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HM Treasury

Newsroom & speeches

50/05

24 May 2005

Chancellor launches Better Regulation Action Plan

The Chancellor of the Exchequer, Gordon Brown, this morning launched a Better Regulation Action Plan to boost flexibility and enterprise.  A full copy of the Action Plan is attached.

Speaking to business leaders in Downing Street at the launch the Chancellor said:

“Today Alan Johnson, John Hutton and I are announcing details of a risk based approach to regulation to break down barriers holding enterprise back.

The modern enterprise challenge is to enhance the flexibility needed for a successful economy and tackle the regulatory concerns we know all industrial economies face without sacrificing the standards a good society needs.

In the old regulatory model – which started in Victorian times – the implicit regulatory principle has been 100 per cent inspection of premises, procedures and practices irrespective of known risks or past results. The theory has been to inspect everyone continuously, demand information wholesale, and require forms to be filled in at all times, the only barrier to the blanket approach a lack of resources.

The new model we propose is quite different. In a risk based approach there is no inspection without justification, no form filling without justification, and no information requirements without justification. Not just a light touch but a limited touch. Instead of routine regulation attempting to cover all, we adopt a risk based approach which targets only the necessary few.

A risk based approach helps move us a million miles away from the old assumption - the assumption since the first legislation of Victorian times - that business, unregulated, will invariably act irresponsibly. The better view is that businesses want to act responsibly. Reputation with customers and investors is more important to behaviour than regulation, and transparency - backed up by the light touch - can be more effective than the heavy hand.

So a new trust between business and government is possible, founded on the responsible company, the engaged employee, the educated consumer - and government concentrating its energies on dealing not with every trader but with the rogue trader, the bad trader who should not be allowed to undercut the good.  And the risk based approach has wide application from environmental health, to financial services and even taxation.

But what does this mean in practice? How will we ensure a million fewer inspections every year, a reduction in inspections of one third, and a 25 per cent reduction in form filling?

That is why today we want to share with you our action plan which sets out the timetable and milestones for delivering the benefits of our agenda.  Specific measures we are taking, the details of how we will be driving forward this agenda.

As announced in the Queen’s Speech and following the Hampton Review we will legislate in the new year to reduce 29 regulators to just seven, embed the risk based approach at the heart of regulators’ statutory duties, make it quicker and easier to remove unnecessary regulations and reform the penalty regime, doing more to help companies comply with the rules but creating tougher penalties for persistent offenders.

And in the next session we will introduce a second bill removing outmoded and unnecessary regulations. We will begin a widespread consultation with businesses to identify regulations that should be removed or simplified.

But regulators must not wait for legislation to apply the principles of the risk based approach and instead will immediately start:

We will address with local authorities the crucial area of local government, because for a risk based approach to be effective, the principle needs to be applied consistently especially by the 611 local authority inspectorates and enforcement departments who carry out 2.5 million inspections of businesses a year – 73 per cent of all business inspections.

The new Consumer Trading and Standards Agency (CTSA) will bring coordination at the local level.   It will define codes of practice that offer consistent guidance about priorities and performance management to be followed by all local inspectorates and enforcement agencies for all businesses, achieving what business wants – stability and consistency. 

And the CTSA will lead in the inspection of large companies with outlets all over the country.

So, for example, a large supermarket, which could now potentially be subject to inspection by 203 separate trading standards offices and have to comply with 203 slightly different enforcement practises and inspection regimes, would only have to deal with one set of standards, applied consistently nationwide on a risk based basis by the CTSA.

And an incentive scheme will promote more joint working between local authorities and, potentially, consolidate local inspectorates.

We will look to apply on a wider basis the principle of risk based regulation to financial services legislation and the work of the FSA.  The FSA, which we set up in 1997 as a world leading example of how to regulate financial services, was itself a merger of nine regulators into one. 

It has already done valuable work on adopting a risk based approach and I welcome the thinking it is doing about how it can further reduce the burden of financial regulation.

To motivate delivery and give transparency - we will, as David Arculus and the Better Regulation Task Force recommended, by no later than the Pre-Budget Report of 2006 and earlier if possible, set challenging, quantifiable targets to reduce the regulatory burden and departments will prepare measurable simplification plans to implement the Hampton reforms.

Departments are already beginning to measure the total administrative burden of regulation and will work with business to identify where regulations are needlessly difficult. 

We will apply the risk based approach to the work of HM Revenue and Customs from frontiers right across to tax returns, where instead of blanket requirements we favour less form filling and less need for inspection.

Take as an example one of business' greatest burdens - the administration of tax.  We are cutting the tax return for half a million of the smallest businesses from sixteen pages to four.  We will set targets to cut the burden of tax administration on businesses.

David Varney, Chairman of her HMRC, is now consulting with you on a single tax account for small businesses: a single point of contact for all taxes, piloting single inspection, a risk based approach to visits, information provided only once, less time spent on form filling and flexible payment options that suit modern British business needs.

Already 70,000 firms no longer have to provide forms that account for every VAT transaction but make just one calculation and pay one flat rate. Working with the Chambers of Commerce we will encourage take up among the 600,000 companies now eligible to benefit from this VAT simplification. 

And we remain ready to consider further reforms in this field.

And we propose also to take this agenda to Europe, pushing for the risk based approach to be at the heart of EU rule-making.

During our presidency we will ensure that comprehensive impact assessments are undertaken for all new EU legislation and that, for the first time, the administrative burden on business of EU proposals is clearly and transparently measured. 

And we will challenge the Commission to ensure that existing regulations are reformed so that they can be implemented in a risk-based way.

And following current consultation with business, we will submit a dossier of proposals for the simplification of EU regulations and work with the commission and other member states to create a timetable for delivering regulatory simplification in 2006.

From 2006 onwards we will continue to argue for better European regulation:

Finally, to make sure this agenda happens - an agenda that lets be honest with ourselves does require a culture change in government - our programme of reform is being be led by a new Better Regulation Executive, which will be headed by someone recruited from business, so extending this new relationship of trust between government and business".

 

Notes for editors

 1. The business leaders attending the launch included John Cridland (Confederation of British Industry), Martin Temple (Engineering Employers' Federation), Ian Peters  (Engineering Employers' Federation), Stephen Alambritis (Federation of Small Businesses), Sylvia Jay (Food and Drink Federation), Judith Hackitt (Chemical Industries Association), Sarah Anderson (Mayday Group), and Stephen Skaroff (Association of British Insurers).
 
 2.  Media enquiries should be addressed to Will Straw at the Treasury press office on 020 7270 4420.

 3. Non-media enquiries should be addressed to the Treasury Correspondence and Enquiry Unit on 020 7270 4558 or by e-mail to public.enquiries@hm-treasury.gov.uk.

 4.  This press release and other Treasury publications and information are available on the Treasury website at http://www.hm-treasury.gov.uk/. If you would like Treasury press releases to be sent to you automatically by e-mail you can subscribe to this service from the press release site on the website.

Better Regulation Action Plan 

Setting Targets to Reduce the Burden Upon Business

Objective: Set challenging targets to reduce the burden on business of administering regulations. Achieve targets by implementing the reforms recommended by the Hampton Review and the Better Regulation Task Force (BRTF) report ‘Less is More’ (both published in March 2005).

Immediately

Departments will begin measuring the total burden upon businesses of administering regulations (e.g. the costs of form-filling, undergoing inspections, and complying with data requirements).

Businesses are invited to propose areas of regulation and its administration that are needlessly burdensome. By end-2005 the Better Regulation Executive will have a system in place to respond to proposals in 90 working days, and departments will either deregulate or explain why it is not possible.

By the 2006 Pre-Budget Report

The Prime Minister’s Panel for Regulatory Accountability will set challenging targets against which departments will quantifiably reduce the administrative burden over time.

Departments will review existing legislation and prepare ‘simplification plans’, covering administrative and wider regulatory costs, including through implementation of the BRTF recommendations and the Hampton Review’s risk-based approach to enforcement.

Reforms requiring legislation will feed into departmental bills and a planned Deregulation Bill will be introduced in the second session of Parliament.

 

Legislating to implement the Hampton Review, and to speed up deregulation

Objective: Make the legislative changes needed to implement the Hampton Review, and reform legislative procedures to make it easier to remove unnecessary regulations.

July 2005

Government will begin consultation on the Better Regulation Bill, which will contain:

  • improvements to the procedures for removing outdated and unnecessary legislation, making it faster and easier to deregulate;
  • enabling powers to merge regulatory bodies;
  • steps to put requirements into regulators’ statutory duties to enforce regulations using a rigorous risk-based approach; and
  • powers to reform penalties according to risk-based principles.
Early 2006

The Better Regulation Bill will be introduced to parliament.

Summer 2006

Subject to parliamentary approval, the Better Regulation Bill becomes law.

October 2006

A Deregulation Bill will be considered for the second session of parliament, to contain deregulatory proposals based on suggestions by business and a thorough review of regulation by departments.



Fewer regulatory bodies, applying risk-based enforcement

Objective: Reduce the compliance burden on business by merging 29 regulatory bodies into 7, joining-up enforcement and inspection practices, and applying a risk-based approach to all areas of enforcement.

July 2005

Departments will detail how they plan to take forward the Hampton recommendations on regulatory mergers.

From Summer 2006

Regulators will prepare for legislative changes by beginning to join up their enforcement practices in ‘shadow’ form, and will start to implement the risk-based approach recommended by Hampton. In particular they will begin to:  

  • reallocate their resources to areas where the regulatory risk is greatest, reducing the burden on compliant businesses and enhancing regulatory outcomes overall;  
  • perform more joint inspections, determined by proper assessment of risk, so that there is no inspection without a reason;
  • and  reduce data requirements on business, by designing shorter forms and sharing more information.
Summer 2006

Subject to parliamentary approval, legislation will enable the mergers to come into effect, and requirements to pursue risk-based enforcement will be embedded in their statutory duties.

October 2006

Detailed merger plans for the 29 regulatory bodies undergoing consolidation into 7 will be finalised and implemented.

 

Risk based enforcement by local authorities

Objective: Apply the Hampton recommendations to local authorities. Reduce the variations in enforcement practices between different areas, and the burden on business, through better nationwide coordination.

July 2005

A new Local Authority Better Regulation Group will be established comprising local authorities, national regulators and Government departments to:

  • improve the coordination of local and national regulatory services;
  • reduce regional variations in quality by agreeing a national ‘Regulatory Enforcement Concordat’ for a common approach to risk assessment and regulatory best practice (first draft published Autumn 2005);
  • strengthen the consistent application of the ‘Home Authority Principle’ for businesses trading in multiple local authority areas; and
  • coordinate resources so that data requirements on businesses are reduced and inspections more joined up.
July 2005

DTI will consult on details of a new national Consumer and Trading Standards Agency (CTSA). The CTSA will coordinate, under a single Code of Practice, the 203 trading standards offices nationwide, and reduce variations in the quality and consistency of regulation experienced by businesses with multiple locations.

Autumn 2005

The Government will consider, in light of the Lyons Review, introducing incentives to encourage local authorities to pursue regulatory consolidation.

2006 onwards

Local and national regulatory bodies will work together to apply a consistent risk-based approach to their activities.

 

Simplifying and shortening forms

Objective: Reduce the amount of information required from business, shorten forms and reduce the time needed to complete them by designing forms better and improving regulators’ handling and sharing of data.

By September 2006

Information requirements imposed upon business will be reduced as national and local authorities join up their procedures and share more data. BRE will publish guidelines for improved design of forms. New technology will increasingly be applied to pre-populate forms with data that is already held about businesses, so that the same data is not repeatedly requested.

‘Time to complete’ statements will appear on forms, as they do in the United States.

From 2006 onwards

Regulators will publish information about the number of forms they send to businesses, the time taken to complete them, and the measures being taken to reduce this burden.

BRE will report on regulators’ data handling and storage requirements. There will be no investment in new data systems without reviewing the scope for data sharing between regulators.

 

Reforming penalty systems

Objective: Strengthen the impact of penalties as a deterrent to persistent regulatory non-compliance, as recommended by the Hampton Review, and enhance regulatory outcomes.

July 2005

BRE will initiate a wholesale review of regulators’ penalty systems. Inconsistencies and weaknesses in current systems will be identified.

Early 2006

Enabling powers to allow reform of the penalties regimes will be introduced to parliament in the Better Regulation Bill.

January 2006

BRE will begin consultation about penalties reform, including proposals to:   

  • speed up the penalty process;  
  • introduce new ‘administrative penalties’ as an additional tool for regulators, to punish non-compliance with the administrative requirements of regulation; 
  • ensure that penalties are proportionate to the consequences of non-compliance; and
  • where appropriate, reduce variation between the penalty practices of different regulators.
Autumn 2006 Penalties reform will be introduced, following the anticipated passage of the legislation.
By 2008

The Better Regulation Executive will review the impact of the new system of penalties and investigate whether a specialist Regulatory Tribunal Service should be established to smooth the process of appeal against penalty notices.

 

European regulatory reform

Objective: Greater use of risk-based regulatory practice in European law-making process, and share best practice with other member states, during the UK’s presidency of the European Union and beyond.

July to December 2005

During the UK’s presidency our priorities will include:

  • working to ensure that comprehensive impact assessments are undertaken for all new EU legislation and that, for the first time, a method of clearly and transparently measuring the administrative burdens of EU proposals is developed;
  • following current consultation with business, we will submit dossiers of proposals for the simplification of EU regulations and work with the Commission to create a timetable for delivering regulatory simplification in 2006;
  • working with other member states and the Commission to ensure that EU laws can be implemented and enforced according to our new risk-based approach; and
  • consulting on applying a risk-based approach to the UK’s implementation of the financial services action plan.

 

2006 onwards

We will build on the outcomes of our presidency by:

  • working with the Commission and member states to promote the use of risk-based regulatory practice throughout Europe; and
  • develop a clearer voice for business in the EU rule-making process through the Commission’s proposed Independent Advisory Network.

 

Strengthening institutions to deliver regulatory reform

Objective: Ensure that the right resources are in place to deliver the Hampton reforms, and meet targets for reducing the burden on business. Effect a transformation in the culture of Government departments and regulators, applying a risk-based approach at every stage of the regulatory process.

Immediately

John Hutton appointed as Cabinet-level minister to drive regulatory reform. Better Regulation Executive begins work, replacing the Regulatory Impcat Unit, and among other things will:

  • provide stronger central coordination of delivery and implementation of the Hampton Review and BRTF recommendations;
  • support the Prime Minister’s Panel for Regulatory Accountability by challenging departments on their progress with regulatory reform; and
  • work with departments to change regulatory culture and processes throughout Whitehall. Better Regulation Executive will be formally launched once the new Executive Chair of the BRE is appointed.
June 2005

New Better Regulation Commission will be established, replacing the Better Regulation Task Force, to advise and challenge the Government on regulatory reform, and scrutinise departmental plans for regulatory simplification.

January 2006

National Audit Office will begin reporting to Parliament on:

  • departments’ performance against the methodology and process for reducing the administrative burden of regulations; and
  • regulators’ performance against the recommendations of the Hampton review.


Improving Tax Administration for Business

Meeting targets to reduce the burden on business

Objective : Reduce the administrative burdens on business from the tax system. Apply to HM Revenue and Customs (HMRC) the principles of risk-based enforcement developed by the Hampton Review.

June 2005

Key tax forms will be identified that require improvement against the Hampton methods for developing better, shorter forms, designed around criteria for assessing risk.

July 2005

Budget consultation on business priorities for simplification of tax administration will finish.

2005 Pre-Budget Report

Chancellor will set out progress with simplifying tax administration, informed by consultation responses on proposals to bring together a business’ tax liabilities and payments into a single account, creating a single point of contact for all taxes, piloting single inspection, pursuing a risk based approach to visits and developing flexible payment options that suit modern business needs.

2006 Budget Report

Following an assessment by HMRC of the burden that tax administration imposes upon small business, targets will be set by the Chancellor for HMRC to reduce the administrative burden over time.

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