The research shows that the Government's assessment system is failing the EU policy making process. This document was made by Professor Francis Chittenden and is part of the Global MBA offered by FGV in partnership with Manchester Business School (MBS).

1. THE BRITISH
REGULATORY SYSTEM
TIM AMBLER, FRANCIS CHITTENDEN
AND STEFANO IANCICH
Published by the
British Chambers of Commerce
March 2008

2. CONTENTS
ABOUT US
The British Chambers of Commerce is the Foreword p.3
national voice of local businesses, acting on
behalf of a network of Accredited Chambers of
Commerce across the UK. Executive Summary p.4
Representing over 100,000 businesses and 5 The British Regulatory System p.6
million employees, Chambers of Commerce are
the Ultimate Business Network. Lying at the The EU Impact
heart of their local community, Chambers serve
all businesses with a passion no-one else can
Assessment process p.9
match.
UK Regulatory Impact
Editorial note Assessment in 2006/7 p.17
The opinions expressed in this report are those of
the authors and may not necessarily represent
Key Findings p.27
those of the British Chambers of Commerce.
Acknowledgements Conclusion p.28
Kieran O’Keeffe, Policy Adviser, Regulatory Reform.
Sally Low, Director of Policy and External Affairs.
Recommendations p.30
The British Chambers of Commerce
65 Petty France
St. James’s Park
London
SW1H 9EU
Tel: 0207 654 5800
Fax: 0207 654 5819
Email: info@britishchambers.org.uk
Website: http://www.britishchambers.org.uk
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3. FOREWORD
Welcome to our sixth annual Impact Assessment this year’s research that too often officials are
report The British regulatory system published in focused on transposition as the moment at
collaboration with the London and Manchester which to conduct an Impact Assessment. To
Business Schools. In February we released our have real influence then a partial UK Impact
2008 Burdens Barometer, which shows that the Assessment should emerge immediately after
cumulative cost of new regulation to business the Commission makes a legislative proposal.
since 1998 is now £66 billion. What is striking
about this figure is not just its enormity, but also The Government must be fully engaged with
that 71 per cent of it is EU sourced. EU Impact policy making in Brussels and shine a spotlight
Assessments still tend to be highly conceptual on new legislation at the formative stage. At
and it is questionable whether they influence present the EU and UK Impact Assessment
policy. Furthermore, few Directives or systems are totally disconnected. The
Regulations have Impact Assessments.
Government must establish a coherent linkage
However, it would be too easy to lay the blame between the two if they are to make good on
at the door of the European Commission for their commitment to provide a lighter regulatory
whom Impact Assessment is an important tool, environment for our members.
but one with which they will struggle without
the support of member states who must be
relied upon to conduct their own parallel Impact
Assessments. Without this, the Commission has
little or no data on which to base their own
analysis while member states will miss a key
opportunity to influence EU policy.
The Government has invested heavily in the UK
Impact Assessment. However, their focus has
been on the UK end of the legislation by which David Frost
time it is too late to influence the Brussels stage Director General
which drives the whole process. We know from British Chambers of Commerce
3

4. EXECUTIVE SUMMARY
This is the sixth annual report examining how the government. The number has increased
UK regulatory system works in practice and progressively to about 350 in the year covered
whether it follows the Government’s own by this report, the year to 30th June 2007. The
guidelines. In the last decade, regulation has cumulative burden on British business since 1998
become a major UK industry. Tens of thousands is, according to the (R)IAs themselves, £66bn., of
are employed not in commerce to grow GDP but which 70 per cent arises from EU sourced
to interfere in that process. Each regulation has a regulation (73 per cent last year). In terms of the
purpose and many contribute to national well number of regulations, the EU accounts for only
being but “better regulation” in practice has about 35 per cent. The financial cost shown by
come to mean “more regulation”. The Impact the (R)IAs is only part of the burden; keeping
Assessment system designed to control the track of changing legislation through the forest
volume may have improved quality at the of legislative paper is a major burden in itself.
margins but the original purpose of Regulatory Small wonder so many firms do not bother to do
Impact Assessments ((R)IAs), namely so and that those who do bother grumble about
challenging the need for the regulation and the the burden of so doing.
serious consideration of alternatives, has not
At the same time, some reductions are
been met. The National Audit Office has reached
beginning to arise from reform and we
similar conclusions.
acknowledge that regulation is not solely a
The British regulatory and the solar systems financial matter: social and environmental
have something in common: government, benefits can also be enhanced.
politicians, Brussels, business people and critics
This expansion of regulation may help explain
are revolving around the same ideal but are not
the worsening overall control of the process and,
necessarily on the same planet. Occasionally the
one suspects but this is beyond the purview of
Government planet passes close to that of the
this paper, effectiveness. “Command Papers” are
critics and some small reforms take place. In this
the official lists of new regulations. As the July
report we note them but also continue to draw
Paper was issued late, for the second year
attention to the areas where further reform is
running, it has not been possible to find about 15
needed. We credit government, and the Better
per cent of (R)IAs. Since the whole point of
Regulation Executive in particular, with greater
(R)IAs is to make regulation transparent, this
efforts to accommodate British business, such as
economy with their availability illustrates the
common commencement dates twice yearly. We
systemic failure. For over ten years, the
also acknowledge that British business is not
Government has had no overall control system
universally consistent in its demands especially
for regulations although a database is planned
when regulation protects them from
for 2008. It has since transpired that some
competition. A new Impact Assessment system
(R)IAs listed in the Command Paper are not
came into effect after the period of this report
(R)IAs at all. In short, the 2007 data are so
and we will judge that next time. Meanwhile, the
compromised that we are holding over our
regulatory system of 2006/7 must be judged by
detailed audit until we can obtain clarification in
the guidelines with which it was supposed to be
time for next year’s analysis. As a postscript, we
conforming.
have discovered that 79 per cent of the major
The weaknesses of the UK and the EU Impact Post Implementation Reviews that should have
Assessment systems are compounded by the been published by the end of 2007, have not
lack of synchronisation between them which is been.
documented in this paper. It is not enough to
The comparison of EU and UK Impact
publish the first UK Impact Assessments, which
Assessments leads to a simple conclusion: the
are ostensibly for consultation, after the
EU very rarely employs IAs, and even more rarely
decisions have been made in the EU.
quantifies them thoroughly but, when it does so,
Despite expressed concern with the total volume the system works very well. Conversely, the UK
of regulation, their pace of introduction, as goes through the motions with all Directives and
measured by (R)IAs, has continued to increase. Regulations but so superficially that the system
About 130 regulations per annum were does not work. The specific findings from our
generated in the first four years of this research are documented in the report.
4

5. EXECUTIVE SUMMARY
It is curious, with hindsight, how much attention 3. The BRE should extend the proposed
has been given to perfecting the UK domestic Impact Assessment database to
system, in theory, with so little regard to the EU ensure that all relevant EU legislation
which has been the source of the heaviest that should have UK Impact
burdens on business. Assessments are included with the
The report documents the progress made on last dates and versions of the EU and UK
year’s recommendations and consolidates the Impact Assessments as they are
remaining and new recommendations as follows: produced (the “audit trail”).
4. Ministers should insist on due Post
RECOMMENDATIONS Implementation Reviews being
completed and published for all
1. When, in an area with EU competence,
regulations placing significant burdens
a Minister signs off a new UK-only
on British business, i.e. all those
regulation in the IA, in relation to an
appearing in the British Chambers of
area with EU competence, he or she
Commerce’s Burdens Barometer three
should explain why it is needed in the
years previously.
UK but not in the rest of Europe.
5. We will not try readers’ patience by
2. UK government should switch its
repeating last year’s recommendations
attention from the domestic IA
but simply invite all those seriously
agenda towards having an effective
interested in reforming and improving
UK IA system for EU sourced
the UK’s regulatory system to provide
legislation. Having Regulations (or
better alternatives, explain why those
“Laws” under the new Treaty) rather
recommendations are wrong or
than Directives would help but that,
unaffordable or even, if all else fails,
together with the EU IA system are
implement them. This would make a
out of UK hands. The UK IA system
pleasant change from avoiding
needs to be synchronised with the EU
uncomfortable truths.
Workplan so that EU legislation is
effectively challenged in time to have 6. One exception is that parliamentarians
any effect. In other words, an early should take responsibility for
provisional IA and consultation with legislation. MPs now have the power
British business should take place, and to block poor and/or redundant
be recorded, as soon as the Directive regulation but they do not use it. To
is proposed. That first provisional IA complain of excessive regulation
should be preserved for the audit trail. whilst failing to use the powers they
have to resolve the matter is not
acceptable.
5

6. THE BRITISH
REGULATORY SYSTEM
This year’s report begins with a brief review of reduce the length of IAs and to focus them
previous recommendations and where they now but since all the redundant verbiage can now
stand. We then focus on the EU Impact be transferred to the EM, we may be not
Assessment process before turning to the UK. better off. We will report on these new IAs
next year.
This year we have sought to examine the Post
Implementation Reviews which should have been 3. The UK bodies monitoring and advising on
completed by now. Our experience may not surprise regulation should be consolidated to just
seasoned Whitehall watchers. We also tested how one independent unit, either as part of the
well the UK Impact Assessment process meshed NAO or an equivalent body, answerable to a
with the EU for the Directives of 2005. The remodelled Regulatory Reform Committee
weaknesses of the UK and the EU Impact of the House of Commons.
Assessment systems are compounded by the lack of
Some changes here but nothing so radical as
synchronisation between them. It is not enough to
our recommendation. The Better Regulation
publish the first UK Impact Assessments, which are
Task Force (BRTF), briefly then known as the
ostensibly for consultation, after the decisions have
been made in Brussels. Finally, this report lists the Better Regulation Commission, was a satellite
main findings, draws conclusions and summarises in government’s reflected sunshine but not
our recommendations. influential enough to make waves, still less
tides. It has been replaced by the Risk and
PROGRESS SINCE LAST YEAR Regulatory Advisory Committee (R&RAC)
We list last year’s recommendations and note where which has a more reflective role in the sense
progress, or otherwise, has taken place. of commenting on the whole system after
regulations have been enacted rather than
1. EU Regulations and UK Statutory when they are being formulated. Critics talk
Instruments should both be divided into two of horses and stable doors but that may be
categories: laws and administrative orders. unfair. The regulatory culture of Whitehall
and government needs to change and this
With the de facto approval of the European may help achieve it. Meanwhile some
Union Treaty we can expect that part of the members of the BRTF/BRC have moved to
recommendation to come into effect, namely advising HM Opposition. Given their
that the word “regulation” will not be used laudatory approval of the status quo, even
by Brussels in these two senses. The logic ripples would be surprising.
has yet to dawn in Whitehall where Statutory
Instruments are similarly confused (less than The thrust of last year’s report was that MPs
20 per cent are regulations). It has been should step up and take responsibility for
suggested that regulatory SIs should be regulation which present arrangements allow
distinguished by differently coloured paper. them to do. The Regulatory Reform
That small step would doubtless require Committee (created 2006) should be the
primary legislation. focus of that but early signs are not
encouraging. So little has been attempted,
2. Parliamentary challenge should be focused
Opposition MPs have not bothered to turn up
on proposed new laws informed by
for meetings.1 It can only get better.
Explanatory Memoranda and Impact
Assessments combined into single 4. The other UK Parliamentary committees
documents. Explanatory Memoranda should should be rationalised to give clear
be replaced by one page summaries of authority to the one with primary
(R)IAs prepared by the independent expert responsibility.
(see 5 below).
The principle of having one effective
The justification for retaining both an regulatory review body rather than the
Explanatory Memorandum (EM) and an ineffective six Parliamentary committees
1 Jean Eaglesham, “Fresh Impact Assessment (IA) for each regulation noted last year and two external government
war on red tape elicits hint
is unconvincing. Both explain the regulation committees, has made no progress. We do
of déjà vu”, Financial Times,
9 December 2007 and the need for it. Steps have been taken to not challenge the need for an internal
6

7. THE BRITISH
REGULATORY SYSTEM
management group, namely the Better 6. The EU and member state Impact
Regulation Executive, and for the post facto Assessments should be synchronised both as
audit function provided by the National Audit to timing, data provision and methodology,
Office. It is only the number of e.g. the Standard Cost Model should be
supernumerary committees and their limited harmonised across the EU to provide best
contribution which is in question. practice and comparative data. (R)IAs on EU
legislation should be in good time for
5. Generalised consultation should be partially consultation or independent challenge (see 5
replaced by forensic testing of the (R)IA by above) to influence EU, as well as UK,
an independent expert employing targeted legislation.
consultation as needed.
No progress here either but we modify this
Consultation can be a useful means of recommendation in the light of this year’s
achieving the goals for Impact Assessment analysis below.
or, at the least, improving regulatory
7. Data on costs and benefits in EU Impact
effectiveness and/or reducing the burden but
Assessments should be based upon national
it more often is not. The process is biased
(R)IAs. National (R)IAs are prepared to inform
both by selective listening by the civil negotiations with the Commission, and these
servants and the Regulators being able to figures should be aggregated at the level of
focus on the new regulation while consultees the EU economy and included in the EU IAs.
have businesses to run. Accordingly, and this
is compounded by the volume of regulation, As 6 above.
we find increasing scepticism about whether 8. The BRE should have stronger quality
consultees’ views significantly change control over (R)IAs sourced both from the
proposals. Confirmation bias2 can reduce EU and UK legislation.
consultation to a sterile expression of views
If anything the BRE has distanced itself from
that pass by unheard.
this function, pointing out that it is the job of
We therefore proposed that the process, departments to quality control their own
which is quite wasteful, should be partially (R)IAs. The HMRC does well in this respect.
replaced by real challenge by an individual So where should the buck stop? The word
with sufficient expertise to propose realistic “Executive” implies a hands-on role; the
alternatives. The EU use a similar system. We proposed new database (see below) provides
believe this option is better than, in the the opportunity for the BRE to intervene
interests of objectivity, removing the Impact when an IA is not up to standard.
Assessment process from departments 9. UK civil servants should support the
altogether. Proper publicity for IAs should Commission and press for EU Regulations in
always encourage representations to be place of Directives wherever possible in
made but formal consultation should only be order to simplify legislation and give effect
employed when it is efficient and effective to the single market.
from the business sector’s perspective. We
This recommendation runs into misplaced
acknowledge that the UK government is now
nationalism. Some believe we should show our
giving more time for consultation but this
independence by different transposition of
does not solve the underlying problem.
Directives. The scope for that is increasingly
No progress has been made and we regret limited as the EU makes Directives more
the conclusion that confirmatory bias and precise and polices them better. In any case,
subjectivity continue to undermine Impact those differences run counter to the single
Assessment at both EU and UK levels. We market which the UK supports and creates
considerable extra complexity, confusion and
2 Vibert F, The Itch to build on this recommendation towards the
Regulate: Confirmation Bias paper. Directives were introduced to fudge lack
end of this report.
and the EC’s New System of of agreement between national politicians. This
Impact Assessment
(European Policy Forum, fudge is unhelpful.
London, 2005)
7

8. THE BRITISH
REGULATORY SYSTEM
10. All new regulations should have The reason for this recommendation is that a
performance criteria, e.g. extent of number of regulations save costs for
implementation, costs and benefits and government at the expense of business, i.e.
sunset clauses, or at least fixed review they are quasi taxation. Under the current rules,
dates after which the regulation would a minister can legitimately sign off a regulation
lapse if the formal review is not laid that is good for the Exchequer but bad for the
before parliament. UK as a whole. There is no requirement on the
The new Impact Assessment guidance asks minister to explain his or her rationale, still less
for more specific performance criteria but justify it. No progress has been made.
whether this will result in actual improvement
12. The BRE should maintain a web-based (R)IA
remains to be seen. So far as the rest of the
database keyed to Bills/Acts, Statutory
recommendation is concerned, the IA
Instruments, earlier partial (R)IAs as well as
guidance notes (p.5) only require “The date
EU legislation and IAs. It should be the
at which a review would be undertaken to
source of Command Papers and be a public
establish the actual costs and benefits of the
access point for (R)IAs.
policy and to see whether it has achieved/is
achieving the desired effects. It is often a Whilst it may not go quite so far as here
good idea to review a policy change after proposed, BRE at last accepts that it should
three years but this will depend on the get a grip on recording IAs and maintain a
policy.” central website of summaries with links to
11. The ministerial sign-off on (R)IAs should the actual IAs on departmental websites. The
state explicitly the basis for his or her site should be operational in 2008. We would
judgement which should also state that the urge that this is backdated to include all
costs and benefits are being judged on (R)IAs and would be prepared to provide a
behalf of UK citizens as a whole. copy of our database for that purpose.
8

9. THE EU IMPACT
ASSESSMENT PROCESS
BACKGROUND in June 2005 which highlighted the need to
The Commission’s integrated Impact Assessment ensure early coordination within the
system was introduced in 2003 based on the Commission, openness to input of external
White Paper on European Governance of July stakeholders, commitment to the Lisbon and
20013 and the Better Lawmaking Action Plan of Sustainable Development Strategies and a
June 20024. The formalised and integrated Impact general improvement in the quality of policy
Assessment process was “to improve the quality proposals. March 2006 saw the Guidelines
and coherence of the policy development process further up-dated to include the composition of
by focusing on all major policy initiatives Inter-Service Steering Groups and the
presented in the annual policy strategy or in the introduction of the assessment of administrative
work programme of the Commission”.5 costs. New requirements for executive
summaries, providing a recommended length
The strategic direction of the Impact Assessment
and an obligation to translate these into all EU
system was also influenced by the Göteborg
languages, were also introduced. Finally, in
strategy of 2001, which linked the policy of
November 2006, the Commission announced an
Sustainable Development (i.e. meeting the needs
exhaustive plan to measure and reduce
of present generations without jeopardising the
administrative costs in the European Union.9
needs of future generations) to the Better
Regulation debate. Based on these two principles, We have reviewed the quality of IAs since their
the benefits of Impact Assessments are not limited introduction in 2003 but only to a limited extent
to moderating the burden on business but also to due to their slow and sporadic introduction in
assessing alternative policy options and their likely practice. Last year we concluded that the overall
positive and negative impacts in all relevant performance of the Commission’s IA system , “is
spheres. patchy, and further substantial improvement is
needed before Impact Assessment can genuinely
Although the Commission’s IA system was
offer the prospect of promoting better regulation”.10
3 See European Governance, developed “after examining established
a White Paper, COM(2001) procedures in Member States and other OECD
428 final SAMPLE OF IAs USED FOR ANALYSIS
countries,”6 there are a number of important
4 Action plan "Simplifying This year we have screened 55 out of the 85 IAs
and improving the regulatory differences between the Commission’s IA system
identified for the year to June 2007 of which 20 IAs
environment", COM(2002) and those of most countries, concerning in
278 final were randomly chosen for a more in-depth quality
particular the scope of application and the
5 Communication on Impact assessment. The largest number (eight) came from
focus. While most countries (e.g. UK) apply IAs
Assessment, COM(2002) 276 TREN DG, followed by ENTR (seven). 25 IAs were
final only to new primary and/or secondary
prepared for Communications, 16 for proposed
6 Commission Staff Working legislation, the Commission’s system is broader
Paper, Impact Assessment:
Directives, 10 for Regulations, four for Decisions and
and also extends to other, non-legislative policy
Next Steps – In support of one for a Progress Report (Enlargement Strategy
competitiveness and proposals. In addition, whereas most countries
and Main Challenges 2006 – 2007, DG ELARG).
sustainable development. tend to focus their assessments primarily on
SEC(2004)1377 As we reported last year,11 the availability of
economic impacts (in particular the costs of new
7 See The Evaluation completed and planned IAs and the existence of
regulation), the Commission emphasises an
Partnership, “Evaluation of the a central EU website that is updated regularly
Commission’s Impact approach that is balanced across the economic,
Assessment System”, 2007
and contains copies of all IAs, is much more
social and environmental dimensions, and
8 European Commission
efficient and open than the 2006/7 UK system.
responds not only to the demands of Better
Impact Assessment Guidelines
SEC (2005) 791 Regulation, but also to those of Sustainable Of the 85 IAs listed on the European
9 Action Programme for Development.7 These features make the Commission’s website:
I
Reducing Administrative Commission’s IA system difficult to compare
Burden in the European 38 were published between July and
with most national IA systems.
Union, COM(2007) 23 final December 2006;
I
10 T Ambler, F Chittenden The Commission’s IA system has been subjected
and Deming Xiao, “The 45 were published between January and
Burden of Regulation: Who is to a number of revisions such as the 2005 June 2007;12
I
watching out for us in replacement of “Preliminary Impact
Europe?” (British Chambers of
Assessments” with “Roadmaps”. A full IA would one was not available online (European
Commerce, London, 2007); grouping of territorial co-operation (EGTC),
be required for all the items included in the
11 http://ec.europa.eu/govern DG REGIO);
ance/impact, 05/12/2007 Commission’s Legislative and Work Programme
12 ibid (CLWP). New IA Guidelines8 were also published I one was only available in French.
9

10. THE EU IMPACT
ASSESSMENT PROCESS
QUANTIFICATION OF IAS and services and achieve world leadership in
Table 1 summarises the costs and benefits embedded technologies. On the policy side, the
identified by the 55 IAs in this analysis. Only aims are to create a single, Europe-wide R&D
seven out of 15 DGs quantified costs and programme that is industrially driven, to put in
benefits in their IAs. Furthermore, closer place a new mechanism able to combine, for the
examination shows that such data can only be first time, national, EU and private funding and
taken as a broad reference rather than careful to ramp up R&D investment in Europe. The
estimates of the anticipated costs and benefits Commission claims in the IA that the proposed
of proposed policies. option to implement a “Joint Technology
Initiative” will achieve gains of at least €14.7bn
DG Environment (ENV) estimated the most
per year in reduced system design and
significant costs to business, contributing nearly
development costs by 2015, equivalent to at
70 per cent of business costs while DG INFSO
least 55k person/years of effort compared to the
accounted for nearly 40 per cent of EU
“business-as-usual” scenario13. The net present
government costs. In terms of benefits, DG
value of these gains in 2006 is estimated at
INFSO contributed nearly 95 per cent of total
€109bn. The huge benefits estimated in the
benefits to business while DG TREN contributed
proposal should be subjected to a rigorous Post
nearly 67 per cent of total benefits to EU
Implementation Review to validate the
government.
assumptions on which these numbers are based
The benefits to business are heavily influenced (e.g. total worldwide R&D should increase by
by Council Regulation on the establishment of around 170 per cent over the next ten years,
the “ARTEMIS Joint Undertaking” to implement a expenditure on embedded software R&D is
Joint Technology Initiative in Embedded predicted to increase by 225 per cent, from
.
Computing Systems. On the economic and €58bn in 2002 to €132bn by 2015.) and whether
technological side, the aim is to launch an the proposed initiative has a realistic chance of
initiative to realise Europe’s potential in the achieving the stated objectives.14 The table
future markets for intelligent products, processes omits DGs with no IAs in our sample.
Table 1: Costs and Benefits Quantified in IAs
Costs to EU Benefits to EU Costs to EU Benefits to EU
business (€m) business (€m) government (€m) government (€m)
DG One-off Recurring One-off Recurring One-off Recurring One-off Recurring
ENTR 160 20
ENV 4678 165 362 930 242 54
INFSO 1600 125 14700 1160
J LS 5
MARKT 790
REGIO 15
SANCO 59 15
13 Source: Summary of the
TAXUD 40
Impact Assesssment on the TREN 500 3375 240 969 10 1700
establishment of the
“ARTEMIS Joint Total 6778 3540 365 15222 3143 282 2544 40
Undertaking” to implement
a joint Technology Initiative
in Embedded Computing
systems {COM (2007) 243
final}, {SEC (2007) 582}.
14 Software Intensive
Systems in the Future,
IDATE/TNO, 2005.
10

11. THE EU IMPACT
ASSESSMENT PROCESS
Table 2. shows the extent to which different DGs
sought to quantify costs and benefits. Overall,
the process still seems to be dominated by
qualitative data with the majority of IAs failing to
identify the relevant costs and benefits.
Table 2: Quantification of Costs and Benefits
Costs to EU business Benefit to EU business
Q NQ NS NA Q NQ NS NA
7 38 4 11 4 45 0 11
12% 63% 7% 18% 7% 75% 0% 18%
Costs to EU government Benefit to EU government
Q NQ NS NA Q NQ NS NA
19 34 0 7 4 43 0 13
32% 57% 0% 11% 7% 72% 0% 21%
Q Quantified and figures provided including zero
costs/benefits
NQ Not Quantified
NS Not quantified but stated to be insignificant
NA Not available or not discussed
Based on this analysis, a random sample of
20 IAs was chosen for an in-depth quality
assessment. Table 3 summarises the composition
of the sample by DG and legal instrument.
Table 3: Composition of the sample by DG and legal instrument
DG Legal instrument Total
Directive Regulation Communication Decision
ENTR 1 3 1 1 6
TREN 1 1 2
SANCO 2 2
RTD 1 1
DEV 2 2
EMPL 1 1
FISH 1 1
INFSO 1 1
JLS 1 1 2
TAXUD 1 1
TRADE 1 1
Total 4 5 8 3 20
11

12. THE EU IMPACT
ASSESSMENT PROCESS
We are baffled by the Brussels decision process Figure 1: Analysis of economic, social and
concerning whether an IA should be produced. environmental impacts
Our sample is just under 25 per cent of all IAs 100%
and may not be representative but even so, Percentage of IAs
55 per cent apply to administrative orders, i.e. 90%
items which are not really Directives or 80%
Regulations at all. At the same time, Brussels
only rarely applies IAs to Directives or 70%
Regulations. In previous years we were advised 60%
that this was because the process was just
50%
starting up but after four years we would expect
more progress. 40%
Directives are approved at a rate of about10015 30%
and Regulations at a rate of 2,00016 per annum.
20%
For example, in 2004 121 Directives were passed
15 EUR Lex: Directives of which 89 (73 per cent) had UK (R)IAs17 and 10%
adopted: 141 in 2006 and 76 therefore should have had EU IAs. So assuming
in 2007 although the latter 0%
may be incomplete. about 75 per cent of Directives are burdensome Economic Social Environmental
16 EUR Lex: 2052 in 2006; for business – because they had UK Impact
and 1708 in 2007. Assessments – 75 should have EU Impact
17 Deming Xiao, Regulatory Assessments compared with an estimated 2018
Impact Assessment in the social impact and 10 (50 per cent) identified an
EU and UK, MBA
that used the process in 2006/7 based on our
Dissertation, Manchester sample. In the case of Regulations, about 97.5 environmental impact. Overall, 9 (45 per cent) of
Business School, January per cent19 are administrative orders and not the sample of 20 IAs identified impacts in all
2007 three dimensions, 5 (25 per cent) in two
“Regulations”, in the UK sense of the word or
18 Our random sample of dimensions, and 5 (25 per cent) in only one. In
20 IAs contained four laws, at all. In other words, about 5020
prepared for Directives, regulations should have had EU IAs but, in our one case the IA did not identify any impacts at
leading to a generous pro-
sample, only about 21 actually have them. all. This relates to a Communication from the
rata estimate (4/20*85=17)
Commission to the European Parliament, the
of about 20 Directives
issued in the year.
On this arithmetic, we should expect 75+50 = Council and the Committee of the Regions
19 Chanyeon Hwang, A
125 UK (R)IAs per annum to be drawn up for EU “Towards a general policy on the “Fight against
Study of EU Regulations, sourced legislation which ties up reasonably well Cyber crime, COM (2006)2667 final”. Despite the
MBA Dissertation, with the 35 per cent21 of (R)IAs in our database non-legislative nature of the instrument and its
Manchester Business
School, January 2005 which claim to have EU origin. On the other strategic purpose, the document reported that
20 About 2,000 hand, as we will see later, some UK (R)IAs that the general policy options were assessed on the
Regulations are issued per should exist for EU legislation do not appear to basis of the following criteria:
annum of which 97.5 per
do so. In other words, the extent to which the
I
cent are Administrative
Orders- therefore it can be UK system is missing the EU legislation where it Social impacts
I
estimated that (2.5 per cent should apply, is far from clear. Our third
*2000 Regulations) 50 were
Economic impacts
recommendation will suggest a simple
I
Regulations that should
have been subject to Impact administrative arrangement to close the gap. Costs for public administration
I
Assessment.
Degree of coherence with policy objectives
21 This compares with 23 As the Commission’s approach to the IA system
per cent (26 per cent of relies on achieving balance across economic, I Added value and respect for the subsidiarity
primary UK legislation and
social and environmental issues, our starting principle
17 per cent of secondary,
I
calculated by # pages) point was to analyse the extent to which these
Feasibility
according to David Stephen, principles were embedded in the IAs. Figure 1
(Regulation by Brussels?
The Myths and The
summarises the result. But we could find no evidence of this analysis in
Challenges, European the ten page IA, the purpose of which remains
Movement Policy Paper 2, The screening of our sample showed that 18 (90
obscure.
November 2004) but he per cent) of the IAs identified at least one
omits EU Regulations which
economic impact (either on businesses or public Table 4 shows the extent to which the impacts in
require no UK legislation.
Taking those into account administration), 14 (70 per cent) identified a the three different dimensions were quantified.
his figures match the 35 per
cent quite closely.
12

13. THE EU IMPACT
ASSESSMENT PROCESS
Table 4: Quantification of impact of IAs stressed the need to make the tax system more
Quantification Type of impact consistent by proposing uniform taxation for
commercial road transport fuel in order to
Environ-
complete the internal market. An initial proposal
Economic Social mental
relating to the harmonisation of the taxation on
Number of IAs commercial diesel was presented in 2002.23 This
quantifying impacts 7 0 0 proposal was withdrawn following the screening of
legislative proposals pending before the Legislator
Total IAs identifying
at that time. However, the Commission also
these impacts 18 14 10
announced its intention of reconsidering the need
per cent of IAs quantifying for a legislative solution in the light of the results of
the identified impacts 39% 0% 0% a comprehensive Impact Assessment. An IA was
therefore prepared to analyse the impact of
different options. It was based to a large extent on
The quantification of costs and benefits is rarely
the quantitative results obtained for 19 EU
adopted in a systematic way. Although we could
countries with the Tremove models and for 25 EU
find a quantification of the economic dimension in
countries with the Poles and Transtools models.
seven out of 18 IAs (with varying levels in depth of
The following aspects were examined: impact on
analysis), there was no evidence of quantification in prices, on transport demand and fuel consumption,
the social and environmental dimensions. The social on industries (distortions of competition,
impacts identified in the different IAs included, for administrative costs…) and the budgetary impacts.
example, employment, mobility, improvements in
human health, better relationships between During the course of the Impact Assessment, the
administrations in different Member States as well as Commission decided to modify the options first
between citizens and administrations. examined based on the results of these analyses.
Concerning the rates of taxation to be
The environmental objectives were still more vague implemented, for instance, the Commission
and related especially to noise, air pollution or services did not follow the suggestion made by
waste disposal. While the main challenge for a some hauliers to approximate the rate at the
proper quantification of the economic dimension lowest level possible. Economic simulations
seems related to a lack of data, especially at illustrated that such a change would have
Member State level, the lack of adequate contradicted environmental considerations:
methodologies and unclear outcomes may also be lowering the rate would encourage consumption
responsible for the lack of quantification in IAs and therefore be against the fulfilment of Kyoto
relating to social and environmental dimensions. objectives. In addition, this option could have led
Also the use of available data varied widely. to significant negative budgetary impacts on
Member States which would have to be
At one end of the spectrum, quantitative data was
compensated by increases in other taxes, and
fed into sophisticated modelling and simulation
which might possibly create more economic
tools, and the uncertainties and sensitivities
distortions. This is an example of an EU IA
underlying this analysis were described in detail in
prepared with the intention of properly
an exhaustive technical IA report. This is the case,
evaluating the options available to regulators.
for example, for the proposal amending Directive
2003/96/EC as regards the “adjustment of special In contrast, at the other end of the spectrum,
22 COM (2001)370, tax arrangements for gas oil used as motor fuel for conclusions were frequently drawn, and solutions
12.09.2001. commercial purposes and the coordination of were often proposed, based on qualitative and/or
23 Proposal for a Council taxation of unleaded petrol and gas oil used as incomplete quantitative evidence. For example in
Directive: amending
Directive 92/81/EEC and
motor fuel, COM (2007)52 final”. The White Paper the Communication from the Commission to the
Directive 92/82/EEC to on Transport “European transport policy for 2010: Council and the European Parliament “A policy to
introduce special tax
time to decide”,22 noted that with the road reduce unwanted by-catches and eliminate
arrangements for diesel fuel
used for commercial transport sector now fully opened up to discards in European fisheries”, COM(2007) 136
purposes and to align the competition, the absence of harmonised fuel taxes final, where the effects of different options were
excise duties on petrol and
diesel fuel (COM (2002) 410
seemed increasingly to be an obstacle to the compared using vague qualitative data (e.g.
of 24.07.2002). smooth functioning of the internal market. It positive, high, negligible…).
13

14. THE EU IMPACT
ASSESSMENT PROCESS
The new Action Programme for Reducing Of the four IAs providing quantitative
Administrative Burdens in the European Union24 information, two stated that the proposal will
states that “… the reduction of the administrative not produce administrative burdens while the
burden (AB), sometimes referred to as red tape remaining two quantified administrative costs on
or bureaucracy costs, is one crucial component the basis of rough estimations. For instance, in
with which a more conducive environment for the proposal for a “Regulation of the European
business can be put in place, without lowering Parliament and of the council amending
the level of existing or the ambition of new Regulation No 11 concerning the abolition of
policies in the area of environmental, consumer discrimination in transport rates and conditions,
or health protection“. The same document also COM (2007)90 final”, “… figures from the
reports that “… Studies carried out by the measurement of administrative burdens in The
Central Planning Bureau (CPB) of the Netherlands have been extrapolated to the EU-
Netherlands indicate that the administrative level based on the relative percentage of GDP
burden as a proportion of GDP varies from (World Bank data, 2005) and the country
6.8 per cent in Greece, Hungary and the Baltic distribution list developed by Kox (2005) in
States to 1.5 per cent in the UK and Sweden. It is order to correct the extrapolated figures
by all means not the case that this burden is according to different estimated levels of
generally lower in those countries that enjoy administrative burdens in different Member
higher GDP levels. Moreover, for a group of States.” This is a very high level analysis based
countries with still relatively harmonised upon data that is conveniently available, but it is
standards of legislation these differences raise unlikely to produce even reasonable
questions about inefficiencies and approximations of the actual ABs incurred
implementation”. The Action Plan emphasises across the EU.
the centrality of Impact Assessment and the
Standard Cost Model to reduce the It seems unlikely that the EU objective for a 25
administrative burden of regulation in the EU by per cent reduction in administrative burden can
25 per cent. even be quantified, still less achieved, given the
evidence from this sample of IAs.
ADMINISTRATIVE BURDENS
We turn now to consider administrative burdens CONSULTATION
(Table 5 below). The quantification of The Guidelines require that for public
administrative burdens through the adoption of consultations in the context of Impact
the Standard Cost Model, has been an EU Assessment work, the minimum standards for
requirement since March 2006, when the consultation, as laid down in the relevant
updated IA Guidelines were published. The Commission Communication of 2002,25 be
Commission’s claim to reduce the administrative applied. This includes that “the Commission
burden of regulation in the EU by 25 per cent, is should strive to allow at least 8 weeks for
undermined without quantified data and a reception of responses to written public
consistent methodology. consultations”, and “when defining the target
group(s) in a consultation process, the
Commission should ensure that relevant parties
Table 5: Quantification of administrative burden in
have an opportunity to express their opinions.”
IAs Administrative burden
Number of IAs
Quantified 4 Table 6: Type of consultation
Not quantified but figures Type of Consultation Number of IAs % of IAs
24 http://ec.europa.eu/
stated to be insignificant 2 Open 2 10%
governance/impact,
05/12/2007
Not quantified 7 Targeted 10 50%
25 "Towards a reinforced
culture of consultation and Not discussed 4 Both 5 25%
dialogue – General principles
and minimum standards for Stated to be Not applicable 3 No Consultation 3 15%
consultation of interested
parties by the Commission" Total 20 Total 20 100%
(COM (2002)704 final.
14

15. THE EU IMPACT
ASSESSMENT PROCESS
Almost all IAs make reference to some be used only because of tight deadlines
consultation, either open to all interested parties associated with a proposal. Finally a transparent
2 (10 per cent), targeted at specific stakeholder consultation process must ensure that
groups 10 (50 per cent), or a combination of stakeholders are adequately informed about the
both 5 (25 per cent). However, it is also clear use made of their contributions through a clear
that not all of these consultations were actually explanation in the revised IA.26
staged for the IA and/or proposal itself; some
The final step in this stage of the research was to
referred to consultations that were undertaken in
consider the extent to which Impact
a wider policy context. One such example is the
Assessments examined relevant options in a
proposal for a directive of the European
proportionate manner, including the options of
Parliament and of the Council on “The protection
‘no EU policy’, ‘no policy change’ and alternative
of the environment through criminal law, COM
instruments. A summary of the results is shown
(2007)51 final”. Although several studies were
in Table 7, below.
launched to compare criminal and administrative
penalties in Member States’ environmental laws
and different public conferences and workshops Table 7: Number of options presented
had been held since November 2003, no formal Number of
consultation was conducted on the specific options presented Number of IAs % of IAs
proposal. For three of the 20 IAs examined we
0 1 5%
could not find evidence of any kind of
stakeholder consultation and in one case 1 or 2 2 10%
extensive consultation was claimed in the IA
without mentioning the interest groups involved. 3 or 4 13 65%
However, we also found good consultation 5 or more 4 20%
practice such as for the regulatory proposal of Total 20 100%
the European Parliament and the Council on
“Common rules concerning road transport
operators, COM (2007) 263 final”, where
stakeholder consultation was assisted by an
Table 7, shows that overall, most IAs identified
independent expert, who contributed by putting
between two and five policy options. The IA that
all the comments received into an economic
did not identify any options at all related to the
perspective. Similarly, for the Communication on
communication from the Commission to the
“Renewed Market Strategy, COM (2007) 183
Council and the European Parliament “Proposal
final”, where, after a mix of open and targeted
for a EU Code of Conduct on Division of Labour
consultations, a revised IA specified how the
in Development Policy, COM (2007)72 final”
consultation process helped to improve the
which presents operational principles that should
formulation of the proposal (e.g. a refocused
guide EU donors regarding the nationality of
section on problem definition, more information
employees used in cooperative ventures. Since
on the specific needs of Small and Medium-sized
this was an advisory code rather than a Directive
Enterprises (SMEs) and concrete examples of
or Regulation, the absence of options is
recent business cases which highlighted
reasonable.
methodological difficulties inherent in trying to
model the precise macro-economic impact of As noted above, it is hard to appreciate why IAs,
the proposal). and the scarce resources consumed, should be
devoted to Communications and administrative
Overall a transparent and effective consultation
orders.
process requires early involvement with
stakeholders. Sufficient time is required for CONCLUSIONS
comment and contributions on framing the It would appear that the IA system can work well
issues and the selection of relevant options. and does so in a minority of cases. However, the
Other important aspects, for example, are that majority of IAs are unlikely to have a positive
26 Action plan "Simplifying
and improving the the use of open consultation (in particular online effect on the quality of the proposal. Lack of
regulatory environment", surveys using ‘closed’ questions) may lead to relevant data and adequate methodologies and
COM(2002) 278 final
oversimplification of the issues and should not unclear outcomes are major problems.
15

16. THE EU IMPACT
ASSESSMENT PROCESS
The new Action Programme for Reducing demonstrates.27 The possibility that a very small
Administrative Burdens in the European Union number of firms will be sampled for each
emphasises the centrality of Impact Assessment regulation, and the potential use of one broad
and the Standard Cost Model (SCM) to reduce
category of small firms (1-49 employees) without
the administrative burden of regulation in the EU
separating out the “0” employee and micro-
by 25 per cent. However, the SCM methodology
still presents several weaknesses that in part businesses could render the data meaningless
explain why a reduction in administrative and make the tracking of the changing level of
burdens could be achieved but not perceived by administrative burdens over time a misleading
business, as the Dutch experience exercise.
27 See World Bank, “Group
Review of the Dutch
Administrative Burden
Reduction Program”, 2006
16

17. UK REGULATORY IMPACT
ASSESSMENT IN 2006/7
OVERVIEW the search engines did not work properly, and in
The number of regulations, (R)IAs produced by many cases, the lack of specification of the type
government departments has grown steadily of (R)IA on the website (initial, partial, full and
from about 130 in the late 1990s to about 360 final) added complexity to our task.
for the year to 30th June 2007.28 We cannot be
HM Revenue and Customs is, as in previous
precise about the last year because it only
years, the department with the best designed
became apparent from the June 2007 Command
website. A clear link to better regulation in the
Paper, which lists (R)IAs, which was again
home page, and separation of partial and final
published late, that some 90 (25 per cent) had
(R)IAs, grouped by year simplified our search
not been captured by our sweeping of all
enormously. A common policy, aimed at
departmental websites. We understand that
harmonising the relevant information across all
some of those in the Command Paper are not
departments, would be helpful. The Better
(R)IAs at all.
Regulation Executive is probably the right body
The publication in late January 2008 meant that to implement this innovation. This unit used to
we were not aware of the shortfall until after our make all (R)IAs available on its website, but
detailed analysis had been completed. subsequently withdrew from that activity. They
Accordingly we cannot publish the annual tables now aim a partial return to a central database
this year but aim to publish both 2006/7 and but indicate no plans to standardise
2007/8 next year, assuming that the BRE and departmental (R)IA websites which implies that
government departments ensure prompt and the difficulties in obtaining (R)IAs will remain.
complete publication on their websites. To
Of the 245 final (R)IAs found in 2006/7, 89
suggest we did not look hard enough is no
arose from EU Directives or Regulations,
excuse as the whole point of (R)IAs is that they
equivalent to 36 per cent of the total. UK driven
are readily and easily accessible to explain and
(R)IAs still form the majority. The Food
justify the new regulations. Since a Command
Standards Agency and DEFRA seem to deal with
Paper only has to list what has already been
a greater number of EU Directives or
published, being unable to do so for nearly
Regulations, respectively with 87 per cent and
seven months reflects the lack of importance
53 per cent of the share of (R)IAs produced by
government gives to the regulatory process.
each department.
We found 142 out of the 193 (R)IAs listed in the
One-off costs and benefits to business
Command Paper to end December 2006. A final
amounted respectively to £1.3bn and £30.8m
RIA was not prepared in 21 cases where the
while recurring costs and benefits to business
departments stated that such regulation will not
£712.1m and, surprisingly, £2.2bn, respectively.
have a financial impact on business/government,
Almost half of the benefits to business are
in which cases we do not understand why they
accounted for by “The gambling (operating
appeared in the Command paper. We have been
licence and single-machine permit fees)
unable to find another 29 (R)IAs either because
regulations 2006” where DCMS claimed that “A
it was stated by the department that no online
conservative estimate based on projections from
copy is available, or because the web-link was
a range of consultancy studies suggested that
not functioning, e.g. The Specified Diseases
the new regulatory regime could lead to an
(Notification and Slaughter) Order 2006 SI
increase in net consumer expenditure on
2006/2166 – DEFRA.
commercial gambling of £1,000m a year over a
The search for the (R)IAs was more difficult this five-year period beginning in 2004/05”. There
year than on previous occasions, as the high was no data to support these claims in the final
number of unidentified (R)IAs demonstrate. In (R)IA nor any explanation of where this
the Command Paper to December 2006 most of additional expenditure would come from. Unless
the original links to departmental websites were there is a great increase in consumer earnings
28 T Ambler, F Chittenden
not working, mainly because of departmental re- and/or borrowings directly attributed to the new
and Deming Xiao, “Who is organisation and/or updating of the web-pages. gambling regulations, the claimed amount seems
watching out for us in Another challenge is the lack of common dubious. Net consumer expenditure is, in any
Europe?” (British Chambers
of Commerce, London, structure in the organisation and display of the case, not an appropriate measure of business
2007); relevant information. Few departments have a benefit, since costs need to be deducted. A
well organised website for (R)IAs. In some cases sensitivity analysis should have been used to test
17