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IMPACT ASSESSMENT IN THE EUROPEAN UNION
Andrea Renda, Senior Research Fellow, CEPS Bruges, 31 March-1 April 2011
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INTRODUCTION: IMPACT ASSESSMENT
IA is seen as a useful tool in support of more efficient, effective, transparent and accountable policymaking
Internationally sponsored (OECD) and currently adopted in many EU countries and at EU level, within broader regulatory reform programmes
The focus and depth of analysis change remarkably from country to country
IA requires resources and transparency of regulatory processes: in many Civil Law countries it has failed so far
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INTRODUCTION: IMPACT ASSESSMENT
Impact assessment is:
A tool to analyse the flow of new legislation
Aimed at
transparency: the rationale behind the legislative choices is explained to other institutions and external stakeholders
efficiency: ex ante cost-benefit of legislation can foster more efficient rules
accountability: proposing administrations and/or political decision-makers engage in “evidence-based policymaking”: they take responsibility against evidence provided by the IA document. 3 3
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IA: MAIN STEPS
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Analysis of status quo
Identification of need for regulation
Analysis of alternative policy options
Consultation
Collection of information
Identification of preferred option
Detailed cost-benefit analysis
Input to drafting 4
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IMPACT ASSESSMENT: THE ORIGINS
Regulatory impact analysis (RIA) was introduced for the first time in 1981 in the United States, during the Reagan Administration
This was the result of the promise to bring regulatory relief from red tape to businesses during the electoral campaign
First years testified that:
RIA is costly
RIA must be coupled with public administration reform
RIA desperately needs consultation and oversight 5 5
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RIA IN THE US (1)
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1981: Reagan administration introduces RIA (EO 12,291) Does not apply to independent agencies (e.g. FTC, FCC, SEC) Estimated yearly saving: $10 billion
1985: The grand experiment Yearly OMB Report on the costs and benefits of Federal regulation Council of Competitiveness replaces Task Force on Regulatory Relief
1993: Clinton launches the NPR (EO 12,866) Eliminate 16,000 and modify 31,000 pages in the Federal Code Threshold for RIA: only “significant regulatory actions” (> 100M million
USD)
2002: RIA under George W. Bush (EO 13,258) Removal of Vice-President’s role in solving controversies between OIRA and
proposing agencies OIRA Prompt letters: from “consultant” to “adversarial gatekeeper”
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RIA IN THE US (2)
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OIRA To Congress
Agency
Better RIA
To Congress OIRA
Yes
no
Yes no
Agency
Preliminary RIA
Final RIA
Draft regulation
Consultation
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RIA IN THE US (3)
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In the US, RIA is based on net benefits calculation…
… but only government agencies are obliged to carry out RIA, i.e. RIA is mandatory only for most significant secondary legislation
Oversight is key: OIRA, GAO, CBO all contribute to quality assurance
The use of net benefits criteria as the sole pillar of analysis is not generally accepted in Congress, independent agencies, and in common law adjudication
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REFLECTION ON THE US RIA SYSTEM
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The US experience is a polar star in the landscape of regulatory reform, but
The US is a presidential democracy: RIA works as a way to control bureaucracy and fulfil electoral promises
Countries that have undergone no public management reform will have different needs when it comes to RIA
The scope of the US RIA system is limited to secondary legislation. This has been frequently overlooked in adopting RIA in other countries
The US RIA does not generally touch on distributional issues: when RIA is extended to primary legislation, this becomes an outstanding problem 9
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IMPACT ASSESSMENT IN THE EU
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1986: Business Impact Assessment System (BIAs) SMEs Task Force at the Commission Since 1989, competence of DG XXIII (now DG Enterprise)
2002: communication on Impact assessment Preliminary assessment + Extended Impact Assessment
2003: Inter-institutional agreement on better lawmaking Reinforced in 2005 with the “Common Approach to IA”
2005: Re-launch of the IA system (“growth and jobs”) New IA guidelines, more emphasis on economic analysis
2007: Appointment of the Impact Assessment Board 5 DGs involved, rooted in the SG
2010: Communication on smart regulation
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IMPACT ASSESSMENT IN THE EU
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NUMBER OF IAS PER YEAR
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NUMBER OF IAS PER DG
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IMPACT ASSESSMENT IN THE EU
Proportionality principle: criteria are (i) the significance of likely impacts, (ii) political importance and (iii) the situation in the context of policy development Communications which give broad policy orientations Non-legislative initiatives/white papers which set out
commitments for future action “Cross-cutting” legislative action “Narrow” legislative action in a particular field or sector, and
unlikely to have significant impacts beyond the immediate policy area.
Expenditure programmes Comitology decisions
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PLATEAU-ING?
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Very high initial expectations: it “should guarantee that we know the full costs and benefits of future legislation” (Verheugen, 2005)
Some bad episodes (REACH, Roaming regulation, Services Directive, 2006 Communication on the telecoms review, etc.)
Degree of quantification is still quite low
Lack of skills in some Commission DGs
Growing emphasis on “accounting” methods such as the Standard Cost Model
Still insufficient focus on implementation, compliance and enforcement phases of legislation
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2007-2009: TOWARDS SUCCESS?
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The appointment of the IAB seems to have led to an improvement of the overall quality of the IAs
Still, there are probably too many IAs, or resources are sometimes inefficiently allocated
Attention to admin burdens led to more quantification of costs (but not always benefits) in Commission IAs
Parliament and Council still have to be adequately involved
Member States are still mostly idle on the impact assessment side (but very active on admin burdens – not the same!)
Can we check this empirically?
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ASSESSMENT OF IMPACTS
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ASSESSMENT OF COSTS
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ASSESSMENT OF BENEFITS
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ASSESSMENT OF ALTERNATIVES
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SOPHISTICATION?
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REASON TO ACT, 2003-2009
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OBJECTIVES AND INDICATORS, EX ANTE
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OBJECTIVES AND INDICATORS, EX ANTE
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OBJECTIVES AND INDICATORS, EX ANTE
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EU: CLOSING THE POLICY CYCLE
The second Barroso Commission is trying to close the policy cycle: No ex ante impact assessment without a preliminary ex
post evaluation: will this change anything?
Multi-level governance: national Parliaments involved in ex post evaluation?
Emphasis on the definition of indicators for M&E in ex ante impact assessment documents
Emphasis on linking the definition of general, specific, operational and SMART objectives with M&E indicators
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THE “SMART REGULATION” COMMUNICATION
“Evaluating the effectiveness and efficiency of EU legislation will improve the quality of policy-making and help to identify
new opportunities to simplify legislation and reduce administrative burdens …
… the Commission will … complement evaluation of individual pieces of legislation with … ‘fitness checks’ [that] assess if the regulatory framework for a policy area is fit for purpose and,
if not, what should be changed …
The aim will be to identify excessive burdens, inconsistencies and obsolete or ineffective measures to help to identify the
cumulative impact of legislation”
COM (2010) 543 11 October 2010
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THE SMART REGULATION COMMUNICATION
Future steps Strengthen the ex ante consideration of transposition,
implementation, enforcement + use implementation plans
Close the cycle + review the evaluation guidelines
Publish planned evaluations on an ad hoc website
Complete “fitness checks” in environment, transport, employment/social policy and industrial policy, and identify new areas for 2011
Finalize the admin burdens reduction programme
Improve consultation on simplification and involve MS
Expand the mandate of the Stoiber Group
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OUTSTANDING ISSUES
Efficient selection of proposals
Proportionality of analysis
Oversight
Transparency and accountability
Role of the Standard Cost Model
Efficient use of IA resources
Inter-institutional challenges
Convergence with national IA systems?
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BETTER REGULATION: LOST IN…?
Formulation
Drafting/elaboration
Translation (!)
Consultation
Co-decision
Transposition
Implementation
Evaluation 30 30
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EU IA: LESSONS LEARNED
Successful implementation of IA takes time
The design of the system is essential for its success.
First years led to some disappointment among stakeholders.
Demand for quality assurance led to the appointment of the IAB
Additional gatekeepers are entering the stage, from the EP to the ECA and the Stoiber group
RIA needs “sense of ownership”
Several DGs have yet to be fully involved in the process
MARKT, ENTR are working on their version of the IA guidelines
DG EMPL specific guidance for assessing social impacts 31 31
Annex : IA IN EU COUNTRIES
Andrea Renda, Senior Research Fellow, CEPS Bruges, 31 March 2011
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CIVIL LAW COUNTRIES
RIA, where existent, serves widely different purposes and has different scope and depth
Often the scope is too ambitious or misunderstood (e.g. Italy)
Every paradigm shift (à la Kuhn) needs a cultural shift, and this is lacking in many countries
A “better regulation” community is slowly emerging
Parliamentary democracies are less prone to RIA
Administrative procedures, decision styles, agencies’ knowledge differ widely
RIA gives results in the long-term (next government?)
New mavericks?
Ireland, Sweden, France, the Netherlands… 33
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GROUPING EU COUNTRIES (1)
Source: OECD, Government at a glance, 2009
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GROUPING EU COUNTRIES (2)
Pioneers CEE countries with RIA
development
Late adopters Red-tape-dominated
Laggards
United Kingdom
Czech Republic, Estonia, Hungary, Poland, Slovakia, Slovenia
France, Ireland, The Netherlands, Sweden, Belgium (Flanders)
Austria, Belgium (Central gov), Denmark, Finland, Germany
Bulgaria, Greece, Italy, Lithuania, Latvia, Luxembourg, Malta, Portugal, Romania, Spain Cyprus
Recent research projects (ENBR, EVIA, but also OECD EU15) have highlighted a huge adoption-implementation gap, which seems to be hard to fill in the near future
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LESSONS LEARNED
Political commitment remains essential
Oversight and coordination
Hierarchy
Gradual introduction or big bang?
Need to exploit the links with the SCM
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CONCLUSION
RIA still faces difficulties outside the US: the European Commission is perhaps the only meaningful example of a successful RIA system
How do we solve the impasse?
Exploit the link with the Standard Cost Model at EU and national level (see below)
“First, make it good!”: too often RIA is grounded in very superficial economics, which eventually leads it to lose credibility with the general audience and academics
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Reviewing the stock: available options
Process re-engineering De-legislation Codification Recasting Consolidation Review and sunset clauses Staged repeal Scrap and build Guillotine…
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The Standard Cost Model
The SCM is being adopted in many countries to measure/reduce administrative burdens on businesses
Many countries have adopted the SCM on a macro basis – i.e. for a full baseline measurement…
Virtually all EU member states and the EU itself; Australia (Victoria)
Other countries have used it merely to scrutinise specific areas (e.g. business licensing)
The SCM promises significant welfare gains The Netherlands: 1.5% of GDP UK BRTF (2005): +£16 billion (+1%) Key assumption: all resources saved are allocated to a more
productive use
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The Standard Cost Model
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Direct financial costs Substantive compliance costs Administrative costs
Compliance costs
Monetary transfers to public administration
(taxes, duties, etc.)
Modification of productive process or
output
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The Standard Cost Model
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Administrative costs
Business administration costs
Administrative costs from central government regulation
Administrative activities that businesses may
continue if the regulations were removed
(‘Business as usual’)
Administrative activities that businesses only
conduct because regulation requires it, i.e. administrative burdens
The SCM measures all
costs from regulation, but
aims at reducing only
administrative burdens…
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SCM: initial phases
Phase 0 (start-up) Identification of regulations and demarcation Start-up meetings/pre-consultation (also for ex ante
assessment of administrative burdens) Identification of appropriate methodology
Phase 1 (preparatory phase) Regulations are broken down into IOs, DRs,
administrative activities. Population and segments (e.g. firm size) Classification of origin (ABC or more detailed) Cost parameters Interview guide
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IOs, DRs, administrative activities, etc.
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Regulation
Information obligation 1
Data requirement 1
Information obligation 2
Information obligation n
Data requirement 2
Data requirement n
Activity 1
Activity 2
Activity n
Internal costs •Hourly rate •Time •Overhead
External costs •Hourly rate •Time
Acquisitions (Monetary value)
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SCM: completing the baseline
Phase 2 (analysis) Data collection through empirical techniques
Phone Interviews Face-to-face interviews Business panels/focus groups Expert assessment
Standardisation of time and resource consumption per business per segment
Identification of “normally efficient business”
Phase 3 (extrapolation/reporting)
Validation and extrapolation to national/regional level Reporting or integration with RIA
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Example: the EU SCM In 2007, the EU launched an ambitious action programme on
measuring and reducing ABs Expected reduction: 25% of GDP Expected impact: +1.4% of GDP
This is the first example of application of the SCM in a multi-level governance framework
The SCM was also applied to the EU IA model, bridging ewx ante and ex post analysis of legislation
All Member States took it on board Much easier to communicate
Does not require public management reform 45
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Interim results
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Results from the first round of
the EU measurement in 13 priority areas
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