4. Projects and case studies of Regulatory Impact Assessment
4.2. Regulatory Impact Assessment in Western European member states of the EU
The Member States of the European Union have taken various measures to introduce RIA systems in their regulatory policies. The pioneer of this trend is the government of the UK, but all Western European states have taken some kind of initiatives in order to obtain feedback about the quality of regulatory activity. By doing so, governments have taken steps to develop the dialogue between regulators and those affected by the regulations, to improve the structure of impact assessment methodologies, and to integrate the use of RIAs into the rule making process. Guide books have been published in a number of EU member states on how to prepare regulatory impact assessments 39 , with special respect to the assessment of the impacts exerted on small enterprises. Several Member States of the EU have launched training projects about impact assessment for public servants.
RIA guides invariably point out that the authenticity of the assessment depends on whether it is based on reliable data that are suitable for making robust, possibly quantitative inferences that even non-professionals understand well. The guides recommend the quantification of the costs and benefits in monetary units wherever possible and the application of rigorous methods. In cases when the benefits originating from the introduction of the regulation cannot be expressed in terms of money, quantification is still desired, e.g. by making statements about the expected number of lives saved, or about expected changes in the volume of pollution, etc. In cases where a complete monetisation of the expected impacts is not possible, evaluators should refer to the most significant cost or benefit items that will change as a result of the regulation.
4.2.1. United Kingdom
In Europe the public administration of the United Kingdom shows the best example for a continuous, institutionalised quality control of regulatory activities. The UK government has been preparing regulatory impact assessments since 1988. 40 The work is coordinated by the so-called Better Regulation Executive, whose office is part of the Prime Minister’s Office. Its task is to supervise the quality of the regulatory activity of the government, to improve regulatory policy, to develop the methodological devices needed for preparing clear and consistent RIAs and for applying them throughout the policy process.
Impact assessments are carried out not only concerning UK national regulations, but also concerning European Union legal rules affecting public bodies, private organisations (such as small enterprises) or non-governmental organisations.
During the first decade of RIA activity in the U.K., most regulatory impact assessments have analysed regulatory proposals about small- and medium size enterprises 41 and about competition issues. In recent years, impact assessment has been extended to the policy areas of health care, sustainable development, the enforcement of equal opportunity rights and regional development. Moreover, impact assessments have been used as methodological instruments deregulation, that is, for identifying unnecessary legal rules and for facilitating the process of their withdrawal.
The guidelines of RIA activity have highlighted that efforts invested in regulatory impact assessments should be proportional to the likely effects of the proposals. In those special cases, when the expected effects of a regulation are negligible, there is no need for a detailed RIA. The assessments should pay special attention to the key indicators of compliance cost.
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39[BRE 2007]
40The terms Regulatory Impact Analysis or RIA are also used.
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An evaluation of recent RIA activities in the UK. Impact assessment activities of the UK government are regularly evaluated by independent experts. In 2006 an evaluation prepared by the National Audit Office 42 covered the work of four government departments, namely, the Department for Culture, Media and Sport (DCMS), the Department for Trade and Industry (DTI), the Home Office, and that of the Department for Transport (DfT).
The above mentioned Report of the National Audit Office has produced the following findings. In 2005 various organisations of the British government completed ca. 200 regulatory impact assessments to examine the effects of a number of bills (legal drafts). Government departments routinely employ external experts with background in economics and statistics to prepare RIAs. The responsible public servants, in particular the ―drafters" of regulations share the relevant legal, administrative and statistical information by using the Intranet network of the particular government department. The final form of the legal rule that is signed by the Minister of that government department which has submitted the proposal must clearly refer to the results of the RIA by stating that ―the benefits of the regulation justify its costs". This statement must be justified with the help of the quantitative and qualitative techniques of RIA or, if this is not possible, then the remaining uncertainties must be clearly indicated.
Most legal rules affecting companies are issued by the Department for Trade and Industry. Among them, the above mentioned Report has evaluated the Regulatory Impact Assessments of the following regulations:
• A modification of legal rules concerning labour courts,
• A law on labour relations issued in 2004,
• A law about increasing the minimum wage and others.
The above mentioned Report of the National Audit Office was based on a large sample of already completed regulatory impact assessments, and all of which have been evaluated against various criteria. A selection of the most important evaluation criteria goes as follows:
• Did the RIA examine all relevant options?
• Did the RIA examine, whether the purposes of the regulation were clear, the intervention was rational?
• Was the RIA conforming to the methodological directives issued by the Better Regulation Unit?
• Did the RIA apply innovative techniques?
• Did the RIA apply quantitative and qualitative assessments, including cost-benefit analyses and sensitivity analyses?
• To what depth has the RIA examined the impacts of the regulation, its enforcement and compliance?
• Was the „afterlife" of the regulation followed in the framework of so-called monitoring or ex post evaluation exercises?
• Were the competition distorting or competition influencing effects of the regulation examined?
• Have consultations taken place with affected stakeholders and have their opinions been taken into consideration in the RIA?
Based on the above findings, the Report has evaluated the individual departments by using the following criteria:
• According to the depth of the administrative culture of impact assessment. Here the evaluators may assess the proactive behaviour of the organisation, as measured e.g. by the time elapsing from the preparation of impact assessment to the legal rule coming into force;
• According to how deeply impact assessments are integrated into political process;
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• According to how much stress is laid upon the exploration of the economic consequences of the legal rule.
The evaluators have found that a wide range of RIAs have only met the requirements formally: such analyses were considered to be of a weak quality. On the other hand, a well defined group of RIAs were profoundly integrated into the process of decision making: such RIAs were highly appreciated. In between the two extremes were those, which proved to be useful information but their role in improving regulatory quality was limited.
According to the summarised evaluation of the National Audit Office, the quality of impact assessment activity was rather disappointing in that year. Although the culture of impact assessment preparation has been found highly developed in the UK, the surveyed analyses were, in many cases, not convincing enough, and their presentation was often not quite clear. RIAs were suitable for questioning the necessity of a regulation in certain individual cases only. Apart from this, however, most RIAs have played a very valuable communicative role and have enhanced the clarity of decision making in the particular government departments. RIAs were often prepared too late, so that they were often not in compliance with the political intentions.
The evaluators of the National Audit Office have recommended that RIAs should concentrate more on providing statements about expected economic impacts, instead of just producing statements of purely administrative character. The analyses should more effectively be integrated in the processes of decision-making; they should more clearly reveal the alternatives faced by politics. RIAs should, to a larger extent, rely upon the knowledge and work of external experts and these experts should take bolder initiatives when revealing alternative courses of action for public servants.
4.2.2. Netherlands
In the Netherlands regulatory impact assessments have been carried out since 1985, both for laws and decrees.
Impact assessments have been carried out in every government department, an activity which until 1994 was co-ordinated by the Ministry of Justice and after that year - as the interdependence between regulatory quality and competitiveness was increasingly recognised - it became assigned to the Department of Economy.
In the Netherlands , during the first years of impact assessment activity, the major methodological tools were checklists, which were flexibly applied in order to assess the quality of regulations against various criteria. 43
From 1993 to 2000 the impact assessment method MISTRAL was used, an approach which is focusing at revealing the compliance costs of the regulation but paying not enough attention to the benefits of the measures.
The data collecting method of the MISTRAL was based on taking representative samples from paper-based, telephonic, personal or electronic interactions between enterprises and the authorities. These interactions were then assessed in order to determine their demand in terms of resources such as time and money. In case of regulations which have compelled the entrepreneurs to turn to consultants or accountants, the price of such services were interpreted as regulatory burdens and added to the previous items.
MISTRAL was used for pointing out that in the Netherlands, between 1993 and 1998, the administrative burdens imposed on small enterprises by regulations, as expressed in monetary terms, were increased by almost one quarter. Based on these measurement results, the government has undertaken important steps. An important measure was that the company databases used by government agencies were merged, resulting in a single database used by every public authority. Moreover, law enforcing agencies were forbidden to request enterprises to provide data already existing in this database. These authorities had to justify their demands when requesting data from companies.
In 2000 in the Netherlands the internationally harmonised Standard Cost Model (SCM) has replaced the MISTRAL impact assessment method. The new procedure has pointed out compliance costs of regulations, but also tried to take into consideration the benefits of the measure as well.
4.2.3. Belgium
In Belgium a legal rule, introduced in 1988, established a government office (ASA) which was responsible for the simplification of administrative procedures. This agency annually surveys the existing administrative procedures introduced by authorities for companies and households, and measures the time demanded for compliance, as well as the complexity of compliance activity. The arising burdens will be added up and weighed
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according to the number of those enterprises and households which are affected by the given administrative procedure, thus getting an index which reflects the total load of administrative burdens.
4.2.4. Germany
In Germany , a uniform work flow was introduced in 2000 for the federal ministries, prescribing that every law and decree must be justified with the help of a regulatory impact assessment (Gesetzesfolgenabschätzung, GFA). These assessments must be structured according to a previously defined template. 44 However, as the experiences of the first few years have shown, the initiative did not work out well. The public servants working in the relevant ministries were very critical towards the introduction of GFA and have expressed their opinion that the standard methodology was overcomplicated. Regarding the regions of Germany (Bundesländer), although the legal institution of impact assessment has appeared in most departments of the regional governments, until 2005 only a few sample projects of regulatory impact assessment were implemented altogether.
4.2.5. Sweden
In Sweden it was the SimPlex rule of 1998 which first announced that government offices were obliged to make an impact assessment in each case when putting forward a new legal rule or a modification of an existing one. Based on the methodology attached to the rule, the institution issuing the regulation was supposed to answer 12 questions, the majority of which being connected with the expected influence exerted on small- and medium size enterprises.
Since 2002 the Central Chamber of Industry and Commerce of the country evaluates the performance of impact assessment activity and, connected with this, the regulatory environment of enterprises. The 2006 report of the Chamber on regulatory activity has contained a sharp criticism of the government. 45 According to this report, despite the ambitious plans concerning the simplification of legal rules, the administrative burdens of SMEs have increased in Sweden , while the general quality of regulatory impact assessments remained steadily low.