Regulatory impact assessments in the United Kingdom: Regulatory impact assessments in the United Kingdom Mostaque Ahmed – Cabinet Office Prague, 7 March 2007


Programme: Programme 8th March: Case studies of two RIAs and potential lessons for Czech Republic.


Overview of today’s topics: Overview of today’s topics Why good regulation matters UK institutional framework Role of RIAs in policy development benefits of RIAs UK guidance links with consultation handling European legislation quantifying costs and benefits Current issues in the UK


Why Worry About Regulation?: Why Worry About Regulation? Government intervention can: Create unnecessary bureaucracy for private and public sectors Add to firms’ costs Reduce innovation, productivity and ultimately growth of the economy Distort competition, e.g. create barriers to new firms Damage small businesses Have adverse impacts on different groups in society


Slide5: What is Better Regulation? Ensuring Government only regulates when necessary Reducing unnecessary bureaucracy in both public and private sectors Evidence-based policy making Informed decision-making Keeping adverse impacts to a minimum


Better Regulation is not…..: Better Regulation is not…..


Tools of Better Regulation : Tools of Better Regulation Effective use of regulatory impact assessment Simplification of existing regulations Administrative Burdens Reduction Effective consultation with stakeholders


Benefits - for private/public sector: Benefits - for private/public sector LESS RED TAPE Business, charities and the voluntary sector should get ‘focused’ regulation of which the benefits justify the costs LESS BUREAUCRACY Focused on, and deals with, the situation it sets out to address SIMPLER MEASURES Regulation should be easy to comply with


Conclusions….: Conclusions…. Regulation brings important benefits to business, charities and citizens BUT – it must be light touch, targeted and focused on achieving objectives Better regulation not about removing necessary protections Underpins a global competitive economy capable of sustainable growth


Better Regulation Institutional Framework: Better Regulation Institutional Framework Better Regulation Executive Line Ministries Cabinet Committees (Panel on Regulatory Accountability) Better Regulation Commission Parliament National Audit Office


Better Regulation Executive: Better Regulation Executive In 2005 the new “Better Regulation Executive” was established Supports and challenges departments and regulators to reduce and remove regulation across the private, public and voluntary sectors Listens to frontline staff, business and other stakeholders


Better Regulation Executive: Better Regulation Executive Responsible for: Impact Assessment Framework Guidance on Public Consultation Simplification & Administrative Burdens Reduction Programmes Guidance on Effective Enforcement of Regulation Promoting Culture Change Coordinating EU Better Regulation


Line Ministries: Line Ministries Three levels of control:


Ministers: Ministers PANEL FOR REGULATORY ACCOUNTABILITY (Top level committee chaired by PM) Scrutiny role on departmental regulations Approves all regulations with costs over £20m Challenges and, where necessary, approves over-implementation of EU law


Better Regulation Commission: Better Regulation Commission Independent Body set up to advise the Government on better regulation issues Membership from all economic sectors Reports on specific regulatory regimes (e.g. licensing) & more “technical” issues (e.g. risk) Role in scrutinising departmental simplification plans


Slide16: UK Official Auditor Reports to Parliament directly Conducts an annual review of a selection of RIAs Highlights common issues to BRE that may need changes to what we do Provides detailed feedback to departments


UK Parliament: UK Parliament Legislation laid before Parliament accompanied by an RIA Includes secondary legislation such as Statutory Instruments, Orders, etc Increased scrutiny of RIAs in legislative process Select Committee interest


Conclusions…..: Conclusions….. Better regulation strategy needs to be effectively implemented across Government Therefore, needs politically influential and powerful central Unit External input can add value High-level political commitment vital


Questions?: Questions?


What is a Regulatory Impact Assessment? : What is a Regulatory Impact Assessment? “….a tool which informs policy decisions. It is an assessment of the impact of policy options in terms of the costs, benefits and risks of a proposal.”


When is an RIA done?: When is an RIA done? For all policy proposals with possible impact on business, charities, the voluntary or public sectors Even if recommended option is not regulatory Major proposals must clear Cabinet Committee – Panel on Regulatory Accountability, chaired by the Prime Minister before they can be cleared by other policy committees


UK Regulatory Impact Assessments: UK Regulatory Impact Assessments Assess options: regulatory & non-regulatory Enable meaningful consultation Inform EU/international negotiations Identify sectors disproportionately affected Encourage effective implementation and delivery planning Valuable communication tool Seek to ensure benefits justify the costs


Benefits of an RIA: Benefits of an RIA Clarify the objectives of your proposal Think through the full impact of your proposals Identify and assess alternative options for achieving the policy goal Ensure your consultation exercise is meaningful and reaches the widest possible range of stakeholders Determine whether the benefits justify the costs Determine whether particular groups may be disproportionately affected Better policy, better delivery


Key questions: Key questions Why is change needed? How can we get there? Who will be affected? What are the alternatives to regulation? Do the benefits justify the costs?


RIA Process: RIA Process The UK RIA considers: Direct and indirect costs and benefits: Economic Environmental Health/quality of life Effects on: Business Public sector Charities and voluntary sector Consumers, individuals and social groups


Slide26: Stages of RIA Policy idea & development (Initial) Consultation (Partial) Policy agreement (Final) Winners and losers, risks, broad estimates of costs and benefits Ideas fleshed out, quantitative assessments Final recommendation, costs and benefits confirmed following consultation


Slide27: RIA PROCESSES RIA drafted by line ministry Submission to Parliament Scrutiny by NAO


Consultation – Why consult?: Consultation – Why consult? Greater support for proposals from outside world Likely risks, e.g. unintended consequences Potential costs and benefits Valuable information about policy proposals


Consultation Types: Consultation Types “Formal:” e.g. on the Internet – anyone can respond Must follow the Code of practice Informal – limited number of people can respond Use of Forums Involving people you know are interested Inviting people to come forward


The Code of Practice on Consultation – six criteria: The Code of Practice on Consultation – six criteria Consult widely; 12 weeks written consultation at least once in the process Be clear on the proposals, who may be affected, what the questions are and the timescales Ensure the consultation is clear, concise and widely accessible Give feedback on how responses influenced the policy Monitor effectiveness at consultation Follow Better Regulation Best Practice


Slide31: EUROPEAN UNION UK strongly supports the use of Impact Assessments in Brussels – by Commission, Council and Parliament UK uses its own RIAs and, where available, Commission IAs to inform negotiating positions Welcome Commission’s new guidelines on measuring administrative burdens IAs have been helpful in improving Commission proposals – e.g. Air Quality UK also uses its own RIAs to implement EU law nationally Government policy not to over-implement – “gold plate” – EU law


So to summarise…: So to summarise… Key Gains to policy makers are: Better understanding of the problem Evidence-based policy Better consultation Decisions will stand up to challenge Better achievement of policy objectives


Break: Break


RIA: Core content: RIA: Core content What’s the problem being solved? Clear rationale - market failures or social reason Risks assessment for not acting What are the options? Baseline option of doing nothing Include non-regulatory options What are the costs and benefits? Wider economic, social and environmental Distributional impacts (e.g. health, gender etc) Dynamic effects, e.g. unintended consequences


RIA: Further content: RIA: Further content Competition and Small Firms Impacts Enforcement, sanctions & monitoring Consultation Implementation & delivery plan Post-Implementation Review Recommendation


Political sign-off - The Declaration: Political sign-off - The Declaration “I have read the Regulatory Impact Assessment and I am satisfied that the benefits justify the costs” The responsible Minister must sign this statement in the final RIA


Good practice: Good practice Part of decision-making process Specify the problem then consider solutions Early involvement of analysts Economists, statisticians, social researchers Help ensure evidence-based Extensive consultation before final decision made


Economists main input: Economists main input Providing a clear rationale for government intervention Ensuring a consistent framework for analysis Advice on costs and benefits Sensitivity analysis Unintended consequences


Appraising the options : Appraising the options Consider all impacts: Economic, social and environmental Impacts should be: quantified where possible but if not then: described qualitatively Sensitivity analysis: Test the robustness of analysis by varying the underlying assumptions


Alternatives to Regulation: Alternatives to Regulation Alternative forms of regulation Self regulation, co-regulation, codes of practice, ombudsmen, voluntary agreements Economic instruments to change behaviour Taxation, subsidies, tradable licences Information based approaches Labelling, public registers, government info campaign


Costs and benefits: Costs and benefits Economic: Government: Exchequer impact, front line staff Business: Overall costs/savings, impact on SMEs, effect on competition Consumers: Impact on cost, quality and choice of goods and services


Costs and benefits (2): Costs and benefits (2) Social: Health Safety at work Levels of skills and education Environmental: Impact on waste, air pollution, noise pollution etc Throughout all of this distributional and equity issues must be considered


Quantifying the unquantifiable: Quantifying the unquantifiable Goods without a price: Such as the environment, health, animal welfare Techniques include: Willingness to pay / surveys Hedonic pricing (house prices near to good schools) Travel cost method (how far people willing to travel to facility) Valuation of time (choice between different transport) Wider impacts: Investment, innovation, productivity etc Appraisal and Evaluation guidance from HM Treasury http://greenbook.treasury.gov.uk


Quantifying the unquantifiable (2): Quantifying the unquantifiable (2) If all else fails: How many people will benefit? How many lives will be saved? Compare on cost alone if benefits cannot be measured?


Other issues: Other issues Discounting Accounting for time Policy and Administrative costs Distributional impacts (incl. small firms, gender, health, rural and race) Sensitivity analysis Testing your assumptions, allowing for uncertainty


Conclusions: Conclusions Evaluating cost and benefits of policy options helps better decisions to be made Can be difficult, especially benefits Various techniques can help Start early in the policy development cycle Need to account for distributional impacts, unintended effects, risk and uncertainty Need to test any assumptions made


Current issues in the UK: Current issues in the UK Currently considering major improvements to the RIAs to address key challenges: Inconsistent top-level support Variable quality of RIAs Insufficient focus on costs and benefits RIAs and Guidance too lengthy Consultations could be improved Need to embed culture change Ongoing process of learning from experiences


Slide48: Revising the UK Impact Assessment: Main Proposals Revised template with one-page summary sheet – focus on costs and benefits Shorter Guidance Improved role for Chief Economists Changing the name from “Regulatory Impact Assessment” to “Impact Assessment” A possible on-line database of completed Assessments, providing a single point of access for stakeholders Improved training and support to departments


Slide49: Revising the Impact Assessment: What will success look like? Impact Assessments developed as policy options are being identified and considered – full cycle approach Decision-makers to expect and have high-quality Impact Assessments when they make policy judgements Clear identification of costs and benefits, including disproportionate impacts Impact Assessments to be the accepted basis for cross-departmental discussion within Government on impact of proposals Stakeholders outside Government to want Impact Assessment because of greater visibility on costs and benefits


Questions? : Questions? Better Regulation Executive: www.cabinetoffice.gov.uk/regulation Mostaque Ahmed Tel: +44 207 276 2152 Email: mostaque.ahmed@cabinet-office.x.gsi.gov.uk