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Lord Vinson: My Lords, the Minister's closing remarks have been exactly what the whole House wanted to hear. It was a draught of commonsense. It typifies what this profound debate has produced—people are not interested in who is right, but what is right. The various party spokesmen summed up much better than I could, and the debate showed the depth and breadth of experience in this House. On behalf of this side, I thank all noble Lords who have taken part and reiterate to the Minister that if this is the way that
 
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he has started, by God, he has set a wonderful precedent to continue. Thank you. I beg leave to withdraw the Motion for Papers.

Motion for Papers, by leave, withdrawn.

EU: Effective Regulation (EUC Report)

5.05 pm

Lord Grenfell rose to move, That this House takes note of the Report of the European Union Committee on Ensuring Effective Regulation in the EU (9th Report, HL Paper 33).

The noble Lord said: My Lords, this debate on the dangers of over-regulation follows on nicely from the previous one, so it with great pleasure that I rise to introduce two reports. I begin by thanking the members of the Select Committee for the hard work that they put into this inquiry and our resulting report on how to make European Union regulation less burdensome. I am extremely grateful also to our committee Clerk, Simon Burton, and to the committee's second Clerk, Sarah Price, who drafted an excellent report.

I am pleased to see non-members of the Select Committee on the speakers list. Their interest in the subject is greatly appreciated and I particularly look forward to hearing the noble Lord, Lord Filkin, the chairman of the Merits of Statutory Instruments Committee, in the debate. The fact that, apart from me, members of the Select Committee are not on the list may be due to their exhaustion after their efforts in the debate earlier today on the burning issue of the so-called European constitution.

Our main report was published almost nine months ago. However, our debate on it is timely in light of the follow-up report, which is also before the House, published a month ago today. That second report updated the House on the Government's response to the original report and on developments in the area during the UK presidency. More than that, the Commission is now in the throes of developing some encouraging initiatives in the field of better regulation which respond in many respects to the actions called for in our original report. I shall come to those later in my remarks.

Our main report considered the principles of good regulation, looking in detail at the progress that the EU institutions were making as regards creating a better regulatory environment. In March 2005 the Commission, on the initiative of Günter Verheugen, the industry and enterprise commissioner, issued a communication entitled Better Regulation for Growth and Jobs in the European Union. It proposed three key action lines: promoting better regulation tools, working more closely with member states, and reinforcing the constructive dialogue between regulators and stakeholders.

This overdue recognition of the huge importance of moving now to improve regulation was warmly welcomed. Much European Union regulation is broadly accepted as an essential part of the single
 
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market, but, in recent years, an increasing number of EU regulatory instruments have been seen by many as either unnecessary or as an undesirable burden on industry. Such regulation has undoubtedly damaged Europe's reputation for good law making—hence, the increasing talk of the need for "better'" regulation.

The European Commission defines better regulation as,

The Commission's definition therefore properly highlights the importance of light, focused regulation.

The UK's Better Regulation Task Force, which was ably chaired by Sir David Arculus, who gave evidence to us, set out five principles of good regulation that aim to show on what grounds "light, focused" regulation can be constructed. Those principles are proportionality, accountability, consistency, transparency and targeting. The principles suggest that regulators should intervene only where necessary and should work transparently and keep regulations simple and user-friendly.

The EU Commission works to principles very similar to those outlined by the Better Regulation Task Force. These principles stem from the discussions of the Mandelkern Group of member states' experts on better regulation, which was set up in November 2000 and was tasked with developing a coherent strategy to improve the European regulatory environment.

There was broad agreement among all our witnesses that the principles of good regulation to which the Commission works are basically sound. Problems arise when those principles are not implemented effectively. Regulatory reform is important for two reasons: first, to stimulate economic growth and competitiveness, and, secondly, to improve the EU's image.

Better regulation will, it is argued, help to make the EU a more attractive place in which to invest and work. The joint statement issued in December 2004 by the Irish, Dutch, Luxembourg, British, Austrian and Finnish presidencies stated:

We also heard from some witnesses, Commissioner Verheugen naturally included, who argued that improving regulation in Europe would help to restore citizens' trust in the European Union. Our report made clear our belief that involving Europe's stakeholders in better regulation initiatives could help to improve the Union's image and foster better understanding of its institutions and working practices.

The March 2005 Commission communication discussed three main practical strategies for improving the regulatory environment. These were: first,
 
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improving impact assessment; secondly, simplification; and, thirdly, improving consultation methods. A proper impact assessment helps to pinpoint the benefits and drawbacks of a proposal and helps to ensure that the regulation proposed is really necessary and not overly burdensome.

The Commission set out its commitment to integrated impact assessments in the communication, saying that the policy was,

Our committee welcomed the Commission's commitment to impact assessment but called on it to make it mandatory for all key proposals to be accompanied by an assessment, whether initiated by the Commission or member states, to ensure that all possible policy options have been assessed ex-ante.

The committee also welcomed the introduction of the Commission's revised impact assessment guidelines, issued in June 2005, which set out the procedural rules for, and key analytical steps in, impact assessment. We hope that these guidelines will help to ensure that the process is taken seriously and does not just descend into a "tick the box" exercise. Our report also stressed the importance of officials considering all options when completing an impact assessment, including, most crucially, the "do nothing" option and achieving the aim of the legislation through non-legislative means.

If impact assessments are to be effective, they must be undertaken at the correct time. Our report recommends that they be undertaken at an early stage and revised as proposals proceed through the EU law-making process. This recommendation reflected the thinking of Sir David Arculus, who told us that impact assessments should indeed be done right through the process. In addition, we recommended that when, in the course of debate, the European Parliament and Council depart substantially from a Commission proposal, they should produce a revised impact assessment. Further, if assessments are to inform the full process, ex-post assessment is important. Important lessons could be learnt and ex-post assessment could be used to help to examine the effectiveness of EU legislation.

The second of the Commission's practical strategies is simplification. In the October 2005 communication, the Commission pledged to screen proposals that were pending before the Council or Parliament with regard to their general relevance and their impact on competitiveness. The Commission could then decide whether to modify, replace or even withdraw such proposals. In addition, the Commission continues to implement its rolling programme for simplifying the acquis. Commissioner Verheugen told us that this was being undertaken sector by sector and that the results would be presented sector by sector as the work progresses. Our report welcomed this approach.

The last of the Commission's practical strategies was consultation. Effective consultation should provide both an opportunity for officials to explain
 
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Commission proposals and an opportunity for interested parties to shape them. The revised impact assessment guidelines include a list of the Commission's general principles for consultation. The real danger with consultation is stakeholder fatigue. Businesses and other stakeholders get tired of engaging in consultation exercises when they do not see their comments being taken on board. To combat such fatigue, our report recommended that consultation should be much better targeted and conducted as a meaningful and genuinely interested process.

Our inquiry considered the case to be made for the creation of a new European body to oversee and improve regulation and concluded that, at present, there is absolutely no need for such a body. Indeed, we felt that such a body would only add another layer of bureaucracy to the EU's regulatory environment and would entail an unnecessary duplication of resources. One of the central recommendations of our report concerned our recognition that action at EU level will not be enough to improve the regulatory environment. We strongly recommended that member states tackle regulatory problems arising at national level and lend their support to the Commission for a better regulation agenda.

So what progress has been made, and where do we go from here? The Government's response to our first report agreed with one of the committee's main conclusions; namely, that it is important that the various better regulation initiatives are implemented efficiently and assessed fully. In their response, the Government also took the opportunity to update the committee on the main developments on better regulation during the UK presidency, and outline further developments expected during the forthcoming year—to which the Minister will no doubt refer this evening.

The UK presidency sought to reinforce progress made on impact assessment by ensuring that impact assessments were discussed and used as points of reference during negotiations on specific dossiers, such as the chemicals regulation and the capital requirements directive. In November 2005, the Commission announced plans for a methodology to measure the administrative costs of new regulatory proposals. In time, it is hoped that the methodology could be incorporated, where appropriate, into impact assessments. That same month, the EU institutions agreed an inter-institutional common approach to impact assessments which sets out how the institutions are expected to co-operate with each other. This is a very welcome step forward.

As regards simplification, in September 2005 the Commission announced its intention to withdraw 68 legislative proposals, deeming them to be either outdated or inconsistent with revised better regulation standards. The following month, the Commission published a communication setting out a three-year rolling programme which aims to repeal, codify, recast or modify 222 basic legislative regimes, covering around 1,400 legal acts. We wish it well and hope it succeeds.
 
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The UK presidency then worked with colleagues in Austria and Finland to produce a joint discussion paper for the ECOFIN meeting in December 2005 entitled Advancing Better Regulation in Europe. The aim of the paper was to ensure systematic progress over the forthcoming months and years. Seven areas are identified in which further progress could be made: impact assessment—naturally—and simplification, tackling the administrative burden of EU legislation, risk-based enforcement, consultation, advancing alternatives to regulation, and international regulatory co-operation.

The White Paper Prospects for the European Union in 2006, published by the Government last January, reiterates the joint presidencies' commitment to better regulation, stating that:

We therefore have good reason to believe that the better regulation agenda will retain the political momentum that has been building up behind it in 2006.

A month ago, on behalf of your Lordships' House, I attended and spoke on better regulation at a conference in St Pölten, Austria, organised by the Austrian presidency and attended by government ministers, parliamentarians and EU officials. At that conference, Commissioner Verheugen announced a firm target—to cut the bureaucratic costs for European enterprises, especially small and medium-sized enterprises, by 25 per cent. I warmly welcome this commitment. Last Thursday, the German Chancellor, Angela Merkel, told the Bundestag that this target must be met.

The previous day, Commissioner Verheugen had announced three new initiatives. The first was to set up in the Commission a standing committee of senior officials to monitor the quality of impact assessments drawn up by the Commission. Secondly, he said that he would table proposals to achieve the previously pledged 25 per cent cut in the burden placed on industry. Thirdly, he announced a speeding-up of the simplification programme and listed a number of now simplified proposals, including two of major importance—the review of the sixth VAT directive and the updating of the EU customs code.

The Commissioner acknowledged that these initiatives were part of what was inevitably a long and difficult process of improving EU regulation. One wishes him well, but much will depend on the performance of the institutions: the Commission, the Council and the European Parliament. As our report insists, they must stand by the pledges they made in the Inter-Institutional Agreement on Better Law-Making.

But action at European level will not be enough, as we emphasised in our report. While giving, we hope, full support to the Commission in its efforts to improve regulation, member states need at the same time to tackle problems arising at the national level.
 
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I believe that Her Majesty's Government well understand that. As to the work of your Lordships' Select Committee on this vital question, let me somewhat immodestly record our satisfaction that many of the measures that we called for nine months ago are now firmly on the European agenda. We can only hope that the momentum behind the current drive to improve Europe's regulatory environment will not be lost. I beg to move.

Moved, That this House takes note of the report of the European Union Committee on Ensuring Better Regulation in the EU (9th Report, HL Paper 33).—(Lord Grenfell.)

5.21 pm

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