Merits of Statutory Instruments Committee: Post-implementation Reviews

My Lords, I thank the noble Lord, Lord Filkin, for his years of hard work as Merits Committee chairman, and congratulate the noble Lord, Lord Rosser, on his recent appointment as chairman. I also thank the Merits Committee for the report on post-implementation reviews, and I thank noble Lords for their contribution to this thought-provoking debate. After only a year as a Minister, I have tried to look at this issue from a new and business-minded perspective. I am a huge fan of lessons learnt, impact analysis and understanding the impact of policy decisions. In the long run, they save money and improve performance and productivity. I am not a fan of something that paralyses the system, however—we need balance. My personal perspective as a newcomer to this is that I agree with the spirit, and most of the content, of the report. The debate is about whether every piece of secondary legislation needs PIR. That could paralyse the system and create a huge amount of extra work for little benefit. PIRs need to have a clear benefit; we need to ensure that they do not become a tick-box exercise. We expect to review everything unless there is an explanation for why a review is not necessary. This "comply or explain" methodology is how the Government will hold themselves to account. I encourage the Merits Committee to be tough on any department that is not clear in its explanation for why it is not carrying out a review. We need to look at whether Parliament should stop taking legislation through without full and thorough impact assessments. All the processes are in place, but there is scope for Parliament to be tougher on both impact assessments and PIRs. My current impression is that there is not enough pre-policy preparation, and that the end of the process needs to be improved. We should look back and learn before we move forward. That does not mean, however, that we need PIRs on everything. Parliament needs to hold officials to account for the impact of policy implementation, and there is no doubt that there needs to be a cultural change across Parliament and parts of government. A strengthened process should be easy to monitor. The best way to achieve a major cultural change would be to assess how the strengthened impact assessment and PIR process works over the next 12 months and look again in 12 months’ time at whether BRE should have a stronger role in policing new policies. I turn to PIR. I shall explain the background to our approach, explain why we have not accepted all the committee’s recommendations and address the points raised. In the context of better regulation, PIR—to state the obvious—improves public accountability and improves policy design by feeding in lessons learnt. It also looks at the extent to which burdens are minimised and benefits are maximised. It also gives a better understanding of effective policy enforcement mechanisms. In carrying out PIR, the review content is important; it is not the forms we fill in but the lessons we learn and the consequent actions that we take. The Government’s newly strengthened approach to PIR is set out in our response to the committee’s report. There are three principles. The first is integration into the policymaking process. The second is transparency, so that stakeholders can hold the Government to account. That is very important: if you have transparency, if you have "comply or explain", it is much easier. The third principle is proportionality. We have to use the right amount of resource for each PIR. "Comply or explain" is a new and higher standard. From April this year, when the Government decide not to undertake a PIR, they must state publicly why not. If a planned PIR is not carried out when due, the Government must also explain why. Flexibility is important. We do not want to impose rigid requirements on departments to carry out reviews at any particular time. It is important that we have time to gather sufficient evidence. We expect most reviews to be carried out three to five years after implementation, after which things may change. There may be good reasons to change plans in response. On integration into the policy-making process, departments have to retain responsibility for their policies. They have to carry out appraisal and evaluation, which are essential steps in policy-making. Responsibility cannot be farmed out, but we are seeking a cultural change at official level. From April, an improved impact assessment template will be rolled out across government. It will be published on the BIS website in April, and I would be happy to share information with the Committee in the mean time. But let me be clear, we take PIRs seriously, like impact assessments, and they must be signed off by Ministers. A key issue is that the resources devoted to PIRs need to be proportionate to the likely benefits accruing from the review. "Comply or explain" is a simple idea, but the Government have reaffirmed that they expect departments to carry out and publish a review of policies which were previously subject to impact assessment. Departments may depart from this policy, but they will have to explain in public their reasons for doing so. Turning to the two main points of difference between the Merits Committee and the Government, there is a debate about how many instruments should be reviewed. I understand that 1,111 SIs were laid in 2008-09. Even a quick desk-top review of each of those would cost a lot of taxpayers’ money. Many SIs are closely related. For example, more than 80 have been made under the Companies Act 2006, which is currently being reviewed. It would be inefficient to review each of these individually when they can be bundled into a single review. On proportionality, the banking crisis is a good example of many lessons to be learnt, but there has to be a pragmatic proportionality in what we choose to review, how we choose to do it and what resources to dedicate to it. Sometimes, there is a danger that we lose focus. The Government have a responsibility to spend taxpayers’ money effectively. Intense reviews of every policy would be a waste of resources. The intensity of the review should be aligned to the level of policy impact and the potential benefits of a review. Individual departments should decide the scale of PIR appropriate within the guidance which we shall provide. There needs to be a clear sense of proportionality. We need to ensure that the process is sufficiently flexible and that departments focus resources on full analysis of high-impact policies. The Government see a desk-top review as an appropriate form of PIR for low-impact policies. There has to be differentiation. By desk-top review, we mean that the policy official would not necessarily answer all the questions suggested by the Merits Committee; for example, the review may not always involve full stakeholder consultation, but a short report would be published. PIRs would always cover the core questions: to what extent has the policy achieved its objectives; to what extent have the success criteria been met; and to what extent have there been unintended consequences? The noble Lord, Lord Rosser, suggested that Explanatory Memoranda should contain a plan to review. That is contained in the new impact assessment template, which will be in use from April 2010. I think that he also said that more should be published and that it should be published with more enthusiasm. I agree with that. We have committed to review in 12 months’ time everything that has been happening. Publication, transparency and a review in 12 months will ensure that a bit of name and shame will go on and each department will have to perform. How will they be held to account? If you are publishing PIR plans with "comply or explain", the permanent secretaries and their departments will be held to account for performance, as required when they publish their annual performance report. The Treasury and BIS will be updating that requirement in the near future. The noble Lord, Lord Norton of Louth, said that if a PIR committee is to work, the House needs to act. The House has that power already; it should use it. The Joint Committee is a very good idea that is worth considering. The noble Baroness, Lady Butler-Sloss, mentioned the Merits Committee report recommendation on cumulative impact on schools. I agree: a proportionate PIR should look at the cumulative impact on schools. That is a good example of where reviewing individual statutory instruments is a bad idea, but where a collective review is a good idea. I will write to my colleagues at DCSF and report back to the Merits Committee. The noble Lord, Lord Filkin, and the noble Lord, Lord De Mauley, both asked how many post-legislative scrutiny exercises the Government have carried out. As was mentioned, the policy on scrutiny dates back to 2005. Memoranda are beginning to fall due this year. Progress in producing post-legislative memoranda has not been as strong as we would have liked. We hope that the flow of memoranda will improve as the process becomes better established, and we will continue to monitor the situation. The Government have submitted and published three PLS memorandums so far, and two more are due next month. The three that have been published are on electoral administration, the Railways Act and the Prevention of Terrorism Act. Those due in the next few weeks are on the Constitutional Reform Act and the Education Act. One question that I asked when I got into this was: what is the difference between post-implementation review and post-legislative scrutiny? PIR is required for all legislation of a regulatory nature, and for non-legislative regulatory intervention, such as guidance. PIR and PLS are very closely related activities, which are both concerned with reviewing legislative instruments. Many of the activities required to carry out one are also required to carry out the other. A review of whether the policy is working as intended is common to both. In the next month or so, the Government will clarify the relationship between PIR and post-legislative scrutiny of primary legislation, and will update the relevant guidelines. The noble Lord, Lord James of Blackheath, raised the issue of process within departments to follow up and whether we should have a central index. I think that that is covered by transparency. We will be able to name and shame the departments that are not doing their jobs. I am not an expert on horses, but I gather that Defra has introduced a revised system, with more enforcement, using the Animal Health executive. Nevertheless, that points to some issues that should have been addressed. The noble Lord, Lord De Mauley, asked about where PIRs are promised but not carried out. The NAO has found that in most cases where a PIR had been promised but not carried out, departments reported either that the legislation had been superseded or that they still planned to carry out a PIR or other work to evaluate success. There was a good reason to delay in most cases. The final question is one that I have struggled with personally. That is the issue of how important is money: the £50 million threshold. I must be honest; I think that that needs a little more definition. There are other priorities apart from money—public interest, and many others—but I believe that most of them are covered by the policy of "comply or explain". If you are not doing it, you will have to explain why. This is an excellent report, and we welcome it. Policy review is important to us all. I do not believe that Parliament is any different from business. The more you talk about mistakes, the more you get a slightly different culture and the more you learn--after all, in all walks of life, not everything works perfectly. The Merits Committee report has stimulated a tightening of policy and the tighter integration of PIR in the impact assessment process, and undoubtedly there will be an increased level of transparency in order to hold the Government to account. The Regulatory Policy Committee is an independent body, set up last year to comment publicly on the analysis underpinning new regulatory proposals. As the improved impact assessment process focuses more strongly on PIR, the RPC and others will be able to take an interest in PIR in two ways: first, the consultation-stage impact assessment will set out departmental plans for a later PIR, and the RPC may comment on that; and, secondly, the consultation-stage impact assessment may refer to an evaluation of previous related regulation. Again, the RPC will be able to comment on that analysis, or note where it is lacking. To summarise: the Government will tighten our approach to PIR and, through increased transparency, will hold discussions with stakeholders, including the Merits Committee. We will ensure that everyone is held to account for performance, and I encourage the Merits Committee to carry on pushing on this subject.