The most important EU reform

As national calls for a ‘manifesto’ for EU reform take place on one side whilst the Commission make noises about UK taxation,  I thought to ask myself which is the most important reform.  Now those are important pre ambles .  Taxation on property is direct and ‘Competence on direct taxation remains primarily with Member States’ .  So on the one hand we want to debate and prepare for reform, on the other, carefully aligned with a niche domestic political agenda, the Commission are pushing their influence.  That combination of Commission bureaucratic pressure combined with internal national divisions is how so many of our previous ‘wins’ on EU reform were eroded, a chunk of our rebate, the opt out on the social chapter and the opt out on the working time directive, and we have little to show for their loss as a result.

So unless the tendency for the Commission to keep pushing at its boundaries as a regulatory machine is stopped any reforms risk being ephemeral.  Now the Commission has sole right to legislative initiative.  That is, it alone can propose new legislation at the EU level (aside from unanimous acts in Council which are slightly different as they are a commitment to national acts).  That right combined with its influence over the process of legislative approval is what gives the Commission bureaucracy its primary power and promoting legislation is a key career objective for many in its ranks.

Even more, it needs no permission for this, it can propose legislation on anything it can argue is compliant within the treaty.  To my knowledge only one directive has been overturned once passed and that took nearly 8 years.

This makes the Commission a political power in its own right , way beyond the EU civil service as it is often described.  Imaging if a meeting of Permanent Secretaries could put legislation before the House of Commons without any Ministerial involvement and force a vote.

The increasing influence of MEPs on the legislative proposal has , although less this time around, also added to organisational bias to a self perpetuating expanding regulatory acquis.  Almost by definition the European Parliament as a whole likes to do things at an EU level.

So in order to restore some balance to this classic organisational bias and restore democratic accountability the ‘legislative initiative’ should be revoked. That would be my ‘most important EU reform’.  Make them a civil service that only proposes legislation when a binding scope is agreed in the Council of Ministers.

As it happens that would also prevent our own departments covertly using EU processes when UK processes would block them and further reduce the need for the EU loophole in current deregulation policy.  It would also give the UKIP MEPS less not to do!


Smart Meters and Innovation

Recently I was in a discussion about the slow roll out of smart meters following, as it happens, a call from my now ex supplier on installing a ‘smart’ meter.  So this led to my thinking about accelerating the roll out by increasing consumer demand. In innovation terms how do we make the consumer the demanding early adopter rather than the supplier.  Most potential early adopters who simply want visibility of their use can do that by a simple energy monitor.

My experience with my supplier was telling – what did I get for staying in for a day without electricity?  Nothing.  But it means no more physical meter reading, better visibility of my use, more accurate billing, better demand prediction for them and less privacy for me – not even worth a discount?  Apparently not.

So then what would make me stay in for a day without *shudder* electricity?

How about instead of hiding the cost and benefits in everyone’s bill, it’s separated out – an upfront cost for a decent discount – sure.  If it’s not a good deal then, very simply, smart meters need to do more to be economic.

So then what else might make me stay in or maybe even spend my own money in way that won’t make it a grudge purchase?  How about selling me on discounted electricity when demand is low.  For me as for most dual fuel houses with a hot water tank – the cut off right now to make it work is when is the price less than gas.  The reason here is simple – I store hot water for use later so when energy is cheap I can top up the tank.

With a little more work, in winter at least, I could top up the house heating – a little more work is required to work out when and how much to pre-heat the house out of peak hours and if it’s worth it but doable even if it would need more of a price difference as it is less efficient. Pretty much everything else requires some expensive capital rather than simply a machine readable on-line price, a heating circuit, some relays and a few pounds worth of microprocessor.

But that’s challenging, gas is cheap at least for now , water heating is insulated and easy to time shift but the thermal mass of the house isn’t.  However even for this and the talked about future scenarios of time shifting via electric storage in electric cars – I want control for me not for them – and that means an open way of publicising the discounts available whether via a documented interface for the meter or via a machine readable web service.

So if offering me a flexible price isn’t terribly useful – at least unless it is cheaper than gas and some insulated phase change thermal storage tanks or I get a fuel cell in the cellar and I can control my use without downside – what is?

Smart in this case means connected – it is the key difference between a smart meter and simple energy monitor.  So how can that connection be used for me rather than the supplier?

If it takes meter readings so frequently (every half hour or so) then it really should be very easy to change my supplier.  After all, as an on grid user, changing supplier is really a logical association of my use of the grid supply with indirect energy suppliers, nothing actually physical happens.  Now at the moment switching takes 2-6 weeks according to Which.  If I can supply a meter reading to anyone at anytime (as is the plan, as it will be a centralised system) why can’t I change supplier at the touch of a button – or say automatically connect to the cheapest supplier?

Now with that in place the interesting reversal is that I want one now and its worth me paying for it.  Indeed I’d rather my supplier did not take responsibility if it prevents me switching.

In this case , as in many areas, hiding the costs and the supply chain limits demand and innovation.  It’s also a very interesting example that how the centralisation occurs is much more important than whether or not the centralisation occurs.  Indeed with the right approach to interoperability profiles, process and standards, centralisation of the smart meter system is arguably not necessary and becomes both a potential point of failure of both the data flow and innovation.

Better Regulation for Dummies – phase 1

So seen as the Queen’s speech mention of cutting regulation has been and gone to a rapturous critical reception and now forgotten here’s the instruction manual I’ve been meaning to write based on my earlier reasoning here and here.

Phase 1 – Legislative underpinning.

Pass (and yes that’s the hard bit) primary legislation that binds all legislative proposals to the following:

1) All legislation (primary acts and statutory instruments) put before the house shall have an independently verified impact assessment based upon quantified objectives.  So the maximum acceptable cost of achieving the legislation’s objective is part of the approval process and the objective is transparent. Exceptions as per clause 3.

2) All legislation shall have included an automatic sunset clause that is activated if, after three years, there is no independently verified report on whether the legislation has met its objectives within the accepted cost range.  If no such report is placed before Parliament; or if the objective is not met or if the predicted economic impact is exceeded then the legislation is terminated.  There shall be no exceptions.

3) The only exception for emergency legislation shall be by consensus of the Cabinet which triggers a requirement for the quantified objectives and impact assessment to be presented within six months.  If the impact assessment is not presented or the objectives not me or the costs exceeded after three years the legislation shall be terminated and an automatic motion of no confidence shall be moved and voted on in the House of Commons.

4) All references to any legislation officially recorded in Parliamentary proceedings  and in any Government documents should be the formal current referencing system appended to the name of the Minister signing the legislation into law or the proposing MP in the case of a private members Bill.

Now I think that will focus resources on the key levers of government as well as act on good measure as to whether any legislation is worthy of Parliamentary time, it empowers Parliament and constrains the executive apart from when they choose to put some skin in the game.  There will be little or no ability to ignore EU political and regulatory acts and it would improve senior EU engagement and lobbying no end.  The Finance act would have to be transparent about its objectives and the balance between raising revenue and nudge policies.

Yes resources should be moved to something like the NAO but it should not require new resources, after all such impact and effectiveness monitoring will minimize wasted effort and should be happening anyway.

Now I did once propose this in real work and although popular by some in the trade association it was seen as too extreme by others yet it really is only basic project management.  The main arbitrary element is the choice of three years but its reasonable.  Too soon and you have set up costs and change management issues, too late and its difficult to benefit from its removal.  Its well within Parliamentary terms and reflects the comprehensive spending review periodicity – which will be important for phase 2.

Oh and if this sounds eerily familiar you should remember the classics.

I was wrong.

Fortunately I am not a politician so that was easy.  I said when I wrote ‘Cut red tape – isn’t it in shreds yet?’ that I expected to re blog it every year.  Now that was only eight months ago so they are ahead of schedule.

That is courtesy of the Queen’s speech ‘A bill will be introduced to reduce the burden of excessive regulation on businesses.’  Now that’s exciting as its a Bill so the need for regulating the regulators is recognized as I thought (so not always wrong, mind you I did think it unlikely .  The bad news is it still seems about reducing the burden rather than controlling the annual tidal wave of new regulations.

I wonder if it will include the European legislation and use of the budget to avoid the existing one in – one out rule?

Well according to the notes its only primary legislation so most EU directives create secondary legislation so won’t be in, that’s a few thousand loop holes.  Some of it is seems counter intuitive – lets not ‘assess air quality zones’ and some fairly fuzzy on ‘non-economic regulators’ to have regard for their impact on growth. Oh and no mention of the Finance Bill that enacts the budget despite the fact it IS primary legislation – that could get interesting.  What the briefing doesn’t say is what it will actually do in general and how it should be assessed …

Maybe I should do a simple ‘how to’ as I’m not sure the penny has dropped with our Politicians and Parliamentarians that they make the rules … or at least delegate that to others.

Roughly speaking, the Government is not trying to be an innovator

Last night I had the privilege of attending a Foundation of Science and Technology dinner on Governments ‘new’ industrial strategy. A certain lack of radical thinking ( reminding me of my first post , and indeed my second and i’ll try and avoid ranting about the patent box again ) was in evidence and much agreement between the usual suspects.

Unsurprisingly, the power of public procurement as the biggest potential tool to unlock funding and innovation in the private sector came up.  No names, it was under Chatham House Rule.

Now I maintain that Government does not unlock innovation in this way as it is simply not looking for it – it is a cultural rather than procurement problem.

Now this has been examined by Government looking at the private sector’s Research and Development Intensity – what percentage of sales revenue is spent on R&D – in the now defunct R&D scoreboard.  So if we turn the tables how much does Government spend on getting better at doing Government and how could you generate a useful metric.

So in 2010-11 UK gov spent £1,702 million on R&D to improve Government services and £655 million on aiding better policy (not perfect as that will leave out many pilots and trials but those would not be scientifically evaluated anyway) .  Note that isn’t including spending on education and research per se nor is meant to be – this is about Government trying to do what it does better.

Now if you take tax revenue as a basic equivalent to private revenue (again not perfect but it covers available cash and over and under taxation has similar properties to over and under pricing and is also a proxy for economic health) that is £528.9bn courtesy of the Guardian trawling through the HMT stats.

So that gives a very rough first order approximation of an R&D intensity for UK Government of 0.0045%.

In 2010 the UK gov scoreboard said : ‘Among the UK’s 1,000 leading companies R&D intensity stood at only 1.7%.’

Needless to say that’s ‘only’ about 370 times higher than Government.

Not really surprising Government isn’t demanding and stimulating its supply base like private sector innovators is it?

The new business bank – symptomatic relief or admission of failure?

BIS has launched – or rather merely announced – a new business bank. It aims to leverage £1bn of public funds to make £10bn available.  Now it may be that it is a sensible piece of symptomatic relief – in which case the obvious follow on questions are:

1) What’s the exit strategy?  (wind down? pump priming leading to independence?)

2) What conditions trigger the exit strategy?

3) Indeed what exact conditions or symptoms triggered the relief in the first place?

Now I say symptomatic relief because it isn’t a therapy itself – it doesn’t make it more convincing to lend to business, it doesn’t make it easier for other banks to lend to business – one could argue subsidized competition makes it harder.  Almost by definition it redistributes funds from those that would be supported by the private sector to those that would not.

So if its an admission of failure then a failure of what?

Competition policy ?  One more bank might be better created by breaking up some if we have too few that are too large to fail.

The banking bailout?  If the existing banks are not doing what we want – bear in mind we own some of them – didn’t we spend a lot of money on the wrong banks already?

The business environment? If lending to UK businesses is so unattractive is there an underlying reason – taxation levels, regulatory burdens on HR, finance and so on?.

Now where do I find the policy impact assessment or business case and consultation documents that may throw some light on the issue?  Oh – budget 2011 apparently.  ‘Four ambitions in the ‘Plan for Growth’ (PDF 1.7MB), published at Budget 2011′  according to the notes in the press release.

Never fear an industry led task force is referenced.  That must support the policy right?

Here are some quotes:

‘studies point to low levels of demand for finance among businesses’

‘demand for bank credit is subdued’

‘Applications for bank debt remain very weak’

‘a general lack of awareness about alternatives to bank finance and hence improving support for this segment is a key element of our recommendations.’

‘on our assumptions the finance gap could be between c£84bn and c£191bn over the next five years’

‘Government can start by clearing up the “alphabet soup” of business support schemes’

So in fact it seems that start a new bank isn’t there very much – only the discussion on a ‘radical’ form of the suggested ‘agency for business lending’ and even the evidence for that looks weak verging on inconsistent.  That turned into a mere ‘Launch a feasibility study’ in the reports recommendation.  The recommendations that aim back at Government seem …. slow … in adoption and the announced policy may – if the leveraging works – address from around 5% to 10% of the problem.  That’s a £1bn micro-intervention …

Can we see the rest of the solution please? Have you published the business case?  If not, why not?  Which of the existing funds and grants will be axed to fund this bank or is it ‘new’ money?  Given this is a wholesale approach how will you measure its success and ensure it doesn’t just drive out private sector investment or help the baseline of the retail banks?

Surely it can’t be a big announcement for a conference speech whilst Parliament is in recess can it?  (Okay that wasn’t hypothetical, merely cynical.)

Cut red tape – isn’t it in shreds yet?

Once again BIS are asking you – yes you ‘Cut Red Tape – we need your help’ – which legislation it should remove or transform. We have been here before – ad nauseam in fact. It has been tried near enough by every occupant of Secretary Of State for Trade and Industry or BIS or the Competitiveness Unit when it was in Cabinet Office in my memory.  I don’t believe it ever impacted the rising regulatory burden.

There are a few reasons why it is unlikely to work very well this time either.  At least this time they didn’t call it a bonfire of red tape.

1)  It just plain doesn’t matter against the scale of new regulations.  

Last year (last full figure) there were 3133 regulations and terrifyingly only 321 regulatory impact assessments.  (To be fair many were exceptional transport orders owing to the Olympics but around 2000 is about normal and 20-50 or so primary acts).  So unless the issue of the dark tide of new regulations is under control the red tape initiative is rather more a sparkler in the darkness instead of November the 5th.

2) Resources in industry that are able to put forward sensible suggestions are minimal.  

They are going to prioritise new legislation because – like it or not – we have processes in place to cope with old legislation and all the attention is on new risks and costs not ones that are already in the books.

3) Those same resources need to trust that the BIS Sponsors will have an impact.

An example.  Many of those people (me included in my last role) have been saying that the perverse conflicting carbon reduction and energy efficiency legislation needs radical simplification in response to DECC, BIS and Treasury ministers year after year over three administrations. The Chancellor made it an issue in a budget speech. Yet there has been no surgery on the alphabet soup of the ETS, CCL, CCA, CRC, ECA (non exhaustive list – who says ICT is the home of the TLA?) and so on.  It doesn’t take much to work out that if you stack regulation on top of regulation all with the same objective you are either trying to hide something (like the Government’s effect on your heating Bill?) or the foundations you are building on don’t work, making a rather shaky tower.  (Better more consistent metaphors in the comments please!).  More simply put if you do this kind of work the first question is ‘what’s changed from when you brought in the legislation in the first place’

4) Timescales – resources again.  

The last CRC simplification consultation (of four or so over the past four years) ended in June and the contributions that may or may not be accepted to are still being considered.  As is the consultation on open standards in government procurement that also ended in June.  Add in setting these up, assessing the issues and consolidating a factual return with achievable and legal recommendations for action (as all these are in the context of equally complex EU and international treaties) you are talking about gambling man years of resources in the hope that you might actually get Government to do their own job properly.

5) The question itself is just too costly and too much of a gamble to address from a business point of view

You need to look at your existing business process, work out which compliance process have regulatory impacts (a good example is the impact of audit and taxation requirements on a finance system – it exists so you don’t have to worry about the law on a day to day basis, HR is the other good example).  Then you have to work out how your business process could be more effective if the regulations were changed in a way that supported your interests – and be aware a regulatory debate may make it worse not better like the the last review of the bribery regulations.  So if you identify and unpick the impact of a set of regulations on a complex system, model the potential business process re-engineering on a speculative basis and then ask for the regulations to be change to allow that re-engineering and hope that no official. minister or MP adds an amendment that means you have to redo the entire process if they do anything at all.

As for me – i changed roles a while back (no more CRC consultations yay!) and if i’m still blogging I expect to be able to reblog this post every year.  So next I’ll will have to put the time into suggesting how someone can make that a false prophecy.

Now I realize I may have ranted somewhat and I should emphasis that although I feel its misguided this is a good initiative by BIS. It opens the door and raises the issues of better regulation and we are, in international terms, generally very good at this – although it seems that when we fail we do it really quite badly – DECC.  Raise a valid point with a decent level of supporting information and you can normally get a hearing on your issue at any time whoever you are.  That more than anything else is worth fighting for – BIS do keep the door open all the time please!

Regulate thyself to deregulate others?

Following a decidedly technical reshuffle with some clear themes on planning, energy, environmental and business regulation it did occur to me that we tend not to talk about some fairly obvious issues with deregulation or better requlation policy.

Firstly, by definition, continuous better or de-regulation policies limit the freedom of action of the executive functions of government.

The implication of that statement is that Ministers and the Civil Service will have reservations about such policies.  In general the Government is much happier to regulate others than themselves.

That means if you have a continuous process of quality inspection rather than an intermittent ‘bonfire’ of red tape (a ‘smolder’ maybe be more accurate) there are only two possible solutions.

One – a strong political grasp of the regulatory agenda.  That has its own issues.  It tends to be very short term and subject to political trends and whim hence the bonfire approach and not forgetting that promises to legislate make for good soundbites in speeches.  It creates significant tension between departmental leads, particularly Treasury and business (as regulation is off balance sheet accounting)  but also between any strong advocate of new regulation like DECC and the leadership function. It is all too difficult to have the level of expertise that a Cabinet sub-committee would need to recognize the poor legislation that could come from any part of the government before there was a public consultation and expectations and commitments made to regulate.  It also means there is little political incentive to go back and look at regulations that did pass the process and recheck them.

Two – primary legislation.  This is much more entertaining but also more unlikely.  The executive itself would probably have to propose legislation that limited its own freedom to act.  Tempting for the opposition until you realize that it also applies to the freedom of all future governments.  It would have to have a majority of MPs willing to vote for a greater and stronger recognition of their role as the UK’s supreme legislature- that sounds good unless you have a interested in promoting a piece of legislation to promote yourself or maybe looking for a promotion to the executive … even a private members bill looks unlikely on that basis.

Now at the moment we largely have scenario one.  Given this is all hypothetical I’ll spend some time looking at what scenario two would look like in practice and why bonfires have been so ineffectve.

Can you buy compliance?

In an era of public budget restraint (if that’s what you call borrowing more every year) it is likely the incentive to regulate to achieve a departmental objective is actually higher.  If the alternative could affect the departmental budget it still might be cheaper than what is, effectively, off balance sheet accounting.  So, DECC, if you want a green house gas report maybe you could pay for the audit?

I can’t actually find a regulatory impact assessment that includes an alternative of buying the behavioural change sought.  But it is certainly possible in some cases.

I note that my local authority makes money by selling the contents of my recycling bin … if only they offered me a percentage …