UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 329-vHouse of COMMONSMINUTES OF EVIDENCETAKEN BEFOREREGULATORY REFORM COMMITTEE
THEMES AND TRENDS IN REGULATORY REFORM
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This is an uncorrected transcript of evidence taken in public and reported to the House. The transcript has been placed on the internet on the authority of the Committee, and copies have been made available by the Vote Office for the use of Members and others.
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Transcribed by the Official Shorthand Writers to the Houses of Parliament: W B Gurney & Sons LLP, Hope House, Telephone Number: 020 7233 1935
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Oral Evidence
Taken before the Regulatory Reform Committee
on
Members present
Andrew Miller, in the Chair
Gordon Banks
John Hemming
Judy Mallaber
Dr Doug Naysmith
John Penrose
________________
Memoranda submitted by Better Regulation Executive
Examination of Witnesses
Witnesses: Ian Lucas MP, Parliamentary Under-Secretary of State (Minister with responsibility for Regulatory Reform), Mr Jitinder Kohli, Director General of Strategy and Communications, and Mr Philip Rycroft, Chief Executive, Better Regulation Executive, Department for Business, Innovation and Skills, gave evidence.
Q115 Chairman: Can I welcome you, gentlemen, to the meeting: Ian Lucas, the new Minister responsible, a particular welcome to you; Philip Rycroft in one of your early outings in this field; and Mr Kohli, we are sad to see you moving on but best of luck in your new career and thank you for the evidence that you have given on previous occasions. I am not going to say that about this session until after it is over! If I may go straight in because I know everyone is on very tight diaries at the moment. In our evidence sessions various people have mentioned the work of the Better Regulation Sub-Committee of the National Economic Council and words like "waste of time if it had no powers" and it will be "candy floss", and so on, have cropped up. What powers of challenge will the new NEC Sub-Committee and the Regulatory Policy Committee have, who will be on it, and how will its members be empowered to challenge government thinking? Will it publish its opinions and if not how will the Government be held to account?
Ian Lucas: The new committee will be transparent in the advice that it gives and one of the roles that is very important is the advice that it provides to the National Economic Council Sub-Committee relating to regulation will actually be publicly available. By that we mean that the pressures that it is exerting upon the committee will be there for all to see. I think that is extremely important because in a similar way to the way that the information of the National Audit Office is publicly available and exerts political pressure on the politicians who ultimately make the decisions, this advice will be there in the open. I think that in itself will be a major pressure on the system to ensure that the agenda that it is pursuing is taken forward. We see it as a relatively small committee because I think it is important that its advice is tightly brought together and presented to the Sub-Committee of the National Economic Council, but we do believe that it should represent the broad range of business experience. It will certainly be tuned into consumer interests because this is a very important agenda for consumers too, and although it will be a small committee it will be informed by the whole regulatory reform agenda, informed by the work of the Better Regulation Executive and it will be - and I stress this again - conducting its work in the open.
Q116 Chairman: Will any of its work not be transparent?
Ian Lucas: Certain discussions will clearly not be transparent in that not everything that is said within government is transparent, but the key issues and the advice that it gives will be there for all to see.
Q117 Chairman: So it will hold the Government to account by virtue of its transparent process?
Ian Lucas: Absolutely. What it says will be there and if the Government chooses not to follow its advice then clearly the politicians will have to justify those decisions.
Q118 Chairman: It is a small committee you have said but it is an important committee. When will it meet? What sort of budget will it have? And a question that stems from slightly derogatory comments about yourself, has the importance of the regulatory reform agenda been downgraded by the Department?
Ian Lucas: If I can deal with that question first. I have been in post for three to four weeks now and the regulatory reform aspect of my job has been a very, very important role within the work that I have been doing. I think I met Jitinder if it was not on day one it was certainly day two ---
Mr Kohli: It was day one.
Ian Lucas: And he has
conveyed to me the importance of better regulation and the work of the
Executive in the strongest terms. I have
been enthused by his enthusiasm, which you will know very well, and I have also
discussed the issue very closely with Philip on my left who will be taking
matters forward. This is an agenda that
I personally see as extremely important.
I have run a small business in the past and I have been frustrated by
bad regulation in the time that I was running that small business and I know
the importance and frustrations that business has with bad regulation. I have already met with a number of members
of representative organisations such as the CBI and the
Q119 Chairman: It was not my suggestion; I just read the press!
Mr Kohli: If we look at
this from a long-term perspective of where we were three or four years ago, we
did not have targets on administrative burdens, and people were talking about
that. We had very little progress in
Q120 Chairman: So when will the Committee meet and what is its budget?
Ian Lucas: The National Economic Council Sub-Committee?
Q121 Chairman: The Regulatory Policy Committee?
Ian Lucas: The first meeting of the National Economic Council Sub-Committee is fixed and the Regulatory Policy Committee will meet in the summer.
Q122 Chairman: I would be grateful if you could keep this Committee informed about that.
Ian Lucas: Absolutely.
Q123 Chairman: How will the new committees interact with each other and the BRE and avoid overlapping or creating gaps for things to fall down as an alternative? Who will have the power to examine and change impact assessments and direct actions based upon those changes?
Ian Lucas: The National Economic Council Sub-Committee will be informed by the Regulatory Policy Committee, so the advice will be presented by the smaller committee to the Sub-Committee. The reason we want a small committee is that we want that advice to be very focused, very specific and, as I say, very public. The work of the Better Regulation Executive will continue in a broader sense. It has a very, very broad role, an advocacy role as far as the agenda of better regulation is concerned which is extremely important, and the role of the Better Regulation Executive will inform the specific advice that the smaller committee is giving to the NEC Sub-Committee.
Q124 John Penrose: Just a quick follow-up, Minister, the reason we are asking these questions is obviously because the arrangements are an alternative to the regulatory budgets which were abandoned a couple of months ago. Why were they abandoned?
Ian Lucas: We made a decision that because of the present economic circumstances, which are unprecedented certainly for 50 years, we are in a position where the focus of government needed to be on the assistance that government could provide to businesses under immediate pressure. As a result of the economic situation the Government has within the last year produced a number of different policies which have themselves created additional burdens within government. In that context, the Government made a decision that to introduce regulatory budgets at this particular time was not the right way forward. Although we understand the compelling case for regulatory budgets, the focus was on the Real Help Now strategy, providing help to business with the additional funding that is being supplied by government and that has been at this particular juncture in the economic cycle the focus of government.
Q125 John Penrose: Can I just check, does that mean had you had regulatory budgets basically you would have broken them already because of the Real Help Now strategy and therefore it was just not going to be helpful and even embarrassing to introduce them and then break them immediately?
Ian Lucas: No, it would not have been embarrassing to introduce them because it is a considered policy and a policy that brings benefits, but we have had an extraordinary economic year, one in which government has had to react very quickly to a worldwide recession which has created extremely unusual economic conditions and at that particular time the Government made the decision that the Real Help Now agenda and the implementation of the policies linked to that were to be the absolute focus of government steps that were taken. That is what has been done. We are also taking forward the very important regulatory reform agenda because we know that it is important for business at this particular time in the economic cycle not to have additional burdens placed upon them and the way that we are doing that is through the structures that we have been talking about. They are structures which are closer in form to those of regulatory budgets and we believe that is an effective way of dealing with the issue of regulatory reform at this particular time.
Mr Kohli: If regulatory budgets had come into force the first year would have been a shadow year, so the year 2009-10 would have been a shadow year, and so the first year in which they would have had bite would have been the year 2010-11. In the midst of a recession saying to the business community that our priority is to deliver something that is going to help them in two years' time is not necessarily the right thing to do, and indeed when the Government announced its policies a number of business people said, "We can understand that right now your focus has to be on helping businesses through the recession." In the announcement the Government made, it made it clear that it is looking to implement regulatory budgets at some future date.
Q126 Dr Naysmith: It is a pleasure to see you here this morning, Minister, welcome. We have taken evidence already in this inquiry from consumers and consumer organisations, particularly the Citizens Advice Bureau, Consumer Focus and the Association of Chartered Certified Accountants, and all of these bodies advocated much greater involvement of consumers in forming regulatory policy, including specifically the financial sector. Given the potential impact of regulatory policy on consumers, do you agree that there is a case for greater representation of consumers on the boards of regulators?
Ian Lucas: I have a real enthusiasm for the voice of the individual consumer to be heard loud and clear in the regulatory process. Exactly how that is achieved I think is the complex and, as is so often the case, difficult question. I already touched in one of my answers earlier on the fact that the consumer voice needs to be heard in the Regulatory Policy Committee, although that does not necessarily mean it should be a specific advocate from a consumer organisation, but I think it is very, very important that we do take into account those voices.
Q127 Dr Naysmith: Will there be consumer representation then on the Regulatory Policy Committee?
Ian Lucas: The voices of consumers will be part of the mix.
Q128 Dr Naysmith: Some people would suggest that that is a slightly weasel phrase because we do not know what it means.
Ian Lucas: I mentioned that the committee was going to be small and the challenge when you have a small committee is that it is important to get the right mix of abilities and experience within that committee. What I am trying to make clear is having the experience and knowledge of individual consumers will have to be reflected in that committee but whether there is going to be a specific representation I think that is difficult to achieve with a very small committee.
Q129 Dr Naysmith: Are you saying the decision has been taken not to have the contribution of consumers?
Ian Lucas: No, I am not.
Q130 Dr Naysmith: It is still possible.
Ian Lucas: --- Because we are not talking about the individuals concerned. I think we need to hear the voice of the consumer in the process and a really important part of what I want to achieve is ensuring that the different regulators across the board make it a fundamental part of their work to involve consumers and consumer organisations in developing policy and any regulation that they are pursuing, so it is very important that that voice is heard. I want to be an advocate for the consumers within that process to make sure that regulators are taking notice of the consumer in the policies that they present.
Mr Rycroft: If you think about the process of making regulation, it is also about getting that deeply embedded within the process by which departments make the regulations they want to put forward - the consultation mechanisms that they put in place, their responsiveness to the wider group of stakeholders that the policy will impact on - so that when the regulations come through we have some assurance that they are, if you like, reflecting that broad range of interests. For the organisation which I now have the privilege to lead it seems to me one of the roles that we have is to be testing the quality of the propositions that are coming forward across that whole range and making sure that the regulation is proportionate and fit for purpose, and that means reflecting the needs of all stakeholders.
Q131 Dr Naysmith: I can see that that is reasonable enough because if you have one individual representative they become a sort of token and you have got to do much more than that, but whether or not there should be a representative as well as doing much more than that or not is a matter that still needs to be sorted out. If I can switch the emphasis slightly. How can regulators be given more independence and more power to challenge the business strategies of regulated companies to avoid repeats of some of the things that happened in the financial sector? Normally they say it is a business strategy but actually you need some sort of regulation or ability to look at that and possibly regulate it.
Ian Lucas: Clearly we are operating in a different context now because of the financial events of the last year. People are generally looking at the issue of regulation and taking into account the experience of the economic events of the last year or so, but I think it is important not to simply look at the agenda through that prism. I think it is very important that we accept that good regulation is important in what we need to achieve. I see good regulation as involving close working between regulators and the related and a relationship where the regulated, whether it be a company or an individual business, can have a relationship with the regulator that sets parameters and a framework within which they both work together so that there is co-operation and a positive relationship. I have a personal experience which is seared in my memory of being regulated by someone who I considered at the time of as being of a tick-box mentality who was telling me how to do my job, which I did not think was the appropriate way to proceed, and it created a very negative impression by me of that particular regulator at that particular time. That is an example which is at the front of my mind when I look at regulation. I think that we have a complex system of regulation with lots of different regulators across different departmental sectors and one of the roles that I want to take forward is to work to get those regulators to have a positive relationship with the businesses that they have responsibility for.
Q132 Dr Naysmith: And you are suggesting that they would have a close enough relationship to be able to know what new business strategies were as they were being developed?
Mr Kohli: I think this depends on what you are regulating. If you are regulating financial services with significant systemic risk, the implication of a management strategy can be that a financial institution folds or is under risk of folding and therefore the government has to bail it out because it is too big to fail. That is a very different proposition to a company which is installing machinery that carries some risk for those people who are using that machinery. It is not clear to me that there is a case in that kind of case for the regulator to second-guess whether it is appropriate for that machinery to be installed or not. The regulator's job is to protect the safety of the worker. It is probably not appropriate or proportionate for a regulator to start saying, "Hold on a second, why are you in that market in the first place?"
Q133 Dr Naysmith: A financial regulator would not necessarily be interested in health and safety issues. What we are talking about is financial institutions.
Mr Kohli: I am sorry, I misheard the question then.
Q134 Dr Naysmith: Sorry, I maybe did not phrase it very well.
Mr Kohli: In financial services, whether the Financial Services Authority has increased powers as a result of the lessons that it and the Government and everyone is learning from the crisis - Adair Turner's report sets out clearly a way forward for the regulation of financial services and the Government is due to publish a consultation document in the coming days on financial services, which will be very much based on the learning of Adair Turner's report. If the question is about financial services I suppose I would say we are on that case.
Q135 Dr Naysmith: Could I ask you, Minister, has the financial crisis changed the better regulation agenda, for instance by illustrating the need for better implementation and enforcement?
Ian Lucas: It has certainly indicated that we are in a different context, as I said. I do not think that the better regulation agenda - the words you used - has been changed. I think what we need to address is whether the regulation in place is the appropriate regulation for any particular sector. The real challenge is to set out and be clear about what the major risks are in any particular sector and to try to ensure that the regulation addresses those risks. This is not easy and clearly the lesson from the financial services problems over the last year has been that this is not at all an easy process. If it were an easy process it would have been fixed right across the board some time ago. What we need to do is be very focused in addressing the real risks and the important risks within society as a whole in different areas and ensure that the regulators are addressing those risks.
Q136 Dr Naysmith: Do you think there have been any failures then in implementation and enforcement in just the areas that you are talking about?
Ian Lucas: I think sometimes we address the wrong risks within regulation. One of the most difficult roles of any regulator is to focus on the correct risks because very often I think those risks may not be at the top of the political agenda at any particular time but they are the most important ones because they can have the most profound consequences if they go wrong. Health and safety is an obvious example. Clearly, important health and safety regulation would protect individuals but it needs to be proportionate and sensible in the way that it is applied but it can have very severe consequences if that regulation is not properly established.
Mr Kohli: If you look at Lord Turner's earlier report on pensions, one of the lessons of that report is that in regulating defined benefit pension schemes increasingly through the 1970s and 1980s what governments achieved was making defined benefit pension schemes less and less attractive for employers to offer so we were regulating more and more a particular thing and in doing that we made it so unattractive that people ceased to offer these schemes. That is an example of where government failed to regulate the right risk because it was looking in the wrong place. A real lesson both from that report and new Adair Turner report is that it is actually really hard to look at the right risks and it is a constant challenge for regulators always thinking about where are the risks in society that we are trying to protect people from and how do we design regulations that genuinely work in protecting people against those risks.
Q137 Chairman: So we are always behind the curve, we are always catching up for the last mistake that was made?
Mr Kohli: There is always a need to constantly improve regulation.
Q138 Dr Naysmith: That is another way of looking at it.
Mr Kohli: You have always got to improve.
Q139 Dr Naysmith: You are right.
Ian Lucas: There will be cases where we are doing the right thing but nobody notices. In fact, that is one of the problems, is it not, that when a policy is successful people tend not to notice?
Chairman: That neatly leads us on to Judy Mallaber.
Q140 Judy
Mallaber: Talking about
people not noticing, there have been surveys by the Forum of Private Business
and the
Ian Lucas: I would come back to the point that I have just made. If I go back to the sunny days when I was a solicitor in Oswestry many years ago, and I was filling in forms as was my responsibility at that time, if one year I was not filling in a form that I had filled in the year before, I probably would not have registered that I had not filled in that individual form. Even though there was a reduction in my burden of regulation I may not have had a positive impression about that reduction. I think one of the real challenges about improving perceptions of the Government's regulatory reform agenda is that sometimes improvements may not be as noticeable as when things go wrong. On the other hand, I would have noticed if I had had an extra form to fill in. That is one of the challenges of my present job. I think what I would like to do - and I mentioned I have already met with some representatives of the business sector to talk about precisely this issue - is to be very responsive to the concerns that those representative organisations and also individual businesses have. I am very impressed by the Better Regulation Executive website which has a portal for individual businesses to raise concerns that they have about bad examples of regulation and frustrating examples of regulation. I think that responsiveness within our organisation to the concerns of the sectors and also the perceptions, if we are responsive, is hugely important. I do think we have made a lot of progress but there are always going to be examples of businesses being very frustrated by what they see as unnecessary regulation, and I think the Department and also the Better Regulation Executive have tried to create a structure within which it can respond to those concerns when they are expressed, and I think we need to improve that.
Q141 Judy Mallaber: Does it matter to you that your successor as the Oswestry solicitor is not aware? Are you going to write to him or her or just hope that you do not get a complaint on the portal?
Ian Lucas: I hear loud and clear when the individuals I used to work with are dissatisfied with things and I am always listening!
Q142 Judy Mallaber: But you reckon it is perception and not reality?
Ian Lucas: If you look at
the independent statistics and reports to which you referred, the World Bank
ranks the
Q143 Judy Mallaber: Can I move on to the area which obviously needs regulation but which causes frustration: employment and health and safety issues generally. What progress has been made on the pilot helpline for SMEs that was meant to be established under the Anderson Review which suggested a helpline on those issues?
Ian Lucas: The Anderson Review was a document which was broadly welcomed by government and many of the recommendations that were made by the review have been agreed to be taken forward. I think there were ten recommendations and nine of those are being taken forward. There was a suggestion, for example, that we were going to have one year's free access to assured advice on employment and health and safety regulation. This was to ensure that businesses who have taken advice from government on employment issues do get that advice, so we have accepted that recommendation, at least in part, and we are carrying out the pilot. We have announced the strategy in June and we gave a commitment to run some pilots to explore this and they are going to be run between June of 2009 and April of 2011 and we are going to be focusing on tailored and assured advice to help those businesses comply with employment and health and safety law.
Q144 Judy Mallaber: Is that helpline too recent - we were told it was set up in the spring - to yet have learned any lessons from it? Do we know if it is being used? If you do not have that information can we be sent anything that you do have?
Ian Lucas: I think it is even more recent than that. The pilots are going to run from June and therefore I need to give you more information on that as it comes through.
Mr Rycroft: We will be watching this very closely because I think this is an absolutely critical area, that interface between particularly small business and that body of regulation and helping them to traverse that complex territory. We will be keeping a very close eye on this, watching what lessons we can learn from it and we certainly look forward to coming back to this Committee and sharing that knowledge with you.
Q145 Judy Mallaber: I think if we could have that information and also if you feel that in the future that it is a model that could be applied more widely to other sectors that would be very helpful.
Mr Kohli: Indeed, that is the key question. This is potentially enormously powerful. The idea that a small business can ring up a phone number and that phone number will tell businesses what to do. The thing I hear from small businesses up and down the country is, "We believe in regulation. We all think it is a good thing. We understand why you have it but why can you not just tell us what to do and then we will do it? It is all so complicated. It is hard to get your head round." That is what we are going to do. We are going to give them a phone number and say, "Ring this number and they will tell you what to do and you can just do it. If you do it and you find yourself facing an issue in terms of employment law or health and safety law then you will be covered as a result of the helpline." It sounds like a brilliant idea. We need to check whether it works and that is what the pilots will do. If it does work then I know that a number of other regulators in other areas of policy are already thinking about whether this idea can be translated across the board. I am terribly grateful to Sarah Anderson for coming up with this idea and really hearing from the business community what will make a difference and coming up with a very innovative idea in that area.
Q146 John Hemming: That leads into this area of how you can develop co-operation between the regulators and the regulated to try to make sure that people are doing the right thing. There are two angles to that. One is that you have the assured thing, the concept that if you do what you are told you will not get a kicking for it, which is important, and the other one is from Clive Davenport of the Federation of Small Businesses who said: "The problem we have is that, when a regulator comes into a business, it is perceived, sometimes correctly, sometimes incorrectly, that he is there to penalise you ... and therefore you do everything you can not to tell him anything in case it could result in a penalty." You have this problem to what extent regulators can be encouraged to have off-the-record discussions on compliance with businesses that permit sensible dialogue without prejudicing enforcement. In a sense, it goes both ways because they cannot forget what they have been told but the question is whether it could be used in evidence against them.
Ian Lucas: I think that it is always difficult to give blanket immunity in a case. If there were an extreme case of particularly bad behaviour it would not be appropriate for me to sit here saying there should never be a case where action should be taken, but I hope what I have conveyed already the type of relationship that I would like to see between the regulator and the regulated. It is a relationship that would be based on mutual understanding, that businesses have businesses to run, so the regulator must understand that, but the regulator also has his responsibilities in terms of ensuring that appropriate regulation is properly enforced. I think the first key issue is communication and information so that business understands that the regulator has a role to play and understands what the focus of that regulator is, and that the main risks, the key risks, are the most important risks and the ones that need to have his main focus of attention. I think that a good policy of communication between regulator and business would mean that those key risks are identified and become a better focus for the individual business. That is about a continuing relationship between the regulator and the regulated and I think that at the heart of that is very, very good communication and real understanding of the shared goals that both business and the regulator should have.
John Hemming: Going through that I think I may have a declarable interest which I have previously declared in this Committee as being a director of an FSA-regulated company where there is that sort of conversation going on. If I need to declare it, here it is.
Q147 John Penrose: Could we move across to impact assessments and the quality thereof. There has been a lot of discussion about the variation in quality and ways to improve and one of the suggestions has been to increase the amount of external validation and audit and commentary on the accuracy and quality of the numbers, particularly from businesses if they are the ones on the receiving end of regulation. I suppose the same thing might apply to public sector organisations too. Do you think that is a good idea and, if so, how would you make that progress work?
Ian Lucas: I think transparency is a very good idea. Impact assessments are a hugely powerful tool and I think that the more open they are and the clearer they are in terms of the aims that the policy has and the measure of the impact that that policy has the more impressive they are as a tool for government. We are very committed to that. We are taking forward more and more public scrutiny and what we are trying to do is really develop that. We are going to have a forward programme of publishing the impact assessments which is going to be taken forward from the summer and we want to take that still further forward by trying to pull together a clearer benefit/cost ratio agenda which we are going to be taking forward in the autumn.
Q148 John Penrose: I am talking about external audit by businesses or others. Do you have a programme of that at all?
Mr Kohli: One of the reasons for setting up the Regulatory Policy Committee is precisely to tackle this issue. I believe the quality of impact assessment has improved enormously over the last few years and indeed National Audit Office reports say that the quality of impact assessment has improved, but they identify, and others have identified, a gap in the UK machinery, which is where is the external scrutiny of impact assessment? To some extent, that external scrutiny is there and it comes much more effectively from the business community through trade bodies, et cetera, than it used to because the new impact assessment is much easier to scrutinise than the old one. However, there is still this gap and that is what the RPC will hopefully fill.
Q149 Chairman: Can we be clear on that, Mr Kohli. Are you saying that the RPC will have the power to change impact assessments and direct action based on those changes?
Mr Kohli: I am saying the RPC will have the power to comment publicly on the accuracy of estimates in impact assessment.
Q150 Chairman: So in the new regime who will have the power to change impact assessments?
Mr Kohli: It slightly depends on how it works in a particular case and each case will be different, so you can imagine a case where the RPC has an early conversation with a government department where a government department shares an early draft of the impact assessment and the RPC says, "We just do not believe these numbers and if you were to put them out into the public domain we would come along and tell you publicly that these numbers do not work for us and the correct numbers would be X, Y and Z." I think it would be a fairly odd thing for the department to take no notice of that early advice from the RPC about its intention in a future public document. So that is the kind of dynamic you want. Do you really want a dynamic where the RPC publishes reports all the time saying impact assessments are wrong? No. What you want is the pressure to lead to impact assessments being better in the first place.
Ian Lucas: The power of that process is in the transparency of it, the fact that this information is going to be public, which is why I talked about transparency at the outset. It would be a very, very rash department that would go ahead with an impact assessment that it had been advised by the RPC was not a suitable or a good one.
Q151 John Penrose: A related point on this. Given the changes to the impact assessment templates which you two have mentioned, it looks as though post-implementation review is going to be very much more frequent. Are you envisaging it happening in every case or the majority of cases, in which case which ones will get the treatment? How are you going to deal with that in the future?
Ian Lucas: I am a great believer in post-implementation review. I think Parliament should do a lot more of it. One of the weaknesses of, for example, the introduction of legislation is that in the past there has been a tendency to believe that once we have passed a bill then our job is finished, and I think that is entirely the wrong approach. Across the piece, whilst we may not have an individual review in each individual case, I think it is always the right thing to see how information is being rolled out.
Q152 John Penrose: I am with you on the principle. What I am trying to get at is how many instruments and bits of legislation will it apply to? Will it apply to everything or will it apply to just some, in which case which ones?
Mr Kohli: What government departments are required to do under the new impact assessment template to which you referred is say, "When do you intend to find out what the real costs and benefits were through a post-implementation review process?" The impact assessment template has not been in place that long and so people have written dates like 2010, 2011, 2012 or 2013. I think it will be the role of Parliament, the BRE and external bodies to come to a government department and say, "You passed a piece of legislation a few years ago and you said that you were going to do a post-implementation review in June 2011. Well, actually it is August 2011, where is your post-implementation review?" That external scrutiny would be on a case-by-case basis.
Q153 John Penrose: That is everything then?
Mr Kohli: In some cases departments may have found ways to explain that there may not be a need to do a post-implementation review. I would hope that Parliament and stakeholder bodies held them to account at the time and said that was unacceptable. There will be cases where that did not happen though.
Q154 John Penrose: But the assumption is everything.
Mr Kohli: The default is you have to do it.
Mr Rycroft: Just as with a lot else we have discussed this morning in terms of shifting that boundary and the expectations going forward, this is another critical juncture, in a sense, in our capacity to understand how regulation is working. The fact that we can now ask the question and expect people to be able to demonstrate what they have done in response to that again becomes quite a powerful tool in our kit. We will be keeping a very close eye on this and again it is something that we would expect to bring back to the Committee over time.
Q155 John Penrose: Swiftly moving on to EU impact assessments of one sort or another, clearly the process that the EU goes through starts very early and the impact assessment comes along at some point later on in the process. Are we getting in early enough in the discussions of draft Directives or should we be getting the EU to do it earlier in its process?
Ian Lucas: I think the key is to be in there at inception and if not at inception as early as possible in respect of any proposed legislation that is being brought forward. I have had experience of this as a constituency MP with a business in my constituency when they have seen on the agenda an individual proposal that causes them concern. I think Members of Parliament can play a really valuable role here in terms of flagging up anything that is raised with them, with the Department in the first instance so that we are aware of the specific concerns that are being expressed, because sometimes those concerns are ill-founded and we can resolve the difficulty fairly easily, but the earlier we know about it the better. We want that to be a process that we are taking forward in a very aggressive way where we ensure the concerns are addressed as soon as possible.
Q156 Gordon Banks: The Risk and Regulation Advisory Council's paper Response with Responsibility recommended a Public Risk Commission with a range of objectives. What is your view of this Commission and could you comment on its membership and funding?
Ian Lucas: The RRAC has made a really valuable contribution to this hugely important issue of public risk and policy-making. It has brought forward the report and we are considering at the moment that report, its content and reflecting upon the recommendations that it has made. We would really like to take on board the points that it is raising and we are actively considering it as we speak.
Q157 Gordon Banks: So you think there might be some merit in it?
Ian Lucas: Absolutely. It has been an important piece of work and it is something that we want to take forward.
Mr Kohli: There is certainly merit in having a better understanding of public risk across our society. I think the question that remains unresolved is whether the right way of achieving that is by setting up a new body or whether in a world where we are setting up the Regulatory Policy Committee and an NEC Sub-Committee it makes more sense for much of the work to be carried forward by existing structures. If there is some gap that remains which existing structures cannot pick up then there is a question as to whether it then makes sense to set up a new body, and that needs a bit of working through internally.
Q158 Gordon Banks: Because that is a real worry that there are so many bodies doing so many factions of an agenda that you could get to the position where nobody - and I mean the public and business and the regulated - knows who is responsible for doing what and that is probably as bad a situation as we could get?
Mr Kohli: Absolutely, and that is the risk that government needs to weigh up and that needs a little bit more internal thinking.
Ian Lucas: We have talked a lot about risk this morning already before we got on to this particular question. Clearly a lot of these areas cross over with each other and we are considering how best to create the structure that is going to deal with that issue best.
Q159 Gordon Banks: I am not meaning to be too personal but there have been management changes in BRE and we have already heard about the RPC this morning and the role that that would play. I suppose I am giving you an opportunity to sum up anything you have not said. What is the future of the regulatory reform agenda and what are the major challenges?
Ian Lucas: Clearly we have got a new department in place - Business, Innovation and Skills - and I know concern has been expressed on the fact that the Regulatory Reform title is now no longer there in the Department. Similar concerns have been expressed by universities in a different context. I would make it absolutely clear that regulatory reform and its importance to business is at the heart of the Department's agenda because it is such an important part of any successful business. It is not an add-on; it is part of the core, and therefore the importance of the regulatory reform issue is expressed in my title of Minister of Business and Regulatory Reform. As I said earlier, it is a very, very important and also exciting agenda. It is a difficult agenda for many of the reasons that we have been discussing and you on this Committee have long performed a valuable role in taking forward where I think there has been real progress in this area. We have discussed the new structures that are going to be set up because we want to improve on what we have done so far. I also think that one of the key things I want to take forward is the responsiveness of the Department to business. I have just touched on the way that Members of Parliament can help in terms of flagging up difficulties from their own constituencies. I want it to be a very responsive department because I think that will make us do our jobs better and our job is to take forward better regulation. That is the aim.
Q160 Gordon Banks: Would you agree that one of the overarching ambitions must be to see the regulated seeing the regulator as a partner instead of someone who is out there to get them and going to cost them a lot of money and therefore they will tell them what they need to tell them and what they do not need to tell them they will not tell them?
Mr Kohli: I have two observations on that. One is the very valuable questions you were asking on communications earlier and how do we get the message out on the good things that are happening. Indeed, we have bought for the Committee a set of materials that we are using to communicate out to businesses which you may be interested in. The other thing to mention, I suppose, is that we have a public indicator to improve the perception of business in relation to regulation. It is a little bit more complicated than asking is there more or less regulation because we have talked about that one before. It is about do you think regulation is fair and proportionate, which very much gets to the heart of your question around partnership and trust between regulators and the regulated.
Q161 Chairman: We presume this note will include details of the MPs' hotline that the Minister has just perhaps alluded to! On that note can we thank you very much for your attendance and your very frank responses to our questions. Again, can I say, Mr Kohli, we wish you well in your future career and, Mr Lucas and Mr Rycroft, we look forward to working with you in the next session. Thank you very much.
Ian Lucas: Thank you very much.