A recently released report by Tim Ambler of the London Business School and Francis Chittenden of the Manchester Business School for the British Chambers of Commerce shows how the UK experience of regulation review is pretty much as Australia’s has been – farcical. It is a little unfair about existing efforts which – though they remind me of Woody Allen’s comment that listening to Wagner made him want to invade Poland – look like they may bear somewhat more fruit. Even so, it’s nice that the life in the farce lane view of regulation review as currently practiced is starting to make it’s way unapologetically into the mainstream.
The BCC press release reads thus.
The key findings in this expos© of inaction are:
- Both Conservative and Labour administrations approach deregulation with apparent enthusiasm, learn little or nothing from previous efforts and have little if anything to show from each initiative.
- There have been 15 deregulation initiatives since 1985: the 1995, 2001 & 2006 Acts are the major ones.
- 1994 Act identified 605 âproposals for reformâ yet produced only 26 deregulations over the next four years. On closer study, the authors explain the real number may actually be less than 10.
- 2001 Act produced 63 deregulatory opportunities yet only 27 deregulations were introduced over the next four years. At the same time business was hit by over 600 new regulations.
- After reviewing the history, the authors conclude that the Regulatory Reform Act 2006 is likely to produce the same results as Whitehall has already started to undermine the initiative by manipulating targets and double-counting.
A little more detail is over the fold, but you can also download the report if you wish here (pdf).
The report outlines the cycle of regulation busting I tried to outline in an op ed late last year reproduced here.
1. Government agrees that there is excessive regulation and requests examples of regulations that can go.
2 .Industry finds it hard to substantiate examples because they are inured to the regulations,it is time consuming, they doubt anything will change,it is not a single regulation that is causing difficulty but the cumulative total and many are interconnected.
3. Eventually a list is compiled.
4. The civil service welcomes the list and expresses enthusiasm.It then takes many months,behind closed doors, to consider each item. They reject those they can and express good intent and more study for most of the others. A very few regulations are promised to be axed so that the Minister in charge can claim it was all a great
success.5.Announcements are made or responses provided in answer to parliamentary questions about the number of
proposals implemented or rejected.However,it should be noted that the civil service regards as âimplementedâ
anything where the policy has changed,i.e. they have agreed it can be implemented. That does not mean it is
implemented, i.e.axed, in practice. Deregulation had been a policy objective of the Government since 1979,and it took on a new urgency in 1983 with renewed scrutiny of the regulatory activities of central and local government.Table 2 shows the major initiatives since 1985.
The table on pages 12-14 is particularly damning documentation of serial announcements following this pattern.
Reminds me of a time when I was on a deregulatory task force on taxation. We surveyed small busimnesses to assess the burden of taxation paperwork on them. It soon became apparent that the fundamental objection they had to taxation paperwork was that it might result in them paying tax!
More seriously, though, doesn’t the successive failures of this sort of thing suggest that it is actually really hard? Isn’t it possible that reducing the compliance burden actually carries heavy costs elsewhere?
Yep, there will be cases where that it true DD. But the problem (well one problem) is that there is little if any opportunity cost for the bureaucrats in saying ‘yes give us that piece of information’. The huge kerfuffle over the GST BAS form is an example of this. It’s remarkable that even now after Howard told his bureaucrats that they had to simplify the BAS that it the BAS still asks for various bits of information that it’s hard to see are of any use to the ATO or for preventing avoidance. (Strictly calculating GST only requires you to work out what GST you’ve collected in what you’ve sold and deduct what GST you’ve paid on your supplies and I believe that’s how some countries administer it).
The BAS I have in front of me requires me to tell the ATO a whole bunch of things that it is hard to know why it needs. Total Sales, export sales, other GST free sales, capital purchases, non-capital purchases. None of these categories are trivial to understand in an accounting sense. (eg is the cost of international postage an export sale or not?).
Obviously you need to know these things (and many more) if you’re auditing someone, but it is easy for the ATO to say they want the information to set up systems to detect cheating. Maybe it’s true, but personally I doubt it quite a bit. And HOW much use is it? And how does that compare against the inconvenience to the business? Do you really think the ATO has much idea, or do you think (as I do) that they’re suiting themselves because they don’t bear the cost of collecting the information? (And the cost of the fact that the tax information they require does not conform in various ways to standard accounting practice and so – to some extent – requires two sets of books). And if it is good for detecting avoidance, is it still good at the same time as permitting people the ‘installment method’ in which they only declare these things once a year.
As you’d know from your own experience, there’s lots of information that bureaucrats collect that they actually don’t use at all. As I understand the ATO required the banks (at the costs of tens of millions of dollars) to supply information on bank accounts for TFN data matching and then didn’t use it for years and years.
Further, I think you’re argument IS stronger in tax which is an inherently difficult thing to administer (because people try not to pay it!). In other areas I think the problem of extraneous information collection is worse. I’ve just been reviewing some licencing procedures and there’s all sorts of nonsense they ask for – like requiring people to prove they have finance to set up a business (they’ve already paid the regulator $400 odd for the licence, are they going to do that if they don’t have finance, and if they don’t have finance, should anyone care?).
But I certainly wouldn’t disagree with your statement that it hasn’t been done well (anywhere to my knowledge) because it is hard. That’s dead right and the central reason is that, just as it’s hard to get business to minimise costs for anyone but themselves, so it’s hard to get bureaucrats and politicians operating with a view to minimising costs for all – rather than themselves.
Having had to get bunches of independendent and employed professonals and others to fill in forms of myriad design and with the destinatinon black hole my general rule is “show me how this bit of information will be useful and /or fed back to the originator” and if not why not.
It’s not all that simple but its a start.
I thought the data collected by the ATO is used by the ABS in aggregated form and is probably pretty useful for trend analysis of economic trends. Certainly as someone allegly in the business of economic development I value any industry-wide data that is more or less up to date. The ABS has cut back on much of its surveying and so access to aggregated ATO data is useful in lieu.
However, my understanding of deregulation more generally is that such exercises are almost invariably exercises in being seen to do something, rather than a genuine attempt at reduction.
that’ll be “allegedly”, the keyboard ate a couple of my fingers…
Give me a break. If you want data you can take representative data rather than impose it on the entire business population of the country. And you’d design it for the ABS. Why does the ABS need to know ‘Non-GST purchases’?
Your point about compliance costs not being borne by those imposing them and therefore being oversupplies is largely correct (though political pressure does set a limit to it). It mirrors the frustration data collectors have where survey respondents are not getting the benefit from it and so have no interest in its quality.
I’ve argued half-seriously in the past that every compulsory form that goes out from officialdom should be assessed by an independent agency which sets a fee that those completing it can charge the issuing authority. IOW make the full cost appear in the govt’s budget. But I can’t see that proposal getting past the Dept of Finance, though it might make a good election promise for someone.
Regulatory Reform Act 2006. Heh. Let me adapt a classic exchange from Yes Minister. Here, Sir Humphrey is complaining to his cabinet colleague about the new minister:
“All we have to do is head him off this deregulatory nonsense, I remarked to Bernard. Bernard said that he thought that we were in favour of deregulation. I hope I have not over-promoted young Bernard. He still has an awful lot to learn.”
“I explained that we are calling the Act “Regulatory Reform” because you always dispose of the difficult bit in the title. It does less harm there than on the statute books.”