4. Projects and case studies of Regulatory Impact Assessment
4.1. Regulatory Impact Assessment in the central organisations of the EU
Better regulation. An important aim of the regulatory policy of the European Union is to develop and promote the methods of good governance among the institutions of the Community and among Member States.
Governance concerns the way in which governments use their powers. It is the process of making and implementing decisions in and by public institutions while conducting public affairs, managing public resources, and enforcing regulations and involving stakeholders such as companies, consumers and public authorities. A well-defined component of good governance is the policy area aiming at ―better regulation", which consists of actions to generally improve the regulatory environment, to reduce bureaucratic burdens, to design better laws for consumers and businesses. 28
Regulations are not the only means of implementing policies. In fact, in the European practice of RIA it is one of the major tasks of the analysis to clarify whether the regulation submitted for RIA is needed at all. Besides and instead of issuing new regulations or modifying existing rules, governments may resort to subsidy instruments or to the so-called open methods of coordination which also play a considerable role in this respect.
The latter governance strategy consists of (a) collecting good practices of public policies, and best examples of how companies comply with those policies, (b) comparing and analysing them at consultative meetings 29 in order to find benchmarks (c) disseminating these benchmarks and supporting their applications with the help of subsidy schemes and (d) following the results of the previous efforts in the member states. 30
28[EC 2006c]
29E. g.: in case of SMEs [EC 2006b]
30[EC 2001]
Small- and medium size enterprises in the EU face an increasingly complicated legal and administrative environment, which has reduced their competitiveness and in some cases has even rendered them relatively weak and vulnerable in the international competition [bib_38]. Therefore, the EU has set the aim of improving the quality of regulations affecting SMEs by way of centrally supported and coordinated actions, including the institutionalisation of regulatory impact assessments and consultations with the concerned interest groups in order to simplify the body of rules affecting SMEs. 31
Regulatory Impact Assessment, as a tool for improving regulations, has been increasingly applied during the past two decades both in the central organisations of the European Union and in its member states [bib_39].
Since the 1980s a continuous effort can be observed to assess the impacts of European legislation on small and medium sized companies. 32 Already in the 90s the impact assessments of several hundreds of drafted directives were issued in publications on paper and later on the Internet. 33 In practice this means that drafts of regulations are regularly submitted to be tested according to pre-defined criteria.
Involvement of consultancies. In Europe several research and consulting institutions have specialised for the calculation of the costs of following up on regulatory rules. Certain working processes of RIA have been frequently outsourced from the public sphere into the private sphere and the involved private think tanks have brought new methods and extra knowledge to the relevant research. Impact assessments outsourced to external consulting firms by the Directorate General (D.G.) Enterprise of the European Committee usually take 9-12 months to be completed and may cost between EUR 50.000 and 400.000.
Involvement of stakeholders. In addition to relying on expert analyses, regulators frequently meet with representatives of the regulated stakeholders (companies and consumers) on formal and informal interest reconciliation meetings. The task of these consultations is to examine (a) whether the regulation is implemented by the appropriate level of public administration (subsidiarity), and (b) whether the burdens imposed by the regulators on those who are being regulated are not overly exaggerated (proportionality).
Up to 2001, the central organisations of the European Union have prepared impact assessments about planned and issued regulations by using the following criteria:
• Impact on budgets. This form of impact assessment examines the fiscal consequences of the measures.
• Environmental impact assessments. The purpose of these assessments is to reveal the influence of the measures taken by the Union on the environment. Its methodology has been laid down by the Environmental Directorate, but environmental impact assessments have to be carried out by all the other directorates of the EU.
• Business impact assessments. The purpose of these impact assessments is to issue legal rules that burden enterprises within the Union to a reasonable extent only.
Around the year 2000, the demand towards clearly shaped, institutionalised impact assessment systems was growing stronger in the European Union . 34 Critics of the existing and operating budgetary, environmental and business impact assessment systems have emphasised that these systems had little connection with each other, had become inflexible and bureaucratic. Consequently, the need has been formulated to simplify and to standardise these systems. Moreover, it was suggested that impact assessments should be made mandatory in relation to every important regulatory initiative of the Union, including the ex post impact assessment of each essential legal rule every five year. Regarding impact criteria, the recommendation was made to extend the scope of impact assessments to social impacts as well.
Parallel to the demand for an extended character, requirements concerning the quality of the assessments were also growing. It was claimed that impact assessments should become an organic element of the political process, should reduce the risks of regulatory failures, and should contribute to the transparency of the regulatory reform which aims to establish good governance. Mandatory periodic consultations with entrepreneurial interest groups should be only the first step in introducing an overall regulatory management policy reform in the long run.
31[EC 2005a]
32It has become institutionalised under the following names: Regulatory Impact Assessment or Business Impact Assessment (in English) or Fiche d’Impact (in French)
33[EC 1997]
34[EPC 2001]
RIA in the context of competitiveness . These critical judgements have become more intensified following the Lisbon strategy of 2000, which has laid special emphasis on the competitiveness of enterprises. Against this background, several high level forums of the EU urged the European Committee to address the impact of administrative burdens on competitiveness with the help of impact assessments.
In particular, it has become particularly important to dynamically reduce compliance costs imposed on enterprises by EU regulations. It was understood that if these costs remain high, productivity cannot be improved and the economy cannot grow because the compliance with bureaucratic regulations absorbs the energies and resources of enterprises. Moreover, these compliance costs are often passed over to consumers, thus interfering with the distribution of incomes which further raises questions of fairness. The high level of these costs also reduces the international competitiveness of European companies, especially if overseas competitors can operate in an environment of lower regulatory costs. Extremely high regulatory costs can undermine the success and the rationale of the regulation itself, since they compel many companies to break the rules, with the consequence that law obeying enterprises which dutifully follow the regulations suffer from further competitive disadvantages.
In 2002, following the evaluation of several experimental impact assessment projects, a new method of impact assessment has been introduced in the European Union . 35 Various Directorates of the Committee of the European Union are now obliged to carry out impact assessments in accordance with a uniform framework and uniform methods. A new framework has been created which allows examining the regulations against the established criteria of economic, social and environmental consequences and confronting the draft rule with the articulated interests of the interest groups affected by the planned regulation. According to the new regulation of impact assessment, first a preliminary impact assessment of the main suggestions is prepared, and an extended, deeper impact assessment is carried out only if the results of the preliminary impact assessment indicate that more detailed assessment is necessary.
In January 2004 the financial ministers of Ireland , the Netherlands , Luxembourg , Great Britain, Austria and Finland put forward a suggestion concerning the further reform of the regulatory system of the European Union . 36 In this document they urged the elaboration of a standard European method which would be suitable for measuring the administrative burdens caused by regulations. They suggested that, following 2005, the EU should carry out the impact assessment of all new directives by means of a common, approved methodology in order to simplify regulations in a systematic and institutionalised way, both on the level of the European Union as well as in its member states.
Despite continuous reforms, the impact assessment system of the EU is still changing. In 2006, on behalf of the European Committee, an independent board evaluated and summarised the observations and experiences of the Regulatory Impact Assessments having been carried out on behalf of the central organisations of the European Union since 2002, i.e. since the introduction of the new system of impact assessments. 37 The most important deficiencies were found to be the following:
• It is difficult to acquire data for the completion of the RIA.
• The quantification of indirect impacts and non-evident benefits is rather problematic.
• For the completion of high quality RIAs, expertise and resources are often missing.
• RIAs frequently define alternative policy options that are not adequate or are not realistically evaluated.
• Quite often the procedure of the RIA is not clear enough.
• Consultation with the interest groups is often abandoned.
• Often there is no appropriate coordination between the political decision makers and the staff responsible for implementing the measures.
• It often occurs that no quality control is being carried out for RIA activities.
• It often occurs that a RIA will be prepared only in the latest phase of the decision making process.
35[EC 2002a] , [EC 2002b] and [EC 2005d]
36[EC 2004a]
37[Renda 2006]
Despite ongoing reforms, in 2006 there was still no centralised EU institution for impact assessments, and most of the member states did not have an appointed and adequately authorised organ for the execution of impact assessments. However, a further institutionalisation of regulatory impact assessment is necessary, if the EU wants to reach its declared aims of reducing bureaucratic burdens. In 2006, the European Committee issued a declaration claiming that up to 2012, the administrative burdens of the enterprises caused by EU and member states regulations would be reduced by 25%. According to model calculations, this development would result in an expected 1,5 % increase of the GDP as well as increased investments of up to 150 billion Euros which, in turn would create many new workplaces. 38