Memorandum submitted by Professor Rob
Baldwin of LSE
The reform agenda contains a number of unresolved
tensions between "Better", "Less is More"
and "RiskBased" Approachesas discussed
A first message of the better regulation movement
is that regulation can be improved by the application of a series
of regulatory improvement toolstools
that are conceived of with some consistency by UK, EU and OECD
policymakers. Within the vocabulary of the OECD there are seven
main regulatory improvement tools:
Regulatory Impact Assessments (RIAs)
Consultations and Transparency.
Reducing Burdens and Red Tape: Administrative
and Regulatory Simplification.
Alternatives to Traditional Regulation.
Regulatory Policies and Reviews.
It is, however, the RIA that is seen as the
centrally important tool of regulatory improvement in the UK,
the EU and the OECD.
Since the RIA system was introduced, around
a thousand RIAs have been conducted at a current rate of about
160-200 per year.
When the BRE published its consultation on The
Tools to Deliver Better Regulation in July 2006 the only such
tool to be discussed was the RIAwhich was described by
the Minister for the Cabinet as "the cornerstone of our approach
to better regulation."
Little could have been done to make made the primacy of this tool
more plain. The problem with the RIA, however, is that the processes
that it involves may be at tension with the requirements of "better"
regulationif better regulation is seen as lighter touch
control as per the language of "smarter" regulation.
At this point it is necessary to pause in order
to recap on the requirements of "smart" regulation.
Proponents of "smart" regulation have argued convincingly
that designing good regulatory systems demands a central focus
on how best to combine different institutions and techniques.
Smart regulation thus moves beyond state controls and looks to
mixes of control methods as applied not merely by public bodies
but by other institutions and actors including trade associations,
pressure groups, corporations and even individuals. It advocates
deploying those combination of instruments that will be most appropriate
in a given setting and designing strategies that mix instruments
and institutional actors to optimal effect.
The messages of "better" and "smart"
regulation appear at first glance to be consistent. If, however,
we investigate the capacity of the current better regulation movement
to deliver smart regulation on the ground, we see that the route
to delivery is not unproblematic. Here it is useful to measure
the better regulation movement against the five core principles
for smart regulatory design.
These principles can be summarised as follows:
1. Prefer policy mixes incorporating a broader
range of instruments and institutions.
2. Prefer less interventionist measures.
3. Ascend a dynamic instrument pyramid to
the extent necessary to achieve policy goals.
4. Empower participants which are in the
best position to act as surrogate regulators.
5. Maximise Opportunities for Win-Win Outcomes.
Regarding the first principle, the better regulation
movement might be expected to perform well since it repeatedly
emphasises the need to consider alternative, more imaginative,
ways of regulating.
In practice, however, a number of factors may militate against
its delivery of imaginative regulation. First, the RIA occupies
a central place in "better regulation" but the evidence
is that RIA processes are not highly effective in leading policymakers
to consider alternative ways of regulating. RIA processes, moreover,
are more attuned to measuring the effects of traditional "command"
systems of control than "alternative" methods and this
may positively discourage the canvassing of more imaginative regulatory
strategiesespecially those `softer' strategies involving
voluntary and incentive- driven controls where predicting effects
(and hence calculating costs and benefits) is extremely difficult.
Second, smart regulation is about cumulative regulatory effects
and the coordination of regulatory systems with widely varying
natures. RIA processes, however, are best suited to looking at
the costs and benefits associated with a single, given, regulatory
proposal rather than combinations of approach. They are most attuned
to the "single strategy."
Those officials who are charged to carry out RIAs would find it
very difficult to calculate the costs and benefits of a simultaneously
acting combination of very different regulatory strategies and
institutions. It would, for instance, be extremely hard for proponents
of a combination of, say, state, corporate and trade association
laws, codes and guidelines to predict how all the relevant actors
will draft, design and apply their different control strategies.
This would make calculations of costs and benefits a matter of
heroic guesswork and the ensuing uncertainties would undermine
the essential value of the RIA. Smart regulation involves too
many variables, estimates and judgements to lend itself to the
Bureaucratic incentives should also be borne
in mind. An official who is contemplating regulating and knows
that the RIA process has to be undertaken will experience little
impetus to propose complex combinations of regulatory institutions
and strategies with all the attendant predictive and calculative
difficulties. Rather than aim for a "smart" form of
regulation, he or she will incline towards a simpler regime that
can be predicted to pass a RIA. Such bureaucratic incentives may,
moreover, militate against the application of a high level of
"regulatory craft" as advocated by Malcolm Sparrow.
Such craft calls for the placing of problem-solving at the centre
of regulatory design.
Problems, when identified are, on this view, to be responded to
with a variety of strategies in a manner consistent with smart
For an official who faces a potential RIA, however, the incentive
to adopt a problemcentred approach maybe weak, not merely
because this would require the evaluation of costs and benefits
regarding a variety of institutions and strategies, but also because
it may demand an unpacking of the way that a host of existing
regulatory regimes impinges on a problem and an examination, within
the RIA process, of potential ways to reshape and re-deploy those
regimes in combination with any new regulations.
The political and bureaucratic implications would be dauntingthe
proponent of the RIA would often be questioning the way that numbers
of established regulators go about their jobs in order to evaluate
his or her proposed regulation. A far more attractive proposition
will be to take any existing controls as givens and consider whether
the addition of a new regulation will pass a cost benefit test.
The consideration of alternatives is liable, accordingly, to straitjacketed
by existing regulatory frameworks. Overall, then, if RIA processes
are retained at the centre of better regulation, they may not
conduce to smarter regulation as encapsulated by its first principle.
The second principle of smart regulation holds
that less interventionist measures should be preferred. Again,
it might be anticipated that the `better regulation' approaches
will encourage less prescriptive, less coercive modes of influence.
The record of the RIA procedures, however, does not demonstrate
that they are well attuned to either the measurement, or the consideration,
of alternative, less interventionist controls. Smart regulation,
moreover, demands that attention is paid to enforcement strategy,
not merely the formal design of regulatory laws.
It is, after all, how a regulatory power is used on the ground
that tends to determine its essential character. Here again, however,
the RIA process draws attention away from how regulations are
applied in practice. First, it is the case (as was noted above)
that very many RIAs do not attend to implementation and enforcement
issues at all well.
Second, there are structural reasons why RIAs cannot be expected
to come to grips with enforcement strategy in a routinely well-informed
mannerRIAs tend to focus ex ante on the general design
of regulation and it may be impossible to predict how any regulator
or set of regulatory bodies will go about deploying the powers
that they are to be given in a proposed regulation.
Smart regulation's third principle urges that
"responsive" strategies of regulation should be adopted
and should be employed across mixes of regulatory strategiesas
applied by numbers of different institutions and instruments.
Smart regulation thus holds out the possibility of escalating
degrees of coercion through the interaction of different but complementary
instruments and parties.
It is difficult, however, to argue that "better regulation"
approaches sit easily alongside this principle. The RIA process,
as noted, encounters difficulties in dealing with either questions
of enforcement or with "combined" strategies of regulation.
These difficulties are likely to be compounded by attempts to
evaluate incremental, and coordinated escalations up the three
sides of a strategic pyramid that reflect the combined use of
quasi-regulatory and corporate self-regulatory as well as state
Smart regulation, fourthly, advocates the empowerment
of those participants who are in the best position to act as surrogate
regulators. This, accordingly, favours using the influence of
quasi-regulators, such as industry associations and pressure groups,
where appropriate. Here again the better regulation toolkit might
be expected to prompt consideration of alternative regulatory
methods but it may fail, for reasons discussed above, to come
to grips with "combined" regulation where quasi-regulatory
functions have to be evaluated alongside other regimes. This suggests
that it is one thing to develop a set of regulatory improvement
tools but another to use those tools harmoniously. In practice
the application of the toolkit may be hindered by tensions between
different toolsas between the RIA tool and the consideration
of alternatives. The better regulation toolkit, moreover, may
fail to empower quasi-regulators optimally for cultural and political
reasonsregulators and politicians may produce "single
solution" proposals because, for instance, they see a problem
in traditional ways due to their prior commitment to a certain
course of control or because important interests distrust non-traditional
regulatory methods. It may also be the case that the existence
of a toolkit for evaluating regulatory strategies will not necessarily
drive the use of surrogate regulators and produce "smarter"
proposals because the messages to be gleaned from, say RIA processes
may be poorly heeded within the political and administrative systems
that drive policiesa matter to be returned to below.
Yet another reason why "better" regulation
may be slow to make best use of surrogate regulators and to come
to grips with "combined" sets of controls is because
empowering quasi-regulators or corporate self-regulatory controls
within combined regimes of control may require an incremental
approach to regulatory design in which key actors negotiate and
adjust the roles of different controlling institutions and influences
over behaviour. This kind of regulationas is envisaged
by smart regulatory theoryinvolves a reflexive, dynamic
approach in which regulatory strategies are constantly revised
and "tuned" to changes in circumstances, preferences
and so on. Such ongoing processes are not amenable to evaluations
in a "one-shot," policymaking process. Issues will have
to be revisited as different control systems adjust to each other.
Those control systems, moreover, will have to deal collectively
with changes. This can be portrayed as a process of continuous
regulatory coordination and change rather than the operation of
a single fixed design. The better regulation toolkit does envisage
the use of a variety of regulatory controls but it is difficult
to see how ongoing regulatory coordination with all its flexibilities,
can be tested in advance by a RIA process as if it is a static
The final principle of smart regulation suggests
that opportunities for win-win outcomes should be maximisedso
that, for instance, corporations can behave more responsibly and
maximise profits at the same time.
Win-win outcomes, however, may not always be possible and, in
certain circumstances, there are tensions between corporate profit-seeking
and some regulatory objectives.
In practice, therefore, regulators will need to identify areas
and issues that will lend themselves to win-win outcomes if certain
stimuli are applied. The targeting of regulatory approaches will,
accordingly, be central to success. Regulators of a variety of
kinds will have to deploy a wide range of strategies and aim these
at different kinds and sizes of enterprise, as well as activities,
in order to maximise win-win outcomes. This, again, is exactly
the sort of flexible and adaptive regulatory strategy that is
extremely difficult to set out and evaluate in advance according
to the RIA-centred better regulation toolkit as now encountered.
For the above reasons, it can be contended that
better regulation is at tension with the prescriptions of smarter
regulation. A further tension within the notion of "better"
regulation should, however, also be noted. This issue is prompted
when asking the question: "Better for whom?" It is clear
from field research that "better" regulation is conceived
of differently by different interestssuch as by small and
by large businesses.
The former, for instance, put an especially high premium on regulatory
systems that pay attention to their special sensitivities to certain
Potential dangers of RIA processes are that, as with all cost-
benefit analyses, they skew calculations in favour of those parties
who benefit from the existing distribution of wealth
and that they place emphasis on overall costs an benefits rather
than distributional issuesand, accordingly, underplay the
question of who bears the costs and who enjoys the benefits. What
may be better regulation for large enterprises or urban consumers
of services may not be better regulation for small enterprises
or rural consumers.
A second set of tensions exists between the
messages of the "better", "less is more" and
"risk-based" approaches to regulation. The publication
of the Less is More
report in 2005 marked, as noted above, a change in emphasis within
UK governmentaway from the pursuit of better regulation
and towards less regulation through the imposition of lower costs
on business. Regulators were charged to use the Standard Cost
Model (SCM) to assess the costs that its regulations place on
businesses and to devise ways to meet reduction targetsexpressed
as percentage decreases in those costs.
The SCM estimates the costs of completing activities that are
driven by regulation on the basis of a few basic cost parameters-
so that the cost per activity (or data requirement) is the product
of price (wage costs plus overheads/costs for external services)
and time (the time taken to complete the activity) and quantity
(the population of businesses affected and the frequency of the
requirement per year).
The emphasis, it is to be noted, rests on the
reduction of administrative costs (ie information providing costs)
rather than policy costs (ie the costs of carrying out the required
action, such as fitting the guards or filters). Such an approach
to burdens reduction, argues the SCM Network, brings the advantages
of: showing how changes in information requirements will affect
costs; identifying parts of legislation that are particularly
burdensome for business; and assisting in the calculation of cumulative
An initial difficulty with the SCM approach
is that it presupposes that it is possible to separate out policy
costs from administrative costs. A second problem is identifying
those costs that are imposed by a regulatory requirement and go
beyond those costs that will be incurred by competent management
in the ordinary course of business. These are issues that involve
contentious assumptions and combine to produce the danger that,
if industry is asked to cost administrative burdens (as is the
case) they will tend to conflate policy and administrative, as
well as regulatory and managerial costs. The effect will be grossly
to exaggerate both the costs of informational burdens and the
potential gains to be made by removing a regulation.
Not only is the SCM fraught with difficulty
but it produces problems for regulators whose activities and proposals
stand to be evaluated by means of RIAs. The SCM offers a particular
approach to the calculation of costs but there are dangers. The
criteria and assumptions employed in the SCM may not always correspond
to those that are used when the actual cost burdens are calculated
through the RIA process. A dilemma arisesdo regulators
use "notional" costings as demanded by the SCM or do
they operate with the costings approaches that they have developed
on their particular ground. If they adopt the former approach,
the RIA may prove the poorer for itespecially when the
SCM criteria are perceived as in need of adjustment. If they take
the latter course, there is likely to emerge a divergence between
SCM and "real" costings methods and results.
A further tension between the RIA and the burdens
reducing processes may arise out of the Government's desires (a)
to reduce quite significantly the burdens of supplying information
that regulators impose on them and (b) to ensure that regulators
target their enforcement activities more precisely in order to
take up less business time.
The problems are, first, that targeting enforcement
demands that inspections and other actions are based on intelligence,
and second, that, if the obligations of businesses to supply information
to regulators are reduced, it is increasingly difficult for regulators
to engage in targeting without generating intelligence independently.
Such independent generation of data may, of course, prove hugely
expensive for regulatorsindeed far more expensive for them
than for the businesses that they are controlling (who may have
the information quite readily to hand).
This is especially likely to prove an issue
when, in the wake of the Hampton Review, regulators are expected
to target their enforcement actions at those businesses or service
providers who pose greatest risks. Risk-based systems are built
on risk analyses, which are founded, in turn, on the collection
of quantities of good data.
A third serious tension lies between the prescriptions
of the RIA and the realities of normal governmental policy processes.
As a result, a key challenge presented to the proponents of RIAs
is that of locating the RIA within the policy process. On this
front, a first issue is whether the RIA can be carried out to
a high technical standard. The UK holds itself out to be a world
leader in carrying out RIAs but it appears that the current fit
between the RIA and policy processes does not conduce to the production
of high quality RIAs. A succession of reports from the National
Audit Office (NAO) and the British Chambers of Commerce(BCC) has
revealed a number of weaknesses. The National Audit Office (NAO)
looked at 23 "test case" RIAs in 2001
and reported on 10 further sample RIAs in 2004.
The NAO revealed in 2004 that only half the RIAs examined included
"a reasonably clear statement of objectives" and seven
out of 10n did not consider any option for regulation other than
the one preferred by the department. None of the 10 RIAs considered
what would happen in the absence of the regulation. All acknowledged
a level of uncertainty about the data that were used for estimates
but such uncertainties were not always reflected in the cost and
benefit figures used, which presented single point estimates rather
than ranges. Only one out of 10 gave the results of sensitivity
tests and only three out of the 10 contained quantified estimates
of benefits (often no market for benefits existed making quantification
difficult). Most RIAs, accordingly, did not offer a quantified
comparison of expected costs and benefits. As for considering
the likely effects of regulations on the ground, only half of
the sample RIAs considered enforcement and sanctioning effects.
Most RIAs, moreover, described how the regulation would be monitored
but "often in a very brief and vague way" and only four
stated that there would be a formal review to evaluate the success
of the regulation. The NAO's 2005-06 evaluation of RIAs
stated that only two out of twelve RIAs analysed levels of compliance
well and the same report produced the finding that: "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."
The NAO's findings were broadly in line with,
though perhaps less critical than, the British Chambers of Commerce
(BCC) studies of 2003 and 2004 which looked respectively at 499
and 167 RIAs produced by government in the two periods studied
(1998-2002 and 2002-03).
The BCC studies noted a series of problems with RIAs and concluded
that ministerial statements that benefits justified costs were
not in general supported by the evidence in the RIAs. Some departments,
indeed, were under-resourced or badly managed for conducting RIAs.
On choice of regulatory strategy the BCC found that the option
of not regulating was considered in only a minority of cases (11%
in 1998-2002 and 23% in 2002-03) and less than half of RIAs (44%)
quantified all the options considered. RIAs are supposed to pay
acute attention to business (and especially SME) compliance costs
but the BCC reported that costs for business were only quantified
in 23% of RIAs and a quarter of RIAs did not consider effects
on SMEs at all. A substantial minority of RIAs contained little
factual data about consequential costs and benefits and "scant
attention" was given to "sunset" clauses or to
subsequent monitoring or evaluation. Nor was the BCC impressed
by new efforts to improve RIAsit found that the RIA process
showed little recent evidence of improvement.
Such criticisms suggest prima facie that the
way that RIA processes are accommodated within policy-making procedures
is not conducing to technically impressive assessments. Clearly
there is room to improve the technical quality of RIAs and such
improvements may be necessary if RIAs are to conduce to better
regulation. It would be a mistake, however, to assume that technical
improvements in RIAs will be sufficient to improve regulation.
Those RIAs would still have to be located within in legislative
and regulatory policymaking processes in a manner that allows
them to influence emergent laws and policies. There are, however,
a number of reasons why RIAs tend to prove less influential than
might at first be supposed.
Governments, for instance, may be committed
to certain regulatory steps and strategies for ideological reasons,
or because of manifesto commitments or because a political settlement
has been made with various interests. They will, accordingly,
not be minded to pay too much attention to RIAs that send contradictory
signals. Ministers, for example, tend to be predisposed towards
legislative solutions and, if they have promised to legislate
in order to address a problem, they will not respond enthusiastically
to RIAs that propose non-legislative solutions. The costs and
benefits of regulation, moreover, tend to be difficult to quantify
and the perceived "softness" of RIAs may reduce their
impact on the policy or legislative process. This is liable to
be the case especially where costs and benefits can only be calculated
on the basis of guesses about the use that various regulatory
actors will make of their powers or about the strategies that
will be deployed to apply regulatory rules. In 2006 the NAO stated
that weaknesses in assessments meant that: "RIAs are only
occasionally used to challenge the need for regulation and influence
It is also frequently the case that the full
nature of the regulatory proposal is unclear from any given item
of legislation (eg a framework Act) because the real substance
will follow in secondary legislation. The effect will be that
regulation escapes a good deal of parliamentary and RIA scrutiny.
It might be responded that the secondary legislation will, in
all likelihood, be RIA-tested in its own right at a later date,
but this may be no complete answer to the point. The framework
regulatory strategy within which that secondary legislation is
to operate will in most instances be established by the primary
legislation that has "escaped" RIA influence. Many key
regulatory issues will already have been decided by the time the
"secondary" RIA is carried out.
Another concern is that even when the secondary
legislation is RIA-tested, it may be extremely difficult to assess
the substance of a regulatory proposal because its nature will
still depend on the use that will be made of the delegated powers
involved. Additionally, of course, secondary legislation will
not be debated in Parliament in the way that primary legislation
and any RIA-based messages are, accordingly, the less likely to
influence decisions in the legislature.
A further problem that arises in the legislative
process is that amendments of laws and rules may be introduced
at a late stage in the progression of legislations and the proposals
involved may, for that reason alone, escape RIA attention.
The culture of governmental policymaking may
itself prove resistant to the influential use of RIAs. This has
been a special concern to the NAO, which found in 2006 that RIAs
were often seen by officials as a bureaucratic task rather than
being integral to the process of policy-making. The NAO, accordingly,
recommended that a number of steps would have to be taken to change
It should be made make clear to policymakers
that the RIA is necessary and that the level of effort put in
to preparing the RIA reflects its importance.
Policymakers should start impact
assessment early and use the RIA to project manage the decision-making
Policymakers should make greater
and earlier use of departmental expertise and, as far as possible,
embed expertise into policy teams.
Cultural changes, however, are easier pleaded
for than achieved. The recommendation that RIAs should be used
earlier in the policy process than presently may, for instance,
prove more difficult to implement than might be assumed. A real
problem in some areas may arise from tension between the politics
of a process and the RIA principles. Within the RIA process policymakers
are supposed to consider and compare the array of regulatory routes
to a policy objective but in the real world, a proposal may be
the product of a process of political negotiation. It arises when
compromises and concessions have been made between different interests
and, as such, it may be the only feasible option politically.
To compare this proposal with an array of alternatives
via the RIA procedure may be to compare a live horse with a number
of dead non-runners. (Such a comparison is also likely to be seen
by relevant policy-makers as an exercise too far.) This is not
to say that RIAs have no valueis, however, to point out
that there may be strict limits to the extent to which RIA processes
can be fully "embedded" within policy processes so that
they can influence political decision-making.
The above discussion raises some worrying points,
notably that better regulation, as pursued via RIAs, may not produce
"smarter" regulation or conduce to lighter touch regimes
of control; that it may be at tension with desires for lower information
burdens on business and with the Standard Cost Model approach;
and that it may impact on policy and legislative processes far
less than many of its proponents might imagine.
The way forward is, as indicated, not to focus
simply on carrying out RIAs in a technically superior manner.
Nor is it to settle for embedding the RIA within the policy-making
process more fully. Such steps would not ensure that RIAs would
impact on legislative processes in a satisfactory manner or that
they would lead to smarter regulation. This is why the Better
Regulation Executive's 2006 report, The Tools to Deliver Better
Regulation is excessively narrow in its approach to improving
RIAs and their impact. The report's "key" recommendations
are staggeringly modest in highlighting the needs to: take steps
to make RIAs more transparent; shorten the RIA guidance; and have
RIAs signed off by Chief Economists as well as Ministers.
What needs to be done is to rethink the better
regulation philosophy as a whole. At present, the centrality of
the RIA means that better regulation is sought to be achieved
by making predictions about the future effects of regulatory regimes,
attaching costs and benefit to these, and attempting to convince
policymakers and legislators that they should give weight to what
is often perceived of as so much guesswork. (Biases against smarter
regulatory methods tend to be omitted from consideration.)
The key change has to involve a shift away from
the predictive philosophy and towards one that gives centrality
of place to reviewa process that involves both evaluation
and modification. Assumptions of comprehensive rationality have
to give way to incrementalist strategies
so that it is accepted that regulatory systems cannot be designed
ex ante (on the basis of ever more sophisticated analyses) and
left alonethat steps must be taken, first, to measure whether
regulatory systems are working as well as they can (and better
than alternatives) and, second, to bring about changes in regulatory
strategy in order to effect improvements.
It might be argued from within the BRE and OECD
that a movement "from design to review" has already
been instituted. It is true that the UK Government, like the OECD,
has expressed a commitment to regulatory reviews.
The ongoing challenge, however, is to give new emphasis to that
review and adjustment process so that, within government, it is
seen as more important than design by RIA. Embedding a review
philosophy also means that regulatory policymakers will have to
come to grips with the difficulties of post-implementation evaluation
These problems should not be understated. A
first difficulty is that reviews and changes may create regulatory
uncertainties and trigger adaptation costs. Some regulatory systems
may be adjustable at low cost, but others may be difficult to
change because high uncertainty and high adjustment costs are
involved. All regulators will, accordingly, have to make context-specific
judgements about the tradeoff between improvements in regulation
and the uncertainty costs involved in regime adjustments.
A second problem is that evaluating regulatory
performance is extremely difficult technically, not least because
formulations of objectives will be contentious, appropriate benchmarks
will be difficult to identify and regulatory objectives are liable
to change over time.
Regulatory statutes tend to allocate large discretions and mandates
that are unclearthis means that little legislative guidance
on yardsticks can be assumed.
Nor, thirdly, will a move from design to review
allow us completely to escape the difficulties of assessing the
"regulatory mixes" that were discussed above in looking
at "smart" regulation. In multi-actor, multi-strategy
regimes, attributions of responsibility will be far more difficult
to make than in simpler regimes. Other evaluative problems will
be severe when mixes are involved. The application of performance
measures always produces a danger of counter-productive effects
but in mixed regulatory regimes such effects may be particularly
difficult to assess because they will be experienced by a variety
of actors in quite different ways. Similarly, the complexity of
smart regimes makes it difficult both to evaluate the case for
alternative mixes of controls and to bring about adjustments in
numbers of institutions and rule systems. What can be said, however,
is that evaluations of and adjustments to regulatory mixes, though
never simple, will be far more easy to carry out in an ex post
incremental manner rather than through an ex ante design approach.
With these caveats in mind, it can be reasserted
that a movement from a philosophy of design to one of regulatory
review can be expected to hold out a far more realistic prospect
of better regulation than current approaches that give centrality
of place to the predictive RIA. Review processes make advancements
towards smarter methods of control more realistic. They give greater
emphasis to the measurement of resultsand improve accountability
and transparency. They offer superior ways to evaluate the quality
and reliability of regulatory data and they allow policymaking
cultures to be reshaped over time rather than presuppose that
they can be overridden in a single operation.
At the level of UK regulation, the case for
the suggested change in better regulation philosophy seems strong.
It should involve not an abandoning of the RIA process or an ending
of attempts to improve RIAs and embed them within policymaking
practices. A review philosophy would retain such efforts but would
not put all eggs in the RIA, or design, basket. The RIA would
be seen as the start of the regulatory assessment process rather
than the end and the real locus for shaping regulation would become
the review stage.
Do such arguments apply to better regulation
at the EU level as much as to domestic government? Arguably they
have all the more force since EU regulation usually involves a
process of delegation to Member States through the use of Directives.
This process makes the difficulties of quantifying the anticipated
costs and benefits of a regulatory proposal a degree more difficult
than is the case in domestic legislation. Even the simplest EU
instruction to institute a command and control regime (ie with
no "mix" of regulatory methods) might demand that those
charged to undertake a RIA should make heroic assumptions about
the sorts of powers and sub powers that might be deployed according
to some assumed enforcement regime at Member State level.
The better regulation movement involves commendable
efforts to reduce the costs of regulation down to absolutely essential
levels. It carries within it, however, the potential to place
undue emphasis on evaluation mechanisms that are technically difficult,
hard to fit into policy and legislative processes, and liable
to lead to counter-productive results. A revised philosophy of
better regulation is needed if tools such as the RIA can be used
1 The roles of Regulatory policies and institutions
are not to be forgotten but they are not the focus of this chapter-which
does see tools as of far greater significance. Back
For OECD endorsement of the RIA see eg OECD, Report on Regulatory
Reform (Paris: OECD, 1997); Regulatory Policies in OECD Countries,
(Paris: OECD, 2002). See also the European Commission, Communication
on Impact Assessment (5 June 2002). On practise in the EU see
"A Comparative Analysis of Regulatory Impact Assessment in
Ten EU Countries"-A report prepared for the EU Directors
Better Regulation Group (Dublin, May Back
See Hilary Armstrong at p.4 of The Tools to Deliver Better Regulation
(Better Regulation Executive, 2006). Back
This section draws on R Baldwin, "Is Better Regulation Smarter
Regulation?" PL 485-511. Back
On "smart" regulation see N Gunningham and P Grabosky
Smart Regulation (Oxford, 1998). For other discussions of mixed
public and private, or "combined" regimes of regulation
see eg D Osborne and T Gaebler, Reinventing Government (Boston:
Addison-Wesley, 1992); I Ayres and J Braithwaite, Responsive Regulation
(Oxford: Oxford University Press, 1992); C Sunstein, "Paradoxes
of the Regulatory State" (1990) 57 Univ of Chicago L.R. 407;
C. Sunstein, After the Rights Revolution (Cambridge, Mass: Harvard
U.P, 1990); C Parker, The Open Corporation (Cambridge: Cambridge
U.P, 2002); G Burchell, C Gordon and P Miller (eds) The Foucault
Effect: Studies in Governmentality (Chicago: University of Chicago
Press, 1991); J Black, "Dencentring Regulation: The Role
of Regulation in a Post-Regulatory World"  Current
Legal Problems 103; "Enrolling Actors in Regulatory Processes"
 PL 62; M Sparrow, The Regulatory Craft (Washington D.C:
Brookings Institution Press, 2000). On the British regulatory
state as a "smart state" see M. Moran, The British Regulatory
State (Oxford: Oxford University Press, 2003) 21-26. Back
On "smart" regulation see Gunningham and Grabosky n
26 above. For other discussions of mixed public and private, or
"combined" regimes of regulation see eg D Osborne and
T Gaebler, Reinventing Government (Boston: Addison-Wesley, 1992);
I Ayres and J Braithwaite, Responsive Regulation (Oxford: Oxford
University Press, 1992); C Sunstein, "Paradoxes of the Regulatory
State" (1990) 57 Univ of Chicago L.R. 407; C Sunstein, After
the Rights Revolution (Cambridge, Mass: Harvard U.P, 1990); C
Parker, The Open Corporation (Cambridge: Cambridge U.P, 2002);
G Burchell, C Gordon and P Miller (eds.) The Foucault Effect:
Studies in Governmentality (Chicago: University of Chicago Press,
1991); J Black, "Dencentring Regulation: The Role of Regulation
in a Post-Regulatory World"  Current Legal Problems
103; "Enrolling Actors in Regulatory Processes" 
PL 62; M Sparrow, The Regulatory Craft (Washington D.C: Brookings
Institution Press, 2000). On the British regulatory state as a
"smart state" see M Moran, The British Regulatory State
(Oxford: Oxford University Press, 2003) 21-26. Back
Gunningham and Grabosky, n1 above 91. Back
See Gunningham and Grabosky, n 26 above 387-422. Back
The idea here is that regulation should be "responsive"
and escalate in severity as necessary to achieve compliance. Ayres
and Braithwaite (in Responsive Regulation, Oxford: Oxford University
Press 1992) are concerned with state and business relationships
but Gunningham and Grabosky argue for escalating approaches on
three planes-not merely one based on state controls but also one
founded on commercial and non-commercial quasi-regulation and
another on corporate self-regulation. These planes make up the
three sides of their pyramid-see Gunningham and Grabosky n 1 above
A win-win outcome is where higher levels of socially desirable
behaviour produce higher profits-see N Gunningham "Beyond
Compliance: Management of Environmental Risk" n B. Boer et
al Environmental Outlook (Sydney, ACEL Federation Press, 1994);
M E Porter and C Van der Linde, "Green and Competitive"
(1995) Harvard Business Review 120-134; J C Robinson, "The
Impact of Environmental and Occupational Health Regulation on
Productivity Growth in U.S Manufacturing" (1995) 12 Yale
J. Regulation 388. Back
See eg the BRTF's Imaginative Thinking for Better Regulation (London:
Cabinet Office, 2003); Alternatives to State Regulation (London:
Cabinet Office, 2000). OECD, Regulatory Policies in OECD Countries
(Paris: OECD, 2002) pp51.57. Back
See Gunningham and Grabosky n.26 above 388. Back
See M. Sparrow n 26 above. Back
Ibid Chapter 9. Back
See Gunningham and Grabosky n 26 above and also Black n 25 above
on enrolling a variety of regulatory actors. Back
See Sparrow n.26 above 310 Back
The Cabinet Office Guide, Better Policy Making: A Guide to Regulatory
Impact Analysis (London: Cabinet Office, 2003). Chapter 2 focuses
on the effects of the new regulation at issue and takes existing
regulations has givens. Back
On the centrality of enforcement and the "practice of regulation"
See Sparrow n 26 above 3-7. Back
See NAO, Evaluation of Regulatory Impact Assessments 2005-06 HC
1305 Session 2005-06, June 2006, p.4. Back
See Gunningham and Grabosky n 26 above 400. Back
On the need to integrate different levels of action from different
sides of the pyramid (eg non-punitive state controls with (more
severe quasi-regulatory and self-regulatory controls) see Gunningham
and Grabosky n 26 above 398-401. Back
On win-win see M E Porter and C Van Der Linde, "Towards a
New Conception of the Environment-Competitiveness Relationships"
(1995) 9 J of Economic Perspectives 97-118; J Gobert and M Punch,
Rethinking Corporate Crime (London: Butterworths, 2003) 342-345.
It is arguable that the main advance on this front is to be made
by providing information to firms on how to achieve such outcomes.
See Gunningham and Grabosky n1 above 416-8; on small business
estimates that information is one of the top potential drivers
of compliance see FSB. Back
See R. Baldwin, The New Punitive Regulation (2004) 67 MLR 351. Back
See R Baldwin, Better Regulation: Is It Better for Business? (Federation
of Small Businesses, 2004). On the meanings of "good"
and "better" regulation see the references at footnote
2 above. Back
Eg, small businesses find that regulation diverts managerial attention
and time away from wealth creation in a far more acute manner
than is the case with large enterprises-see ibid. Back
See GR Baldwin and CG Veljanovski, "Regulation by Cost-Benefit
Analysis" (1984) 62 Public Administration 51 Back
Better Regulation Task Force, Regulation- Less is More (Cabinet
Office London 2005) Back
By 2006 the Prime Minister had announced 25% administrative burdens
reductions targets for the DTI, Defra and HSE and the DTI had
published plans to deliver annual business savings of around £200
million a year-Cabinet Office, Update on the Implementation of
Less is More (July 2006). Back
See SCM Network website. Back
NAO (2001). Back
NAO (2004). Back
NAO, Evaluation of Regulatory Impact Assessments 2005-06 HC 1305
Session 2005-06, June 2006. Back
Ibid. p. 2. Back
See BCC 2003 and BCC 2004. Back
The European Commission has, for its part, carried out impact
assessments (in qualified form) since the Business Impact Assessment
system was introduced in 1986. European impact assessments have,
however, possessed many shortcomings. These were analysed between
2000 and 2002 and a new Impact Assessment system was outlined
by the Communication on Impact Assessment of 5 June 2002.35 This
formed part of the Better Regulation Action Plan35 and aimed to
analyse the effects of European regulatory proposals on business
in order to conduce to competitiveness, innovation and growth.
The first year for carrying the new Impact Assessment process
was 2003 and so it is early to draw conclusions on its performance.
A review by the European Policy Centre has, however, suggested
that only 30% of proposals have been assessed and there are a
number of general failings, notably: to list alternatives; to
comment on or quantify impacts; and to identify data gaps. Back
The RIA relating to the Employment Act 2002, for instance, noted
that "a great many assumptions" had to be made in its
NAO, Evaluation of Regulatory Impact Assessments 2005-06 HC 1305
Session 2005-06, June 2006,p.2. Back
See generally R Baldwin, Rules and Government (Oxford, 1995) Ch.4. Back
On comprehensive rationality versus incrementalism see eg Y.Dror,
"Muddling Through: Science or Inertia" (1964) 24 PAR
153; D. Braybrooke and C. Lindblom, A Strategy of Decision (New
York, 1963). Back
Government policy since June 2001 has required departments to
review the impact of major pieces of regulation within three years
of implementation (OECD, U.K Challenges at the Cutting Edge (2002)
p.34). The BRTF recommended post implementation review in April
2000 (Helping Small Firms Cope with Regulation) but the revised
RIA Guidance of 2003 limits systematic reviews to major pieces
of legislation and only issues a general prescription: "say
how the policy will be monitored and evaluated/reviewed."
Research for the BCC, as noted, found that this aspect of the
guidance was given "scant" attention in RIAs (BCC 2004).
On the OECD view that ex-post evaluation of regulatory policies,
tools and institutions is of value see OECD 2002 p.115-6. On the
case for revisiting regulatory systems see G Mather and F Vibert,
Reducing the Regulatory Burden (London: European Policy Forum
European Forum 2004). Back
For a review of benchmarks on regulatory quality see University
of Bradford, Centre for European Studies, Interim Report on Indicators
of Regulatory Quality (CEC, DG Enterprise, 9 May 2004) (Project
C M Radaelli, Indicators of Regulatory Quality (Brussels 25 January
On perverse effects see eg NAO op.cit, para 11. H.M Treasury op.cit
J Sandbach, "Performance Indicators Could Damage Universities"
Health (1987) Public Finance and Accountancy 19; G Bouckaert,
"Improving Performance Measurement" in A Halachmi and
G Bouckaert (eds.) The Enduring Challenges of Public Management
(San Francisco: Jossey-Bass, 1995); C Pollitt, "Performance
Indicators: Root and Branch" in M Cave, M Kogan and R Smith
(eds.) Output and Performance Measurement in Government (London:
Jessica Kingsley, 1990). Back