Select Committee on Regulatory Reform Minutes of Evidence

Examination of Witnesses (Questions 40-59)


29 JANUARY 2008

  Q040.  Judy Mallaber: You see them at a very early stage.

  Mr Sargent: Very early on, when they are just saying, "Here is a list of things that we think might be useful for us to be doing"; so we are seeing them probably within the first few weeks of the ideas beginning to emerge in plans.

  Mr Kohli: To give you an example, sometimes even before the plans have been written we are engaged in that process. I was invited by Dame Deirdre Hutton to speak at an event which the Food Standards Agency held with its stakeholders, to effectively brainstorm ideas of the things on which the Food Standards Agency should focus energy, and a large number of people affected by the FSA's regulations were in the room and that was an event at which BRE staff were present as well as Food Standards Agency staff.

  Q041.  Judy Mallaber: Do you regard it as your job to make suggestions and say, "We are not sure about that" or is your job more to mediate and to make sure that they are talking to the right people?

  Mr Sargent: Across the piece. Jitinder referred to the dispute resolution as an example of one where we more actively did some research and worked with the department on that. One of the things I am particularly encouraged about, if I look at the development of the second year's plans really is that if you think about it we have a situation now where previously people regulated and brought about legislation as an activity that they could perform in and do well in and it would be well regarded. Now we have a significant amount of brainpower in a given year being spent on what can we do to simply, what can we do to clarify, what can we do to improve things, as another line of activity, which the plans are all about.

  Q042.  Chairman: So your message to the external stakeholders is that the drafts are genuine drafts and they are genuinely out there for consultation?

  Mr Sargent: Absolutely. And they do change as they evolve.

  Q043.  Gordon Banks: It is really good to hear about your involvement in the simplification plans at different levels and that they are not just something that are churned out by the department and then you have a reactive role to play, so from my point of view that is very heartening. Do you think that you have a role in training civil servants to draft regulations so that the more pertinent interests of business, especially small businesses, can be taken into account? And if that is not your role whose role is it? I suppose it goes back to the other question I was asking, upside down, if you are trying to get business engaged after the complying stage, how do you get people like me, before I came here, to be engaged at a very, very early consultative stage and to buy in to what you are trying to do so that I take some kind of ownership of this?

  Mr Sargent: I do perceive it as our responsibility in terms of training. It is part of the culture to try and achieve that. Jitinder will give you more details of the specific programmes we do, but the short answer is that I do perceive it as an important part of our role.

  Mr Kohli: We cannot achieve the kind of culture change that we are talking about across government departments and regulators if we do not work very closely with them to help them to make that journey. Formal training is one route to do that—it is not the only route to do that but it is certainly one. We have put on formal training over the last year or so in two areas—one is around impact assessment and a new impact assessment to help people genuinely work out what the cost and benefits of the new regulations are; and also on how to use a standard cost model which forms a basis of the administrative burden measurement exercise. So on those two areas we have done training. The main training provider for most civil servants is the National School of Government and we work pretty closely with them on ensuring that better regulation schemes are in their training programmes. I have had a couple of meetings with them where we are pushing at an open door and they are very keen to get the message across. The one thing I would add to that is that in the last few weeks we have announced that the bodies that Rick Haythornthwaite chairs, the Better Regulation Commission as was, is to be replaced by a new body called the Risk and Regulation Advisory Council, and one of its jobs is to work with both Ministers and senior civil servants to develop a better understanding of public risk. Certainly one of the things that they will be doing is running workshops to help Ministers and senior civil servants to understand what good and poor practice is, and that is in their terms of reference.

  Q044.  Gordon Banks: It is hard to measure how a regulation or how a piece of legislation that has a certain level of burden on an industry or charities, etcetera is good and acceptable, as opposed to what might have come out of the department if your involvement had not taken place, because you do not know what might have come out of that department so you have nothing to measure it against really. So it is very, very difficult and that is where the feel bit comes into it, when you get back to businesses and people who are faced with these things, that they feel things are better because sometimes you are not in a position to actually measure what might have been because if you do not know you do not know.

  Mr Sargent: One of my personal pet projects—and I did this when I was chairing an advisory body for government as opposed to now operating within government—was the idea that I was very anxious that civil servants spent time in the community they regulated. It was an obsession of mine, so we did a thing called A Week in Business, in which the Department of Trade, as then, and HMRC and various others participated, and I persuaded individuals at the top to require their top civil servants to do that, and what is now in the better business enterprise regulatory forum it is the requirement that people do this week in business. I feel that if you are regulating health that you should be spending a week in it as opposed to just turn up for two hours and walk in and walk out. My own team has an obligation to spend time with people so that we really understand it. For me it is a cultural thing because if you are really busy and just go and hang out with a small business—you go to a newsagent and hang out for a day it feels like a waste of time and so you need the people at the top to say, "It is okay to stand behind the counter for the entire day in a shop." It does not feel like real work and so people need that permission to do that. That is beginning to happen—it is not purely that which we do—and there is definitely a culture that that is happening, 5%, 10%, whatever it is, that it is happening. But people need permission to do things like that.

  Q045.  Gordon Banks: It might not be a burden that is there from six o'clock in the morning but it might be a burden that comes on at eight o'clock at night because of some regulation. Moving on to something you mentioned earlier, Mr Sargent, was the relationship with the EU and you mentioned that you had had some successes. The British Chamber of Commerce seems to say that there is a lack of synchronisation between the EU and Member State impact assessment systems. Is that something with which you would not go along?

  Mr Sargent: The EU is a distance behind the UK in terms of its agenda, frankly. I think the Barroso Commission and Catherine Day, who is now the Cabinet Secretary, are two individuals who really get the agendas. We start with the fact that there are now two individuals at the top of the political leadership and civil service leadership who are personally committed to this and that is quite important. The structures by which people work have a distance to go. They have just started their journey on impact assessments and they are where we were—if you go back to our old regulatory impact assessments—they are in a place where they have yet to get clarity and make these become absorbed and so forth, but they are doing it. The first thing that the Barroso Commission did when it came in was to look at the workload and take a significant amount out and to say, "We are just not going to do this stuff," and that was quite a unique change. So if you look at the Community, particularly the administrative burdens project on that, we are in danger of having a European-wide standard cost model by which you start to measure costs and the Commission has now bought into that and is using the same methodology. So I think we have moved significantly, particularly in the last 18 months, to a situation where people want to do it; they need to get everybody else on board, and I think the big success that we had in getting involved in the Commission accepting the 25% target was that all the nations accepted variations on the target as well. So we have a situation now that is pretty common across the nations of Europe as well as the Commission.

  Q046.  Gordon Banks: So who in your organisation has a responsibility for liaising with the EU Commission?

  Mr Kohli: We have a Director of European International.

  Q047.  Gordon Banks: You have a director?

  Mr Kohli: He sits on the Commission's high level group, he talks to other Member States and he and his team were enormously successful in persuading the European Council last year in the spring—not the Commission but the Council—to agree to the 25% target at the EU level, which effectively meant getting 27 Member States to sign up to it.

  Q048.  Gordon Banks: This is a question from ignorance, I am afraid, but do our European counterparts all have organisations such as yourself?

  Mr Sargent: It varies.

  Q049.  Gordon Banks: Because it is difficult to speak to someone if you have nobody to speak to.

  Mr Sargent: Let me give a personal observation. Unfortunately our colleague who is responsible for Europe would have more facts to hand but I can give you a personal impression. If we start with the business community it is not as an effective a voice in Brussels because it is not as well organised. We start with the fact that government needs to do its bit but the reality is that the business community needs to do its bit and one of the things that European officials complain about most often is that they very rarely see the business people who are being regulated talking to them. So there is that lack of connection going on, which hopefully is improving. So you start with that end of the equation. Jitinder, myself, as well as my colleague Andrew, are off to Paris in a few weeks' time to meet with the French who are quite influential and have perspectives on this. We met the Chairman in Berlin where we were having quite an active dialogue with quite a few of the members and in that place, for example, there were 56 countries, which included every Member in that. So literally in 24 months we have gone from a situation where we would not have had many people to talk to, only the Dutch, the Danes, the Germans and the French, to a situation now where every country has its equivalent of myself and Jitinder, and we turn up at events and we have a dialogue and communicate, and not just Europe but there were 56 countries at that, and when I went to one a year earlier there were 29. So it is fairly fast moving.

  Mr Kohli: So in a couple of years there are two countries that had done the measurement exercise on which we were embarking and both the Netherlands and Denmark are relatively small countries in comparison to our economy. Since then Sweden, Germany, Denmark, the Czech Republic and Austria have done measurement exercises and 11 other Member States have done partial exercises and France is finishing its exercise in the next couple of months. It is a movement which is going on across Europe and the UK is one of the leading lights. So it is one area where we have persuaded our counterparts in the Member States to get involved.

  Q050.  Dr Doug Naysmith: Mr Sargent, your organisation previously under a Public Service Agreement required an improvement in the perception of regulation by April 2008. But in the memorandum you sent us the perception of regulation is still pretty poor. Do you think there has been any achievement at all of that original requirement?

  Mr Sargent: I think it is the area in which we are most challenged. Changing perception in a large multinational or in government is the most difficult thing to achieve.

  Q051.  Dr Doug Naysmith: Do you think it was achieved at all or are you still where you were?

  Mr Sargent: I think it is partially achieved but I think it has a long way to go, is the short answer.

  Mr Kohli: We have only started measuring and we only have one measurement, which is from the National Audit Office survey fieldwork carried out about a year go. They are back in the field right now—I say they are back in the field, I will be corrected by the NAO if I am wrong—so we will get a second data point in the coming months.

  Q052.  Dr Doug Naysmith: The paragraph in your memorandum was pretty bleak and said that there was not much improvement.

  Mr Kohli: We have a mountain to climb in addressing perception. If we are going to succeed we are going to have to take real costs out of the system which businesses genuinely noticed—that is what the administrative burden programme will do—and we also have to address other issues that businesses find frustrating and irritating. So it is not just about a numbers game, it also has to be about focusing on the things that people find frustrating. Could I give two examples, would that be helpful?

  Q053.  Dr Doug Naysmith: Could I just say something to you first, and then you can give me the examples. Sir David Arculus said that success should be judged by whether results are felt on the ground, not by whether departments think they have done a good job—and that just makes common sense—and the government will have failed if a difference cannot be felt. I am not sure that "felt" is a useful word. How do you measure feeling? You can feel good one day, get up the next day and feel awful—feelings change in between. How are you going to measure that? What plans are there to improve business perception?

  Mr Kohli: The central measure that we are using, the NAO asked the question in their survey which is, "Do you agree with the statement that most regulation is fair and proportionate?" That feels to us to be a reasonable thing to try and alter. I do not think we are going to get to a world where business—

  Q054.  Dr Doug Naysmith: What is the proportion now that says that it is not fair and proportionate?

  Mr Kohli: 46% against 39 who agree. So we have a minus seven, which is probably less bad than people think.

  Q055.  Dr Doug Naysmith: That is a lot better than predicted.

  Mr Kohli: But certainly success for our organisation and our endeavour has to be moving those numbers to a more positive light. The department still has strategic objectives which measures that.

  Mr Sargent: The NAO is just doing its second one so every year you will get a benchmark and so every report has to be benchmarked. Local government obviously is one of the areas which business feels regulation has been expecting that and that measurement has been embedded there as well. So we have a situation where we put structures in place that independent people will be verifying whether these things are happening or not.

  Q056.  Dr Doug Naysmith: The Committee asked for an explanation of why the initiatives you selected for implementation were chosen in preference to others, and for evidence of their potential cost effectiveness and expected outcomes. We were rather disappointed that you did not actually provide us with that information so now is your chance. What was your reasoning behind your selection of the initiatives you did select and what evidence did you use to support the choices that you made?

  Mr Sargent: You would have to look at each individual one but let me give you—

  Q057.  Dr Doug Naysmith: What sort of evidence?

  Mr Sargent: Let me give you examples. We started with looking at reviews and surveys that had been done by both government as well as independent groups of people as to what it is that is worrying businesses. If you look at the NAO report they talk about lack of clarity with guidance, lack of understanding of things, so that is one example. We did lots of visits, we did lots of focus groups; we looked at surveys both internal and external to government. The administrative burdens project, for example, is one of the benefits as it tells you exactly where the costs are falling down so if you have somebody who has a billion pound cost they might think, "Right, we want to put energy in there." So a whole collection of things. We would have to give you a very long list to say every single survey that we used and every single piece of evidence that we used, but generally in broad terms they involve talking to people who are on the receiving end. We can give you some examples.

  Mr Kohli: Can I give you one example, which would help to elucidate here? First of all, the administrative burden exercise gave us a great deal of data; it gave us 20,000 lines on a spreadsheet and each line was a separate requirement in law and for each of them it told us what the cost was and how that cost was comprised. One of the things it told us that we found slightly surprising was that a higher proportion than we had expected of the costs arise from requirements in law to give information to others, including to consumers, and when we talked to our Dutch and Danish counterparts they were surprised that our numbers were as high as they were. Our overall numbers are not high but they were surprised that the ratio was as it was. So we thought, let us try and understand what is driving those numbers and what are the areas where these kinds of regulations work and where they do not work. So we commissioned a project working with the National Consumer Council to say where are these requirements of consumer information helpful or unhelpful. We will send you a copy of this report[14]—this is the report that was published jointly with the National Consumer Council, and you will see the message very clearly here on the front cover. Sometimes they work but actually 52 different safety requirements on a toaster probably does not help the consumer of the toaster and actually gives regulation a bad name, which is one of the things I am worried about, going straight back to your perception point. This is one initiative where that is where the evidence came from. So in order to do this work we got a lot more evidence; we talked to citizens and said to them, "Which requirements work for you; which requirements do not work for you?" and out of that comes an understanding of how to do it better and a guide to policy makers on how to get it right next time. That is an example of an initiative and the thought processes relating to it.

  Q058.  Dr Doug Naysmith: What I was trying to get at was the underlying evidence that you use. What enables you to make these decisions? For instance, there are what people would call—departments call sometimes—low hanging fruit, easy things to get a hold of and demonstrate that you have done something. Obviously you need to do some of those because they are there and they need to be done, but that could tend to obscure the long-term, more strategic things that are much harder to work at but will give a much better overall impression in the long-run. So how do you choose between these?

  Mr Sargent: If we go back to the administrative burdens project, which is one example, that was very clear because there were four or five areas where fundamentally 80%, 90% of the costs fell so straight away you said to yourself, "If you deal with that 80 to 90% across the four areas we are likely to have a bigger impact." So straight away out of the 20,000 we have narrowed it down to a few hundred areas of specific obligations. That is an example of being very specific. The low hanging fruit is one area; the low hanging fruit quite often tends to be what one would call irritants—things that wind people up, they do not know why they are doing it, and they are quite easy to deal with and quite often cost very little money, but they drive perception. If you take consumer law review and health and safety review that we are in the middle of at the moment that is an example that we know if we can get to the bottom of that, understand it and do something there then we will have a significant impact. So that is why we chose those two areas, that is why we chose dispute resolution because we knew that employment is the single biggest area where people struggle in managing their business, particularly if you are a smaller firm, and within that the bit that was really causing you a problem was disputes with your employees and the fact that they were really cumbersome, awkward to deal with and leading to bad relations. So that is why we tackled that in the course of the last year. So if you look at our reviews and our programmes they very much start with where we are going to have the biggest impact—they work through there; and at the same time what are the things that are winding people up, and quite often they are slightly separate.

  Mr Kohli: We are not terribly interested in things that are short-term and sound good. That is not the kind of organisation we are trying to be, and that is why this is a long-term agenda.

  Q059.  Dr Doug Naysmith: Do the similar sort of principles apply to the 700 initiatives in simplifying the departmental procedures as well? How do you decide what should be given priority?

  Mr Sargent: There are two things there. We ask them to do a plan which says, "We think we can achieve this," and that plan is made up of a raft of things—some big, some small. Some of the things that are achievable. I am very anxious that people look at things that they can achieve quickly, easily and effectively and in the short-term, so out of the 741 they delivered 288 in the first eighteen months. Some of them are small, some of them are quite big—they vary. While that is going on and within those plans, if you look at the Business Enterprise and Regulatory Reform Department quite a lot of the stuff in there is big and long-term stuff. So if you analyse the plans they are a mixture of both; they are a mixture of what they can achieve now, this month, next month, the month after and the sort of stuff that might take one, two, three years to achieve. But we as the overall body responsible for looking across government use the data that we have collected and we look at the research and look at the NAO surveys and say, "This is what people are worrying about and if you are not doing something about it we will be on your case." So if, for example, if the Health & Safety Executive was not interested in dealing with things we would be on their case. The reality is that there is nobody that we do business with that does not want to do something about it because it helps them.

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