Deregulation, Better Regulation
and Regulatory Reform
Facilitator: Tony Cash
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Outline
• The different impact of regulation on large and
small firms
• Measuring and reducing the burden
• Right touch regulation
• Examples from various countries
• One in and one out regulation
• Behavioural insight
• Example ‘The UK Regulatory Policy Committee’
• Alternatives to Regulation.
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The Power Of Incentives
‘Most of economics can be summarised in
four words: “People respond to
incentives”. The rest is commentary.’
Steven Landsburg – ‘The Armchair
Economist’
So in regulation we must look at the
incentives that exist now and that
will result
24/03/2016
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Better Regulation and Deregulation
Compared
Better regulation includes other options
than cutting regulation. We will explore
some of these options.
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Regulation and Small Firms
• Small firms cannot afford to have a compliance
department – time for compliance can be
disproportionate
• Can be more difficult for small firms to keep ahead
of latest changes
• Perception of regulation may prevent people
starting up businesses or increasing employment
• Etc.
• So some governments even consider exempting
micro businesses from various requirements.
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UK Business Secretary’s View
• “We are launching our review, not from Whitehall, but
starting from the viewpoint of the people affected by the
rules. The consumers, the citizens, the small
businesses who actually have to carry out instructions,
and can tell us whether they are working how they are
meant to.
• “The problem is that to the experienced practitioner –
from the civil servant drafting the language, through the
inspector visiting premises, down to the lawyers
weighing in during a dispute, the rules can seem to
make sense. For people whose job is regulation,
there doesn’t seem to be a problem. And if they are
the only people we talk to, we won’t see the
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problem, and it will just get worse.” Vince Cable
Vince Cable View CTD
• “Our starting position is not “all regulations are wrong”.
– Sometimes regulations are what make a market possible, and
enable the trust required between consumers, workers and
businesses.
– “But what we have heard, consistently, from smaller businesses
in particular is that they are tired of continuously having to adjust
themselves to the government’s latest priority – to find out about
some new procedure, some unfamiliar form or website to visit.
• “…the effect on enterprise can be chilling. Ownermanagers of micro businesses estimate that they
spend between one or two days per fortnight on
regulatory issues.
– Big companies, by contrast, can hand over the problem to a
dedicated compliance department …small businesses soon start
fearing even worse regulations than actually exist, and too easily
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become prey to offers of expensive help.” (Vince Cable)
Better Regulation Five Principles
Any regulation should be:
• Transparent
• Accountable
• Proportionate
• Consistent
• Targeted
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Exposure to the chemical dihydrogen monoxide in sufficient
quantities can cause death.
Should it be regulated?
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“Right Touch” – A View
• “Right-touch regulation is the minimum
regulatory force required to achieve the
desired result”
(Harry Cayton, Chief Executive, Council for Healthcare
Regulatory Excellence)
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Right Touch Regulation: The Core
Principle
• Distinguish between those who will
– exceed our standards anyway
– meet the basic standards, perhaps needing
help
– only comply with standards with strong
incentives
• If using regulation, make sure the first
two categories don’t suffer because of
the latter
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International Standard Cost
Methodology Network
“Rules should never be an objective in themselves, but
always a means of assuring a public interest or
achieving a public goal. In the last few decades, the
system of rules in a lot of countries has become
increasingly complex, due to which the cohesion
and logic of rules for companies and citizens are not
always easy to grasp.
This hampers compliance and is unnecessarily
time-consuming and expensive, not to mention
irritating. As countries, we have an obligation to
create the best possible conditions for our business
community. We must reinstate the balance.”
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SCM Definitions: Types of Cost
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Standard Cost Model (for Business
Costs)
Legislation
Information obligation
Administrative activity
Time
Tariff
P=
Cost of each administrative activity
Number of
enterprises
Frequency
Q=
Number of administrative activities each
year
Administrative Burdens (AB) = P x Q
Tips for Gathering
Information on Compliance
Burdens
• Use existing databases or ask business representative
groups to help you to identify a representative sample of
businesses with which to consult.
• Prepare a short survey to distribute to these businesses
asking them to detail any compliance burdens which they
envisage (it is important that you supply sufficient
information on your proposal to accompany the survey- an
early draft of your RIA would be very useful in this regard).
• If necessary, establish a small focus group to discuss the
survey findings in more detail
• Use any existing Groups or Fora involving business of
which your Department is a member to discuss the impact
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of your proposals. (Ireland RIA Guidance 2009)
How Can You Reduce Burden?
• Remove, reduce, merge or improve
regulations
• Simplify the process to comply with
regulations
• Data-sharing and joined-up government
• Develop ICT solutions and services
• Provide better guidance and
information.
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Example: the Netherlands
• The Netherlands experience informed the UK’s
better regulation initiatives since 2004/5
• “The Dutch approach offers a way to reduce
paperwork and administrative costs, saving
businesses money and freeing up people for
more productive activities.”
• “The approach has three components measurement of the burden, political
commitment to a target and an organisational
structure that provides incentives to achieve
that target.” David Arculus ‘Less is More’ 2005
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Example: Germany
• “With its Bureaucracy Reduction and Better Legislation
Programme, the Federal Government on 25 April 2006
decided to measurably lower administrative costs
caused by federal information obligations, to avoid the
imposition of new information obligations and to
vigorously work for the reduction of existing information
obligations at European level.
• “The Federal Government aims to reduce the present
administrative cost burden by 25 % by 2011, and to
achieve about half of that amount by the end of
2009.
• “In these efforts, the connection to the impact of a
reduction of the administrative burdens related to EU
legislation is to be maintained.”
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Example: Ireland
• “Ireland was a relative latecomer to
Regulatory Impact Analysis but has been
catching up” OECD
– (Since 2005 RIAs a requirement for all
government departments / offices)
• “In March 2008, DETI was given
responsibility for leading and co-ordinating
the measurement and reduction of
administrative burdens across government,
leading to the achievement of the 25%
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target by 2012.”
Example – EU Initiatives
• EU publication ‘Better Regulation- simply explained’
acknowledges that Netherlands and UK have inspired
some EU initiatives e.g. tracking and reducing admin
burdens, and impact assessment
• Better Regulation strategy is based on three key action
lines:
– Promoting the design and application of better regulation tools
at the EU level, notably simplification, reduction of
administrative burdens and impact assessment.
– Working more closely with Member States to ensure that better
regulation principles are applied consistently throughout the EU
by all regulators.
– Reinforcing the constructive dialogue between stakeholders and
all regulators at the EU and national levels.
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Developments in Better Regulation (UK)
• Less Is More (Better Regulation Task Force) and
Hampton Report
• Davidson Review (“gold-plating of EU Directives etc”)
• 25 per cent reduction in admin burdens between
2005 and 2010 (worth £3.5bn)
• 2010 commitment to reduce the costs of paperwork
and wider regulatory costs by a further £6.5bn in
2010-15.
• Establishment of Regulatory Policy Committee (RPC)
and Reducing Regulation Ministerial Sub-Committee
(RRC) in 2010
• One in one out approach
• Behavioural insight
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Hampton Principles
• Regulators, and the regulatory system as a whole, should use
comprehensive risk assessment to concentrate resources on the areas
that need them most
• All Regulations should be written so that they are easily understood,
easily implemented, and easily enforced, and all interested parties
should be consulted when they are being drafted
• Businesses should not have to give unnecessary information, nor give
the same piece of information twice to the same or different regulators
• The few businesses that persistently break Regulations should be
identified quickly and face proportionate and meaningful sanctions. It
should be easy to determine non-compliance.
• Government and regulators should provide authoritative, accessible
advice easily and cheaply so businesses know what is expected of
them.
• When new policies are being developed, explicit consideration should be
given to how they can be enforced using existing systems and data to
minimise the Administrative Burden imposed.
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UK’s One-in, One-out Rule (OIOO)
• Objective: to bear down on cost and
volume of regulation; encourage lastresort attitude to regulation
• Scope: no new primary or secondary
UK regulation can be brought in without
reducing regulations with a greater/
equivalent reduction
• Presently, EU measures excluded.
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Behavioural Insight
In UK when proposals are reviewed will
be asked questions including:
• Does the proposed approach harness
the insights of behavioural economics in
order to achieve outcomes in minimally
burdensome ways?
• (examples on next slide)
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Behavioural Insight MINDSPACE (1)
Cabinet Office MINDSPACE model
• Messenger – we are heavily influenced by
who communicates information
• Incentives – our responses to incentives are
shaped by predictable mental shortcuts such
as strongly avoiding losses
• Norms – we are strongly influenced by what
others do
• Defaults – we ‘go with the flow’ of pre-set
options
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Behavioural Insight MINDSPACE (2)
• Salience – our attention is drawn to what is
novel and seems relevant to us
• Priming – our acts are often influenced by
unconscious cues
• Affect – our emotional associations can
powerfully shape our actions
• Commitment – we seek to be consistent with
our public promises, and reciprocate acts
• Ego - we act in ways that make us feel better
about ourselves
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Impact Assessment
An Impact Assessment is both:
• A tool used by policy makers to assess and present the
likely costs and benefits (monetised as far as possible)
and the associated risks of a proposal that might have an
impact on the public, private or civil society organisations,
following HMT Green Book’s appraisal and evaluation
techniques
• A continuous process, consistent with the policy appraisal
cycle, as set out in the Green Book, to help policy makers to
fully think through the reasons for government intervention,
to weigh up various options for achieving an objective and to
understand the consequences of a proposed intervention.
• Guidance makes clear that regulation should be last
resort, only used when it is superior to other options by a
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clear margin.
Key Stages of a UK Impact
Assessment
•
•
•
•
•
•
Development Stage (not published)
Options Stage (not published)
Consultation Stage
Final Proposal Stage
[If applicable – Enactment Stage]
Review Stage (Post-Implementation
Review)
• http://www.bis.gov.uk/ia
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Impact Assessments: UK Format
•
Summary and Interventions
– What is the problem under consideration? Why is
government intervention necessary?
– What are the policy objectives and intended effects
– What policy options have been considered (including
any alternatives to regulation)? Please justify any
preferred option
– When will policy be reviewed
•
•
•
•
Ministerial sign-off
Summary Analysis and Evidence: cost benefit
summary for each options
Evidence Base (detail)
[Also specific impact tests]
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UK Regulatory Policy Committee
Criteria
• RPC emphasis on two areas;
– Have the costs and benefits, and the impacts
on small firms, public and third sector
organisations, individuals and community
groups been robustly identified and reflected in
the choice of options?
– Have the necessary burden reductions required
by “One-in, One-out” (OIOO) been identified,
and are they robust?
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Regulatory Policy Committee
Recommendations
(2010)
• Recommendation 1: Don’t presume regulation is the
answer
• Recommendation 2: Take time and effort to consider
all the options
• Recommendation 3: Make sure you have substantive
evidence
• Recommendation 4: Produce reliable estimates of
costs and benefits
• Recommendation 5: Assess non-monetary impacts
thoroughly
• Recommendation 6: Explain and present results
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clearly
RPC Ratings
• January 2011, all Opinions on impact assessments
include a rating based on a traffic light system:
• RED The IA is "Not Fit for Purpose". Major concerns
over the quality of the evidence and analysis and overall
quality of the IA.
• AMBER concern with the IA which should be resolved
before the IA is submitted to the RRC–
• GREEN: The IA is "Fit for Purpose". We may still
highlight some minor issues with the IA.
• Any IA receiving a RED opinion must be amended and
resubmitted to the RPC for a new opinion prior to
submission to RRC
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General Government Policy
Options (1)
• Types of Regulation
– Classic command and control
– Encourage Self-regulation (e.g. Advertising Standards
Authority Ireland)
– Co-regulation (self-regulation supported by government
regulation e.g. Medical Council Ireland)
– Performance based regulation e.g. in US vehicle emission
standards set in law but left to manufacturers HOW to meet
• Encouraging higher standards
– Recognition e.g. Quality Marks
– Encourage & support Codes of Practice (e.g. UK OFT)
• financial incentives
– Direct e.g. tax, price controls, funding
– Guarantee arrangements e.g. UK Small Firms Loan 33
Guarantees
Government Policy Options (2)
• Permits schemes
• Provide support e.g. mediation and conciliation
services (UK ACAS)
• Other incentives
– E.g. giving greater rights to redress in the courts
• Education and information (e.g. smoking,
fireworks, health UK awareness campaigns)
• Disclosure (e.g. UK OFCOM and broadband)
• “Nudges” (use of behavioural insight)
• Etc
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A Thought: Establish the Real Problem
Is it:
• A supply issue
• A competition issue
• An information issue (e.g. to enable
better choices)
• A cultural issue
• Etc?
The answer makes a big difference to
which options will work!
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Pre-Conditions for Successful Policy
and Regulation
•
•
•
•
Veracity (willing to embrace truth and facts)
Neutrality (open & aware of assumptions)
Willingness (determination to find best solution)
Acceptance (deal with society/ economy as it is,
not as you’d like it to be)
• Reason (logical analysis of evidence)
• Concern for people (i.e. the real impact in the
real world).
• Thanks for your attention.
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