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The Future of the SCM (Workshop III) Presentation by Sweden, Germany and the Netherlands

The Future of the SCM (Workshop III) Presentation by Sweden, Germany and the Netherlands DEBR, Łódź, 16 June 2011. Contents. Ministry of Enterprise, Energy and Communications: SCM – an established method? A tool to monitor and keep political pressure

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The Future of the SCM (Workshop III) Presentation by Sweden, Germany and the Netherlands

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  1. The Future of the SCM (Workshop III) Presentation by Sweden, Germany and the Netherlands DEBR, Łódź, 16 June 2011

  2. Contents • Ministry of Enterprise, Energy and Communications: • SCM – an established method? • A tool to monitor and keep political pressure • A tool to get it right in the first place Federal Chancellery (Bundeskanzleramt): • Expansion of the Federal Government‘s Better Regulation Programme • New role of the Regulatory Control Council • Assessment and presentation of compliance costs Regulatory Reform Group: • Institutional settings • Measuring Regulatory Progress and Noticeability • Certificate of Good Service – improving service – less irritants

  3. What is SCM? • (time x wage) + external costs x frequency x population = administrative cost

  4. SCM – an established method?

  5. A tool to monitor and keep political pressure

  6. A tool to get it right in the first place!

  7. Calculation tool for SCM

  8. SCM – adopt it for your purpose!

  9. II. „SCM 2.0“: Compliance Costs (Germany) • Expansion of the Federal Government‘s Better Regulation and Bureaucracy Reduction Programme • New role of the Regulatory Control Council • Assessment and presentation of compliance costs • The Dutch approach and experiences

  10. Challenges for taking the admin burden reduction programme forward • citizens and companies have a broader sense of „bureaucratic burdens“ than IOs and the costs resulting from them („tip of the iceberg“) • consolidation of the existing body of law is part of better regulation, but does not necessarily lead to substantially lower burdens • most regulations have a specific goal: scrubbing them is no option • burdens also stem from the interplay of the different – more or less independent – levels (law-making, implementation and enforcement)

  11. What’s new: The German case (2010 onwards) • Definition of compliance costs (Art. 2.1 of the RCC Act):„The compliance costs embrace the entire measurable time and costs required for complying with a Federal statutory provision by citizens, commerce and public administration.“ • The Regulatory Control Council (RCC) checks in particular the ex ante assessment of compliance costs of new regulations for citizens, the business sector and public administration (which will in principle be obligatory as of July 1, 2011) for comprehensibility and correct methodology, as well as the description of the other costs to businesses and especially for small and medium-sized enterprises. • Information obligations (IOs) are part of compliance costs (Art. 2.2 of the RCC Act).

  12. What are compliance costs? What is part of compliance costs: What is not part of CC: • Macroeconomic effects, such as: - effects on competition and economic growth - effects on investment decitions • taxes, social securuty contributions, monetary benefits according to Art. 104a of the German Basic Law • benefits of a regulation Costs from substan-tive obligations, e.g. installation of a particle filter Costs from information obligations, e.g. documentation of the installation of the filter

  13. Changes to the Explanatory Memorandum So far In the future (acc. to the planned new JRP*) A. Problem and objective B. Solution C. Alternatives D. Financial implications on the public purse1. Budgetary expenditure ex- cluding implementation costs2. Implementation costs E. Other costs F. Administrative costs A. Problem and objective B. Solution C. Alternatives D. Financial implications excluding compliance costs E. Compliance costs1. Citizens2. Economy (including costs from IOs) 3. Public administration F. Other costs (in particular other costs to the economy) * Joint Rules of Procedure of the Federal Ministries (GGO)

  14. Objectives of the ex ante procedure To create transparency on the effects of regulations To improve the law-maker’sbasis for decision-making Contribution to better regulation

  15. The tasks of the Regulatory Control Council (RCC) were significantly expanded (new RCC act) In particular, the RCC examines the presentation of compliance costs of new regulations – for citizens, the economy and the public admini-stration – as well as of the other costs to the economy, notably SMEs. • In addition, the RCC may examine the following aspects: • comprehensible presentation of the intention of and need for the regulation, • consideration of other possible solutions, • consideration regarding the time of entry into force, time limits, and evaluation, • considerations of simplifications of law and administration, • 1:1 implementation of EU law („gold plating“)

  16. „Interim conclusions“ • The assessment of compliance costs can be much more complex than of administrative costs from IOs • However: scientific accuracy is not called for … • … but a balance between practicability of the assessment and plausibility of the results. • Therefore: Early involvement and informal exchange with the RCC (as before).

  17. How to estimate compliance costs • Step 1: Identify all requirements of a regulation • Step 2: Assess the associated costs: - Step 2.1: Identify the numbers of cases - Step 2.2: Assess time consumption and material costs • Step 3: Presentation of total costs of a regulation

  18. Definition of „requirements“ • Requirements are • „Individual regulations which directly lead to a change in costs and/or time consumption for the addressees of the norm.“ • (definition according to the German ex ante manual) • Assessing the compliance costs resulting from fulfilling requirements means estimating the probable financial and time burdens or reliefs of the planned new regulation. • In this process, only the expected change of compliance costs is relevant („delta“).

  19. Different types of requirements Citizens / economy Public administration (implementation and fiscal action) • processing of applications • inspections / surveillance • provision of information • public administration as awarding authority (public contracts, e.g. constructions) • … • target achievements • directives • information obligations • inspections / surveillance • omission (of intended action) • … This results in … Compliance costs

  20. Step 1: Identification of all requirements New regulation list ofrequire- ments per normaddressee requirement has to be named and attributed to a norm addressee (IOs on the economy have to be reported separately) requirement requirement relatedrequirements can be bundled! EC process EC (IO) requirement CIT PA

  21. Identification of requirements: example 1 Individual requirements: UV Protection Act Requirements identified: • retrofit/replace old solarium equipment • acquire protective goggles • conduct customer consulting • staff training

  22. Identification of requirements: example 2 Bundled requirements (process): Energy Conservation Act 4 individual requirements were bundled under the heading „obligations on the construction of new residential buildings“: • annual energy consumption must not exceed that of a reference building • transmission heat loss must not go beyond a certain threshold • primary energy consumption has to be calculated according to a particular formula • requirements on summer heat insulation need to be fulfilled

  23. Step 2.1: Identification of number of cases Require- ment or process number of cases for all require- ments, processes or case groups event-driven number of cases no of affected addressees EC periodical fulfillment x EC (IO) frequency (per year) CIT PA

  24. Identification of number of cases: example • Operators of solaria need to adapt them to the UV protection act Some 4.000 operators with 45.000 units are affected. Two case groups are to be expected: • Retrofitting existing units: about 40.000 cases • Acquisition of new units: about 5.000 cases

  25. Step 2.2: Identification of costs per case • Three types of costs: detailed presentation Current costs per case in euros or time units require- ment / case group time consumption (in hours) x tariff (per hour; only EC, PA) + EC€ EC (IO)€ Material costs CIThrs./€ PA€ To be reported separately, not per year. EC€ EC (IO)€ implementation costs CIThrs./€ PA€

  26. Example: identification of costs for citizens „Snow tyre requirement“, Art. 2.3a of the German Road Traffic Act Car owners, which do not regularly adjust tyres according to weather conditions, now have to switch to winter tyres (WT) in autumn and to summer tyres (ST) in spring. • Time consumption • Activities according to check list, estimated time consumption • 33 minuten per case and year • Material costs • New acquisition of WT (700 €) compated to ST (600 €) • difference („delta“) of 100 € are additional costs caused by the regulation • New acquisition every six years => frequency = 1/6 => 17 € per case and year • plus 2 x 20 € installation costs (garage) per case and year • Total costs 57 € per case and year

  27. Identification of compliance costs: overview Planned regulation / norm (e.g. law, decree, ordinance) Requirement 1 (individual regulation) forcitizens, economy and/or public administration requirement 2 requirements 3 to n Vorgabe 2 Vorgabe 3 bis n if necessary, bundle requirements (into processes) / build case groups etc. tariff* time con-sumption material costs (if nec. pro rata) number of norm addressees ** frequency per year** etc. costs (per case) number of cases (per year) etc. costs (per case) x number of cases = annual compliance costs of a requirement / process etc. • compliance costs of requirements / processes 1 to n = compliance cost of the regulation (per year) * tariff not applicable to citizens ** if required for determining the number of cases

  28. Step 3: Presentation of total compliance costs e.g. for the economy: list of all requirements (including IOs) Individual presentation for every individual requirement: - number of cases x costs per case = compliance costs Aggregated presentation: - Total compliance costs to the economy from XYZ requirements result in XYZ euros per year, out of which XYZ from IOs…. One-off implementation costs:- XYZ euros from the introduction (of new requirement)

  29. Fictitious example: explanatory memorandum – E • E. Compliance costs for citizens, the economy, public administration • E1. Citizens: Additional compliance costs: ~ 200.000 hrs. p.a. / 30 min. per case € 2.5 million p.a.E2. Economy: • One-off implementation costs: € 33 million; Additional compliance costs: € 20 million p.a; of which administrative costs (from IOs): three new information obligations: € 3 million p.a. E3. Public administration: • Additional compliance costs: on federal level: € 2 million p.a. on Länder level (incl. communal level): € 1 million p.a. One-off implementation costs: on Länder level (incl. communal level): € 1.5 million

  30. Substantial Compliance Costs - Definitions and concepts Substantive obligations: to comply in a direct way with norms, standards, codes of conduct etc. to safeguard public goals Substantive compliance costs: all costs to comply with substantive legal obligations Business as usual costs: costs that would remain if there was no legal obligations Marginal costs:costs that would dissappear if there was no legal obligation / the costs of all activities/investments which exceed 100% compliance or average practice Base line: starting point for reduction plans Base line : the average existing relevant practices in businesses (see model next slide) 30 Measuring Compliance Costs | May 19th 2010

  31. Composition of substantive compliance costs Substantive compliance costs Law Transport dangerous products Substiantive compliance costs Base line Law to check identity new employees Substantive compliance costs Law Employees Council = Marginal costs = Business as usual costs 31 Measuring Compliance Costs | May 19th 2010

  32. Netherlands - Regulatory Reform Group • Content • Broadening from AB to all Regulatory Costs • Institutional settings in the Netherlands • Measuring Regulatory Progress and Noticability • Certificate of Good Service – improving service – less irritants

  33. Next Generation Better Regulation in Netherlands • 2003 – 2007: mainly focussed on reducing administrative burden • 2007 – 2011: broadening - going beyond AB • Other regulatory costs (compliance costs, grants, enforcement) • Service and quality related regulatory items (speed, transparancy, reliability, service of street level regulatory desks) • Less costs + better service/quality => noticeable reduction of regulatory burden • Moving from 1 to 14 targets 33 Measuring Compliance Costs | May 19th 2010

  34. Next Generation of Better Regulation (easy) • Next Generation of BR (more difficult) • Inclusion of other cost types: Substantive compliance costs • Inclusion of other target groups • citizens • professionals • volunteers • public sector 34 Measuring Compliance Costs | May 19th 2010

  35. Next Generation of BR (even tougher) • BR will include more ‘behavioural’ aspects • Irritants • Communication • Perception survey • Regulatory Service • BR policies will be more outside-in • User orientation – size, lifecycle, turnover • Stakeholder involvement • Consultation • Ex-post evaluation • Exemptions for target groups, reducing frequencies for target groups • Because • Our manuals were not (technical; inside-in) • The value for money question will increasingly be asked (what relevant change has a decade of BR brought to us?) 35 Measuring Compliance Costs | May 19th 2010

  36. Next Generation of BR (and even more tough) • Better Regulation has to become less static and more dynamic • More attention to the politics of better regulation • More attention to sequencing • More attention to use of institutions for countervailing powers, watchdogs, oversight bodies • Inclusion of ‘end of pipe’ actors in BR policy: • Regulators, Decentral Authorities, Inspectorates 36 Measuring Compliance Costs | May 19th 2010

  37. The institutional setting in The Netherlands Parliament Counsel of ministers Minister of Economic affairs Minister of Finance Minister of …. Regulatory Reform Group stakeholder stakeholders stakeholder stakeholders stakeholders Advice AB Coordinator AB Coordinator AB Coordinator

  38. Strike the right balance Method Infrastructure Strong coordination? Dept. involvement? Countervailing power? Available? Resources? Knowledge? Quality control? Political commitment Incentives Clear targets? Ownership? Stakeholder involvement?

  39. The Mark of Good Public Services: Improving Service – Reducing Irritants A systemof10 standards of public service delivery for businesses. (10 most important products to businesses) A measurement method to assess to what extent these standards are met. An improvement plan including the targets of governments to improve their public services. Measurable, noticeable, accountable, transparent 39 IRRC, Amsterdam, 10 and 11 March 2011

  40. I. Time limits and periods II. Professionalism 1. Waiting times within legal limits 4. Government officials have sufficient expertise 2. Quick response if legal limits are exceeded 5. Inspections are well coordinated & integrated 3. Requests are formally correct The System of 10 Standards IV. Reliability III. Company orientation 9. Few objections and appeals 6. Response to questions within 3 days 7. Available information is up to date 10. Reduction of Administrative Burdens 8. Businesses are satisfied with public services 40 IRRC, Amsterdam, 10 and 11 March 2011

  41. Measurement results in a spider diagram 41 IRRC, Amsterdam, 10 and 11 March 2011

  42. Improvement plan Shows the weaknesses in public services. Improvements for: Government organization overall. 10 most important products. Not just “another” plan: it structures and incorporates all existing initiatives to improve public services. Gives clear indication of what actions to take for improvement Better communication between governments and businesses. 42 IRRC, Amsterdam, 10 and 11 March 2011

  43. Business sentiment Monitor feedback mechanism of policy cycle In the Business Sentiment Monitor, several statements about regulatory burden are presented to businesses Gives insights in accomplished objectives Monitors own progress Gives new input for RRG’s programme Uncovers ‘white areas’ Uncovers pinch points and new areas of focus Gives input for specific communication efforts Are we doing the right things, and are we doing these things right?

  44. Noticable reductions

  45. Findings both 2008 and 2009 Regulatory burden is perceived very differently in different lines of business Life cycle and size of companies is very determinative for the perception of regulatory burden Regulatory issues remain the same over time (time, costs, etc) The more companies have been in contact with the communication campaign, the greater their confidence in the reduction programme is. Findings are valuable input for future programmes

  46. For further information:

  47. Thank you very much!

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