Select Committee on Regulatory Reform Minutes of Evidence

Examination of Witnesses (Questions 20-39)


1 APRIL 2008

  Q20  John Hemming: We are now about halfway through the Administrative Burdens Reduction Programme and perhaps have seen a 1% reduction on the Standard Cost Model. Is it best, steady as you go, to keep going down the same route or should we be revising the target or aiming to revise the Standard Cost Model?

  Mr Davenport: I think BRE is already having its problems in trying to achieve this 25% on 25% on 25%. It is starting so scrabble round a little bit to see where it can be doing things that will comply with that model. I think if we are going to make it work for the next half, it is a matter of refining it, improving it, looking at the whole process again to see whether there can be improvements in other areas to make the whole thing more efficient and improve that 1%.

  Ms Low: We are in the Admin Burdens exercise, as you say, and I think it has merit in terms of continuing with that exercise, but I do not think, as we have said, with the impact that it is achieving that it is really setting out to achieve the benefits for British business that we feel we need it to do. One other thing to say on the Standard Cost Model is that we have also had problems with the "business as usual" exercise which was built into that model, which I do not think for a number of reasons was the right way to approach it, because effectively it managed to shave off a large percentage of the overall figure in ways that we would not have endorsed.

  Mr Ehmann: I think the starting point is that the lessons that we can take from the Dutch and the Danish show that we cannot do exactly what they did because I do not think that will produce a satisfactory end result in 2010, so I think we to change things and up the ante in some areas. Just to contribute a few which I have mentioned earlier and some of my colleagues have as well, HMRC must be involved fundamentally. I do not think we can achieve valuable change without that. We need to look at whether simplification plans are too heavily backloaded towards 2010. If they are, then I think there is a genuine problem in trying to convey to businesses that this is a serious agenda over the next few years and it will be very difficult for business organisations like ourselves to be supportive of the process if in a year's time, if we go back (which we will) and ask a similar question, we still do not notice any improvement amongst our members' perceptions, so we must start delivering more quickly. As I said earlier and I will not labour the point, we have got to communicate much more effectively and in a much more bespoke way. We have got to elicit business suggestions rather than sit within government and devise a good way of reducing burdens. The other thing is we need to plan for beyond 2010 for this to be credible, otherwise there is a feeling that it is perhaps government holding in its stomach to reach 2010 and afterwards there is a chance that all sorts of things could befall us. The last thing I would contribute, which seems to me to be the elephant in the room, is some sort of appraisal of culture in the Civil Service. By that do not mean in an ephemeral sense; I mean what is the incentivisation structure and how does one progress within the Civil Service in relation to regulation and deregulation and the better regulation option.

  Q21  John Hemming: That comes to the difficulty of measuring quality which of course you cannot do. What you are saying is not to change the 25% target but to do things earlier that are planned for doing later?

  Mr Ehmann: I am saying do something slightly differently and I am saying do some other things which are not being done as well.

  Q22  John Hemming: Okay, Matthew?

  Mr Fell: My starting point would be: this is the game in town so we should not rip it up and start again. It has at least started to change culture in that there are now teams of officials working to identify ways of simplifying legislation to get them to that 25% target, and quite clearly some departments will get there and some might not, but everyone is pointing in the right direction. The challenge for me lies in that this is meant to be a net reduction and I think there has perhaps been an overfocus on looking at the existing stock of legislation, and coming on to some of Alexander's points about what is coming down the pipe, I think we need a little more emphasis on that so we do achieve that net reduction. I think that will be useful going forward if that is where more of the emphasis was put.

  Q23  John Hemming: So summing it up, put on the foot on the accelerator; go roughly in the same direction; but have somewhere to go after 2010?

  Mr Ehmann: Yes.

  Mr Fell: That is good for me.

  Q24  Judy Mallaber: The BCC has argued for better linkage between EU and UK impact assessment processes. Do you think that our emphasis should really be on what you would regard as the burden of EU regulation and improving EU impact assessments rather than the current emphasis on the Administrative Burdens Reduction Programme and the 25% target? Would you like to switch that emphasis based on your statement that 71% of your Burdens Barometer figure is EU-sourced legislation?

  Ms Low: It is true that a large proportion of the cumulative burden is EU-derived. What we would like to see from the UK's perspective is the UK Government pushing much harder at a much, much earlier stage to ensure there is a much better link in establishing what the impact assessment of what might become a Directive is going to be. I think that having a partial impact assessment at that early stage, three years before we see a Directive for example, could yield much better results in terms of stemming that flow of EU-derived regulation. Out of that 71%, the number of regulations that come from the EU, there are actually more in number but fewer of greater value within that number, so we need to address that as well. It is essentially about looking at the UK Government pressing much harder at the earliest possible stage. That is the most important point to be made. We are not at the moment; we are very much focused on implementation and implementation deadlines and timings and dates as a UK Government rather than being bolder and requiring better analysis at the earliest possible point. That can bring the added benefit of better data to draw from when the proposals are being considered at an EU level, which has to be a benefit in terms of having better quality policy-making and more informed policy-making.

  Q25  Judy Mallaber: Can you give some examples of some of the areas that you are most concerned about in terms of EU regulation?

  Ms Low: Assuming that members of the Committee will have received this poster which has all of the regulations listed in the Burdens Barometer and, as I say, it is marked which ones are EU-derived and which ones are not, I could not talk to individual ones out of that list because there are so many, but I can certainly quote from a number of—

  Q26  Chairman: Can you not give priorities to which ones you think are the most burdensome?

  Ms Low: The most burdensome for small and medium-sized businesses tend to be the ones on employment-related issues. Data protection is another very big burden on business. The number of dangerous substances, sale and control of substances and hazardous substances areas are some of the others.

  Judy Mallaber: We are coming on to discussing employment and health and safety so we can maybe pursue that further.

  Q27  Lorely Burt: Just on that point, we were talking about getting in there before EU regulations come down the line; in your view is there any truth to the view that once we have got the EU regulation, we are not doing industry in Britain any favours by the way that we are then subsequently interpreting those regulations? You hear the express "gold-plating" and something I am fond of saying is, "Why are we doing it to ourselves?" Is that your view?

  Mr Ehmann: I cannot talk about whether it is symptomatic of a widespread problem but I certainly have been involved with some work that has been going on both at a European level and domestic level here on an obligation called the Intrastat where there is latitude to discuss potential simplification of this process of reporting imports and exports of businesses. What we found when we looked at this in detail was that the requirements laid out by Europe were in fact added to by this Government, and in the pursuit of simplification in Europe it puts one in a very difficult circumstances for the Government to argue for additional simplifications that are pan-European if it has not taken full effect of the ability domestically it has to do so. I can certainly say in that circumstance, yes, there was, but whether that is symptomatic of widespread gold plating I do not know because, as Lord Davidson's review suggested, it was not as widespread as previously thought.

  Q28  Judy Mallaber: So would you put more emphasis on getting in at an earlier stage with EU regulation rather than the current programme that we have? Do you think that the emphasis should shift?

  Ms Low: Yes.

  Q29  Judy Mallaber: Is it realistic, as you have suggested, that Member States should be required to do impact assessments before the Commission get involved?

  Ms Low: Partial impact assessments. There should be a consultation and an estimate of burdens at that earliest possible stage. It would not be easy to carry out a detailed impact assessment at that point, but a partial impact assessment looking at the potential impacts on business could be done at that earlier stage.

  Q30  Judy Mallaber: And would your aim be to stop those regulations or just to look at how they are implemented?

  Ms Low: No, to enable the policymakers and the politicians taking that piece of proposed legislation forward to have a more informed view of what the impacts would be and then, if the impacts and costs outweigh the benefits, then that should be subject to scrutiny.

  Q31  Judy Mallaber: Are there currently any pan-European initiatives on this or is it very much just left to the Commission and then the governments to look at it after? Are there any pan-European initiatives that impact on business?

  Ms Low: I would have to come back to you on that. I cannot think of any off the top of my head.

  Q32  Judy Mallaber: Moving on to another aspect, you were a bit sceptical about the Dutch and Danish experiences, but from the links between you and equivalent industry bodies overseas, are there any examples of organisations similar to those that we have operating that do things better or do things differently that we can learn from?

  Mr Ehmann: From the Institute of Directors' point of view, purely from the conversations I have had with other business organisations—and I am not talking about formal links—I have not learned of any other best practice but, as I said, I think there is a question about perhaps not just business organisations being aware of foreign contemporaries but also foreign governments being aware of the outcomes that come from processes. What I find interesting about the Dutch and Danish examples is that we embarked on a process that was not even partially evaluated at that stage and the feedback from businesses, as I dictated earlier, has not been as favourable as one might imagine in those countries. I think that is particularly important not just for UK business but also for us ensuring the productivity of Europe as a whole, because clearly Europe and Germany, for example, are embarking on very similar processes too. If this process as currently constructed is not going to deliver results we should surely pass on that learning too?

  Q33  Judy Mallaber: Do you gather information on what is happening in other countries and do you talk to your equivalent organisations about it?

  Mr Fell: My instinct is that a lot of the debate has focused this morning on how we improve the UK model and how the UK Better Regulation agenda could be enhanced, and it is my experience that we are actually a little bit ahead of the curve compared to Europe. The CBI certainly receive infrequent visits from our sister federations who are quite keen to learn about what is going on in the UK and apply that both in their countries and indeed look to promote the agenda at an EU-wide level, so it is certainly not perfect here but my sense is that we are perhaps ahead of the curve as far as European countries are concerned.

  Q34  Chairman: By that do you mean in terms of the direction in which we are moving or do you mean, going back to Ms Low's Burdens Barometer, that we have in net terms fewer burdens?

  Mr Fell: I mean by use of some of the tools such as impact assessments, whether it was simplification programmes or common commencement dates, all the things that have been introduced in the last three years, I think we are perhaps ahead of the game in deploying some of those. Quite clearly, some of the results have still to come through from that but I think others are keen to learn from us and draw on our experiences rather than there being people out there who are light years ahead of where we are on this agenda.

  Q35  Judy Mallaber: What about the US? Do we have any knowledge about how the Office of Information and Regulatory Affairs operates?

  Mr Fell: I could very happily come back to you with more detail later on that. I think the US, contrasted to Europe, is perhaps the one area where there are lessons to be learned from.

  Q36  Judy Mallaber: Nothing you wish to share with us at the moment?

  Mr Davenport: Coming back to Europe, we have a permanent office in Brussels and we are a key member in ESBA, which is the European Small Business Association. We are seeing European legislation now starting to come through, albeit in its initial stages, on regulatory reform, so we are a little bit concerned that we could end up with regulatory reform on regulatory reform if we are not careful, Europe doing one thing to improve things and then the legislation comes over here and it gets churned again. There are some concerns about that at the moment, but it is early days.

  Q37  Chairman: Comments about the US from any or all of you would be extremely interesting.

  Ms Low: Could I just add that we are members of Eurochambres and we are managing a number of Europe projects across our European member chambers on this issue and I would slightly take issue with that. I think we have good mechanisms and good processes in the UK which serve as a good model, but ultimately, going back to the root of that 71%, it is important as well to identify and head off potentially burdensome regulation at the very start of the process. That is one point where pressure could be brought to bear more.

  Mr Ehmann: Unfortunately, I do not have anything additional to offer on Europe but what I would say is that there is a lot of best practice floating around in the UK in terms of other suggestions that are made abroad.

  Q38  Dr Naysmith: Could I first of all apologise for arriving half an hour late? It is always a dangerous thing to do, to come in in the middle of a hearing like this and then start asking questions, so if I start asking something that has already been covered will the Chairman or you please tell me to shut up and say, "We have done that", and we will move on to something else. I am going to move on to talk about the scrutiny of regulation, but before I do can I pick up a point about gold-plating that was mentioned a few minutes ago? Every time I meet a business group they tell me that things are different in other countries; we gold-plate and they in Italy and France and Spain do not follow the legislation. You mentioned, Mr Ehmann, just a minute or two ago a study that had been done; it is probably the BRE one of a couple of years ago, which claimed to have looked at it fairly rigorously but that it really is insignificant, the amount of gold-plating that goes on. Is that true or was that playing down what is happening, or do we need a study that looks at it properly and sorts that out?

  Mr Ehmann: I think it is an issue on which we at the Institute of Directors still do not have a completely bottomed-out view on at the moment. The BRE's report, as you rightly noted, by Lord Davidson suggested that the extent of the problem was limited, if at all existent, in the UK. What I would say is that, from the few pieces of regulation that I in my role had to deeply get involved with, I found one example in the last year from only dealing with a few in quite regular detail and that was, as I say, this Intrastat reporting requirement, so whether that is enough to launch a wider inquiry I do not know. I think there is a wider question about whether the UK Government has a culture of adding to, and I think that is a very serious allegation. If we are adding to the obligation that comes out of Europe that is a pretty serious problem and perhaps we need to look at that.

  Q39  Dr Naysmith: Would that not qualify as gold-plating?

  Mr Ehmann: Yes, it would indeed.

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