Regulatory Review Group
Good morning and welcome to the meeting, which my briefing says is our 17th in 2008. We have apologies from Iain Smith. I remind everyone that mobile phones and BlackBerry-type devices should be turned off, so that they do not interfere with the sound system.
Agenda item 1 provides the opportunity to question two members of the regulatory review group on its work. The group recently published its annual report, which the Scottish Government received favourably. The report sets out far-reaching recommendations to improve the legislative process.
I welcome our two witnesses, Professor Russel Griggs and Stephen Boyd, and invite them to introduce themselves and make any opening statements, after which we will ask questions. I presume that your report provides a statement, so it is a matter of introducing yourselves.
Professor Russel Griggs (Regulatory Review Group):
To start, we simply wish to say good morning. Most of you around the table know us. The regulatory review group has published its first annual report. We produced an interim report in February, just to find out whether we had the right direction of travel, and the Government said that we did.
We are here to answer questions and explore issues that the committee would like to explore. Yesterday afternoon, we had an interesting meeting with the Scottish Cabinet, which again agreed our direction of travel, so we will keep going in the same direction.
We are interested in the committee's views. I guess that today's meeting arose from a conversation that I had with the committee's previous convener just before the recess—he wanted us to speak to the committee after we issued our report. It is for the committee to ask questions.
Indeed. Who wants to kick off the questions?
I enjoyed reading the annual report and the interim report. Will you describe where we are on implementation or what needs to happen for implementation to occur? The idea of the business impact assessment is good, but I am keen to know what will happen in practice. Will the BIA definitely be implemented? Do we need to debate its implementation?
The business impact assessment will be implemented. Jamie Hume, who looks after the RRG's secretariat, other members of the team and I will work out a process for monitoring its implementation. All civil servants who produce legislation, and perhaps all committees that do so, will be asked to use the BIA. We will monitor who has and has not used it and publish that information every year in our annual report. That will give us a view of where we do and do not have challenges.
There are two critical parts to the BIA. One is ensuring that Government in all its forms considers options before it decides on legislation. Legislation should be last on the list of what it wants to do, so it should consider other options. More important is encouraging continuing dialogue between business and Government about the impact of any legislation, to allow them to understand each other. Many businesses do not understand how the Government puts together legislation, and perhaps the Government does not understand the situation in business.
One great impact of the BIA will come from its use internally. We have worked on fisheries in Richard Lochhead's directorate, where the BIA is being used as an internal checklist of whether things should be done. We are making positive progress, but getting everything in place depends on how quickly we can write all the information and get it out to civil servants.
Those comments were on the BIA specifically. We may come to other matters in later questions. Stephen Boyd may have something to add.
Stephen Boyd (Scottish Trades Union Congress):
That is a fair summary. There is a widespread understanding that the predecessor of the BIA, the regulatory impact assessment, did not work particularly well in Scotland or the United Kingdom. From time to time, regulatory impact assessments underestimated or overestimated the impact on business. For example, we argue that the public sector procurement directive was implemented in Scotland in a minimal way to pre-empt accusations about placing extra burdens on business. However, it was not implemented in a particularly effective way, and the regulatory impact assessment process did not assist. With the BIA, we are trying to do something new. We all have aspirations and believe that the BIA potentially is a positive development.
I like the idea that legislation should not be the first choice, and that in many cases it should be the last.
I have two follow-up questions for Professor Griggs. First, the regulatory review group's annual report suggests that the BIA should be compulsory, but your answer a moment ago suggested that it might not be and that you will monitor the situation. Should the BIA be made compulsory? How likely is that to happen? Secondly, in the group's view, should the BIA apply to committee-sponsored legislation and member's bills?
The answer to both questions is yes, but I have a caveat on the first one. We would like the BIA to be compulsory, but we must work with the Government on that. The important thing is to consider what compulsion means. That is why we are going to have a monitoring system. We can compel people to carry out BIAs, but we need to monitor that.
Since the Hampton review, the best practice advice to civil servants at Westminster has been that they should visit three companies every time they put through a piece of legislation. That has never been monitored, so we have no idea whether any civil servant has ever done that. Our view is that, if we compel people to do something or recommend it as best practice, it must be monitored. We will tell people that they must go through the process, but I cannot instruct every director general in the civil service or John Elvidge to say that, which is why we are putting in place a monitoring system so that we can see who has and has not gone through the process.
You asked whether committees should use the BIA for their legislation. I believe that the BIA will be a useful tool for committees when they examine the impacts on business.
You mentioned visits to three companies. Your interim report suggests that the process would involve between six and 12 companies. I presume that they would not be the same ones each time, and that there would be a pool. That is probably a useful number for some types of legislation or regulations, but with major legislation, such as that proposed on a local income tax—I do not want you to comment specifically on that—should far more companies be consulted? A national picture will be built up based on the companies that are spoken to, but if only 12 companies are spoken to about a major piece of legislation, it might be difficult to get a national picture. Will the pool of companies and businesses that are spoken to time and again contain a spread of the Scottish economy, so that we cover all the areas, including social enterprises and the voluntary sector?
To answer the second question first, we will have a hub-and-spokes system. We already have relationships with most trade associations in Scotland. When considering proposed legislation that focuses on a specific sector, we will talk to the trade association for that sector to select a group of companies that includes small, medium and large businesses in the sector. We hope that the businesses involved will change over time. We want to involve as many companies as possible.
On, for example, local income tax, I come back to what the regulatory review group is about: we are about testing proposed legislation. I assume that on an issue such as local income tax, there will be lots of consultation with many bodies before the proposal gets to the legislation stage. When it gets to that stage, we are only interested in how the legislation will impact on business. So even for a big issue, such as the local income tax, maybe a dozen businesses will be consulted, if they are picked carefully. It could be slightly more than a dozen, but we would not need to go to large numbers. The issue is how the legislation will impact on business. Many people will be consulted on the more general debate about local income tax. I am just trying to be specific about our role in that.
Taking that a little bit further, I have a supplementary question for Stephen Boyd. Should the workforce be involved in the BIA and, if so, how?
Whether it is involved will, unfortunately, reflect the working relationship within the company. Depending on the legislation, particularly if it could have an impact on the workforce or the communities and environment in which they live, it is only fair that the employer consults the workforce as part of the process. I hope that other avenues in the consultation process for bills will allow that type of input.
I want to be clear that I support the BIA approach, but, as I have said in numerous meetings with the regulatory review group, there are dangers in the approach that could lead to worst-case-scenario contributions from employers. We are trying to do something new here, which is one of the reasons why we have to monitor and review the approach. If we go out to six to 12 companies, they might all overstate the potential impact of the legislation on their business. That would not necessarily be the case, but it is important to monitor and review the process, and perhaps to tinker with it, to encourage companies to give considered responses.
It is not about civil servants getting the managing director's views. We will encourage companies to find out whose day job would be most affected by the proposed legislation and encourage them to discuss it at that level. To be perfectly honest, the managing directors of a lot of companies do not understand the impact that particular legislation will have on their company, so we are going to encourage them to speak to the people in the company that do understand it. We hope that that will take them more widely into the company, if I can put it that way.
Do any of the members who have indicated that they want to speak want to continue on the subject of the business impact assessment?
I want to pick up on the question that the convener posed. Sometimes you will get the answer that you expect. When the Government introduced the national minimum wage, the Conservative party and elements of the Confederation of British Industry told us that Armageddon was approaching. I dare say that if you had spoken to half a dozen of their major members, they would all have said that the national minimum wage is terrible and it should never be introduced. However, it was introduced by a fantastic piece of legislation, so surely there has to be a point at which you take what you are being told with a pinch of salt.
Absolutely, but we must recognise that the BIA is one element of the wider consultation process. You are right about the national minimum wage—when it was introduced, employment rocketed by 2 million throughout the United Kingdom—but there were counter-arguments to the CBI's objections. I am sure that the approach that is adopted in Scotland will allow counter-arguments to be placed firmly in the public domain and considered as part of the wider debate.
David, you have to remember what we are trying to do here. We are not saying, for example, that the national minimum wage is right or wrong. We are asking whether a particular piece of legislation impacts on a business. We expect the BIA to be quite detailed. We do not expect it to be completed in a half-hour conversation. It is about considering the detail of the possible impact of legislation on a company.
Over time, we hope to put in place a group of civil servants who understand enough about business to know when they are having the wool pulled over their eyes. Part of the challenge that we face at the moment is that there is a lack of understanding of Government by business and of business by Government. If we have conversations, over time we will get a better understanding of what is going on with both sides.
I find it surprising that you say that, because most major companies employ corporate affairs people whose job it is to understand politics—I might even confess to having done a bit of that myself. Equally, plenty of civil servants who work in the Scotland Office and the Executive have been on secondments to major companies. I do not follow the argument that there is a great misunderstanding between the civil service and the business community—they meet each other all the time.
I did not know that it was best practice to visit three companies, and I was surprised to read that nobody had done it. I wonder whether the visits were not made because the civil servants thought that it was not worth while, because they already understood what was going to happen.
I do not think that that is the case, although I remember well our sharing time in another period of your life, David. Much of the process is about the detail of the impact. As we get into legislation on the environment and other areas, we are doing things that have not been done before. If we have done something for 20 years, we know a lot more about it than we do about something that we have never done before. There is no doubt that better conversations about environmental legislation can be had between people who work at a more detailed level, rather than between public affairs people.
We have been critical of the way in which Government and trade associations work together, because they do so at official level, with corporate affairs people speaking to officials in the organisations, rather than by getting together the people in the organisations and the Government whose day job is to deal with the matter and who understand the detail.
We spoke to the better regulation executive by videoconference recently, not because it knows what to do, but because it finds it challenging to test what it wants to do to real businesses. We are talking about there being more practical and detailed engagement than there has been between trade associations and Government.
We are trying to move the better regulation debate on to a different level and to implement positive measures that will allow us to produce a more coherent appraisal of new legislation and its impacts. The better regulation and deregulation debates, as well as debates about red tape and business burdens, have been horribly vague over the past few years. A variety of issues relating to employment regulation, environmental protection and utility regulation are conflated and confused. Nobody has a very good idea of what we are talking about.
A number of business organisations have promoted the idea of there being overregulation, but they have been less than specific about the regulation that supposedly is burdening their companies. The whole BIA process, as Russel Griggs described, attempts to cut through that confusion. People moan about the national minimum wage, so we should ask them to explain to us in clear, precise terms what it means to their company and why it is detrimental. As part of that process, the Government should say, "Consider the positive aspects. Consider the positive labour supply effects of the national minimum wage or similar legislation."
As I said, we have concerns about how the BIA might play out in practice in its initial stages, but I am confident that we will work through them. People will develop expertise and confidence in dealing with the process, and it will lead to better public policy decisions.
I say to David Whitton that if you speak to some of the civil servants in the BRE, they will say that it is easier to have a debate about legislation with trade association officials than with real businesses, because they get into the detail. Stephen Boyd is right that that is where we want to take the debate.
I was struck by the emphasis on a reluctance to set targets, because you are after better, not necessarily less, regulation. You sounded sceptical about the proposition that there is too much regulation per se and you are sceptical in your report about the proposition that for every new regulation an old one should drop out. Will you explain the reasons for your scepticism about those propositions? Is there a connection with your comment that, although you have to look at existing regulations, that is not in the work plan for the foreseeable future?
On the last question, we hope to examine existing regulations this year. I will come back to that.
We approached the report in this way. Everybody complains about tax and regulation, and we all have rules in life that we have to obey but perhaps do not like. Our natural inclination is not to have such rules, and businesses therefore complain about regulation. However, when we ask businesses—across the world, not just in the UK—to specify the regulations that they would take away, they find it hard to do so. Like all better regulation groups in the world, we have struggled to find specific things that business wants to do.
We have therefore tried to look at the situation differently. We have said that, if we ensure that we introduce regulation that is appropriate and formulated co-operatively between business and Government—accepting that there will always be differences between them, so they will not always agree—we will have regulation that people cannot argue about. It will not matter whether there is more or less than at the moment; the point is that we will have regulation that people are happy with and know the impact of. That is not to say that the Government will not impose legislation that will have a significant impact on business, but if it does, it will at least understand its impact.
Our group is fairly eclectic, with a mix of people and views. I will have to be careful how I say this—and I am interested in Stephen Boyd's view—but nobody has been able to gather evidence about the specific regulations that we could remove or add. The question of one in, one out is simple: the Government could take out one small piece of legislation and replace it with one huge piece of legislation with a greater impact. Our view is that the one in, one out idea adds nothing to the debate. It would also allow the Government to bundle pieces of legislation together—that perhaps has been done elsewhere—which does not really lessen the burden. There might be one regulation rather than six, but the burden is not reduced. One in, one out is a simplistic idea that works on the periphery of the real debate, which is about better regulation.
There is a business and moral case for regulating the workplace, environmental protection and so on. If markets are to work efficiently, they require to be regulated. I do not need to stress that point at the moment, as the financial markets unravel around the world. However, if an overly restrictive, target-based regime is in place, it can make it difficult to implement new regulation.
There is broad consensus that we need far tougher regulation of the markets. Although there is a debate to be had about the level of regulation and the need not to stifle innovation, which is a legitimate debate, there will have to be new regulation. If there is a tough, target-based regime, and the political imperative is to justify those targets and reductions in them, it can make regulation difficult to implement.
We have seen some small-scale examples of that recently. The Scottish whisky industry struggled to have passed new regulations that it was looking for to protect the industry, because the Government was working to its own target-based reduction regime, which made it difficult to introduce the regulations that business was arguing for.
Personally, I think that it is absurd to approach the better regulation agenda by trying to measure and then justify reductions in the unmeasurable. It is a huge waste of a scarce resource—our civil servants. Russel Griggs can tell you better than I can the number of civil servants who currently are engaged in the agenda in Westminster. I argue that they could be far more productively deployed elsewhere.
The number is more than 230.
That is quite a large number.
You choose not to take a target-driven approach, and you have a coherent argument for that choice. You seek instead to build a partnership between regulators and business. That will deliver a different world if what lies behind the proposal is endorsed, but if there is no such endorsement, is there not a risk of further bureaucratisation and layers of demands?
I notice, for example, that the Government's report contains a reference to
"A requirement for business to dedicate time and resources needed to allow Government to consult meaningfully with them".
If such a requirement were used in the right way, it would be an asset, but if it were used in the wrong way, it would be another burden on business. If it were used in the wrong way, a requirement for engagement between regulators and businesses would compromise the regulation that, for good reasons, businesses need, or it would simply draw businesses into the process of bureaucratic regulation. In making progress on what seem to be admirable objectives, how do you guard against those risks of bureaucratisation and compromising necessary regulation?
We do it in two ways. You are right: we must explain to businesses that if they want better regulation, part of that involves giving up some time to ensure that they get regulation that is appropriate to them. We know from talking to businesses and all the associations that are involved in the regulatory review group that they want to do that.
The chemicals industry, for example, will give up time to consider how European legislation is interpreted and put into domestic legislation, because it recognises that, over time, that will save the industry money. It costs some companies in the environmental sector up to £1 million a year to comply with regulations. By getting involved in the process of putting regulation in place, and by spending some money at the outset ensuring that the regulation gives the Government what it wants and is implemented appropriately, businesses can save themselves significant amounts of money. Businesses are beginning to count the cost of that, which is quite easy to do with much of the environmental legislation.
We think that businesses and the regulators have the will to engage. The regulators recognise that that is necessary if they are to produce the desired outcomes. For example, the Scottish Commission for the Regulation of Care wants there to be good care homes throughout Scotland. To help it to achieve that, it would like to have a more flexible way of working that allows it to focus its time on ensuring that the bad care homes get better and the better ones are encouraged. There is a willingness on both sides. I do not think that a partnership approach will encourage more bureaucracy. I hope that, ultimately, it will cost each party less, because everyone will sit down round a table and work out what they are doing rather than put regulation in place first and then try to unwind it retrospectively, which costs them more money. I think that the amount of bureaucracy will decrease.
Provided that the regulator and the regulated are of like mind and want the process to work. Does that mean that a staged process is necessary to reach that position?
We have spoken to all the regulators and, without exception, they want to move to a different world. It takes a lot of their time to deal with complaints, many of which they feel are justified, because the regulation being complained about was not structured in such a way as to produce the desired outcome, with the result that they have to discuss with Government how the regulation can be changed. The regulators would like to move forward.
In taking forward an agenda that is genuinely about better regulation, everyone faces major challenges. More businesspeople must engage with others, as Russel Griggs has done, to improve regulation rather than moan about the generality of regulation.
The problem with the better regulation agenda in the UK is that we do not have a highly developed institutional framework that helps us to deliver it. On labour market issues, we now look towards Europe. When Holland implemented the working time directive, it did so through sectoral industrial agreement between the trade unions and the employers, who were able to keep Government out of the process. That was possible only because Holland has a long-established institutional framework that is widely respected by all stakeholders and which allows such dialogue. It is true not just of the labour market but of the full gamut of public policy in the UK that we tend not to have the working relationships in institutions that would help us to do such work. My aspiration for the regulatory review group is that it tries to build a more consensual approach. We certainly hope that, in the fullness of time, such an approach will, as Russel Griggs has explained, bring about a decrease rather than an increase in bureaucracy.
I will talk a bit about the regulators themselves. For many years, I was a trading standards officer, so I have a wee bit experience of regulation. As a regulator, I always found it useful to use common sense in applying regulations, which is just what Professor Griggs mentions in his report. We certainly used our common sense to a great extent when we were on the ground going round businesses. We used a lot of discretion day to day and even—if I may say so—ignored some regulations if we felt that they did not quite apply, or should not be applied, in a situation.
The trading standards service has been mentioned. It has a good set-up in the UK as a whole through the co-ordinating body for regulatory standards, the Local Authorities Co-ordinators of Regulatory Services. Is that a model that other regulatory bodies should adopt?
Indeed it is. You will be pleased to know that no trade association has made a complaint about a trading standards officer in Scotland over the last number of years—we asked—whereas the service south of the border gets thousands of complaints. That is interesting. Part of the reason for that is that the model is good. Trading standards officers and other regulators in Scotland cannot prosecute in their own right, whereas they can south of the border. We have an interesting interface called the procurator fiscal, who sits between regulators and prosecutions; that does not apply south of the border.
We have been talking to Philip Hampton, who started off the drive for better regulation several years ago with the Hampton report. He is considering whether something like a procurator fiscal or the Crown Prosecution Service could put such a barrier between trading standards and prosecutions in England. The Government has tried to get round that by introducing the Local Better Regulation Office. Interestingly, your colleagues in the Society of Chief Officers of Trading Standards in Scotland were worried about LBRO's impact on Scotland, as were we, because of the different system in England. We have worked with those organisations to ensure that we get the right impact in Scotland and do not harm the relationship with businesses.
The way that trading standards officers have worked together, applied common sense and driven for consistency is important. As you know, one of the constant complaints from businesses is that there can be huge inconsistencies throughout the country in the policies that are delivered through local authorities. The trading standards service is a good model of regulation.
The challenge that the service faces this year is that, for the first time ever, there are no young people going into trading standards. That is a big problem across all the regulators; there is, oddly enough, a skills shortage in regulation—full stop. There is a problem with getting people to go into the Scottish Environment Protection Agency, trading standards and occupational health. That is a difficulty.
Do you have any idea why that is the case? I suspect that the method of training is different from that in many other professions. If somebody wants to be a lawyer, they go to university, get their law degree, then do their year in a law firm and that is them trained. However, with regulators such as the trading standards service, the method is that one trains within the local authority. Therefore, it costs a local authority much more to train a trading standards officer than to train a lawyer, because a lawyer is already trained when they join the local authority. Perhaps we need to examine the funding mechanisms for training. In my many years' experience in a local authority, the training budget was the first to be cut whenever there were efficiencies to be made because it was an easy one to knock down. I am concerned and disappointed that no youngsters are training to be trading standards officers in Scotland just now. That is awful.
It is, but, as far as I am aware, it has nothing to do with budgets; it is just the challenge of getting people in. I will give you a personal view. One of the challenges that regulators have in attracting staff is that they have come to be thought of as policemen rather than enablers who use their common sense. Fewer people want to become policemen than want to become helpers, so perhaps the regulation industry has a little task to do to change young peoples' view so that they see it as a helping environment rather than a policing environment. As far as I am aware, the problem has nothing to do with money.
That is interesting. Part of the trouble lies with some of the regulatory bodies. For example, Scottish Natural Heritage has no regulators; it has environmentalists who regulate—their primary focus is the environment. When people first come into regulatory jobs, they do not really understand what regulation is all about or the need for a light touch, which you mentioned in your report. In that respect, they are unlike trading standards officers, who are taught in the first instance to be regulators. Many of our regulatory bodies take the opposite approach to that taken in trading standards. Did you come across that in your deliberations?
That is an interesting point; I will have to be careful about how I answer the question. There is no doubt that people can come into those organisations with an agenda—if I can put it that way—that may not be about regulation. There needs to be clarity from the regulator on what it is trying to achieve. If the regulator is trying to create a better environment, the way in which to do that may be open to interpretation—some people may put their own interpretation on that.
Over recent years, one challenge that we have faced is that too many people have concentrated on process and not outcome. Many regulators have moved to a place where they argue about which pump someone is using rather than looking at what comes out of the end of the pump. They should be doing the latter, not the former.
I agree that a job has to be done in that regard. We need to move away from regulation that is based on a process environment to one that is based on an outcome environment. Some of those who work for the regulators will find that challenging.
I always took the view, which I imparted to my staff, that our job was not so much to rap people over the knuckles or get them into court as advise businesses on compliance. There are myriad regulations in the trading standards field and in other fields, such as environmental health and VAT regulation. That makes the advisory role of the regulator extremely important.
I liked the recommendation in your report that regulators on the ground should be used to impart experience and advice when regulations are being made. The recommendation is even more important when it comes to implementation. It is often the case—indeed, it is probably always the case—that the full impact of a regulation is seen only after implementation begins.
Over the past week or two, an example of that was brought to my attention: the implementation of new fire regulations and their impact on bed-and-breakfast establishments. I was told that, although there is nothing implicitly wrong with the regulations, the various fire authorities are covering their backs by implementing them absolutely. The regulations that apply to small business premises now apply to small B and Bs that take fewer than six people, which used to be exempt. I was told that massive costs are involved in meeting the new requirements.
The example shows that we need to get in there and ask two questions. The first is, "Is this what the regulations were meant to achieve?" The second is, "Are there any unintended consequences?" If there are unintended consequences, we need to see how we can quickly change things. Unfortunately, I do not think that we have the mechanisms to act quickly.
We do not. We are looking at the case that you just set out, which has also been raised with us—it is a clear case of unintended consequences.
The first case that we ever looked at was on the impact of the care commission on care homes. We found exactly the same situation as the one that you raise: interpretation at the coalface, so to speak, had led to unintended consequences. People had interpreted things in a way that was totally different from that which was intended.
That case raised the issue of communication problems. Many people who work for the regulators do not feel sufficiently empowered to say to their bosses, "I have been doing this for a couple of weeks and this bit is all wrong. We need to talk to Government about changing things." We need to change the culture to ensure that people feel empowered and that they have the authority to do that.
As you said—again, I will have to be careful how I say this—certain cases should lead people to say, "That is just stupid. We won't do it." People are not encouraged to do that, however.
The other issue is that many of the costs that I mentioned earlier are incurred in providing regulators with information that is then put in a filing cabinet and only ever used if both parties end up in court. There must be a more sensible way of tracking and keeping records that does not involve both the company and the regulator holding on to information that costs the company quite a lot of money to put together.
We have had some concerns about SNH over the past few months. I do not have much of a problem with the agency attracting people with an environmental background or who have an environmental perspective on matters; after all, it is there to protect Scotland's natural heritage. However, if it is to play a proper advisory role, it must be resourced at all levels. I am not convinced that that is the case, and there is a problem with the interaction between the skills that are held locally and those that are held centrally.
I know of some examples of very good practice at SNH. Counter-intuitively, perhaps, it has worked with the open-cast coal industry on various developments in South Lanarkshire and Ayrshire that are, to varying degrees, sited in protected areas. The agency worked with the developer from a very early stage to ensure that the development was as sensitive as it could be to the needs of the protected areas.
However, developers in those areas live in dread of one or two particular individuals moving away, because there might well be no one else to replace them. The skills that they would need to interact with would be held centrally and would therefore be more difficult to access, which would hold up the whole process.
This year, I have had the pleasure of participating in two fascinating conferences on how different European countries and regions have handled the Natura 2000 agenda and the habitats and birds directives. What came across loud and clear was that other countries and regions have more highly developed partnership mechanisms for managing protected areas, which provide more reassurance to developers with regard to what might be possible in such areas as well as reassuring communities and the population at large that protected areas will be protected.
In Scotland, such partnership mechanisms are completely absent, and I have major concerns about what that might mean for the development of the renewable energy sector. Instead of taking an absolutist approach to protected areas or simply giving developers carte blanche, we have to develop mechanisms that reassure both sides. Although SNH should be absolutely pivotal to that process, I am not convinced that it is up for that debate. I have to say that that worries me.
The resource issue is certainly crucial. The fact is that it has become difficult to attract people into local authority professions such as trading standards—I should add that there are only a couple of hundred trading standards officers in Scotland. When Scotland had a dozen regional and island local authorities, there was a visible career structure that allowed people to reach a reasonably high level. However, in the current structure of 32 local authorities, some councils have only one trading standards officer. That means that when people become TSOs, they remain TSOs. Even those employed by the bigger authorities are lucky to be able to rise one or two levels above that.
I have always felt that good regulators use their common sense and apply their brains to their task. On the other hand, a poor regulator or officer will simply go by the book, because that is the easy way of covering their back. That is a cultural matter that needs to be tackled.
I agree entirely. A couple of companies with which I am associated have good regulators, and it is clear that such regulators tend to say, "I'm here to create a better environment," and focus on outcomes. Other regulators go into a company and simply say, "I'm here to enforce the legislation." Those two approaches are distinctly different, and we need more of the former and less of the latter.
Some areas of regulation, such as Mr Thompson's example of trading standards, lend themselves to a more mature, considered approach. However, other areas—for example, health and safety and certain industrial sectors—probably need a slightly more by-the-book approach. One major concern is that the open-cast coal sector in Scotland, in which there have been three deaths in the past year, is covered by one quarry inspector who is based in the north of England.
This is all an argument against having a target-based culture. The fact is that having national targets leads to people taking a by-the-book approach at the local level.
The problem with coming in late, of course, is that many of the best questions have already been asked. However, reading my sensational literature—the Financial Times—on the bus this morning, I noticed a particular headline on a comment piece that queried whether light-touch regulation had had its day. Given the events of the past couple of days, one can understand why the Financial Times has such headlines.
Russel Griggs told us that we have a state with Adam Smith principles but no policemen—or at least we are finding it difficult to recruit them. That makes me query whether one can actually talk of a continuum of regulation that applies to very large firms right through to bed and breakfasts. I find that very difficult to understand. I will explain why in a supplementary, but I want to ask that question for a start.
I guess what we are saying is that there are some things on which every company in the land should be regulated—Stephen Boyd made that good point. For example, we all need to care for our staff, and whether we have one member of staff or 2,000 does not matter a hoot. We need to care for them; therefore, there are regulations.
However, we must consider the area of proportionality and appropriateness. I will make an interesting statement: I would rather take the HM Revenue and Customs approach. The Inland Revenue has gone a long way with its customers to try to figure out how to do what it does better. We all have one income tax form, but not everybody has to fill in all of it. I think your point is that one of our challenges is to ensure that, as we go through the process, we fill in only the appropriate parts, if I can put it that way. One of the areas that we and others are looking at is how forms have to be filled in for large and small companies. We ask what everybody needs to do and what some perhaps do not need to do.
I would never, ever get into a discussion about financial regulators because that is way beyond Stephen Boyd's and my ken, although we may have our own views on financial regulation—in fact, we discussed them earlier. I was at an interesting debate last week on whether we should have more financial regulation. I guess I am still sitting on the fence on that.
That is the problem with the debate on better regulation. The FT is probably correct to speculate that light-touch regulation has had its day, but it is talking about the financial sector. We cannot really jump from discussing the regulation of financial services to discussing the regulation of the workplace or the environment, because they are different issues. The problem up to now is that regulation has been discussed in a general way, which is completely unhelpful.
On the way through on the train this morning, I was reading Larry Elliot's recent book. He describes how banks are highly regulated in terms of what they can and cannot do to their workforce and the environment, although their banking activity is almost completely unregulated. That has led to banks complaining about overregulation because they do not like the minimum wage, for example; in terms of their banking purpose, however, they have a completely free hand. The FT is correct to say that those days are coming to an end.
I will lob in my supplementary. Takeovers have meant that much of what looked like common bits of Scottish business furniture have suddenly ended up being owned from far away, by which I mean Europe and the like. For example, Bauer Radio has taken over broadcasting in the shape of Radio Forth and Radio Clyde. A German company with no interest except in profit has taken over a Scottish concern. Our goods are moved on Scottish railways by the state-owned German company Deutsche Bahn. British Energy, which will give evidence in a few minutes, might be owned within months by the state-owned Electricité de France.
That raises an interesting and complex question, because all that business goes round the back into Europe and into a regime with a strong system of commercial law that is independent of common law in the old British sense. To my mind, that could lead to enormous problems because we will find that those companies can exert power in Brussels. Not having a background in commercial law of that sort, we would find it difficult to tackle that. For instance, in the early days of North Sea oil, a small Board of Trade presence found itself confronted by the so-called seven sisters oil companies. The result was that they simply bought over the regulators. We might be in such a situation again, because of the uncharted waters that we are going into.
Our report makes some recommendations on Europe, but I am not sure that I want to get into such a discussion. Germany is highly regulated; France is perhaps less so, but in certain areas it is very regulated. Each country in Europe has a different system of regulation. I think that multinationals are quite clever at becoming part of the environment that they go into. I have not seen—I would be interested to hear Stephen Boyd's view—any suggestion that the large international businesses that have come to Scotland over the past 20 or 30 years want a fundamental change in the way that we do things. Once they have got here, they have argued as ordinary businesses.
We have not seen that in Scotland as such. Arguably, the financialisation of the UK economy and the role that has been played by US investment banks in the City of London have led to a particular approach. Clearly, we have concerns about the ownership of Scottish industry—perhaps I can look forward to a future committee inquiry into that—but we are not aware of the specific causes for concern that Christopher Harvie has described.
Following on from that discussion, it would be churlish not to mention the section of the report entitled "Scottish input to the European Commission", which includes the recommendation:
"we would strongly support the ‘Team Scotland' approach in Europe as set out in the key messages of the Scottish Government Action Plan on European Engagement."
Do you have anything to add to that just now?
Let me say why we took that approach, which is not a political approach at all. If we are encouraging this partnership between Government and business to make the biggest impact possible on regulation, we thought it odd that in Europe—where we know that there are challenges—one of the partners cannot always be at the table. Businesses can go and make their case, but they cannot take Government with them. We felt that that was not correct. Where Westminster, for its own reasons, has a different view from that of the Scottish Government—no matter what shade that Government is; this is nothing to do with politics—at the political level, we go with that different view. Our view is that, if we are encouraging a partnership in which business and Government come together and support each other on key issues that are relevant to Scotland, we should have the opportunity to go jointly to Europe and say, "We in Scotland have our own particular view on this." James Withers would be able to quote one or two examples from farming that would be particularly pertinent. To go back to a previous point, we took the commonsense view that we could see no reason why Government and business should not sit beside each other going into European situations.
Given that Scotland is a member of Regleg along with other parts of Europe, we already have a level at which Scotland's presence is acceptable. Are you saying that we need to firm up on that and to open the door?
I guess that what we are saying—this is where it gets complicated—applies to a number of areas on which we have moved forward. Earlier in the report, we say that Westminster needs to take account of devolution before putting things into legislation rather than afterwards; this issue is to do with the same thing. If we have a process that encourages parts of the UK to take more responsibility for what they do, we need to change the rules and protocols as that goes along. I guess that that is all that we are saying.
That is very helpful. I will allow two quick questions before we finish up.
On that point, one might argue that the annual fisheries quotas negotiations represent a regulatory process in which Scottish business, Scottish ministers, businesses from south of the border and UK ministers are all present. Is that the model that is being suggested? Connected to that, and further to the deputy convener's reference to Regleg, do devolved Administrations in Spain, Germany and other parts of Europe follow the model that has been described? Are there examples of that from elsewhere in Europe?
The answer is that we have not looked at that yet.
The fisheries negotiations is a good example so, yes, I suppose that that is the kind of model that we are suggesting. However, there are exceptions on which the Department for Environment, Food and Rural Affairs might take a different view from the part of the Scottish Government that deals with agriculture. The concern is that on areas such as waste, on which our farming sector takes a different view from that taken by the sector south of the border, we should jointly be able to put that view strongly and coherently.
The point about the fisheries negotiations, I suppose, is that we attempt to resolve the differing interests of the Scottish and English fishing fleets in the UK negotiation.
I guess that I am not really bothered about how that is achieved as long as the case that needs to be made is made. However, we have not looked at that because we got to that point only in the latter part of the year. We perhaps need to go back and have a look at it.
Finally, again on European issues, I want to ask about Natura 2000, which Stephen Boyd mentioned. I suspect that the issue might arise in our discussion of the prospects for energy under the next agenda item. Can Professor Griggs confirm whether Natura 2000 will be considered by the regulatory review group as part of its consideration of the implementation and interpretation of European legislation in Scotland?
The answer—I am looking at Stephen Boyd—is that I suspect so.
We spoke earlier about skill shortages in certain areas, but I did not think that we had a shortage of Scottish lawyers. The report recommends that UK regulators that are based outwith Scotland should have a Scottish lawyer on their staff. I would be interested to find out where the specific example that is quoted in the report comes from. How could that recommendation be enforced?
We agreed with the Scottish Cabinet that we could make recommendations on how we think that Westminster should do its job better, but we have no power to enforce those. Therefore, we need to work with the Scottish Government and others to figure out how to do that. We are already talking to the Department for Business, Enterprise and Regulatory Reform, which is quite interested in the matter.
To answer the specific question, the example quoted relates to the Health and Safety Executive. Up until four years ago, the HSE had a Scottish lawyer based in London who could interpret legislation to meet Scots legal standards before it was issued to the guys in Scotland. When that lady retired, she was replaced with an English lawyer. The HSE's Scottish director, who has now retired, confirmed that that caused severe difficulties for a period because legislation coming up from London would arrive in a form that required the organisation to employ, at some cost, a very competent Edinburgh-based legal firm to translate the legislation. The HSE in Scotland had to pay money for something that was previously done in London. In our view, if Westminster produces legislation that it wants to be implemented in a jurisdiction with a different legal system, it should pass that on to the jurisdiction in a form that is fit for purpose, rather than requiring the local office to spend its budget on making it fit for purpose.
Is that not what the Advocate General is supposed to do?
You will know more about that than I do. I have no idea. All that I am saying is that that regulator, and another, gave us their view that they need someone at headquarters who can interpret legislation for the Scots legal system. That is especially important for areas such as health and safety, in which, as Stephen Boyd pointed out, the law is interpreted and implemented in a different way in Scotland. If you are saying that the Scottish Government should do that, that is fine. We suggested what we thought was the only way possible; if there is another way of doing the same thing, I am quite happy to listen to other suggestions.
Gentlemen, thank you very much for that review of work in progress. It is interesting and exciting to see the progress that has been made in a year. We look forward to receiving regular updates on the regulatory review group's activities. Thank you for attending.
We will have a brief break for a couple of minutes to sort ourselves out.
Meeting suspended at 10:28.
On resuming—