Inside Track

I think most business caught by the CRC are still in shock that government will, from 2012, take nearly £1bn from them in what can be seen as a carbon tax.

In the absence of recycling revenues, should government be confident that the performance league table, which provides a publically comparative index of participant’s energy efficiency, is a strong enough driver to affect substantial change within the sector.

I believe that these sort of schemes work much better if there is both a ‘carrot and stick’, rather than just the ‘stick’. This heavy stick approach will do little to engage organisations, but more importantly, as I said last Wednesday, seriously damages the trust between manufacturers and government.

Our members are so dismayed at the announcement that we have today written to Gregory Barker to outline our concerns. The letter, backed by many manufacturing companies and manufacturing Trade Associations, will outline that the decision to push through this change to CRC without consultation seriously calls into question the way in which government intends to work with the private sector, as a trusted partner, to tackle the national deficit. The decision also does nothing to simplify an already complex policy landscape and calls into question the government’s desire to deliver a low carbon economy at least cost to industry.

We will hear further details of proposed changes to CRC in the next month or so and I am sure we are all left wandering whether those proposed changes will be as damaging as this one.

Today EEF's Regulation Task Group publishes its major report:  'Reforming Regulation, improving competitiveness, creating jobs'.  Le'ts be clear, regulation has a place in a civilized society - it helps protect employees, consumers and the environment.  At its best it can allow businesses to compete without being pressured to compromise their ethics.  However, where it is excessive, ill-conceived or poorly implemented, it can impose significant cost on individuals, businesses and the wider economy with little or no benefit. 

Over the past two decades businesses have been promised reductions in costs imposed by regulation, only to see them rise year on year.  A telephone survey of 300 EEF members found that regulation was rated as the second worst aspect of the UK business environment behind taxation.  More than half of those surveyed identified regulation as an obstacle to growing their business. 

The coalition government has promised to reduce regulation and set out a bold 'one-in, one-out' approach where the costs imposed by new regulation must be matched by removing existing regulation imposing similar costs.  We welcome the ambition and priority given to the issue, but do have some concerns about how this will work in practice. 

For example it seems that EU-derived regulation will be excluded from the one-in, one-out system.  In one sense that seems reasonable - why should the UK government be held responsible for regulation it didn't want?  However, a thousand pounds of cost resulting from new regulation affects a business exactly the same, wherever the regulation emanates from.  And excluding EU legislation will mean that it falls off the radar; with most climate change, health and safety legislation coming from Brussels that is a huge issue.  We could once again have a situation where government can claim to have made savings and cut costs when we all know that the total cost has actually gone up.

What we need is openness and transparency, with all the cards on the table, that is why the report calls for one-in, one-out to be a stepping stone to regulatory budgets where departments are set a binding limit for the regulatory costs they can impose.  As appropriate, some can allow an increase, some require a decrease.

Another key issue is how the government engages with the European Commission and Parliament.  This is the major driver in health, safety and environment.  In recent years we have seen layer upon layer of climate and environment directives that have created a confused and ever-changing framework.  There have also been some really poor pieces of health and safety legislation, for example the Optical Radiations Directive, which the Health and Safety Executive concluded would 'bring no additional health and safety benefits in Great Britain'. 

The report urges government to build on work carried out earlier this year that started building a coalition of member states calling for reform of the Commission's approach to regulation.  It's a slow game, but vital.  Whilst the Conservatives are currently rather marginalised in Europe, the Liberal Democrats are part of the major ALDE political grouping which could be very effective in building an alliance.

The report also welcomes the role of the Regulatory Policy Committee in providing a robust challenge to regulatory proposals.  It's job is to check that the policy makers have proved the case for regulation, showing that the benefits outweigh the costs and that regulation is the only way of achieving the desired outcome.  Such a body needs to have teeth so its findings can't be ignored as well as being genuinely indpendent and able to speak out.  Under the last government it was truly independent, but had no teeth.  The coalition is certainly giving it teeth - but at the cost of independence.  We're calling for that to change.

Creating a more competitive regulatory environment will be one of EEF's major campaigns over the coming year.  We will be using the report as a constructive basis for advancing our arguments on a range of regulatory proposals, from simplification of UK waste regulation to negotiations on the Electromagnetic Fields Directive.  As ever our health, safety and environment services are there to help EEF-members and non-members cope with regulation and protect the environment, their workforce and their profitability.  Contact your local EEF office to find out more.

Altogether the report includes 10 recommendations focussed on controlling costs imposed by regulation and changing the culture amongst policy makers.  Click here to read the report or the two page position paper. 

One of the key themes set out in the new government's coalition agreement is reducing the burden of regulation.  Spearheading this is an ambitious commiment to "cut red tape by introducing a 'one-in, one-out' rule whereby no new regulaton is brought in with out other regulations beinc guct by a greater amount."  If that target of actually reducing regulation is deliverd that would have a major impact on the costs to business of complying with health and safety, climate and environment and employment legislation.

It's certainly bold, but haven't we been here before?  The Major government promised 'deregulation', whilst 'better regulation' was a constant theme of New Labour's appproach to business under both Blair and Brown.  And yet throughout that time the cost of regulation continued to rise every single year.

So are things different this time?  Well in some ways it's too early to say.  There are some promising signs, but structures are still being established and are yet to be tested (there are many proposals for regulation wating in the Whitehall wings, but I understand that civil servants are holding back, waiting for someone else to test the water first!)  However, work does seem to be progressing apace, with both Business Secretary Vince Cable and Cabinet Secretary Oliver Letwin driving things forward.  Regular progress updates continue, with EEF contributing to the debate.  So what do they have planned?  The key proposals include:

• ·       a review of all the regulatory proposals in the pipeline;
•         a ‘one-in-one-out’ system to tackle the rising regulatory burden whereby no new regulation can be brought in without the cost of other regulation being cut by a similar amount; 
• ·       ‘sunset clauses’ for all regulations and regulators to ensure that their performance and the ongoing need for them is kept under regular review; 
• ·       strengthening the scrutiny of all new regulatory proposals by giving greater powers to a body called the Regulatory Policy Committee - it was formed in late 2009 and has really hit the ground running.
• ·       giving the public and the business community the opportunity to identify and challenge the worst regulations - an eye-catching initiative but not one likely to have far-reaching impact;
• ·      ending the so-called ‘gold-plating’ of EU legislation whereby the UK government adds additional requirements that increase the regulatory burden on British businesses;
• ·       making greater use of alternatives to government regulation, such as co-regulation and professional standards, to achieve policy objectives; 
• ·       better targeting and a more risk-based approach to inspection;

There are some big opportunities to reduce unnecessary costs to business, whilst still maintaining essential protections.  But there are also some potential elephant-traps lurking.  For example sometimes the alternatives to regulation can be even more bureaucratic - just take a look at carbon trading and some British Standards.  And the reality is that half or more of all regulation comes from the EU, changing it's approach means building broad alliances with other member states.

All of that said, we have an unprecedented opportunity for change.  That is why an EEF Task Group on Regulation was formed to carry out a thorough review.  The Task Group, composed of senior representatives of EEF member companies, has heard from key figures in regulation.  Its report is just being finalised and is due to be launched in September - ahead of the party conferences and in time to inform development of the government's plans.  

That report is intended to be more considered than just a simple 'we don't like regulation'.  The reality is that regulation does have a place in a civilised society:  it provides important protections, and at its best ensures that everyone competes on a level playing field.  The challenge is finding the right balance point, between protections and the cumulative cost to business of complying.

This is likely to be an important area that has a very significant impact on all areas of regulation.  We'll keep you updated on developments.

Things are hotting up ahead of both, the deadline for CRC registration and government reviewing the scheme.

I hear that despite both DECC and the Environment Agency (EA) going all out to make sure that all organisations that should be registering for Carbon Reduction Commitment (CRC) Energy Efficiency Scheme, are signing up, less than half have already done so.

As well as this, my concern is that there are still organisations that consider that there is no need to register, because either the organisation is in a Climate Change Agreement, or they believe the organisation, as a whole, does not qualify.

All this registration confusion is taking place at the same time that government is considering what to do with this highly complex scheme. There is talk of a fundamental review, with some organisations calling for the cap-and-trade phase of the scheme, due to start from 2013, to be scrapped.

With government looking to simplify the UK climate change policy landscape, I can’t see that CRC will be left unscathed when DECC sets out details of the future of climate change policy in the ‘autumn’.

As for mopping up the organisations that have yet to register ahead of the 30th September deadline, I understand that the EA has an army of people phoning round organisations it believes should be registering. It shows how committed the Agency is to ensuring the scheme starts well. It may be too committed though, as it has phoned organisations that have already registered.

A welcome position from the EA is the message, “Do not delay registration even if your information is not fully accurate. We urge all organisations to register as soon as possible before the 30th September. We will work with you to resolve any errors in the information you supply.”

A word of warning, is that a number of registrants have lost the information they have entered due to not using the “save” button in the registration process. The Agency is advising that you regularly save your registration as you go through it. The registration is saved on the system for 30 days from when you last saved it.

One thing is for sure, this is not the last word on both registration and significant policy reform.