1.  The Government's policy is to reduce the burden of administering regulations without jeopardising policy objectives.[2] The underlying rationale is that if businesses spend fewer resources on complying with regulations, the 'saved' resources could be more productively employed in running the business. This would then contribute to the long-term goal of achieving faster productivity growth.[3]

2.  In 2005, the Better Regulation Taskforce published a Report which set out eight recommendations for how the UK Government might reduce the cost to business of complying with regulation. Three of the eight recommendations are being implemented through the Administrative Burdens Reductions Programme, and all eight form part of the Government's long-term goal to increase the productivity of the British economy.[4]

3.  The Taskforce considered that the Programme offered the potential for an estimated £16 billion increase in GDP for an investment of £35 million.[5] These numbers had come from pioneering work in Denmark and the Netherlands on the administrative cost of filling in forms.[6] The rationale that reducing administrative burdens would improve productivity was based on a review of an earlier equivalent exercise in the Netherlands. The estimate of potential benefits was based on an extrapolation from predictions of how the Dutch economy might respond, and at the time there had been no assessment of the outcomes or impact on the Dutch economy.[7] The Government accepted the Taskforce's recommendations in full and implemented all eight recommendations, including the commencement of the Programme.[8]

4.  The Programme is unlike previous attempts to improve the regulatory environment as, for the first time, departments mapped all extant legislation in the UK and estimated the cost of complying with all related administrative activities (Figure 1).[9] The Better Regulation Executive adopted a method, known as the Standard Cost Model, to estimate the costs of the tasks that businesses undertake to provide the necessary information to comply with regulations. Using these results, the Better Regulation Executive announced that the administrative burden of regulations in the UK was just under £20 billion in May 2005.[10]

Figure 1: Administrative Burdens

5.  The Better Regulation Executive's objective was to establish an externally validated and credible baseline of administrative burdens in the UK.[11] It therefore employed PricewaterhouseCoopers (PWC) to conduct interviews and hold focus groups with businesses to establish the time and resources they spent carrying out administrative activities. However, the small sample sizes and non-random sample selection mean that the results are not statistically reliable.[12] The Better Regulation Executive's consultants conducted 8,500 interviews for some 20,000 information obligations. The cost estimates are, therefore, approximate figures and not precise calculations.[13]

6.  Measuring the cost of administrative burdens has been potentially beneficial for departments. For example, it has raised awareness of burdens and the areas of regulation which impose the costliest information obligations. This has improved policy officials' understanding of the costliest regulations and provided an indication of where simplification activities can have the greatest impact.[14]

7.  The two main measurement exercises were carried out between September 2005 and May 2006. The PWC measurement exercise was a large, complex project and the consultants used up to 700 staff to complete the work. The consultants also encountered a challenge in identifying people who were able to respond knowledgeably on the time taken to comply with specific obligations.[15] The average cost per interview was £2,000.[16]

8.  HMRC worked with KPMG to conduct a separate but parallel exercise to measure the administrative burdens imposed by the tax and duty system. The combined cost of the consultancy contracts were £17million, of which £7 million was incurred by HMRC. In all, up to 300 civil servants worked on the projects but staff costs incurred by departments were not recorded.[17]

9.  Departments and regulators have committed to reducing administrative burdens by 2010.[18] The targets were not based on calculations of either the desirable or achievable levels of reductions, but followed the precedent set by the Dutch Government.[19] The Better Regulation Executive believed that the use of a common target provided a clear, simple and pragmatic approach to focus efforts within departments.[20]

10.  Due to the specialist nature of tax regulation, the Chancellor of the Exchequer set separate targets for HMRC to reduce the cost of complying with tax forms by 10%, and to reduce the cost to compliant businesses of complying with audits and inspections by at least 15%, by 2010-11.[21] HMRC set its targets on the basis of consultation with its external advisory board, made up of businessmen and accountants, and after consultation with the Danish tax authority. Advice from the consultation enabled more informed target setting and a more focused approach to simplification, with particular emphasis on forms and inspection audits.[22]

3   C&AG's Report, para 1.4 Back

4   C&AG's Report, para 1.6 Back

5   Q 9 Back

6   Q 31 Back

7   Q 31 Back

8   C&AG's Report, para 1.19 Back

9   C&AG's Report, para 2.19  Back

10   Q 31 Back

11   Q 2 Back

12   Q 21 Back

13   Qq 12, 18-22 Back

14   C&AG's Report, para 2.18 Back

15   Qq 40-41 Back

16   Qq 4, 39 Back

17   Qq 4, 9 Back

18   C&AG's Report, para 2.15 Back

19   Qq 15-16 Back

20   Qq 15, 70 Back

21   C&AG's Report, para 9 Back

22   Q 14 Back