Meg Hillier MP Chair of the Committee of Public Accounts House of Commons. 1 March Dear Meg,

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1 Lord Prior of Brampton Parliamentary Under-Secretary of State Department for Business, Energy & Industrial Strategy 1 Victoria Street London SW1H 0ET Meg Hillier MP Chair of the Committee of Public Accounts House of Commons T E W +44 (0) enquiries@beis.gov.uk 1 March 2017 Dear Meg, THE GOVERNMENT S RESPONSE TO THE COMMITTEE S REPORT ON BETTER REGULATION In the Government s response to the Committee s report on Better Regulation, there was a commitment to provide more information on two of the recommendations by February The attached paper sets out further information on the Government s understanding of the impact on businesses of existing Regulations, and an interim update on progress with our efficiency review. The paper sets out what has already been done by BRE and Departments to understand the impact and scale of existing regulations on business. Deregulatory budgets and Cutting Red Tape Reviews provide, and will continue to provide strong incentives for Departments to look at existing regulations to find business savings. The targeted Cutting Red Tape reviews aim to address the issues that concern business the most. I understand that Alex Chisholm has already written explaining that Ministers across Government are currently considering the best way to change the system to make the Better Regulation Framework more proportionate. The attached provides an update on progress with making improvements to the system. However, there will be further improvements to follow and we will provide a further update to the Committee in the July 2017 Treasury Minute Progress Report. DAVID PRIOR

2 Update to the Public Accounts Committee on Better Regulation Introduction 1. In its response (Cm ) to the 18th report of the Public Accounts Committee for , the Government undertook to set out how it intends to improve its understanding of the scale of existing regulations, and also to publish details of the changes that are to be made to increase further the proportionality of the better regulation system by February This statement seeks to fulfil that undertaking. 2. The Better Regulation Executive (BRE) is a unit at the heart of Government, with a principle focus of working with Departments to monitor the measurement of new regulations that impact on business and to reduce the overall level of regulatory burden. 3. To do this, the BRE and Departments have focused on: - understanding the regulatory issues that are of greatest concern to UK business; - deepening their understanding of the issues of concern in their respective areas and encouraging regulators to do the same; and - promoting a joined-up understanding of areas of concern, which cut across boundaries between Departments and regulators. The first section of this note sets out what BRE, Departments and Regulators are doing to improve their understanding of existing regulations, while the second part sets out current progress on greater efficiency, including monitoring and evaluation. Recommendation 3: Work to improve understanding of existing regulations Understanding the issues of greatest concern 4. BRE s knowledge of the areas of greatest concern to business is based on - engagement with business groups, trade associations and individual businesses both proactively and in response to their representations, which are likely to focus on those issues or regulations that are the most costly to business; - an in-depth survey every two years to identify business perceptions of regulation; - evidence gathered through the Focus on Enforcement, Business Focus on Enforcement and Cutting Red Tape programmes; and - work by departments and regulators to understand the burdens they are placing on business through engagement with their stakeholders on the impact of regulations. 5. For proposed new regulations, Government has a robust process of scrutiny through the Regulatory Policy Committee (RPC) which provides independent scrutiny of the quality of the analysis supporting regulatory proposals and the Reducing Regulation Cabinet sub-committee (RRC) which reviews Departments proposals before consultation and again before they are finally implemented. There is also an opportunity for BRE to 1 Accessible.pdf

3 challenge other regulations in the same policy space and to consider any proposals for new regulation in the round. This has helped to improve consultations and has improved intra-departmental policy discussions. 6. Over time, this information will be augmented by reviews of regulatory secondary legislation required by the provisions of the Small, Business Enterprise and Employment Act 2015 (SBEE). The SBEE Act provides that the relevant Minister must include a statutory review provision in such legislation, or provide a statement as to why a review provision would not be appropriate. For large measures with statutory review clauses, the BRE will continue to encourage Departments to include a monitoring and evaluation plan in the impact assessment. The provisions of SBEE apply to new or replacement regulations, so over time the proportion of legislative regulatory stock containing Post- Implementation Reviews (PIRs) should rise. 7. As previously described to the Committee, the programme of Post-Implementation Reviews (PIR) is now beginning to come on stream. Since 2011, it has been an administrative requirement that new statutory instruments should include a clause that requires a post-implementation review every five years. Review clauses are supplemented with sunset clauses 2 for domestic regulatory measures with significant regulatory impacts. Deepening understanding of the issues of concern 8. BRE works with Departments to understand regulatory issues of concern to business. Regulating Departments have budgets (supported by the One-In, Three-Out rule) to reduce their regulatory impact on business over the Parliament. To comply with these budgets, Departments need to identify areas where they can find savings for business: since they can only do this by understanding the costs that their regulations impose on business, the budgets provide a powerful incentive for Departments to improve their understanding of the impact of their regulatory stock on business. 9. The BRE also provides encouragement, support and challenge to Departments to consider particular regulatory issues of generic concern to business. 10. The Red Tape Challenge and Focus on Enforcement programmes identified that a significant area of concern for all businesses was the impact of how regulation was enforced. This has helped to shape and inform Government action, for example, statutory regulators (i.e. those regulators that have a separate legal identity from Governments) will soon for the first time contribute to the Government s business impact target. 11. Regulators are already subject to a statutory Regulators Code 3, which expects them to engage with those they regulate and hear their views so that the regulator is able to understand better the impact of their activities on business, and to ensure that they maximise the benefits they provide to business whilst minimising negative economic impacts. 12. Within BEIS, the Regulatory Delivery Directorate provides practical training, tools for regulators and works collaboratively with them to support improvements in compliance with the Regulators Code and, subject to Parliamentary approval, will have a similar role in respect of the forthcoming Growth Duty. 2 Sunset clauses provide that the statutory instrument will cease to have effect after seven years unless another regulation is laid to amend the statutory instrument to extend or remove the end date. A post-implementation review is required to justify the need for the SI to be retained. 3 Section 23 of the Legislative and Regulatory Reform Act 2006

4 Cutting Red Tape 13. Building on the success of the Red Tape Challenge and Focus on Enforcement reviews, the Government launched the Cutting Red Tape programme in July The reviews looked at specific sectors and worked with trade associations and businesses to gather evidence and develop a focussed and detailed understanding of the regulatory burdens on a sector or market. BRE then worked with Departments and regulators to get them to commit to series of actions both statutory and non-statutory that would address these findings. There have been six Cutting Red Tape Reviews published so far with others due to be published by Easter These reviews have covered activities that affect tens of thousands of businesses: together with the Red Tape Challenge, Focus on Enforcement and Business Focus on Enforcement reviews, and the work by Departments and regulators, this has given the BRE and Departments a considerable insight into the burdens impacting on business. Initiatives by Departments 15. In addition to the interventions mentioned above which seek to understand directly from business what regulations they are concerned about, some Departments have also reviewed their stock of regulation as a whole to help improve their understanding of regulatory issues that impact on business. This has developed good practice which BRE will encourage other Departments to adopt - where appropriate. Home Office 16. In support of the Government s deregulation agenda, the Home Office carried out a comprehensive audit of all Home Office legislation from 1850 to 2013, with the aim of assessing the potential for deregulation in those that directly regulate business and might be considered as in scope for the Business Impact Target. This found that 143 regulations directly impacted on business. The Home Office has used the result of the audit to focus attention on those 143 regulations. Department for Education 17. The Department for Education (DfE) has thoroughly reviewed all of its relevant regulatory stock (including compliance and enforcement costs) that falls within the scope of the Business Impact Target. 18. The principle purpose of DfE s regulations is to safeguard children and young people, and to secure good educational standards. Through its review DfE identified the regulations that impact on business and estimated their regulatory load. Working with its stakeholders, DfE assessed where reductions to burdens may be possible without compromising children s and young people s safety or damaging educational standards. Following analysis of the findings, DfE s economists then developed estimates of the potential reduction in burdens to business. 19. DfE s independent regulators have also considered the burdens that they place on business: the Equality and Human Rights Commission is assessing the impact of its qualifying regulatory provision (QRPs) on business; the Higher Education Funding Council in England are in the process of submitting their first QRP assessment to the RPC;

5 the Office of Qualifications and Examinations Regulation (Ofqual) already carry out assessments on the changes they make in the regulation of examination and assessment, and is also preparing to submit its first QRP assessments to RPC - it is also reviewing systems and decision-making processes to ensure that its duty under the Growth Duty is addressed when this comes into effect; the Office for Standards in Education, Children's Services and Skills (Ofsted) is simplifying its guidance. Department for the Environment, Food and Rural Affairs 20. Defra has developed a number of products and tools to provide a full picture of the legislation under its policy responsibility and to strengthen its oversight of policy under development or review. These include Defra Lex, a publically accessible on-line database of all its legislation in force, with enriched search features and information not available elsewhere, including details on extent, enforcement bodies, consultation responses and impact assessments. Defra uses this information to maintain a complete Regulatory Stock Assessment of the costs and benefits of its regulations, including EU regulation. An updated version of this assessment, providing information as at 1 January 2017, is due to be published this summer alongside an overarching report on Better Regulation in Defra. These tools are being used to support the legal analysis to prepare for future Defra legislation and also contributed to Defra s ability to review 1,400 regulations under the Red Tape Challenge exercise. Regulators 21. Subject to Parliamentary approval of secondary legislation, a wide range of regulators will soon be under a statutory duty : - to have regard to the desirability of economic growth 4. A number of regulators (eg the Pensions Regulator, or the Financial Conduct Authority) have had the equivalent of a growth duty provision in their legislation for a number of years - to report on changes they make to their regulatory policies and practices and to assess the resulting impact on business Although the latter duties have yet to come into force, regulators are already acting to improve their understanding of their impact on business. Health and Safety Executive (HSE) 23. The HSE has carried out the following work: a. Reform of Health and Safety Legislation In response to Professor Ragnar Löfstedt s 2011 review Reclaiming Health and Safety for All and the Cabinet Office led Red Tape Challenge, HSE undertook a comprehensive review of its stock of over 200 pieces of legislation. HSE removed or improved 84% of health and safety regulations by the end of the last Parliament. This included reducing the overall stock of legislation by 50% and was achieved without compromising or diluting health and safety protections for workers. b. Review of HSE s Approved Codes of Practice (ACoPs) HSE reduced the page count of ACoP material by 40%. Changes to ACoPs, which have legal standing, go 4 Section 108 and 109 of the Deregulation Act Section 22(9) Small Business, Enterprise and Employment Act 2015 as amended by s14 of Section 22(9) Small Business, Enterprise and Employment Act 2015

6 beyond a simple reduction in page quantity. Changes have been designed to simplify requirements and remove burdens where possible, as well as improving the usability of the documents through clarity of presentation and language. c. Review of HSE s guidance - HSE reduced the number of guidance pages by 60%. The review was targeted to provide resources for business that give practical advice and allow a proportionate approach in complying with health and safety law. This means removing duplication, combining publications to present information in the most appropriate manner for the audience and the withdrawal of guidance no longer relevant or where industry has taken the lead. d. Introduction of the LA Code Published in May 2013, the Code sets out the risk based approach to targeting health and safety interventions that LA regulators should follow. LA regulators have reduced their proactive inspections, from a baseline of 118,000 in 2009/10 to 6,300 in 20013/14, representing a 95% drop. e. Focus on enforcement The government led Chemicals Sector Review delivered significant benefits to business by integrating previously separate COMAH (Control of Major Accident Hazards) and environment protection inspections to remove unnecessary duplication and overlap. Promote a joined-up understanding of cross-cutting issues 24. Some issues cut across multiple Departments and regulators. Given the risk of uncertain accountability for addressing them, BRE has put particular focus on these in its programme of reviews. These are run in by BRE partnership with the relevant Departments and regulators. 25. The Focus on Enforcement review programme looked at how selected sectors were affected by regulations that were the responsibility of a number of Departments and regulators. For example it delivered a greater understanding and resolution of issues in coastal developments: the review resulted in the signing of a Coastal Concordat by the Environment Agency, Natural England, the Marine Management Organisation and the Local Government Association which provides a single point of entry, guiding applicants to the bodies they need for range of consents, licences, permissions etc. It has also looked at multi-regulator, multi-department impacts on areas such as small food manufacturers, chemicals, volunteer events and adult care homes 26. Leaving the European Union and the launch of the Industrial Strategy present Government with a range of opportunities to ensure that the future regulatory landscape is as efficient and effective as it can be to support growth, innovation and productivity. In the immediate future there will be major challenge for Departments to understand the stock of regulations that directly and indirectly implements 45 years worth of EU law.

7 Recommendation 6: BRE plans for a more proportionate approach to the assessment and validation of the small number of regulations with the greatest impacts 27. The Better Regulation Executive, in partnership with Departments and the Regulatory Policy Committee, conducted an efficiency review of the better regulation framework between April and October The aim of the review was to ensure that analytical and scrutiny resources across Government are appropriately focused on the most significant measures. The Regulatory Policy Committee (RPC) supports the Government s goal to ensure that limited analytical resources are deployed proportionately in support of the most significant Ministerial decisions. 29. The outcomes of the efficiency review are part of a continuing process of review of the framework, which was previously assessed in 2012 and Government remains committed to making the better regulation system more proportionate and efficient in the light of experience. 30. BRE and Departments will be monitoring the effectiveness of the efficiency proposals once implemented and will evaluate the success of the changes to the system within 12 months. Progress to date 31. Prior to bringing forward a package of changes, the shape of which is still being considered across departments, BRE has already begun work to simplify processes and clarify requirements of the better regulation system. These include:- reviewing the appropriate scale of business cost/benefit rounding to be used in scoring for the BIT; developing a new validation impact assessment template to encourage proportionate assessment of low-impact measures; developing tools such as a quick-start guide to help officials to understand the better regulation process and what information is required when. 32. Separately, the independent Regulatory Policy Committee have already committed to: Set out explicitly expectations of proportionate analysis so that Departments and stakeholders have a clear understanding of what degree of analysis is appropriate to decisions at different scales of likely impact; Comment explicitly in Opinions on the proportionality of the analysis presented, and on where presenting less information might have been proportionate and appropriate; Continue to work with Departments to ensure that scrutiny processes for their highestpriority measures (and especially of deregulatory measures) do not unnecessarily delay their work; Continue to work with Departments to ensure that they take appropriate advantage of flexibilities in the regulatory scrutiny system (for example, by completing appropriate analysis of primary regulation to reduce the analysis/resource required around secondary legislation);

8 Continue to improve dialogue with Departments so that more frequent issues are identified and dealt with outside the formal submission process and Departments can raise their concerns about proportionality and process. 33. Government will provide a fuller update to the PAC in July setting out the further changes that it will take to improve the efficiency of the better regulation system.