top stories

Share

consultation on draft guidance for policy makers issued by the Cabinet Office

Comments from the Association of Chartered Certified Accountants
October 2002

Executive Summary

The Association of Chartered Certified Accountants (ACCA) is pleased to submit its comments on the Cabinet Office consultative document Better Policy Making and Regulatory Impact Assessment.

ACCA welcomes the new guidance for policy makers on Regulatory Impact Assessments (RIAs) and, in particular, the Small Firms' Impact Test and the consideration which will be given to the costs and benefits of regulation and the impact on different businesses, depending on their sizes and sectors. We believe that the guidance will assist policy makers to produce regulations which are well founded and workable.

ACCA argues that the Government must ensure that the minimum consultation period of 12 weeks is adhered to if professional bodies, trade associations and other organisations are to provide appropriately representative responses.

The Government should create a counter-balance to pressures to regulate. This counter-weight should take the form of a Compliance Penalty Scheme (CPS) which would be managed by the Chancellor of the Exchequer. In addition, there should be a new role for the Audit Commission to monitor the impact of regulations, pre-introduction and post-introduction.

ACCA looks forward to seeing whether the guidance is effectively put into practice by all the relevant Government departments.

Specific Comments

1. In the following paragraphs we address the relevant questions attached with the draft guidance.
   
   Do examples of good practice improve the guidance; is it easy to follow, with clear advice on additional help?
   
   
2. The guidance is easy to follow, has useful examples of good practice and has clear sign-posting about where policy makers should go for additional help and advice.
   
   Is sufficient information and sources of help given on estimating costs and benefits?
   
   
3. Research demonstrates that the cost of compliance with regulation is disproportionate for small businesses and that regulations affect small businesses differently, according to their sizes and sectors. ACCA, therefore, welcomes the more sophisticated approach to considering these factors, their unintended consequences and the indirect costs of regulation.
   
   
4. ACCA welcomes the detailed information on estimating the costs and benefits of policy-makers proposals. There needs, however, to be greater transparency in the preparation of regulations, as well as evidence as to how the costs and benefits are evaluated, especially where the costs fall on businesses but the benefits are enjoyed by society as a whole.
   
   Are there other alternatives to regulation which you think should be included in the guidance?
   
   
5. ACCA supports the inclusion of information about searching for alternatives to legislation, which we believe should always be given thorough consideration.
   
   Is it helpful to combine the guidance on domestic and European regulatory proposals?
   
   
6. The Better Regulation Task Force (BRTF) recently reported that 40% of all major regulations affecting UK businesses are initiated in Europe. Moreover, the Forum of Private Business (FPB) estimates that 80% of employment regulations originate from Europe. It is, therefore, essential that the guidance combines domestic and European regulatory proposals to ensure a joined-up approach to the consideration and implementation of regulations. In addition, it can be argued that, because British civil servants have a tendency to "gold plate" regulations with stricter enforcement procedures, UK businesses fare worse than their counterparts in other member states. We, therefore, welcome the indication that an RIA will be undertaken on all regulatory proposals from the European Union.
   
   Do you think the Small Firms' Impact Test is easy to follow and will lead to policy makers taking better account of small business issues?
   
   
7. ACCA welcomes the Small Firms' Impact Test, which should ensure that policy makers are committed to considering the impact of their proposals on small businesses. While the test is easy to follow, however, we are concerned that it should be carried out on both UK policy proposals and those from Europe.
   
   Would you be prepared to take part in a focus group as part of the Small Firms' Impact test?
   
   
8. Since half of ACCA's members work in or service SMEs, we have unrivalled experience in this sector. ACCA's UK Small Business Committee includes owner-managers, accountants, academics and representatives from leading small business organisations and seeks to act as a voice for small businesses. ACCA will be delighted to participate in a focus group as a part of the Small Firms Impact Test and we shall welcome the opportunity to discuss this initiative in further detail.
   
   Is the guidance on the Competition Test clear?
   
   
9. ACCA welcomes the recent move requiring policy makers to carry out Competition Assessments as part of their Regulatory Impact Assessment. Given that this policy became compulsory on 1 September 2002, we are, however, concerned about the delay which has taken place in consulting on the Competition Filter Test. Although the Competition Filter Test is clear, we believe that the initial checklist should be more comprehensive. Moreover, where it is claimed that the competitive risk is low, the reasons for this assessment should be published and must always be supported by rigorous research. It is important that policy makers are encouraged to carry out further Competition Filter Tests should new information emerge. It would have been helpful if more information on the detailed assessment had been included in the guidance, together with the appropriate actions which policy makers are advised to take in adopting alternative policy options or modifying existing ones. Getting the best from the consultation exercise
   
   
10. We consider that the Government can and should improve its performance in regard to the periods allowed for official consultations. If professional bodies, trade associations and other representative organisations are to provide the Government with appropriately representative input into these exercises, they have to consult beforehand with their respective memberships. Usually, the twelve week period is more or less observed. In a number of recent cases with which ACCA has dealt, however, including the DTI's consultation on the Electronic Commerce (EC Directive) Regulations and consultations from the Cabinet Office, on best value performance indicators and tackling poor performance in local government, the period allowed for comment has been significantly less than the supposed standard period.
    
    
11. In the latter two cases, it appears that the relevant consultation deadlines were set in the context of the Central-Local Government memorandum of understanding which permits a six-week, rather than a twelve-week, period of consultation. This justification notwithstanding, we question whether it is right for Government Departments to enter into separate agreements to reduce the otherwise standard period of consultation.
    
    Where the period allowed for consultation is too short, interested parties may be unable to do justice to the issue in question. This can also give the impression that the Department handling the consultation exercise concerned is not wholly serious about considering comments on proposals. In this connection, ACCA has recently been in correspondence with a Cabinet Minister; in disagreeing with a point which we had made, he explained his position by saying that our suggestion would conflict with the 'principles' which were set out in an earlier consultation document, the conclusions of which had still to be announced.
    
    
12. There is a considerable quantity of research which reveals that the amount of government regulation has increased in recent years. While ACCA welcomes the guidance on RIAs, we argue that the Government must create a counter-balance to the "pressure to regulate". ACCA suggests that this counter-weight should take the form of a Compliance Penalty Scheme (CPS) which would be managed by the Chancellor of the Exchequer: Government Departments which are responsible for placing compliance burdens on business (e.g. DfES) should be expected to show reductions in these burdens year on year; those Departments which fail to achieve the targeted improvements should have their annual budgets cut by the Treasury.
    
    
13. There is currently no mechanism to review the impact of regulations after they have been introduced. As a result, regulations may have a very different compliance effect than was anticipated when they were brought in. Regulations also have an on-going impact on businesses which is never properly assessed and, as a result, is not subject to review and modification unless the issue is raised through the political processes (for example, by lobbying organisations).
    
    
14. ACCA believes that the Audit Commission should be given responsibility for monitoring the impact of all regulation to determine how far it is necessary. All RIAs should be subject to rigorous review by the Audit Commission before being presented to Parliament. Furthermore, all Government Departments should be subject to a periodic Regulatory Review by the Audit Commission.
    
    
15. While the CPS and a new role for the Audit Commission would address the causes of over-regulation, small businesses need a solution at the implementation stage. Through IT, ACCA believes that the Government should explore possible ways of reducing the growing administrative burden on small businesses and the cost of regulations. As a minimum, this should include realistic financial incentives for submitting Government returns electronically.

Back to top