The Government has today announced that it is to introduce a one-in, one-out system of regulation whereby "When Ministers seek to introduce new regulations which impose costs on business or the third sector, they will have to identify current regulations with an equivalent value that can be removed."
This is clearly a welcome initiative, as it will make regulatory costs (which are too often overlooked in austerity discussions) similar to spending, in that ministers would have to prioritise amongst different pieces of regulation just as they have to prioritise what to spend money on.
But what about rules and regulations coming from Brussels? Our research, based on the Government's own Impact Assessments, shows that in 2009, 59 percent of the annual cost arising from all regulation introduced since 1998, £32.8 billion, stemmed from EU legislation. So that's around £19bn. (Note that this includes all regulations introduced since 1998 - when the government started to produce IAs - which gave rise to a cost in 2009, as opposed to the government's figures which only include new regulations introduced last year).
Unfortunately, the Government has decided to duck the uncomfortable question and not include regulations from the EU in the scheme.
This could prove problematic for several reasons.
Firstly, it will limit the impact of the scheme, as it will not cover the bulk of the cost of regulation. As a point of comparison, imagine the Coalition having a series of proposals for how to get the country’s public finances in order, but only having full control of 40% (or less) of the actual budget.
Secondly, ignoring the impact of EU legislation leads to unrealistic expectations of delivery. This, in turn, could undermine the credibility and legitimacy of the Coalition government's entire regulatory reform drive.
Thirdly, and perhaps most importantly, the point of the budgets is to ensure regulatory prioritisation within departments. If so much of the annual regulatory cost originates in the EU – then how much of a real “prioritisation” can actually take place? This is particularly true for departments/agencies such as the DfT, FSA, HSE and DEFRA whose regulatory output is almost completely dominated by EU laws - in come cases over 90% of the cost (see table).
In addition, the Conservative party has been – rightly – a critic of ‘EU overregulation’ in the past. In a speech in May 2009, launching the party’s European election campaign, David Cameron said:
“Our next task is to fight the EU's culture of centralisation and over-regulation. Brussels can be a force for economic dynamism - but too often it acts like an economic millstone.”
Starting off with launching a flagship proposal which doesn't address EU regulation doesn't look too good, and gives the impression that the Coalition Government is in denial over how much impact laws stemming from Brussels has on the UK economy.
But there is another way.
According to negotiation theory, in the interaction between domestic and international (EU) politics, governments strengthen their bargaining power if they can convince their negotiation partners that their mandate from voters and business at home is very restricted – and that they are ready to stick to that mandate.
That is how the Coalition Government should use the one-in one-out scheme.
EU legislation should have to meet the same stringent criteria as domestic legislation (including being signed off by the Coalition's "Regulatory Policy Committee") . At a very early stage in EU negotiations, the UK Government should give its negotiators the authority to reject proposals that do not meet its priorities and threaten to break its own regulatory budget. UK ministers must make clear to their EU partners that they simply do not have the mandate to sign up to a proposal that will break their departmental regulatory budget. This would strengthen the UK's negotiating hand massively.
It would be radical but not more radical than other member states simply choosing not to implement EU laws properly or resisting CAP reform, for example.