Government response
INTRODUCTION
The Government welcomes the Report of the Regulatory
Reform Committee: "Themes and Trends in Regulatory Reform"[1].
The report is a valuable contribution to the development
of the better regulation agenda.
The Government appreciates the continued challenge
and support of the Committee as it moves into the next phase of
the better regulation agenda refining our approach to risk, getting
an even deeper understanding of regulation's relationship with
businesses and consumers and making the most of the strengthened
framework of transparency and challenge surrounding the introduction
of new policy.
RESPONSE TO CONCLUSIONS AND RECOMMENDATIONS
A more balanced approach to Better Regulation
Recommendation 1
We conclude that events in the financial sector
do not require a wholesale revision of the fundamental approach
to regulation in other sectors. However, there are lessons to
be learned. Foremost among these are that regulators should:
(a) seek to understand risk more fully and develop
the resources to do that, where appropriate looking at whole systems
rather than individual problem areas
(b) focus more on assessing possible future risks
(c) identify areas of hidden risk
(d) identify possibilities of conflict of interest
in taking decisions
(e) seek to anticipate unintended consequences
of regulation
(f) develop mechanisms for challenging prevailing
wisdom and political pressure
(g) involve representatives of consumers in such
challenge
(h) be willing to use their powers more effectively
(i) seek to match the experience and weight of
those they regulate.
The Government welcomes this recommendation.
A key principle set out in Sir Philip Hampton's 2005
report 'Reducing administrative burdens: effective inspection
and enforcement[2]' is
that "Regulators, and the regulatory system as a whole, should
use comprehensive risk assessment to concentrate resources on
the areas that need them most."
The Government believes that this principle remains
sound, and agrees with the Committee's perspective that the events
in the financial sector do not require a wholesale revision of
our fundamental approach to regulation in other sectors.
The BRE has examined expert commentary on the causes
of the financial crisis and in October 2009 published an article[3]
presenting its own perspective on some of the issues the Committee
raises and a series of questions for regulators to consider in
reviewing their own work.
The Committee's criteria, alongside the good practice
principles set out in the guidance[4]
underpinning the current round of Hampton Implementation Reviews
of national regulators, provides an appropriate basis for Select
Committees to use in assessing the work of regulators in their
own inquiries.
Beyond the work of specific regulators, and their
individual Parliamentary scrutiny mechanisms, there is a role
for Government in ensuring that good practice in managing risk
is identified and shared across departments and regulators, and
that the fitness for purpose of specific regulatory systems (looking
beyond the level of the individual regulated business) are kept
under review.
The Government through the Local Better Regulation
Office (LBRO) will continue to build its capability of managing
risk and uncertainty for the future at local level and work to
promote best practice among regulators to take forward the recommendations
listed above.
Recommendation 2
In future, analysts and commentators must avoid
confusing risk-based regulation and so-called "light-touch"
approaches. Risk-based "right-touch" regulation remains
a valid approach provided there is:
(a) diligence in understanding risk;
(b) a willingness to accept some degree of failure
(albeit that in certain sectors there must be maximum effort to
eliminate failure);
(c) an awareness that risk assessments, with their
tendency sometimes to lead to a false sense of security, should
be subject to appropriate challenge; and
(d) the willingness to be intrusive rather than
light-touch when appropriate. At this stage in the debate,
better balance is required in order to ensure an effective delivery
of the regulatory reform agenda. The BRE should have a role in
promoting to the business world an approach to better regulation
that incorporates those principles. (Paragraph 25)
The Government accepts the intent of this recommendation,
the need for clarity in the debate about risk and regulation,
and the need for appropriate levels of challenge within regulators.
These are themes that will also be addressed in the work described
under Recommendation 1.
The BRE will continue to work with other Government
departments and regulators to promote the importance of an effective
risk based approach with business. The joint statement on the
benefits of better regulation[5]
signed by the Government, business groups, trade unions, consumer
groups and regulators on 19th October 2009 is an important
shared commitment to a balanced regulatory reform agenda.
The BRE will also be working with LBRO, national
and local regulators, sponsor departments, business and consumer
bodies to see how best to develop a better understanding of managing
different types of risk and uncertainty.
Recommendation 3
We recommend that the Government implement the
Risk and Regulation Advisory Council's proposal for a body to
challenge excessive regulatory responses to risk either by way
of the RRAC's own proposal for a Public Risk Commission or through
charging an appropriate existing body with that responsibility.
(Paragraph 27)
The Government accepts the recommendation in part
but does not believe that there is currently a role for a separate
new Public Risk Commission.
The Regulatory Policy Committee (RPC) will provide
a transparent, independent challenge to the Government on its
policy-making approach, including on issues of public risk. The
RPC's initial focus will be the scrutiny of the Government's cost-benefit
analysis. During the RPC's initial phase of operation, officials
from the RRAC's support team and the Better Regulation Executive
will work with the Chair of the RPC to examine how best to embed
the RRAC's findings in the Committee's approach.
The Government will respond to the recommendations
set out in, 'Response with responsibility: Policy-making for public
risk in the 21st century'[6]
by the end of 2009.
Recommendation 4
We believe that principles-based models of regulation
based on promoting right outcomes can have value in promoting
simpler and stronger rules. There is no reason why clear fundamental
principles cannot overlie well-designed and helpful structures
of supporting rules and guidance, with both being appropriately
and proportionately enforced. The BRE and/or the Regulatory Policy
Committee should have a role in determining the frameworks of
regulation that are appropriate in individual instances.
(Paragraph 34)
The Government accepts this recommendation in
part and believes that principles-based models can be effective
whilst maintaining that each individual case of regulation needs
to be judged on its merits taking into account the particular
protections, beneficiaries, regulated firms and markets under
consideration.
Principles-based models of regulation can be very
effective in delivering outcomes and have the merit of providing
businesses with freedom in how they achieve policy objectives.
However in some circumstances, particularly where resources are
tight, businesses prefer clear and simple rules that offer them
certainty. This was one of the key findings from research carried
out with small and medium-sized businesses in the Anderson Review[7].
The Government will continue to explore in which
circumstances principles-based models can be applied most effectively.
The remit of the Regulatory Policy Committee (RPC)
will allow it to be able to comment on departmental approaches
to individual regulatory frameworks.
Recommendation 5
We therefore encourage regulators to seek more
active consumer and/or end user involvement, including at board
level, and we recommend that the Better Regulation Executive should
arrange specific measures to allow for consumer and end user
feedback. (Paragraph 38)
The Government accepts the intent of this recommendation
and agrees that the involvement of consumers in the regulatory
process is valuable in a number of ways, including providing external
challenge.
A number of models, both statutory and otherwise,
exist. Some regulators already include consumer members or committees.
For example, in 1998, the Financial Services Authority set up
The Financial Services Authority Consumer Panel. This panel represent
the interests of consumers in the development of policy for the
regulation of financial services. The Food Standards Agency (FSA)
also has an Advisory Committee on Consumer Engagement, which was
established in 2007. This committee reports annually to the FSA
Board on the effectiveness of their engagement with consumers
and identifies opportunities to strengthen the engagement processes.
Many Regulators[8]
are signed up to the Code of Practice on Consultation[9],
which recommends consumer and end user participation in the policy
development cycle. The better regulation website[10]
also provides an opportunity for businesses, consumers and citizens
to provide end user feedback direct to the relevant policy area
within Government.
It is open to regulators to explore mechanisms for
involving consumers more widely, in ways to suit their specific
operating circumstances, and the Government would encourage them
to do so wherever this is appropriate, as provided for in the
recently extended Compliance Code[11].
Recommendation 6
The Better Regulation agenda remains a valid project
whose aim should be to improve regulatory outcomes for the whole
of society. There remains a need to improve results in a way that
profoundly shifts perceptions. It seems to us that the BRE needs
to develop a stronger role in evaluating how a more sophisticated
Better Regulation agenda might best be delivered. (Paragraph 42)
The Government accepts this recommendation.
The World Bank has recently concluded that the UK
has the best business environment in Europe and the fifth best
in the world. Nonetheless, changing perceptions about regulation
is proving challenging. A recent National Audit Office report[12]
found that whilst businesses are reporting that individual aspects
of complying with regulation have become less burdensome over
the last year and there has been some improvement in overall business
perceptions of regulation since 2007, only 45% of businesses responding
to the survey felt that most regulation is fair and proportionate.
The Government will continue to invest time and resources
working to understand perceptions of regulation and the different
drivers of them in more detail as the basis for further developing
the better regulation agenda. The Government is also working with
other countries, in particular the Netherlands and Denmark, in
order to share best practice on changing perceptions.
The Better Regulation Executive's report "Better
Regulation: better results: maximising the benefits of regulation",
published on 19th October 2009[13]
included both analysis of original research on perceptions and
several areas of good practice for departments and regulators
in understanding and influencing perceptions, including a map
of the drivers of the perceptions of regulation grouped according
to the level of control that the Government has to influence them.
Alongside our recent report on the benefits of regulation
we published qualitative and quantitative research into public
perceptions of regulation that we co-commissioned with the Environment
Agency and Health and Safety Executive. This research built both
on the annual surveys carried out by the National Audit Office
and research that we have carried out previously, for example
as part of the Anderson review of guidance.
Going forward: design and compliance
Recommendation 7
We welcome the BRE's work on perceptions of guidance
and the Government's acceptance of most of the recommendations
in the Anderson Review. We urge the Government to push forward
quickly with implementing those recommendations and with further
means of promoting and sharing guidance best practice that address
the problems we have outlined. Although we appreciate that there
might be resource implications and legal constraints, we recommend
that the Government encourage regulators and enforcement bodies
to be more willing to answer questions from their regulated organisations
and consider creative ways to permit without prejudice or off
the record discussions on compliance. (Paragraph 47)
The Government accepts this recommendation and
is driving forward on implementation of the Anderson recommendations.
The revised Code of Practice on Guidance, published
on 21st October 2009[14],
incorporates recommendations from the Anderson Review[15]
that Government guidance is accompanied by a "Quick-start"
guide, should not contain legal disclaimers of liability, and
should make clear where users can seek redress if they followed
Government guidance which was inaccurate or inconsistent.
Further recommendations are also being put into practice
such as piloting an insured helpline where businesses can get
advice on employment and health & safety regulations. In Spring
2010 the Government will publish a progress report on implementation
of all the commitments made in the response to the Anderson Review.
The Government's Regulators' Compliance Code[16],
published in December 2007, encourages regulators to provide clear
and accessible guidance to make it easier for regulated entities
to understand and meet their regulatory obligations. They should
also ensure that the regulated organisations can seek and access
such advice without directly triggering an enforcement action.
Sir Philip Hampton's 2005 review, 'Reducing administrative
burdens: effective inspection and enforcement[17]'
laid a strong emphasis on the need for clear and accessible guidance
from regulators. The Statutory Compliance Code for Regulators
and guidance for Hampton Implementation Review teams have built
upon this principle, and the Government will continue to embed
this approach in its continuing work with regulators.
Recommendation 8
We welcome the "Trading Places" initiative
and the Hampton implementation reviews published to date, and
look forward to the further Hampton implementation reviews due
for publication this year or early next year. We encourage regulators
and the BRE to explore opportunities for joint working including—where
appropriate and subject to legal advice—in reporting of
infringements outside of their particular jurisdiction. (Paragraph
50)
The Government accepts this recommendation and
agrees that collaborative working and co-ordination between regulators
can enhance effectiveness and efficiency.
The Government has sought clarification from the
Information Commissioner about the legal position for sharing
data on non compliant businesses for regulatory purposes.[18]
The value of data sharing is also recognised in the Statutory
Code of Practice for Regulators and in the Hampton Implementation
Review methodology. Several examples show organisations have successfully
shared intelligence enabling infringements to be reported outside
of their immediate responsibility. For instance, The Gangmasters
Licensing Authority uses data gateways to allow key information
to be exchanged with its partners such as police forces and HMRC.
This permits frequent and meaningful transfers of information
across different jurisdictions about companies who are suspected
of non-compliance.
The Retail Enforcement Pilot[19]
also demonstrates that officers from one discipline can report
failures in compliance to officers in a different discipline who
are qualified to take appropriate action. In addition, the Primary
Authority scheme[20],
launched in April 2009, provides local authority regulatory services
departments across the country with intelligence on national businesses
through a secure website. The Government and the Local Better
Regulation Office (LBRO) have invested in the regional Trading
Standards and Environmental Health Co-ordination Network which
encourages regulatory services to be shared across council boundaries.
The Government is currently consulting[21]
on proposals to use the Legislative Reform Order (LRO) mechanism
to amend legislation governing the sharing of information between
the organisations responsible for enforcing workplace rights and
related legislation. If the LRO is made it will create new legal
gateways which will increase the extent to which officers can
share information and intelligence and contribute to more targeted
and efficient enforcement activity.
Recommendation 9
We recommend that the BRE seek ways further to
improve consistency and quality of IAs including through more
thorough and proactive business validation. We welcome the Minister's
statement that post-implementation review will be the norm. The
BRE should monitor compliance with departmental commitments to
conduct them. (Paragraph 53)
The Government accepts this recommendation in
part. The Government is currently revisiting the Impact Assessment
and Post Implementation review processes and believe that the
BRE, alongside other stakeholders, should monitor compliance with
departmental commitments to conduct them.
Changes made to the Impact Assessment template in
2007 have improved the consistency of the information provided.
This has enabled the reporting, for the first-time, of a cross
government benefit-cost ratio[22]
for new regulations enacted in 2008-09, and a quantified Forward
Programme[23] of future
regulations.
The Impact Assessment template and the associated
Impact Assessment guidance for policy makers are currently being
revised to further improve information and reporting requirements
as Government continues to improve the IA process across all areas
of policy development, including; consultation, policy design
and post-implementation review.
The Government has set up the Regulatory Policy Committee
to provide independent external scrutiny on policy development.
The RPC's remit will allow it to comment publicly on the benefits
and costs of policy decisions, which will further increase the
transparency of regulatory decision making across Government and
promote further improvements in the underlying analysis of expected
policy outcomes.
The Government will continue to encourage formal
public consultations to be conducted in line with the Code of
Practice on Consultation[24],
criterion 3, which stipulates that IAs are to be carried out for
most policy decisions and included in the consultation document.
The BRE will continue to collaborate with Departments,
via the network of Better Regulation Champions and Better Regulation
Units in each Department, to support and encourage high quality
impact assessments which underpin policy-making decisions. The
BRE will also continue to communicate its expectations on post-implementation
review through these networks.
This engagement with policy-makers on impact assessments
and post-implementation reviews complements, but does not replace,
the Government's approach to promoting the post-legislative scrutiny[25]
of Acts.
The Government believes that post implementation
review is key way of learning lessons to inform future policy
making, based on the reality of policy implementation on the ground.
The Government intends to continue to embed post implementation
reviews and post-legislative scrutiny and to monitor progress.
One way in which the Government will seek to improve its ability
to do so systematically is through enhancements to the Impact
Assessment library.
Recommendation 10
The Government should expedite the setting up
and rapid entry into full operation of the new regulatory committees
announced on 2 April 2009, together with publication of cumulative
regulatory costs and benefits in accordance with its stated intention,
and with terms of reference that will permit a full contribution
to the regulatory evaluation process. In accordance with our recommendations
on greater consumer involvement, the external Regulatory Policy
Committee's membership should allow for a voice for sectors other
than solely the business sector and for consumer and end user
interests. (Paragraph 58)
The Government accepts the Committee's recommendation.
A new better regulation sub-committee of the National
Economic Council - NEC (BR), has been established this year taking
on the responsibilities of the Panel for Regulatory Accountability.
The new committee has a remit in the current economic environment,
to look carefully at the timing of planned new regulation with
the aim of avoiding the introduction of new regulation unless
there is a clear case for action now. On 15th October,
the Government published for the first time its Forward Regulatory
Programme[26], and on
21st October, it published cumulative benefit-cost
information and a benefit-cost ratio[27]
for new regulation enacted in 2008-09.
The first Chair of the Regulatory Policy Committee,
Michael Gibbons OBE, has been appointed and the Government is
in the process of appointing three committee members who will
be drawn from a variety of backgrounds, bringing a range of perspectives.
The Director and secretariat staff have also been appointed and
took up their posts throughout October.
Recommendation 11
The external Regulatory Policy Committee should
take measures to validate impact assessments and cost-benefit
analyses with input from affected parties and should be given
means to provide such parties with incentives to offer properly
quantified advice. The BRE should support it in that work. (Paragraph
59)
The Government accepts the Committee's recommendation
in part.
The Regulatory Policy Committee (RPC) will initially
focus on providing advice to Government on whether the assessment
of the benefits and costs of new regulations are robust and proportionate.
This will involve scrutinising impact assessment for the top regulatory
measures across government, working closely with individual Government
departments and providing detailed advice to Parliament at key
stages in the process.
Responsibility for liaising with stakeholders and
ensuring good quality quantified input to impact assessments lies
with the relevant Government department, and should take place
through both ongoing contacts and formal public consultation process.
The RPC is likely to consult stakeholders as part
of its independent scrutiny process.
The Government remains committed to effective consultation
with affected parties as this brings to light valuable information.
The Consultation Code of Practice[28]
states the possibility of longer periods of consultation.
"if the policy under consideration is particularly
complex, consideration should be given to the feasibility of allowing
a longer period for the consultation …. So that consultees
can take advantage of the full consultation period and prepare
considered responses."
The Consultation Code of Practice also stresses the
importance of the clarity of scope of formal public consultations
and provides recommendations on reducing the burden of consultation.
To ease the administrative burden of responding to
consultations, the Government will consider further ways that
response processes can be streamlined, for example response templates
may ease the burden of participation. Some departments are already
adopting greater use of e-engagement.
Recommendation 12
To assist in maximising objective but effective
challenge to EU-sourced legislation, we recommend that the BRE:
(a) revisit the recommendations in our previous
report regarding a feasibility study on EU regulatory reform objectives
and the need to increase BRE influence on EU regulatory reform
(including by means of a permanent representation in Brussels)
and as a matter of urgency
(b) explore means of improving and bringing forward
in time the UK's input into EU impact assessments. (Paragraph
64)
The Government accepts the principle of the Committee's
recommendation and continues to work to reinforce the EU's better
regulation agenda.
This year the Commission updated its Impact Assessment
(IA) guidelines with key improvements that the UK lobbied for
with other Member States. This included extending the scope of
measures subject to IA, including comitology proposals, a greater
focus on quantifying costs and benefits and a stronger emphasis
on assessing impacts on SMEs and on administrative burden level.
The Government's 'Transposition Guide'[29]
asks departments to work with the FCO's UK Representation to the
EU (UKRep) to consider at the earliest possible stage how a European
proposal will be implemented and enforced in the UK, and, to try
to shape European Commission policy before proposals are published.
To reinforce this process the BRE's current update of the IA process,
mentioned above in response to Recommendation 9, Page 13, will
encourage departments to proactively provide data from UK IAs
to inform the European Commission's IA evidence base. The BRE
is also in constant contact with the European Commission to encourage
the use of robust quantitative analysis in the development of
its proposals.
It is also important to identify implementation issues
at an early stage. Tools such as the Implementation and Enforcement
of Environmental Law's (IMPEL) practicability and enforceability
checklist[30] can be
used to ensure better regulation principles are built into European
law. The checklist can be used at any stage in the process of
developing or revising EU law. IMPEL and the Network of Heads
of EU Environmental Protection Agencies (EPAs) are currently reviewing
their respective checklists with the view to finalising a joint
'better regulation' checklist by early December 2009.
6 November 2009
1 http://www.publications.parliament.uk/pa/cm200809/cmselect/cmdereg/329/329i.pdf
Back
2
http://www.berr.gov.uk/files/file22988.pdf Back
3
http://www.lbro.org.uk/publications-information.html - Better
Local Regulation - New Approaches to Securing Compliance, Page
14 Back
4
http://www.berr.gov.uk/files/file48275.pdf Back
5
http://www.berr.gov.uk/whatwedo/bre/benefits/better-benefits/page53245.html
Back
6
http://www.berr.gov.uk/files/file51459.pdf Back
7
http://www.berr.gov.uk/files/file49881.pdf Back
8 8
http://www.berr.gov.uk/whatwedo/bre/consultation-guidance/page44420.html Back
9
http://www.berr.gov.uk/files/file47158.pdf Back
10
http://www.betterregulation.gov.uk/ Back
11
http://www.berr.gov.uk/whatwedo/bre/inspection-enforcement/implementing-principles/regulatory-compliance-code/page44055.html
Back
12
http://www.nao.org.uk/publications/0809/complying_with_regulation.aspx
Back
13
http://www.berr.gov.uk/files/file53252.pdf Back
14
http://www.berr.gov.uk/files/file53268.pdf Back
15
http://www.berr.gov.uk/files/file49881.pdf Back
16
http://www.berr.gov.uk/files/file45019.pdf Back
17
http://www.berr.gov.uk/files/file22988.pdf Back
18
http://www.berr.gov.uk/files/file45414.pdf Back
19
http://www.berr.gov.uk/whatwedo/bre/inspection-enforcement/implementing-principles/retail-enforcement-pilot/page44050.html
Back
20
http://www.lbro.org.uk/lbro-projects-primary-authority.html Back
21
http://www.berr.gov.uk/files/file53063.pdf Back
22
http://www.berr.gov.uk/files/file53280.pdf Back
23
http://www.berr.gov.uk/files/file53203.pdf Back
24
http://www.berr.gov.uk/files/file47158.pdf Back
25
http://www.cabinetoffice.gov.uk/secretariats/economic_and_domestic/legislative_programme/guide_html/post-legislative_scrutiny.aspx Back
26
http://www.berr.gov.uk/files/file53203.pdf Back
27
http://www.berr.gov.uk/files/file53280.pdf Back
28
http://www.berr.gov.uk/files/file47158.pdf Back
29
http://www.berr.gov.uk/files/file44371.pdf Back
30
http://ec.europa.eu/environment/impel/cluster_3.htm Back
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