Examination of Witnesses (Questions 60-77)
DEPARTMENT FOR
BUSINESS, ENTERPRISE
AND REGULATORY
REFORM AND
HM REVENUE AND
CUSTOMS
20 FEBRUARY 2008
Q60 Mr Mitchell: Mr Sargent, you just
got me worked up into such an anti-European frenzy that I went
and voted against the government. I would like to put it to you
that this shift in emphasis to what we are talking about today
which is the actual delivery of administrative burdens is an attempt
to evade the main issue. You were not being very successful. Sir
Brian, you are nodding vigorously. Shall I address the question
to you? I hope that was an agreement.
Sir Brian Bender: Part of the
frustration maybe the Committee has had with this hearing is the
NAO Report is only focusing on one aspect of the Better Regulation
Executive role. Another and crucial aspect is to work with Departments
to police the system of Regulatory Impact Assessment, so every
bit of regulation, legislation, whether it stems from Europe or
whether it is produced by a government department nationally,
is subject to an Impact Assessment. That is placed before Parliament
and that looks at the cost of the regulation. That is not the
subject of this Report or this hearing.
Q61 Mr Mitchell: Nor is the subject
of this Report the real things that business is complaining about.
The most burdensome aspects are having to keep up to date with
changes, the length of time it takes to go through complying,
the need to simplify complex rules, clear information etc., so
this is not the real issue so far as business is concerned. That
is why not many of them realise what has been done.
Mr Sargent: It is part of the
issue. Obviously the NAO chose to focus on the bit that was incredibly
tangible but you are quite correct. We find it very helpful that
the NAO in its survey has highlighted the fact that there are
other issues which we, in the rest of the work we do, are addressing.
Q62 Mr Mitchell: Why cannot anybody
explain to me why there are such wide variations in performance?
That follows from the memorandum, bringing performance up to date
as well. I keep thinking of the DTI. I do not know what BERR means.
It sounds like butter in French or something. 1% of baseline.
Communities and local government which have always been dedicated
to the ruination of both, 9%. Health and Safety Executive, 3%.
Why are there these wide variations in performance?
Sir Brian Bender: This is the
programme for a three year period and, in the case of my own Department,
the changes have to be delivered in almost every case through
changes in legislation. If you take the Companies Act, by the
time we have finally implemented the Companies Act, that will
have delivered on this arithmetic 300 million of savings, but
in the year ending in December we had not implemented very much
at all. So I am advised and—I stick my neck out here—I
confidently predict on present plans that we will have achieved
around 50% of our target by the end 08 Report.
Q63 Mr Mitchell: Will the Companies
Act be easy to comply with? I notice with astonishment that 59%
thought it was difficult to comply with. That amazes me.
Sir Brian Bender: It is I think
the longest bit of legislation that has been through Parliament.
Q64 Mr Mitchell: Yes, but the basic
requirements are fairly simple, are they not?
Sir Brian Bender: What it did
was bring everything into one place, simplify and produce quite
a lot of administrative simplification, including for small firms
including electronic transmission and so on. We do believe that
it has very real benefits for business in terms of administrative
simplification.
Q65 Mr Mitchell: I notice that while
the departments are putting more emphasis on on-line tools, business
rates these as the least important in fact. Is that just because
on-line is convenient to departments but more difficult for businesses?
Mr Sargent: I am just trying to
work out what you are referring to. If we take the planning example,
we have one example, one practice, one planning practice, which
does about 400 applications per year. It had identified that they
were saving each of them £100 each time they did it. One
practice said to us, "Instead of taking a whole day to prepare
all the planning stuff and send it off, it is now taking us an
hour". It is very much something that the business community
wants, particularly those who have to send documentation to people,
to be able to deliver them electronically.
Q66 Mr Mitchell: Which small business
presumably finds more difficult?
Mr Sargent: Not necessarily. There
are very few people these days who do not have access to a computer
and cannot in turn get on-line access.
Q67 Mr Mitchell: Why at tables 18
to 22 is business rate the least important means of delivering
what you are supposed to?
Mr Sargent: The items that are
there are items that the business community would like. The fact
that it is at the bottom does not mean that it considers it less
important or less useful. Starting at the top, if we take employment
or simplification, one of the ways of achieving simplification
is to have a place where someone can go to, download a single
form that they can fill out and give to their employees. That
is an example of where the on-line tools are the way by which
you achieve the most important item which is simplification. It
tends to be the manner by which you achieve some of the higher
ones.
Mr Mitchell: I obviously misunderstood
the table.
Q68 Mr Williams: In paragraph 2.20
under the heading, "The challenge of delivery", it says,
"The Government has committed to making a real difference
to businesses by reducing the burden of complying with regulation".
It then goes on to talk about the reductions and points out that
these are calculated at an aggregate level. We are talking of
a £4 billion reduction. With over two million firms, it is
peanuts, is it not? It is less than £2,000 a year on average.
Mr Sargent: The amount that each
firm will save will vary, depending upon—
Q69 Mr Williams: That is right, but
the average will be less than £2,000 and that is at the end
of the project.
Mr Sargent: Do not forget, if
you took an average—that will vary from company to company—if
you as a company were making £5,000 profit and you could
bring that up to £7,000 on a permanent basis, because this
is not a one off exercise; this means that you have permanently
taken it out of the equation, that is not a bad day's work surely?
Q70 Mr Williams: If you are down
at that level you are probably not going to make even the 2,000,
are you, if you are going to be that small? This is a medium sized
business so, at the end of the day, I am not knocking achieving
it but what I am saying is, if anything, we are under-achieving
and under targeting.
The Committee suspended from 4.43 pm to 4.51 pm
for a division in the House
At the end of the day, to say much ado about
nothing is silly because money is money as far as businesses are
concerned but it really is a matter of mirrors and smoke screens,
trying to make it look as if we are doing much more than we are
actually achieving. If we look at paragraph 2.15 it says: "In
deciding on reduction targets, the government followed the precedent
set by the Dutch and Danish Governments ...". They adopted
reduction targets of 25%. Their targets were based on political
decisions. That is a strange way of arriving at a statistical,
accounting way of setting targets, is it not? It is even funnier
for us to base our political decision—assuming it was—on
their political decision. It really shows that it is a very nebulous
operation, is it not?
Mr Sargent: I would be disappointed
if you felt that the £4 billion was not worth having and
the 25% target is a very good cultural way of focusing people's
minds. The NAO I think summed it up. By setting the target and
setting one that was clear, simple and unambiguous, it focused
everybody's minds. For me, that is the benefit of doing that and
that is the experience we learned elsewhere, that it was a target
that was worth setting and it was going to generate something
good.
Q71 Mr Williams: The next sentence
is interesting in National Audit Office terms. It says: "The
UK Government adopted targets that it believes will support a
pragmatic approach ...". These are agreed reports. Normally
in one of our reports, if it says, "The UK Government believes",
it normally means that the NAO does not believe them or does not
agree with them. Is that the case? Is this their assessment but
not one you are able to go along with?
Mr Burr: It is not one we are
not able to go along with, but we were recording it as the government's
view rather than our view.
Q72 Mr Williams: That is not quite
how, after 17 years on this Committee, I would read that. That
is a measure of considerable reservation on the part of the National
Audit Office. "The targets are not based on calculations
of the desired or achievable level of reductions". Again,
that is smoke and mirrors. If we move to page 33, it says there
in paragraph 4.13 that our examination—that is the NAO's
examination—identified two factors which raised doubts over
the extent to which it would be possible to measure accurately
the impact of initiatives. Here again the National Audit Office
is saying that this is what you are saying but it is not what
they are saying. They have reservations there as well. Does that
not cause your some concern?
Mr Sargent: Before I answer, could
I just clarify which item you are referring to?
Q73 Mr Williams: Paragraph 4.13.
"...our examination"—the NAO's examination—"identified
two factors that raise doubts over the extent to which it will
be possible to measure accurately the impact of initiatives ..."
and then it deals with those subsequently.
Mr Sargent: When you sit down
and try to analyse something which is very tangible and the administration
cost is something quite tangible that you can look at, you have
to make a decision. First you have to identify the laws; then
you have to identify how many items come out of those laws which
we have done. Then you have to identify a reasonable number of
businesses that will give you some indication as to whether this
is big or small. That is what we have done and I am struggling
obviously to be convincing, clearly, but that is very tangible.
When you go back five years later and you look at it, you say
that this clearly used to take someone five hours five years ago
and it is clearly taking an hour now, what might vary is that
£30 or £10 an hour. That might be a debatable point,
but there is a tangible improvement.
Q74 Mr Williams: You heard the comments
from my colleagues and it is quite clear we all have the same
feeling. There is nothing very tangible here.
Mr Banyard: Could I give you an
example? We have been working in a small, tangible area to try
and improve the ease with which you complete tax returns, whether
they are income tax returns, VAT returns or Pay As You Earn payroll
returns. Each year we survey business and one of the questions
we ask is, "How easy do you find it to complete tax returns?"
The work that we have been doing has shown a three year, year
on year improvement in the percentages of people who say that
it is easy to complete tax returns. If you do focus on an area,
I think it is sometimes noticed. If you ask a specific question—was
this particular thing easy to do?—then I think people may
notice it; whereas if you ask the general question, "Is there
more or less regulation?" I think it is much more difficult
for somebody to say, "It is easier".
Q75 Mr Williams: It is better to
come out and admit that right at the beginning instead of trying
to give the impression it is much more statistically economics
and audit based than it actually is. If you look at 4.14 it refers
to the Less is More report. It says that that report recommended
that government should consider how the total cumulative impact
of regulation on business could be assessed. That was their recommendation.
The next sentence says: "This work has not been a top priority
...". When was the Less is More report? I have forgotten
the date of it.
Mr Sargent: 2005.
Q76 Mr Williams: Here we are in 2008.
The work that was stated in 2005 as something you should be doing
still has not been done. Why?
Mr Sargent: Let me put it in context.
There is no recognised methodology that we have been able to identify
looking both internally and externally, so that you can say the
cost of regulation overall is this. You can look at specific areas.
You can look at a piece of employment law and track that but how
do you measure competition law, for example? That is the reason
why. The answer is there is work going on and indeed the Department
has been having work streams which resulted in a seminar only
a few weeks ago and reports which will be out imminently. What
you have not seen is the tangible summation or conclusions because
it is a pretty difficult area in which to try to come to conclusions.
Mr Williams: The reality is that, as
politicians, we know and, as long serving civil servants, you
know, business always moans about rules and regulations. I was
in the Department of Industry for quite a while. Before that,
in 1964, I took the Consumer Credit Act through Parliament and
one of the things I did there was to insist that the Credit Reference
Agencies, which used to rely literally on gossip; they decided
whether you got credit or you did not, but they would collect
information from the local shopkeeper, from the milkman, from
the newspaper shop and so on. I inserted into it, under massive
protest, the provision that they would be subject to the law of
libel. I was asked to meet with them. They told me it would destroy
them. They were at the risk of destroying people so they had to
face their responsibility. They are now highly prosperous businesses
because they were forced by regulation and by the fear of libel
action. They had to look at their activities again, transform
the whole nature of a credit reference agency and they are now
very, very profitable, so sometimes regulations which are moaned
about most can achieve things that are valuable. We ought to have
more guts as politicians and stand up to business more often and
say, "Well, moan if you like. It is in the public interest.
It is in the consumer interest and we are going ahead with it".
That is my sermon for the day.
Q77 Chairman: I think that concludes
our hearing. Everything that Mr Williams says about the attitude
of industry is right but it is just a bit depressing, despite
your best efforts, Sir Brian, that in the brief provided to us
by the Institute of Chartered Accountants this afternoon their
survey shows that more chartered accountants believe the regulatory
environment has deteriorated rather than improved since 2006.
It is depressing, is it not?
Sir Brian Bender: It is depressing
and it brings me back to some of the conversations earlier and
Mr Sargent's point. We have a lot of work to do to engage with
business about what we are doing and trying to do in this area.
Mr Sargent: The Institute of Chartered
Accountants sets standards by which companies prepare their accounts.
The amount of paper required to prepare the accounts has trebled
in the past 15 years. That has nothing to do with government regulation
or Parliament. That has to do with the standards that are set
by accountants for themselves, which is an interesting space to
go into.
Chairman: Thank you very much, gentlemen.
That concludes our hearing.
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