APPENDIX 8: LETTER FROM THE MINISTER
TO THE CHAIRMAN ON THE DRAFT REGULATORY IMPACT ASSESSMENT
Thank you for your letter of 19 June with some questions
on the Draft Regulatory Impact Assessment which accompanied the
Draft Bill. The answers to your questions are as follows:
1. What precisely is meant by the potential for a
'reduced burden on the frontline' in the context of the replacement
of HFEA and HTA with RATE?
This quote is from paragraph 4.9 of the draft RIA
which discusses the announcement in 2004 of the decision to establish
RATE. This decision followed the conclusions and recommendations
of the review of the Department's arm's length bodies published
in Reconfiguring the Department of Health's Arm's Length Bodies.
The objectives of the review were part of a wider process to improve
efficiency and cut bureaucracy in the management of the NHS; and
to reduce burdens on and free up resources for the NHS.
In its conclusions, the review report at paragraph
10 of section 2 drew attention to the many similarities between
the HFEA and the HTA. Among other things they both will be competent
authorities under the EU Tissues and Cells Directives, they regulate
ethically sensitive areas and focus on technical matters of safety
and quality and set standards.
The reduced burden comes from having one authority
rather than two (or three if the work of the MHRA is included)
to regulate this sector, thus
- reducing the number of bodies
that establishments have to deal with,
- potentially reducing costs associated with having
several bodies regulating in one or similar sectors,
- potentially reducing the number of inspections
of establishments undertaking more than one activity subject to
licensing or inspection,
- making regulation more effective and more efficient
by building-in flexibility into the legislation to enable the
Authority to delegate more widely or contract-out if that is more
effective
- making it a statutory requirement for the Authority
to regulate in accordance with the principles of Better Regulation,
which are set out at Annex A [submitted but not printed].
2. Does 'rationalisation' of blood establishments
and inspection costs mean that closure and subsequent job losses
can be expected?
3. Has the Department made any estimate of the potential
savings from 'rationalisation' of blood establishments?
The wording at paragraph 4.12 is not, unfortunately,
as clear as it could be. There is no intention whatsoever to rationalise
blood establishments and it would not be within RATE's power to
do so in any event. The intention here was to say that there may
be potential for cost savings if the costs of inspections can
be rationalised for those blood establishments that also store
tissue. In these cases RATE could carry out an inspection to cover
both blood and tissue licences, for example at sites operated
by two blood establishments.
4. If RATE assumes the regulatory functions of the
MHRA, what is the rationale for the decision not to transfer relevant
MHRA funds directly to RATE?
The MHRA does not receive funding from the Department
to undertake its regulatory functions in respect of the safety
and quality of blood and blood components. The Agency is a Government
Trading Fund and is required to recover the full costs of the
services it provides without cross-subsidisation and it recovers
the cost of supplying these services by charging fees to blood
establishments and hospital blood banks.
Likewise, RATE will be expected to recover its costs
associated with its regulatory activity in this area from fees
charged to blood establishments and hospital blood banks. However,
given the flexibility afforded to RATE by this Bill, the Authority
could if it wished decide to seek to contract with the MHRA or
another organisation to carry out this function on its behalf.
5. Some responses to the consultation exercise expressed
concern that the merger of HTA and HFEA into RATE could lead to
'another layer of bureaucracy' or a 'reduction in the quality
and level of oversight.' What assurance can the Department provide
that these concerns will prove unfounded?
The purpose of the Department's ALB review was to
save costs and reduce bureaucracy. In establishing RATE this remains
our intention, reducing also the number of bodies to which establishments
have to report, the number of bodies carrying out inspections
and providing the necessary flexibility for RATE to carry out
its statutory functions in line with Better Regulation. As such
RATE will reduce the level of bureaucracy while providing proportionate
and joined-up regulation across the whole sector.
6. What level of consideration was given to option
4, updating the Human Fertilisation and Embryology Act 1990 but
retaining the HTA and HFEA, and what are the reasons for its rejection?
All the options were considered fully by Ministers.
Account was taken of all the arguments for each option as set
out in paragraphs 4.27-4.44. These include potential cost savings
and the establishment of a more effective and efficient body with
the necessary flexibility to undertake its regulatory and advisory
functions in accordance with the principles of good regulatory
practice.
It follows developments in the field of regulation
(as discussed below) by establishing a smaller more strategic
board, but retaining necessary expertise, with expert advice being
available to it as necessary by high level panels comprised of
experts in a range of disciplines. This ensures accountability
and transparency in decision-making, with the panels providing
advice and options to the board, who retain the responsibility
for making decisions in the light of that and other advice received.
Accountability is further enhanced by having a member of the board
as chair of each of the expert advisory panels.
We also recognise that concern has been expressed
with the current model of regulation by the HFEA and the HTA.
This has been presented by various professional bodies[199]
in correspondence with the Department as well as by the Science
and Technology Committee in its Fifth Report of Session 2004-05[200].
In the light of all the evidence we took the view
that a single regulatory body, with high-level expert advisory
panels established by statute and with a clear remit, and working
under a flexible framework established by Parliament, would be
the best approach to regulation in this area. This model recognises
the need to harmonise regulation in order to ensure consistency
across the whole sector, while avoiding the potential for gaps,
such as those discussed recently in respect of stem-cells, to
appear in regulation.
The use of expert advisory panels would also meet
any criticism that the advice received by the Authority was partial
and not transparent.
It also recognises the direction taken by the EU
in its Directives concerning standards of quality and safety for
the donation, procurement, testing, processing, preservation,
storage and distribution of human tissues and cells; and blood.
These Directives cover the whole range of issues to be regulated
by RATE and, in our view, it would be disproportionate to maintain
three competent authorities when regulating across similar sectors.
Certainly, if we did not already have the HFEA, HTA
and MHRA in place as competent authorities and were faced now
with the Tissue and Blood Directives, we would be unlikely to
be proposing the establishment of three authorities to deal with
their subject-matter.
We do note the concerns that have been raised as
to the remit of RATE and whether this would be too wide for a
single authority. However, we take the view that RATE would be
established, primarily, to regulate tissue, albeit a range of
tissue in various circumstances. As I have mentioned above, the
model we have proposed for RATE, involving a smaller board containing
both professional and lay expertise and with advice being available
to it from expert panels, is one that has been adopted successfully
elsewhere.
I attach for the committee's information a table
at Annex C [submitted but not printed] that sets out details
of a number of bodies with the same or a similar configuration
and each with a much wider remit than that proposed for RATE.
Some of these bodies, such as OFCOM, were the result
of mergers of smaller organisations and your Committee may be
interested in the merger into OFCOM which has been audited by
the NAO[201]. According
to the NAO Report, published in July 2006, the main drivers for
creating a single regulatory body were to respond to rapid change
and ongoing technological development, to remove overlap of existing
regulation; and to incorporate EU obligations. The NAO found that
OFCOM had achieved some 13% efficiency savings[202]
while concluding that the merger into OFCOM was achieving many
of the benefits expected[203].
7. Have the £10m indicative costs of compliance
with HFEA's Code of Practice been independently verified?
8. Can the Department provide a breakdown of compliance
costs by type of licence holder?
The cost of compliance of the HFEA's Code of Practice
was quantified during the Administrative Burden Measurement Exercise.
This was a cross-Whitehall project carried out by departments
and PricewaterhouseCoopers which measured the administrative burden
on business stemming from all regulation in place as of May 2005.
The indicative costs were arrived at through a variety of survey
methods with experts and business representatives.
We do not have available a breakdown of the costs
by type of licence holder.
9. Has the transitional £2m to £6m cost
range for the establishment of RATE been independently verified?
Yes. As explained in the RIA, the £2m-£6m
figure does significantly depend on the ultimate location of RATE.
In order to best assess the various options for the location of
RATE, the Department asked external consultants to identify and
cost various options. The £2-£6m figure stems from that
exercise.
10. Under what circumstances would transitional costs
be at the a) high b) low end of the range?
11. Who will decide upon the location of RATE?
12. Are there any timing considerations concerning
the location of RATE that might impact upon transitional costs?
13. Have any London civil estate properties already
been earmarked for RATE?
In terms of transition costs being at the higher
or lower end of the scale, broadly speaking, the more that changes
from the existing set up of the HTA and HFEA, the higher the transitional
costs. This encapsulates chiefly the location of RATE, but includes
among other things terms and conditions of staff, IT systems,
any potential redundancy costs and consultancy support if required.
The location of RATE will be decided in accordance
with Treasury guidelines by Department of Health Ministers. We
have considered existing London Civil estate buildings as part
of our deliberations, along with locations outside of London and
the South East. There is no significant relationship between the
timing of the decision upon the location of RATE and related costs.
14. Has the £700K annual savings estimate from
the establishment of RATE been independently verified?
15. Can the Department provide details of other regulatory
body mergers that have resulted in savings at 10% or more of operating
costs?
The RIA makes clear that the potential savings of
£700k are a broad estimate based on 10% of the operating
costs of the HFEA and the HTA. As such the savings have not been
independently verified as this is a calculation based on previous
mergers and recognising that some of the savings made will be
used to improve the effectiveness of the new organisation, for
example in setting up and servicing Expert Advisory Panels.
However, the mergers (both creation of new bodies
and merger by absorption to reduce 16 of the ALBs down to 7 bodies—see
Annex D [submitted but not printed]) undertaken by the Department
since 2003/04 as a result of the arm's length body review have
in fact produced savings in grant-in-aid of some 20%—amounting
to some £116m per year. There is also evidence of possible
savings to be made from mergers discussed in the NAO report on
OFCOM, discussed above.
In line with the drivers for the ALB Review we also
expect the establishment of a single body to lead to more effective
and efficient regulation with streamlining across the sector,
taking account of best regulatory practice and a reduced burden
on those regulated. Again, these are efficiencies identified by
the NAO in the establishment of OFCOM and discussed in their report.
The RIA recognises that there are benefits beyond
financial saving, including the rationalisation of regulatory
structures and increased clarity of the law and of the regulatory
process. Among other things we expect this to help reduce the
scope for successful legal challenge and ensure that RATE is better
able to keep pace with current and anticipated developments in
medicine and technology as well as with changing public attitudes.
16. What will a) Grant-in-Aid b) Licence fee funding
for RATE be in its first year, excluding exceptional transitional
costs?
17. Can the Department provide a breakdown of RATE's
likely funding sources after the transitional period?
18. What was total a) Grant-in-Aid b) License fee
funding for HFEA and HTA in each year over the past five years?
The expectation is that the grant-in-aid funding
and licence fee income will not change significantly in RATE's
first year. However, this will depend on the scheme or schemes
determined by RATE for the issue of licences and the fees associated
with them. RATE will be able to raise income from licence fees
under the Human Fertilisation and Embryology Act 1990, the Human
Tissue Act 2004, for authorisations under the Blood Safety and
Quality Regulations 2005, regulations under the EC Tissue Directives;
and from charges for the provision of certain advice and assistance
relating to its activities and in connection with the register
of information.
RATE would also continue to receive grant-in-aid
from the Department.
It is not possible at this stage to say what income
is likely to be generated under each heading as this will be a
matter for RATE to determine, in accordance with the requirements
under the Bill, particularly the requirement not to cross-subsidise
sectors.
The grant in aid and licence fee income for the HTA
and HFEA over the past five years is set out below (2006/2007
accounts are currently being prepared):
HTA
| Year | Grant in Aid
| Licence Fee income |
| 2005/2006 | £1,223,956*
| n/a |
| 2004/2005 | n/a
| n/a |
| 2003/2004 | n/a
| n/a |
| 2002/2003 | n/a
| n/a |
| 2001/2002 | n/a
| n/a |
HFEA
| Year | Grant in Aid
| Licence Fee income |
| 2005/2006 | £6,198,000
| £4,211,459 |
| 2004/2005 | £5,850,000
| £4,124,892 |
| 2003/2004 | £4,211,000
| £3,528,427 |
| 2002/2003 | £3,108,000
| £3,220,558 |
| 2001/2002 | £2,745,562
| £1,574,816 |
19. Will regulatory and compliance costs under Option 3 (revision
of law and structures) be the same as those under Option 1 (do
nothing) i.e. £18m per annum?
The 'do nothing' option will leave regulatory costs in the region
of £8m and compliance costs of some £10m per year. If
the law is revised as in option 3 then we estimate savings of
some £700k per year as the result of forming RATE. In addition,
there will be a further one-off cost of about £0.8m to amend
birth registrations as well as the necessary transitional costs
associated with the establishment of RATE. There will also, under
either option, be additional costs associated with implementation
of the Tissue and Cells Directives.
However, with the establishment of RATE there will
also be a streamlining of procedures in line with the 'better
regulation' principles with the potential for more effective and
efficient regulatory practice.
20. Can the Department provide a list of the representative
bodies with which it has had dialogue?
(a) How many representations has the Department
received from licensed clinics during the consultation process?
During the course of the review of the Human Fertilisation
and Embryology Act officials from the Department of Health have
had dialogue with a range of stakeholders, including bodies representing
patients, clinicians, embryologists and researchers. These discussions
are continuing. In particular, the Department maintains regular
dialogue with the British Fertility Society, an umbrella organisation
for professionals in the reproductive medicine sector.
Annex E [submitted but not printed] lists those organisations
which responded to the Department of Health's 2005 consultation
on the review of the Act, with responses from licensed clinics
denoted in bold type. In addition, officials from the Department
visited a sample of clinics in 2004-2005, prior to and during
the consultation period.
21. The Department states that the proposed measure,
'by reducing direct costs of regulation, will have a positive
effect on small firms.' Has this positive effect been quantified
in monetary terms and independently verified?
22. Why does the Department believe that reduced
regulatory costs can be expected to have a 'positive impact on
supply and therefore a knock-on impact for paying customers?'
While the potential reduction in costs cannot be
accurately identified, we do expect the establishment of RATE
to reduce the costs of regulation and to streamline the way the
sector is regulated. Reduced costs and reduced bureaucracy for
clinics and establishments may find their way into reduced costs
to the NHS as well as reduced costs for those people who use their
services. Of course, it is for the clinics and establishments
to decide whether to pass on any savings, but the establishment
of RATE would create the climate for this to take place. In the
assisted conception sector some 80% of treatment takes place in
private clinics.
The International position
You also asked in the course of oral evidence about
regulation of this sector overseas. While there is much data about
the regulation of assisted conception and embryo research, many
overseas jurisdictions are only beginning to regulate in the area
of tissue. This is in part because, in Europe especially, the
process of regulation is changing in the light of the EU Tissue
and Cells Directives.
The HFEA chairs the European Assisted Conception
Consortium, which brings together practitioners and national regulators
in the area of assisted reproduction within the European Union.
The consortium seeks joint action and encourages consistency in
the interpretation of the EU Tissue and Cells Directive.
The HFEA and HTA also participate in the European
Union Standards and Training in the Inspection of Tissue Establishments
(EUSTITE) project. This is a 3 year project funded by the European
Union which aims to optimise and harmonise the standards and methods
applied by Competent Authorities in the inspection and accreditation
of tissue procurement and tissue establishments within the EU.
While the only current model we know about that has
been set up in a way similar to our proposals for RATE is the
French regulator, Agence de la Biomedecine, which regulates treatment
and research involving both embryos and tissues, we understand
that many other European countries may follow this example.
Part of the problem in obtaining information about
regulation across assisted reproduction and tissue (including
blood) is in the interpretation each country places on regulation
and implementation of the Directives. However, our inquiries across
European Competent Authorities indicates that of 29 countries
(excluding UK but including the EEA/EFTA countries) the majority—27—appear
to have only one competent authority. However, as mentioned above,
this is a developing area of regulation and we remain in close
contact with competent authorities throughout Europe.
I do hope your committee finds this information useful.
CAROLINE FLINT MP
MINISTER OF STATE FOR PUBLIC HEALTH
27 June 2007
199 The Wellcome Trust, Medical Research Council and
Academy of Medical Sciences in their letter of 12 October 2006
in which they said "The HFEA has already struggled to keep
up with its remit under the [1990 Act] and has often been criticised
for not having the breadth of expertise to deal with the relevant
issues facing it. The HTA also appears to struggle with the difficulties
of dealing with such a broad range of sectors and activities."
Also, the Royal College of Nursing, Royal College of Obstetricians
and Gynaecologists and the British Medical Association, in an
undated letter to the Department late 2006 in which they said:
"Both the HFEA and the HTA have found it difficult to ensure
that they have the necessary range of expertise to make informed
and appropriate decisions on matters that have a serious impact
on the lives of many people." Back
200
-extract reproduced at Annex B [submitted but not printed] Back
201
The creation of Ofcom: Wider lessons for public sector mergers
of regulatory agencies: Report by the Comptroller and Auditor
General | HC 1175 Session 2005-2006 | 5 July 2006-available at:
http://www.nao.org.uk/publications/nao_reports/05-06/05061175.pdf Back
202
para 3.12 Back
203
para 3.5 Back
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