Publications

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International Regulatory Reform Conference – concluding remarks from the RPC Chairman

The Chairman of the Regulatory Policy Committee provided the closing remarks for the International Regulatory Reform Conference in Berlin. A copy of the speech is available here.

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Click here to download the full report “Assessing Regulation” PDF 622kb

The Regulatory Policy Committee publishes its latest Report summarising the work of the RPC between January and August 2012. See associated press release for further details.

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The RPC in conjunction with the four other European independent advisory boards for cutting red tape and better regulation have prepared and submitted a joint paper in response to the EU consultation on smart regulation.

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21 September 2012

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Click here to download the full report “Improving Regulation” PDF 424kb

The Regulatory Policy Committee publishes its Annual Report 2011 summarising the work of the RPC between January and December 2011. See associated press release for further details.

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The RPC has worked jointly with our European colleagues on a publication titled ‘The End of the Commission’s Action Programme for Reducing Administrative Burdens in the European Union -What comes next?’.
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Click here to download the full report “Rating Regulation” PDF 393kb

The RPC today publishes its third report “Rating Regulation” summarising the work of the RPC between January and June 2011. See associated press release for further details.

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Click here to download the full report “Challenging Regulation” PDF 308kb

The RPC today publishes its second report “Challenging Regulation” summarising the work of the RPC between September and December 2010. See attached associated press release for further details.

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Download the full report “Reviewing Regulation” PDF 393kb

The RPC today publishes its first report “Reviewing Regulation“, which
summarises the results of its independent, real-time scrutiny of new regulatory
proposals out to consultation between December 2009 and May 2010, with 107
subjected to detailed review of the quality of evidence and analysis. It has
published 22 opinions where it found major issues.

These first findings show that a good proportion of regulatory proposals are
well supported by detailed analysis and evidence. However a number of them lack
analytical rigour, are poorly presented and appear to be produced as a result of
being required to do so, rather than as a means of open and thorough
investigation and inquiry.

Commenting on the report, Mr Gibbons RPC chair said:  “The RPC’s first six months of
operation demonstrate the value of independent challenge – to business,
consumers, employees and the general public alike. No-one benefits from poor
regulation, particularly in tough economic times, and the RPC’s independent
scrutiny of regulatory proposals so far have found that over one in five failed
to make the case for intervention.  We make six simple recommendations which
should help officials make a stronger case. For example, policy-makers should
not presume that regulation is the answer to the problem they are trying to
solve and, where regulation is necessary and where all other options have been
considered, they must produce reliable estimates of costs and benefits.  It is
not enough to produce apparently thought-free tick box exercises to obtain the
necessary approval; policy proposals must be presented with a case that
demonstrates how the regulations will achieve what they’re supposed to and fully
identify and justify any burdens on the economy and society.”

‘Reviewing Regulation’ makes six recommendations to contribute to improving the
decision-making process with respect to regulation in the UK:
- Don’t presume that regulation is the answer 
- Consider all the options – and provide robust analysis of all alternatives,
including the ‘do nothing’ option
- Provide substantive evidence – and make sure it is properly referenced and
sourced 
- Produce reliable estimates of costs and benefits – assess all risks, costs,
uncertainties and benefits appropriately
- Assess non-monetary impacts thoroughly 
- Explain and present results of analysis clearly
Further details on the recommendations are contained in the report.

The issues examined range from the inclusion of aviation in the EU Emissions
Trading System to proposed changes to street trading and pedlary. They cover
regulations affecting the public sector, the third sector, consumers, and
businesses, with annual costs ranging from under a million per year to hundreds
of millions.

For each proposal, the RPC has examined the case for government intervention,
including whether both the costs and benefits have been properly assessed and
whether other non-regulatory options were analysed and considered. Where the RPC
had concerns over the robustness of the evidence and analysis presented it
commented publicly. It does not however comment on the overall policy objective
which is a matter for Ministers.

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The RPC has worked jointly with our European colleagues on a response to the recent EU consultation on Smarter Regulation.
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OPINION

Introduction

1. The Department for Communities and Local Government (CLG) is undertaking a public consultation on a package of proposals aimed at further enhancing the effectiveness of Energy Performance Certificates (EPCs) and Display Energy Certificates (DECs) by extending their scope, improving levels of compliance and making better use of energy performance data.  EPCs and DECs play an important role in the Government’s carbon reduction aims by providing vital information about the energy efficiency of buildings and advice about measures to improve their energy performance.
 
2. As part of this consultation, CLG has developed seven impact assessments (IAs) .  The Regulatory Policy Committee (RPC) has reviewed the consultation document and accompanying IAs and, after meeting with CLG, would like to make the following comments.

Summary Opinion

3. The RPC believes that the proposals to extend the scope of EPCs and DECs are not supported by a strong evidence base.  CLG could have researched into the effectiveness of the current system of EPCs and DECs before proposing to extend their scope further.  The RPC notes that some of the proposals, if implemented, would go beyond the minimum EU requirement.  The costs of the proposals appear to be underestimated as investments required for delivering the anticipated benefits in the form of energy efficiency gains are not included in the total costs.  Similarly, the costs of the additional administrative burdens likely to be created under some of these proposals are not considered in the IAs.

Detailed Opinion

Policy background

4. According to the consultation document (Annex A) the Energy Performance of Buildings Directive 2002/91/EC (EPBD) is designed to tackle climate change by reducing the carbon emissions from buildings.  EPBD requires EPCs for all buildings when they are built, sold or rented; regular energy assessments of large public buildings and display of DECs, regular inspections of the energy performance of Air Conditioning (AC) and installations and regular inspections of boilers above a certain size. 

5. The European Commission has proposed a recast of EPBD (EPBD2) aimed at extending the scope of the original Directive, strengthening and clarifying certain provisions.  This has been agreed in principle and is expected to be implemented by 2012-13.  In 2009 the UK Government consulted on EPBD2 in a separate public consultation .

General issues

6. The RPC is of the opinion that CLG should have fully researched the effectiveness of EPCs and DECs since their introduction in 2007, before proposing to extend their scope further.  The RPC understands that CLG is currently undertaking a two-phase research programme on the use of EPCs.  However, the findings of that research have not fed into the current consultation. The current proposals that aim to further extend the scope of EPCs therefore require evidence on the successful implementation and delivery of anticipated benefits in other areas in order to be considered credible and robust.

7. The RPC believes that the way costs and benefits are calculated and presented in several of the IAs is incorrect.  In particular, CLG has assumed that at least 20% of the owners of properties will implement some of the recommendations of EPCs and DECs, which will reduce the energy costs by 5%.  Subsequently, CLG has included this in the monetised benefits.  However, the costs of implementation of those recommendations in order to deliver the energy efficiencies (which in some cases may require significant capital investments) are not included in the estimates of monetised costs.  As a result, in suggesting an overall net benefit for these proposals, the overall picture of costs and benefits for these proposals is distorted and misleading.  

8. In addition, it is not clear from the IAs why those particular percentages (20% and 5%) and assumptions have been used in the cost-benefit analysis.  CLG refers to an earlier IA and a study conducted at the time of the introduction of EPBD regulation.  However, the current IAs have not attempted to adjust those estimates based on available evidence and data on actual implementation of EPCs/DECs since their introduction (e.g. statistics on compliance and take-up rates for implementation of energy efficiency recommendations).  This would have significantly strengthened the reliability of data and evidence used in the IAs. 

9. Similarly, there is no justification provided as to why exactly the same levels of take-up rates and savings are used for estimating benefits of different policy proposals.  It appears that the likely take-up of the recommendations and resulting efficiency gains may vary by sector.  For example, the take-up rates and savings achieved in commercial buildings would be different from those in houses of multiple occupation (HMOs). 

10. Some of the proposed new measures are likely to create additional administrative burdens (e.g. requiring annual renewal of DECs, time spent on inspections, etc.).  These costs, however, are not included in the total cost estimates and are not reported in the relevant sections of the IAs. 

11. CLG acknowledges that many of its proposals will impact on small firms and concludes that the overall effect on the Small and Medium Enterprise (SME) sector is likely to be positive.  However, the analysis and evidence behind this kind of statement in the IAs appear to be weak and inconsistent.  For example, the IA for requiring EPCs for HMOs states that the proposal will have a positive effect on the SME sector, because all the firms undertaking domestic energy assessments are small firms.  However, it does not take into consideration the fact that some HMO owners, who will be required to pay for EPCs, may also be SMEs. 

12. The RPC notes that some of the IAs claim that the enforcement arrangements for the new proposals will comply with the Hampton principles of effective and risk-based enforcement and that the cost of enforcement will be zero (e.g. extending DECs to commercial sector).  However, there is no evidence provided in the consultation document or the IAs to support these conclusions.
Proposals for extending Display Energy Certificates (DEC) to commercial buildings (IA2)

13. CLG proposes to extend DECs to commercial buildings and require that they are updated annually.  The RPC notes that since the EPBD regulations do not currently require DECs for commercial buildings, the current proposal, if approved, would go beyond the minimum EU requirement (“gold-plating”). 

14. The RPC understands that it is Government policy not to go beyond the minimum requirements of directives, unless there are exceptional circumstances, justified by a cost-benefit analysis in the IA .  The analysis in the current IA does not seem to provide a robust justification that benefits of the proposal will outweigh the costs. 

15. CLG has told the RPC that since it is planning to use a new Bill as a legal instrument for implementation of this proposal there should not be any case of “gold-plating”.  The RPC believes that, regardless of whether there is a “technical” case of “gold-plating” or not, any regulatory proposal that is likely to create significant costs should be supported by a robust evidence base and analysis.

16. The RPC also notes that CLG has not estimated the costs of the alternative voluntary approach (Option 3).  Therefore, it is not possible to make an objective comparison of the alternative options.  The IA states that it is difficult to estimate the number of DECs that will be issued under the voluntary scheme.   However, the RPC believes that CLG could have used more evidence to strengthen this analysis.
Proposals for requiring EPC ratings to be displayed on all property advertisements (IA3)

17. At present, EPC ratings must be provided in the written particulars of dwellings that are being marketed.  EPBD2 will introduce a mandatory requirement for all adverts to include EPC ratings by 2012/13.  CLG is currently proposing to introduce such a requirement before the anticipated implementation date under EPBD2.

18. The RPC notes that there is a mandatory EU requirement for this policy to be implemented by 2013, but the IA does not make the case for early mandatory implementation.  On balance, it seems that the voluntary option of early introduction should be preferred to the mandatory option as the benefits would be the same but the costs of the mandatory option are higher. 

19. The only cost included in the IA is the one-off cost to estate agents of changing the advertising templates (CLG assumes it would take 2 hours of work (£36) per estate agent).  The RPC would like to see more evidence behind this assumption as it believes that the actual cost for estate agents, most of whom are SMEs, could be higher (as there are different types of advertisement, including on-line which would probably require more work ).

20. In addition, the IA does not include the cost of the advertising space that will be “lost” as a result of the requirement to include EPC charts or ratings in the adverts.  If the information about energy efficiency of properties was an essential factor in attracting potential buyers, then estate agents would already have been including that information in the adverts.   

21. It also appears that CLG is not yet clear on precisely how the information would be required to be presented in the adverts (e.g. the EPC chart, the number or letter rating).  CLG intends to use the current consultation to obtain feedback from the industry and other stakeholders before finalising its position on this.  The RPC notes that this factor (i.e. what information is required to publish) may affect the likely costs of the new regulation.
Michael J S Gibbons OBE
Chair

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Watchdog finds the case is not made in a third of new regulation.

The Regulatory Policy Committee, set up by the Government to scrutinise new regulatory proposals and increase accountability in policymaking, today reports on its first few months of operation.

The RPC started work at the end of 2009, providing independent, real-time scrutiny of all new proposed Government regulation for the first time. This month it publishes its first set of opinions on a number of regulatory measures.

RPC Chairman Michael Gibbons said, “The damage and associated costs of badly thought through regulation are enormous – to businesses and individuals, as well as ultimately to Government. Poor understanding and assessment of the impact of a proposed regulation can result in costs that out-weigh the benefits and a host of unintended consequences- and fail to deliver the policy objective. Consistent, independent assessment of the cost of regulation is more important than ever in the current economic climate and I’m optimistic that our scrutiny will drive departments across government to raise their game and become increasingly rigorous in analysing the best means of achieving good policy outcomes.”

Commenting on the RPC’s first opinions, Mr Gibbons said, “The RPC looks at the quality of analysis and evidence supporting new regulatory proposals, providing a practical quality control system for policy makers. As our early work shows, in nearly a third of the cases we’ve examined, departments are failing to assess the full impact of proposed regulation: for example, failing to quantify many of the costs and benefits, and not showing that the policy option selected will achieve its objective. This isn’t just a matter of failing to tick the right boxes – the practical implications, including costs, are considerable.”

Until now, there has been no mechanism for independent, real-time, scrutiny of all new government regulation. The opinions published this month are the first fruits of the RPC’s trawl of the 117 new government consultations issued since January, of which 66 have had regulatory implications. Of these, 49 have had impact assessments, 47 of which fall within RPC’s scope.

These have all been reviewed by the RPC, and where the RPC identified concerns, then subjected to further scrutiny including discussions with the relevant government department(s) and other interested organisations. This scrutiny has resulted in the ten critical opinions published to date – which combined with at least six more in the pipeline, means overall that RPC has found fault with over 30% of impact assessments examined. Impact assessments are the government’s mechanism for ensuring that the costs and benefits of proposed regulation are accurately assessed.

The RPC is interested in the views of external organisations and has developed arrangements with trade associations and other NGOs, including CBI, TUC, EEF and Forum of Private Business to assist the RPC in achieving its objectives.

Notes to editors:

1. The RPC considers all regulatory proposals apart from taxation measures.

2. The RPC’s first opinions were published on its website this month. These are the first output from the committee’s assessment of new regulatory proposals.

3. The RPC comprises a secretariat of economists and analysts and An independent advisory committee chaired by Michael Gibbons OBE and made up of:

• Dr David Parker – Professor Emeritus of Economics, Cranfield University;
• Dr Ian Peters – Chief Executive of the Institute of Internal Auditors;
• Philip Cullum – Deputy CEO, Consumer Focus;
• Mark Boleat – Consultant on regulation and public policy;
• Sarah Veale – Head of the Equality and Employment Rights Department at the TUC

4. The RPC provides trade associations and relevant NGOs with a Monthly update on all regulatory proposals, and liaises with them in analysing which impact assessments raise issues and merit further investigation. A number of organisations have called for a body to independently scrutinise and challenge government on its proposals and the RPC has already achieved substantial support for its work.

Brendan Barber, TUC General Secretary: “In tough times, it’s more important than ever for business, employees and consumers that we both welcome the benefits of good regulation and reduce the costs of the bad. The RPC’s first months’ work show how it can help improve public policy by carefully scrutinising and highlighting any flawed analysis in how the costs or benefits of new rules stack up.”

Matthew Goodman, Forum of Private Business: “Despite nearly two decades of better regulation initiatives, there is still a real need for independent scrutiny of the impact of regulation before it hits small businesses. The RPC’s ‘real time’ analysis of costs and benefits is a real step forward in checking that a watertight case has been made for new regulation. That’s what makes it so important that businesses work with them in assessing which draft regulations need further analysis. The Forum of Private Business welcomes these first signs of a practical and transparent check on bad regulation from the RPC.”

Roger Salomone, Regulation Adviser, EEF “Independent scrutiny is a vital ingredient in keeping the policy-making process honest. The Regulatory Policy Committee can make a major contribution by challenging the assumptions and analyses behind new proposals.”

David Frost, Director General, British Chambers of Commerce: “It is vital that Government Departments take proper account of the burdens they place on business when designing regulation. The creation of the Regulatory Policy Committee adds independent scrutiny to the legislative process, and will highlight bad practice amongst policymakers. In the current economic climate, business needs every chance possible to create growth and jobs, and weeding out poor regulatory interventions will contribute to achieving this.”

5. The RPC’s terms of reference

For further information or an interview request please contact Sue Youngman, Compass Rose & Co 0207 731 4848 or 07768 283 162.

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Introduction

1. The Government is currently undertaking a public consultation on amending the prohibition of the keeping or release of live fish order 1998 (and as amended in 2003), made under the Import of Live Fish Act (1980). It has the preferred option of introducing a prohibition on the keeping and release of novel non- native fish species in England and Wales, by Order level, until these species have undergone risk assessment.

2. This option is preferred over other options because it is estimated to produce a greater level of benefit (though this is non-monetised) at a lower cost than the next best alternative, and is considered most in line with the Government’s overall strategy on preventing the invasion of novel non-native species. The Regulatory Policy Committee (RPC) has looked at the consultation Impact Assessment (IA) and associated documents and makes the following opinion.

Summary Opinion

3. The RPC is of the opinion that the analysis and evidence presented in the IA does not make it sufficiently clear why recent relaxation of EU rules with respect to the prevention of the spread of fish diseases potentially causes large negative impacts on the UK, requiring new and additional regulatory measures in this area. In addition, the cost estimates of alternative options do not appear to be sufficiently robust. The RPC notes that the Department is using the consultation to understand better the potential costs and benefits of regulatory change.

Detailed Opinion

4. The Department for Environment, Food, and Rural Affairs (DEFRA) is currently undertaking a public consultation on proposals to make regulatory changes in relation to the keeping and release in England and Wales of live, novel, non- native fish species. Currently this is regulated such that certain novel non- native fish species that are considered to present a risk to native fish and biodiversity in England and Wales can only be kept by those who are granted a licence to do so. Subject to satisfying health requirements, non-native fish where there is no evidence that they present a risk can be kept without the requirement of a licence. DEFRA says that the regulatory change is necessary because of a recent relaxation of European rules in relation to the prevention of the spread of fish diseases.

Risk

5. The preferred option of DEFRA’s consultation appears to be an inversion of the current policy in relation to the keeping and release of novel non-native fish. This is in the sense that it aims to introduce restrictions on the keeping or release of non-native live fish species, by order level, prior to risk assessment. Certain orders, with their associated species, will be effectively listed on the face of the legislation and prevented from being kept or released until they are ‘removed from this list’ following risk assessment. This contrasts with the present position where live fish can be kept without risk assessment unless they are listed on the face of the legislation.

Options

6. The RPC has met with the Department and appreciates that this is a complex area where there is international, European, and domestic legislation affecting a range of issues, in terms of and for example, animal health, and biodiversity, in relation to a vast number of fish species. Though this complexity is reflected, at least in part, in the IA, the presentation of the IA does not allow a reasonably straightforward comparison between possible courses of action in this area to be made.

Benefits

7. In terms of the benefits and costs presented, the IA does not provide a monetary estimate of the potential benefits of any of the options it considers. Given that the benefit is largely considered to be in terms of the protection of biodiversity, this is perhaps understandable. However, the IA uses one example of the costs of eradicating a previous release of an invasive fish species in the UK. It is not clear why this evidence could not have been used to at least inform greater quantification of the potential benefits of action in this area.

Costs

8. The preferred option appears to be based on a judgement that it will provide “…better protection… than the previous options…”,and it is also expected to result in lower costs. However, it is not clear from the IA on what basis the cost calculations for each option have been determined. This appears particularly so in relation to a comparison of the costs between the preferred option and those in ‘Option 4’, which are largely based on how many risk assessments will be performed each year. DEFRA have told us that the calculations are based on information provided by the Centre for Environment, Fisheries & Aquaculture Science (Cefas). It would have been helpful in terms of appreciating the pros and cons of each option if this information had been provided in more detail in the IA.

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Introduction
1. The Department for Children, Schools and Families (DCSF) is currently undertaking a public consultation on draft Regulations and associated Statutory Guidance to require Local Authorities (LAs) in England to assist parents/carers of disabled children and young people by giving them access to short breaks from their caring responsibilities.

2.    The objective of the proposed Regulation is to ensure that LAs continue providing short break provision to carers after the current ring-fenced funding under the Government’s Aiming High for Disabled Children (AHDC) programme ends in April 2011.

3. The Regulatory Policy Committee (RPC) has reviewed the consultation document and accompanying impact assessment (IA) and, following discussions with DCSF, would like to make the following comments.

Summary Opinion

4.    Given the analysis and evidence presented, the RPC is of the opinion that the case for introducing new regulations with respect to the provision of short breaks for carers of disabled children could have been better made in the IA. The IA appears to be an assessment of the impact of the overall policy, as opposed to an assessment of the costs and benefits of different options (both regulatory and non-regulatory) for achieving the policy objective. The RPC also has concerns regarding some elements of the cost-benefit analysis, particularly the way the benefits and costs are calculated and presented in the IA.

Detailed Opinion

Policy background

5.    The Children and Young Persons Act of 2008 introduced a new statutory duty on LAs to assist carers of disabled children by giving them breaks from caring. Through the current draft Regulation and Guidance, the Government wants to further define the legal requirements surrounding short break provision to ensure that the full service offer for carers established under the AHDC programme is continued post April 2011.

6.    The AHDC programme is funded by ring-fenced expenditure from Central Government. Current Government policy with respect to ring-fencing appears to be a move away from this form of support, as the Government aims to increase local autonomy with respect to the provision of local services.

7.    The movement away from ring-fenced expenditure means that expenditure for the current programme of short breaks for carers will be subsumed into LA ‘baseline’ funding. While accepting this, DCSF is of the opinion that this results in a risk to the provision of short break services for carers. LAs may decide to divert their resources away from this programme to other areas or prefer to rely more on universal services thus risking the delivery of the benefits achieved so far under the AHDC programme. Therefore, DCSF considers that the current programme is important enough to warrant protection via the introduction of new and specific Regulations.

Options

8.    The IA states that two alternative options have been considered for achieving the policy objective. The first option (‘do nothing’) is to maintain the status quo, i.e. continue providing the short break provisioning through ring-fenced funding. The second (preferred) option is to introduce Regulations and Guidance to place explicit duties on LAs.

9.    However, the actual analysis in the IA does not seem to provide a clear assessment of options as alternative routes for achieving the policy goal. Instead, the analysis appears to be focused on the overall impact of the whole policy, which, ideally should have been done as part of the IA of the 2008 Act. The RPC notes that the IA for the 2008 Act did not analyse the impact of the new policy.

10. In comparing the ‘do nothing’ of maintaining ring-fenced expenditure with the options of doing something else, there appears to be at least two courses of action. The first is a non-regulatory route, where the expenditure is no longer ring-fenced, and the second is the regulatory route.

11.    The non-regulatory option has a potential cost that the level of provision will be diluted over time as funds that were previously earmarked are diverted to other local services. Such a diversion would directly impact on the benefits of the current programme.

12. The regulatory route has potential costs with respect to the administrative activities of drawing up and maintaining the regulations and guidance. It also has the potential to limit flexibility with respect to local expenditure decisions. In terms of benefits, it has the potential of avoiding at least some of the current expenditure on ‘field force support’, estimated in the IA to be currently £5 million per annum.

Costs and benefits

13.    Overall, a more explicit assessment of the costs and benefits of the regulatory and the non-regulatory options in quantitative terms would be helpful. Where this is not possible an assessment of the costs and benefits in qualitative terms would better enable the reader of the IA to reach a more informed conclusion on the relative merits of regulation versus non-regulation in this area.

14.    The IA claims some benefits under the regulatory intervention option that do not seem to be directly linked with the specific measures introduced by that option (e.g. lost earnings, sick days). The RPC has concerns about the soundness of the underlying assumptions used in estimating those benefits (e.g. the assumption that about 40-60% of primary carers will return to work part-time as a result of these regulations). Overall, there is insufficient evidence to suggest that the regulatory option will produce greater benefits, such as fewer sick days, than the ‘do nothing’ option.

Conclusion
15. In conclusion, the IA provides useful information about the rationale for, and benefits of the current programme of supporting carers of disabled children. However, whereas the IA describes the costs and benefits of the current programme it does not provide sufficient evidence to illustrate how the benefits described would be better retained by the regulatory measures proposed than by the non-regulatory option.

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Introduction

1. The Department for Environment, Food and Rural Affairs (DEFRA) is consulting on options for increasing the amount of waste non-packaging agricultural plastics (NPAP) that is recycled by setting up a producer responsibility scheme.

2. The consultation presents three options: do nothing, leaving existing regulation such as the landfill tax and the Agricultural Waste Regulations (AWR) to secure increased recycling; set up a producer responsibility scheme for the collection of NPAP for recycling through on-farm collection; or a producer responsibility scheme based on a network of hubs. There is no preferred option, though draft regulations for introducing a producer responsibility scheme based on a network of hubs have been published alongside the consultation. According to the impact assessment (IA), the main costs for options 2 & 3 are incurred by farmers, who will bear the passed-on costs for establishing the schemes. The benefits are stated as ’free at the point of use’ disposal for farmers of NPAP, and greenhouse gas savings.

3. The policy objective stated in the IA accompanying the consultation is “to ensure that farmers have an affordable means of disposing of their NPAP waste in accordance with the AWR and to increase the amount of waste NPAP that is recycled”.

4. The Regulatory Policy Committee (RPC) has looked at the quality of evidence and analysis supporting the proposals, and, following a discussion with DEFRA, would like to make the following comments.

Summary Opinion

5. The RPC recognises that this is a consultation with no preferred option, which is intended to gather further information. However, even at this stage, the IA would benefit from a clearer understanding of farmer behaviour and the development of the market for collecting and recycling NPAP in recent years. In addition, the IA does not clearly outline the source and magnitude of the costs or benefits, making it difficult for the RPC to comment on the quality of analysis supporting the options presented.

Detailed Opinion

Options

6. Based on the evidence presented, very little appears to be understood about farmer behaviour regarding NPAP. Given that the amount recycled may be significantly driven by the decisions of farmers, the evidence and analysis would have benefited significantly from improved knowledge of the behaviour of these key individuals.

7. The RPC understands that there are difficulties in gathering accurate data about behaviour and that the consultation is intended to do this. However this information is central to assessing whether the proposed regulations will achieve the desired outcomes.

8. With existing regulation in this area and annual increases in landfill tax anticipated, it is expected that recycling will become more attractive to farmers relative to land-filling. The evidence base would benefit from a clearer understanding of how the market for collection and recycling has developed in recent years in response to existing regulation and other changing circumstances. The IA does acknowledge that there is likely to be some change in this area, and under the ‘business as usual’ scenario, it is assumed that recycling will increase from 20-35% over the relevant period. However these assumptions could be supported with sensitivity analysis.

9. Evidence on how the market may develop in the future would clarify the extent to which the market and existing regulation may deliver the policy objective without the need for additional regulation, which appears to impose significant extra costs on farmers. It may also help to identify whether there are other reasons for low levels of recycling, such as issues around the enforcement of existing waste regulations.

Costs

10. The IA does not clearly outline the source and magnitude of the costs. As a result, it is difficult for RPC to comment on the robustness of analysis supporting the policy. Although the IA outlines the background assumptions in the annex, the calculations of the cost items are not included.

11. Because of this, it is uncertain whether the costs of separating out NPAP from other waste and cleaning it, as will be required before recycling is possible, have been included in the options. This could be a significant cost to farmers.

12. It is unclear how the introduction of a statutory scheme will affect existing collectors. Although the small firms impact test describes some of the impacts, these effects have not been quantified.

13. It is also unclear the basis on which certain minimum standards have been imposed, such as the requirement for hubs to be open for at least 8 hours a year, on at least two occasions. As these requirements will be central to the costs of the scheme, they should be explained more clearly.

14. The RPC notes that DEFRA has made a genuine attempt to show who will bear the costs of a producer responsibility scheme. In this case, it is likely that costs will be passed on to farmers, despite NPAP producers bearing the initial cost. We are unable to judge the extent to which farmers will then be able to pass on their higher costs in increased food prices.

Benefits

15. As with the costs, the IA does not clearly outline the source and magnitude of the benefits making it difficult for the RPC to comment on the robustness of analysis supporting the policy.

Conclusion

16. The analysis and evidence presented in the IA appears to support neither of the proposed options 2 and 3, as both are likely to lead to a net cost. However, given the lack of supporting evidence presented regarding the sources and supporting assumptions of the costs and benefits, the accuracy of these figures is unclear. It is therefore not possible to replicate the results of the summary sheets using the information provided in the evidence base.

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Introduction

1. The Government is currently undertaking a public consultation on introducing new statutory requirements for reservoir owners and operators in England and Wales to produce and maintain a flood plan for the reservoir(s) they own or operate where these pose a risk to life. Using powers under the 1975 Reservoirs Act, these would be introduced first for the 100-highest risk reservoirs and then extended to all other large raised reservoirs (i.e. over 25,000m3) according to the preferred option in the impact assessment (IA). The consultation also seeks views on introducing these requirements for reservoirs below 25,000m3 on the basis of risk once new powers have been created under the Flood and Water Management Bill 2009.

2. The proposed plans would include information on key roles and responsibilities in the event of a reservoir failure, the nature and operational characteristics of the reservoir dam and a communications plan to activate an off-site response.

3. The objective of the proposed new requirement as stated in the IA is to secure a reservoir flood plan for each reservoir that poses a risk to the public. According to the IA, these plans will reduce the probability and the extent of an escape of water, as well as potentially delay it. It will also improve the off-site response to minimise the resulting impact. The benefits, in terms of expected avoidance of fatal and non-fatal injuries and the avoidance of damage to property and infrastructure from flooding by reservoirs, are estimated to exceed the costs of drawing up and maintaining reservoir flood plans.

4. The Regulatory Policy Committee (RPC) has looked at the quality of evidence and analysis supporting the proposals, and, following a meeting with the Department for Environment, Food and Rural Affairs (DEFRA), makes the following comments.

Summary Opinion

5. Given the evidence presented in the IA, the case for introducing new statutory requirements for reservoir undertakers to have on-site flood plans is not clear at this stage. Even if the case for intervention were clear, the preferred policy measure does not appear to be risk-based. Furthermore, the estimated benefits appear to be optimistic given historical data and experience. Specifically, the benefits are based on numbers of lives saved in the event of reservoir failure, RPC10-DEFRA-0229      despite the fact that there have been no such fatalities since reservoir safety legislation was introduced in the 1930s.

Detailed Opinion

Rationale for intervention

6. The consultation stage IA says that flood impacts from reservoir floods are externalities where “the consequences are external to undertakers” (page 4). However, there is existing legislation (Reservoirs Act 1975) with respect to the safety of reservoirs, as well as a market for insurance, and recourse to the legal system. It would seem that one or all of these could result in at least some damage from flooding being factored into the current and existing activities of reservoir undertakers. It is not clear from the IA the extent to which externalities in relation to potential flooding from reservoirs are internalised currently.

7. It appears that reservoirs are already monitored and inspected to a high degree to deal appropriately with the risk of flooding – a view that appears to be borne out by the data. It also appears that a number of reservoir undertakers currently have their own on-site flood plans, although we note that DEFRA says it is difficult to ascertain the exact number that do have one, due to reasons of commercial confidentiality.

Benefits

8. The IA presents an estimate of the benefits of requiring reservoir undertakers to have on-site flood plans. These benefits are estimated in terms of the avoidance of fatal injuries in the event that there is a reservoir failure in the future.

9. The IA says that no lives have been lost in England and Wales as a consequence of reservoir flooding since the 1930s. This implies that reservoirs in England and Wales are reasonably safe at present, though the DEFRA says that there have been a number of ‘near misses’ in recent years.

10. DEFRA acknowledges that estimating the benefits of potential reservoir failure is fraught with difficulty and says it has used conservative assumptions. The RPC understands this but would like to see more evidence that the uncertainty has been appropriately evaluated in terms of lives saved and damage to property and infrastructure avoided.

11. The IA would be enhanced if it could include evidence on the four “near misses” that are identified as drivers for this new requirement and explanations of how the existence of flood plans would have made a difference. DEFRA has referred us to an Environment Agency report and another IA to support their arguments on this point. These could have been referenced in this IA.

Costs

12. The IA presents an estimate for the initial cost of a flood plan at £2,640, with an annual cost of £940. It is not clear from the IA how these costs have been calculated. DEFRA has told the RPC that these estimates were produced by an external consultant who is an expert in this area and quality assured by a representative group of reservoir undertakers and off-site planners. It would have been helpful if the IA referred to this work, and explained in more detail how the cost estimates were built up.

13. The IA says that there will be no additional enforcement costs from the introduction of statutory requirements for on-site plans. If plans need to be approved and monitored to ensure they conform to statutory requirements, the IA should explain in more detail why no additional costs to the enforcement bodies are expected.

Risk

14. It is not clear why there is an increased risk of reservoir failure, and therefore potential fatalities, in the future. DEFRA has told the RPC that the increased probability of reservoir failure is backed by international research and engineering judgement. If this is the case, it should be presented or referenced in the IA.

15. Specifically, it is not clear from the evidence presented in the IA the extent to which climate change will be a factor in the potential flooding of reservoirs as opposed to rivers in the UK in the future. Although climate change is briefly cited as a contributing factor to the increased likelihood of reservoir failure, this link is not fully explained either in the consultation document or IA. Even if it is a factor, it is not clear why existing safety requirements in respect of reservoirs are not the appropriate response to this issue.

16. Notwithstanding the risk of deaths and injuries caused by flooding, which is covered in the IA, there should be greater consideration in the IA given to how flooding would affect the surrounding areas. This should include potential damage to commercial activities, including farms and businesses, damage to residents and property owners and damage to the environment. A more detailed assessment of the risk to the public and how the proposed new regulation would mitigate this would enhance the evidence base.

17. Even if the case for intervention were clear, the proposal would be more proportionate and targeted if DEFRA used existing data on the highest risk reservoirs, of which size is only one factor, to determine which reservoirs should be subject to the requirement for on-site plans. Despite the existence of this data, which forms the basis of Option 2, the preferred option is to require flood plans of all reservoirs over 25,000m3 under these proposals.

18. The RPC notes however that DEFRA is planning a risk-based regime for those reservoirs below 25,000m3 which will be the subject of a further consultation. However this process is not clearly presented in either the consultation document or IA, and there are inconsistencies throughout both documents regarding the outcome of this consultation process. There is therefore a risk that respondents may not understand precisely what is being proposed. The consultation and IA may have been clearer if DEFRA had left all decisions concerning reservoirs below 25,000m3 to a later consultation.

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Introduction

1. The Regulatory Policy Committee (RPC) has reviewed the consultation document and accompanying impact assessment (IA) on the Regulations and Guidance under Section 154 of the Education and Skills Act 2008 produced by the Department for Children, Schools and Families (DCSF).

2. The policy decision to introduce powers for governing bodies of maintained schools to refer their pupils to off-site provision specifically aimed at improving their behaviour is already made as part of Education and Skills Act 2008. The Regulations and Guidance set out the details of how the powers under Section 154 will be exercised, with an objective to ensure that they are used appropriately as a tool for improving pupils’ behaviour.

Summary Opinion

3. Overall, there is only limited evidence and analysis provided in the consultation document and the IA to support the introduction of these new regulations. The consultation does not consider any alternative options for implementation, which could undermine the overall effectiveness of the options appraisal process and cost-benefit analysis. It is not clear from the analysis what the anticipated net impact of the policy will be and hence whether the benefits of this new regulation will justify the costs.

Detailed Opinion

Policy background and design

4. Section 29(3) of the Education Act 2002 provided powers to school governing bodies to send pupils to off-site provision for instruction- or training-related activities included in the curriculum for the school. The IA states that many schools have been using this power to send pupils to various forms of alternative provision not only for instruction or training purposes but also for reasons related to their behaviour. This practice was seen as being vulnerable to legal challenge, which could create serious problems for schools. To address this issue, the Government introduced Section 154 of the Education and Skills Act 2008, which provides a power for governing bodies to refer pupils to off-site provision specifically aimed at improving their behaviour.  

5. The consultation document and IA for the regulations and guidance provide only a limited appraisal of the potential impact of the new powers under Section 154. The IA states that the case for introducing the new powers was made in a comprehensive IA prepared for the Education and Skills Act 2008. However, the original IA prepared for the Act does not provide any analysis of the potential impact of the new powers on governing bodies and other stakeholders. The Summary page of the original IA briefly confirms that the new policy is unlikely to create any additional costs as “the schools and local authorities are already making provision for pupils who are directed off-site”.

6. The IA (of the 2008 Act) does not provide any evidence about existing problems and/or abuse of the off-site provisioning powers currently provided under Section 29(3) of the Education Act 2002. Therefore, there is limited supporting evidence provided to justify the need for a policy intervention through these additional regulations. The original IA would have benefited from a better assessment of the impact of the requirements on different stakeholder groups. The absence of a full assessment of the policy in the final IA of the 2008 Act further highlights the need for a comprehensive assessment of the new policy within the IA produced for the proposed regulations and guidance.

Options

7. No alternative policy options have been considered when developing the draft regulations and guidance. The IA acknowledges that alternative options have been excluded because of Ministerial commitments made as part of the legislative approval process for the Education and Skills Act 2008. As a result, the IA fails to provide an objective and robust assessment of different policy options to ensure the most effective route for implementation is selected.

8. For example, the draft regulations require the governing bodies to hold a review meeting every 30 days from the date that the requirement to attend off-site provision is first imposed. However, there is no rationale provided in the consultation document or the IA for the 30-day period being chosen, nor any indication of whether other time periods or any other alternatives were considered.

Costs

9. While the new requirement of having review meetings is delegated to the governing bodies under the 2008 Act, the cost estimates in the IA are based on an assumption that only one representative of the governing body will attend each meeting. DCSF confirmed that this was made in line with the new provisions introduced in the draft regulations. The regulations require that a governing body must send a written invitation to several individuals, including a representative of the governing body, requesting them to participate in the review no later than six school days before the date of any review meeting. The IA would have benefited from clarifying the reasons for including the cost of only one governor in the total cost estimates.

10. It appears that the IA does not consider the full cost of the review meetings as some of the new requirements brought by these regulations are not captured in the cost estimates (e.g. cost of preparatory activities before review meetings). The RPC acknowledges that this kind of cost could be relatively insignificant. However, including some discussion about this in the IA would have strengthened the analysis.

11. Additionally, the analysis of the costs of review meetings under four different scenarios could have benefited from using historical data about the actual length of stay in off-site provision. While acknowledging that such data may not have been easily available for use in the IA, the RPC is of the opinion that more could have been done to obtain it before consulting on this policy. This would have significantly strengthened the overall cost-benefit analysis.

Benefits

12. The IA attempts to justify the new policy through a break-even analysis by calculating the number of pupils who will have to benefit from this new regulation in order to cover costs. The RPC notes that the break-even analysis does not provide a clear understanding about the anticipated benefits of the new regulations. There is no link between specific policy interventions and the anticipated benefits as presented in the break-even analysis. The IA does not provide sufficient evidence to support the assumption that the changes brought in by the new regulations and guidance (i.e. requiring a review period of specifically 30 days) will in fact raise the level of attainment and therefore increase the lifetime productivity of the pupils.

13. DCSF has also assumed that the regulation is likely to reduce the pupils’ average stay in alternative provision, which will result in reduction of costs for the public sector. However, this is not supported by relevant evidence, such as the current overall cost of sending pupils to alternative provision and the likely reduction this policy would produce.

Conclusion

14. In conclusion, the RPC is of the opinion that the policy decision to introduce new requirements for off-site provisioning is not supported by a strong evidence base. The two IAs prepared for the Education and Skills Act 2008 and for the current draft regulations and guidance both fail to consider any alternative options or provide a robust assessment of the impact of this new policy on governing bodies and schools.

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Introduction

1. The Regulatory Policy Committee (RPC) has reviewed the consultation document and accompanying impact assessments (IAs) on the implementation of the third EU Directive on driving licences. This Directive harmonises definitions of vehicle sub-categories and rules on the duration of the validity of a licence. It also introduces minimum standards for driving examiners.

2. This is a joint consultation by the Department for Transport (DfT), the Driving Standards Agency (DSA) and the Driver and Vehicle Licensing Agency (DVLA).

3. The RPC notes the pre-consultation with interested parties.

Summary Opinion

4. The RPC notes that the consultation document is comprehensive, clearly setting out all the issues and identifying what needs to be done in order to comply with the Directive. The RPC also recognises that the UK must implement the Directive and that the options for implementation of different measures available to Member States under the Directive are limited.

5. Nevertheless, the RPC has concerns that the final recommendation for implementation of different measures under the Directive is not supported by a robust assessment of costs and benefits.

Detailed Opinion

Options

6. The three IAs published alongside the consultation document have not captured and analysed the full impact of all new measures proposed under the Directive. For example, the required introduction of new standards for periodic training of examiners is not assessed.

7. In addition, it is not clear from the evidence and analysis in the IA how the shortlist of options for detailed appraisal was developed and what justification there was for assessing different policy measures (some affecting motorcyclists and some affecting cars and trailers) as alternative options in the same IA. 

8. The IAs are primarily focused on the impact on the public sector, specifically on the IT systems and business processes of the DSA and DVLA. The analysis to assess the potential impact on the private and third sectors appears limited. For example, the impact on delegated training examiners does not appear to be fully analysed and the costs, arguably relatively small, imposed on these entities are not included in the total cost estimates.

Costs

9. The RPC notes that there are errors in the calculation and presentation of the cost estimates in the IA. For example, the annual average costs and one-off costs do not add up to the total costs.

10. There are also discrepancies between the total cost estimates presented in the consultation document and the individual IAs. The consultation document concludes that the total cost of implementation of the Directive is at least £10 million for developing the necessary systems, and annual operating costs of £2.1 million thereafter. However, it is not clear how these numbers were calculated as they do not appear to be consistent with the cost estimates provided in the three IAs.

Benefits

11. The IA assumes that the implementation of some measures under the Directive will result in a 1% reduction in the annual total number of casualties among motorcycle road users in the UK. This is estimated at a monetary value of £20.8 million per annum. However, there is no supporting evidence or justification provided in the IA as to why the 1% figure was chosen. The IA also does not include any sensitivity analysis to demonstrate the soundness of the assumptions and the estimates under different scenarios, which could have strengthened the overall cost-benefit analysis.

Conclusion

12. The RPC recognises that the UK is required to implement the third Directive on driving licences. The RPC also accepts the principle of proportionality in relation to resourcing an IA of the minimum necessary implementation of that Directive, especially in light of the fact that the range of options for consideration is limited. However, in their current form, the IAs fail to provide sufficient evidence and analysis to support the proposed route for implementation of the Directive as the most cost-effective available.

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Introduction

1. The Home Office (HO) is consulting on proposals to introduce additional training for door supervisors. The proposals would introduce compulsory training in a range of skills for door supervisors when they renew their licences, as well as compulsory ongoing refresher training in physical intervention for all door supervisors.

2. According to the Impact Assessment (IA) accompanying this proposal, the objective of the measure is “to ensure that all door supervisors have attained the same level of knowledge and skills and that public safety is maximised”.

3. The IA presents two options, other than the do nothing option. Option 2 brings the regime for door supervisors seeking to renew their licences in line with the regime for door supervisors seeking first-time licences i.e. they must undergo training in a number of areas (“top-up training”). Option 3 (the preferred option) would, in addition, introduce ongoing refresher courses in physical training (“refresher training”).

4. The Regulatory Policy Committee (RPC) has looked at the quality of evidence and analysis supporting the proposals and, following a discussion with the Home Office, would like to make the following comments.

Summary Opinion

5. The IA makes little attempt to justify its preferred option. The costs of refresher training have not been fully presented. Consequently the option that excludes refresher training (Option 2) appears to be as expensive as the option that includes it (Option 3). Therefore the IA does not adequately show all the impacts of this policy option.

Detailed Opinion

Costs

6. The annual costs arising from this proposal include the cost of training and the opportunity cost for door supervisors to attend the training.

7. We note that the IA is calculated over 3 years, but the additional costs that arise from Option 3 are incurred after the third year. Although the IA mentions that costs will arise, and quantifies the costs per person for additional training, it does not calculate or estimate the number of people likely to be affected. Therefore, the costs to the economy are not fully quantified and these costs are not included in the net present value. Forecasts based on historical data could provide some indication of the number of door supervisors that would require refresher training after the third year. Because of this omission, the IA does not provide a comprehensive picture of the costs arising from this proposal and could be considered to be misleading.

Benefits

8. The IA sets out a number of potential benefits from this policy, including increased police and public confidence and improvement in public safety.

9. It is not clear whether there is evidence to support the increased training requirements of door supervisors, both under Option 2 and 3. HO has provided anecdotal evidence that all deaths resulting from ejections were carried out by door supervisors who had not been trained in physical intervention. However, this does not provide the evidence to support the statement that training in physical intervention would have prevented these deaths or reduced crime around relevant establishments. We would expect there to be some evidence of the effectiveness of this training before the Government requires compulsory training for all door supervisors renewing their licence. In terms of Option 2, if this evidence was the result of a review by the SIA of its training and qualification standards and was presented during a previous consultation process, it should still be presented in this IA.

10. According to the IA, the case for introducing the preferred Option 3 rests on the existence of “skills fade” especially in the area of physical skills. However evidence for this is not presented or referenced in the IA. Without that evidence, the justification for the introduction of new regulation which will affect all door supervisors is unclear.

11. The Security Industry Authority has told the RPC that Option 3 has strong support from stakeholders, particularly industry. It is important that any relevant evidence supporting stakeholders’ opinions is included in the IA.

12. Paragraph 47 of the IA refers to future work with Camden Police. The objective will be to establish the effectiveness of compulsory training in affecting patterns of behaviour and to assess what benefits the training will have in reducing physical harm. The case for supporting Option 3 may be influenced if informed by evidence gathered during this exercise around the effectiveness of training required under Option 2.

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Introduction

1. The Regulatory Policy Committee (RPC) has reviewed the Government’s consultation document and impact assessment (IA) proposing possible changes to the existing and separate legislative regimes for street trading and pedlary in the UK.1

2. The Government’s preferred option in this consultation is to introduce new sanctions against illegal street traders and new certificate and registration requirements with a new national database for pedlars.

3. Pedlars are currently certified by individual police forces to peddle legally across the whole country (it is an offence to peddle without a certificate). Street traders are required to obtain a licence to trade from a local authority for that particular authority’s area. Certified pedlars are exempt from the street trading licensing obligations to the extent that they are acting as pedlars and that no private acts have been obtained to limit pedlary activity in that area. The Department for Business, Innovation and Skills (BIS) has commissioned research2 into the operation of the pedlary and street trading regimes and has used that information to inform this consultation.

Summary Opinion

4. Given the evidence available, the RPC is of the opinion that a wider range of options should have been appraised in the IA to enable a more effective comparison of possible alternative courses of action in the areas of street trading and pedlary. In addition, based on the figures presented in the IA, introducing changes solely to the existing street trading regime appears to provide better value for money than changing the street trading and pedlary regimes together (as proposed in the preferred option). Aside from this, it is not clear that the benefits and costs of proposed changes to the street trading regime are sufficiently robust at present.

Detailed Opinion

Options

5. BIS has said that it is open-minded on the eventual policy option it will adopt, and will undertake a further consultation if regulatory changes are pursued. The current consultation document presents several options including subsuming pedlary into the street trading legislation and removing the regulation of pedlary altogether. However, BIS does not bring forward these options for appraisal in its consultation IA. Rather, the IA presents the preferred option, alongside an option to introduce guidance on the existing regimes (and the required “do-nothing” counterfactual).

6. BIS’s current preferred option combines two components that involve making regulatory changes to both pedlary and street trading. By presenting the regulatory option in this way, the costs of the pedlary changes (£2.4-3.7m PV) are overshadowed by the larger benefits of the street trading changes (benefit £13m PV). On the basis of the information in the IAs it would produce a greater net benefit to split the components into separate options and regulate on street trading alone (or in conjunction with guidance on pedlary) than to implement the changes to both regimes.

7. There is no obvious reason provided in the IA as to why the pedlary and street trading regimes could not technically or legally be dealt with as separate options. BIS has so far not presented a sole method of resolving all of the different issues it has identified with the two existing regimes. For instance, civil sanctions for illegal street trading will not resolve any confusion that may exist regarding the definition of a pedlar. Given that the regulatory regimes, issues identified, and possible solutions are all different, it seems preferable for these solutions to have been presented as distinct options. On that basis, and given the other options that are discussed in the consultation document, it appears that the IA does not appraise a sufficiently wide range of options. It is also not clear the extent to which the preferred option has been subject to testing and comparison in relation to other possible measures that could have been considered.

Costs

8. The IA presents one cost estimate. This is an estimate of the amount that some pedlars are said to be willing to pay to establish a national register/database of pedlars. However, how this figure would relate to the actual costs of establishing and maintaining a national register/database of pedlars is not demonstrated.

Benefits

9. The IA presents an estimate of the benefits of additional regulation in the area of street trading as a reduction in resource costs from prosecuting suspected illegal street traders. This benefit is estimated as a saving of up to £7,000 per prosecution multiplied by 200 prosecutions per annum.

10. The origin of the two figures given and their robustness is unclear from the IA. It is not apparent from the IA whether the figure of £7,000 per prosecution is an 3 average figure across all local authorities. It is also not clear from the IA on what basis it is assumed that 200 local authorities undertake one street trader prosecution per annum. Alternative estimates and assumptions would produce different levels of benefit.

11. Additionally, the assumption that estimates of current prosecution levels will fall to zero immediately following the introduction of new regulations in this area appears optimistic. One may expect prosecutions to fall as a consequence of the introduction of fixed penalty notices, but this fall is likely to be more gradual. It is not clear that prosecutions would ever reach zero.

12. One assumes that in practice the main benefit of introducing new civil sanctions against illegal street trading would be the improved enforcement of the regulatory regime against illegal street trading. Presumably street trading is regulated as it poses some risk to the safety of consumers, society in general and/or it unfairly competes with other traders. However, the benefits of effective regulation against illegal street trading are not analysed in the IA and consequently the benefits of an enhanced enforcement regime are not quantified (other than the estimated savings in court costs).

Risk

13. Some local authorities have obtained private acts to control the activity of pedlars and introduce street trading sanctions in their local areas. However, from the evidence presented in the consultation documentation there does not appear to be any significant public risk posed by illegal street trading or pedlary at present.

Footnotes

1 The consultation is being conducted jointly with the Scottish Government; street trading is a devolved matter. To the extent that this RPC opinion refers to a devolved matter it relates only to England and Wales.

2 BIS commissioned Durham University to conduct research into street trading and pedlary perceptions – see (http://www.berr.gov.uk/files/file49664.pdf)

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Introduction

1. The Health Act 2009 created a power for the Secretary of State to prohibit sales of tobacco from vending machines in England.

2. Following a consultation, the Government laid regulations before Parliament on 27 January 2010 to use this power.

3. The stated objective in the Impact Assessment (IA) accompanying this legislation is “to reduce smoking take-up, prevalence and/or the number of cigarettes smoked by under-18s, thus creating a future beneficial effect on public health. Because 12% of regular smokers aged 11 to 15 report that cigarette vending machines are a usual source of tobacco, further restricting access to these machines will contribute to the above objective. A consequential benefit of the policy will be to create a more supportive environment for adults who are trying to quit smoking.”

4. The Regulatory Policy Committee (RPC) has looked at the quality of evidence and analysis supporting the draft legislation, following discussions with the Department of Health (DH), and makes the following comments.

Summary Opinion

5. The evidence set out in the IA does not provide a specific link between the proposed measure and a reduction in smoking by under-18s. Evidence that young people are accessing cigarettes from vending machines does not in itself show that the new regulation will lead to reduced smoking, as under-18s may still access cigarettes from other sources.

Detailed Opinion

Benefits

6. Annual monetised benefits are calculated on the basis of the relevant smokers’ (in this case, under-18s’) life-years gained from reduced smoking because of the removal of access to vending machines. The IA also identifies similar long- term health benefits to adults. To these are added “key non-monetised benefits” for the “main affected groups”, which DH states are: reduced morbidity arising from reduced cigarette consumption.

7. However, there is not enough evidence to support the assertion that prohibiting the sale of tobacco from vending machines will lead to a reduction in smoking by under-18s, which is the primary objective of the regulation. DH has presented evidence that vending machines are a usual source of tobacco for 12% of 11-15 year olds, but data concerning whether they are the sole source would be more pertinent in this case and could support claims that banning vending machines would lead to a reduction in smoking. DH has recognised that the extent to which smoking in this age group will be affected is highly uncertain and therefore uses a range to calculate the benefits; however, the underlying assumption that there will be any significant impact is not backed by sufficient evidence.

8. As England would not be the first country to prohibit sale of tobacco from vending machines, the IA would benefit from evidence on evaluations of this regulatory measure in other countries and regions. Evidence of this nature would indicate whether children are able to obtain cigarettes from other sources and, therefore, the effectiveness of any ban on vending machines. DH has advised us that the cost of evaluating and analysing such information would be disproportionate.

9. There is also little evaluation of previous policy actions, most notably the change in age limit for buying tobacco, and it is therefore difficult to know the size of the problem. The main evidence relating to the smoking habits of under- 18s is a study of 11-15 year olds from 2008. Given that the proposed policy is targeted at all under-18s, it would have been helpful to have some evidence which takes account of the new minimum age for purchasing cigarettes.

Costs

10. The annual costs have been calculated as the £24.3m cost to legitimate smokers plus £38m-115m opportunity cost of lost tobacco duty.

11. The latter figures are calculated by using DH guidance on completing IAs on the basis of known tobacco duty revenues (as explained on page 7 of the IA) and an estimated range of the reduction in cigarettes purchased overall. There is then an increase of this figure, which is justified as follows:

“Based on the Department for Transport statistical estimate of a life of £1.6million the estimated value of a quality-adjusted life-year (QALY) is £60,000. The NICE budget threshold (i.e. the price at which the NHS purchases a QALY) is £20,000 to £30,000. The mid-point of this range is £25,000. Therefore the ratio of this to the societal value of a QALY (£60,000) is 2.4 meaning the reduced Government health expenditure has an opportunity cost of £2.40. Hence, reductions in tax revenue are multiplied by 2.4 in the net benefit calculation, to take account of the monetised gains that could have been achieved with that revenue. Therefore the opportunity cost of lost tax revenue equals £38 million to £115 million per annum.”

12. However, the grounds for a definitive link between government health expenditure and tobacco tax revenue is not provided. There is no guarantee that lost tax duty revenue will necessarily result in a reduction in health spending.

13. Another possible cost raised that has not been quantified is lost manufacturers’ profits from reduced tobacco sales. The justification given for not quantifying this is expressed as follows: “This is largely not an economic cost, as it would likely be offset by increased expenditure (and profit) elsewhere in the economy.”

14. This does not provide a satisfactory explanation and is a questionable treatment of direct effects. In addition, the economic impact on the vending machine operators and clubs seems to be neglected, although we note that the British Beer and Pub Association (BBPA) has told DH that vending machines “do not provide a major revenue stream”. Although reduced revenue for manufacturers in this instance may not be an impact that will weigh heavily in the judgement of the policy maker, the impact on businesses has not been fully considered and more should have been done to quantify this.

Overall cost-benefit analysis

15. There has been a significant change to the IA since the consultation stage, namely that the policy is now expected to result in a net benefit, whereas a net cost was anticipated in the previous IA. This appears to come about from the inclusion of adult health benefits and also a change in assumptions about the value of life-years. DH should have explicitly acknowledged the source of these changes and why different assumptions have now been used, the effect of which is to support the chosen policy option.

Conclusion

16. In conclusion, the evidence set out in the IA does not provide a specific link between the proposed measure and a reduction in smoking by under-18s. The RPC recognises that the revised IA took on some of the concerns identified by the RPC in a meeting with DH officials after the consultation period ended, including:

• The costs of disposal of vending machines had not been assessed in the consultation stage IA. The revised IA has identified one company that is offering free disposal of tobacco vending machines across England.
• The consultation stage IA had not fully analysed the effect of the ban on pubs. The revised IA has produced evidence submitted in the consultation period by the British Beers and Pub Association (BBPA) that vending machine sales “do not provide a major income stream”.
• Adult health benefits had not been quantified in the original IA. The revised IA has now quantified some of these.

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Introduction

1. The Regulatory Policy Committee (RPC) has reviewed the consultation document and the impact assessment (IA) on Housing Benefit (HB) reform. The objective of the policy is to deliver a simpler and fairer system of housing support by changing the way benefits are paid to those in employment. There are also proposals for longer-term structural reform.

Summary Opinion

2. The analysis and evidence, as presented in the current IA, appears to be incomplete in some areas. In addition, the proposals would have been more suitably presented as separate options in the IA summary, which would have better reflected their separate impacts and accounted for their different stages of development. The RPC understands that there will be future consultations on the proposals and anticipates that they will contain a fuller examination of the policy problems under consideration and the evidence to justify intervention.

Detailed Opinion

Options

3. The consultation contains two parts: firstly, immediate changes to reduce the barriers preventing people on HB from entering the workforce; and secondly, longer-term structural reforms around how HB is calculated. The first part on HB entitlements for working recipients contains proposals to pay transition payments and fixed period awards. The structural reforms in the second part are at a more preliminary stage. The RPC understands that DWP intends to consult again on all of the proposals once further decisions on their direction have been taken.

4. Both parts have been presented as a single policy option in the IA summary page with a single best estimate range for all potential changes. This makes the relative merits of each measure difficult to assess and suggests that all of the proposals will be implemented as a group. They would have been more coherently presented as at least two separate options (one summary for the work proposals and one summary for potential longer-term changes).

5. In relation to the first part, neither the problem under consideration nor how different types of intervention could reduce the problem is thoroughly analysed.

6. As noted, the longer-term reforms are at a preliminary stage. However, as DWP recognises, if the Government decides to pursue suggestions put forward in the consultation such as requiring private sector rental properties to be of a certain environmental standard and changing the recipient of HB payments, then further analysis of the impacts of such changes would need to be developed. For example, any evidence supporting the introduction of environmental standards obligations would need to include analysis of the costs to landlords and the benefits to the environment (including estimates of reductions in greenhouse gas emissions).

Costs

7. The summary page of the IA summarises the costs and benefits of all of the possible policy changes. An average annual cost figure of £0-200m is presented and described as an indicative range of potential increased benefit expenditure. However no information is provided as to how this figure has been calculated.

8. The RPC acknowledges that DWP has attempted to show distributional impacts on HB recipients of the proposed changes to entitlement.

Benefits

9. The summary page of the IA presents an average annual benefit of £0-300m, described as an indicative range for measures that may decrease benefit expenditure. No information is provided as to how this figure has been calculated.

10. The analysis also lacks any assessment of the potential administrative savings to local authorities from the measures.

Conclusion

11. The analysis and evidence presented in the IA appears to be lacking in a number of areas, which limits the reader’s ability to take an informed view. DWP notes that it is conducting this consultation over a shortened time period because it has informally consulted with a wide range of stakeholders since 2008. However, the evidence gathered from these pre-consultations is not obviously presented in the IA. The RPC recommends that more detailed analysis of the problems, proposals and associated costs and benefits is undertaken before policy decisions are made.