Memorandum submitted by the Professional
Contractors Group Limited
EXECUTIVE SUMMARY
— The Better Regulation agenda has
many aspects that are welcome, but there is scope for further
work.
— The effectiveness and success of
the Better Regulation Executive must be judged in future years
based on evidence of reductions of regulatory burdens.
— The activities of HM Treasury and
HM Revenue and Customs must be brought within the scope of the
Better Regulation Executive.
— Post-Implementation Assessment of
all measures must be mandatory and made publicly available to
ensure that regulations have their intended effect.
— The Better Regulation Executive must
measure policy burden costs in addition to administrative burden
costs.
INTRODUCTION
1. The Professional Contractors Group was
founded in 1999 as the representative body for freelance contractors
and consultants in the UK. Many of its members operate their own
one or two-person limited companies; PCG also represents unincorporated
sole traders and freelancers who operate via umbrella structures.
2. All of PCG's members take on business
risk and supply their services to a range or succession of clients.
They therefore represent the flexible, skilled, knowledge-based
workforce on which the UK's future prosperity depends. They provide
IT, engineering, project management, marketing and other functions
in sectors including financial services, telecoms, oil and gas
and defence.
3. PCG considers the needs of its members
both as workers and as enterprises. As a trade association, PCG
represents the very smallest enterprises in the UK. It is therefore
one of only six cross-sector trade bodies in the country.
BETTER REGULATION
AGENDA
4. The Government's Better Regulation agenda
has many aspects that are welcome, and it clearly represents a
more concerted effort to reduce regulatory difficulties than has
been mounted in the past.
5. We support the move to a more risk-based
approach to assessment among regulators, and the introduction
of a Regulators' Compliance Code. The five principles of good
regulation identified by the Better Regulation Taskforce—proportionality,
accountability, consistency, transparency and targeting—also
strike us as sound.
6. We believe there is scope for further
work as part of the Better Regulation agenda, not least in ushering
in a broader cultural shift among policy makers with regards to
better regulation. In a governmental culture which measures success
in terms of activity, and in particular legislation produced,
we question whether civil servants are really able to "think
small first". A similar issue surrounds politicians: they
tend to want reform and change; businesses, meanwhile, want stability.
7. The Better Regulation agenda is still
at an early stage, and its success, and that of the Better Regulation
Executive, will ultimately be depend on whether there is evidence
of a net reduction in regulatory burdens.
TAXATION & BETTER
REGULATION
8. The measurement of tax impacts is currently
wholly inadequate, with the Treasury and HMRC often unable to
identify even the most basic information such as how much revenue
a measure has generated. PCG feels this lack of measurement frequently
gives rise to bad law and needs reviewing as a matter of urgency.
9. One solution to this problem would be
to include the Treasury and HMRC within the purview of the Better
Regulation Executive. Taxation is one of the most significant
interactions between the individual and the state and it is wholly
unacceptable that it should not be administered with the same
rigour as other measures.
10. The result of keeping the tax authorities
outside the purview of the Better Regulation Executive has been
that the Treasury and HMRC frequently produce flawed consultations
and Impact Assessments on new tax measures. One recent example
of this has been the Treasury's consultation on "income shifting"
published in December 2007. PCG raised concerns that the estimates
of the likely costs of the measure under discussion seemed to
be totally unrealistic. We did accept, however, that as the Impact
Assessment alongside the consultation was still in draft form,
a more robust estimate of costs may not have been possible.
11. We were more concerned, however, that
the decision to proceed with the legislation had been taken prior
to a full Impact Assessment being conducted. The consultation
paper did not seek to consult on whether or not the policy should
be taken forward, even though there is no evidence that a problem
which must be corrected exists, and no evidence that the Government's
proposed "solution" will bring more benefits than costs.
The legislation, therefore, represents governmental policy-making
at its worst: decisions have been taken, on the basis of no meaningful
evidence, that pre-judged the outcome of the Impact Assessment
process.
12. PCG believes that the exclusion of the
Treasury and HMRC from the purview of the Better Regulation Executive
undermines the ability of the tax authorities to produce well-informed,
evidence-based policy. For any new tax proposal it should be possible
to identify expected yields, the administrative costs to both
the tax authorities and to the taxpayer and the economics and
social impacts, both benefits and costs. As with any other measure,
taxes should be assessed, after they have been in operation for
a reasonable period, with regard to whether they have achieved
the desired outcome. Unless the Treasury and HMRC are brought
within the scope of the Better Regulation Executive, more poorly-drafted
and badly-implemented tax measures will continue to be proposed.
POST-IMPLEMENTATION
ASSESSMENT
13. PCG would like to see a full post-implementation
Impact Assessment of all regulations and legislation to be made
mandatory. Outcomes are, PCG feels, of crucial importance to the
Better Regulation debate. Outcomes from regulations must be monitored:
no measure should be undertaken without a desired outcome having
been explicitly identified; and there is no point implementing
a new measure and then not checking that it is not doing what
it was supposed to do.
14. We agree with the House of Lords Select
Committee on Regulators that meaningful assessment of regulations
is not possible without clear targets and objectives with which
to judge whether a measure has been successfully and proportionately
implemented.
15. We therefore welcome the Government's
recent commitment to post-implementation reviews but stress the
need to make them work. This must involve full consultation with
all stakeholders and interested parties, and include the establishment
of appropriate systems to monitor impacts. Post-implementation
reviews must always be made publicly available for scrutiny.
POLICY COSTS
16. While efforts have been made to measure
the administrative burden of regulation, PCG agrees with Sir David
Arculus's comment in the final report of the Better Regulation
Taskforce that policy costs, which after all make up 70% of all
regulatory costs, must also be measured and reduced. This will
allow policy makers to examine not only how regulations are implemented
as they currently are, but also why and whether they are justified
at all.
17. We welcome the upcoming launch by the
Government of an annual cost / benefit ratio of all new regulation,
as confirmed in the new Enterprise Strategy, and hope that this
will take policy costs into account.
MONITORING COMPLIANCE
18. A final key area in which we feel the
Better Regulation Executive must work with regulators is in the
monitoring of those individuals and businesses being regulated.
Regulators must check whether businesses find it easy to comply
with regulations, and if not why not. They must also monitor whether
the circumstances that invited regulation in the first place still
apply and therefore whether the regulations are still required.
March 2008
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