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Is the better regulation agenda producing better regulation? Peter Kellett Environment Agency, Vice Chair, UKELA1

‘The better regulation agenda is about finding more effective ways of designing and enforcing regulation, without placing unnecessary burdens on those who are regulated. It is about streamlining bureaucracy in order to support increased productivity and prosperity’.2 ‘The modern enterprise challenge is to … tackle the regulatory concerns … all industrial economies face without sacrificing the standards a good society needs … Implementing … a forward-looking limit on the net costs flowing from regulation would be another first for the UK – no other country has yet taken this step – adding further weight to our position as one of the best places in the world to do business’.3 ‘The CBI has welcomed the commitment by the Conservatives to identify new ways of delivering deregulation for business’.4 ‘No doubt costs are created by regulation, and benefits are derived from deregulation’s removal of those costs. Corporations become more profitable when relieved of regulatory restrictions that prevent them from externalizing their costs; consumers sometimes benefit from lower prices; governments, and thus taxpayers, save money when they are able to cut the budgets of regulatory agencies. In most cases, however, the costs saved by deregulation only reappear elsewhere…’.5 ‘This [burdens] mindset reveals the old culture that would still send little boys up chimneys and children on 16-hour shifts in cotton mills. These ‘burdens’ are what makes a country civilised’.6

1 Peter Kellett MA Solicitor (non-practising), Vice-Chair UKELA, 6 June 2008. These views are personal and do not necessarily represent the views of the Environment Agency. I am grateful to Tim Jewell for his observations upon a draft of this article. I have strayed in this paper beyond the strict confines of ‘environmental permitting – rights and obligations’ but many of the issues we considered at UKELA’s 2008 conference are linked to ‘better regulation’. 2 Hilary Armstrong, Chancellor of the Duchy of Lancaster, extract from Foreword to ‘Consultation on the Regulators’ Compliance Code and the scope of the Code and the Principles of Good Regulation, May 2007’, the Cabinet Office. 3 Department for Business Enterprise and Regulatory Reform (BERR) ‘Enterprise: unlocking the UK’s Talent’ 12 March 2008 pp 61, 70. http://www.berr.gov.uk/whatwedo/enterprise/enterprisesmes/ enterprise-framework/index.html. 4 CBI work on the regulatory agenda 2007: http://www.cbi.org.uk/pdf/ regulatoryissuesautumn2007.pdf. 5 J Bakan The Corporation, the pathological pursuit of profit and power (Constable London 2005) pp 149–50. 6 P Toynbee The Guardian 13 October 2006.

Introduction Two years ago I suggested it was time to decide what is meant by ‘better regulation’. Domestic environmental laws appeared likely to change in the face of an ill-defined but powerful ‘better regulation’ agenda.7 I described how the better regulation agenda was reborn through the key report of Philip Hampton8 and the establishment of a Better Regulation Programme under the Better Regulation Executive (BRE). 9 A subjective concept like better regulation could involve more or less regulation, higher or lower standards, or the same standards delivered through more efficient means. Most stakeholders want better regulation – but perhaps only if it is defined their way. ‘Better regulation’ is defined in this article to mean: ‘ more efficient or effective regulation and not less regulation unless it can lead to similar environmental and human health standards and outcomes’. This article will examine some of the progress made by the agenda since 2006. Under consideration are: the Davidson Review of implementation of EU legislation;10 burden reduction targets at national and EU levels, including the radical regulatory budget approach; better regulation through the Compliance Code, legislative reform orders and administrative penalties and reforms of the environmental permitting systems. Finally, there is an assessment of whether the better regulation agenda is actually producing better regulation as defined above.

The Davidson Review ‘Simplifying EU legislation’ The government faces choices when implementing EU legislation in cases where existing domestic legislation goes further. 11 Those choices concern not just the

7 P Kellett ‘Better regulation: the modernising agenda and UK environmental laws’ (2006) 18 ELM 169. This article was initially delivered at UKELA’s 2006 conference. 8 P Hampton ‘Reducing Administrative Burdens: Effective Inspection and Enforcement’ HM Treasury March 2005 (The Hampton Review) http:/ /www.hm-treasury.gov.uk/d/bud05hamptonv1.pdf. 9 The separation of the Better Regulation Executive from the Cabinet Office, during the 2007 government reshuffle, appears to have increased the strength of the former Department of Trade and Industry (BERR). 10 N Davidson QC ‘Simplifying EU Legislation’ (Davidson Review) 28 November 2006, BERR http://www.berr.gov.uk/whatwedo/bre/ reviewing-regulation/eu-legislation/page44103.html. 11 For example some IPC processes were not covered by the IPPC Directive. The government chose, after full consultation, to keep these regulated under the PPC system rather than leave a few isolated activities under a previous and by then largely redundant system.

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intelligibility of the rules as a whole but also transparency in terms of clearly identifying the EU or national policy origin of requirements. Regular assertions of widespread gold-plating led to the Davidson Review being commissioned by the Chancellor to consider the issue which it defined as:

… when implementation goes beyond the minimum necessary to comply with an EU Directive by extending the scope; substituting wider legal terms for those used in the Directive; not taking full advantage of derogations within a Directive to keep requirements to a minimum; providing sanctions or enforcement mechanisms in the legislation that go beyond the minimum needed; or implementing early.12 The final Davidson Review failed to find substantial evidence of gold-plating.13 It suggested that simplistic measures (eg the ratio of words in the transposition instrument and in the EU obligation) generally fail to examine whether burdens for the regulated are increased or decreased by the transposition instrument. Further explanation can reduce uncertainty where obligations would otherwise be unclear and so reduce burdens. Simply copying out new obligations without examining the fit within existing domestic legislation can lead to unnecessary double banking14 (where European legislation covers the same ground as existing domestic law and where the two regimes have not been made fully consistent or merged into one). Tellingly the Review found that: … inappropriate over-implementation may not be as big a problem in the UK – in absolute terms and relative to other EU countries – as is alleged by some commentators. The factors include the following: •

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many allegations of over-implementation of European legislation are misplaced as they either relate to concerns about the EU measure itself or wrongly assume that certain UK legislation originated from the EU; it can sometimes be beneficial for the UK economy to set or maintain regulatory standards which exceed the minimum requirements of European legislation; evidence to support assertions that the UK implements and enforces more rigorously than other Member States is often lacking. Furthermore, the review heard similar concerns about their governments from business representatives in other European countries. Unlike in the UK, very few other EU governments currently have explicit policies or procedures to guard specifically against over implementation – the UK is regarded by some as a leader in this field; and

12 http://www.cabinetoffice.gov.uk/regulation/documents/ davidson_review/evidence.pdf. 13 Note 10. 14 ibid p 9 para 6.

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the OECD and World Bank consistently report that the UK has one of the most favourable regulatory environments for doing business in the EU.15

So those submitting evidence appeared unable to produce substantial evidence of over-implementation; where it does occur it may be beneficial and other Member States business’ advocates are concerned about this issue but lack the UK’s policies to prevent unnecessary gold-plating. Of course there are areas where regulation could and should be improved.16 But if the myth of widespread overimplementation has truly been slain then perhaps it is time to debate how EU obligations and national policy requirements can be delivered in the most effective but least burdensome way? The form and substance of the regulatory measures adopted is clearly important in this debate.

Burden reduction targets at the national and EU level In what way should regulation be improved? Target setting approaches are not universally loved; yet as statements of political and policy intention, they are widely used and are beginning to have a huge impact on environmental regulation. As governments strive to reach better regulation targets a plethora of initiatives and reviews has arisen.17 When considering targets in the environmental field it is perhaps worth reflecting on some numbers. To work out whether the benefits of new proposals outweigh the costs, impact assessments must now be conducted.18 Such assessments are necessarily approximate tools to assess the baseline costs and benefits of policy measures and then place these against a range of proposed changes. The ratio of effort put into designing policy proposals and assessing their potential impacts is shifting. Far more effort is now put into impact assessment. The proportion of the administrative burden from environmental regulation is in the region of just 3.7 per cent of the total administrative burden which is perhaps less than a reader with an interest in environmental regulation might have guessed.19 Contrast this with, for example, the (then)

15 ibid p 9 para 8. 16 Unsurprisingly the Review suggested that there was a need for a review of waste exemptions (which is currently underway) and better guidance on the definition of waste. 17 See eg the website of the Australian Victorian Government Department of Treasury and Finance. Some will doubtless achieve real improvements but some bring to mind the infamous ‘cones hotline’. 18 Even the European Commission is proposing to conduct assessments for nearly half of its future better regulation initiatives: see the European Commission ‘Second Strategic Review of Better Regulation in the European Union’ COM (2008) 32 p 3 fn 1. The impact assessment process is challenging. 19 See Better Regulation Commission ‘The Commission’s Independent Assessment of the Department for Environment, Food and Rural Affairs Simplification Plan 2006/7’ which states that the total administrative burden is some £14 billion of which Defra’s share is some £528 million. h tt p : / / a r c h i v e . c a b i n e t o f f i c e . g o v. u k / b r c / s c r u t i n y / simplification_plans.html.

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Department of Trade and Industry’s share of the non-tax burden which appears in the region of 38.1 per cent.20 Despite this, environmental regulation has been put forward as a priority area for streamlining and burden reduction targets at the European level. It may be that some aspects of environmental regulation are rather unpopular, and not just with business. See, for example, the arguments put forward by Malcolm Forster in his 2006 UKELA Garner Lecture.21 In 2006 I explained how each Westminster department had to publish a simplification plan describing how it would meet its 25 per cent administrative burden22 reduction target. 22 Defra’s 2006 plan, ‘Maximising Outcomes Minimising Burdens’,23 updated in 2007 in ‘Cutting Red Tape Defra Simplification Plan’, describes how it intends to approach simplification of the regulations it is responsible for and how it aims to achieve a 25 per cent reduction in administrative burdens. 24 The road ahead may challenge some departments, including Defra, as the burden baselines do not allow for EU legislation in the pipeline that has yet to be transposed.25 As such some departments may need to achieve even greater burden reductions than the 25 per cent target. Few doubt that administrative burden reductions can be achieved in domestic environmental regulation and there was little debate when the first 25 per cent targets were adopted. The Dutch, who sit at the forefront of the European better regulation agenda, linked their departments’ annual budget allocations to the achievement of 25 per cent burden reduction targets and unsurprisingly targets were met. They are considering how to achieve a 50 per cent target as a next step. Presumably there will come a point when, in delivering further administrative burden reductions there will be impacts on policy outcomes.26 In 2006, I also described how the European better regulation agenda led to a range of measures including the adoption of EU impact assessment guidelines.27 At the spring 2007 EU Council the better regulation agenda

20 See HM Government: ‘Administrative Burdens of Regulation – Department of Trade and Industry: Administrative Burdens Measurement Exercise – DTi results’ p 2. www.berr.gov.uk/files/ file35915.pdf. The administrative burden of taxation regulation appears similar to that for the DTi – see HMRC March 2007 ‘Delivering a new relationship with business – Progress towards reducing the administrative burden on business’ http://www.hmrc.gov.uk/ Budget2007/measure220.pdf. 21 M Forster ‘The fourth age of environmental law – the end of the beginning or the beginning of the end?’ (2007) 19 ELM 3 107. 22 At that point this meant administrative burdens (eg time spent form filling etc) not policy burdens (eg the cost of installing new pollution abatement reduction equipment). Kellett (n 7). 23 Defra November 2006 www.defra.gov.uk/corporate/regulat/pdf/ simplification-plan.pdf. 24 Defra December 2007 2007 www.defra.gov.uk/corporate/regulat/pdf/ 2007simplification-plan.pdf. 25 See ibid p 6 which sets out a balance sheet approach to new pipeline burdens. 26 For example, arguably regulators need accurate, targeted, regular information to monitor industrial performance yet reducing administrative burdens could reduce the flow of such information. 27 Impact Assessment Guidelines of the European Commission 15 June 2005 (SEC (2005) 791). Kellett (n 7).

became firmly embedded at the European level when the Council endorsed a Commission Action Programme for Reducing Administrative Burdens in the EU:28 Building on the significant progress in implementing the aims of the renewed Lisbon Strategy for Growth and Jobs to date and in order to face the most pressing challenges, the European Council calls on Member States and EU institutions to pursue actions to: … enhance the better regulation agenda to create a more dynamic business environment …29 The tension between competitiveness and regulation, including environmental regulation, is nothing new but the direction of travel appears clear. The Council agreed to reduce administrative burdens, to boost Europe’s economy, through the adoption of a target: ‘… administrative burdens arising from EU legislation should be reduced by 25 per cent by 2012’.30 The familiar 25 per cent target is now set at the EU level to mirror that previously set by the Dutch, German, Danish and UK Governments. It will be interesting to see how successful the European Commission is in progressing an agenda that, in part, involves reducing the environmental acquis rather than continuing to propose further environmental legislation which has, at least to date, been its traditional role. The Commission considers that it has now given the highest priority to simplifying and improving the regulatory environment in Europe.31 Its programme involves a series of measures including improving the policy cycle by applying impact assessment and simplifying and codifying existing laws using a rolling simplification programme: ‘…work on simplification has reached cruising speed’.32 The Commission notes, perhaps optimistically, that work on streamlining could be further speeded up if fast-track procedures could be agreed by the European Parliament and Council. One impact of a target culture, where 152 of some 400 legislative acts that might be codified have been, emerged in December 2007 with the codification (by which they mean consolidation) of the IPPC Directive.33 The Commission notes: ‘The codified act includes all the previous amendments to the [IPPC] Directive ... The substance of [the IPPC] Directive has not been changed and the adopted new legal act is without prejudice to the new Proposal for a Directive on Industrial Emissions’.34 This new measure was issued, according to the preamble,

28 COM (2007) 23. 29 See the EU Presidency Conclusions – Brussels, 8/9 March 2007: 7224/ 1/07 REV 1. 30 ibid para 24. 31 The European Commission ‘Second strategic review of Better Regulation in the European Union’ COM (2008) 32. 32 ibid p 3. 33 Directive 2008/1/EC of 15 January 2008 concerning integrated pollution prevention and control; OJ L 24/8 29/01/2008. 34 See http://ec.europa.eu/environment/air/pollutants/stationary/ippc/ index.htm.

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in a codified form ‘in the interests of clarity and rationality’ even though the IPPC Directive is also in the process of a fundamental review which is likely to lead to a completely recast Directive. Many Member States now have to revise their transposing legislation and guidance essentially to take account of revised article numbers with no changes of substance. Once a revised IPPC Directive is adopted they will have to do it again. Some might describe this result of ‘cruising speed’ activity as the opposite of better regulation. The latest domestic, but potentially very significant, turn in the burden reduction debate can be found in the government’s recent Enterprise Strategy (the Strategy).35 The Strategy adopts new approaches to dealing with burden reductions on the advice of over 600 small businesses and entrepreneurs to enable, amongst other things, ‘an enterprise environment on regulation ... by ... improving availability to innovate: to commercialise new ideas’.36 The Strategy observes that there is ‘continuing evidence that owner-managers when dealing with regulatory issues are more likely to divert their attention away from more productive activities’.37 The Strategy acknowledges it is right to regulate to protect the environment and, in the future, to meet climate change commitments but that, in addition to benefits, regulation brings costs that can be significant and even when not significant can be ‘irritants for managers, owners and employees because of the process required by the regulation’.38 Building on the 25 per cent administrative burden reduction targets the Strategy proposes a series of measures including: •

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a new system of regulatory budgets; a rolling limit on annually recurring costs of regulation; for departments, limiting the cost of new regulations that can be introduced over time – crucially this covers not just administrative burdens but for the first time all policy costs; an approach to regulating small firms (with less than 20 FTEs and a turnover below £2.8m) to examine whether they can be fully exempted from new requirements or benefit from simplified enforcement – the strategy notes that in many cases this will not be possible for legal or policy reasons but suggests that it can be achieved in some areas; reviewing existing legislation against Hampton principles and introducing new or amended exemptions for small firms; ensuring firms can place more reliance on official guidance – the strategy appears to suggest that small businesses want clear guidance and certainty rather than flexibility in guidance on regulation although a further independent review into the best way to

35 HM Treasury, BERR ‘Enterprise: unlocking the UK’s talent’ March 2008 www.hm-treasury.gov.uk/d/bud08_enterprise_524.pdf. 36 ibid p 3. 37 ibid p 61. 38 ibid p 62.

deliver clarity and cer tainty has also been commissioned.39 Whether environmental laws can easily be designed in a way that provides preferential policy approaches for small firms is an interesting question. The potential impact, for example, of a type of activity on a watercourse is generally not dependent on the number of employees or turnover of the company holding the permit but on the nature of the activity in question.40 With the notable exception of producer responsibility, European environmental law also does not generally appear to adopt such approaches. What is perhaps clear is that small firms’ parts of impact assessment are likely to receive greater attention in future. Despite the potential importance of regulatory budgets the Strategy does not contain much detail on the concept but notes that the Better Regulation Task Force advised that such an approach ‘would be difficult and take time, as well as setting an international precedent’.41 The Strategy observes that the foundations have been laid for adopting this sort of approach and the success of the administrative burden reduction programme ‘has provided evidence that the discipline required for regulatory budgets could work’. 42 The government therefore intends to consult on a practicable system for regulatory budgets, perhaps focusing first on SMEs or on a particular sector without preventing cost-effective action on key cross-departmental priorities such as climate change, emission reduction targets or regulation needed for other legal or policy reasons.43 The Strategy suggests that arrangements will be needed to keep departments within their allocated budgets through a detailed but flexible methodology that closely controls ‘all regulatory costs while at the same time maintaining the independence of regulators …’. It is difficult to predict the impacts of this potentially radical approach but a number of possible consequences of capping and reducing the overall regulatory burden spring to mind: •

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even where the policy case for action is clear, departments without sufficient flexibility in their regulatory budgets will be unable to impose new burdens; existing domestic environmental regulation may come under greater pressure as departments are required to deliver the requirements of EU legislation; environmental regulators are likely to have more limited independence to choose options to deliver outcomes in future.44

39 ibid p 7. The tension between the desires for certainty and flexibility in guidance could occupy an entire article. 40 Presumably companies wishing to avoid regulation completely could do so by re-structuring their operations to create a series of smaller holding companies. 41 ibid p 69. 42 ibid. 43 Interestingly, the tax system alone has been specifically excluded from the concept of regulatory budgets. 44 Regulators may need to pay equal attention to the policy costs and the administrative costs in future.

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Non-target driven impacts

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Outside of the target-setting agenda a large number of better regulation driven measures will impact on UK environmental laws45 but the following perhaps illustrate some of the issues that have arisen: the Compliance Code; Regulatory Reform Orders; the Local Better Regulation Office and Macrory administrative penalties.

The Regulators’ Compliance Code The Regulators Compliance Code (the Code) 46 imposed, from 6 April 2008, additional central controls over regulation, superseding and expanding upon the previous voluntary 1996 Enforcement Concordat. It aspires to ensure that regulators become more proactive, efficient and effective by targeting their resources towards improving regulatory outcomes. In future regulators will need to demonstrate clearly how they have achieved this. The statutory Code must be followed unless regulators conclude that its provisions are not relevant, or are outweighed by other relevant considerations, or its provisions are inconsistent with other legal requirements such as EC law.47 It applies in England only but binds the Environment Agency in the exercise of its regulatory functions in Wales. The Code places detailed wide-ranging specific obligations on regulators in seven areas which can be summarised as follows. •

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Economic progress – regulatory approaches must be justified in cost-benefit terms; regulators activities and interventions must be kept under review to see whether it is possible to remove or reduce the burdens they impose and should have regard to the fairness of the impacts of their interventions on SMEs. Risk assessment – regulators should allocate efforts and resources in a targeted manner by assessing risks to outcomes. Risk assessment should be based on relevant good-quality data and include the potential impact of non-compliance on regulatory outcomes and the likelihood of non-compliance. Regulators should involve the regulated and others in designing risk methodologies and regularly review them. Advice and guidance – regulators are obliged to communicate promptly all legal requirements and changes to the regulated. They should provide general information, targeted advice and guidance to help the regulated meet their obligations without directly triggering enforcement action. Regulators should distinguish between minimum requirements and going further and generally provide advice free of charge.

45 See P Kellet (n 7) for a longer but far from complete list of better regulation initiatives. 46 BERR ‘Regulators’ Compliance Code – Statutory Code of Practice for Regulators’ 17 December 2007. http://www.berr-ec.com/CGIBIN/ priamlnk.cgi?CNO=1&MP=ATZSER^GINT78&LET=R. 47 The Code was approved by both Houses of Parliament under s 23 of the Legislative and Regulatory Reform Act 2006. See the Code paras 2.1–2.7.

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Inspections and other visits – these should only occur under a risk-assessment methodology save where requested or acting on intelligence. Random inspections should only form a ‘small element’ to test risk-assessment methodologies. The greatest effort should be focused where breaches pose serious risks to regulatory outcomes and there is a high likelihood of non-compliance. Regulators should give ‘positive feedback’ to encourage good practice. Information requirements – regulators should analyse the costs and benefits of data requests and consider how to reduce costs to the regulated. Data sharing between regulators is encouraged. Compliance and enforcement actions – regulators should reward those who achieve consistent good compliance levels. When considering enforcement, regulators should discuss the circumstances with those suspected of a breach and take those discussions into account when deciding the best approach. Regulators’ sanctions and enforcement policies should be consistent with the Macrory Review principles (such as aiming to change the behaviour of the offender) and characteristics (measuring outcomes not just outputs). Regulators must also give clear reasons for taking formal enforcement action and explain in writing the complaints and appeal procedures. Accountability – regulators should develop continuing co-operative relationships with the regulated. Regulators should also publish clear standards and targets for their service and performance and measure and report against this. Staff should be courteous and efficient. Regulators should provide effective and timely complaints procedures and include a final stage referral to an independent external person.

The Code suggests that compliance can best achieved by helping the regulated understand requirements more easily and by the regulator responding proportionately to regulatory breaches.48 It generally proceeds on the assumption that the regulated want to meet regulatory requirements and so in the process, by including additional safeguards for legitimate operators, potentially creates additional opportunities for those engaged in criminal activity and equally for others to frustrate or delay enforcement activity.49 Critically the Code states that it does not apply directly in individual cases – it is intended to affect the way regulators design their approaches to regulation.50 Despite this, elements of the Code cover regulators’ approach to enforcement in individual cases (such as discussing the circumstances with those

48 ibid para 1.3. 49 Having witnessed the threatening behaviour from a regulated customer who kicked open a fire door, stormed into an office, threatened those inside with violence and only backed down when he noticed that a number of large firemen were also in the office (to discuss his waste transfer site that had been on fire for some time) – this is a potentially dangerous assumption, particularly for waste crime. 50 ibid para 1.4.

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suspected of a breach).51 Safeguards have been built into the Code to protect against some areas of potential misuse of the Code to frustrate or delay justified enforcement activity. The Code has already caused regulators to revise their approaches to regulation and to increase some charges during the current financial year to pay for some of the new requirements the Code imposes.52 It is more difficult to predict how far the Code will meet its aspiration of improving regulatory outcomes. Perhaps the greatest impact will be noticed by those regulated by regulators who have traditionally worked without minimal central controls – in the future the broad obligations of the Code will constrain the approaches field staff may adopt and that may not be a bad outcome.

Legislative Reform Orders Legislative Reform Orders (LROs)53 replace Regulatory Reform Orders.54 LROs allow ministers powers to make Orders that remove or reduce burdens arising from primary or secondary legislation directly or indirectly. Burdens are defined in an outcome-focused way to include financial costs, administrative inconveniences, obstacles to efficiency, productivity or profitability, or sanctions that otherwise affect the carrying on of lawful activities. LROs illustrate the tension between the desire of governments to drive through better regulation reforms and the desire of parliament to scrutinise reform effectively. Significant preconditions and restrictions apply before a minister can introduce an order55 including some quite subjective ones, for example: the effect of the provision is proportionate to the policy objective and the provision does not remove any necessary protection. In addition, a clear undertaking was given to parliament, during the passage of the powers to make LROs, that they would not be used ‘to implement highly controversial reforms’.56 LROs face such a rigorous procedure both before and during the parliamentary process, including the possibility of having to go through a ‘super-affirmative’ procedure, that the published guidance to officials states ‘Do not let the process put you off ’.57 LROs have advantages not least that the process, although rigorous, is more straightforward than a bill and there is no need to compete with other departments for an elusive bill slot (better regulation is far from sexy). However, all the work is front loaded and unless the superaffirmative process is followed there is no opportunity to make amendments to the LRO once introduced into

51 For example ibid para 8.2. 52 The Environment Agency has, for example, revised its enforcement and prosecution policy to take account of the requirements of the Code and increased its fees and charges for some systems by 0.6 per cent in the current financial year. 53 These can be made under Part 1 of the Legislative and Regulatory Reform Act 2006. 54 Made under the Regulatory Reform Act 2001. 55 ibid s 3. 56 See the explanatory notes to the Legislative and Regulatory Reform Act 2006, para 6. 57 http://www.berr.gov.uk/files/file45999.pdf.

parliament which leaves the chance that the LRO will fail at the very last moment after a substantial amount of effort has been put in to promoting the measure. Time will tell if the LRO process proves more attractive to departments than the short-lived Regulatory Reform Orders. The third and fourth areas concern the proposed establishment of a Local Better Regulation Office and delivery of the Macrory Review58 under the Regulatory Enforcement and Sanctions Bill (the RES Bill).59 In May 2007 the government published a consultation on the draft RES Bill (the May 2007 Consultation) with two aims: to establish a local better regulation office and to introduce more flexibility in an enforcement regime that restricts regulators to processes of criminal prosecution.60 A redrafted RES Bill was introduced to Parliament in November 2007 with the additional aim of implementing key recommendations from the government’s paper ‘Next Steps on Regulatory Reform’ July 2007.61

The establishment of a Local Better Regulation Office and the primary authority principle The May 2007 Consultation suggested that competing demands and limited resources meant that ‘there is little evidence of a risk based approach being applied consistently’.62 The government considered that the Local Better Regulation Office (LBRO) would ‘not only focus on reducing burdens on business and implementing the Hampton principles but also on supporting the capacity of local authority regulatory services to help them deliver more effectively’.63 The initial impact assessment summary suggested that local authorities might save £1.5–3.5m per year through their engagement with the LBRO.64 Part 1 of the RES Bill aims to establish an LBRO. The LBRO’s objectives are to ensure that local authorities exercise their regulatory functions in a way that is effective, does not give rise to unnecessary burdens and that conforms to some familiar if slightly nebulous friends, the ‘better regulation’ principles.65 The LBRO will be empowered to issue statutory guidance and directions to local authorities about how they should exercise their enforcement functions, generally or specifically.66 The LBRO will assume an advisory role to ministers – the May 2007 Consultation envisaged ‘a highprofile voice with access to Ministers and policy-makers’.67

58 BRE Macrory Penalties Review Consultation Document Regulatory Justice: Sanctioning in a Post-Hampton World (May 2006). http:// www.berr-ec.com/CGIBIN/priamlnk.cgi?CNO=1&MP=ATZSER^GINT 78&LET=R 59 Now an Act, the Bill received Royal Assent 21 July 2008. 60 Cabinet Office Consultation on the Draft Regulatory Enforcement and Sanctions Bill, May 2007, p 3. 61 http://www.cabinetoffice.gov.uk/regulation/reform/next_steps/. 62 Consultation (n 60) p 10, para 1.3. 63 ibid p 10, paras 1.4–5. 64 ibid p 9, vii. 65 RES Bill (n 59)cl 5 which sets out these better regulation principles at cl 5(2) – regulatory activity should be conducted in a transparent, accountable, proportionate, and consistent way and targeted only at cases where action is needed. 66 ibid cl 6–7. 67 Consultation (n 60) p 30, para 3.53 and the RES Bill (n 59) cl 9–10.

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A balanced membership of LBROs will presumably be important. The LBRO also will be empowered to prepare and revise a list of national priorities for local authorities in allocating resources.68 Given the number of potentially competing priorities, any attempt to make sense of the priorities imposed on local authorities by different parts of government appears to have been broadly welcomed.69 Part 2 of the RES Bill describes how government proposes to ensure better coordination of regulatory enforcement by local authorities through a primary authority principle. A primary authority would take a lead role on enforcement (and, for example, can direct another local authority not to take enforcement action) against a person regulated by more than one local authority. These proposals have not been welcomed by local authorities as they consider the power to impose a primary authority ‘should not be forced’, ‘would interfere with a council’s right to decide on its own service provision’ and amount to an ‘undemocratic fettering of a council’s right to take action’.70 Other than in cases of significant risk of serious harm to human health or to the environment, unless the primary authority (or the LBRO on appeal) consents, then certain enforcement action may not be taken.71 If approved, it will be interesting to see which local authorities opt to become primary authorities and which do not. Although many local authorities may have views on the merits of other authorities determining their enforcement priorities (as to date the use of such an approach has always been voluntary) perhaps that is the new reality of the better regulation agenda. Considerable thought and partnership working will presumably be needed to ensure that the primary authority system actually works on the ground.

The Macrory reforms Following Hampton, the Cabinet Office commissioned an independent review of regulatory penalties72 which led to Richard Macrory’s ‘initial findings on the penalties system and my vision for a modernised system of regulatory sanctions’73 and to the final Macrory Review report in November 2006.74 Unusually, it was immediately accepted in full by the government.75 Part 3 of the RES Bill contains proposals to implement key recommendations of the Macrory Review.

68 RES Bill (n 59) cl 11. 69 For example the LACORS (the local authority umbrella body) position statement on the Bill welcomed the enforcement priority work. 70 RES Bill (n 59) cl 28–29. 71 ibid cl 10(4). 72 http://www.cabinetoffice.gov.uk/regulation/reviewing_regulation/ penalties/index.asp. 73 BRE Macrory Penalties Review Consultation Document Regulatory Justice: Sanctioning in a Post-Hampton World (May 2006). http:// w w w. c a b i n eto f f i c e . g ov. u k / re g u l a t i o n / d o c u m e n t s / p d f / macrory060524.pdf. 74 BRE Regulatory Justice: Making Sanctions Effective (November 2006). http://www.berr-ec.com/CGIBIN/priamlnk.cgi?CNO=1&MP=ATZSER ^GINT78&LET=R. 75 Consultation (n 60) p 37 para 5.2.

The RES Bill arguably marks a watershed in the enforcement of environmental law with a substantial shift from criminal prosecution to civil penalties76 and could result in a stronger case being made for the establishment of an environmental tribunal. It also represents a seismic shift in the relationship between the regulated, regulators and the public. Hampton argued that penalty regimes were cumbersome and ineffective and recommended comprehensive review. The Macrory Review suggested that the current sanctioning regime is ineffective as it is over reliant on criminal prosecution and lacking in flexibility and therefore an extended sanctioning toolkit was needed. 77 This debate is not new but there have traditionally been quite polarised views between those who consider that operators who choose to conduct potentially polluting activities should be held criminally responsible for all consequences of that decision, through to opinions that many breaches of environmental laws are merely technical and therefore, particularly in the absence of fault or negligence but also perhaps generally, should be capable of being disposed of through civil rather than criminal routes. It is worth reflecting upon the famous observations of Lord Salmon on the issue of fault: It is of the utmost public importance that our rivers should not be polluted. The risk of pollution, particularly from the vast and increasing number of riparian industries, is very great … If this appeal succeeded and it were held to be the law that no conviction could be obtained [under the then applicable Rivers (Prevention of Pollution) Act 1951] unless the prosecution could discharge the often impossible onus of proving that pollution was caused intentionally or negligently, a great deal of pollution would go unpunished and undeterred to the relief of many riparian factory owners. As a result many rivers which are now filthy would become filthier still and many rivers which are now clean would lose their cleanliness. The legislature no doubt recognised that as a matter of public policy this would be most unfortunate.. 78 Presumably a revised approach to sanctioning and fault that delivers more efficient and effective ways to achieve the intended outcomes of environmental regulation should be welcomed by all parties to the better regulation debate. The question is perhaps whether it will be given the chance to operate. Under Part 3 of the RES Bill, regulators will be offered a more flexible set of sanctioning tools (including fixed monetary penalties, variable monetary penalties, compliance notices, restoration notices, stop notices and enforcement undertakings). Most of these powers can be

76 Of course, fixed penalty notices exist currently under specific legislation (eg fisheries) and in other regulatory areas (eg under legislation of the Financial Services Authority) but not in a cross functional manner. 77 Note 73 p 37 paras 5.1–3. 78 Alphacell v Woodward [1972] AC 824.

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challenged by civil appeal. One aim of the original package was to reduce the burdens on the criminal courts so the existence of a new form of appeal might enhance the arguments for the establishment of an environmental or regulatory tribunal. It would take a separate article to describe in any depth the parallel system that Part 3 proposes to create but some generic better regulation observations might be made. Regulators will only be given access to the tools if they can first demonstrate compliance with a number of tests, including the Hampton and Macrory principles and parliament approves such access through an affirmative resolution or statutory instrument. This presumably means that only those regulators who consider that the costs of training their staff in the new approach are outweighed by the resulting benefits are likely to seek access to the toolkit. Powers can also be suspended or withdrawn. The May 2007 Consultation suggested that the proposals will benefit regulators, business and those whom regulation seeks to protect through an efficient response to noncompliance, focused on restoration and the arrest of future non-compliance rather than the more time consuming and expensive criminal prosecution. The accompanying impact assessment suggested that considerable savings might be made.79 Spring soundings from HSE and the Environment Agency suggested that these regulators were not yet convinced on costs and benefits.80 Mirroring the Compliance Code, fixed monetary penalties for more minor breaches will be subjected to ‘notice of intent’ provisions before a penalty is imposed to allow for representations to be made. Fixed, and variable, monetary penalty procedures replace any criminal liability.81 The discretionary requirements approach is much more complex but it does offer some really creative ways of dealing with breaches. For example, enforcement undertakings allow those who commit breaches to ‘plea bargain’ by offering to take action to avoid repetition of the breach, restore the position to that which existed before the breach was committed and to benefit those affected by the breach. The use of such undertakings could achieve better outcomes and maintain better relationships between regulators and the regulated community. As with the Compliance Code, the RES Bill process appears to assume that operators wish to comply and effective enforcement could be undermined by those who have no intention of complying and wish to slow the enforcement process. Reassuringly (to regulators who have to investigate breaches to that standard in any case and to the regulated who might otherwise fear lower evidential burdens leading to increasingly frequent sanctioning) the Bill proposes to

79 Consultation (n 60) p 39 para 5.9. 80 See UKELA Press Release of 28 March 2008 following its joint event on the RES Bill with the Health and Safety Lawyers’ Association http:/ /www.ukela.org/rte.asp?id=10&pressid=32. 81 RES Bill (n 59) cl 41, 44.

adopt the criminal standard of proof.82 Finally, it is probably safe to observe that lawyers who lose out on regulatory work in the criminal courts may, if they feel so inclined, find replacement work on the civil side. Part 3 of the RES Bill does not deliver the whole Macrory package and there must be a risk that the package could fall into disrepute if the full accepted recommendations are not delivered (for example, the need for environmental sentencing guidelines). The interdepartmental Review of Environmental Enforcement indicated that one area that might benefit from further attention is the Court of Appeal’s decision against establishing a tariff for environmental fines. Further work on this Review is awaited with interest.

Better regulation driven reforms to environmental permitting and compliance systems Fundamental reforms are of course being delivered to the planning system driven, in part, by the better regulation agenda.83 The Planning White Paper originally proposed to reform the way in which decisions are taken on ‘nationally significant infrastructure projects’.84 Such projects included energy, waste, waste-water and transport. The justification for reform appeared to be as follows: The process for dealing with major infrastructure projects, from submission of the proposal to decision in particular, is too slow and complicated. It took seven years to get to a decision on Heathrow Terminal 5; … nearly four years to get to a decision on Dibden Bay container terminal. Prolonged procedures of this sort rarely result in better decision making but they do impose high costs, not only on promoters but also on other participants in the process. Delays can also result in years of blight for individuals and communities during which people are unable to move house or receive compensation. And they can put at risk the country’s economic and environmental wellbeing if, as a consequence, good development is delayed or investment and jobs go overseas rather than wait for modern infrastructure that is needed to support efficient business logistics.85 As the Planning Bill progresses through Parliament it will be interesting to see whether shorter simpler decision making processes will indeed result in better decision making and depends in part on what we mean by better regulation. Might, for example, those who took part in the Dibden Bay decision have preferred a shorter, simpler process? Presumably, the answer is ‘yes’ but perhaps what

82 ibid cl 39(2), 42(2) – a change from the May 2007 Consultation. 83 See D Elvin pp 261–74 and A Dodd pp 237–45. 84 ‘Planning for a Sustainable Future’ White Paper, 21 May 2007 http:// www.communities.gov.uk/publications/planningandbuilding/ planningsustainablefuture. 85 ibid para 1.20.

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they might have wanted more was the outcome each argued for. The views of the CBI: ‘without reform there is a real danger that the UK will fail to attract and deliver the unprecedented amounts of investment across its core infrastructure networks which are essential for sustaining economic growth and achieving prime environmental objective[s] – particularly on climate change’86 and Friends of the Earth ‘Less say – No meaningful right to be heard in person at inquiries; Less democracy – No ministerial accountability for decisions; No mention of climate change – Major new developments like power stations don’t have to take climate change into account’87 are not easily reconciled. Some interesting questions arise, which are left to others to answer, including: whether the planning simplification is likely to lead to different decisions being taken; and how far proportionality should play a role in major developments? In 2006 I explained why Defra, Welsh Assembly Government (WAG) and the Environment Agency had launched the Environmental Permitting Programme (EPP).88 At that point a First EPP Consultation on policy proposals to combine and streamline waste management licensing and pollution prevention and control (PPC) had been published. EPP argued that domestic environmental permitting and compliance systems were over-complex, mainly due to the historical build-up of domestic systems, as increasing numbers of EU requirements had been repeatedly overlaid and implemented. If having a clear understanding of the European environmental acquis is a far from simple task, it was made more difficult still by the wide range of approaches taken to translating the acquis into domestic legislation. It is suggested that it is necessary to seek a way to streamline and modernise environmental permitting and compliance systems if the environmental outcomes sought are not to be masked by unnecessary complexity. The Scots had already conducted a similar exercise, for different reasons, for its water legislation in the form of the Water Environment (Controlled Activities) (Scotland) Regulations 2005 (SI 2005/348).89 EPP aimed to implement a simpler way of delivering environmental requirements. In doing so it sought to design a more risk-based, proportionate and empowering system, to introduce voluntary elements for industry and regulators and to find ways to reconcile previously divergent approaches to delivering environmental requirements.90 It also sought to design a system that was suitable for the migration of other similar systems in due course.

86 http://www.cbi.org.uk/ndbs/content.nsf/802737aed3e34205802567 06005390ae/49ede05daac8c0c880256e62004bfc77. 87 h tt p : / / w w w. f o e . c o . u k / re s o u rc e / l o c a l / p l a n n i n g / n ews / planning_bill.html. See also P Michaels pp 275–81. 88 http://www.defra.gov.uk/environment/epp/index.htm. Kellett (n 7). 89 This radical approach was described in the context of a session on devolution at UKELA’s 2005 Edinburgh Conference. 90 Kellett (n 7) pp 173–6.

A Second EPP Consultation was launched in September 2006, containing revised policy and draft regulations.91 This Consultation examined each step of a permitting and compliance system and suggested how a common risk-based and proportionate approach to each procedural step of a permitting and compliance system might be delivered through a single set of regulations. It aimed to establish common approaches where there had previously been divergence – that is, a simpler system with fewer sets of rules, simpler rules and clearer underpinning guidance. Third and Fourth EPP Consultations were launched in January and June 2007 on draft Government Guidance on the proposed permitting and compliance systems to regulators (the Environment Agency and local authorities). The Fifth EPP Consultation on Government Guidance on Directives and on Waste Technical Competence was launched in July 2007 (accompanied by an updated version of the draft regulations for information). The first phase of EPP was delivered on 6 April 2008 when the Environmental Permitting (England and Wales) Regulations 2007 (the EP Regulations) came into force.92 The EP Regulations replace over 40 pieces of unconsolidated legislation with a single set covering: who needs a permit and who needs to register an exemption; a single permitting and compliance system and how directive and domestic policy requirements are delivered through permits and compliance.93 The EP Regulations arguably simplify regulation in a number of key ways. First, they reduce fundamentally the amount of existing legislation without undermining environmental protection.94 Reducing the sheer amount of legislation should assist industry, regulators and others in understanding what the environmental requirements are and how they should be delivered. The EP Regulations deliver the same outcomes through a single piece of law one third of the length of previous legislation. That fundamental simplification is the tip of the iceberg as it drives simplification in all of the things which underpin the legal system – the need for government guidance is in turn simplified as are the procedures, forms, IT systems and the training needed to understand and deliver the system. Secondly, the EP Regulations improve the structure of legislation so it is easier to follow, in particular by separating the procedure from the substantive environmental protection requirements.95 Separating common procedures from divergent environmental

91 Defra, WAG and the Environment Agency Second Consultation on proposals for creating a streamlined environmental permitting and compliance system (September 2006) http://www.defra.gov.uk/ environment/epp/. 92 Environmental Permitting (England and Wales) Regulations 2007 (SI 2007/3538). 93 ibid ch 4, paras 4.3–4. 94 The Second EPP Consultation noted that over 40 separate instruments would be replaced and simplified; see fig 2 at p 54. 95 This could mean that few if any of the procedural rules in the EP Regulations would need amendment in the event of changes to EU legislation over what needs a permit or what regulatory requirements would apply to such activities.

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protection requirements is just as important as reducing the sheer amount of law. Why should the procedural rules for environmental permit applications or transfers or appeals differ depending on which system they fall under? The EP Regulations perhaps demonstrate that there are few strong reasons for adopting different procedures to deliver a diverse range of requirements. For example, why should some activities benefit from statutory defences and others not? Thirdly, they allow simpler delivery of Directive requirements avoiding additional complexity through the use of referential drafting to identify precisely what Directive requirements apply to what activities.96 The use of referential drafting to identify and deliver environmental requirements may yet make better European lawyers of us all as we look beyond domestic law directly towards the source of requirements. Fourthly, improved drafting by using plainer English than is found in the legislation it replaces is surely to be welcomed. Finally, the Regulations seek to take a more risk-based approach to regulation in a number of areas. For example, the EP Regulations introduce risk-based approaches to public participation in decision making – see the Environment Agency’s Public Participation Statement.97 Further, historically a disproportionate amount of effort has been put towards low-medium risk type activities. In law these activities require environmental permits but given the considerable hurdles involved in obtaining permits, prolonged debates often follow about whether they might fit within the scope of a waste exemption. Standard rules permits represent an attempt to introduce simpler ways of delivering environmental requirements for simpler activities.98 Having delivered the EP Regulations, Defra, WAG and the Environment Agency lost little time in launching a second phase to examine whether the common approach to environmental permitting and compliance should be widened, following further consultation in the autumn of 2008, to incorporate other pipeline requirements and similar existing systems.99 Pipeline Directives include the environmental permitting and compliance requirements of the Mining Waste100 and the Batteries Directives.101 Other existing permitting and compliance systems under consideration at the time of writing include water

96 See the Cabinet Office’s Guide to implementing a Directive in the UK which advises at p 15, para 3.13 that the general presumption should be not to elaborate Directives. 97 Required to be published under the EP Regulations and entitled ‘Working together: your role in our environmental permitting decision making’ Issue 2, July 2007. 98 By May 2008, 27 such standard rules had been published covering a wide range of lower-risk waste operations: http://www.environmentagency.gov.uk/business/1745440/1745496/1906135/1985720/ ?lang=_e. 99 See http://www.defra.gov.uk/environment/EPP/. 100 See http://ec.europa.eu/environment/waste/mining/index.htm. 101 Directive 2006/66/EC of the European Parliament and of the Council of 6 September 2006 on batteries and accumulators and waste batteries and accumulators; see http://www.defra.gov.uk/ environment/waste/topics/batteries/index.htm.

discharge consenting, groundwater authorisation and radioactive substances regulation, water abstraction and impoundment and some waste carriers and brokers. Of some interest in terms of the coherence of UK environmental law is the proposed delivery of the requirements of the Mining Waste Directive. A spring consultation proposed that the EP Regulations were used as a platform to deliver these requirements in England and Wales.102 This consultation showed how easy it is to deliver new requirements through the addition of a schedule to the EP Regulations, rather than the traditional approach of designing a separate system. However, in Scotland the government’s preferred option for transposition of this Directive is to modify the planning system.103 In parallel to EPP, Defra, WAG and the Environment Agency are conducting a better regulation review into whether the current list of waste exemptions remains appropriate. The Environment Agency has adopted a lowrisk regulation policy pending the outcome of this review. It seems likely that some activities that currently require a Waste Famework Directive permit (such as shoe recycling bins in shoe shops) may end up with the benefit of an exemption. On the other hand some higher-risk activities that are currently exempt could lose the benefit of an exemption and in future require a permit. The former changes would reduce burdens but the latter would increase them. A parallel UK-wide better regulation review is also being conducted of Radioactive Substances and Wastes Exemptions Orders. The regime under the Radioactive Substances Act 1993 contains a number of exemption orders which exclude certain activities from the need to obtain an authorisation or registration.104

Conclusion The better regulation agenda is gaining momentum at a time when some aspects of environmental regulation appear unpopular. If the myth of widespread overimplementation is truly slain then what changes will this stronger agenda deliver? Have the efforts to reduce administrative burdens been sufficient or have they been so successful that they have stimulated much more radical and potentially deregulatory approaches? Hampton considered that better regulation should not compromise regulatory outcomes. It relies on a balancing

102 See the Joint CLG/Defra/WAG consultation: ‘EU Directive 2006/ 21/EC on the Management of Waste from the Extractive Industries (The Mining Waste Directive) Consultation Paper on Proposals for Transposition of the Directive in England and Wales’ January 2008 which proposed that the Mining Waste Directive should be transposed using the EP Regulations in England and Wales. 103 See the Scottish Government’s consultation of April 2008 on transposing the Mining Waste Directive into Scots law at para 39 which states ‘The Scottish Government’s intention is to modify existing planning application procedures so that they explicitly incorporate most of the requirements of the MWD’; http://www.scotland.gov.uk/ Publications/2008/04/08110255/4. 104 See http://www.defra.gov.uk/environment/radioactivity/government/ legislation/exemption_orders_review.htm.

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exercise of rights and responsibilities – between protecting the public and the environment, the right of industry to operate with minimal interference and empowering those who enforce rules to do so in an efficient and effective manner. Better regulation is being produced. The more widespread use of impact assessments, the compliance code, targets to combat administrative burdens and the modernising of environmental permitting systems, despite some concerns, appear to be producing better regulation without compromising standards. It is perhaps too early to tell whether Regulatory Reform Orders or the promise of administrative penalties will produce better regulation. Central controls on the delivery of regulation are also increasing. If the planning reforms or the primary local authority proposals appear to deliver different decisions, rather than more effective and efficient decisions, it is possible that some may struggle to accept those different decisions. The emergence of regulatory budgets as a policy tool is potentially the most radical step change of all. Capping the overall policy burden may result in fewer precautionary approaches being adopted in environmental regulation. Before anyone can honestly answer whether enterprise faces an unjustified cumulative environmental policy burden they perhaps need to spend some time working within regulated industry and some more time living adjacent to an operational landfill. Will the rigour of impact assessment be applied to regulatory budgets and make them flexible enough so that, in addition to reducing burdens, they allow new burdens to be imposed where the benefits far outweigh the costs, or not?

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