Departments urged to consider social impact of drive to cut red tape

National Audit Office review of government’s bid to cut regulation cost highlights need for better understanding of social impact, and more evaluation of regulatory decisions once implemented

By Suzannah Brecknell

29 Jun 2016

Public spending watchdog Amyas Morse said Whitehall's current bid to reduce regulation was "not truly reducing burdens on businesses where they feel them most". Picture: Photoshot

The government’s regulatory watchdog should be able to judge departmental impact assessments as not-fit-for-purpose if they do not adequately consider the social consequences of a decision to cut red tape, according to the National Audit Office.

The new report from the NAO looks at the government’s progress towards its target of reducing the cost of regulation to business by £10bn by 2020. The target is overseen by a joint Cabinet Office and business department unit, the Better Regulation Executive (BRE).

Departments are required to produce impact assessments for any new regulatory or deregulatory proposals, which are scrutinised by the Regulatory Policy Committee.

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Impact assessments are expected to consider wider costs and benefits when making regulatory decisions.

However RPC found that of the 271 impact assessments it scrutinised during 2014, only a third included robust considerations of wider social impacts of regulatory decisions.

The NAO’s report says: “As part of its scrutiny process, the RPC can comment on the quality of calculations of wider impacts, but it is unable to judge an impact assessment to be unfit for purpose if the calculations are inadequate.”

It recommends that the RPC should be “enabled to declare an impact assessment unfit for purpose on the grounds of insufficient consideration of such wider impacts”.

The NAO also calls for government to improve its understanding of the economic costs of regulation, and focus its work on areas which will have the greatest impact on businesses.

Amyas Morse (pictured), head of the National Audit Office, said: “The current system is set up to ensure that government can hit its target. But it misses the point by not truly reducing burdens on businesses where they feel them most.

“If the Target is to have a greater impact on productivity and growth, the government must improve its understanding of businesses’ overall experiences, and prioritise their most pressing concerns. Departments will also need to take a more active role in reducing regulatory costs and assessing the impacts of their regulatory decisions.”

Of 83 regulatory decisions made in 2011 that fall into scope of this report, only two have been reviewed, and a further five reviews are scheduled.

“The current system is set up to ensure that government can hit its target. But it misses the point by not truly reducing burdens on businesses where they feel them most" - Amyas Morse, National Audit Office

“Departments frequently fail to plan for evaluation when making regulatory decisions,” the NAO’s report says. However, the watchdog noted that more recent impact assessments did include plans for post-implementation reviews.

It calls on the BRE develop guidance that would encourage departments to plan evaluations earlier. The RPC, meanwhile, should be asked to consider whether impact assessments contain adequate monitoring and evaluation plans.

The report also notes concerns that the system set up to encourage better regulation is creating too much bureaucracy, and diverting resources from genuine deregulatory activity.

The NAO estimates that departments’ Better Regulation units cost £2.3 million per year and the Better Regulation Executive and RPC together cost £4.1 million in 2015-16.

Several departments told the NAO about concerns over these costs. In response to a survey, one department said that 80% of the resource allocated to delivering deregulatory targets goes “directly on managing better regulation accounting”.

Another department said: “Better Regulation Units are increasingly advising policy officials on how to navigate RPC clearance and how to score things against the Business Impact Target rather than investing time on deregulation.”

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