the BRE improve its induction and mentoring procedures for staff on short-term contracts or secondments so that those staff are not expected to have dealings with outside bodies until they have sufficient training.

BRE working relations

39. A fairly constant theme of the evidence was that the BRE has developed positive working relations with its partners. The Department of Health said that the BRE had "worked hard to understand our agenda" and that there was "a good balance between being a critical friend and challenging, offering advice and support…".[70] The BCC referred to a "good dialogue".[71] However, the IoD said: "the onus is very much on us to go to the BRE with what we want rather than the BRE coming to us a lot more proactively."[72] That sentiment was endorsed by the FSB.[73] The CBI commented that whereas communications with business representative organisations were good, those with businesses themselves-especially smaller business-could be more proactive.[74]

40. An analogous point was made by LACORS in relation to local authorities; that is, that BRE relations with LACORS and the Local Government Agency (LGA) are good but that the BRE does not have a high profile at the local authority level.[75] They specifically referred to a lack of BRE engagement with the shift in policy on key performance indicators. When we visited the BRE offices, Sir William Sargent told us that the BRE has a target of making 1,000 outside visits per year. However, anecdotal evidence suggests that a lack of awareness of the BRE and its agenda might persist in some quarters.

41. We therefore recommend that BRE strengthen its channels for obtaining grass roots information from the level of individual businesses and individual local authorities, as well as individual organisations in the third sector, possibly as part of its structure of account managers or by means of round table dialogue sessions. The BRE should use its contact with the new Local Better Regulation Office as one means of achieving that objective. It should also take steps to advertise its existence at all levels, including trade associations.

42. Several witnesses also mentioned the desirability of greater dialogue at various levels. The TUC representative said that when it was suggested that unions, the BRE and small businesses should meet together, "the suggestion [was] met with, 'Yes, that's a good idea' with a terrified look at the same time." She also said: "The BRE needs to get better at talking to the right people and getting different groups in the room at the same time and developing some sort of synthesised thinking about things. Often, in dialogue, something will emerge from the third way…or some other possibly consensual way of doing something."[76] DEFRA's memorandum specifically requested more frequent discussions between its policy makers, BRE and business interests to ensure that balanced views are obtained.[77] However, while observing that it is not the BRE's role to look at policy, the Minister referred to the Gibbons review[78] on resolution of employment disputes as an example of the produce of dialogue.[79] Sir William Sargent was also keen to point out that dialogue already takes place.[80]

43. The NCC was emphatic about the scope for much greater sharing of best practice between regulators, and about the role that the BRE could play in facilitating that.[81] The Environment Agency was enthusiastic about greater sharing of best practice between regulators, although it stressed its view that regulators face different models and risks.[82] Nevertheless, it agreed that that there was a role for the BRE in facilitating the sharing of best practice.[83] Consequently, we recommend that the BRE become more actively involved in facilitating greater sharing of best practice among regulators and Departments. The new Local Better Regulation Office should be involved in articulating the local authority perspective in that exchange.

Accountability to the BRE

44. Alongside the question of the BRE's leverage within Departments is that of the accountability of regulators to the BRE on their progress in reforming regulation. The Environment Agency expressed concern that the BRE might encroach on oversight of their responsibilities as a regulator and that the BRE's approach was too much that of "one size fits all".[84] The HSE said: "it is important that we preserve a structure whereby bodies are accountable to their own management and through [them] to Parliament and the public; not that they start an alternative line of accountability…to colleagues in the BRE, because I think that would only lead to confusion."[85] However, the NCC said: "One of the things we observe often with regulators is that, although they may often require other organisations to produce metrics on how they are doing, they quite often do not have very many indicators themselves on how they are doing."[86]

45. It seems to us that there is some inertia in the UK system of implementing better regulatory practice at Departmental level, but that so far as regulators are concerned it is important to preserve the principal line of accountability to regulators' management, and to Parliament and the public. However, both Departments and regulators should bear in mind that, if they want the BRE to assist them in matters such as sharing best practice, as they told us they did, they should expect to hold themselves to account to the BRE on how efficiently that best practice has subsequently been implemented. Equally, as mentioned in paragraph 17, it is incumbent on the BRE to apply good regulatory principles of proportionality and risk-based assessment, and not insist on across-the-board implementation of initiatives by all regulators, and on submission of multiple reports (which was mentioned by the Food Standards Agency[87]-although in fairness it seems that the BRE compromised on that issue), if such implementation and reporting would not achieve truly beneficial outcomes.

46. To avoid the possibility of inertia, we recommend that the BRE should play an active role in holding Departments to account for their performance in the area of regulatory reform and that it should develop a system for monitoring and evaluating Departmental performance and reporting the results publicly. The BRE should work with Departments to develop suitable evaluation criteria with appropriate weighting of those criteria and agreed evidential sources for assessing performance. Agencies should be included in such evaluation where relevant.

Her Majesty's Revenue and Customs (HMRC)

47. At present, HMRC falls outside of the BRE's remit, although during our visit to the BRE Sir William Sargent explained that there is frequent dialogue between the two bodies. It was suggested in written evidence from the IoD and the Professional Contractors group (PCG) that HMRC should be brought within BRE's remit. The IoD observed that in a March 2007 survey, two thirds of its members cited HMRC as the Government body with which they had most recently interacted. It went so far as to say that: "In an environment where the HMRC form such a critical role in frequent contact, the development of business perceptions of Government as well as the role they occupy as a significant source of regulatory burdens, it is untenable for the Department to fall beyond the reach of the current Better Regulation agenda and the BRE."[88] The CBI referred to what it said was a lack of proper consultation by HMRC in relation to recent capital gains tax changes[89] The PCG likewise referred to the degree of contact between business and the HMRC, and also to lack of proper consultation, attributing that to HMRC's place outside the BRE's remit.[90]

48. We put the question of whether to bring HMRC into the BRE's remit to a number of witnesses. The FSB said that it was intrigued to know the reasons why the HMRC should not be included in BRE reviews.[91] The TUC seemed to think that there might be a strong argument for incorporating HMRC into the BRE's remit.[92] Of HMRC involvement in regulatory reform, the IoD representative said: "I do not think we can achieve valuable change without that."[93] He added: "I think the BRE needs to have as much of a stick as they have with any other Department with HMRC, in fact perhaps more so."

49. We asked Baroness Vadera to explain the Government's thinking. She said that the argument for HMRC being outside of the BRE's remit is that it is not formally a regulator in the sense of setting rules and regulations.[94] On the other hand, it is involved in a massive amount of data collection from essentially every business, organisation and individual in the country.

50. Nevertheless, we believe that this is another area in which action speaks louder than definitions, and that bringing HMRC within the remit of the BRE would not necessarily achieve a discernible benefit. The BRE should, however, foster continued interaction with HMRC. HMRC should operate in accordance with the same regulatory initiatives and principles as other Government Departments with respect to regulatory reform and should certainly consult in accordance with the same guidance as applies across Government.

51. We recommend continued strong interaction between HMRC and the BRE on the implementation of regulatory reform, reinforced by an established pattern of regular meetings, and that HMRC should operate under the same initiatives and principles as all Government Departments with respect to the regulatory reform agenda.

Scrutiny of the BRE and annual reporting

52. Earlier this year, the Better Regulation Commission[95] was replaced by the Risk and Regulation Advisory Council (RRAC), an independent advisory panel of seven members, with a mandate to focus on risk-based management of regulation.[96] Before its replacement, the BRC had provided independent oversight of the BRE as well as a degree of independent and high-level thinking. For instance, the BRC itself recommended greater focus on risk-based regulation and the establishment of a body with that focus as its main remit. It also recommended consideration of regulatory budgets.[97] Nevertheless, the dismantling of the BRC seems to have led to a perception that there is something of a vacuum of both scrutiny and strategic thinking. The Institute of Chartered Accountants expressed concern about this issue,[98] as did the CBI.[99] The TUC regretted the BRC's demise[100] and said that there was a need for a thinktank.[101] The HSE said that there was a role for the RRAC in "perking up ideas".[102] Most notably, when we asked ACTAL[103] during our visit to the Netherlands which single measure they believed would make the biggest favourable impact on the UK system of regulatory reform, the response was that the BRC should be re-formed.

53. The Minister told us that high-level strategic thinking is provided by the Government. Her view was based on her belief that it was principally the Government that had driven the regulatory reform agenda during the past six or seven years. We acknowledge the merit in that view, but in the light of the comments we have referred to we wonder whether there remains a role outside Government for independent challenge. We believe that there is. Accordingly, we recommend that the Risk and Regulation Advisory Council should be given a clear role in providing independent challenge in the regulatory reform area.

54. Currently, the BRE reports on a six-monthly basis to the Prime Minister, but there is no system of regular reporting to Parliament. The NCC suggested that an annual stock take by BRE was desirable in general terms.[104] We are also aware of a wider calls for greater parliamentary scrutiny in the area of regulation.[105]

55. In order to provide greater accountability and a measure of independent review, we recommend that the BRE submit an annual report to Parliament, addressing performance against its clearly defined objectives. The report should distinguish between the work of Departments and the work of the BRE itself.

56. Finally, on our recommendation, the House of Commons Liaison Committee suggested that the position of BRE Executive Chair be added to the Government's proposed list of appointments that should in future be the subject of a pre-appointment hearing.[106] The Government has, as yet, not accepted that view. Given the Minister's claim in her evidence about the importance of better regulation and the degree of high-level support for the BRE, we believe that the Government might wish to act positively in this regard. We therefore recommend that, given the high importance attached to the regulatory reform agenda, the Government give serious consideration to including the position of Executive Chair of the BRE on the list of senior posts that should be subject to future pre-appointment hearing.

68 Q 93 [Ms Veale and Mr Cullum] Back

69 Q 327 Back

70 Q 121 [Mr Wilmore] Back

71 Q 57 [Ms Low] Back

72 Q 55 [Mr Ehmann] Back

73 Ibid. [Mr Davenport] Back

74 Q 55 [Mr Fell] Back

75 Q 181 Back

76 Q90 [Ms Veale] Back

77 Ev 82 Back

78 http://www.berr.gov.uk/files/file38516.pdf Back

79 Q 332 [Baroness Vadera] Back