Select Committee on Regulatory Reform Written Evidence

Memorandum submitted by Professor Claudio M Radaelli of Exeter University

  Dear Mr Caulfield,


  Further to your letter dated 20 February 2008, I am sending a short memorandum. I would be glad to elaborate on the memo and discuss it with you and your colleagues—please do not hesitate to contact me again if you feel you need more information. I look forward to reading the results of this inquiry.

  I take the liberty of enclosing three annexes on specific points.

Prof. Claudio M. Radaelli

Director, Centre for Regulatory Governance

  [1]  This is a most-timely inquiry on a largely neglected topic. Indeed, better regulation is one of the few high—profile policies where there has been limited discussion of what the main political purpose is. There is no systematic reporting on the activities and the results achieved by the cabinet office and BERR. Independent scrutiny and ex-post evaluation has been higher than in several other EU countries, but overall inadequate, with the important exceptions of the reports on the National Audit Office on regulatory impact assessment (ex-post evaluation) and most recently on the reduction of administrative burdens.

  [2]  What has been achieved? Although there aren't many systematic studies available, my impression is that in the UK we have learned about better regulation and RIA, but we have not learned through these tools. Compliance with RIA guidelines is high, but we have no information on whether by using better regulation tools our institutions have become smarter and regulatory quality has increased. We should not underestimate the achievement of having learned about better regulation—most EU countries are still struggling with this stage. There is a big implementation gap in Europe (annex 1). The Better Regulation Executive is right to say that they are leaders in Europe. But there are challenges for the UK too, especially in relation to learning through better regulation. The challenge for the Better Regulation Executive, therefore, is twofold. On the one hand, they have to measure their activities and become accountable for what they deliver or do not deliver. On the other, they have to show how these activities are contributing to major desirable changes.

  [3]  The challenge of measuring—Measuring activities and results of better regulation policies is difficult, but not impossible. There are at least 20 years of research on regulatory quality indicators. The UK has not adopted a system of indicators yet. In consequence, the Better Regulation Executive does not report regularly on output and outcome. Neither have citizens and business had an opportunity to discuss how progress should be measured—with the exception of the badly-conceived administrative burdens reduction plan (see annex 2). This is bad news for regulatory accountability. Indicators reveal the preference of the governments about better regulation. They are one very direct way in which the component of symbolic politics at work in better regulation can be minimised. Ideas like "good regulation", "efficient regulatory reforms" and "changing the culture in Whitehall" are difficult to grasp in abstract. Measures tell us what they mean in practice and how they can be monitored. If measures are built in a process in which the setting and meaning of indicators are discussed, we have a fruitful combination of evidence and policy process that can foster high quality deliberation on the intent of better regulation. Finally, consider the cost of not measuring: someone else out there will start producing "Burdenbarometers" and similar measures of better regulation....

  [4]  The overall intent is not clear—The problem is compounded by the lack of discussion in government, in parliament, and in the quality press on the general intent of better regulation. There are three possible aims for a policy like this. The first is to promote better regulation with the goal of regulatory legitimacy in mind. Better regulation, in this case, has a governance orientation. Its objective is to increase the social legitimacy of regulation via open consultation processes and an emphasis on regulatory quality (often represented by the principle that regulation is socially acceptable if it increases the overall net welfare of the community). Citizens or the median voter are the main stakeholders in this model. The second possible intent is to increase the political control of the core executive on regulating departments and agencies. Regulatory quality is not an objective in this model. Its essence is the power of the core executive. The third possible aim is to maximise short-term political benefits by sending signals to the business community. In this model, the needs of the business community are not empirically investigated, they are dictated top-down from the core executive. The latter first identifies low-hanging fruits, and then tries to market them to the business community as "improvements" of the business environment. Symbolic politics is the essence of this model. It sits comfortably with lack of policy evaluation, poor reporting of central better regulation units, targets set without considering carefully their conceptual foundations, accelerated production of reviews, initiatives, "minds and hearts" packages and so on. It would be immensely helpful if we could establish what we want from better regulation in this country, and whether we live in one of these models, or in a fourth model (possibly a hybrid?).

  [5]  Departments are puzzled—The better regulation units operating in departments have a difficult job at the moment. It is not easy to sell better regulation because of the increasing pace of new initiatives. On RIA, there has been a long period of time in which departments knew the old guidance was no longer endorsed by the cabinet office, but new guidance was slow to appear. More generally, policy officers developing regulation have to comply with the new RIA guidance, take into account the Davidson review for the EU part of their job, implement Hampton, measure and reduce burdens at source, engage creatively with consultation, and so on. By adding requirements at an accelerating rhythm, we may make the overall package of better regulation appear unrealistic to the policy teams that formulate and implement rules. If you speak to departments, you will often hear that better regulation policy has increased regulation inside government. Add to this that the Better Regulation Executive has decided to operate at arm's-length from the departmental RIAs—whilst in the past they entered departmental RIAs more directly. This has created in some departments the impression of "having left alone" at a time when the number of better regulation procedures to be implemented is increasing. One problem here is administrative capacity. Whist investments have been made at the centre, in the Better Regulation Executive, capacity for better regulation remains distributed unevenly across departments. In a typical department, good RIA desk officers are not promoted, their professional identity is not visible (they may be seen as economists, but not as "better regulators" or "good evaluators of proposed legislation"), and they have an endemic problem of fulfilling procedures for which there are no resources around the house.

  [6]  No "plug & play" solutions—The fact the departments are puzzled and that there is low capacity in some quarters has something to do with the fact the better regulation tools do not work like plug and play devices. If they are not inserted in a pre-existing system of administrative law and policy capacity, the system will not recognise them—much like a computer will not recognise a new peripheral. Better regulation tools plug and play successfully if they do not bracket politics away, if they build on the capacity developed in environmental policy assessment, if they operationalise venerable administrative law procedures enshrined in administrative procedure acts, if they expand on freedom of information acts and so on. To illustrate: RIA makes sense to a US policy officer because it is the operationalisation of the "giving reasons" and "notice and comments" rules in the administrative procedure act. I elaborate on this point in the PowerPoint presentation attached to this memo (annex 3).

  [7]  The system runs the risk of becoming self-referential—No matter how good regulatory innovations look on paper, when implemented they run the risk of being captured by the administrative system. This is why a robust network of better regulation actors is essential to the development of this policy. In the UK, the following actors are missing in the better regulation picture: Courts, the Parliament, civil society organisations, the quality press and quality media in general, professions, and some portions of the business community. The inquiry is a formidable opportunity to start entering the House of Commons in the picture. Courts may start reviewing rules by considering the quality of impact assessment. The involvement of Courts in the US has transformed the whole system of bureaucratic incentives in areas such as risk assessment and RIA—there is nothing like the fear of your RIA being picked apart from a Court that makes a policy officer most-interested in carrying out high quality economic analysis. A profession of better regulation experts may evolve, but at the moment we do not have a body with its shared professional standards that can press on the government to secure high quality better regulation activities. Finally, academic research is scarce and does not produce independent peer review of what the Better Regulation Executive does.

March 2008
Annex 1Improving the Practice of Impact Assessment
Annex 2Reflections on the Poitical Economy of the "War on Red Tape"
Annex 3The Architecture of Regulatory Impact Assessment
The annexes are not printed but are available from Professor Radaelii of Exeter University

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