House of Commons - Regulatory Reform

Select Committee on Regulatory Reform Minutes of Evidence

Memorandum submitted by the Environment Agency

SUMMARY

The Environment Agency welcomes the opportunity to respond to the Regulatory Reform Committee's inquiry into the Better Regulation Executive (BRE) and the impact of the regulatory reform agenda. We are committed to the better regulation agenda and keen to work with the BRE and others to deliver real results for the environment, the public and consumer protection and for business.

We have been leading on developing and delivering better regulation initiatives on the ground for many years. The current level of priority given to better regulation in government has been helpful in pushing the agenda forward, for example in terms of gaining momentum behind the Environmental Permitting Programme.[1]

However, we think that the BRE's current agenda fails to strike the right balance. With too much emphasis on cutting red tape, there is a risk that the agenda loses sight of how regulation can most effectively deliver the outcomes it is designed to achieve. We would like to see the BRE adopting a more balanced approach, working more closely with regulators to ensure that regulatory reform delivers real results. This would benefit the environment, the public, consumer protection, and business, as well as maintaining credibility and public confidence in regulation.

We want to work with the BRE and other government departments to unblock obstacles to better regulation. For example:

We are keen for the BRE to work with us more effectively for example to communicate with business and other stakeholders and to share good practice between regulators.

1. INTRODUCTION

1.1 As a modern regulator, and one of the major regulators in the UK, we are well placed to provide evidence to this inquiry. We are committed to the better regulation agenda and have been leading on developing and delivering better regulation initiatives on the ground since our "Modernising Regulation Change Programme" began in 2000. Much of our experience pre-dates the Hampton Report and the creation of the BRE in 2005.

1.2 In 2005, following extensive consultation, we published Delivering for the environment[5] which set out our approach to regulation. Our main focus is on improving the environment in the context of sustainable development. We have to get the balance right between:

— providing risk-based, outcome-focused and cost-effective regulation;

— not imposing unnecessary administrative burdens on businesses; and

— ensuring the public retains confidence in us as an effective regulator.

1.3 Our approach to regulation drive environmental improvements using a risk-based approach. It is not about lowering levels of protection of the environment, but rather preventing or minimising environmental impacts and achieving high standards of environmental management by better targeting our effort. We aim to find the right balance, improving the environment, rewarding good performance and taking tough action on those who fail to meet acceptable standards.

1.4 We have already achieved significant results from this approach:

— we have reduced the cost of regulation to business by around £10 million a year;

— we are on track to deliver our contribution to Defra's target to reduce administrative burdens by 25% (£25 million per year) by 2010;

— for example 23,000 low-risk water abstractors no longer have to register with us saving £1 million a year, and similarly 500,000 low-risk hazardous waste producers are saving £14 million a year; and

— the Environmental Permitting Regulations transpose 14 Directives and over 40 pieces of UK legislation into a single set of regulations saving £1.6 million in administrative costs per year from 2008.

1.5 Our work has been widely recognised by:

high-performing national regulator

contribution to modern regulation

1.6 We continue to deliver successful results for the environment:

— Most of the environmental indicators continue to improve.

2. STRATEGY FOR REGULATORY REFORM AGENDA

2.1 It is important that the better regulation agenda strikes the right balance between effective regulatory outcomes, reducing burden on business and retaining public confidence in the effectiveness of the regulatory system.

2.2 We think that the BRE has failed to strike the right balance. Seemingly distracted by the current emphasis on reducing the burden on business, it may have lost sight of how regulation and the outcomes that it delivers can be supported and made most effective. We would like to see the BRE adopting a more balanced approach, working more closely with regulators to ensure that regulatory reform delivers real results. This would benefit the environment, the public, consumer protection, and business, as well as maintaining credibility and public confidence in regulation.

2.3 With an emphasis on cutting red tape there is a risk that the agenda loses sight of the reason for regulation—the very real benefits that regulation delivers to the environment, business and wider society. It is essential that initiatives are seen to be about driving better regulation and that in communicating this agenda the BRE does not undermine the credibility of regulation.

2.4 We would like the regulatory reform agenda to support and enable us to focus on achieving real results for the environment, business and other stakeholders. Our regulatory customers support initiatives that make a real difference to them and the environment, such as consolidating regulations and developing single permits rather than just focusing on administrative burdens.

2.5 For example, adapting to climate change, reducing greenhouse gases and using resources more efficiently are good for business—creating new business opportunities and making savings for existing businesses. Such a strategy can have the same effect on business profits as a 5% increase in sales and 20% reduction in energy use. Despite this only 3% of all FTSE All-Share companies are aiming at low carbon strategies.[11]

2.6 The Environment Agency Board is accountable directly to Ministers in its sponsor departments, Defra and Welsh Assembly Government. BRE has an important role in offering comment and advice to the Board on which it can base its own decision and advice to Ministers. The clarity of the accountability relationship is weakened when the role of BRE begins to encroach on regulatory policy or even oversight of the regulator.

Therefore those setting the regulatory reform agenda should ensure proportionate approaches to the oversight of regulators. Any additional bureaucracy should respect existing accountability arrangements, be justified and deliver real results and should not further restrict the ability of regulators and the regulatory system to innovate in response to changing circumstances.

For example, it is also important that the agenda does not adopt overly simplistic or prescriptive "one-size fits all" approaches that fail to recognise the very different regulatory models and risks that different regulators are regulating. We need an approach that delivers flexibility and allows regulators to tailor solutions to their own circumstances to achieve the best results. Both Government and the BRE need to take a better regulation approach to their regulation of the regulators.

3. REMOVING OBSTACLES TO DELIVERING RESULTS

There are a number of obstacles to delivering balanced and effective better regulation. For example the Barriers to Better Regulation report points to: inconsistencies in legislation; lack of a common legislative framework or platform, and; a failure to consistently involve regulators in developing European legislation and its transposition into member states' law.[12]

3.1 Better regulation needs better legislation in the UK and Europe. We need more effective and consistent regulation with greater transparency, certainty, predictability and reduced burdens for business. We need a better regulation agenda in the UK and Europe that delivers:

— A better strategic picture of how policies fit together.

— Clearer definitions of the desired outcomes for regulation.

— Use of more innovative approaches to achieve results.

— A consolidated, and better coordinated regulatory framework, with more streamlined and transparent processes. For example consolidating regulations and moving towards a single environmental permit.

— Common approaches to regulation across policy areas including definitions, permitting, consultation, and monitoring arrangements.

— Effective penalties that act as a powerful deterrent and encourage compliance.

— Flexibility for Member States and regulators to tailor solutions to their own circumstances to achieve the best results.

The BRE could usefully focus on how the UK might more effectively influence the EU legislative agenda to deliver better regulation.

3.2 We need modern funding arrangements to deliver modern regulation. One of the areas we see as essential in delivering effective regulatory reform is improving our funding arrangements. In particular:

— We face significant restrictions in moving regulatory income within and between regulatory regimes in the way that Hampton set out due to ring fencing. This prevents us from getting the best value for money from our income though we recognise that this needs to be done in such away as to protect financial accountability.

— We have no regulatory income to fund advice and other services, for those we do not regulate directly (ie through some sort of permit), which the Regulators Compliance Code calls for. For example NetRegs, which provides web-based advice and support for 300,000 business per year (particularly SMEs) and is forecast to save businesses £14.8 million in administration costs by 2009-10, is reliant on unsecured external funding. Without a grant from the Treasury Capital Modernisation Fund, NetRegs would have taken 25 years to reach its current status.

— We are limited in our enforcement work as we cannot recover costs for enforcement activity that targets "rogue" businesses. We want to recover costs from regulated businesses as this activity levels the playing field for legitimate business. Rogue businesses are those that avoid their obligations, damaging the environment, public health and local communities and gain competitive advantage over legitimate businesses.

3.3 We need access to meaningful and effective sanctions. In 2006, Macrory made a series of recommendations to ensure that regulatory enforcement is more meaningful, proportionate and effective.[13] Despite being accepted by government, only partial progress has been made to deliver some of these recommendations through the Regulatory Enforcement and Sanctions Bill. We believe that meaningful and effective sanctions are an essential component of real risk-based regulation that delivers outcomes and helps to level the playing field for legitimate business and maintain public confidence.

4. BETTER JOINED-UP WORKING

4.1 We want a more balanced and inclusive approach to the Government's Better Regulation Agenda from the BRE. We are concerned about the impact of BRE creating policy without the knowledge and input of the experts responsible for delivering regulation. If the views of regulators are not given sufficient weight the quality of initiatives and their deliverability risks being undermined, for example with poorly thought through ideas leading to unintended consequences. This could lead to business expectations being raised and dashed and overshadowing the very real improvements being delivered on the ground by regulators. This undermines credibility and support for the agenda and regulation as a whole. The regulatory section of the recent Enterprise White Paper was sprung on regulators (and indeed Departments) late in the day and still contains ideas which will need very careful evaluation if they are not to risk discrediting the better regulation agenda. For example, blanket exemptions for SMEs would not be a risk-based approach since many SMEs are substantially poorer environmental performers than large companies.

4.2 We are keen for the BRE to work with us to develop policy, communicate with business and other stakeholders and to share good practice between regulators. We want to share our experience, alongside other regulators, to work more effectively with the BRE. We hope that the BRE will listen to and value our views. We bring our experience, on the ground, of delivering better regulation with our regulatory customers and a perspective on what works and what does not.

4.3 We need to ensure that delivery bodies and our regulatory customers have sufficient capacity to effectively implement the better regulation agenda on the ground, and that support is provided to overcome any obstacles or problems that are inevitably uncovered during this process.

4.4 We need better forward planning with clearly defined and agreed goals and more realistic timescales. A better vision and forward plan would improve the efficiency of the better regulation programme as well as provide sufficient time and support for regulators and government departments to deliver initiatives. Given the considerable number of recent initiatives, we need to avoid "initiative overload". We also need time to allow the effectiveness of various initiatives to be assessed so that all parties (government, regulators, business and others) can develop a more informed view of "where next" for the regulatory reform agenda.

4.5 We would like the BRE and BERR to agree a joint strategy with the regulators to promote the benefits of appropriate regulation to business. We would also urge the BRE to work with regulators to facilitate data sharing and the funding of IT investment to enable more data sharing and joined up working between regulators thereby reducing the burden on business. Additionally, we would also like the BRE to enable common regulatory approaches at UK and EU level and to explore options to improve funding arrangements to enable delivery of the modern regulatory approaches that they call for.

5. MEASURING AND REPORTING ON PERFORMANCE AND OUTCOMES

5.1 We have our own robust reporting mechanisms to measure performance and outcomes against our modern regulation programme through our Corporate Scorecard. We also use this information to feed into Defra's performance assessment framework which they use to report to the BRE on progress with better regulation.

5.2 In addition, the BRE and the National Audit Office recently carried out a Hampton Implementation Review of five national regulators including the Environment Agency.

6. CONCLUSIONS AND RECOMMENDATIONS

6.1 We are committed to better regulation and welcome the opportunity to continue to work with the BRE and others to achieve more for the environment through regulatory reform.

6.2 We think that the current regulatory reform agenda could be better focused on supporting the delivery of effective regulation that delivers real benefits for the environment, public and consumer protection and for business. A better balanced approach will help support public confidence in the effectiveness of the regulatory system. In summary we need:

— A better balance to the regulatory reform agenda.

— Unblocking obstacles to delivering results through more effective and consistent regulation and modern funding arrangements.

— Better joined up working including sharing best practice and communicating with business.

3 April 2008