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Good Practice: Regulatory Impact Assessments - Introduction to RIAs

What is an RIA?

Government departments assess the likely outcomes of regulating in order to try to achieve the right balance between under-regulating, which may fail to protect the public, and over-regulating, which may create excessive bureaucracy.  Since 1998, the Government has used Regulatory Impact Assessments (RIAs) to assess likely outcomes, producing around 150 to 200 a year.

RIAs identify the costs and benefits of a policy proposal and the risks of not acting. They are intended to inform the policy decision making process and communicate clearly the objectives, options, costs, benefits and risks of proposals to the public to increase the transparency of the process. 

There are three stages to an RIA:

Initial RIA. Carried out at the early policy development stage. This can help identify areas where departments need more information.

Partial RIA. This builds on the Initial RIA and should accompany the formal public consultation for the proposal.

Final RIA. This builds on the analysis in the Partial RIA, updating it in the light of consultation and further analysis and information. The Final RIA should accompany legislation when presented to Parliament.

Our samples consist mainly of RIAs which have passed the Final stage. However, we also consider the quality of the Initial and Partial RIAs in our sample as part of our evaluation process.

 

What should a final RIA cover?

Purpose and intended effect    Identifies the objectives of the regulatory proposal.

Problem    Assesses the problems that the proposed regulations are addressing.

Benefits    Identifies the benefits of each option including "Do Nothing" option.

Costs    Looks at all costs including indirect costs.

Securing compliance     Identifies options for action to maximise compliance with new regulation.

Impact on small businesses     Using advice from the Small Business Service.

Competition assessment     Identifies the impact on competition within UK markets.

Public consultation     Takes the views of those affected, and is clear about assumptions and options for discussion.

Monitoring and evaluation     Establishes criteria for monitoring and evaluation.

Recommendation     Summarises and makes recommendations to Ministers, having regard to the views expressed at public consultation.

What is the NAO's role?

The NAO's report: Better Regulation: Making Good Use of Regulatory Impact Assessments (HC329 Session 2001-02), published in November 2001, examined how Government departments assessed the likely outcomes of regulating in order to try to achieve the right balance between under-regulating, which may fail to protect the public, and over-regulating, which may create excessive bureaucracy.

The 2001 report reviewed a sample of 23 RIAs to identify good practice and how to make the process effective within departments. It found three main factors which characterised effective RIAs:

starting the process early;

consulting effectively with those affected by the proposal; and

analysing appropriately the likely costs and benefits of the proposal.

In April 2002, the Committee of Public Accounts (PAC) considered the 2001 report and recommended that the NAO should evaluate a selection of RIAs. The Cabinet Secretary responded in December 2002 inviting the head of the NAO, Sir John Bourn, to evaluate a sample of RIAs each year with the aim of identifying positive and negative learning points. 2003 was the pilot year for this work.

For the pilot year we examined the thoroughness and quality of a sample of ten from over 200 RIAs which had been approved by the relevant Ministers. The sample was based on suggestions contained in the Better Regulation Task Force's 2001/02 Annual Report: Champions of Better Regulation, which drew our attention to ten RIAs the Task Force thought were below standard plus one RIA which it considered to be an example of good practice. Our final sample included seven of these suggestions and three others selected from the Cabinet Office Regulatory Impact Unit's website.
 

What do the Cabinet Office Regulation Impact Unit and the Better Regulation Task Force do?

The Cabinet Office Better Regulation Executive (BRE) works with other Government departments, agencies and regulators to help ensure that regulations are fair and effective.

The BRE's work involves:

• Promoting the Principles of Good Regulation
• Identifying risk and assessing options to deal with it
• Supporting the Better Regulation Commission
• Removing unnecessary, outmoded or over-burdensome legislation through the powers as enacted in the Regulatory Reform Act.
• Improving the assessment, drawing up and enforcement of regulation, taking particular account of the needs of small businesses

In addition to taking an overview of regulations which impact on business, the BRE also examines the impact on the voluntary sector, charities and the public sector.

The Better Regulation Commission was established in September 1997. It is an independent body that advises Government on action to ensure that regulation and its enforcement accord with the five Principles of Good Regulation

Proportionality

Accountability

Consistency

Transparency

Targeting

The Task Force does this by carrying out studies of particular regulatory issues.

 

How do the different bodies work together?

The NAO provides an independent evaluation of the sample of RIAs, based on its own methodology, resulting in its own findings and recommendations.

Throughout our work we liaise with the BRE and the Commission. We are grateful to the Task Force for providing excellent samples of RIAs containing many useful examples of good practice and also learning points where the process might have been better. We are also grateful for the cooperation and advice we receive from the BRE during the course of our evaluations.

We consider that it is important that the Government continues to see RIAs as an important part of the regulatory process and our evaluation aims to help highlight their crucial role. Our evaluation also seeks, by drawing out a series of learning points for the preparation of RIAs, to help encourage a culture of scrutinising regulatory proposals within the policy making process. We see this as adding to the wider Better Regulation initiative and the valuable work undertaken by the BRE and the Commission.