Regulatory quality in Europe: Concepts, measures and policy processes

By Claudio Radaelli and Fabrizio De Francesco

The European Union and its member states are investing in ambitious programmes for ‘better regulation’ and targets of regulatory quality. This book, available in paperback for the first time, lifts the veil of excessively optimistic propositions covering the whole better regulation agenda. It provides an innovative conceptual framework to handle the political complexity of regulatory governance. It approaches better regulation as an emerging public policy, with its own political context, actors, problems, rules of interaction, instruments, activities and impacts. Focusing on the key tools of impact assessment, consultation, simplification, and access to legislation, the authors provide fresh empirical evidence on the progress made in the member states and in Brussels, drawing on an extensive research project and an original survey of directors of better regulation programmes in Europe. Radaelli and De Francesco show how indicators define, measure, and appraise better regulation policy, linking measures to policy processes in which the stakeholders learn by monitoring. Although better regulation is a top priority for competitiveness in Europe and the legitimacy of EU policy, the level of commitment and the development of tools vary considerably. The major challenge for better regulation is institutionalisation - this calls for clear choices in terms of what the EU wants from better regulation.

Essential reading for academics (political scientists, lawyers, and public economists) and policy-makers in charge of regulatory reforms in governments and international organisations.

• Language: English
• Publisher: Manchester University Press
• Release date: Jul 19, 2013
• ISBN: 9781847796554

Claudio Radaelli

Claudio M. Radaelli is Professor of Political Science, Jean Monnet Chair, and Director of the Centre for Regulatory Governance at the University of Exeter

Book preview

Regulatory quality in Europe

European Policy Research Unit Series

Series Editors: Simon Bulmer, Peter Humphreys and Mick Moran

The European Policy Research Unit Series aims to provide advanced textbooks and thematic studies of key public policy issues in Europe. They concentrate, in particular, on comparing patterns of national policy content, but pay due attention to the European Union dimension. The thematic studies are guided by the character of the policy issue under examination.

The European Policy Research Unit (EPRU) was set up in 1989 within the University of Manchester’s Department of Government to promote research on European politics and public policy. The series is part of EPRU’s effort to facilitate intellectual exchange and substantive debate on the key policy issues confronting the European states and the European Union.

Titles in the series also include:

Globalisation and policy-making in the European Union Ian Bartle

Creating a transatlantic marketplace Michelle P. Egan (ed.)

The politics of health in Europe Richard Freeman

Immigration and European integration Andrew Geddes

Agricultural policy in Europe Alan Greer

The European Union and the regulation of media markets Alison Harcourt

Mass media and media policy in Western Europe Peter Humphreys

The politics of fisheries in the European Union Christian Lequesne

Sports law and policy in the European Union Richard Parrish

The Eurogroup Uwe Puetter

EU pharmaceutical regulation Govin Permanand

Extending European cooperation Alasdair R. Young

Regulatory politics in the enlarging European Union Alasdair Young and Helen Wallace

Regulatory quality in Europe

Concepts, measures and policy processes

Claudio M. Radaelli and Fabrizio De Francesco

Copyright © Claudio M. Radaelli and Fabrizio De Francesco 2007

The right of Claudio M. Radaelli and Fabrizio De Francesco to be identified as the authors of this work has been asserted by them in accordance with the Copyright, Designs and Patents Act 1988.

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British Library Cataloguing-in-Publication Data

A catalogue record for this book is available from the British Library

Library of Congress Cataloging-in-Publication Data applied for

ISBN 978 0 7190 7404 2

First published 2007

16 15 14 13 12 11 10 09 08 07          10 9 8 7 6 5 4 3 2 1

Typeset by R. J. Footring Ltd, Derby

Printed in Great Britain

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This book is dedicated to our families

Contents

List of tables, boxes and figures

Acknowledgements

List of abbreviations

Introduction

1 Appraising regulatory policy

2 Defining quality

3 How indicators perform: a review of the literature

4 Measuring the performance of better regulation policies: the cross-national experience

5 The results of the questionnaire

6 The state of play in the EU

7 Better regulation indicators

8 Conclusion

Appendixes

1 Questionnaire – measuring regulatory quality

2 System 1. Indicators for the quality of the process

3 System 2. Indicators for internal evaluation

4 System 3. Indicators for external evaluation

References

Index

Tables, boxes and figures

Tables

2.1 How different stakeholders look at better regulation

3.1 Classification of the main studies with composite measures

3.2 An example of the construction of first-level indicators

3.3 Type of regulatory costs and methodologies

3.4 Cost of risk-reducing US regulations per life saved

3.5 Advantages and disadvantages of different types of measure

4.1 The nine Australian regulatory performance indicators

4.2 Correlation between quality assurance systems and approach to regulatory impact assessment

4.3 Indicators currently in use

5.1 Respondents to the questionnaire

5.2 Regulatory quality tools

5.3 Diffusion of quantifiable targets

5.4 Quantifiable targets

6.1 Summary of the four evaluation studies on the Commission impact assessment

6.2 Scorecard of the codification of the Commission’s acts

7.1 The three systems of indicators

A.1 Purpose, interpretation and data collection of design and principles of better regulation policy indicators

A.2 Purpose, interpretation and data collection of quality assurance process indicators

A.3 Purpose, interpretation and data collection of quality of guidance on RIA indicators – basic information on activities

A.4 Purpose, interpretation and data collection of quality of guidance on RIA indicators – quality of guidance

A.5 Purpose, interpretation and data collection of consultation indicators – activities

A.6 Purpose, interpretation and data collection of consultation – guidance

A.7 Purpose, interpretation and data collection of quality of simplification programme indicators – activities

A.8 Purpose, interpretation and data collection of quality of simplification programme indicators – simplification strategy

A.9 Purpose, interpretation and data collection of quality of access strategy indicators – access strategy

Boxes

2.1 Dimensions of better regulation: indicators of design, activity and outcome

2.2 Tools of better regulation policy

4.1 The fiscal year 2005 PART – regulatory program section

4.2 Canadian guidance on the assessment of regulatory initiatives

4.3 Standards of regulatory process: a self-assessment checklist

4.4 The NNR regulation indicators for 2003 and SimpLex checklist

4.5 The NAO checklist on regulatory impact assessment

6.1 IMAC indicators of better regulation policy design

6.2 IMAC indicators to monitor legislative output

6.3 The prioritisation indicators of the Commission’s simplification action plan

Figures

3.1 A typology of regulatory burdens

5.1 Chief objectives of regulatory quality in Europe

5.2 Principles of regulatory quality

5.3 Guidance on regulatory tools

5.4 Monitoring of targets

5.5 Performance measurement

5.6 Coordination in use of tools

5.7 Indicators of activity

5.8 Number of countries that would be able to quantify the lives saved through new regulations

5.9 Number of countries that would be able to quantify illness reduction arising from new regulations

5.10 Number of countries that would be able to quantify the regulatory benefits delivered by new regulations

5.11 Number of countries that would be able to quantify regulatory costs arising from new regulations

5.12 Number of countries indicating which key activities should be tracked at the EU level over the next five years

Acknowledgements

We have been working together on better regulation since 2000, but we gratefully acknowledge the support of the European Commission, DG Enterprise, for having funded our research project on indicators of regulatory quality in 2004 (tender ENTR/03/053) at the University of Bradford. Our greatest personal and professional debt is to Robertus Scharrenborg, an economist (with interests in political science as well) from DG Enterprise of the Commission, who chaired the project’s steering group. Robertus went beyond the call of duty and standard contractual relations to provide generous guidance and support.

We conducted the project with our colleagues in economics Sam Cameron and Hossein Jalilian, who sent us detailed comments on what is now chapter 3 of the book and helped us to design the questionnaire presented in appendix 1 and discussed in chapter 5. The project team included two advisors, Bruno Dente and Scott Jacobs, who provided perceptive insights at all stages of the project. We wish to acknowledge the quality of the research environment provided by the Centre for European Studies at the University of Bradford, now led by Roberto Espindola. Roberto and the Marie Curie fellows of the Bradford training centre on Europeanisation (especially Ulrike Kraemer and Delphine Tatot) were always keen on providing help, suggestions and, most pleasant of all, discussions over lunch. There was a period in which we had a very lively ‘indicators of regulatory quality table’ at the University’s refectory.

We were fortunate to have an enthusiastic and creative steering group, comprising Peter Ladegaard (at that time at the Organisation for Economic Co-operation and Development, OECD) and, from the Commission, Massimo Angelino, Peter Curran, Lars Holm Nielsen, Ulrik Mogensen, Eric Philippart and Manuel Santiago dos Santos. Together with DG Enterprise, the Secretariat-General of the Commission provided access to work under way in Brussels and engaged in the scientific and policy debate on our findings.

The OECD provided access to its database on indicators of regulatory quality and agreed to meet with us in Brussels and Paris to discuss our work. In addition to Peter Ladegaard, we wish to thank Rolf Alter, Joseph Konvitz and Stephane Jacobzone for their perceptive comments and for having invited us to present the report in Paris at a meeting on regulatory reform with OECD delegates.

The project for DG Enterprise was supported by a network of policy-makers active in better regulation programmes across Europe. Thanks to this support network, our project became a unique experience for us in terms of exchanges and discussions with a very special group of people. Not only did the members of the support network kindly agree to answer our questionnaire but they also provided insights on how the tools of better regulation are implemented, interacted with us by email and telephone, and animated the interim and final project meetings. We wish to thank the members of the support network who joined us from Austria, Belgium, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Luxembourg, the Netherlands, Poland, Spain, Sweden, the UK, and, outside the EU, Bulgaria, Norway and Romania. The support network also included business organisations such as the Board of Swedish Industry and Commerce for Better Regulation, Eurochambers (the Association of European Chambers of Commerce and Industry) and Small Business Europe. Officials from Australia and Canada who were not formally included in the support network kindly agreed to answer questions and to give us access to their work on the measurement of regulatory performance.

We benefited from discussions with the Better Regulation Executive and the National Audit Office in London. Mark Courtney of the Better Regulation Executive kindly invited us to address the ‘directors of better regulation’ at a meeting in London in March 2005. Claudio Radaelli was asked to join the experts panel of the National Audit Office on regulatory reform – an experience that has increased the sophistication of our arguments and the motivation for turning the initial project for DG Enterprise into a book.

A large number of researchers and policy-makers in Europe and the United States provided helpful suggestions on the draft chapters of the book. They include Robert Baldwin, Dominik Böllhoff, Simon Bulmer, Alessia Damonte, Bruce Doern, Robert Hahn, Adrienne Heritier, Ed Humpherson, Oliver James, Jacint Jordana, Yannis Karagiannis, David Levi-Faur, Mick Moran, Susan Owens, Mark Pollack, Carol Weiss and Nikos Zahariadis.

The transition from project to book took one year. It was undertaken at the Centre for Regulatory Governance of the Department of Politics, University of Exeter. We thank the Department for having supported Fabrizio De Francesco with a scholarship in spring and summer 2005. At Exeter we have the privilege of working with a strong public policy team. We wish to thank our colleagues for their support, inspiration and healthy, challenging conversations throughout the year 2005. The series editor at Manchester University Press, Professor Peter Humphreys, sent us a detailed report on the manuscript in December 2005. Finally, it was a great pleasure to work with Anthony Mason at Manchester University Press and Ralph Footring, freelance production editor.

Abbreviations

Introduction

Since the early days of the single market in the European Economic Community and the first wave of privatisations in the 1980s, rules have played an important role in European politics. Mutual recognition, minimum harmonisation and delegation to standardisation bodies were introduced with the aim of completing the single market without the need to create a huge body of legislation and political fatigue over comprehensive harmonisation (Egan, 2001). Some scholars looked at Europe as an example of regulatory cooperation in an interdependent world (Majone, 1994). Independent regulatory agencies emerged as a response to the problem of credibility of political regulatory institutions. The scenario for smooth regulatory reform was set. Reality took a different direction, however. Today, concerns about the quality of European rules and the role of independent regulators in the market are diffuse. So much so that regulatory quality has become one of the priorities of the competitiveness strategies of the Member States and institutions of the European Union (EU).

In this book, we critically discuss the concept of regulatory quality, approach regulatory reform by taking the institutional context and the policy process into consideration, and use indicators to measure the quality of policies designed to enhance the ability of governments and EU institutions to deliver high-quality regulation. We design regulatory indicators by considering four classic tools: impact assessment; consultation; simplification; and access and regulatory transparency.

Regulatory reform and better regulation policy

Regulation provides a fascinating perspective on how politics is changing. Regulatory reform has transformed the nature of the state, opened new domestic and international arenas of power, and created new institutional architectures. The tide of regulatory reform originated in the Anglo-Saxon world. In North America, the rise of the regulatory state preceded the welfare state and, in the USA at least, it was seen as a partial substitute for it. Unsurprisingly then, the demand for smart regulation, sometimes complemented by social scientists’ eagerness to test their ideas for new policy instruments, has increased as an obvious response to regulatory explosion.

International organisations have amplified the impact of the regulatory reform movement. The Organisation for Economic Co-operation and Development (OECD) and the World Bank have prioritised regulation in their programmes for ‘good governance’ and have advocated comprehensive regulatory changes linking regulatory reforms to economic growth and more inclusive and transparent modes of governance. By doing so, the OECD and the World Bank have acknowledged the potential of regulatory reform in terms of governance, participation of stakeholders and more balanced state–society relations (Kaufmann et al., 2003, 2005; OECD, 2002). What started as a movement to open up economic sectors to competition has now become a debate about modes and models of governance, accountability and the role of the public interest in international and domestic regulatory choices. This explains why civil society organisations are nowadays an important stakeholder in the ‘regulatory state’ and in business regulation at the international level (Braithwaite and Drahos, 2000; European Policy Forum, 2003, 2005).

In Europe, the EU has rapidly emerged as a crucial arena where regulatory policies are defined, especially since the Single European Act in 1986 set the ambitious plan (in some areas still far from being implemented) to complete the single market. With the Lisbon agenda to make the EU the most competitive knowledge-based society,¹ regulatory reform has become a priority for the Member States and the EU institutions. The Mandelkern (2001) report, prepared for the Laeken summit of the European Council, was an important turning point.² For the first time, all Member States agreed on the need to introduce principles of regulatory quality in their policies and to implement specific tools in ‘key areas’. The principles highlighted by the Mandelkern report are: necessity, proportionality, subsidiarity, transparency, accountability, accessibility and simplicity. Turning to the key areas, the report flagged up the systematic use of several options to solve policy problems – the idea being that regulation should not be the default solution to any problem. These options were: the assessment of proposed EU and national legislation, consultation, simplification, access to regulation, implementation of EU legislation, and the design of specific institutions in charge of these tasks. Most of the ideas aired in the Mandelkern report had already been advocated by the OECD (1997a, 1997b, 2002). But the importance of the Mandelkern report is political: with the report, a political agenda for the Member States and the EU institutions was set. Since then, there has been a flurry of initiatives in Europe.

In 2002, the Commission adopted a system of integrated impact assessment to measure a wide range of costs and benefits of proposed legislation, in the context of the goal of sustainable development. In 2003, the Council, the European Parliament and the Commission signed an ‘inter-institutional agreement on better regulation’, thus making this issue a joint priority of the three institutions. In January 2004, the finance ministers of Ireland, the Netherlands, Luxembourg and the UK – the Member States in charge of the four EU Presidencies over the course of 2004 and 2005 – proposed to coordinate and intensify action on regulatory reform, following the template set by the Mandelkern report. The finance ministers asked the Commission to monitor the process by using ‘indicators to measure progress with regulatory quality and reform at European and Member State level for activation through the open method of coordination and for application in impact assessment’. In December 2004, the Irish, Dutch, Luxembourg, UK, Austrian and Finnish Presidencies of the EU linked progress with the Lisbon agenda to regulatory reform.³ Specifically, the six Presidencies highlighted the issues of tackling the administrative costs of regulation and the need to test the impact of proposed legislation on European competitiveness; they also (one more time) asked the Commission to develop, in consultation with the Council, ‘indicators to measure progress with regulatory quality and reform at EU and Member State level’. The Competitiveness Council of 24 September 2004 called on the Commission and the Member States to evaluate ‘the cumulative impact of existing legislation on the competitiveness of industry and of specific industry sectors’ and to develop ‘a method for measuring administrative burden on business’ (Council of the European Union, 2004a: 3). In June 2005, the Council issued a recommendation for a ‘new start’ for the Lisbon strategy, to include a specific ‘broad economic policy guideline’ on ‘better regulation’. The Council (2005a: 23) argued that:

the cumulative impact of regulations may impose substantial economic costs. It is therefore essential that regulations are well-designed and proportionate. The quality of the European and national regulatory environment is a matter of joint commitment and shared responsibility at both the EU and Member State level.

In a few years, the EU and its Member States have moved from a discussion of principles of regulatory reform to a debate on indicators of regulatory quality, targets and processes of facilitated coordination to achieve their goals.

In short, regulatory reforms have emerged in the political agenda of the EU, its Member States and international organisations. The demise of Keynesian demand management has shifted priorities from ‘command and control’ modes of governance to other modes. In this context, regulation provides its own set of unique challenges. While the instruments to govern taxes and public expenditure are now well known across the OECD countries, the debate on how to govern regulation is more speculative and uncertain. Contrast the progress made with policy techniques such as budgeting, anti-inflationary monetary policies and tax policy with the difficulties experienced in measuring cumulative regulatory costs (SQW, 2005) and the complexity underlying the definition and implementation of regulatory budgets (McGarity and Ruttenberg, 2002; Thompson and Weidenbaum, 1998).

Looking at the development of regulatory reform, three aspects stand out. They can be described as: the shift from sector-oriented reform to horizontal, cross-sectoral reform; the priority given to regulatory management; and, most importantly for this book, the emergence of ‘better regulation’. The first aspect is the evolution from sectoral reform (think of environmental regulation, health and safety, telecommunications, broadcasting and energy) to the identification of institutional models and specific tools that are applicable across sectors. This is evidenced by the diffusion of independent regulatory authorities, the pivotal role assigned to ‘regulation for competition’, the commitment to use market-friendly alternatives to ‘command and control’ regulation, the introduction of mandatory consultation in the preparation of new legislation and the use of cost–benefit analysis to support the introduction or revision of rules.

The second aspect is the attempt to move beyond individual reforms and specific regulatory tools and to create the preconditions for regulatory management. Following the OECD (1997a: 204), regulatory management ‘can be seen as a logical evolution of the regulatory state’. It designates the coordination of regulatory policy across the entire life-cycle of regulation by dint of central management institutions situated in the core executive and by managing the aggregate regulatory effects, such as total costs on a sector. Regulatory management sets goals in terms of the government’s delivery of high-quality regulation; it is neutral, though, as to the size and scope of government, focuses on regulatory transparency and accountability, and creates ‘the longer-term cultural change inside the administration’ (OECD, 1997a: 203).

The transition from deregulation to regulatory reform and, more recently, to management is still under way and the results are variable (OECD, 2002; SQW, 2005, on the UK). There is an area, however, where the effort to coordinate regulatory activities and manage them has gone further. This is the area that, broadly speaking, is known in the EU and OECD Member States as ‘better regulation’ – the third aspect we wish to discuss throughout this volume. This term can be elusive and misleading. Policy-makers use it in a normative sense, to indicate specific reforms that have to be undertaken in order to create the capacity, at the level of governments and EU institutions, to deliver high-quality regulations. As social scientists, we do not assign any normative value to this concept. We use ‘better regulation’ to designate a set of principles and tools that discipline the regulatory policy process. Put differently, what policy-makers call ‘better regulation’ is essentially meta-regulation (Morgan, 2003; Parker, 2002; Scott, 2003). In turn, meta-regulation can be successful or fail. The fact that policy-makers call it ‘better regulation’ does not mean that the quality of the regulations that we observe empirically is high. Although the results achieved by the EU and its Member States vary markedly, at least at the conceptual level ‘better regulation’ can be considered a public policy.

This is an innovative aspect of this book. We approach ‘better regulation’ in the same way we would approach other public policies, such as housing policy or environmental policy. In consequence, we examine this new policy in terms of its actors, problems, resources, rules of interaction, decision-making structures and outcomes. We insist on the fact that we do not assign any normative value to the notion of ‘better regulation’ – but we will not carry on with the quotation marks to indicate this, hence they will be dropped hereafter.

Why is better regulation relevant to political scientists interested in the transformations of governance? To begin with, it is based on explicit principles and thereby defines what citizens can legitimately expect from public regulation. Advocates of better regulation want both to change the way regulatory institutions think and to provide a new social contract between government, regulatory authorities, citizens and interests. The emphasis on regulatory transparency, accountability, access to legislation and consultation is grounded in a model of governance. Accordingly, better regulation has inspired proposals for governance that go well beyond individual policy domains. The transformations we are talking about involve much more than tinkering with policies. They imply wider changes in the arenas and the nature of power. Hence the current debate in scholarly journals and in policy-making circles makes reference not just to regulation but to the state as well.

Another reason behind our interest is the pervasiveness of this new policy. Better regulation seeks to streamline the whole life-cycle of regulation, from the preparation of new rules to their implementation and enforcement. Accordingly, its tools target the stage of policy formulation (with the introduction of systematic impact assessment of new regulatory proposals), the stage of policy implementation and evaluation (with initiatives for better implementation and enforcement, simplification, and ex-post analysis of regulatory costs and burdens) and in some instances both stages (via consultation standards, rules on policy advice, and broad programmes for access to legislation and regulatory transparency). Better regulation covers the process of formulation both of rules affecting the citizen and the economy, and of rules affecting the public sector, thus covering the broad area of ‘regulation inside government’ described by Hood et al. (1999).

More importantly still, better regulation is a set of principles and instruments for the management of the regulatory process. Impact assessment, consultation standards, simplification procedures and rules for the use of experts and advisors in policy formulation are essentially standards applicable to the regulatory process. This is why we consider better regulation a paradigmatic case of meta-regulation. Let us pause for a moment to reflect on this concept.

Parker and Scott use the concept of meta-regulation to designate rules and standards by which governments control the self-regulatory regimes of corporations (Parker, 2002) or public sector organisations (Scott, 2003). Instead, we follow Morgan’s notion of meta-regulation. According to Morgan (2003: 490):

[meta-regulation] encompasses any set of institutions and processes that embed regulatory review mechanisms on a systematic basis into the every-day routines of governmental policymaking, such that a particular form of economic rationality becomes part of the taken-for-granted ways of policymaking.

As such, meta-regulation brings reflexivity into the design of regulatory policies (see also McGarity, 1991). Morgan mentions the example of the institutionalisation of cost–benefit tests applied consistently to the formulation of public policy as an example of meta-regulation. She goes on to add that:

This principle is institutionalised as a general mechanism of governance, not confined to one-off efforts to reform particular policy sectors, but instantiating generally applicable, sector-neutral and continuously applied techniques of regulatory reform. (Morgan, 2003: 490, emphasis in original)

Further, a key objective of meta-regulation is to control the regulators (Froud et al., 1998; Posner, 2001).

Some caution, however, is in order here. Firstly, as mentioned, we do not assign any normative load to the concept of better regulation policy. When we use this term, what we have in mind is comprehensive, horizontal programmes for the management of regulation. We do not claim that better regulation policy produces better, more efficient, growth-oriented rules. This is an empirical question. We do not claim that better regulation policy is the only way to improve regulation; indeed, there may be better ways to produce smart regulation (Baldwin, 2005; Gunningham and Grabosky, 1998: ch. 6; Sparrow, 2000). We are aware of the limitations and criticisms of meta-regulation (Morgan, 2003). Morgan, reflecting on the Australian experience, argues that meta-regulation makes the regulators think about aspects of social welfare, previously couched in the language of values, need or harm but now couched in the language of economics. We can discuss the implications of the ‘economisation of regulatory politics’ (Morgan, 2003: 509), although we would observe that, no matter what the values, need, and harm are, policies still have costs and benefits. Economic analysis and other types of evidence can provide a useful point of reference for political argumentation and debate (Majone, 1989), as shown by the use of economic analysis by environmental organisations (Melnick, 1990: 48).⁴ Other limitations of better regulation relate to its obsession with slogans and principles rather than with the substance of politics. It may well be true that – as Wegrich (2005: 4) perceptively observes – better regulation is silent ‘about how the adoption of tools and formal procedures could