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I welcome members to the committee's fifth meeting in 2004—I mean 2005; our papers obviously have the wrong date on them. I have not received any apologies, so we have a full house today, which is good. Professor Page is a little late this morning. We will change round the first two agenda items to start with item 2, which is also on our review of the regulatory framework in Scotland, if that is acceptable.
Members indicated agreement.
I welcome all our witnesses. Alan Mitchell is head of policy at the Confederation of British Industry Scotland; Susan Love is the policy development officer for the Federation of Small Businesses in Scotland; David Lonsdale is the policy officer for the Scottish Chambers of Commerce; and Brian Jamieson is Scottish Enterprise's company secretary.
I express the thanks of the Scottish Chambers of Commerce to the committee for this opportunity. Our members recognise that regulation can fulfil various purposes, not least that of helping policy makers to reflect public concern over the actual or perceived risks of a given activity. Our members are keen to ensure that the policy makers' responses are proportionate and are as straightforward as possible. We have consistently advocated a simpler, lighter and improved regulatory burden on Scots firms, as that would contribute directly to the broader policy objectives of growing the economy, improved competitiveness and good governance.
My role in Scottish Enterprise includes scrutinising legislative proposals, and that is the perspective that I bring. I suppose that Scottish Enterprise's interest in all public sector activity is in activities that enable economic development rather than in anything that would hinder it. Unlike fellow members of the panel, I represent a public body that does not have a role in public lobbying for specific Government action, which might explain why our submission reads a little more blandly than those of the other organisations represented on the panel. I am happy, however, to participate to the extent that I can in this discussion of the issues.
The CBI is delighted to be here to participate in the debate and, I hope, to move it on. I would like to mirror David Lonsdale's comments. There is of course a role for regulation, but it must be balanced. Our main focus at the CBI is on what we need to do to grow the economy. We very much view the debate on the position and level of regulation in that context and we are looking forward to a constructive debate this morning.
I have a couple of points to make, but I will not go over everything in our written submission. There is a huge range of issues, which we have all picked up on in our submissions.
Our first questions are of a general nature and seek to develop an overview.
In her evidence last week, Dr McHarg raised an interesting point: put simply and crudely, it was whether regulation is a good or bad thing. I think that I understood what you said in your opening statements but, for the record, I ask each of you to confirm, from your organisations' points of view, whether you think regulation is a good or bad thing and whether you think that it is Government's role to regulate. I also ask you to say how that sits with some of the comments that you have made about a lighter touch and so on.
I do not think that anyone from the business community would pretend that there will not be occasions when public policy, on whatever subject, is best dealt with through regulation. However, there is an issue around how to select when regulation represents the best way forward. Beyond that, we often examine an individual bit of regulation and think that there is nothing intrinsically wrong with what it is or with what it is trying to achieve, but we must bear in mind the cumulative effect of hundreds or thousands of bits of legislation, however individually sound they might be. There is a role for legislation, and one of the roles of the Executive and the Parliament is to legislate, but that is not their only role. For example, if the Executive's priority is to grow the economy, issues about regulation and where that sits need to be put into that context.
Whether regulation is a good thing depends entirely on the objective that the Government wants to achieve and whether regulation is the appropriate vehicle for achieving that objective. If the Government chooses to regulate, it is important to ensure that the regulation is as effective as possible. The regulation must be enforceable and transparent and the Executive must be accountable for it.
I jotted down a couple of examples. Obviously, regulation that frees up markets, creates more choice and breaks down cartels and monopolies is a great thing.
David Lonsdale has stolen the word that I jotted down, which is "proportionate". There is a range of regulation available. Regulation can be bad or good, but it is sometimes necessary. If a voluntary code is not working, we might need to consider regulation or statutory intervention. The difficulty is that, as we go up that scale, things become more set in concrete and the civil servants or officials who are tasked with enforcing the regulation tend to take a more inflexible attitude. We need to decide how inflexible or flexible we can be when setting regulation in place.
I want to test three other points. I realise that I may be asking people to repeat what they have said, so if people have already dealt with some aspects of my questions, perhaps they could summarise. What are the key principles of better regulation? Does better regulation necessarily mean less regulation? What could we do in Scotland to improve the quality of regulation?
Less and better are not necessarily equivalent. The real issue is the extent to which flexibility is left in the system.
As I said in my opening remarks, our members are certainly in favour of a lighter regulatory burden in principle, where that is practical and appropriate.
As a general rule, less regulation is desirable. One of the business community's key measuring sticks is whether it needs to implement fewer regulations.
I do not think that any of us would disagree with anything that has been written about how regulation could be improved. The better regulation task force listed the five principles of good regulation as proportionality, accountability, consistency, transparency and targeting. We do not disagree with any of those.
Having had the benefit of listening to my two colleagues, I recall that my associates in the British Chambers of Commerce produce a burdens barometer that is based on 35 key pieces of United Kingdom regulation. The barometer measures the impact and financial cost of regulation by taking its figures—they are not simply made up—from the regulatory impact assessments for a whole gamut of regulations each year. As my submission mentions, last year the burden came to £30 billion, but I am advised that the figure has increased substantially in the 2005 edition of the barometer, which will be published later this month.
I apologise to my committee colleagues, but I want to pursue that. As a result of that work, did your organisation think that it was part of its representative role to suggest to Government how those individual regulations might be combined, adapted or otherwise modified in such a way as to reduce the burden while maintaining proper control of environmental issues and so on?
The approach that my UK colleagues have taken is to realise that what is done is done. If improvements can be made, that is great, but they want to assess how they can improve the flow of regulations in the future and to learn from that.
I am sorry, but that was my question. Did they make practical suggestions on how some regulations that are already in force could be amended, combined or—if appropriate—dropped?
I would have to look back to find out on which regulations they made representations. I would be happy to check that and to come back to the committee, if that would be appropriate.
I would be interested to find that out.
Any such material would be helpful, especially if there was a Scottish perspective to it. You said that you were a little uncertain about that.
Your submissions indicate that there is general agreement that although RIAs can improve the quality of regulation when they are used properly, in practice they are either not used or not prepared properly. What steps can be taken to ensure that RIAs are integrated into the policy-making process and that they influence policy decisions? Who would like to take that on?
Fire away, Susan.
In describing our experience of working with officials in developing regulatory impact assessments, it is difficult to get away from discussing the culture that exists around RIAs. Although a lot of progress has been made on getting the Executive to come to business organisations at an early stage to indicate what it is thinking of doing, that connection gets lost somewhere along the way when the officials get down to the nitty-gritty of drawing up an RIA.
In our submission, we suggest that the production of RIAs should be statutory. That would not necessarily improve the quality of RIAs, but it would ensure that they were always done. On quality, we agree that independent scrutiny is required. We suggest that a better-resourced, beefed-up and more powerful IRIS unit would be best placed to undertake that work.
I will sound what is probably the first note of discord of the morning. We are not convinced that the conducting of RIAs should be made statutory. In our submission, we suggest that ministers should perhaps certify that an RIA meets the guidelines. That would provide a level of accountability and transparency that is missing at the moment.
Do you have anything to add, Brian?
I have just a quick comment. Although I have no direct practical experience of conducting RIAs, I can draw an analogy with the way in which Scottish Enterprise develops policies and programmes. Independent challenges are the key element of the Government-approved review process. I would not like to be prescriptive as to whether such challenges should be built in from the IRIS unit or—as happens in Scottish Enterprise—from a non-operational part of the business. However, once an independent challenge is documented, the senior project owner—in this case, the civil servant tasked with drafting the regulations—would have to document how they have answered that challenge so that the fact that that has been done is auditable in the future. Such a policy line would mean that people would have to document how they had gone through that process instead of, as is perhaps being suggested, paying lip service to it in a couple of lines.
I am sorry to butt in again, but I would like to comment on the idea of having a statutory RIA. One of the issues that we outline in our submission concerns the way in which the IRIS unit currently defines regulations. For example, it came back to me on section 52 of the Local Government in Scotland Act 2003. The Executive published statutory guidance about private and voluntary sector bidders for local authority contracts for services. When the Executive published that, I asked whether we could get hold of the RIA for it, but I was told by the IRIS unit that as it was not a regulation, as such, but statutory guidance, the statutory aspect would not necessarily apply. In a bizarre, roundabout sense, IRIS was hampered by its own red tape. That is why we argue in our submission that the issue is broader than just regulation. In fairness to the Executive, in its improving regulation annual report, it has begun to map out the fact that the whole agenda is about more than just pure regulation.
That is a good point.
I am interested in Alan Mitchell's point about importing business expertise into the IRIS unit and Susan Love's point about having a routine aspect to the RIA process. What are your views on how the assessments that are made in the RIA process—concerning the necessity for the proposal, the alternative options and the cost-benefit analysis—can be evaluated?
That requires as much factual data as can be gathered about the potential impacts—the number of businesses that will be affected, the way in which regulation will affect those businesses and the impact that regulation will have on how those businesses do what they do.
As Alan Mitchell has outlined, things start to go wrong at an early stage in developing the RIA. The RIAs are not always based on accurate data or assumptions. If we could solve things at that point in the proceedings, we might reap a lot of rewards. Instead of having people from a business background higher up in IRIS, we would like the people who are coming up with policy proposals to spend a bit more time out in the fields.
Does David Lonsdale have anything to add to that?
On business involvement, one question that has emerged is whether we should have a Scottish version of the better regulation task force. It occurs to me that the small business consultative group could fulfil the role of, in effect, a board of directors of the IRIS unit. It might be slightly more difficult for the business representative organisations to be detached from what was going on in IRIS—there is a bit of a gap at the moment. Nevertheless, we would be much more in there, overseeing what was happening, and that might be useful. Whether the board would comprise business representative organisations or businesses per se would be entirely for somebody else to decide.
On evaluating RIAs, we can learn much from Europe, despite the fact that we criticise a lot of the regulation that comes from there. The First Minister, in the speech to which David Lonsdale referred, set some high aspirations for Europe to live up to. We have been over to Brussels to speak to people from the regulatory impact assessment unit there. They could offer a lot of advice and we could learn a lot from them, but I am not sure that that has been picked up on in Scotland.
That might be something that we can follow up.
Our principal comment is that the majority of businesses in Scotland are micro-businesses. Any RIA should be carried out on that basis, perhaps with a large business test at the end. We think that the current process looks at things in the wrong way. The whole regulatory impact assessment should be based on the small business. However, as I have highlighted, we think that the RIAs are missing the cumulative burdens and hidden costs on small businesses and the extra time that it takes them to comply. The RIA could be better informed about those matters by the creation of better links between the policy makers and businesses on the ground.
I agree with what Susan Love has said. The fundamental question is whether the RIA is meeting the guidelines. The other day, I was having a look at micro-business tests. Some of them quite often do not appear in an RIA. The consultation on planning rights of appeal was good—it explicitly mentioned the impact on small developers that are building, say, 10, 15 or 20 homes. However, many other aspects, such as the landfill waste regulations and non-domestic rates and the revaluation transitional arrangements—saying some of the titles is confusing enough, at times—make little mention of micro-businesses or say nothing substantive. The consultation on the transitional arrangements was supposed to mention micro-firms, but it referred to macro-businesses; there was no suggestion that any attempt had been made to garner the views of micro-businesses.
From your papers, we picked up that you feel that there is not enough good-quality consultation and that, at the other end, there is consultation fatigue. That is an interesting area, about which Gordon Jackson has a couple of questions.
The FSB paper states that subordinate legislation, which is hugely important to you,
The difficulty is that a lot of subordinate legislation is so technical and specific that it is not picked up by organisations such as ours. By and large, we focus on issues that will affect a broad range of small businesses. A business in a particular sector might say, "This is causing us problems," but we might not have noticed the issue or received any coverage. We often find from reading about our members' experiences that their problems go back to a piece of subordinate legislation that passed under our radar.
How could we improve the process? To put it bluntly, instruments may go unnoticed by you. Clearly, there is a limit to how much publicity an instrument will ever get. There are masses of instruments every week that will not make the 6 o'clock news because—to use the buzz phrase—they are not on sexy subjects. Is there anything that we should be doing? Perhaps you have to do more to notice them, but are we missing out on something?
The important thing is to ensure that subordinate legislation is considered along the lines that we have outlined, so that there has been proper contact between the affected sectors or businesses and the policy makers. We are trying to ensure that, before an instrument is passed, it has been thought out effectively at an early stage.
Let me open out the discussion to everyone. What can we or others do to improve consultation with businesses on regulation? Should we be doing more? Are we doing nothing? What is being done to ensure that you are aware of the on-going consultations, bearing in mind the other side of the coin, which is the dreaded consultation fatigue? How do we balance those issues?
We all recognise the difficulty. The pile of documents on my desk in any given week is huge and it gets bigger. There is a limit to the extent to which representative organisations such as ours can monitor things. The challenge is how to deal with individual businesses, which, frankly, have their heads down running their businesses. I am not sure how we should create effective links. I was about to suggest a role for the local enterprise companies, but that would take them completely away from where we want them to be, so it is not a way forward. I am not sure how you should build those links. Organisations such as ours can try to monitor things better, but there is a physical—
But what else can we do? We cannot go to individual small businesses. We can only do what we already do, which is to publish everything on the web. The only way in which we can go to small or big businesses is through the business representative organisations, from which information has to cascade. We will not go to every small business in Scotland. Is there something that we could be doing better, or is the issue simply that the sheer volume of regulations is impossible?
That comes back to my point that the first and most important thing that we should do to improve the regulatory framework is to have less regulation. Everything flows from that. I wish that I could offer you proactive suggestions or solutions, but at the moment I am at a loss on how to proceed. Perhaps we can come back to that.
Our businesses want to know that you, as the Subordinate Legislation Committee, are satisfied that the regulations that you are considering have gone through a robust process and that the RIAs that accompany them have been thoroughly investigated and are based on robust data. We want to ensure that the committee does that. For example, there are forthcoming instruments on mineral water and egg marketing, which we are not in a position to deal with.
We need to think about that. I am not defending the committee, but we are the only committee that meets every week and each week we consider dozens of instruments. You are right that there are a lot of instruments. You raise an interesting point.
I agree with Susan Love that the onus should be on the people who draft the regulations and develop the policies to ensure that they consult an appropriate industry group. That might be a specialised industry group. For example, if the regulations are on pig farming, the assessment could state explicitly that an appropriate group had been consulted. The committee would not necessarily have to consult publicly on everything if consultation had been documented at an earlier stage.
I return to my comment on the political will of policy makers and legislators and link it to my comment on the First Minister's suggestion that policy makers need to show restraint on regulation. Alan Mitchell made a good point about the volume of documents. One of my colleagues printed off the consultations and regulations from the Food Standards Agency. I would have brought them with me, but the documentation consisted of three reams of paper, which is a bit heavy to take on the train and lug up from Waverley. It is difficult to square the issue, because one of the benefits of the Parliament is that there is greater transparency, access and consultation. We would not like to feel that we did not have the opportunity to get involved.
I have another question, which you may have answered when I was not here. Do your organisations have, or should you have, people who do nothing else but monitor regulations? Alternatively, is monitoring done on an ad hoc basis when you have half an hour?
We have 21 local chambers in Scotland, which I consulted ahead of today's visit. This may not be tremendously informative, but it might interest Christine May to know that one of the Fife chamber members said, "What we need from the enterprise company and from the chambers is a compliance-with-legislation assistant." That would be the most helpful assistance that could be given. The issue is difficult.
Do Susan Love and Alan Mitchell have someone who does nothing else but examine regulation?
Alan Mitchell, David Lonsdale and I are the policy officers for our respective organisations and our job is to deal with all the consultations from the Parliament, the Executive and the various executive agencies.
I am thinking of the legislation as it goes through.
Yes, we look at that, too. We have a responsibility to cover issues that will affect a range of members, but, rather than just reacting to whatever is coming from Edinburgh, we also have a responsibility to be proactive and to raise issues that our members want us to raise. It is quite plain to everyone that we are on a consultation hamster wheel. Consultations are coming out from everyone all the time; everyone always wants to consult. Although we are happy to help out as much as we can, and although we want to make sure that we can put policy makers in touch with the right people, there is a point at which the Executive, if it is committed to making better regulation, has to get out to the people and not rely on organisations such as ours. If the Executive wants to achieve better regulation and is serious about getting information in at an early stage, it has to devote time to going out and finding people who are affected.
Is that practical? I am not saying that the Executive should be lazy, but how would it make sense for it to go out to people rather than go through your organisation? After all, that would be to take on the role that you claim to carry out, and rightly so, because you have the expertise to represent all your members.
If the regulation is on a particular issue that we have not already responded on or for which we do not have the information, and if we are saying that policy makers should devote their time to getting the regulation right at an early stage, that would be effort, cost and time well spent; it would be better than sending out lots of consultation documents and getting six replies back.
You mentioned making sure that businesses, particularly small businesses, understand regulation and what it means. We will now talk about easily understood regulation.
Susan Love, Alan Mitchell and Brian Jamieson all referred in their submissions to the importance of plain language. The FSB said:
Thank you for that. I am impressed with your research.
Although we have highlighted the fact that many regulations are difficult to understand because of the language that is used, we do not believe that that is a priority, because most businesses do not read the regulations. If we were to make a plea to the committee, we would ask you to focus on getting the regulation right in the first place. The Executive must decide whether there is a need for the regulation and it must ensure that any subsequent advice leaflets or pamphlets that are sent out to business are easily understood.
I am sure that, like me, my colleagues have a panel of people involved in business who are, in effect, voluntary advisers to whom we can go to ask for explanations. We have done that with issues such as climate change and emissions trading—I am the first to admit that. In the short time that I have been working for the chambers, not too many regulations have crossed my desk that I cannot understand. However, if I had to, I would go to an adviser and say, "This regulation is coming out. What do you know about it?" They might have a good understanding of what is happening because they have contacts and networks in the industry.
Susan Love referred to businesses reading, or not reading, the regulations. Most regulations come out with guidance notes. Are those notes read more by businesses and are they more easily understood?
I would be surprised if many firms read the guidance notes that come out with the legislation. One of the witnesses at last week's committee meeting said that the guidance was a bit like an RIA, in the sense that drafting guidance and explanatory notes probably helps the Executive to think through what it is trying to achieve and how that might impact on the wider community.
The plain English test should form part of the independent challenge stage. As a lawyer, I would never accept any excuse from lawyers that regulation has to be in obscure language. I challenge my economic development colleagues all the time by saying, "The board members will never understand this; it is written in jargon." There is really no excuse for obscure language; regulation can be written in plain English.
Many of our members are medium-sized and larger companies, which will have technical specialists who can take the time and who have the expertise to understand the regulations and to put them in the context of other similar regulations. I suspect that it is slightly different in smaller firms, which might be more likely to ask legal advisers what the legislation meant for their business and what they needed to do. Smaller businesses take a different approach to regulation and the management of regulation.
Plain language is important when the legislation is passed and it has to filter down to the people who have to enforce it. That is where things can fall down. If they are busy people and that is the first they have seen of the legislation, they may find it difficult to enforce. I am thinking of the Scottish Environment Protection Agency or local authorities, for example. Sometimes, those organisations will be the ones who are knocking on the doors of businesses and trying to explain to them the ABC of what is required. If those agencies are not clear—and they often are not—the business will be even less clear.
It was interesting that you should refer to butchers. I was approached by a number of butchers in my constituency after I was elected who were unclear about some sort of regulation. The regulation had come from the council and I do not think that the council was very clear about it either, so I take your point.
When dealing with regulations, I have generally found the accompanying notes to be reasonably easy to understand. However, it is unlikely that businesses would ever be reading such notes. People are more likely to receive documents that have been produced specifically for businesses, the voluntary sector or local authorities.
The idea of a single commencement date has been suggested for regulations. A challenge for business people is the sheer flow of regulations and legislation. We could spend a huge chunk of every week reading guidance notes or regulations. If there were a single commencement date for regulations, that might condense things and allow a specific period during which people could take more time to read the documents, without being distracted from the day-to-day and week-to-week task of running their businesses.
National regulation week—a fun idea!
Yes, but otherwise the reading of regulations will get lost, as business people will say, "Oh, I've got a customer coming in, I've got a contract to sort out and I've got an employee who's taking me to a tribunal." In smaller businesses, those are the kinds of issue that the reading of guidance notes competes with week in and week out.
I do not think that we would necessarily take up Mr Jackson's marketing slogan. However, such a thing is done across the United Kingdom. On October 1, a raft of initiatives came in covering issues such as disability. The idea of having everything in a week is good, but whether people would read all the documents is another matter—as is whether you would market it as suggested. However, the idea is good.
I am glad that Susan Love raised the point about enforcers being, in effect, the people who guide small businesses. In my experience, that is exactly what happens. Small businesses do not read regulations and guidance; they wait for the inspector to come round—the environmental health officer, the meat inspector, or whoever—and then take guidance from that inspector. Given that that seems to be the norm—and that mistakes of interpretation can be made along the chain between the inspectors and the businesses—is it important that we target guidance and training on the inspectors rather than on the businesses or on other people in the chain?
We have often highlighted the importance of the links between small businesses and, in particular, local authorities. Local authority enforcers are those who are most likely to come into contact with businesses. It would therefore make sense to focus more attention on them. They may have dozens of pieces of paper on their desks that they do not have time to read and they may not be clear exactly what they are supposed to be enforcing. It would be sensible to ensure that local authorities are well briefed by the Executive on what exactly it is trying to achieve through any particular objective.
Perhaps we should all watch the television programme that is on at the moment.
Good morning. The FSB submission was especially helpful, and slightly scathing, about the impact of the enforcement concordat between local and central Government. What are the panellists' views on the difficulty that the failure of the concordat creates for the business community? Is the case made for a statutory code of good enforcement practice? Perhaps Susan Love would like to answer first, as I was referring to her paper.
Part of the reason for our paper being so scathing is our close involvement with the concordat. I have sat on the concordat working group in Scotland for the past two and a half years. When the concordat came out and everyone signed up to it, we genuinely believed that it could be the vehicle for highlighting the principles of good enforcement among local authorities and perhaps among other organisations. However, there were many initial problems, which have ensured that the concordat has been less successful as time has gone on.
The CBI also supported the concordat. I confess that I do not have huge experience of it, but I suspect that its problems arose because it was set up as a tick-box exercise—let us tick a box to show that we are putting in place a process to make things work better. However, as with all tick-box exercises, unless the commitment, will and resources are there to make things happen, they will not happen. My understanding is that many local authorities do not have sufficient resources to make the commitment that they would like to.
There were two elements to your question, Mr Tosh. The first was about the difficulty for the business community. I do not have a huge amount of evidence, but one of our members recently provided a case study.
I can only echo the FSB submission, which says:
The concordat's importance is in ensuring that local authorities buy in to the principles of good enforcement and that, having signed up to the concordat, they ensure that those principles filter down to every inspection officer who will call at a business. The officers do not have to be aware of the enforcement concordat, but they have to be aware of how they, as inspectors, should interact with businesses and of what businesses can expect from them. We want to ensure that those principles filter down to those on the ground. The local authorities obviously all agreed to the concordat—when the letter landed on the chief executives' desks, it was signed—but that was it. The comment that Brian Jamieson quoted from our submission refers to the head of economic development in one council, who had never heard of the concordat, which suggests to us that it has not gone far through the system. If the principles of the concordat are nonetheless being put into action and all the inspection officers are carrying them out, that is fine. I will not get hung up about a specific piece of paper, but the FSB thinks that that drive has been lost.
One or two of the witnesses have mentioned the evidence that Dr McHarg gave us last week. She gave a robust defence of unequal enforcement, in which she said that it was perfectly acceptable—and, indeed, to be expected—that enforcement regimes would focus on those whom the enforcer saw as the worst offenders and crack down most severely on poor practice. In their submissions, all the witnesses made the point that they want enforcement to be equal, and some have talked about appeal mechanisms against unequal enforcement. Should the committee be worried about unequal enforcement in every respect or should it focus more on cases in which unequal enforcement means that businesses in Scotland have to achieve higher standards, or are pursued more effectively and vigorously by inspection regimes, than their competitors south of the border or elsewhere in the European Community? What do the witnesses make of Dr McHarg's point that inspection should be most severe against those who seem to infract the basic regulations and directives most regularly and most heavily?
I have had a quick glance at Dr McHarg's comments, and it is fair to say that her philosophical approach to the wider issue of regulation is different to that of the members of the Scottish Chambers of Commerce. Therefore, her comments on enforcement do not surprise me.
I was not seeking to get into a debate about Dr McHarg's comments; I was using them more as a lead-in to asking what we need to do to ensure that enforcement is equitable without necessarily being hung up on the principle that there must never be any inequalities.
One of the important issues on equal enforcement is the need for the regulators to have uniform understanding of the regulations. That comes back to the point that we made earlier about the guidance and advice that is given to the regulators and the resources that are available to them. If we have an over-regulated society and the regulators do not receive the resources to keep up with that regulation, that will put pressure on their ability to offer a full guidance and advisory service.
Do you have evidence that higher regulatory standards and more rigid interpretation are being applied in Scotland and that that is damaging the competitiveness of, and the potential for growth in, the Scottish economy?
Every time that I sit around the table with some of our members, their number 1 complaint is the perceived lack of a level playing field.
Does that reflect your members' perception of the impact of enforcement on them or do they have the strategic ability to make comparisons with competitors and know and show that enforcement damages them, but not their competitors, to the disadvantage of their businesses?
In some cases, it will be perception. However, if the business is a multisite or multicountry operation, it will be able to make direct comparisons of the regulatory regime that is applied in another country. In other cases, it will be anecdotal evidence based on the discussions that are conducted and the information that flows in an industry.
In the cases in which your members can identify the problem, does it stem principally from the way in which European directives are transposed into national law or from enforcement?
It is both. On some occasions, it is a matter of the implementation of a directive in Scotland—there have been examples of the gold plating of directives in Scotland—but on others, it is down to how the regulations are enforced and how different regulatory regimes and bodies operate in different parts of the world.
There might be a specific problem with SEPA, because an awful lot of recent legislation is environmental and SEPA is the enforcer of such legislation. The FSB's experience has been that, because much of the legislation is new, there is still a lot of discussion on the exact definition of what it means or of how it will be implemented. For example, there is an awful lot of discussion on the definition of waste, which has caused all kinds of problems for our members, who are not getting a clear answer from SEPA officers or are getting one answer from a SEPA officer in one area and a different answer from an officer in another area of Scotland.
I want to nail this down a wee bit. Murray Tosh gave the defence of unequal enforcement. Obviously, some people are persistent offenders and some are not, but that is not unequal enforcement at all. In any system, people get penalised more if they keep doing something. Unequal enforcement would be when a person who does something only once gets a different punishment from another person who has also done that thing only once. People's perception might be that they have been unequally treated, when they have not. They might say, "Well, I got punished and he didn't." I use the word "punish" loosely. However, as Dr McHarg said previously, it may turn out that the person has done something much more than once.
I understood that there was a report on the butcher shop licensing, in particular, which demonstrated different implementation in different local authorities.
I did not know about that, but that is what we are looking for.
I assume that that report is publicly available. It was issued to us—from the Executive, I think—a couple of years ago. The report clearly demonstrated that two local authorities had interpreted the licensing differently.
You do not keep a kind of secret book or blacklist of unequal enforcement.
Our difficulty is that much of what we hear is subjective, so it is difficult to pin down how a business feels that it has been unfairly treated. A business might say, "I wanted to recycle this in this area and I was told by SEPA that I would need a license. But I heard that Mr Bloggs in the local authority up there didn't need a licence because they interpreted it differently." Or someone might say, "I was told I needed to provide two parking spaces for this extension to my business, but in the neighbouring council area they didn't have to do that." Those kinds of anecdotes have built up the big perception.
But you agree that this is anecdotal rather than specific evidence.
It is difficult to pin down exactly what the nature of a regulation is—that is what bothers businesses.
For that reason, I thought that it might be useful if we could invite the CBI to provide us with evidence. I do not think that we can promise to drill down into any specific field, such as environmental regulation, but Mr Mitchell referred to operators on sites in varying countries. I think that it would be useful to have worked examples of how the application of UK law—or European law within the UK—impacted differentially on the CBI's members. Perhaps the CBI could show, for example, that the application of a directive that came from European environmental law led to much more severe standards here than in other areas and indicate how that impacted on competitiveness and, therefore, the potential to grow the economy. Without promising that we would do a full investigation of the economy, I think that that would let us understand the severity of the difficulty that your members face.
I am happy to try to get that information. CBI Scotland has a profound sense of frustration sometimes that we cannot provide more specific examples to people like yourselves. We hear all the time, "You always moan about regulation; but give us some examples." It is not for want of trying on our part. For example, prior to the meeting of the small business consultative group in, I think, November last year, at which regulation and over-regulation was on the agenda, I sounded out a cross-section of our members and asked them to give me specific examples of regulations that made them go, "Oh, no." I got various examples, but they were not about members saying, "This is just a bad regulation." The examples were all about the inconsistency and volume of regulations.
That would be helpful. Indeed, it would be helpful to have that information from as many of the witnesses as possible.
David Lonsdale referred earlier to the regulations sub-group that the small business consultative group has set up. I understand that it will take on the holy grail of trying to identify specific regulations—indeed, the sub-group is to work solely on the identification of the specifics. I think that it plans to submit that information to the Deputy First Minister for review.
Good; that is excellent. I am getting a wee bit concerned about time. Long Subordinate Legislation Committee meetings are unheard of.
I am aware that time is moving on. I will run some of my questions together. I want to cover two basic points: the idea of post-implementation reviews, or periodic reviews, and sunset clauses. As the subject of sunset clauses was mentioned earlier; I will leave it to one side for the moment.
We spoke up in favour of sunset clauses in our submission. They provide an existing regulatory MOT-type provision for review after 10 years, although we think the timescale should be five years. As I said earlier, the First Minister said that that should be the case for EU directives and we support that. We appreciate that review will, to a certain extent, increase the administrative burden on the Executive and the Parliament. However, we think that such review makes for a useful lesson for business.
Should review be statutory?
I suggested earlier that certain aspects should not be statutory, so it would be inconsistent of me to say that. Reviews ought to be good practice, however. More scrutiny of RIAs and so forth will lead to more transparency, which is a good thing. The procedures should be fleshed out in due course. As I said earlier, good practice will become common practice throughout. At this stage, however, my answer is no.
The question of when to review is the same as, "How long is a piece of string?" To a degree, the answer depends on the regulation. If a regulation is of a specific nature and applies to a specific industry, one would hope that, as part of the regulatory impact assessment and the initial thinking about the measure and what it means, it would be possible to come up with a sensible suggestion for a timeframe. Someone would say, "After X amount of time, given the nature of the regulation and the industry, we ought to see whether the outcomes and expectations we had are being delivered." In some cases, that might be 12 months and, in others, it might be three years. However, in cases in which the regulation applies more widely, the impact that will be felt across different sectors may vary depending on how long problems take to emerge.
Should such reviews be placed on a statutory basis, or would that be going too far?
I understand the concern that making a matter statutory does not make it better. However, making a matter statutory makes it happen and the first stage of making something better is to make it happen, so that we can then ensure that it happens in the best possible way. I see no compelling reasons for not putting post-implementation reviews on a statutory footing. My only reservation is that we must not create an overly complex and hugely expensive bureaucracy to create better regulations, which will simply end up costing money in a different way from the way in which bad regulations currently cost money.
Would the advantages of post-implementation reviews outweigh the added bureaucracy and expense of carrying out such reviews? It is not always obvious that that would be the case.
I do not know whether a review system could be designed that would allow an initial level X review that would move to a level Y review only if certain criteria to do with adverse or unintended consequences appeared to be met. I do not know whether it would be possible to create a simplified graded system. However, as a matter of principle, all regulations should be reviewed to ascertain whether they are still useful. The law of unintended consequences will come into effect in the case of every regulation and might cause huge damage in the case of some regulations. If we could find a way of creating an efficient and relatively cost-effective review system, that would be preferable to not carrying out reviews.
Perhaps I can explain the rationale behind our recommendation, which acknowledges the balance that has to be struck. Our proposal is based partly on the recommendations in the report of the Mandelkern group on better regulation. The group argued that review clauses can be valuable in specific circumstances: when regulation is introduced at short notice in response to a crisis and without detailed analysis; when regulation is introduced on a precautionary motive and further scientific work would provide a firmer basis for decision making; when a sector, event, technology or market is changing rapidly; when the legislation is in the nature of a pilot project; and when the regulation confers rights on the state rather than on citizens. The UK Cabinet suggested an additional circumstance: when measures are taken in the face of considerable opposition. The recommendations were made because reviews are expensive in terms of parliamentary time. We therefore suggest that such reviews should not be statutory but should be used in those specific circumstances.
I should have said this in the context of our earlier discussions. I suggested that discrepancies between the official forecast of costs and benefits and the forecasts in other submissions should be made public in the RIA. I was not being prescriptive when I said five years, but that would be an appropriate juncture, although maybe it would be appropriate to kick in an earlier periodic review.
We support a review, largely based on an analogy with our public sector interventions, which we insist are reviewed. Alan Mitchell suggested that reviews be built into proposals at the outset, depending on how controversial they are. There should probably even be a backstop for proposals that are regarded as uncontroversial, such that a review is built in at some point. We perform implementation reviews of our interventions to ensure that they are relevant, that they achieve what they set out to do, and that they do not have unintended consequences. I am not convinced that such reviews need to be statutory—we find that if policy lines are set, they are followed. Officials would be criticised if they did not review proposals as planned.
Connected to that is the second issue that I want to ask about, which is sunset clauses, which have already been briefly mentioned this morning. Clearly, as part of efficiency savings, instead of having a review you could insert a sunset clause which, unless anybody objected, would deal with the issue by ceasing the regulations. That goes back to the point that was made about the volume of regulation, and always having more and never having less.
We are explicitly in favour of them, except where ministers give a sound reason why they are inappropriate.
The example that I gave at the start of the meeting about butcher shop licensing concerned a regulation that was introduced for a specific reason. The reason no longer exists but, nonetheless, we seem to be consulting on a new regulation. That is a good example of a regulation that should have contained a sunset clause.
If regulation exists for a specific reason, and it is clear that that reason will no longer exist at a particular point down the road, we should get rid of the regulation automatically and drop it from the books.
That would be built in from the start, but I am dubious about it as a general proposition for many regulations, for example, those that implement European directives.
If I may, I will return to a related point that we have not covered. A lot of work is done in the UK Government to ask departments to make known regulations that they have reviewed and which are now obsolete or have been duplicated. I do not get the sense that we are seeing the same kind of commitment within Executive departments. It is important that they do that, but I am not sure that they are.
That is not an unfair point.
It goes back to the fact that the process has to be good but, at the end of the day, it has to be about more than that.
I am changing the agenda so that we can move on more quickly. We have covered many of our questions on improving the quality of existing regulation, which is our next item. I will go through the questions with you, and ask you to reply in writing. One issue is the way in which you can access amendments to legislation, be that on the web or by other means. There is the whole online and free-of-charge issue. I wonder whether you could put together a response on that and send it back to us.
In his response to questions 33 to 35 in the original consultation document, Mr Mitchell of CBI Scotland said:
Off the top of my head, I do not think that there is. I must confess that, although the response is in my name, it was written by my predecessor as head of policy at CBI Scotland. It was the last thing that was done in the transition period between his leaving and my starting.
That explains a lot.
Instead of firing off an answer, I would prefer to think about the matter and come back to the committee.
It comes down to credibility. If business is asked whether there is a problem, it should be able to come back and say "Yes, there are lots of problems, and here they are." It would be helpful to find out the extent to which you were able to identify areas of widespread practical concern. I do not know whether other witnesses want to get involved in the discussion, but the question was prompted more by CBI Scotland's response.
We would probably highlight waste and wider environment legislation because there seems to have been a raft of such proposals in recent years. As I said, we would like departments to be asked to come forward with proposals for simplification of regulations, which is what has happened with the UK Government. Those departments are—presumably—well placed to know whether what they are introducing duplicates existing legislation.
I do not know whether you have a view on my next question, but we are aware that much legislation gives ministers powers effectively to vary or amend primary legislation through orders instead of fresh primary legislation. What are the merits of that method of dealing with legislation, particularly legislation that impacts on business?
As I said earlier, we need a beefed-up improving regulation in Scotland unit or at least a unit that has a wider remit. After all, regardless of the mechanism that is used, some policy objectives do not get picked up under the existing RIA scheme, which is why we have argued for a more powerful body that has a wider remit and which is based in the office of the First Minister. I believe that Susan Love said something similar earlier.
It is not unparliamentary.
If legislation is made in that way, it might not be subject to the rigorous process that we have outlined as being ideal. We want to make sure that before any decision is taken, no matter through which process, the process has been followed.
Thank you. We now move to the final section of questioning, about the role of IRIS. You have all written quite a lot about this and have made suggestions about how it might be improved. Adam Ingram has two questions.
Witnesses have already indicated their opinions on some matters, but where would you like changes in how IRIS functions? Alan Mitchell suggested that there ought to be some sort of business perspective in the IRIS unit and David Lonsdale mentioned beefing up IRIS. Will you pull that together in your proposals to improve the operation of IRIS?
We favour having IRIS as part of the First Minister's office because that would give it the ultimate political credibility that it needs to do what it must do and because that would tie in with the First Minister's objectives to promote economic growth.
Do others agree?
We have to be clear about how much of a disappointment IRIS has been. At the time of writing our submissions—last year—we had not really seen anything happen with IRIS in the previous three years. We are business organisations that work with the Enterprise, Transport and Lifelong Learning Department every week, so we are in a position to ask what IRIS does and whether anyone has heard about anything that it has done in the past three years. One has to admit that the situation is fairly disappointing.
Should IRIS report directly to the First Minister?
We suggested that the IRIS unit should be based in a beefed-up finance department that does a cross-cutting review. Such a finance department would review all costed proposals from all departments; IRIS would therefore fit into that. However, if there is to be no reformed finance department, it would make sense for IRIS to sit in the First Minister's office.
One would like to think that IRIS would help departments to rise above turf wars and that it would also be in line with some of the recommendations that are contained in the Mandelkern report, which talked about direct support from the head of the Government, which in our case is the First Minister's office.
I agree generally, but I tread carefully because I notice that IRIS is at present lodged in the department to which we report. I spoke earlier about an independent challenge which—if it comes from IRIS—has to have clout. We also find that internally, when we have an independent challenge to appraisals, the challenge must have sufficient clout against the proposer so that proposals are not bulldozed through.
There would be other benefits. IRIS might get some money to commission independent research. We spoke earlier about the quality of RIAs and what is being done down south to try to address that. We have concerns about the quality of RIAs that we outlined today. We might get better access to resources—possibly even better access than the finance department.
I thank the witnesses very much for the time that they have spent with us this morning and for their written material. I hope that they will not mind providing the additional information that they spoke about as well as answering the questions that we will send them about accessibility—there were three or four.
Meeting suspended.
On resuming—
I apologise to Professor Page, the committee's adviser on European issues relating to our inquiry, who has been waiting for a little while. He has kindly produced a paper and will go over some of the main points of it with us.
The apologies are all mine for being late and disrupting your programme. My train was late.
Thank you for taking us gently through the main points in your paper. That was helpful.
I do not have hard-and-fast figures on the proportion of directives that are implemented UK or Great Britain-wide as opposed to those that are devolved to Scotland, but I have a copy somewhere of a written answer from the Executive that listed the directives that had been implemented in that way. It is not an insignificant number.
Do you mean the number of directives that are implemented in Scotland?
I mean the number of those that are implemented UK-wide rather than devolved to Scotland. In other words, it is not infrequently that the decision is taken to implement directives in that way.
That is useful. I can remember that, in previous meetings, the legal adviser has often told us that we have taken a different approach from that taken at Westminster, so I wondered whether there was any hard information on that.
Is part of the problem with differential implementation—which is discussed in the first bullet point in paragraph 13—that, once the UK Government has decided to implement a directive in a certain fashion, the timescale means that the Scottish Executive has no option other than to fall in line? Is it the case that the Scottish Government is forced to go down that route regardless of whether it wishes to do so because EU directives have to be implemented by a certain date?
I suppose it is a question of how quickly you are out of the blocks in the implementation of obligations. One can understand why a UK department might be reluctant for a devolved Administration to go its own way, because that would put pressure on it to justify its own approach. Agriculture is one area in which it has been suggested that there has been an unwillingness for the freedom that exists in theory to be exploited to the full.
On that last point, do you feel that enforcement—which we discussed earlier—is an important area in which law could be applied differently in Scotland?
The Deputy First Minister made a speech in December to accompany IRIS's first annual report. Europe has an attraction for politicians in that it can allow them to say, "This is not down to us. It's all because of Europe." There was a certain amount in the speech—and in the report—to the effect that what business people in Scotland complain about is not down to the Scottish Executive, but down to reserved UK responsibilities or European responsibilities. I always view that claim with a degree of scepticism. I would want to inquire a little more closely into whether things were as tied down as all that, or whether there really was so little room for manoeuvre. Such close inquiry must be required for enforcement, because enforcement is a matter of discretion. You would expect an enforcement agency to adopt an approach to enforcement that reflected Scottish circumstances and was not necessarily a mirror image of the approach taken elsewhere in the UK or in Europe.
If a Scottish Executive department has not been heavily involved on the policy-making or transposition side of legislation, and if the legislation has therefore been delivered via UK subordinate legislation and arrived, in effect, on tablets of stone, there is a risk that people will apply a rulebook mentality without really considering Scotland's specific circumstances or how legislation could be made to apply to Scotland's advantage.
Absolutely. That is why, at the initial negotiation stage, what happens before policies are adopted is all important. The question is whether a Scottish voice is heard and whether consideration is given to the issues that you mention.
It is an interesting question.
In your submission, Professor Page, you make the point that outside bodies are not as involved as they could be. We heard earlier about environmental legislation and the amount of it that comes from Europe. SEPA has complained that it has no input at the early stages of consultation.
I am not aware that it has—I stress that I am not aware, because I have not looked into the question in detail. However, from my reading, I have picked up that the focus of the European and External Relations Committee has shifted. It had received a legacy paper from the European Committee on that committee's work during the first session of the Parliament, and it is now thinking again about the most effective approach towards its scrutiny obligations.
Your paper suggests that it would probably be to the Scottish Parliament's advantage to focus in on this area and to take advantage of the flexibilities that are available to us to assist Scottish business and the wider Scottish community. You are saying that that is a project that could be undertaken.
Yes. That would fit very much with what has been said this morning. We know that things are going to happen and we need to determine the extent to which issues relating to those things are being addressed at the moment.
Do you have any suggestions as to what our next steps might be with regard to focusing in on the issue?
You should have a forward-looking agenda that identifies the things that are happening and—because resources are limited—tries to work out which ones are important and are, therefore, the ones that this committee, perhaps in conjunction with another committee, should focus on. You should also draw on other things that are happening. For example, I would want to use the expertise of the Merits of Statutory Instruments Committee of the House of Lords, which can draw attention to instruments that inappropriately implement European Union obligations, which is, arguably, what you would want to prevent. In the light of what we have just been talking about, however, it is a bit late in the day by the time that that committee takes action.
When I was on the European Committee, I was aware of the change that you talked about and there was a much greater emphasis on being proactive. There is a lot of mileage in there being much more discussion between this committee and the European and External Relations Committee with regard to the issue of advance notice of upcoming matters. If committee members agree, we will liaise with the European and External Relations Committee to take the matter forward within the context of this review.
Of course.
You have certainly raised quite big issues that we can work on. I thank you for your attendance. I am very sorry that you have had to wait so long.