PRESENTATION BY. Michael GIBBONS. Member of the Better Regulation Task Force

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1 PRESENTATION BY Michael GIBBONS Member of the Better Regulation Task Force

2 Implementation and Impact looking to the future. What needs to change? Michael Gibbons Member of the Better Regulation Task Force 15 September 2005 Better Regulation is a key initiative if the European Union (EU) is to thrive and prosper. Better Regulation means securing protections for employees, consumers and investors without imposing unnecessary or excessive regulatory costs. Recent years have seen a growing recognition in the EU that regulatory reform is essential, both to enhance competitiveness, growth and employment and to promote a better quality of life for European citizens. Legislation that is implemented needs to be fit for purpose and applied in the least burdensome way. Better Regulation initiatives can make a significant impact. The UK has recently adopted the Dutch approach to measuring and reducing administrative burdens, as recommended in our Less is More report 1. The benefit of this approach is estimated at a 16 billion increase in GDP for an investment of around 35 million, potentially a greater than 1% increase in GDP. Clearly this approach can make a real difference to business and the economy, and the Commission is currently undertaking a pilot programme to examine the feasibility of introducing a similar methodology across the EU. The Better Regulation Task Force (BRTF) tests regulation and enforcement against its five Principles of Good Regulation. We believe that these five principles are equally applicable to the EU and should be considered whenever new proposals are under development. The principles are: Proportionality regulators should only intervene when necessary. Burdens on the regulated should be appropriate to the risk posed. Accountability regulators should account for their decisions and the impact of those decisions on business and citizens, and be subject to public scrutiny. Consistency rules and standards must be joined up and implemented fairly. Transparency regulators should be open to different viewpoints, and keep regulations simple and user friendly. Targeting regulation should be focused on the problem, and minimise side effects. 1 March 2005, ISBN

3 The Better Regulation agenda can be split into several key components and it is useful to look at these components individually, to examine how these principles can be achieved and consider best practice for implementing legislation. Impact Assessment Impact Assessments (IAs) are essential to ensure legislation is well prepared, and should be started at an early stage of policy development. A robust IA typically states the policy objective, compares a number of options, highlights the potential benefits and costs of intervention, considers unintended consequences and makes a recommendation. If a proposal is not thought through properly the policy may fail to achieve its objectives and have a negative, inadvertent effect. In the UK it is government policy that all proposals for regulation that have an impact on businesses, charities or voluntary bodies should have a regulatory impact assessment completed before being considered by Ministers and laid before Parliament (which is taking an increasing interest in the content of IAs). In the EU, IAs are a more recent consideration, although the Commission has recently made the commitment that all of the proposals contained in its annual Work Programme must be accompanied by an IA 2, and has published some excellent new IA guidelines 3 to raise awareness and standards. It has taken time for the IA procedure to bed down in the UK, but the rate of compliance now stands at 100%. However, the standard of IAs is mixed. The Commission will face a similar challenge to that which the UK has faced, i.e. to improve the quality of these documents, once the commitment to carry them out has been accepted. In the UK we have found that some form of scrutiny of IAs is important if standards are to be raised and we therefore believe this is an important consideration for the EU. The UK has a number of procedures in place to improve the quality of IAs, perhaps the most important being the Panel for Regulatory Accountability. Any large proposals (having a significant impact, or with costs estimated at over 20 million) must be cleared by this panel which is chaired by the Prime Minister. The chair of the BRTF also sits on this panel, and can suggest that a proposal is blocked should the IA not provide the necessary justification for proceeding. The BRTF also refers unsatisfactory individual IAs or departments themselves to an independent body, the National Audit Office (NAO), to provide a further level of scrutiny and challenge. In the UK a final IA is laid for scrutiny alongside draft legislation. Should Parliament make any major amendments to the draft legislation then the IA is amended to reflect this. The BRTF believe that this is an important point and should become standard practice in the EU. Major amendments can have a 2 Better Regulation for Jobs and Growth, COM (2005) 97 3 SEC (2005) 791

4 significant effect on the impact of a proposal and these potential effects need to be analysed and taken into account. Simplification procedures The BRTF has embarked on a trilogy of European studies, in order to contribute to the EU s continuing programme of Better Regulation. The first of these studies, Make it Simple Make it Better, looked at the simplification of existing EU legislation 4. Our report concentrates on legislation that has already been implemented, but we do make several recommendations as to how the process of preparing legislation could be improved. The BRTF recommend that new legislation should have scope for amendment built in should a need for simplification arise. This would involve the use of review clauses or would mean framing legislation in such a way to enable revisions to be done more easily, and an explanation provided in the IA or Explanatory Memorandum. We also recommend that any proposal for new legalisation should contain a holistic review of all relevant legislation applying to the activities to be regulated, and an explanation of how the new proposal will fit in with the existing regime. We have found that not enough attention is given to existing provisions when new proposals are being prepared. Amendments to existing legislation can negate the need for new proposals to be implemented or the replacement of existing legislation may be a more sensible approach. Either way, a review of existing legislation for consistency should avoid the creation of a plethora of cross-cutting and confusing requirements. Consultation The second of our European studies focuses on consultation, and will be launched at the UK Better Regulation Conference on 22/23 September In our view, proper consultation plays a vital role in developing better regulation by helping to ensure that proposals are technically viable, practically workable and command public support. Conversely, inadequate consultation often leads to poor quality legislation which is unresponsive to the practicalities of implementation and this erodes the public s appreciation of the benefits of EU law. In other words, good consultation serves a dual purpose by improving the quality of the policy outcome and, at the same time, enhancing the involvement of interested parties and the public at large. The BRTF found that engagement with stakeholders before a proposal is published for written public consultation is not always systematic and transparent, that reporting of the Commission s compliance with its own minimum standards for consultation lacks detail and good practice is not consistently applied. We also found that stakeholders, especially the business community, sometimes fail to engage in a constructive and timely way. They also have a role to play in ensuring legislation that affects them is suitable. The BRTF will 4 December 2004, ISBN

5 be making practical recommendations to address these problems and to improve the quality and legitimacy of EU regulation. Consideration of Alternatives The final part of our European trilogy of studies examines the use of alternatives to traditional EU legislation. Our report will be published by the end of the year. Through our research we have learnt that there is still some reluctance amongst officials and Parliamentarians to use more flexible methods of policy implementation. This is in spite of the Commission, Parliament and Council all committing to their use in the Inter Institutional Agreement on Better Lawmaking 5. The BRTF have found that many of the problems associated with the use of alternatives, such as a lack of certainty and a lack of transparency can equally be applied to the use of legislation. It is not necessarily the tool chosen to deliver the policy proposal that is flawed; more often than not it can be the poor implementation or enforcement of that proposal. Alternatives can provide more flexibility and be quicker to implement and amend than legislation, which can encourage innovation. Alternatives can also get stakeholders more involved in the policy making process, taking better advantage of their expertise of the market. As alternatives are often less burdensome to administer and comply with than legislation they should be given more consideration legislation should not be the automatic choice for implementation. Conclusions Addressing the Principles of Good Regulation can ensure legislation is better prepared. It is vital for all new proposals to have an impact assessment that stakeholders have been allowed to comment on and contribute to, that examines existing legislation and how the new provisions will link with this, and that examines several options for implementation and provides a strong argument for the chosen option. The Parliament (and Council) has an important role in scrutinising proposals that are brought forward by the Commission. Focussing on the IA as part of this scrutiny will help improve the standard of legislation that is implemented. Parliament and Council should also consider revisiting and amending an IA should they make and major changes to proposals during their scrutiny, so that any subsequent effects are analysed and evaluated. 5 Inter Institutional Agreement on Better Law-Making, official Journal of the European Union ( ), 2003/C 321/01

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