1

The Future of the SCM (Workshop III)

Presentation by Sweden, Germany and the Netherlands

DEBR, Łódź, 16 June 2011

2

ContentsMinistry of Enterprise, Energy and Communications:► SCM – an established method?

► A tool to monitor and keep political pressure

► A tool to get it right in the first place

Federal Chancellery (Bundeskanzleramt):► Expansion of the Federal Government‘s Better Regulation Programme

► New role of the Regulatory Control Council

► Assessment and presentation of compliance costs

Regulatory Reform Group:► Institutional settings

► Measuring Regulatory Progress and Noticeability

► Certificate of Good Service – improving service – less irritants

3

What is SCM?

(time x wage) + external costs x frequency x population = administrative cost

4

SCM – an established method?

5

A tool to monitor and keep political pressure

6

A tool to get it right in the first place!

7

Calculation tool for SCM

8

SCM – adopt it for your purpose!

9

II. „SCM 2.0“: Compliance Costs (Germany)

1. Expansion of the Federal Government‘s Better Regulation and Bureaucracy Reduction Programme

2. New role of the Regulatory Control Council

3. Assessment and presentation of compliance costs

4. The Dutch approach and experiences

10

Challenges for taking the admin burden reduction programme forward

► citizens and companies have a broader sense of „bureaucratic burdens“ than IOs and the costs resulting from them („tip of the iceberg“)

► consolidation of the existing body of law is part of better regulation, but does not necessarily lead to substantially lower burdens

► most regulations have a specific goal: scrubbing them is no option

► burdens also stem from the interplay of the different – more or less independent – levels (law-making, implementation and enforcement)

11

What’s new: The German case (2010 onwards)► Definition of compliance costs (Art. 2.1 of the RCC Act):

„The compliance costs embrace the entire measurable time and costs required for complying with a Federal statutory provision by citizens, commerce and public administration.“

► The Regulatory Control Council (RCC) checks in particular the ex ante assessment of compliance costs of new regulations for citizens, the business sector and public administration (which will in principle be obligatory as of July 1, 2011) for comprehensibility and correct methodology, as well as the description of the other costs to businesses and especially for small and medium-sized enterprises.

► Information obligations (IOs) are part of compliance costs (Art. 2.2 of the RCC Act).

12

What are compliance costs?

What is not part of CC:

► Macroeconomic effects, such as: - effects on competition

and economic growth- effects on investment

decitions

► taxes, social securuty contributions, monetary benefits according to Art. 104a of the German Basic Law

► benefits of a regulation

Costs from substan-tive obligations, e.g. installation of a particle filter

Costs from information obligations, e.g. documentation of the installation of the filter

What is part of compliance costs:

13

Changes to the Explanatory Memorandum

So far In the future (acc. to the planned new JRP*)

A. Problem and objectiveB. SolutionC. AlternativesD. Financial implications excluding

compliance costsE. Compliance costs

1. Citizens2. Economy (including costs from IOs) 3. Public administration

F. Other costs (in particular other costs to the economy)

A. Problem and objectiveB. SolutionC. AlternativesD. Financial implications on the

public purse1. Budgetary expenditure ex- cluding implementation costs

2. Implementation costsE. Other costsF. Administrative costs

* Joint Rules of Procedure of the Federal Ministries (GGO)

14

Objectives of the ex ante procedure

To create transparency on the effects of regulations

To improve the law-maker’s basis for decision-making

Contribution to better regulation

15

The tasks of the Regulatory Control Council (RCC) were significantly expanded (new RCC act)

In particular, the RCC examines the presentation of compliance costs of new regulations – for citizens, the economy and the public admini-stration – as well as of the other costs to the economy, notably SMEs.

In addition, the RCC may examine the following aspects:

- comprehensible presentation of the intention of and need for the regulation,- consideration of other possible solutions,- consideration regarding the time of entry into force, time limits, and evaluation,

- considerations of simplifications of law and administration,- 1:1 implementation of EU law („gold plating“)

16

► The assessment of compliance costs can be much more complex than of administrative costs from IOs

► However: scientific accuracy is not called for …

► … but a balance between practicability of the assessment and plausibility of the results.

► Therefore: Early involvement and informal exchange with the RCC (as before).

„Interim conclusions“

17

How to estimate compliance costs

► Step 1: Identify all requirements of a regulation

► Step 2: Assess the associated costs:

- Step 2.1: Identify the numbers of cases

- Step 2.2: Assess time consumption and material costs

► Step 3: Presentation of total costs of a regulation

18

Definition of „requirements“

Requirements are„Individual regulations which directly lead to a change in costs and/or time consumption for the addressees of the norm.“(definition according to the German ex ante manual)

Assessing the compliance costs resulting from fulfilling requirements means estimating the probable financial and time burdens or reliefs of the planned new regulation.

In this process, only the expected change of compliance costs is relevant („delta“).

19

Different types of requirements

• target achievements• directives• information obligations • inspections / surveillance• omission (of intended action)• …

• processing of applications • inspections / surveillance• provision of information• public administration as awarding authority (public contracts, e.g. constructions)• …

Citizens / economy Public administration(implementation and fiscal action)

Compliance costsThis results in …

20

list ofrequire-mentsper normaddressee

Step 1: Identification of all requirements

Newregulation

requirement

requirement has to be named and attributed to anorm addressee

(IOs on the economy have to be reported separately)

relatedrequirements can

be bundled!process

PACIT

EC(IO)

ECrequirement

requirement

21

Identification of requirements: example 1

Individual requirements: UV Protection Act

Requirements identified:

►retrofit/replace old solarium equipment

►acquire protective goggles

►conduct customer consulting

►staff training

22

Identification of requirements: example 2

Bundled requirements (process): Energy Conservation Act

4 individual requirements were bundled under the heading „obligations on the construction of new residential buildings“:

►annual energy consumption must not exceed that of a reference building

►transmission heat loss must not go beyond a certain threshold

►primary energy consumption has to be calculated according to a particular formula

►requirements on summer heat insulation need to be fulfilled

23

Step 2.1: Identification of number of cases

Require-ment orprocess

event-driven number of casesnumber ofcases forall require-ments,processesor casegroups

periodical fulfillment

no of affectedaddressees

frequency(per year)

x

PACIT

EC(IO)

EC

24

Identification of number of cases: example

► Operators of solaria need to adapt them to the UV protection act

Some 4.000 operators with 45.000 units are affected. Two case groups are to be expected:

- Retrofitting existing units: about 40.000 cases- Acquisition of new units: about 5.000 cases

25

Step 2.2: Identification of costs per caseThree types of costs: detailed presentation

require-ment / case

group

implementation costs

time consumption (in hours)

tariff (per hour; only EC, PA)

x

To be reported separately,not per year.

Material costs

Currentcosts percase ineuros ortime units

PA€CIT

hrs./€

EC (IO)€

EC€+

PA€CIT

hrs./€

EC (IO)€

EC€

26

Example: identification of costs for citizens „Snow tyre requirement“, Art. 2.3a of the German Road Traffic ActCar owners, which do not regularly adjust tyres according to weather conditions, now have to switch to winter tyres (WT) in autumn and to summer tyres (ST) in spring.

►Time consumption- Activities according to check list, estimated time consumption- 33 minuten per case and year

►Material costs- New acquisition of WT (700 €) compated to ST (600 €)- difference („delta“) of 100 € are additional costs caused by the regulation- New acquisition every six years => frequency = 1/6

=> 17 € per case and year- plus 2 x 20 € installation costs (garage) per case and year- Total costs 57 € per case and year

27

Identification of compliance costs: overview

costs (per case) x number of cases = annual compliance costs of a requirement / process

costs (per case) number of cases (per year)

material costs (if nec. pro rata)

number of norm addressees **

frequency per year**

if necessary, bundle requirements (into processes) / build case groups

Requirement 1 (individual regulation) forcitizens, economy and/or public administration

Planned regulation / norm (e.g. law, decree, ordinance)

time con-sumption

Vorgabe 3 bis n

etc.

compliance costs of requirements / processes 1 to n =compliance cost of the regulation (per year)

etc.

etc.

etc.

tariff*

Vorgabe 2

* tariff not applicable to citizens ** if required for determining the number of cases

requirements3 to n

requirement 2

28

Step 3: Presentation of total compliance costs

e.g. for the economy: list of all requirements (including IOs)

Individual presentation for every individual requirement: - number of cases x costs per case = compliance costs

Aggregated presentation:- Total compliance costs to the economy from XYZ requirements result in XYZ euros per year, out of which XYZ from IOs….

One-off implementation costs:- XYZ euros from the introduction (of new requirement)

29

Fictitious example: explanatory memorandum – EE. Compliance costs for citizens, the economy, public administrationE1. Citizens:

Additional compliance costs: ~ 200.000 hrs. p.a. / 30 min. per case € 2.5 million p.a.

E2. Economy:One-off implementation costs: € 33 million; Additional compliance costs: € 20 million p.a;

of which administrative costs (from IOs): three new information obligations: € 3 million p.a.

E3. Public administration:Additional compliance costs:

on federal level: € 2 million p.a.on Länder level (incl. communal level): € 1 million p.a.

One-off implementation costs:on Länder level (incl. communal level): € 1.5 million

30Measuring Compliance Costs | May 19th 201030

Substantial Compliance Costs - Definitions and concepts

Substantive obligations: to comply in a direct way with norms, standards, codes of conduct etc. to safeguard public goals

Substantive compliance costs: all costs to comply with substantive legal obligations

Business as usual costs: costs that would remain if there was no legal obligations

Marginal costs:costs that would dissappear if there was no legal obligation / the costs of all activities/investments which exceed 100% compliance or average practice

Base line: starting point for reduction plans Base line : the average existing relevant practices in businesses (see model next slide)

31Measuring Compliance Costs | May 19th 201031

Composition of substantive compliance costs

Law Transport dangerous products

Substantive com

pliance costs

Substantive com

pliance costs

Law to check identity new employees

Law Employees Council

= Business as usual costs = Marginal costs

Substiantive com

pliance costsBase line

32

Netherlands - Regulatory Reform Group

Content

• Broadening from AB to all Regulatory Costs

• Institutional settings in the Netherlands

• Measuring Regulatory Progress and Noticability

• Certificate of Good Service – improving service – less irritants

33Measuring Compliance Costs | May 19th 201033

Next Generation Better Regulation in Netherlands

2003 – 2007: mainly focussed on reducing administrative burden

2007 – 2011: broadening - going beyond AB

• Other regulatory costs (compliance costs, grants, enforcement)

• Service and quality related regulatory items (speed, transparancy, reliability, service of street level regulatory desks)

• Less costs + better service/quality => noticeable reduction of regulatory burden

• Moving from 1 to 14 targets

34Measuring Compliance Costs | May 19th 201034

Next Generation of Better Regulation (easy)

Inclusion of other target groups• citizens• professionals• volunteers • public sector

Next Generation of BR (more difficult)

Inclusion of other cost types: Substantive compliance costs

35Measuring Compliance Costs | May 19th 201035

Next Generation of BR (even tougher)BR will include more ‘behavioural’ aspects

- Irritants- Communication- Perception survey - Regulatory Service

BR policies will be more outside-in

- User orientation – size, lifecycle, turnover- Stakeholder involvement- Consultation- Ex-post evaluation- Exemptions for target groups, reducing frequencies for target groups

Because- Our manuals were not (technical; inside-in)- The value for money question will increasingly be asked (what relevant change

has a decade of BR brought to us?)

36Measuring Compliance Costs | May 19th 201036

Next Generation of BR (and even more tough)

Better Regulation has to become less static and more dynamic

• More attention to the politics of better regulation• More attention to sequencing • More attention to use of institutions for countervailing

powers, watchdogs, oversight bodies

Inclusion of ‘end of pipe’ actors in BR policy:

Regulators, Decentral Authorities, Inspectorates

37

Counsel of ministers

Minister of ….

Minister of Finance

Minister of Economic

affairs

The institutional setting in The Netherlands

ABCoordinator AB

CoordinatorAB

Coordinator

Regulatory Reform Group

Parliament

Advice

stakeholders

stakeholders stakeholders stakeholder

stakeholder

38

Political commitment

Method Infrastructure

Incentives

Strong coordination?Dept. involvement?Countervailing power?

Available?Resources?Knowledge?Quality control?

Clear targets? Ownership?Stakeholder involvement?

Strike the right balance

39IRRC, Amsterdam, 10 and 11 March 2011

39

The Mark of Good Public Services:

Improving Service – Reducing Irritants

- A system of 10 standards of public service delivery for businesses. (10 most important products to businesses)

- A measurement method to assess to what extent these standards are met.

- An improvement plan including the targets of governments to improve their public services.

- Measurable, noticeable, accountable, transparent

40IRRC, Amsterdam, 10 and 11 March 2011

40

The System of The System of 10 Standards10 Standards

I. Time limits and periods1. Waiting times within legal limits2. Quick response if legal limits are exceeded3. Requests are formally correct

II. Professionalism4. Government officials have sufficient expertise5. Inspections are well coordinated & integrated

III. Company orientation6. Response to questions within 3 days7. Available information is up to date8. Businesses are satisfied with public services

IV. Reliability9. Few objections and appeals

10. Reduction of Administrative Burdens

41IRRC, Amsterdam, 10 and 11 March 2011

41

Measurement results in a spider diagram

0%

20%

40%

60%

80%

100%

120%

140%1. Waiting times within legal limits (F)

2. Quick response if legal limits areexceeded (F)

3. Requests are formally correct (F)

4. Officials have sufficient expertise (C)

5. Inspections are well coordinated &integrated (C)

6. Response to questions within 3 days(F)

7. Available information is up to date (I)

8. Businesses are satisfied with publicservices (C)

9. Few objections and appeals (I)

10. Reduction of - 25% AdministrativeBurden (I)

SufficientExcellent

Score

(F) File audit(C) Client audit(I) Issue audit

42IRRC, Amsterdam, 10 and 11 March 2011

42

Improvement plan

- Shows the weaknesses in public services.

- Improvements for:Government organization overall.10 most important products.

- Not just “another” plan: it structures and incorporates all existing initiatives to improve public services.

- Gives clear indication of what actions to take for improvement

- Better communication between governments and businesses.

43

Business sentiment Monitor

feedback mechanism of policy cycle

In the Business Sentiment Monitor, several statements about regulatory burden are presented to businesses

Gives insights in accomplished objectivesMonitors own progressGives new input for RRG’s programmeUncovers ‘white areas’Uncovers pinch points and new areas of focusGives input for specific communication efforts

Are we doing the right things, and are we doing these things right?

44

TANGIBLE Predictability 15% more businesses say they are not irritated by continually changing legislation and rules

Information obligations 25% more businesses say they have very little irritation from unnecessary information obligations

Supervision 15% more businesses say they have very little irritation from strict requirements of supervisory bodies

Lower costs to comply with regulations

25% more businesses say they have very little irritation from high costs to comply with rules.

Aspect Objective 2011

Noticable reductions

45

Findings both 2008 and 2009

•Regulatory burden is perceived very differently in different lines of business

•Life cycle and size of companies is very determinative for the perception of regulatory burden

•Regulatory issues remain the same over time (time, costs, etc)

•The more companies have been in contact with the communication campaign, the greater their confidence in the reduction programme is.

Findings are valuable input for future programmes

46

For further information:

http://regeringen.se

http://regelforenkling.tillvaxtverket.se

www.bundesregierung.de/buerokratieabbau

www.destatis.de/webskm

www.normenkontrollrat.de

www.betterregulationinfo.nl

47

Sofia Hercules

sofia.hercules@enterprise.ministry.se

Joachim Smend (Better Regulation Unit)

joachim.smend@bk.bund.de

buerokratieabbau@bk.bund.deBrian Huijts (Regulatory Reform Group)

B.B.W.Huijts@rr.nl

48

Thank you very much!