Memorandum submitted by the Institute
of Directors
1.1 Thank you for giving the Institute of
Directors (IoD) the opportunity to respond to the new inquiry
on the Better Regulation Executive and the wider regulatory agenda,
which was announced on 19 February 2008. This paper presents our
response to your call for evidence. Issues surrounding Better
Regulation are of considerable interest to the business community
in general and to the IoD in particular. We are therefore pleased
to participate in the consultation and present our response for
your consideration.
1.2 ABOUT THE
IOD
1.3 Founded by Royal Charter in 1903, the
IoD is an independent, non-party political organisation of 53,000
individual members. Its aim is to serve, support, represent and
set standards for directors to enable them to fulfil their leadership
responsibilities in creating wealth for the benefit of business
and society as a whole. The membership is drawn from right across
the business spectrum. 84% of FTSE 100 companies have IoD members
on their boards, but the majority of members, some 70%, comprise
directors of small and medium-sized enterprises, ranging from
long-established businesses to start-up companies.
1.4 IOD RESPONSE:
KEY POINTS
1.5 It seems incumbent upon any organisation
making representations on the Better Regulation Executive's (BRE)
progress to date, to remark that it is always far easier to criticise
an existing programme than it is to create a process and momentum
on an issue as behaviourally complex as regulation.
1.6 The Institute of Directors state this
at the outset because we feel it is important to recognise the
important contribution of the BRE and the political will that
its creation demonstrates. It is also worth noting that the IoD
have been supportive of the Better Regulation agenda and the Better
Regulation Executive since their respective inceptions.
1.7 The following representation from the
Institute of Directors can be split into three main areas of reflection:
— Further Improvement and Recommendations.
1.8 DELIVERY
1.9 To date delivery against the Government's
self-imposed targets has been insufficient and the programme of
work associated with Simplification Plans is heavily back-loaded
to 2010 (current delivery of BERR's 25% target is at 1% of its
net burden and is not unusual in its level of delivery).
1.10 The IoD believes that the measures
selected for incorporation into Simplification Plans also vary
greatly in the tangible improvement likely to be achieved. Current
proposals include extensive references to "improved guidance"
and "migration to e-forms".
1.11 While such changes are welcome; when
considered within a repertoire of activities that could include
reduced form filling, fundamental changes to process, decreased
frequency of data requirements and wholesale removal of unnecessary
regulations, such measures demonstrate a real poverty of ambition
on the part of the sponsoring government departments.
1.12 Yet, these conservative changes would
be understandable indeed justified if they were able to achieve
the necessary shift in business perceptions. However, in a survey
conducted amongst a statistically representative sample of IoD
members in October 2007, 46% felt that that regulation had worsened
over the preceding 12 months, 48% felt it had remained the same
and a woeful 1% noted an improvement to the regulatory environment.
1.13 The IoD's research is not alone in
noting this inability to alter business perceptions. The National
Audit Office's analysis of the Government's Better Regulation
agenda in 2007 noted similarly poor levels of acknowledgement
amongst the commercial population.
1.14 One of the critical concerns is that
the objectives and hence drivers of success for business and government
differ significantly. In the case of government, the measure of
success is procedural and focussed on the achievement of a 25%
reduction to the administrative burden. For business, the only
outcome of interest would be a noticeable improvement in the regulatory
regime, freeing up time and resources for more productive business
activities.
1.15 Clearly, the two outcomes are not mutually
exclusive, yet the focus on the 25% target has not delivered the
"feed-through" necessary to bring about such a change
and there is growing concern that unless amended, Simplification
Plans will not produce the desired results even by 2010.
1.16 While the IoD believes that recalibration
of the Better Regulation agenda is preferable to its abandonment,
it is worth noting that there are quite serious and legitimate
concerns over the process by which the UK came to adopt the existing
"Simplification" model. As far as the IoD are aware,
there had been no independent verification of the scheme's success
and indeed it would appear that no country had implemented measures
far enough through the process to offer any level of meaningful
evaluation. In essence the current regulatory initiatives were
introduced without any evidence that they might deliver significant
results for business.
1.17 In light of the relatively ineffective
outcomes in the Netherlands and Denmark (two of the pathfinder
countries) it is now worth examining these experiences to see
whether success can be delivered through a replication of their
models or whether immediate alterations are necessary.
1.18 At a time where the UK is midway through
the process, the IoD believes that amendments rather than wholesale
change will prove the order of the day, but it is critical we
learn lessons from those who have been through the process rather
than mindlessly march towards the same pitfalls others have endured.
1.19 It also worth noting that an evaluation
would be of significant use to the European Union and other member
states that remain someway behind the UK in their implementation
of the Better Regulation agenda.
1.20 COMMUNICATION
1.21 Notwithstanding the reservations that
the IoD cites regarding delivery, once achievements have been
implemented it remains incumbent on government departments to
ensure that their energies are not wasted and that businesses
are made aware of these regulatory improvements.
1.22 Communication is a two-way process
that is crucial to the success of the Better Regulation agenda.
Without meaningful interaction with the business community, suggestions
of regulatory improvement will not be forthcoming and faith in
the process will be irretrievably undermined.
1.23 In a survey conducted amongst a statistically
representative sample of IoD members in September 2007, respondents
were asked about their awareness of three key improvements (suggested
by the Better Regulation Executive) to the regulatory environment.
Recognition of the implemented changes ranged from 65% (Money
Laundering Regulations) to 25% (Fire Certificate).
1.24 Such recognition rates are concerning,
especially when the constant refrain from government officials
is that Simplification measures are difficult to find. In such
an environment of scarce resources it is surprising that so little
effort has been channelled into communicating meaningful change
and hence it should be no revelation to note that the process
currently lacks the momentum and interest, such engagement would
bring.
1.25 Anecdotally the BRE seem to acknowledge
the problems they face in communicating effectively, yet their
own efforts at the same have been inadequate. When asked by the
IoD in 2007 for a breakdown of the "big wins" from Simplification
Plans the IoD received a generic letter (which we believe was
sent to other business organisations) detailing circa ten regulatory
changes/improvements of note. The most memorable change being
the de-regulation of Bottilium injections; an area in which a
miniscule element of our membership are engaged.
1.26 The lesson here is that government
communications need to move beyond a clunky one-size fits all
approach and that correspondence needs to be tailored to the needs
and interests of the recipient. Clearly the Government does not
have the ability or the resource to correspond with individual
businesses directly, but it is critical that the BRE ensures that
communication with business representative organisations is done
with a firm understanding of the constituent parts of that same
group and their interests.
1.27 FURTHER
IMPROVEMENT AND
RECOMMENDATIONS
1.28 Beyond the two themes set out above
there are a number or improvements that are necessary to ensure
that the Better Regulation agenda delivers meaningful outcomes
for business. These are briefly set out below:
1.29 2010 and Beyond
1.30 Assuming that the current range of
initiatives delivers on their outcomes there remains a question
about the regulatory environment post 2010.
1.31 Having achieved (or not) the 25% administrative
burden reduction target will legislators and civil servants in
the years following 2010 be allowed to pile on the burden?
1.32 Without a strategy for regulatory improvement
the likelihood is that as before, we will return to the standard
"Yo-Yo Diet" of regulation—today's Better Regulation
fast will be followed by tomorrow's regulatory feast.
1.33 In fact, it is apparent that a significant
bank of legislation is already waiting to be introduced in this
post-2010 environment and the BRE would do well to acknowledge
its existence, its threat to the wider agenda and put measures
in place to tackle it immediately.
1.34 Her Majesty's Revenue and Customs
1.35 In IoD research conducted in March
2007, two thirds of members noted that of all the Government agencies
and departments the one that they had last interacted with in-person
or over the phone was Her Majesty's Revenue and Customs (HMRC).
To contextualise this result the second placed agency was Business
Link with less than 15% penetration amongst the same audience.
1.36 In an environment where HMRC form such
a critical role in frequent contact, the development of business
perceptions of government as well as the role they occupy as a
significant source of regulatory burdens, it is untenable for
the department to fall beyond the reach of the current Better
Regulation agenda and the BRE.
1.37 The argument for their exclusion seems
rest upon their tax collection responsibilities, but many of their
regulatory obligations fall outside this remit and even those
that do reside here warrant improvements in process, which should
not be disregarded because of the special status granted to this
area of government.
1.38 The IoD would therefore suggest that
the Committee consider the current rationale for HMRC's exclusion.
1.39 Regulatory Culture
1.40 For the IoD, this is the elephant in
the room. No number of measures tackling various pressure points
of regulation will deliver meaningful outcomes if the incentive
structures and career development paths of the Civil Service are
not examined in light of their effects on regulation and usage
of legislative solutions.
1.41 The IoD had itself proposed to carry
out work with the Better Regulation Executive on Human Resource
processes and drivers of career progression in the Civil Service.
Until recently these suggestions had been met with lukewarm interest
from the Government, but the IoD is hopeful that such proposals
can be taken forward in the coming months.
1.42 The IoD would welcome the Committee's
view on the value of such a study.
1.43 SUMMARY
1.44 We are in a time of unprecedented activity
around the improvement of regulation, yet the business community
is increasingly sceptical about the likelihood of genuine progress.
1.45 Without a meaningful recalibration
of the current process the IoD believes that the method will fail
to deliver the necessary change in business perceptions. This
is borne out by the experiences of policy makers in the Netherlands
and Denmark and research by the IoD, NAO and others on the current
views of business.
1.46 Critically, the IoD hope to work with
the BRE and others to enhance the focus, improve on current levels
of delivery, hone and target future communications and embed current
proposals in a wider Better Regulation strategy, including Civil
Service culture and longer term objectives.
1.47 Thank you once again for inviting the
Institute of Directors to participate in this consultation. We
hope you find our comments useful and we would be happy to contribute
oral evidence on this subject should this aid the Committee's
deliberations.
Alexander Ehmann
Head of Parliamentary and Regulatory Affairs
March 2008
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