Impact Assessments in the EU: room for improvement? - European Union Committee Contents


Memorandum by Open Europe

SUMMARY

  The recommendations and conclusions in this submission are based on Open Europe's "Out of Control? Measuring a decade of EU regulation", published in February 2009.[10] The report was based on information derived from over 2,000 Impact Assessments produced by the UK Government between 1998 and 2008, and was arguably the most comprehensive study ever undertaken of the cost and flow of EU regulations introduced in the past decade.

  Based on these findings, combined with additional quantitative and qualitative research, as well as interviews with people involved in "better regulation" agendas around the EU, Open Europe also assessed the EU's Better Regulation Agenda and gave various proposals for how the Agenda can be improved.

  The evidence submitted is in effect a summary of that report, which also addresses the specific points raised in the Committee's call for evidence.

  We estimate the cumulative cost of regulations introduced in the UK between 1998 and 2008 at £148.2 billion. Of this cost, £106.6 billion, or 71.9 per cent, had its origin in the EU.

  The annual cost of regulation introduced since 1998 has gone from £16.5 billion in 2005 to £28.7 billion in 2008—an increase of 74 per cent. The EU proportion of the average annual cost of regulations is 71.6 per cent, although the proportion differs from year to year. In 2008 alone, EU legislation dating from 1998 cost the UK economy £18.5 billion—up from £12.2 billion in 2005 when the Commission launched its Better Regulation Agenda.

  This illustrates the importance of getting the EU's Better Regulation Agenda right. It also illustrates that while there have been some positive steps taken in the EU to simplify and cut back on existing regulations, the Commission has failed in addressing the flow and cost of new regulations, which continue to impose unnecessary burdens on businesses and the wider economy.

  To address this failure, a radical new approach to regulatory reform is needed both at the EU level and the national level. This approach should inter alia include:

  A new commitment in the EU to the idea of better and less regulation; an independent and powerful European Impact Assessment Board capable of stopping proposals which have not been properly quantified; better targeted and quantified European Impact Assessments; a simple majority in the Council for scrapping proposals, and "€1 in, €1 out" regulatory budgets in the Commission.

  Meanwhile, the link between the EU's and the UK's better regulation agendas needs to be radically improved. In particular, the UK Government must turn both its Impact Assessments and future regulatory budgets into bargaining tools at the EU level, and push harder for new, sweeping improvements of the EU's Better Regulation Agenda, possibly by using its contribution to the EU budget as negotiation leverage.

1.  THE COST OF EU REGULATION

  Based on the analysis of over 2,000 Impact Assessments (IAs), the research makes two main types of cost estimates:

    (a) The cumulative cost of regulations between 1998 and 2008

    (b) The annual cost of regulations between 1998 and 2008

  1.1  The cost of regulation is going up year on year: Since the UK launched its "Regulatory Reform Agenda" in 2005, the annual cost of regulation has gone from £16.5 billion in 2005 to £28.7 billion in 2008—an increase of 74 per cent. Meanwhile, the estimated cumulative cost of regulations introduced in the UK between 1998 and 2008 is £148.2 billion. This is the equivalent of 10 per cent of GDP.[11]

  1.2  EU legislation is responsible for 72 per cent of the cost of regulations in the UK: Of the cumulative cost of regulations introduced over the past decade, £106.6 billion, or 71.9 per cent, had its origin in the EU. Similarly, the EU proportion of the average annual cost of regulations is 71.6 per cent. Overall, the cost of EU legislation has gone up steadily year-on-year over the past decade. In 2008 alone, EU legislation dating from 1998 cost the UK economy £18.5 billion—up from £12.2 billion in 2005.

  1.3  EU labour market laws account for 21 per cent of the total cost of UK regulations: Labour market legislation introduced over the past 10 years has cost the UK economy £45 billion. 67 per cent of this—£31 billion—came from the EU. This means that 21 per cent of the overall cost of new regulations introduced in the UK between 1998 and 2008 can be sourced to the EU's labour market laws alone. The costliest labour market law by far is the EU's Working Time Directive, costing between £3.4 billion and £3.9 billion every year.[12]

  Meanwhile, EU health and safety legislation coming into force in the last decade has cost the UK £6.4 billion. EU agricultural regulations have cost British farmers over £2 billion, and the EU food labelling requirements have cost the UK £1.7 billion over the last 10 years.

  Among UK Government departments, BIS (formerly BERR) is the main facilitator of regulation in the UK. In 2008 alone, the department accounted for regulatory costs to the economy of £12.8 billion (for regulations introduced since 1998)—45 per cent of the total cost of regulation in that year. This was roughly £4 billion more than in 2007—or a 45 per cent increase. Over the past 10 years, 72.7 per cent of the average annual cost of the regulation imposed by BIS stemmed from Brussels. For some departments, such as the Food Standards Agency, DEFRA and the HSE, more than 90 per cent of the cost of arising from regulations has its origin in EU legislation.

  1.4  EU regulations cost the EU €1.4 trillion: We also extrapolated our UK results to reach a cost estimate for the EU as a whole. The cumulative cost of regulation introduced between 1998 and 2008 for all 27 EU member states is €1.4 trillion. Of this, 66 per cent, or €928 billion, is EU-sourced. Since the Commission launched its "Better Regulation Agenda" in 2005, the annual cost of EU legislation across the bloc has gone from €108 billion to over €161 billion—an increase of 50 per cent. However, due to the uncertainties involved in these kind of extrapolations, these figures should be treated with some caution.

  1.5  Conclusions drawn from these figures:

    (1) The EU's Better Regulation Agenda is failing to curb the increasing flow of new regulations impacting on business and the wider economy, and without reform, the cost of regulations will continue to increase year on year.

    (2) Secondly, the fact that a very high proportion of that cost is coming from regulations negotiated not at Whitehall and Westminster but in Brussels and Strasbourg, shows that any regulatory reform agenda in the UK which does not focus primarily on curbing the flow of EU regulations will continue to fail.


2.  THE EU'S BETTER REGULATION AGENDA: TOO MUCH TINKERING AT THE MARGINS

  2.1  Some improvements have taken place as a result of the Commission's "Better Regulation Agenda":[13] Although there are clear problems with the EU's administrative burden reduction targets—for example with the baseline measurement—it marked a break with the past in that "better regulation" is now tied to a specific, quantifiable target. By virtue of being quantifiable and open for all to see, these targets do increase transparency and leave more room for scrutiny of regulators—although still falling well short of what we would consider satisfactory levels of scrutiny.

  2.2  Commissioner Verheugen has been a positive influence: Commissioner Verheugen has broken with the past by emphasising the need to change entrenched attitudes within the Commission's Directorates-General, by criticising the idea of European integration as a process driven by Commission legislation. In 2006 he accused some Commission officials of failing to adapt to "a new political culture", and said: "There is a view that the more regulations you have, the more rules you have, the more Europe you have, I don't share that view."[14] This "cultural change" within the EU must continue.

  2.3  But is the overall situation really improving? While there have been some progress in the efforts to cut or simplify existing legislation in the EU, the European Commission and the member states have largely failed to curb the cost and flow of new regulations, as illustrated by our figures. This is a major shortcoming, as new regulations usually are more problematic for businesses than existing ones, since the flow of regulations forces businesses to continually adjust and develop new compliance strategies.

  2.4  EU initiatives that are presented as "deregulation" too often appear to be of limited value for businesses: For instance, counting deregulation in the number of pages axed from the acquis communautaire is hardly a meaningful exercise.[15] The Commission claims to have removed thousands of pages from the acquis since the Better Regulation Agenda was launched—calling it a "radical simplification".[16] But this does not tell us anything about the content of the removed pages, nor if the content had an actual impact on businesses in the first place.

  Similarly, removing obsolete directives is unlikely to make any difference on the ground. In the Commission's 2008 progress report on the better regulation initiative, removing such acts was identified as one of the achievements.[17] But if these acts are obsolete or "no longer have real effect", removing them cannot be seen as "deregulation", since they had no actual impact in the first place.

  Likewise the Commission's efforts to scrap pending proposals have so far had negligible impact. For instance, when the Commission undertook this exercise for the first time in September 2005, it announced it had withdrawn 68 bills.[18] However, 27 of these were more than five years old and looked unlikely to be adopted anyway, and 22 of them concerned the association agreements signed with the then 10 new member states—bills which all became defunct when the states joined in 2004.[19] Removing pending proposals could potentially prove effective in stemming the flow of regulation, but the responsibility for making sure that meaningful pending proposals were axed would probably need to fall to some independent body.

  2.5  Ambiguity over what "better regulation" means: Most importantly, there is still ambiguity over the central objective of the EU's Better Regulation Agenda. "Better regulation" as a term is meaningless, because it can mean all things to all people. The Commission's Impact Assessments, the first filter that EU laws face, exemplify this confusion. There needs to be a clear message from bottom to top that regulation should be pursued only when it has been shown to be absolutely necessary and that the benefits outweigh the costs to businesses and individuals. The emphasis must be put on result, not process.

3.  EUROPEAN IMPACT ASSESSMENTS: MORE PROBLEM THAN PUNCH

  3.1  So far, European Impact Assessments (EIAs) have had very limited impact on the final outcome of EU policies.[20] Because of their lack of consistency and varying quality, EIAs were not used in our calculations of the impact of EU regulations. EIAs are also produced for far fewer proposals than in the UK. In the five years since their introduction in 2003, there have been only 413 EIAs.[21]

    EIAs almost never lead to proposals being dropped: Since the introduction of EIAs in 2003, we have identified only three cases where an EIA has actually led to a proposal being aborted.[22] Even in these cases it is unclear to what extent this was due to the IA itself or some other reason.[23]

    The Commission's Impact Assessment Board lacks autonomy and teeth: One of the main problems with the EU's IA system is that the IAB is lacking the mandate to take action. For each EIA produced, the IAB gives an "opinion". The IAB has often been quite critical of the EIA system. In its 2007 report, for instance, the IAB identified several problems. Most importantly, it stated:

    "In a number of cases, there was a bias in the definition of options towards the preferred option, often leading to an analysis of options that was too much focussed on the preferred option while other options should have been explored in greater detail."[24]

  However, even where the Board finds that the EIA is presenting the Commission proposal in a biased manner, its opinion is not binding in any way, making its real impact negligible.

    In addition, IAB members—Commission officials—are appointed personally by the President of the Commission, stripping the Board of the vital independence it would need to seriously pick up the fight against the steady stream of new regulations.[25]

    EIAs have a bias towards the preferred option: As the IAB has concluded, EIAs often draw biased conclusions in favour of the option the Commission has proposed.

    EIAs are never updated during negotiations to reflect changes in the proposal: EIAs are almost never updated to reflect amendments made during the often lengthy negotiations in the European Parliament and the Council, making EIAs of limited use once they've left the Commission.

    "Subsidiarity" is only considered in 50 per cent of cases: In a 2007 study the OECD found that less than 50 per cent of EIAs considered a proposal's compatibility with the EU's much-vaunted "subsidiarity" principle—the idea that the EU does not take action unless it is more effective than action taken at national, regional or local level.[26] This means that in more than half of cases, EIAs are failing to properly evaluate genuine policy alternatives, including, crucially, the "do nothing" option.

    Poor quantification of costs and benefits: Costs and benefits have, until recently, rarely been quantified in EIAs, and are still shaky in many cases. Consistent methods for comparing costs and benefits over time are also lacking.[27]

    Consultation and transparency are often absent: According to its own guidelines, when the Commission carries out the EIA, it is supposed to consult business and give them enough time to give feed-back on the proposal that is being assessed. However, this does not always happen. To make matters worse, draft EIAs are not publicly available, making it difficult to find out which of the stakeholders' views have been properly considered.[28]

    Many costly regulations are not subject to EIAs: The Commission's IA guidelines are ambiguous about which proposals should undergo an EIA at all. The Commission's draft 2008 IA guidelines state that "usually" any item contained in its Work Programme ought to be subject to an EIA.[29] This is arbitrary as many costly proposals are not included in the Work Programme.

    Many intangible proposals are subject to EIAs: Because of the arbitrary selection process, many EIAs simply add no value to policy-making. For example, the EIA on the Commission's 2005 proposal on "EU strategy for Arica" included the policy objective "peace and security".[30] It was estimated that completing the EIA and Communication for this proposal took the equivalent of seven man-months.[31] This is a terrible waste of the Commission's resources.

    EIAs are difficult to read: According to the Commission's own guidelines, "any non-specialist should be able to follow the argumentation and understand the positive and negative impacts of each of the options considered in the IA."[32] In reality, EIAs are extremely difficult to read, poorly structured, and often exceed the recommended length. It is actually laughable to suggest that non-specialists and members of the general public should be able to understand them.

4.  EU REGULATORY REFORM IS POSSIBLE—BUT A NEW APPROACH IS NEEDED

  4.1  Our findings on the cost and flow of regulations, and analysis of the EU regulatory reform agenda, illustrate the need for a radically different approach to tackling the problem of burdensome red tape. This involves both reform within the EU institutions, as well as a new approach to EU regulations from national governments. As is often the way in the EU, it will fall to the larger member states to push for reform. The UK is well placed to take a leading role.

  4.2  Cultural change: a commitment to less as well as "better" regulation: Our results show that the primary objective of the Commission must be to reduce the flow of regulation—which in practice means a new, clear commitment to "less regulation". However, our results also show that it is the cost of regulation that imposes the biggest burden, not the number of regulations per se. This means that a new commitment to less regulation must imply less cost. As well as stemming the flow, meaningful deregulation also means simplifying and scrapping the most costly existing regulations rather than just "codifying" or consolidating them to make them clearer.

  4.3  An independent and powerful European Impact Assessment Board: The European Impact Assessments leave a lot to be desired. However, no amount of improvements will make a difference if there is no independent watchdog in place to ensure that the cost-benefit analysis has a real impact on the final decision. This is one of the key lessons from the UK's experience with IAs. The UK produces some of the most sophisticated IAs in the world, and yet regulation is still increasing.

  An independent IA Board should be established with the power to veto legislative proposals if its accompanying EIA does not meet the required standards. In other words, the Board should be given the mandate to play "ping-pong" with the Commission over regulatory proposals. If the EIA process is to be taken seriously by businesses and member state governments, there must be an enforceable minimum standard. The fact that the quality of many final EIAs continues to fall short, and that study after study continues to point out similar issues, suggests that the current IA Board does not have the political clout, nor the time and resources required to raise the standard of EIAs to any meaningful level. There is also a case for expanding an independent IA Board's remit to all the EU institutions rather than just the Commission in an advisory capacity for Parliament and Council amendments. In turn, the Board could then be charged with updating EIAs as the proposals change during the course of negotiation.

  4.6  A simple majority for scrapping proposals: One of the main problems with trying to achieve regulatory reform at EU level is that changing existing EU law involves opening up the whole negotiation process from the beginning, just as if a new law was being created. In practice, member state governments should be able to present a case for EU legislation to be scrapped if it is deemed too costly or best enforced at the national level. If 50 per cent or more of member state governments in the Council vote in favour of scrapping a particular piece of legislation, then it should be abolished. This should apply to existing as well as all new legislation.[33]

  4.7  A robust subsidiarity test: All Commission proposals should undergo a thorough subsidiarity test to evaluate whether the policy could be better enforced at the national or local level. The need for EU legislation should be justified and the "do nothing" option considered in all cases. The IAB should possess the authority to veto proposals that do not do so. The first step would be to legally define subsidiarity, and give examples of what it does and does not entail.

  4.8  Allowing one quarter of national Parliaments to kill off a proposal: If a quarter of national Parliaments object to an EU proposal, then the proposal should be scrapped. National Parliaments must be given enough time to actually receive and scrutinise the proposal, to vote on it, and to register their dissatisfaction and find allies in other countries. Recess periods should be accounted for—so an 18 week window should be allowed.

  4.9  A reversed infringement procedure: The EU could also introduce a reversed infringement procedure, whereby national Governments or Parliaments could block any proposal that does not respect a newly toughened up legal definition of the subsidiarity principle. Should a proposal get through, Governments or Parliaments should be able to take the Commission to the European Court of Justice for failing to respect subsidiarity as legally defined. Currently, the Commission can take member states to court for failure to transpose Directives. EU grievance procedures should become more of a two-way street, forcing the Commission to be far more rigorous in its consideration of the "subsidiarity test" when drawing up new proposals.

  4.10  Improved EIAs: There are many ways in which EIAs could be improved. However, as said, these will count for very little unless the IAB—or some other independent scrutiniser—is given the mandate to ensure that EIAs are properly used. In combination with such a body, EIAs could help to stem the flow of regulation if the following improvements take place:

    Clearer objectives. EIAs should be specifically focused on an overall objective of less regulation.

    Quantification of all economic costs and benefits. This should include a standard template for discounting future costs of regulations, and clear presentation of these future costs. The Council and European Parliament should refuse to consider any proposal that does not have a quantified IA attached.

    More consultation and transparency. Draft EIAs and the IA Board's opinion on them should be published so that everyone can see who was consulted and whose opinion was taken into account when the Commission formulated the proposal.

    Clearer presentation of findings. EIAs should have a clear 1 or 2 page summary, with a table summarising all the costs and benefits. The template which the UK Government introduced for IAs in March 2008 shows that it is possible to summarise the findings of an impact assessment on 1 or 2 pages.

    More EIAs and better selection processes. There must be clearer criteria about what kinds of proposals should be subject to assessment—with a view to making them compulsory for a much greater number of proposals. There should be a threshold for which proposals are subject to IAs, eg proposals with a minimum impact of €30 million across the EU. The IA Board should be responsible for assessing whether the proposal falls under the threshold, and then decide the extent of the IA required.[34]

    Greater use of EIAs by the European Parliament and Council. The European Parliament and the Council are not currently making use of EIAs when negotiating proposals. Both institutions should produce an IA for any significant amendments to legislation. Alternatively, a newly independent IAB as described above could be made responsible for updating EIAs throughout the negotiation process.

  4.11  A "guillotine mechanism" for Commission proposals: Commission proposals should be given an expiry date. If a proposal has not been adopted within a given legislative timeframe, the proposal should be scrapped and started again in a new legislative session. This is described by former German President Roman Herzog as the "discontinuity principle," and is a system currently employed in Germany.[35] The EU institutions would no longer have to deal with legislative proposals that have been in the pipeline for a number of years, and it would also force the Commission to prioritise its proposals, allowing it to concentrate on the areas where it can add value.

  4.12  Sunset clauses for EU legislation: An often repeated idea is the "sunset" clause—whereby legislation is reviewed after a given time period. Sunset clauses should be compulsory at the EU level so that EU regulations can be reviewed in the light of experience and evidence.

  4.12  "€1 in, €1 out"—EU regulatory budgets: If the EIA system were improved, with an independent board to scrutinise it, there is no reason why EU Commission departments (DGs) should not adopt a "€1 in, €1 out" system for regulations. Given the very high proportion of regulatory costs coming from the EU, it would make more sense for the UK to push for regulatory budgets at EU level first, and then to subsequently introduce them in the UK.

  4.13  Sourcing new proposals: In order to avoid the disproportionate influence of interest groups in EU legislation it should be made more transparent who exactly is responsible for a given legislative proposal. As Commissioner Gunter Verheugen has suggested:

    "I think we should also do more to create transparency at the beginning of the process. I would like to know if there is new proposal on the table coming from my colleagues who has asked for that. Start your document with a paragraph saying who has asked for that piece of legislation."[36]

  4.14  Common commencements dates for EU regulation: The EU should introduce Common Commencement Dates for regulations—like those in place in the UK. These are fixed dates occurring twice a year, when new regulations come into force, helping businesses to cope and keep track of changes in legislation.

5.  BETTER LINKAGE BETWEEN THE EU'S AND UK'S BETTER REGULATION AGENDAS

  5.1  Making the link between the UK's regulatory reform agenda and the EU's better regulation agenda is vital. The UK's reform agenda is ambitious. However, because of the large proportion of regulation stemming from the EU, the UK is losing control of it.[37]

  5.2  UK ministers sometimes sign off on EU proposals despite the costs outweighing the benefits: In 2007 the Minister of Transport Stephen Ladyman, for instance, approved an Impact Assessment which showed that the estimated costs of an EU Directive were £400 million a year while the benefits were £18.5 million a year. This encapsulates the UK Government's weak approach to negotiations on EU legislation.[38]

  There is clearly an enormous problem if IAs are being signed off on proposals where the cost so clearly outweighs the benefits. This illustrates the need for the UK Government to focus its attention more clearly on Brussels, if its regulatory reform agenda and its system of IAs are to function effectively. Arguably the most serious shortcoming of UK IAs, is their failure to impact on regulations that are being agreed in the EU. This is in no small part due to timing and targeting.

  Government guidelines state that:

    "In the earliest stages of policy development, it is particularly important that policy-makers should use Impact Assessment to help them understand and define the policy challenge and to analyse the case for Government intervention."[39]

  But in practice, IAs are often produced mid-way through the EU policymaking process, and sometimes far too late to actually have an impact on the resulting piece of legislation. For example, in some cases, the Government's consultation with businesses is launched only one month prior to the due date for a decision in Brussels—and sometimes even after the proposal has already been approved.[40] Moreover, our research has found that when IAs are prepared on the basis of an original EU proposal, they are not always updated to allow for new developments in the policymaking process.

  For example, the Temporary Agency Workers Directive, finally agreed on 19 November 2008, was never subject to an updated IA during the negotiations to accommodate changing circumstances, despite the fact that five years of negotiations took place following the UK's original 2003 IA, which estimated the cost to business from the new law at a staggering £637 million a year. These problems clearly limit the power of UK IAs—and the UK Government—to play a significant role in the consultation, formulation and negotiation of EU policies.[41]

  The Government recently announced that it was committed to "intensive engagement with the EU institutions…to promote the better regulation agenda."[42] But despite this claim, the Government is not nearly as engaged as it could be. The following, more radical approach could go some way to helping to stem the flow of regulations.

  5.3  Using IAs and regulatory budgets as bargaining tools: BIS provides an "instruction manual" on how to use Impact Assessments in EU negotiations. It instructs civil servants to lobby "other Member States to win support for the UK position". This is the right approach. However, the evidence we have collected suggests that the UK Government has not used its bargaining power stemming from its Regulatory Reform Agenda nearly enough.

  Negotiation theory holds that in the interaction between domestic and international (EU) politics, governments strengthen their bargaining power if they can convince their negotiation partners that their mandate from voters and business at home is very restricted—and that they are ready to stick to that mandate.[43] This is exactly how the UK Government should approach EU negotiations in the pursuit of better regulation. The UK Government has two main tools at its disposal—Impact Assessments and regulatory budgets, given that such budgets will be established in the future.

  5.3.1  Impact Assessments: First, the quantification of costs and benefits of regulation has vastly improved in UK IAs—although the costs are probably still underestimates. The scope for using IAs in EU negotiations has therefore widened. The UK Government could use its comparative advantage with IAs in several different ways. It could:

    — Refuse to negotiate EU proposals for which the Commission has not quantified costs and benefits, but where the UK has, and where the costs are shown to outweigh the benefits.[44]

    — Require proposals where the UK IA and the EIA show different estimates to be subject to further assessment before it can be taken forward in the European Council. An example of when estimates differ is "Phase 2 of the European Pedestrian Protection directive", which is currently in the process of being negotiated. The UK IA put the cost estimate substantially higher than the EIA did.[45]

  5.3.2  For the most costly proposals, a more drastic approach should be taken. Where the UK Government is faced with a possible defeat over a key proposal—either imminent or long-term—it should not be afraid to use a robust IA to "build up its defence." But this must be combined with a clear message: Due to the high costs potentially imposed by the proposed regulation, the UK Government lacks the mandate from voters and business at home to sign up to the proposal. The robust findings in the IA will be there for everyone to see.

  And example of where this kind of strategy should be used is with the opt-out from the 48-hour maximum working week, entailed in the Working Time Directive, which the European Parliament almost managed to scrap earlier this year. In fact, extraordinarily, a BERR official told Open Europe that an IA had never been produced on the cost of the loss of the opt-out because "no one expected the opt-out to come up for negotiation."[46]

  The opt-out could well again come up for negotiations before long. This is a clear case of where the Government should have produced a robust IA, and take it to Brussels, arguing that it simply cannot accept proposals for which there is little support at home, and for which the estimated costs are so high. A similar strategy could have been pursued with the Agency Workers Directive.

  5.4  Regulatory budgets: A similar principle should apply to regulatory budgets. If UK regulatory budgets in future are to reflect realities on the ground they will need to effectively incorporate regulations coming from the EU, which account for the majority of the cost. Rather than merely factoring in the cost of EU regulations to the domestic regulatory budget, budgets should also be used at an early stage in the EU negotiation process.

  EU legislation should have to meet the same stringent criteria as domestic legislation. The UK Government should give its negotiators the authority to reject proposals that do not meet its priorities and threaten to break its own regulatory budget.

  Without this function UK regulatory budgets will only ever have a very limited impact on reducing the flow of regulation. As with IAs, ministers must make clear that they simply do not have the mandate to sign up to a proposal that will break their departmental budget.

  5.5  A more assertive approach at an earlier stage in negotiations: The UK Government's guidelines on using an Impact Assessment in EU negotiations recommend that UK policy-makers should be involved in EU-level policy-making not only once a proposal leaves the Commission but also while it is being formulated inside the Commission. They state that:

    "If requested to do so by the Commission, you should consider sharing UK data on the likely impact of a proposal. In cases where you think that the Commission is not sufficiently aware of the impact of a potential proposal on the UK, you should consider taking the initiative to lobby the Commission directly to consider UK data."[47]

  The Commission's so-called Roadmaps, which outline Commission proposals for the coming 12 to 18 months and their likely impacts, ought to act as an early warning system to the Government of what proposals are in the pipeline. This would allow the Government to provide the Commission with evidence of the impact of the proposal. Even at this stage, policy-makers should indicate that a costly proposal simply will not be accepted in the light of hard evidence. The earlier this dialogue is opened the better.

  5.6  On-going UK impact assessment and consultation throughout the EU decision-making process: UK IA and consultation need to be used throughout the EU negotiation process, to account for changes that take place at different stages—including changes made by the Parliament or the Council, especially given that neither of these can currently be relied upon to produce their own IAs. It is not acceptable, for instance, that the Temporary Agency Workers Directive was never subject to an updated IA, despite the original IA estimating the cost to the UK at £637 million.

  5.7  EU-Commission style audit trails: One of the simplest reforms the UK Government could pursue is to publish proper "audit trails" for each new legislative proposal. This would inject instant transparency and help businesses, MPs and others track what is going on with a proposal throughout the often lengthy decision-making process.

  5.8  Source any proposal laid before the Parliament: Ministers should be made to clarify on Bills and SIs whether or not the legislation is derived from the EU. This will make the origin of UK regulation more transparent and serve to improve the debate about the role of the EU in initiating UK legislation, among MPs as well as the general public.

  5.9  The nuclear option: refusing to agree an EU budget deal without reform: The UK is in a powerful position to push for reform at EU level—particularly where regulation is concerned. In order to set the wheels in motion, the UK Government should draw up clear proposals for a radical shake-up of the EU's "Better Regulation Agenda", calling for new commitments to less regulation, and to the idea that state interference can only be justified with conclusive evidence that the benefits of any such interference outweigh costs that have been clearly quantified. It could also propose some of the ideas we explore above. The UK Government should take a tough line and present this ideal to its EU partners, using its veto over negotiations on the Financial Framework—the EU's multi-annual budget—to help focus minds. The UK is in a better position than most to hold budget negotiations hostage, since it is one of the biggest net contributors to the EU.

  In addition, there's a huge need to bolster the scrutiny of EU proposals in Westminster—and so promote better regulation in the EU. However, we will not touch on our proposal for reform of the UK Parliament's scrutiny system in this submission.

29 September 2009


10   See Open Europe, "Out of Control? Measuring a decade of EU regulation" http://www.openeurope.org.uk/research/outofcontrol.pdf Back

11   Calculated assuming that UK GDP in 2008 was £1,461,301,000,000, see Eurostat http://epp.eurostat.ec.europa.eu/portal/page?_pageid=0,1136173,0_45570701&_dad=portal&_schema=PORTAL Back

12   In the original report, Open Europe used the Government's original estimate of the cost of the WTD, which was put at £2.1 billionn (in 2008 prices). However, Open Europe has since revised the cost of the WTD, by using a later Government cost estimate and by adding the cost arising from subsequent amendments, such as those imposed through the ECJ's Jaeger and SiMAP cases. After these adjustments, we estimate the annual cost of the WTD in the UK at between £3.5 and £3.9 billion, see Open Europe, "Time's Up! The case against the EU's 48-hour working week", see http://www.openeurope.org.uk/research/wtdoptout2.pdf Back

13   For more details see: OECD, "Economic Survey of the European Union 2007", 20 September 2007. Back

14   Financial Times, "Uphill battle against Brussels bureaucracy", 10 October 2006. Back

15   Jacques Pelkmans made these observations during a conference hosted by the Centre for European Policy Studies, "European Network for Better Regulation, Final Conference", Brussels, 11 December 2008. Back

16   European Commission, "Radical simplification of EU law: 5,000 pages of Official Journal removed", MEMO/08/62, 30 January, 2008. Back

17   European Commission, "A 2nd strategic review of Better Regulation in the European Union", COM(2008)32, 30 January 2008, p 3. Back

18   European Commission, "Better regulation: Commission intends to withdraw one third of screened proposals", IP/05/1189, 27 September 2005. Back

19   Open Europe, "Less Regulation: 4 ways to cut the burden of EU red tape", November 2005, p 12. Back

20   For a critique of EIAs, see The Evaluation Partnership Limited, "Evaluation of the Commission's Impact Assessment System Final Report", April 2007, p 8. Back

21   For the number of EIAs between 2003 and 2007, see Andrea Renda, "Advancing the EU better regulation agenda: selected challenges for Europe", Centre for European Studies, (draft at 07 September 2008), p 7; Commission website consulted for number of IAs in 2008, see http://ec.europa.eu/governance/impact/practice_en.htm Back

22   These are: "Proposals aiming to modernise and reinforce the organisational framework for inland waterway transport in Europe" in 2008; "Directive on the cross-border transfer of registered office" and "Proportionality between Capital and Control in Listed Companies" in 2007. Back

23   See the Commission's website, http://ec.europa.eu/governance/impact/practice_en.htm, viewed on 13 January 2008. Back

24   Impact Assessment Board, Report for the year 2007, SEC(2008) 120, 30 January 2007. Back

25   For a discussion in this issues, see Craig Robertson, "Impact Assessment in the European Union", eipascope, 2/2008 (European Institute of Public Administration), 2008, p 19. Back

26   OECD, "OECD Economic Survey: European Union", 2007, p 107. Back

27   A 2007 evaluation found that "while only about 40 per cent of IAs monetised some costs of the proposal in 2003, almost 80 per cent of IAs monetised some costs of the proposal in 2007", see Caroline Cecot, Robert Hahn, Andrea Renda, and Lorna Schrefler, "An Evaluation pf the Quality of Impact Assessment in the European Union with Lessons for the U.S. and the EU", AEI-Brookings Joint Center for Regulatory Studies, December 2007, p 8. Back

28   For the Commisison's guidelines, see European Commission, COM(2002)704, 11 December 2002. Back

29   European Commission, "Impact Assessment Guidelines [Draft version]", (27.05.08), p 4. Back

30   European Commission, SEC(2005)1255, Oct 2005. Back

31   The Evaluation Partnership, "Evaluation of the Commission's Impact Assessment System Final Report", April 2007, Annexes to the Report, p 97. Back

32   European Commission, SEC(2005)791, 15 June 2005. Back

33   As proposed, for example, in John Tate & Greg Clark, "Reversing the Drivers of Regulation: The European Union", Policy Unit, Conservative Research Department, 2005, p 51. Back

34   As proposed in Andrea Renda, "Advancing the EU better regulation agenda: selected challenges for Europe", Centre for European Studies, (draft at 7 September 2008), p 43. Back

35   Welt am Sonntag, "An article on the EU constitution", 14 January 2007. Back

36   Address to the Better Regulation 2008 Conference, EUX.TV, 15 September 2008 http://www.eux.tv/article.aspx?articleId=20421 Back

37   There is a clear mismatch between our findings and the Government's claims to have cut down the administrative cost and burden of regulations in the last few years. In December 2008, the Government said that the administrative burden had been cut by £1.9 billion compared to the 2005 baseline measure. Back

38   Final Regulatory Impact Assessment, "Early Availability of Sulphur Free Fuels" (European Directive 2003/17/EC), see p 18 in http://www.opsi.gov.uk/si/si2007/em/uksiem_20071608_en.pdf Back

39   BERR, "Impact Assessment Guidance", p.2 http://www.berr.gov.uk/files/file44544.pdf Back

40   See "Progress dates for EU Directives" in Ambler et al. "The British Regulatory System", British Chamber of Commerce, March 2008, p 25. Back

41   See: Ambler et al. "The British Regulatory System", British Chamber of Commerce, March 2008, p 24. Back

42   HM Government/Better Regulation Executive, "Making your life simpler: simplification plans-a summary", December 2008, p 45. Back

43   See for example: Putnam, Robert D, "Diplomacy and Domestic Politics: The Logic of Two-Level Games" International Organization, Vol 42, No 3. Summer, 1988, pp 427-460. Back

44   For an example of such a proposal, see the IA for European Directive on the Statutory Audit of Annual And Consolidated Accounts (2006/43/EC) on which the Commission did not produce an EIA: http://www.opsi.gov.uk/si/si2007/em/uksiem_20073494_en.pdf Back

45   Compare UK IA to the EIA, see http://www.dft.gov.uk/consultations/closed/protectroadusers/impactassessment.pdf, respectively http://ec.europa.eu/governance/impact/docs/ia_2007/sec_2007_1244_en.pdf Back

46   Telephone conversation with a BERR representative on 15 December 2008. Back

47   Department for Business, Enterprise and Regulatory Reform, "Using an Impact Assessment in EU Negotiations", available at, http://www.berr.gov.uk/whatwedo/bre/policy/scrutinising-new-regulations/preparing-impact-assessments/toolkit/page44278.html Back


 
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