Tackling costs in new and existing regulation- the UK way

Sarah MitchellJames Rees

Tackling new regs

Micros moratorium

Tackling existing regs

Red Tape Challenge

Tackling new and existing regs

One-in, one-out

UK`s Regulatory Agenda

Micros Moratorium•For three years

•All micros and new businesses included

•Scope - all new domestic regulation within the scope of OIOO plus certain categories of domestic regulation that are outside the scope of OIOO (e.g. systemic financial risk). Both regulatory measures and de-regulatory measures.

•Waivers - department must seek the agreement of both RRC and Economic Affairs Committee to a waiver as part of the normal clearance process; a waiver will be considered on a case by case basis.

• Online public engagement

• Focused on tackling the c.21,000 strong stock of existing regulations

• Aim is to :1. find out which regulations are good;2. which impose excess burdens or unnecessary

restrictions on freedom; and3. get the public to propose solutions

Asks the public:

Red Tape Challenge

‘which regulations should be scrapped; done differently; simplified; improved in implementation; kept?’

Regulations included:

• every few weeks – spotlight on regulations affecting one specific sector or industry – from retail to hospitality to construction.

• throughout the process - general regulations that cross across all sectors – from rules on equality to those in employment.

Anyone can comment on.

Once a theme closes, Ministers have three months to work out which regulations they want to keep and why. But the default assumption is that burdensome regulations will go. If Ministers want to keep them, they have to make a very good case for them to stay.

Red Tape Challenge

Regulations included:

• every few weeks – spotlight on regulations affecting one specific sector or industry – from retail to hospitality to construction.

• throughout the process - general regulations that cross across all sectors – from rules on equality to those in employment.

Anyone can comment on.

Once a theme closes, Ministers have three months to work out which regulations they want to keep and why. But the default assumption is that burdensome regulations will go. If Ministers want to keep them, they have to make a very good case for them to stay.

Red Tape Challenge

Programme launched in April. The website has received over 20,000 comments.

Retail theme:• C. 9000 comments• Ministers now considering scrapping <100 redundant retail

regulations• Ministers intend to revoke, consolidate or simplify c.80 more

Red Tape Challenge

In 2010 the Coalition Government announced it would introduce ‘One-in, One-out’…

Autumn 2010 the rule was introduced to:

“We will cut red tape by introducing a ‘one-in, one-out’ rule whereby no new regulation is brought in without other regulation being cut by a greater amount.”

One-in, One-out

The Coalition:our programme for government

HM Government

bear down on the cost and

volume of regulation

achieve culture change

across UK government

What is OIOO?

One-in, One-out is a rule, whereby any new regulatory cost is, at least, matched by cuts to the cost of existing regulations What is the objective?•Bear down on the costs to business of regulation, and•Create culture change across Whitehall

Mechanism

‘IN’

Flow•Regulatory priorities implemented cost-effectively

=

‘OUT’

Stock•Simplifications or deregulatory measures taken from existing stock

• Business costs only

• Net direct costs

• Domestic legislation

For every new regulation imposing a net cost (IN), equivalent value repealed to compensate (OUT)…

OIOO Scope

• Who does it apply to? All Whitehall departments with immediate effect. Independent Regulators have been invited to participate;

• Initial Scope:– Domestic UK legislation which regulates business and civil

society organisations (previously known as the third sector); – Exclusions: tax, emergencies and measures to address systemic

risk;

• What about European regulations? – OUTs can be derived from repealed or recast of existing

regulations – INs arise from gold-plating or failure to derogate

Sources of Regulation

•Statutory instruments•Codes of practice & self-regulation backed by statutory force•Guidance issued under statutory powers•By-laws by central Government

What is Out-of-Scope?

•Regulations which do not impact on business or civil society organisations•Tax & tax administration•Civil emergencies•Spending decisions•Fines & penalties•Specific Enforcement Actions•Financial systemic risk

Scoring INs & OUTs

INs• The introduction or amendment of a regulation which

will result in a direct net cost to business• The removal of a regulation which will result in a direct

net cost to businessOUTs• The removal of a regulation which will result in a direct

net benefit or the recast of a regulation resulting in a reduced direct cost on business

Treatment of EU measures

• EU measures are in scope where the following occurs:– Goldplating – Failure to derogate

• International measures are treated in similar manner to EU measures

Reporting on OIOO

• Statement of New Regulation (SoNR) reports on:– Regulatory flow from Depts for upcoming 6 mts– OIOO Balance for each Dept.

• SoNR process as a lever for :– Strengthening departmental ownership :

responsibility and accountability– Embedding key changes to regulatory system and

culture across Whitehall (e.g. OUTs, RPC role)– Ensuring that Depts also have a grip on their longer

term programmes (feeding in to separate RRC discussion)

£0m

-£10m

-£20m

-£30m

£10m

£20m

£30m

£40m

£50m

£60m

-£100m

-£1,000m

-£3,000m

-£3,300m

DfT

BIS

DWP

Defra

DHDECC

HO/GEO

HMT HSEDfE

FoodSA

Second half: Workshop discussion

OIOO Currency

• OIOO is scored using Equivalent Annual Net Cost to Business

• There is no substantive difference between using the EANCB to score OIOO and using the present value of the direct net costs to business.

• the EANCB as it gives an indication to business of the likely annual impact as a result of the regulation being introduced.

• The net present value can be a very large number which can be misinterpreted, as it indicates the total net impact of the policy over its lifetime, rather than the likely annual costs that business will incur

Direct v Indirect Impacts

• Direct Impacts result directly from the implementation or removal/simplification of the regulation and include more than just direct expenditure.

• If the effect happens after something else happening first (as a result of the regulation) it is considered a second order effect or indirect impact.

• A regulation which imposes a restriction, or determines how an agent should act/operate e.g. Working Time Regulations, has a direct cost (the opportunity cost of doing something else/differently), although this may not necessarily be direct expenditure.

• This is not an economic concept but it allows OIOO to be operational without endless confusion.

Role of the RPC in scrutinising

• An independent, external body who provides external scrutiny for the IAs of all new regulatory proposals

• In order to gain clearance from Cabinet Committees Departments must obtain a Fit For Purpose IA from the RPC

• The RPC does not comment on Government policy objectives, but focuses on the options which have been considered for implementation and the robustness and quality of analysis