Appendix 1: The Provision of Impact Assessments
Letter from Lord Hodgson of Astley Abbotts, Chair of the Secondary Legislation Scrutiny Committee to Paul Scully MP, Minister for Small Business, Consumers and Labour Markets
I am writing to you in my capacity as Chair of the House of Lords Secondary Legislation Scrutiny Committee (SLSC). The role of the Committee is, amongst other things, to examine all negative and affirmative statutory instruments and, where appropriate, to draw instruments to the special attention of the House. Grounds for drawing special attention are set out in our terms of reference and include “that the explanatory material laid in support provides insufficient information to gain a clear understanding about the instrument’s policy objective and intended implementation”. In scrutinising instruments, therefore, we consider the instrument and all the explanatory material accompanying it, including the Explanatory Memorandum and, where appropriate, any Impact Assessment (IA).
Our Guidance to Departments acknowledges that there is a threshold below which it is not necessary for a department to publish an IA for an instrument. But we also advise that: “Even if the policy change does not meet the formal threshold for an Impact Assessment, the Explanatory Memorandum (EM) should always include a short explanation of the net effects of the policy, including broad brush figures for costs and benefits”. This information is, as I am sure you understand, critical to enabling the Committee, the two Houses and the public generally to make a fully informed assessment of the significance of the policy change implemented by an instrument.
In our 39th Report of session 2019-21, we expressed concern that the EMs accompanying many COVID-19 instruments included a standard phrase exempting the instrument from assessment because it would “cease to have effect after less than 12 months”. By December 2020, when our 39th Report was published, we had seen a number of short-term measures being extended for a further six or eight months to cope with the second wave of the pandemic, but still without either an IA or data on the instrument’s performance in the first six months. We concluded: “We are aware that many of these costs are necessary to save lives but even a basic analysis of the impact or some financial information might help the House to weigh up conflicting priorities, such as public health versus the costs to industry:’
We had hoped that this simplified but more transparent approach would be adopted in the future. It was with some disappointment, therefore, that we read your Ministerial Statement on 19 July which, amongst other things, exempted time-limited COVID-19 legislation from a requirement for a full impact assessment and scrutiny by the Regulatory Policy Committee (RPC). The Chairman of the RPC, Stephen Gibson, said: “this means that measures that have very significant impacts on businesses and civil society organisations are not subject to independent scrutiny, as well as being excluded from the [Business Impact Target]”. We share that concern. Whilst the exemption may remove an administrative burden on civil servants, it also removes the accountability implied by having to compare the financial effects of different policy approaches.
We also have concerns about the provision of IAs more generally. We have come across a number of statutory instruments which have introduced long-term changes (and are therefore not subject to the exemption) that have not been accompanied by the required IA at the time of laying. Our 8th and I0th Reports of the current session contain two reports on the draft Health and Social Care Act 2008 (Regulated Activities) (Amendment) (Coronavirus) Regulations 2021.We were told by the Department of Health and Social Care (DHSC) that although an IA had been prepared it was not available. During an oral evidence session with the Committee on 13 July, the Minister, Nadhim Zahawi MP. acknowledged that the IA should have been made available when the instrument had been laid. Just before the debate on the approval motion in the House of Lords on 20 July, DHSC provided an “impact statement”. Members speaking in the debate were unanimous in their criticism about the lack of an IA.
On the same day, in the House of Lords debate on the draft Medical Devices (Coronavirus Test Device Approvals) (Amendment) Regulations 2021, Members also referred to the absence of an IA. (This instrument was the subject of a report in our 8th Report of this session). Other examples include:
- HMT: Money Laundering and Terrorist Financing (Amendment) Regulations 2019 (IA was awaiting sign-off by the RPC at the time).
- DCMS: draft Code of Practice for Online Services on Age Appropriate Design (IA was promised before the Code completes its parliamentary process).
- BEIS: draft Product Safety and Metrology etc. (Amendment etc.) (UK(NI) Indication) (EU Exit) Regulations 2020 (promise of publication of regulatory triage assessment “later this year”).
On other occasions we have been sent an IA months after the instrument has come into effect: for example the Town and Country Planning (General Permitted Development) (England) (Amendment) (No. 3) Order 2020 (the IA was published in March 2021, after the Committee had considered the instrument in September 2020).
An IA should inform and underpin policy development. We therefore find it surprising -and worrying -when, although required, an IA is not available when an instrument is laid. As I said at the beginning of this letter, without this information the Committee, the two Houses and the public generally are unable to make a fully informed assessment of the significance of the policy change implemented by an instrument.
We would therefore be grateful for your comments on the points I have raised. We would also ask for an assurance that departments will improve their adherence to IA procedure, along with information on the steps that will be taken to achieve this goal.
We are meeting next on Tuesday 7 September. If you were able to respond in advance of that meeting, I would be most grateful. I am copying this letter to Mr Gibson, Chair of the RPC.
28 July 2021
Letter from Paul Scully MP, to Lord Hodgson of Astley Abbotts
Thank you for your letter of 28 July expressing concerns about the quality of explanatory memorandums and the lack of impact assessments accompanying measures in response to the Covid-19 pandemic.
I would like to reassure you that we remain committed to ensuring robust regulatory practice, which supports business growth and innovation. However, the unprecedented circumstances of Covid-19 have placed disproportionate administrative burdens on departments.
The Government has had to take a pragmatic and proportionate approach in the face of national emergency. The pace and nature of the response to the pandemic has changed the normal approach to decision making, which in some cases may mean that certain processes have been stripped back, but we will always strive to ensure that there is sufficiently robust analysis to support the decision-making that underpins regulation.
As you may know, an independent public inquiry is to be held in Spring 2022 and commits to a “frank and candid” examination of the Government’s handling of the pandemic. We expect that the inquiry will examine the economic response, including the impacts of regulatory measures.
My officials will continue to engage with departments and ensure they are taking a proportionate, evidence-based approach to implementing their measures. This engagement includes ensuring that explanatory memoranda contain the right level of impact analysis for parliamentary scrutiny. We will also continue to monitor the position of emergency legislation to ensure departments produce retrospective impact assessments where Covid-19 measures are to be made permanent.
I would like to thank you for your continued engagement and I hope this response clarifies the government’s position.
4 September 2021
Letter from Lord Hodgson of Astley Abbotts to Paul Scully MP
Thank you for your letter of 4 September 2021 about the provision of impact assessments (IAs). It was considered by the Secondary Legislation Scrutiny Committee (SLSC) at its meeting yesterday and, I regret to say, members were unanimous in their disappointment and surprise that your response failed to engage with the range of issues raised in my letter of 19 July. In particular, you focus exclusively on pandemic-related secondary legislation whereas my letter made reference to a number of instruments unrelated to the pandemic.
This Committee has for many years been a close observer of Impact Assessment (IA) practice through its scrutiny of tens of thousands of Statutory Instruments (Sis) and would therefore be grateful if you would provide a more thorough answer to my original letter and also to these additional questions raised by your response:
- You state that the Government “will always strive to ensure that there is sufficiently robust analysis to support the decision-making that underpins regulation”. Whilst we welcome such a commitment, it is not clear to us why this “robust analysis” is not included in some form in Explanatory Memoranda, particularly when the policy does not meet the criteria for a full IA. We would like an explanation about why it is not standard practice for every relevant SI, whether a pandemic instrument or a ‘business as usual’ instrument.
- You also state that your officials will ensure a retrospective IA is produced if a pandemic measure is made permanent. Our concern is not only about policy made permanent but also about rolling extensions to a policy, as a result of which “temporary” solutions have remained in effect for well over a year. We would have expected, even if not a full IA, information about impact and cost to be included in the Explanatory Memorandum accompanying any instrument extending a policy beyond 12 months. Can you please explain why this is not done?
I would be grateful if you were able to provide a more substantial response to my original letter and to the points raised in this one no later than by Friday 8 October. The Committee is meeting next on 12 October and will consider, in the light of your further response, whether any further action should be taken.
As before, I am copying this letter to Mr Gibson, Chair of the RPC.
15 September 2021
Letter from Paul Scully MP to Lord Hodgson of Astley Abbotts
I am sorry to learn that the Secondary Legislation Scrutiny Committee expressed disappointment that my letter of 4 September failed to engage with the range of issues raised in your letter of 28 July.
As I said in my earlier response, our commitment to conducting impact assessments (IAs) remains strong, and the analysis that goes into them ensures government considers the need for, and likely impact of, new regulation to support legislative change and to inform decision making and parliamentary scrutiny. I agree with you that more should be done to ensure that departments improve their adherence to IA procedure and we will take the necessary steps to achieve this goal, as set out below.
While not a statutory requirement, the administrative requirements, as currently set out in the Better Regulation Framework, expect departments to publish IAs for measures where the impacts are in excess of £5 million per annum. This includes a range of Covid-19 legislation and the relevant department is expected to submit a full IA to the Regulatory Policy Committee (RPC) for scrutiny (including verification of impact figures).
We understand that production of IAs for such measures is likely to be challenging and could impose potentially significant analytical burdens. We have taken the decision, therefore, in advance of the wider reform of the better regulation framework, not to expect departments to meet the current administrative requirement for the impacts of these specific measures to be validated by the RPC.
This relaxation of the requirements covers time-limited measures; however, emergency measures that are permanent or not time-limited still require IAs to be submitted in the normal way.
Departments have been reminded of the importance of ensuring that the appropriate level of resources is invested in gathering and analysing evidence on the regulatory impacts of the Government’s affected policies, and to publish this where appropriate. However, I share the Committee’s concerns that a number of statutory instruments (SIs), which have introduced long term changes, have not been accompanied by the required IA at the time of laying.
While attempts to produce IAs for public policy making may be problematic in the current climate of the Covid-19 pandemic, I accept that the position of some departments not adhering to providing the required IA at the time of laying is impermissible. It is also unacceptable that departments are not providing sufficient detail about the analysis of impacts in explanatory memoranda (EM) where an IA is not provided.
It remains the responsibility of individual departments to produce a proportionate assessment of the impacts of their policy proposals (the Cabinet Office Guide to Making Legislation is clear on this, as is the guidance on completing EMs) and we will remind departments to take a proportionate, evidence-based approach to implementing measures as well as ensuring that EMs contain the right level of impact analysis for parliamentary scrutiny, and are provided at the right time to support effective policy making.
We regularly highlight to departments the requirement that all SIs should have, when they are laid, some supporting information about impact, either in the EM, de-minimis assessment, or with a full IA attached, to ensure that proper scrutiny can occur. This is done through cross-Whitehall training delivered jointly by BRE and the RPC on better regulation policy and conducting IAs. We are confident that these efforts help to improve the regulatory IA process, but I will ask my officials to take additional steps to reinforce this message, by writing to departments to remind them of the requirements and asking them to commit to meeting them.
With particular reference to cases where time-limited measures are extended beyond 12 months, we will stress to departments the expectation that – in the absence of an IA – information about impact and cost should be clearly set out in the EM. The pandemic has required departments to operate at pace in difficult circumstances, but I agree with the Committee that more can be done to adhere to standard best practice in providing the necessary information for scrutiny.
We are also looking at further proposals as part of the ongoing consultation on reforming the framework for better regulation, including revising the process of scrutinising policy proposals earlier in the policy development cycle, and streamlining the process of producing IAs, both of which should, to some extent, help ease the burden on departments and help avoid instances where IAs are delayed or published late.
I hope this response addresses the Committee’s concerns and clarifies the Government’s position. My department will continue to push the importance following better regulation procedure and I thank the SLSC for its work in helping to highlight this.
I am copying this letter to Mr Gibson, Chair of the RPC.
7 October 2021