Mr Neil Caulfield
Regulatory Reform Committee
Delegated Legislation Office
House of Commons
House of Commons
Monday 17 March 2008
Dear Mr Caulfield,
Regulatory Reform Committee Inquiry: Getting Results. The Better Regulation Executive and the Impact of the Better Regulation Agenda
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
1.9 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.
1.21 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.
1.44 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.
Head of Parliamentary and Regulatory Affairs