David Arculus

Question: The task force's annual report lists 10 Regulatory Impact Assessments (RIAs) that are not up to scratch. Do you think this comes from failures of political leadership in the departments, or administrative failings, or a combination of both?

David Arculus: I think the reasons behind the 10 are different actually, but one of the things we have been looking for is unintended consequences.

Certainly if you look at the example we gave on care homes there was a huge unintended consequence there because the RIA was done in a certain way, but the unintended consequence was that lots of care home owners said it is not worth spending all this money doing up our care home so we are going to sell it.

That led to a shortage of beds and bed blocking in the NHS and so there was a huge unintended consequence.

It is a combination of not thinking of unintended consequences, in some cases of the benefits not being explained, in some other cases they haven't explicitly considered the effect on small business.

One of the things about regulation is that it bears down on small business hardest - so RIAs should look at that kind of issue.

Another issue, the RIA didn't look at how the competitive structure of the market might change and that was the one relating to CO2 emissions from vehicles. Clearly that may change the desirability of certain makes of cars which bounces on to have an economic effect on distributors, dealers, manufacturers, etc.

So they have all come about for slightly different reasons and another factor is where things have been rushed through because there is some sort of emergency.

There was quite a lot of that when we had foot and mouth happening and there has been one or two things from the Home Office as well - things like the proceeds of crime and being able to enter business premises without warrants, work permits being issued to migrant workers - those kind of issues which have been put through rather quickly in response to particularly topical issues.

We feel it is important that the rigour which a regulatory impact assessment gives is not by-passed.

Question: But even with the RIAs in place, the legislation or regulations can still have unintended consequences?

David Arculus: Yes they can, but the challenges I am making to the government going forward are not just about the RIAs.

The three challenges I am making for the year ahead are, please think about alternatives to regulation. We all understand that you have got policy objectives and that many of those policy objectives were stated in the manifesto - but please think about how you can achieve those policies without regulation. Particularly in fast-moving markets you can often benefit from not having non-regulatory alternative.

Secondly, we are saying to government that you have got to consult better. The way you really tease out alternative ways of getting to an end are to actually consult with the practitioners.

We do get a lot of complaints that consultation is often of the "tick box" variety as opposed to a face-to-face variety. So we think consultation should be made much better.

Those two things will then feed into the quality of the regulatory impact assessments. What I am particularly concerned with RIAs is that they are not just about the choice of do we regulate or don't we, but they are about a range of alternatives in between which might be a more effective way of getting to your end point.

If you think about business doing a cost-benefit analysis it wouldn't just consider doing a project or not doing a project, it would actually consider quite a spectrum of things in between.

Question: Do you think that ministers, politicians in general and perhaps the media, believe that if the government passes a law then it has acted, but if it has backed a code of practice then it has not taken a very strong lead?

David Arculus: Yes, I think that is absolutely true. There is a kind of quaint belief that if you regulate you get 100 per cent compliance and if you don't regulate you don't get 100 per cent compliance.

But I think that is very simplistic. I think there are certain situations where if you don't regulate you can actually get a better level of compliance with your policy objectives than if you do.

I have found, looking at some of the RIAs that have been done, the departments make the assumption that there will be 100 per cent compliance with a regulation and sort of 70 per cent compliance if you don't have a regulation.

That obviously tips the scales in favour of regulation, and I think it is not like that. We have been talking to the DTI quite a lot about this issue, and they have now set up their alternatives to regulation unit which is looking at exactly that kind of issue.

Question: Do you think that Whitehall departments fully understand the impact their regulations can have on the business community?

David Arculus: No, I don't think they do fully understand the impact on the business community and that is why consultation is extremely important.

Another thing we have been pushing for is that civil servants should be attached to businesses, either for part of their career or for one or two weeks a year just to get a feel of what being in a business is really like. Also, they should go to some of the Small Business Service focus groups which are run as well.

I think the more opportunities we get for interchange between Whitehall and business the better. I think at the moment the consultation procedure is probably the main one, but we certainly do need more interchange of staff.

Question: Is the government's strategy on deregulation delivering results on the ground?

David Arculus: What we are talking about here is not deregulation, it is better regulation. We do understand that the government has certain policy objectives and my job really is to say 'look, you ought to be achieving those in the most efficient way possible'.

I really hate bad regulation and I think what business doesn't want is no rules. It actually wants good rules, and it wants regulators held to account when they produce those rules.

What we are trying to do is achieve objectives in better ways. There is a great paradox between us as individuals where we want all kinds of protection, and as business or professional people where we find that regulations rather get in our way.

My job is to get the right balance between those two things.

Are we getting better regulation? I think we are. We put in our annual report some of our on the ground achievements. I think the first thing to say is that the levers to enable better regulation are pretty much in place in the UK.

For the flow of new regulations we have got the got the RIA system. For the stock of existing regulations we have got various simplification procedures, of which the most important one is a regulatory reform order.

In addition to that, the task force produces reports on particular areas of the economy and really holds those to account. One of the ones we did about a year ago was a look at the economic regulators.

Our main recommendation there was that the economic regulators should have the same standards of corporate governance that apply to business. Which seems a pretty basic recommendation, but the fact is they tended to be a bunch of individuals with not very strong accountability or transparency.

On care homes we got the government to change their stance. One of the issues there was because the physical standards they demanded were so high, care homes didn't feel able to alter their care homes economically and so they were closing down. The government has now changed that piece of legislation to say it will only apply to new built care homes, not to the existing care homes.

We have also recommended, for instance, that the system for liquor licensing should be much simpler

Our public sector team looked at the problems GPs face with paperwork and they produced a report there which has saved the equivalent of 10.3 million appointments for GPs, which actually equates to another 1200 GPs being freed-up.

And we did a fairly hard-hitting report on the higher education sector. That basically said there was far too much bureaucracy, multiple accountability, multiple funding streams. I think that the education department has taken that on board.

So there is a lot going on, and the Organisation for Economic Cooperation and Development has produced a report on the British regulatory system and recommended it as the best developed in Europe. Partly as a result of that, and partly as a result of work we have been doing, the system of RIAs is now being adopted in the European context, which I think will be a very helpful move because about 40 per cent of regulation comes out of Europe.

Question: Politicians of all parties promise a "bonfire of red tape" or a "war on red tape". Is that something that is easier said than done?

David Arculus: I think it is much easier said than done. The bonfire of red tape was basically the Conservative aim of a deregulatory agenda. I could not say that they succeeded in that, and I don't think that anyone in the world is actually deregulating faster than they are regulating.

There is a greater volume of regulation coming through, I think in all the developed countries, and I think the reason for that is basically that as we get wealthier we all want more protection and higher standards.

We want our railways working to higher standards than they did previously, we want better standards of safety in the air, etc, etc. There is a constant demand from us as private individuals for more regulation.

So my agenda is actually better regulation. Let us see if we can do it efficiently and elegantly. We are having some success there, I think particularly the DTI is picking up our agenda quite fast and the Treasury has been very helpful to us.

It is probably fair to say that some of the other departments can do a little better over the next year and we will be urging them to do so.