Select Committee on Regulatory Reform Minutes of Evidence

Examination of Witnesses (Questions 20-39)


29 JANUARY 2008

  Q020.  Gordon Banks: But I might not know what I want to know about.

  Mr Sargent: I agree.

  Mr Kohli: The way that that might work is it allows you to effectively describe what kind of organisation you are and then tell you the information that is of relevance to you. So I am sure it is not perfect and I am sure that there is a long way to go and it is certainly an area where government needs to improve, but it is absolutely trying to provide the kind of service that you are describing.

  Q021.  Phil Wilson: A couple of questions on this 25% figure. What will be the annual savings on that? What does that equate to in money terms?

  Mr Kohli: £3.5 billion.

  Q022.  Phil Wilson: That is in government?

  Mr Kohli: No, for businesses and third sector organisations.

  Q023.  Phil Wilson: Government departments have identified annual savings of £3.5 billion worth of savings to the department.

  Mr Kohli: No, the government departments are responsible for finding measures which deliver £3.5 billion of savings for businesses and third sector organisations, which is what the measurement exercise covers.

  Mr Sargent: The government is obviously saving money itself as a result of it by not collecting information, but we have not identified it, that is not part of our job.

  Q024.  Phil Wilson: It was the way it read; I thought it was the government departments. One other question. One aspect in the memorandum is to improve transparency where you are going to publish annual total costs and benefits of new regulations based on cost benefit analysis from April this year. So by 2010 that will add up to a 25% cut, is that right? And every year that you save so much money you get the £3.5 billion? So if in 2010 I look at that and say, "That is where the savings have been made"?

  Mr Kohli: Let me try and explain the distinction—that there is a distinction. We are already committed and have been committed for some time for making the £3.5 billion savings absolutely transparent. In this document[12], of which I hope we have given you a copy or sent you a link, which was published just before Christmas, sets out all of the initiatives the government departments are undertaking in order to deliver the reductions towards their £3.5 billion. This is just a summary of a series of longer documents written by other departments, and there is a particular table in here which says, for instance, that the Department for Culture, Media and Sport has identified measures which save £108 million out of their £343 million baseline for instance. So that will be very transparent. And after May 2010 as a government we should be able to demonstrate to Parliament and to the business community that we will have delivered the savings that we are talking about, this £3.5 billion number. What that line in that memorandum is referring to is something slightly different, which is that as a government we do not currently publish the overall cost of new regulations coming in beyond admin and the overall benefits of new regulations coming in. So for each individual regulation you can get hold of an impact assessment which will give you some sense of the costs and benefits and a much better sense of costs and benefits now than it did a year or two ago. What we are promising to do is to effectively tot up the totals of all those new regulations coming in—the costs and benefits—and to publish a series. The only country in the world that does something similar to that is the United States, who do so effectively for secondary legislation—they do a similar series—but they do not do it for all regulations. So we will be the first country in the world to do that kind of series, and that is beyond administrative burdens, that is for the whole of policy costs as well.

  John Hemming: On the numbers again, just looking at the DVLA where you say that there is a £13.9 million a year saving, my personal experience is that it takes me a lot more effort now to get a car taxed than it did five years ago.

  Judy Mallaber: It takes two minutes.

  Q025.  Dr Doug Naysmith: Nonsense. It is the easiest thing in the world to tax your car.

  Mr Sargent: It takes 60 seconds compared to an hour going to the post office.

  Q026.  John Hemming: The first thing, is that about regulatory reform? I would argue is it is not. Secondly, how you quantify those things is an interesting question.

  Mr Sargent: The great thing with that particular example is that it is a very personal experience and I actually feel that the numbers are underestimated because if you take all of the businesses and all of the citizens who have to do that exercise the amount of time they can save is pretty phenomenal. If you think about the achievement, government very rarely gets credit for IT projects but that is taking two separate public sector databases and it is taking a private sector database live, any time of the day or night, and actually allowing you to do a transaction. So that is a phenomenal achievement and it rarely gets credit. But good service is actually better regulation. The fact that you can do something quicker and with less waste of time as far as I am concerned is better regulation. So good service is about better regulation.

  Chairman: I am sure your car is taxed, Mr Hemming!

  Q027.  Judy Mallaber: Rick Haythornthwaite, Chairman of the Better Regulation Commission has described the impact assessment system as "the best leading indicator we have". So why did you decide to stop doing routine scrutiny of impact assessments?

  Mr Sargent: Impact assessments[13], I will make two observations. The manner in which they were being prepared we felt needed improvement and greater transparency and a top sheet where Parliamentarians could take that top sheet and say, "We agree with these numbers or we do not and we can debate it." So the first thing we did was that we created a very transparent structure as of May last year for the impact assessments. The scrutiny of it is something that is done very much by people either on the receiving end of it or Parliamentarians or the press, so we do not feel that our job is to sit and look on a daily basis as to what has happened in that area. People make sure that they do them—we have managed to achieve pretty much 100% across the board people doing them now—but scrutinising on a daily basis, we feel that other people are better placed than we are to do that.

  Q028.  Judy Mallaber: How do you know it is effective if you are not looking at them?

  Mr Kohli: Let me be clear about what we do and do not do. When William and I arrived into the Better Regulation Executive we knew that impact assessment or, as it was then called, the regulatory impact assessment was an important tool of those in government who believed in better regulation, and it was important because it was the way to find out what the cost and benefits associated with a particular policy measure were—except it was not. We looked at them—and that is exactly what we did two and a bit years ago—we pulled out a few of them and we looked at them and we read them and we thought that actually you cannot find out what the cost and benefits are—they are all hidden away in complicated tables. And if we expect Ministers and Parliamentarians and outside stakeholders to really scrutinise this process then we have to make it simpler and more accessible because if even we, who are in government and paid to run this agenda, do not understand it how can we expect others to understand it? So what we have introduced is effectively one sheet which brings transparency to the system, so that it says that the overall costs of this measure are X and it tells you the net present value. I am assuming that when Rick is referring to looking to make a positive comment he is referring to the new system and not the old system. I do not know what date that comment was made.

  Q029.  Judy Mallaber: January 2006.

  Mr Kohli: It is after we had talked to Rick about the new system and we had gone public and what it would look like. Let me get my facts right. Certainly when went to the Better Regulation Commission and said that we intend to overhaul the way that impact assessment works Rick was enthusiastic in telling us that this was a good thing and it would bring better transparency. That said, the UK seemed to be quite good, but we just did not think it worked. What do we in the BRE do on impact assessments? Where you have an impact assessment on a major measure the people in the BRE work very closely with the department to establish that the impact assessment data is accurate. What we do not want to do is to take away the responsibility from the department to get it right themselves. We found a couple of years ago that if a department was not very good at doing impact assessments it would give the impact assessments to the BRE and say, "What do you think?" and the BRE would say that they were not very good and would offer to rewrite them for them, and I think that just does not work; it does not give us the kind of culture change across Whitehall that we need, and what we really need in our view is pressure on departments where they fail to do it well and hopefully the new system will allow that to happen.

  Q030.  Judy Mallaber: So how are you going to assess whether the new system works if you are not analysing what is happening within those assessments? And who is it that is now responsible—rather than the department just monitoring itself, as it were—for scrutinising those assessments to make sure that they are accurate?

  Mr Sargent: The key dialogue we have with the department is the tool that we use quite often—the dialogue. So we are engaging specifically as the document is being created by the department, before it gets made public. Once it gets made public there is not a lot of opportunity for doing that. In addition to that the NAO is obviously then taking a view on the quality of impact assessments, etcetera. But we have a very strong opinion when we are dealing with departments as to what we think about the numbers, the quality of what they have done and that is generally the way we engage.

  Q031.  Judy Mallaber: So you are saying that it is up to the NAO but certainly if you are sat on a Committee it is quite hard to look at an impact assessment and to really know whether it is right or it is not right or it is going to turn out to have been inaccurate.

  Mr Sargent: With any significant impact assessment we will have a strong dialogue with that department and if we felt it was inappropriate and no good we would certainly challenge them and use our internal processes.

  Q032.  Judy Mallaber: Following Lorely's line of questioning, is there any mechanism for reviewing assessments in their implementation to see whether they turn out to have been correct? If so, what is that mechanism and what is your role, if any, in relation to that?

  Mr Kohli: The new impact assessment format has a question in it which says when will the policy be reviewed to establish the actual costs and benefits and the achievement of the desired effects. So departments for the first time are required to say publicly the date on which that will happen. This format has not been in place very long so we have not yet reached any of those dates, but as we do so we would expect both the BRE within government, the department themselves and the stakeholders affected by regulation to effectively hold a department's feet to the fire.

  Q033.  Judy Mallaber: And you would have a role in making sure that that has happened and that it is an adequate assessment of the implementation?

  Mr Kohli: I think it is fair to say that we would have a role; I do not think it is fair to say that we would have the only role. We see this as a partnership between all the people who are affected by the regulation and responsible for delivering better regulation.

  Q034.  Judy Mallaber: So there is no one overall place that you would say has that responsibility because the difficulty is often that analysis falls between a number of different stools and everyone one is expecting everyone else to report what has happened.

  Mr Kohli: We are responsible for ensuring that the government brings into force regulations where the benefits justify the cost and regulation is absolutely essential. If it transpires after a number of years that in a particular area those assumptions were not true then we are responsible for those areas. Let me give you an example, which is an easier way of getting into the issue. A few years ago the former DTI was concerned about the number of employment disputes that were going to tribunal and in their view they were going needlessly. Employers and trade unions both felt that there was a problem that needed addressing. Therefore, what they invented was an idea that before a dispute can go to a tribunal employers should be required and employees should be required to try and settle disputes within the workplace, which is a good idea. The DTI invented a three-stage procedure for how these disputes should be resolved and there was a requirement that employers followed this three-stage procedure. This process unfortunately did not work. What actually happened was that the disputes within workplaces became overly formal too quickly and too many of these cases ended up in court and employers found themselves having procedural problems with the process they had followed in the workplace and employees found themselves in a tribunal situation when they did not want that and what they actually wanted was some form of informal redress—in some cases all they wanted was for their employer to say sorry. Very simple human things in the workplace. When we set up the BRE we spent a lot of time talking to businesses and one of the things that businesses told us was that this was an area which really concerned them; they were really worried that on the ground this was causing more harm than good. So we did some research, we did some thinking about it, we went to the department and we persuaded the department—we were more or less pushing at an open door—that this was not the right way of doing things, and we came up with a different way of doing things. Indeed, the Employment Bill currently before Parliament addresses this issue and effectively gets rid of this very formal requirement and replaces it with an informal way of approaching it. That is an example of a post-implementation review where a policy was done in good faith, did not work—and sometimes that happens—and the department, encouraged by us, realised that it did not work and has come up with a different way of doing things. And it happened to save businesses a lot of money too and I think personally it will save employees a lot of aggravation too. So that is an example of where post-implementation can work, and those examples will continue in the future.

  Q035.  Judy Mallaber: That is helpful. In terms of when impact assessments have just been done though have there been any recent ones that you can recall where the fact of doing the impact assessment resulted in a draft regulation being abandoned? Has it had an impact at that stage?

  Mr Sargent: I can give you an example of one where it dramatically changed and made it easier, which was the extension of the school leaving age from 16 to 17 to 18. That was one of the very early examples of a policy which used this approach, and the process and the thinking ended up with significant savings; and when the policy came out, which you would normally have expected the business world to feel a bit uncomfortable about it because it very much impacted on the people being employed in that age group, the business community was very comfortable with the end result and the policy that was designed. So the policy was not abandoned but it was in the course of the process of being designed altered quite a bit and the end result was government and the business community were in a very comfortable place together.

  Q036.  Judy Mallaber: So by doing the impact assessment they end up with a better policy?

  Mr Sargent: Absolutely, and that is a really powerful example. Unusually, it saves money on both sides of the fence.

  Q037.  Judy Mallaber: Is it possible for you to give us more details of that? I would be very interested to know more details of that as an example to use?

  Mr Sargent: Yes.

  Q038.  Judy Mallaber: On the question of departmental simplification plans have you asked for any wholesale revisions of those or have you been content with those that have come forward?

  Mr Sargent: The plans are the responsibility of the department, is the starting point. The way we are structured is that we have teams that face departments and so we engage in a dialogue with them. One of the things that we do in addition to our dialogue with them—so it is not about saying that we think the plan is awful and we want to reject it because it does not get to that stage because we are in very early with the dialogue. That is the first observation I would make. So that was the first thing that happened. The second thing is that we have encouraged parties to share the draft plan very early on. I in turn have gone to the business community and said, "Please do not publicly criticise a draft plan while it is a draft plan because I am trying to encourage officials and Ministers to share their thinking about where they are heading at draft stage and I wanted to give you a draft when it is a very rough draft where you guys can say, `This is important to us and this is not and actually we do not believe your numbers there' or `These numbers are fine.'" So that the department has guidance and help from outsiders who feel the impact. It is very different from a plan without the people who are on the receiving end being part of the process. So I cannot think of an example where the word wholesale rejection will have happened.

  Q039.  Judy Mallaber: At what stage do you see the plans?

  Mr Sargent: Very early on.

12   2007 Simplification Plans Summary: Back

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