It was just over two years ago that the OECD completed its Report on Irelands regulatory framework and, at the launch of that Report, I agreed that the Government would develop its own national policy on regulation and regulatory reform. Indeed, this was one of the key recommendations of the OECD for Ireland, and one which an increasing number of other Governments are adopting.
Why Regulatory Reform?
Why are they doing this, why the sudden interest by governments? Well, quite simply, they see that there is something in it for them.
For many years governments have rightly focused their attention on taxation policy getting their tax and welfare systems in to shape so that there are real incentives to employment creation and to entrepreneurship, and so that work pays.
Governments have also focused attention on the control and nature of public spending, in order to try to maximise the returning investment in human and physical capital.
However, the quality of the regulatory environment is a key factor in ensuring that correct fiscal and budgetary policies payoff. In too many countries, and sometimes at EU level, we suffer from what the experts call the regulatory impulse. We cant seem to regulate enough!
Whether through primary legislation or statutory instruments or by-laws. It is as if there were no other policy responses open to governments.
We know that we must have regulation in certain economic and social areas. Nobody expects the market to protect the environment or to provide for the less well off or marginalised in our society. We all know that we need health and safety regulation, and employment and consumer protection. But we cant keep adding new regulations and expect that there will be no downsides!
So we need to tackle the issue of volume of regulation, if nothing else. If there are too many regulations then people find decoding them a problem and compliance becomes difficult. So we must scrutinise every proposal for a new law or statutory instrument. Equally, we must systematically examine what is already in place to see if it is still relevant and still achieving the objective that gave rise to it. This greater care and management of the regulatory framework is the core commitment we are making in this White Paper.
Regulatory Impact Analysis (RIA)
One of the themes that has underpinned the modernisation of the public service has been the pursuit of the so-called whole of government perspective. We, each of us in government, are taken up with the day-to-day concerns of our own areas. But when new bills or statutory instruments are proposed to address particular policy needs, they often have impacts on other groups,individuals, businesses, and sectors of the economy. We cant solve our difficulties without reference to the impacts on other areas of public policy. Yet, sometimes, politicians,officials, interest groups, media commentators, to mention just a few, miss the bigger picture. We need to ensure that we are alerted to the potential effects of our actions in other areas.
A Whole-of-Government Approach
One way of achieving this is to adopt a system of rigorous impact analysis of legislative proposals. Detailed analysis of proposals and making explicit the assumptions and intentions behind the legislation and our understanding of the likely impacts can alert relevant Departments to the implications for their areas and help to screen out unintended negative effects.
Alternatives
Similarly, through Impact Analysis, from the earliest point in the generation of policy options, alternatives to legislation are seriously considered. What we have in mind is that there would be greater recourse to information campaigns, taxes,incentives, fines and other policy instruments. I think the example quoted in the White Paper of the plastic bag tax is a good one. We didn't decide to ban the manufacture of plastic bags or prohibit their importation. Instead, Government chose to incentivise the adoption of new consumer behaviour. It has been extremely effective. We still needed to make a regulation, but we didn't need new agencies, inspectorates or a raft of prosecutions to achieve our objectives. This example highlights one of the key principles of proportionality and flexibility. We need one hundred percent compliance when it comes to issues like road safety so, strictly enforced regulation is essential in those cases. In other areas, however,alternative, more imaginative ways of achieving our goals are possible and may be preferable.
Systematic and Inclusive
Where the legislative option is chosen, then RIA helps to focus the regulation and to avoid unintended affects. Regulatory impact analysis is nothing very mysterious. It is simply the systematic analysis of a legislative proposal; and where a preliminary analysis throws up the likelihood of significant economic or social impacts, the undertaking of a more detail examination follows. Such an examination should involve open consultation - beyond the usual suspects! It should be wide,so as to avoid giving inappropriate weight to the well resourced and to highly articulate and visible interest groups. In short, the consultation should be more inclusive to ensure balance between the citizen (or consumer) interest on the one hand and the producer interest on the other. I know that in line with the commitments in the White Paper, the strengthening of the consumer voice is something which the Tánaiste has been giving some attention to recently.
The results of such consultation, where it is deemed necessary by the scale of the proposed regulation, together with economic and any other analysis will be presented to government with the relevant draft bill, so that government have the benefit of the highest quality information when making decisions.
Clearly, not all bills or statutory instruments have very significant or widespread affects. We do not want to burden the legislative system by applying new procedures indiscriminately. Instead, we intend to pilot the model of Regulatory Impact Analysis that has been developed in tandem with the White Paper, and to set thresholds above which the government will require formal RIAs to be carried out. It is also our intention to consider publishing such analysis on a case-by-case basis.
European Action
I should say that the European Commission has adopted the Impact Assessment approach in the context of its Action Plan on regulation which it published in 2002. This is an extremely important development, as a substantial amount of regulation, estimated at more than 50% by some of our partners, is generated at European level in the form of Directives and Regulations.
There is a growing interest across the Union in impact analysis,and regulatory reform is a key priority which both the Tánaiste and the Minister for Finance are pursuing through the Competitiveness Council and ECOFIN; and both are receiving substantial support from other Member States. This is an area where I would like to see the European Commission make further progress, building on the commitments in its Action Plan; and I look forward to giving further momentum to the better regulation agenda with my colleagues and President Prodi at the European Council in March.
Cost Burdens
Of course, people are aware of the cost burdens which regulation imposes. We all know that by increasing the volume and complexity of regulation we increase the burden of compliance on business and that these costs fall disproportionately on small business. What is often lost sight of by policy makers is the growing burden of cost for the Exchequer in terms of regulatory bodies, inspectorates and prosecutions.
We cannot, however, make decisions to regulate or not on cost grounds solely, but we cannot be blind to the question of cost and we must strive to minimise the burden.
While we hear a lot about the compliance and enforcement burden,it is possible that the real cost of regulation shows up in the businesses that don't get started because of barriers to market entry; or in the individuals who don't enter some professions because of barriers to entry; or in the industries which don't flourish because they cannot compete with their international counterparts who operate in more efficient regulatory environments. The effective working of markets requires certainty, and good quality regulation has an important part to play in this regard. However, when over-regulation happens, a certain rigidity occurs in markets and this can lead to stagnation and loss of economic activity.
I would like the new Enterprise Strategy, which the Tánaiste has commissioned, to address the issue of the regulatory burden on enterprises and, in particular, areas where the domestic sector may be better regulated. Given the reliance of so much of our foreign direct investment and of the services sector on domestic inputs, it is vital that we have world-class competitive professional services and other inputs. By promoting Directives on Services and Recognition of Professional Qualifications during our Presidency, we will also ensure more cross-border competition in these areas.
The White Paper
The topic of regulatory reform may be of fundamental importance to our economy, to the quality of governance and to the efficiency of our public service but is not easily accessible. It is beset by jargon. And yet, if we are to achieve our objectives,we need well-informed public debate on regulatory affairs and, as a minimum we need a political and administrative fluency in regulatory principles.
Accordingly, in preparing the White Paper, I asked that we go back to basics and state clearly what we want to achieve. In order to do this and to help policy makers and interested parties,we decided to identify some core principles which would provide high level guidance in our approach to the very varied issues which regulatory reform throws up. We have set down six principles: necessity, effectiveness, proportionality,transparency, accountability and consistency. Together, these principles will help to inform our decisions about regulation going forward. For example, fundamental decisions about what to regulate and how? Choices about how many sectoral regulators(energy, post and telecommunications, aviation etc) we need? Decisions about the types of powers these regulators should have, and how we ensure their accountability?
As you will appreciate, given the rapid developments in some economic sectors, at national, EU and global level, the answers to questions about individual pieces of regulation and the design of regulatory bodies will change over time. So we must remain flexible and continuously review the fit between the economic and social environment and the framework we have in place.
Stock and Flow
The emphasis in my remarks so far has been on dealing with proposals for new regulations. The drive forward is so strong that we don't tend to revisit legislation as often as we should. And yet regulation is the tangible remains of earlier policy decisions. If we accept that policy must evolve, we should also accept that so should our legislative framework. Accordingly, in the White Paper we commit to tackling the stock of law; we are examining the statute book to see which laws are redundant. We are beginning with the pre-1922 period which, you may be surprised to learn, involves looking back over some six centuries at all sorts of legislative curiosities which remain on the statute book. Our plan, working with the AG and his Statute Law Unit and with the Minister for Justice,Equality and Law Reform is to repeal what is moribund; and,subsequently, to develop a programme to re-enact the remaining law in consolidated modern form this latter body of law includes areas where the Minister (for Justice, Equality and Law Reform) has already announced his intention to modernise; areas such as criminal law, conveyancing, land law and liquor licensing.
Conclusion
I mentioned that the journey towards publication today started with the OECD Report of 2001, but I should also mention that in formulating the White Paper, almost 3,000 copies of the public consultation document which the Tánaiste and myself launched,Towards Better Regulation, were issued. Almost 90 submissions were received, and a summary of those submissions and a commentary was published. The potential breadth and complexity of the better regulation agenda is simply a reflection of the pervasiveness of regulation in our lives. At the outset there may have been expectations that we would decide in favour of more regulation or of deregulation, as you read the White Paper you will see that it is not as easy as that. In fact, we need a far more subtle and sophisticated approach than is offered by simplistic approaches to more or less regulation. By adopting the White Paper, the Government and the whole legislative and regulatory system has signed up for the challenge of greater transparency and accountability and a lot more work. Therefore, the White Paper is not so much the last word on regulatory policy, but the first. It establishes core principles which we will seek to apply and it embeds the discipline of regulatory impact analysis in to our governance system. We will shortly appoint a Better Regulation Group to monitor progress on the implementation of the White Paper and to further develop the proposals it contains.
I want to commend the Paper to you and to thank those across Government Departments and Offices and in the Regulators and Competition Authority who supported its development.