Select Committee on Regulatory Reform Written Evidence

Memorandum submitted by the Professional Contractors Group Limited


    —  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.


  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.


  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.


  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.


  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.


  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.


  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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