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Regulatory impact assessments (RIA) have helped contribute to better policy making and reducing the costs to business according to a National Audit Office report published today. It concludes that while there are many examples of good practice in the process of preparing RIAs across Whitehall, there is room for improvement.

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Presenting the report to Parliament, Sir John Bourn, Head of the NAO, said that RIAs have been introduced and developed by Government in response to concerns about these regulatory burdens. Their purpose is to explain the objective of the regulatory proposal, the risks being addressed and the likely costs and benefits of options for delivering the objective. Three factors characterise good RIAs – starting early, consulting effectively, and analysing costs and benefits appropriately. Policy makers could pay more attention to some aspects of preparing RIAs. These include evaluating a range of options (including not regulating) and encouraging self-regulation where feasible. If regulation is required, policy makers should consider how to encourage compliance by those affected.

Regulation can safeguard citizens, promote a prosperous economy and protect the environment. But regulation can also impose costs on businesses, charities, voluntary organisations, and ultimately the citizen. And the effort involved in understanding and implementing new regulations can bear particularly heavily on small businesses.

The report draws on an examination of RIAs produced by 13 departments and agencies. It uses examples of good practice to illustrate what departments and agencies can do to apply the RIA process to good effect so that they achieve the five principles of good regulation: transparency, proportionality, targeting, consistency and accountability. For example, consultation on the basis of the RIA on the proposed regime for the National Minimum Wage resulted in the adoption of a different method of implementation that avoided £150 million in unnecessary administrative costs to employers. And a RIA on new pesticides regulations showed that employers would incur disproportionate costs from a new mandatory training requirement which were not justified by the benefits. So a non-regulatory option was adopted instead.

The Cabinet Office are responsible for providing guidance and assistance on RIAs, while the Small Business Service of the Department of Trade and Industry advise on small business consultation and analysis aspects. The report highlights ways in which they and the line departments and agencies can build on what has been achieved so far. The report recommends that:

  • the Cabinet Office should, in revising the guidance they provide departments, give clearer advice to policy makers on the circumstances in which a regulatory impact assessment is needed, and clarify that the RIA should address how the desired level of compliance is to be achieved in practice;
  • the Small Business Service should produce guidance for departments and agencies on how to consult more effectively with small businesses over RIAs, including making greater use of focus groups and networks of small businesses; and
  • Departments and Agencies should draw on the expertise necessary to quantify the benefits of the regulation proposed and examine the scope for focusing enforcement arrangements so as to minimise the burden on businesses.

The report also sets out examples of good practice and provides a checklist of key questions for policy makers when preparing RIAs.

Sir John said today

“In deciding whether to regulate, and how much, departments and agencies need to strike the right balance between protecting the citizen and limiting the impact on those being regulated, especially small businesses. Considering what form of regulation if any is needed throughout the policy making process requires a continuing culture change in Whitehall. Regulatory impact assessments have proved effective in promoting this change but more could be done to improve the way they are prepared, presented and consulted upon.”

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