House of Commons - Regulatory Reform

Select Committee on Regulatory Reform Fifth Report

5 Current regulatory reform policy

57. In this section of the Report we consider some of the more significant current regulatory reform initiatives and the part that the BRE is playing in their implementation, particularly with regard to its objectives of reducing the stock and the flow of legislation as well as in improving the quality of the regulatory environment. We have not considered all current initiatives, but rather those that are either particularly significant or were the subject of divergent opinion.

The Administrative Burdens Reduction Programme

58. The background to and purpose of the Administrative Burdens Reduction Programme (ABRP) and the standard cost methodology on which it is based are set out in Appendix 1.[107] A similar Dutch programme succeeded in its objective of reducing administrative burdens by the target figure of 25% by 2005. However, when we visited the Dutch regulatory reform bodies, they were frank about two points. First, it seems likely that the Netherlands started from a higher baseline of total regulatory burden than the UK, so that an initial 25% reduction was probably easier to achieve. Secondly, despite the Netherlands having embarked on a further programme of burdens reduction, with renewed 25% targets, there has yet to be any significant positive feedback from the business sector on the success of the programme.

59. The UK's ABRP has likewise not yet achieved the impact that was intended, and the evidence submitted to us reflected that. Professor Radaelli described the programme as "badly conceived."[108] In their evidence, Professor Chittenden of Manchester Business School and Tim Ambler, a senior fellow at the London Business School and an adviser to the BCC, described it as "more hype than substance".[109] Essentially, the criticisms boil down to the following:

The 25% target is arbitrary;
It is wrong to apply the same 25% target to all Government Departments;
The standard cost methodology is flawed in that it does not provide statistically reliable data, and therefore savings figures based on it are also flawed;
Too much stress on administrative costs misses the point that other costs might be more burdensome or that businesses might continue to undertake a certain administrative procedure for their own internal reasons, or because, for example, their clients or outside financing bodies require it;
The programme is not having any noticeable impact;
The UK should learn the lessons of the experience in the Netherlands, where the programme has not, as yet, changed perceptions of regulation in the way that was intended.

We have weighed these criticisms not least in the light of what we heard on our visit, particularly to the Netherlands. We note too that both the NAO and the Public Accounts Committee have published or will shortly publish reports of their own on the Administrative Burdens Reduction Programme.[110]

60. It is certainly correct that the 25% target was chosen for pragmatic rather than objective reasons. The BRE Chief Executive was clear about that in the initial oral evidence session with him.[111] However, DEFRA told us of the advantages of having a demanding target.[112] The arbitrary nature of the target would not of itself alone deprive it of merit, provided the target still resulted in an overall downward pressure on real burdens.

61. We note in passing that one way to provide Departments with an incentive toward further burdens reduction would be to allow them to retain the consequent internal cost savings. We did not have the opportunity to explore that idea in detail with the Minister, but she expressed some enthusiasm for it.[113] We learned on our visit that it happens at least to some extent in the Netherlands—the Dutch Ministry of Health being cited to us as an example.

62. The CBI said that it had given the standard cost model its broad endorsement.[114] The BCC said: "from the outset we have questioned the robustness of the standard cost model…However, despite methodological flaws we recognised that this exercise has some value for our members."[115] There is an element of damning with faint praise in that observation, but the overall impression we gained, including from our overseas visit, was that the standard cost model is an imperfect tool but a useful one nonetheless. It provides a basis for targets in reducing burdens and for measurement and comparison of progress toward those targets.

63. The HSE's written evidence argued that a too rigid application of the 25% burdens reduction target in the ABRP risks working on targets at the expense of addressing the real concerns of business.[116] The IoD said that the programme has been "driven more by outputs than outcomes" and that there has been too much focus on the 25% rather than on the shift in perception that is needed.[117] The CBI pushed for annual reporting of Departmental simplification plans[118] to allow comment on whether goals have had the take-up predicted in the report.[119]

64. The standard cost model was never intended to provide more than indicators of where savings might be made, and we therefore take the view that the right approach is to use the 25% target to drive outcomes, but not to the point of preoccupation with fitting the real savings to the targets. Measurement of savings should be robust and accurate.

65. The IoD's opinion was that the administrative burdens reduction programme is heavily backloaded to 2010, that there is a risk of an "Armageddon scenario" in which business loses faith in the current agenda if no results are seen by business soon, and that there is a need for quicker delivery.[120] On the other hand, the FSB said that what the BRE is doing at the moment is beginning to work.[121] The Minister acknowledged that there is backloading but was confident that the targets should be met as procedural and process changes reach fruition. She told us that she had "cracked the whip" in relation to BERR's own targets.[122]

66. We believe that the credibility of the ABRP savings figures and the achievement of meaningful results is more important than preoccupation with avoiding, say, a 2% or 3% shortfall on the 25% target. We therefore recommend careful scrutiny of all savings figures, but call for recognition that the shortcomings of the standard cost model require acceptance of flexibility around targets. The ABRP should not be considered to have failed if, for instance, 22% of burdens reduction has a discernible impact.

67. We recommend that there be constant scrutiny both of ongoing progress on the ABRP and of the robustness of claimed Departmental savings. The BRE should play a continuous role in such monitoring, which should cover burdens reduction indicators beyond that of the 25% target, such as irritation factors to businesses and others.

68. We recommend that Government Departments and Executive Agencies include in their Annual Reports their progress against simplification plans.

69. We recommend greater measurement of actual take-up of savings proposals.

PERCEPTIONS

70. The IoD memorandum referred to a survey of its members which showed that 46% felt that regulation had worsened over the preceding 12 months and 48% that it had remained the same. Only 1% felt it had improved. Research appended to the FSB memorandum indicated that 72% of businesses felt that health and safety administrative requirements had become more bureaucratic.[123] This is despite changes to health and safety regimes and the savings of £800m of administrative costs that are claimed already to have been made under the ABRP and Departmental simplification plans.

71. Clearly, there is a problem with perception in some quarters, a fact that was recognised by the BRE.[124] We heard that it is taking steps to communicate its achievements, but this needs to be combined with greater efforts to look at real "irritation factors". To that extent, we welcome the BRE's forthcoming reviews of health and safety law and consumer law, where there is scope for making an impact on such irritation factors. We recommend that the BRE continue to look for ways to make greater impacts on burdens reduction and its perception. The Netherlands organisations that we met told us that they were impressed by the UK's record in relation to impact assessments and common commencement dates, but there might equally be lessons to be learned by the UK from approaches in other countries. The Swedes and the Dutch, for example, are both looking more closely at irritation factors within the regulatory environment, and considering ways to set priorities in minimising them. The IoD suggested that all forms submitted to Government should indicate where criticisms can be directed.[125]

72. In Sweden, NUTEK[126] told us about initiatives based on consideration of Government processing times. The Danish "burden hunters" initiative, and the Dutch study of allowing licences to proceed in the absence of express refusal (the "lex silencio" initiative) were two other programmes of interest. The Dutch also told us about their Stevens and Wientjes Committees, which have acted as an interface between stakeholders groups, including business, and government and regulatory reform bodies.[127] The Minister told us that the HMRC has set up similar consulting groups.[128]

73. Although there is a need for both the BRE and Departments to deliver on their promises of further burdens reduction, and to communicate results, we were interested, during the Committee's visit to Copenhagen, to hear the Confederation of Danish Industries say that trade bodies in Denmark have a responsibility to communicate the results of regulatory initiatives to business. A UK equivalent to the Stevens and Wientjes Committees on which UK business bodies are represented and have both buy-in to decision making and then joint responsibility with Government for communicating the outcomes are one possible means of addressing that point. In late supplementary evidence, the BRE indicated that it did not believe that UK equivalents to the Stevens or Wientjes Committees are necessary.[129] However, we recommend that the BRE consider setting up an analogous committee in this country.

74. As was noted during oral evidence,[130] there is a particular need to concentrate on assisting small businesses, especially those that are not members of trade organisations. We particularly commend efforts in this regard, and to that extent we welcome Sir William Sargent's description of BRE's efforts to communicate with one million small businesses during 2008.[131] We also heard that there have been shortcomings in BRE's ability to customise its approach to business sectors.[132] We recommend that the BRE continue to focus further on that issue.

THE PUBLIC SECTOR AND THE THIRD SECTOR

75. Perception of regulation has been a problem in the business sector. There is a similar story of perception gaps in relation to the public sector. In its memorandum, the DWP claimed already to have made progress toward reducing the number of local authority data requests towards the target of 30% by 2010. It said "the Department is confident that it will deliver reductions in excess of 30 per cent by the 2010 deadline."[133] However, the LACORS memorandum says that "90% of councils who have responded to the LACORS survey on national enforcement priorities said that they had not noticed a change in the type or volume of initiatives/requests on regulatory issues coming from…central government departments and agencies."[134] We have the impression that the 30% target has been demoted in significance compared with the 25% ABRP target, because there has not been the same degree of measurement of progress. We recommend renewed focus on this target and that progress in reducing public sector and third sector burdens—and their measurement—be given equal emphasis to that of the business sector programme.

NEXT STEPS

76. The IoD told us that amendments to the ABRP rather than wholesale changes should be the order of the day.[135] In light of all the above, we agree. The CBI said "we should not rip up [the ABRP] and start again. It has at least started to change culture in that there are now teams of officials working to identify ways of simplifying legislation to get…to the 25% target, and quite clearly some Departments will get there and some might not, but everyone is pointing in the right direction."[136]

Impact assessments

77. Professor Baldwin, Professor Radaelli and Professor Yarrow all had criticisms of the UK approach to impact assessments and suggestions for improvement.[137] Professor Baldwin in particular was critical of any attempt to rely solely on impact assessments as a panacea in regulatory reform. However, as previously mentioned,[138] during our visit the Dutch also praised as world leading the UK's pioneering approach to impact assessments in primary legislation. The BRE's clear role in achieving that success deserves recognition. We therefore welcome the fact that the Government plans to build on this success by publishing, from 2008-09, annual cost:benefit figures based on final impact assessments-a measure that the Professional Contractors Group expressly welcomed in its paper to us.[139]

78. There is an issue as to whether there should be independent review of impact assessments, as provided by ACTAL in the case of the Netherlands. Regiegroep Regeldruk[140] told us that having a source of independent validation of the numbers in impact assessments was one of the major advantages of the existence of a body such as ACTAL, and that the Organisation for Economic Co-operation and Development (OECD) had taken the same view. Sweden is in the process of setting up a similar body in the form of a Regulatory Council, which will begin its work in September.[141] In its recent follow-up report on the management of secondary legislation, the House of Lords Merits Committee expressed concern that the BRE does not adequately police impact assessments.[142] However, when we asked whether the BRE should have a policing role there were some firm views from Government Departments that it should not. The BCC took the opposite view. In oral evidence, it suggested that there should be a more robust approach to the policing of Departments and that it would not be inappropriate for the BRE to measure and analyse the impact of burdens.[143] The Institute of Chartered Accountants in England and Wales (ICAEW) was of the same opinion.[144]

79. The BRE agrees with the position taken by Departments, on the basis that it is for Departments themselves to take up the responsibility of applying regulatory good practice by standing on their own two feet as far as impact assessments are concerned. The BRE's argument is that if it has responsibility for scrutinising impact assessments, that will let Departments off the hook.

80. We agree that the BRE has a responsibility to continue to spread best practice among Departments on how to prepare impact assessments, rather than to write impact assessments themselves. We also agree that any scrutiny role carries a danger of upward delegation of the responsibility of preparing a sound assessment. Nevertheless, we believe that there is a role for independent review of certain, although probably not all, impact assessments. However, we are reluctant to recommend the setting up of more Government bodies.

81. We recommend that the BRE should have a role in scrutiny of impact assessments, selected on the basis of financial thresholds, including in support of any introduction of regulatory budgets.[145] A review of the reports on the relevant impact assessments should then form part of the Annual Report to the Regulatory Reform Committee recommended below.

Regulatory flow and regulatory budgets

82. The BCC said that efforts to reduce the stock of existing legislation have achieved a measure of success.[146] However, the BCC the CBI and the IoD all wanted more focus on the flow of new legislation, including statutory instruments. The BCC have suggested dividing statutory instruments into those that make substantive legislative change and those that are merely administrative, such as the large numbers of road-closing orders and updating measures, so that a better track can be kept on the flow of secondary legislation.[147] The CBI wanted better mechanisms for tracking the progress of statutory instruments.[148] This has also been mentioned by the House of Lords Merits Committee.[149] The Institute of Chartered Accountants' memorandum said that: "The flux of new regulation is more troubling for a business than the stock of old regulation as businesses will already have coping strategies for old regulation."[150]

83. The March 2008 Government White Paper Enterprise: unlocking the UK's talent[151] proposed consultation on introducing regulatory budgets to set out rolling limits on the annually recurring costs of new regulation introduced by each Department in a given period. The White Paper acknowledged that when the then Better Regulation Taskforce proposed such budgets in its 2005 Less is more report, it conceded that such a move would be difficult and would take time, as well as setting an international precedent.

84. Concern was also expressed that the credibility of the better regulation agenda depends on having a plan for beyond 2010, "otherwise there is a feeling that it is perhaps government holding in its stomach to reach 2010".[152] It was interesting that, of the memoranda submitted by Government Departments, only the DEFRA memorandum addressed the post-2010 period.[153]

85. Adopting regulatory budgets would be one means to tackle regulatory flow, and to create further incentives for regulatory reform on Departments. We welcome the fact that a full consultation is taking place on this proposal for regulatory reform, although we note that the Netherlands has already experimented with them without their necessarily producing emphatic results. Any proposed system for setting and publicising regulatory budgets should take into account the fact that desirable regulation, not least in the environmental and health and safety areas, carries with it certain inevitable costs. Similarly, there should be safeguards against undue pressure to remove necessary regulation merely as a means of meeting budgetary targets.

86. We recommend that, if regulatory budgets are adopted, and subject to the outcome of any review on independent scrutiny, Departments provide relevant data in their Annual Reports as a means of allowing proper scrutiny. In any event, we recommend that Departments begin already to focus on their plans for post-2010. Whatever the nature of the then Government, there will be a need for further progress in regulatory reform. If regulatory budgets are not adopted then the UK needs to consider alternative means to impose continuing discipline on the flow of new domestic legislation and to provide incentives for Departments to achieve further burdens savings.

EU legislation

Gold Plating
The Cabinet Office Transposition Guide[154] sets out guidelines for transposing EU legislation into UK law. It defines "gold-plating" as occurring when EU legislation is implemented so as to go beyond the minimum standards necessary for compliance, in one or more of the following ways:

extending the scope, adding in some way to the substantive requirement, or substituting wider UK legal terms for those used in the directive;
not taking full advantage of any derogations which keep requirements to a minimum;
providing for sanctions, enforcement mechanisms and matters such as burden of proof which go beyond the minimum needed; or
implementing early, before the date given in an EU directive.

87. In November 2006, the Davidson review[155] reported on the issue of gold-plating and other over-implementation of EU legislation, and concluded that although instances of gold-plating could be identified, its overall incidence was not substantial. During our visit, we heard that two Netherlands studies have reached the same conclusion in relation to Dutch legislation. The IoD told us that they had looked at the issue of gold-plating and had found only one continuing serious instance-namely in relation to the Intrastat system of import and export reporting, which we understand is in the process of being reformed. When we asked whether the BRE had undertaken a quantified study on the extent of gold-plating, Baroness Vadera replied that that had been considered and rejected, on the basis that the cost was not considered to have merited the potential outcomes, and that the Davidson methodology had been preferred.[156] The Cabinet Office has issued guidance on how to transpose EU Directives effectively.[157] The Minister confirmed that, if regulatory budgets are adopted, they will include EU legislation.[158]

88. We welcome the fact that it is now a requirement of impact assessments that they contain an indication of whether gold-plating is occurring, and require it to be fully justified. We welcome the Minister's confirmation that, if regulatory budgets are adopted, they will include EU legislation.

89. The BCC argues for better linkage between EU and UK impact assessment processes. It believes that member states should carry out impact assessments before the European Commission makes its own assessment of costs.[159] That would arguably allow for UK interest groups to be consulted on EU proposals earlier in the policy making process and would provide the Commission with reliable data to assist its calculations.

90. The Hampton Implementation Review of the Environment Agency comments favourably on the Agency's efforts to influence the regulatory debate in Europe.[160] The Environment Agency memorandum says: "The BRE could usefully focus on how the UK might more effectively influence the EU legislative agenda to deliver better regulation"[161] and "…we would also like the BRE to enable common regulatory approaches at UK and EU level and to explore options to improve funding arrangements to enable delivery of the modern regulatory approaches that they call for."[162]

91. We recommend that the BRE prioritise how to increase its influence in achieving regulatory reform at the EU level. We recommend that the BRE undertake a feasibility study of where it would like EU regulatory reform to be from the UK perspective, where the resource gaps are in getting there, and how to remedy them. Although the Minister told us that the BRE has a presence in Brussels through UKRep,[163] and we heard that there is a BRE director with a European remit,[164] the BRE might wish, subject to the outcome of any feasibility study, to consider having permanent representation in Brussels.

Legislative Reform Orders

92. Until July 2007, our sole remit was to consider regulatory reform orders under the Regulatory Reform Act 2001. We considered a total of more than 30 orders under the 2001 Act, but to date the Government has laid only a very limited number of legislative reform orders before Parliament.[165] We fully appreciate that a substantial proportion of Government legislative reform occurs on the back of primary legislation, but we question why there is not a steadier flow of LROs alongside that. We recommend that Better Regulation Ministers within Government Departments keep this under review and take every opportunity to use LROs to their fullest extent.

93. The Committee has repeatedly expressed its willingness to assist in the regulatory reform agenda through its consideration of LROs, provided that the flow of LROs is properly managed so that LROs do not all arrive simultaneously, and provided there is communication on the timetable and on priorities. That remains our position. In the meantime, although it is obviously desirable to correct defects in legislation, it seems to us regrettable when LROs are used for that purpose in relation to very recent legislation that should have been more carefully prepared in the first place. The draft Legislative Reform (Consumer Credit) Order 2008 is a case in point. The House of Lords Merits Committee has expressed similar concerns.[166]

94. We recommend that LROs be used primarily for their intended purpose of reducing burdens and improving regulation, and that steps be taken to improve the preparation of primary and secondary legislation to avoid the need for corrective legislation shortly after the passage of an originating measure. We further recommend that the Government establish proper mechanisms for prioritising and managing the flow of legislative reform orders. In addition, we recommend that we receive periodic updates of the measures that are intended to be reviewed via primary legislation, by way of a copy of the BRE's schedule of such information.

Data sharing, the retail enforcement pilot, and process innovation

95. A consistent complaint about regulation is that there are multiple requests for the same data. The Environment Agency memorandum said: "We would also urge the BRE to work with regulators to facilitate data sharing and the funding of IT investment to enable more data sharing and joined up working between regulators thereby reducing the burden on business."[167] This was emphasised in oral evidence.[168] Obviously, the same point applies to burdens on non-business organisations and on individuals.

The Retail Enforcement Pilot
The Retail Enforcement Pilot was set up in March 2005 to test proposals for a new, joined-up approach to regulatory enforcement in the retail sector. Its basic principle is for different inspection agencies, such as trading standards, environmental health, licensing and fire services to agree which of them will act as lead inspector for particular premises, based on a risk assessment. The lead agency then carries out its normal routine inspection and at the same time collects key information on behalf of the other relevant agencies, who agree not to visit that business unless the information collected indicates a genuine cause for concern. By summer 2008, it will be operational in some 30 local authorities.

96. Referring to the Retail Enforcement Pilot (REP), LACORS told us that it was heartened that the Government is now "focusing on evaluation of that project around data sharing, rather than as a prescriptive regime about how to conduct inspections."[169] The LACORS representative expanded on that point in oral evidence, explaining that a number of authorities had been unable to participate in the pilot because they had wanted to adopt a slightly different model.[170] If that is the case, it seems to us to be regrettable. We urge the adoption of greater innovation and flexibility in regulation, so that, for example, instead of merely looking at whether forms can be simplified and data shared between them, a step change is made into looking at entire underlying processes. The way in which information is acquired by Government should be linked to processes that take place in the outside world, and certain processes that currently require the collection of data, such as the award of benefits, should be rationalised so that the decision on whether to award a benefit is taken at the point of interview with the applicant, rather than by a remote administrator. The BRE's Chief Executive specifically referred to the work that has already been done and will continue to be done by the DWP in the area of benefits claims.[171]

97. LACORS also mentioned that the REP had not been the subject of proper cost/benefit analysis. It seems to us that if the pilot is to be assessed for adoption elsewhere, such an analysis must be forthcoming as a matter of urgency. The BCC said that "initiatives like the retail enforcement pilot are starting to turn theory into practice. While the recognition of this from the business community may not be immediate we get the sense that over time we will see results."[172] However, without cost/benefit data, the REP would clearly constitute an example of a lack of "robust measuring and reporting".

98. We recommend that a cost/benefit analysis of the retail enforcement pilot be undertaken. We further recommend that the BRE and the DWP consider conducting a pilot study on simplification of processes to consider where and how decisions on benefit awards might be capable of delegation to local offices without the need for data collection, and that the results of that study be shared with other Departments as a potential model for rationalising data collection.

107 See page 45 Back

108 Ev 191 Back

109 Ev 199 Back

110 See http://www.publications.parliament.uk/pa/cm200708/cmselect/cmpubacc/363/363.pdf Back

111 Q 03 [Mr Kohli] Back

112 Q 140 Back

113 Q 263 Back

114 Q 16 Back

115 Ev 42 Back

116 Ev 90 Back

117 Q 2 [Mr Ehmann] Back

118 Departmental simplification plans set out individual Department plans for implementing the ABRP targets Back