Annex
CBI submission to the Davidson Review of
implementation of EU Legislation in the UK
INTRODUCTION
1. The CBI welcomes the opportunity to submit
evidence to and comment on the work of the Davidson Review team
and also to re-emphasise some of the general points that we think
are important to the delivery of better regulation. We look forward
to working closely with the team as the Review progresses.
2. The Confederation of British Industry
(CBI) is the. national body representing the UK business community.
It is an independent, non-party political organisation funded
entirely by its members in industry and commerce and speaks for
some 240,000 businesses that together employ around a third of
the UK private sector workforce. The CBI's membership includes
80 of the FTSE 100, some 200,000 small and medium-sized firms,
more than 20,000 manufacturers and over 150 sectoral associations.
3. The CBI supports the Government's commitment
to ensuring that EU legislation is not implemented in the UK in
a way that imposes unnecessary burdens on business; a commitment
illustrated, for example, in the Cabinet Office's transposition
guide on how to implement EU Directives effectively, and of course,
by the commissioning of the Davidson Review.
4. The CBI supports the aim of the Davidson
Review to bolster the productivity of the UK economy. We believe
that timely and coherent implementation of EU legislation, and
effective enforcement by relevant authorities in EU Member States,
is key to creating a level playing field in the internal market
and ensuring consistency and stability in the regulatory environment.
5. There is no doubt a need to review existing
legislation and how it has been implemented in the UK and to correct
any irregularities that exist under the current regulatory regime.
The remit of the Davidson Review is limited to identifying instances
where EU-derived legislation has been over-implemented and making
suggestions for which individual pieces of regulation could be
simplified, but the CBI agrees with the Review team that work
to address over-implementation of EU legislation in the UK must
address all issues surrounding the implementation process.
6. In the end it is the appropriateness
of legislation and regulation, allied to the way in which it is
implemented and enforced, that will determine the success of a
regulatory regime. Therefore, "better regulation" must
mean ensuring that any new legislation and regulation that is
created, at EU or UK level, adheres to the Better Regulation Commission's
(BRC) principles for good regulation: proportionality, accountability,
consistency, transparency and targeting. So, as well as simplification
of existing regulation, the CBI would emphasise the need to put
effort and resources into improving the process by which EU legislation
is made and then implemented in Member States.
7. It is malfunctions in this process that
ultimately cause problems for those on the receiving end of regulation.
Any examples of over-implementation of EU legislation in the UK
provided in this submission are symptoms of a process that is
complex and causes concerns for many companies, in many sectors,
regarding the nature and standard of legislation emanating from
the tripartite EU legislative structure.
8. Ultimately, what business wants is a
targeted and effective regulatory and enforcement regime that
is effective, efficient and joined-up and works to high standards
of consistent delivery. This allows companies to plan effectively
and with certainty, and gives them confidence to expand across
the European internal market.
PROCESS-RELATED
CONCERNS
9. There are certain aspects in the process
of creating, transposing and implementing EU legislation that
CBI members have identified as being of particular concern for
business. The main issue is appropriate "timing" at
the different stages in the process, but linked to this are also
consistent and clear implementation and good consultation with
stakeholders. These things are essential for creating the desired
level playing field in the internal market and consistency and
stability in the regulatory environment.
10. While we recognise that this is outside
the direct scope of the Davidson Review, the examples cited in
this submission reinforce the importance of our broader messages
on the legislative "process". These messages are also
recurrent themes in discussions that the CBI has with its members
on better regulation. Therefore, and considering the importance,
of addressing all issues surrounding over-enforcement EU legislation
in the UK, we find it relevant to include a discussion on "process".
11. Examples highlighting the points made
in paragraphs 12 to 43 are outlined in Annex 1.
1. Timing
12. The CBI agrees with the EU Commission
in its statement regarding the importance for Member States to
engage in the better regulation agenda at EU level in order to
"guarantee that legislation is designed and implemented efficiently,
under a common strategic approach"[2].
We believe that the quality of EU legislation and subsequent implementing
regulation can be improved by early and timely engagement by UK
officials and stakeholders in the EU legislative process.
13. There is a view within the CBI membership
that UK government departments and officials do not monitor and
get involved in the negotiation, transposition and implementation
of European law as early and as systematically as they should.
There must be consideration of how a European proposal will be
implemented in the UK throughout the regulatory process, from
formulation, to negotiation, to implementation. It is too late
to begin thinking about the practicalities of implementation once
a directive has been agreed.
14. So, it is encouraging that there seems
to be recognition within the Government that many potential problems
related to the implementation of EU legislation could be avoided
if UK representatives were involved in negotiations at the very
earliest stage, preferably before a proposal is formally published
by the Commission.
15. The CBI notes that the Cabinet Office's
guide on transposition clearly states that policy makers and government
lawyers should "consider at the earliest possible stage how
a proposal will be implemented in the UK" and that they should
"think about how best to shape a proposal, both before and
after formal publication by the Commission".[3]
It encourages officials to engage more proactively with policy
development at EU level.
16. We also agree with the Government's
policy that Regulatory Impact Assessments (RIA) should be drawn
up at the earliest possible stage and include a cost benefit analysis.
The RIA should then be used throughout the process and inform
the UK's policy and negotiating line. This also encourages early
engagement with business and consideration of the expertise available
within the business community in a range of policy areas. CBI
members report that this stage is too often over-looked in the
process of arriving at an agreed EU directive. However, it is
felt that early consultation with business could help alleviate
difficulties experienced at implementation stage.
17. One area where this early involvement
in the policy-making process seems to be happening is financial
services. There is engagement by both government officials and
business representatives at the earliest stage at EU level to
influence policy-making. CBI members report that the Financial
Services Authority, for example, has a policy team that ensures
this early involvement from the very start of the policy and decision-making
process in Brussels to influence what any given directive will
look like, with consideration for what is needed for smooth implementation
in the UK as the starting point. Financial services legislation
is also an example of where the UK has a good track record of
implementing legislation on time.
18. Ultimately this is about good project
management; a key concept in business that should be used more
extensively and effectively throughout government. A fundamental
component of project management is planning. It seems that lack
of proper planning has in some cases caused problems at implementation
stage, for example, where departments have been late with issuing
consultations and guidance.
19. The 2003 report by Robin Bellis on implementation
of EU legislation suggests that a UK project team should be set
up as soon as the Commission publishes a proposal, in the same
way as Bill teams are formed at national level. The team would
then be responsible for assessing the impact of the proposal on
the UK legal system and stakeholders and agreeing a project plan
and timetable, which allows sufficient time for the drafting of
implementing legislation with appropriate consultation. The CBI
would strongly support adoption of such an approach to dealing
with proposed EU legislation.
20. In addition, if a good project plan,
with a clear timetable for action, is drawn up from the start,
the project team and stakeholders have a document to refer back
to throughout the process from proposal to implementation. A good
initial project plan could also provide an "audit trail"
and help, in tracking changes to directives as they pass through
the legislative process, as well as provide information generally
of developments at each stage of the process. This is important
as there are often substantial changes made to a draft directive
before a final text is agreed. In addition it would be a way of
ensuring that the collective memory of the project team is not
lost if staff has to change during the process but can be used
to inform the process right through to implementation stage.
21. A clear project plan and timetable would
also ensure that the Government's policy stance is well recorded
so that regulators and enforcers know what policy objectives are
to be achieved by a certain piece of legislation in order that
they do not have to reinterpret policy. Missed deadlines and misinterpretation
have been a major cause of infraction proceedings. This is another
area where better project planning and a strategic approach could
assist the process.
22. The CBI recognises that officials transposing
directives face a real challenge when deciding whether to elaborate
the text or to "copy-out". Elaboration is seen as a
way of providing greater clarity and certainty and is often valuable
to business. Additionally, the Bellis report notes that copy-out
can sometimes be recommended as it ensures that officials do not
inadvertently change the intent of the directive. High quality
guidance can instead remove much of the ambiguity of the directive
in practice. While recognising the value of guidance the CBI would
stress the need to ensure that its content and tone do not widen
policy aims.
23. The CBI is of the opinion that the appropriate
approach to transposition must be determined on a case-by-case
basis. Since there are often different implementation options,
we would recommend that discussions on how to implement be held
at an early stage in the policy-making process to facilitate decision-making
at implementation stage.
24. As argued above, it is imperative that
officials engage at an early stage in the policy-making process
to avoid the creation of EU legislation full of ambiguities that
then produce uncertainties or gaps in national regulations, leading
to uncertainty for those who have to comply.
1.1 Timing and Guidance
25. Another area where timing is crucial
is in providing guidance to regulated businesses. Guidance has
to be timely to allow business to plan ahead and be prepared for
their new compliance obligations. Late publication of guidance
is not in the "better regulation" spirit of full and
open consultation and good communication with stakeholders. Officers
on the ground must be able to provide timely, appropriate and
consistent advice to business.
26. The Cabinet Office and the Small Business
Service advise officials to have guidance available for stakeholders
12 weeks before the regulations come into force. However, there
are many instances where this has not been the case.
2. Consistent Implementation and Enforcement
27. The CBI has pointed out in the past
that regulatory overlap is a great concern among the business
community. Overlap of areas of responsibility, inconsistencies
regarding interpretation of regulations at different levels within
or between regulators or conflicts between individual pieces of
regulation, cause uncertainty for companies trying to ensure that
they are fully compliant with regulations governing different
areas of their business operations.
28. Business wants clarity and consistency
from government and central government must therefore eliminate
ambiguity about the Meaning of laws and provide guidance on how
laws should be interpreted and implemented through regulation
and by regulators. The Government should identify precisely who
among government and regulators is likely to be affected by new
regulatory proposals and make sure that they are all informed
about any new developments. In addition where it is unavoidable
to have two or more regulators responsible for a particular regulatory
area, the Government must also clearly set out which regulator
has the lead responsibility. Businesses need to know which regulator's
decision to follow or have a single interpretation of how to deal
with conflicting rules, agreed by the different regulators.
29. Failure by the Government to provide
information on interpretation and implementation, results in EU-derived
legislation being implemented and enforced by local enforcement
staff who may have had no involvement in the policy-making process
and who, due to lack of guidance from central government, have
to interpret regulation. This leads to regulatory creep and inconsistencies,
as each enforcement unit applies its own interpretation.
30. It is also essential for officials working
on a specific directive to provide information to any departments
that may be affected by the directive. For example, officials
in charge of the planning system need to be aware of waste regulation,
for example in relation to the number and range of waste facilities
likely to be needed as a result of the Landfill Directive. There
is also a need to inform the public of the costs of environmental,
regulations, as some of business' compliance costs may have to
be passed on to customers.
2.1 Flexibility
31. As previously discussed, because of
its nature, EU legislation can sometimes be ambiguous, which means
there is room for different interpretations of how it should be
implemented.
32. Therefore it becomes even more important
that there must be a flexible and understanding approach from
regulators towards business. For example, firms and regulators
need to be able to decide jointly what the optimum way of handling
risk is. Regulators should have the flexibility to be able to
accept different ways of dealing with a situation rather than
having to enforce inflexible rules pedantically. It is the way
that laws are interpreted and applied in practice that makes a
big different to business.
33. It is a general problem, however, that
at present if there is disagreement between a regulator and a
company on interpretation, the main way to settle the dispute
is by going to court. This means that in most cases, firms will
back down both because it is generally much more expensive to
go to court than to comply with the regulator's interpretation
and because there are reputational issues at stake for the firm.
Regulators should be encouraged to work with business to avoid
this type of situation and to build more constructive relationships
with business to allow for problem solving and early resolution
of disputes.
2.2 A level playing field
34. The CBI believes that it is important
that officials who transpose directives at national level are
encouraged to monitor how directives are transposed in other EU
Member States. In this way UK officials would learn both about
good and bad practice in other countries. This type of exercise
could also lead to great consistency of transposition and implementation
of EU directives across Europe.
35. Inconsistencies in this area cause difficulties
for business operating in more than one EU Member State since
they may have to deal with several versions of one directive at
any one time. This also counter-acts the creation of a level playing
field in the internal market. CBI members have reported that UK
officials are often reluctant to engage in learning about what
happens in other Member States and there is a feeling that, at
the moment, it is largely up to business and other stakeholders
to provide evidence of good or bad practice in other European
countries.
36. Especially in the area of environmental
regulation there seem to be big disparities in terms of how regulations
are interpreted in different countries. For business this creates
significant problems and means that there is not a level playing
field in the internal market.
37. Extending the Lamfalussy process to
industries other than financial services might be a step towards
more streamlined European legislation and of ensuring greater
consistency in implementation of EU directives at national level.
38. The CBI thinks that it would be useful
to have a comparison of the implementation of EU legislation in
the UK and how it is done in other Member States to enable an
analysis of the differences and the reasons for them.
3. Consultation
39. New legislation may have significant
consequences for business. Therefore, the CBI thinks that there
should be consultation with stakeholders at the start of any legislative
proposal. There is wide-ranging expertise in companies about how
to deal with regulated areas of business and we believe that the
end-result would improve if, when new legislation, regulation
and compliance guidance are devised, full consultation is undertaken
with business.
40. The consultation should include the
possibility, of alternatives to traditional regulation, such as
information campaigns, the open method of co-ordination, co-regulation,
social partner agreements and sectoral agreements.
41. To avoid stakeholder fatigue and cynicism,
it is imperative that consultation is well-organised and relevant.
This may mean going further than having an on-line consultation
document. Arranging stakeholder events is one way of teasing out
and addressing the real concerns surrounding a policy proposal.
For example, the proactive good practice demonstrated by the Health
and Safety Executive (HSE) in its work with stakeholders on the
RIDDOR Review in 2005 could be transferred to other agencies and
government departments seeking to review or implement legislation.
For the HSE, the consultation on RIDDOR did result in a delay
to the expected time-scale for change, and the possibility of
delays must be recognised by regulators and taken into account
when planning the consultation process and time-scales.
42. Consultation should also take place
with key players on the issue of information about implementation
and enforcement. All players who have a role in implementing changes
should be involved as their involvement is needed in ensuring
preparedness, timely implementation, and subsequent compliance.
43. The CBI is pleased that Cabinet Office
guidance encourages formal consultation as key to seeking stakeholders'
input and states that consultation should take place at the first
reading of a Commission proposal and during the negotiation phase,
and once the proposal has been adopted a consultation should take
place on the transposing regulations. The Cabinet Office's transposition
guide states the importance of ensuring appropriate co-ordination
and consultation within government, including devolved administrations,
agencies and local authorities.
THE IMPORTANCE
OF CULTURE
CHANGE
44. The CBI is encouraged that there is
recognition by the Government that EU legislation has not in all
cases been brought into effect in the UK in the least burdensome
way possible and that business and other stakeholders are concerned
about process failures and over-implementation.
45. We recognise and welcome that the Government
has put systems in place to deal with many of the issues and problems
discussed above and to ensure that EU legislation is not over-implemented
in the UK. the most important thing will be to make sure that
the guidance is followed and that the "culture-change"
that it encourages takes place. Business will judge the Government's
performance on delivery.
May 2006
2 EU Commission (2005) Communication "Better
regulation for Growth and Jobs in the European Union"-COM(2005)
97 final. Back
3
Cabinet Office (2005) Transposition Guide: how to implement European
directives effectively. Back
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