Memorandum submitted by the CBI
As the UK's leading business organisation, the
CBI speaks for some 240,000 businesses that together employ around
a third of the private sector workforce, covering the full spectrum
of business interests both by sector and by size. We appreciate
the opportunity to respond to the Committee's inquiry and are
pleased to offer the comments below.
An appropriate regulatory environment plays
a big part in the efficient operation of markets. It helps ensure
a competitive level playing field for business against rogue companies
who flout the law and similarly provides consumer confidence in
products and services.
The level of regulation remains a key concern
of UK employers, with many businesses struggling to cope with
the relentless pace of new regulation. For business, and small
firms in particular, this translates into time and money spent
on complying with government imposed requirements rather than
wealth creation. In order to minimise these costs, all regulations,
new and old, should conform to the principles of better regulation:
proportionate, consistent, accountable, targeted and transparent.
The CBI strongly supports the Government's commitment
to improving the regulatory environment and reducing the administrative
burdens imposed on business. To date, much effort has gone into
reducing the stock of existing regulation. We argue that further
work is required to enhance the process of formulating new regulation,
improve guidance and secure a proportionate and targeted enforcement
regime.
All of this should be underpinned by a risk-based
approach to regulation and regulatory compliance and enforcement.
Has the Better Regulation Executive developed
a coherent strategy for implementing regulatory reform? Is the
current approach to regulatory reform delivering genuine results?
The CBI pursues a strategy of a positive relationship
with the Better Regulation Executive (BRE) and government departments
to instil the five principles of better regulation into the culture
of Westminster and Whitehall and improve the regulatory environment
that business operates in.
The BRE has, in our view, been a positive force
in driving regulatory reform across Whitehall, and this would
occur at a slower pace without the input and influence of the
BRE. It has encouraged departments to raise their game in communicating
to business, offering advice and holding focus groups on regulation,
and has helped develop a better regulation culture throughout
government.
The CBI has welcomed many regulatory initiatives,
such as strengthening the impact assessment process, setting common
commencement dates, and establishing a 12 week consultation period.
Work on the simplification plans is indicative of the culture
change that is beginning to take place, meaning that for the first
time civil servants focus their energy on finding ways to reduce
rather than increase the regulatory burden on business.
All of these initiatives are positive steps.
But it is fair to say that business on the ground would not yet
recognise delivery of this lighter-touch regulatory environment.
For example, in the CBI's London business survey of December 2007
the regulatory environment remained a major issue for business,
with 62% of firms saying the cost of regulation has increased
in the last six months.
The CBI feels that the regulatory reform strategy
could benefit from further emphasis in three key areas:
1. Efforts to address the continued flow
of new regulation being passed into law.
2. Better communication of deregulatory changes
to business.
3. A greater focus on the real impacts for
business.
Efforts to address the continued flow of new regulation
being passed into law
Whilst the government claims to have delivered
around £1.5 billion[7]
worth of savings, this is offset by a steady flow of new regulations,
with around 60 new regulations coming into force at the next Common
Commencement Date on 6 April 2008.
The idea behind simplification plans is that
they provide a route map to deliver a net reduction of 25% in
administrative burdens by 2010. As a generalisation, departmental
plans typically set out planned administrative savings against
the existing stock of legislation. But the CBI feels that they
would benefit from greater emphasis on any additional costs from
future legislation, to ensure that the net reduction target is
achieved. For example, in our view the DBERR simplification plan
currently understates the likelihood of future legislation on
energy and climate change, employment and competition and effective
redress.
The announcement in Budget 2008, to consult
on a new system of regulatory budgets for Government departments,
is a welcome development and has the potential to be a powerful
addition to the regulatory toolkit to help address the cumulative
burden of administrative and policy costs, and in particular the
pace and volume of new regulation.
Greater use of impact assessments (IA), and
the revised IA template, is vital in ensuring that government
understands the full implications of any policy proposals and
should be influential in determining the appropriate policy response,
which should only require regulation as a last resort. Adherence
to this approach has been mixed in recent times. Most notably
it was lacking in the proposed changes to the Capital Gains Tax
regime. On the other hand, DBERR is generally seen as a good communicator
with business, listening to and acting on business concerns on
key issues, such as planning and company law. The Health and Safety
Executive also has good dialogue with business and has a legal
obligation to consult on everything except fees.
A further concern is the amount of new regulations
placed on the statute book via secondary legislation, which receives
little parliamentary scrutiny. At present each government department
generates reams of Statutory Instruments (SI) and, whilst the
situation is improving, there is a mixed record in terms of consultation.
From the perspective of an outside interest group, tracking the
progress of an SI is prohibitively cumbersome.
Better communication of deregulatory changes to business
Communication to employers is fundamental to
show how improvements to the regulatory landscape should be helping
the daily life of business. For both the BRE and government departments
there is a big communication job to do on awareness and take up,
to ensure those businesses who should be feeling the benefit of
the admin burden reduction exercise do experience it. For example,
the 2007 simplification plan from DBERR, assumes 20-30% take up
rate across business on improved employment guidance. However,
this is yet to be fully implemented and savings claimed of £365
million per year are not based on actual results.
The need for clear and reliable guidance is
also essential in developing greater confidence from business
in changes taking place. The CBI is currently responding to the
BRE's consultation on a Code of Practice for Guidance, and is
calling for guidance to be timely, reliable, consistent, and most
importantly, should not be a substitute for clarity in the original
regulation. The Health and Safety route map for workplace transport
safety provides a web based example of good guidance, which is
clear and easy to understand.
A lack of focus on the real impacts to business
Businesses must feel a real difference on the
ground of a reduction in administrative burdens for the project
to be deemed a success. A coordinated and joined-up approach to
delivering a better regulatory environment should be delivered
by all departments.
This should be reinforced through closer work
with business to identify real areas of impact where burdens can
be lifted, such as employment law. The CBI report "Lightening
the Load"[8]
stated that since 1998, new employment rights have added £37
billion to business costs.
A further example is on the planning, where
although it has been beneficial to some businesses to introduce
the use of electronic planning applications, as set out in the
2007 simplification plans, this does not reduce the time needed
to fill in the form, nor the amount of information requirements
that applicants have to comply with. Consequently businesses continue
to complain about an over burdensome planning system.
Does the BRE work effectively with other areas
of government to implement regulatory reform initiatives?
The BRE's role is vital in changing culture
throughout government, and embedding the better regulation agenda.
The CBI view is that to date it has been a positive influence
in seeking a risk-based and light-touch regulatory environment.
Many of its successes will be hard to quantify, as work will often
be on an informal basis, behind closed doors.
There are three areas where we think additional
effort to promote effective working across government would be
useful.
First, in promoting a consistent and coherent
approach to policy making across government. For instance, on
climate change, energy and planning or on the government's response
to social issues such as alcohol misuse and obesity.
Second, confidence in the delivery of the better
regulation agenda could be boosted through greater use of independent
checks and scrutiny. The transition from the Better Regulation
Task Force to the Better Regulation Commission and now the Risk
and Regulation Advisory Council, has meant that there is less
emphasis on independent review. The mantle now rests with the
BRE to perform the watchdog role and this should be a key feature
in going forward.
Third, the impact of poorly thought-through
regulations and interventions, or of poorly targeted enforcement
activities and inspections, can be just as harmful no matter where
they originate. So the BRE should also play a role in ensuring
that the regulatory reform agenda not only is in place across
government but that it filters down to the behaviour of regulators
who have the most contact with business. As stated in the Hampton
report, no inspection should take place without reason, and advice
on how to seek compliance should always come before sanctioning.
Is the approach to measuring and reporting on
performance and outcomes sufficiently robust?
The better regulation agenda would be given
further credibility and momentum through increased transparency
in the measurement and reporting of the regulatory reform agenda.
Much of the business community remains sceptical about what has
been delivered to date.
For instance, annual reporting of the simplification
plans sets out where assumed gains have been reached, but does
not provide commentary on whether the goals achieved have had
the take-up predicted in the report. This might include fuller
explanation of how the successes claimed have been calculated
and greater use of real life examples of where deregulatory measures
have helped businesses in their day to day lives. The CBI agrees
with the NAO report[9]
which says business will judge the better regulation project a
success when it delivers tangible benefits on the ground, and
believes there is still a long way to go until businesses' perceptions
improve.
CBI
March 2008
7 Making a difference-simplification plans summary
sheet 2007. Back
8
Lightening the Load-the need for employment law simplification
CBI report 2006. Back
9
Reducing the cost of complying with Regulations: the delivery
of administrative burdens reduction programme 2007, National
Audit Office. Back
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