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3.20 But the extent and nature of the regulatory burden emerges strongly as a preoccupation. Measuring the burden is difficult, with estimates varying significantly and often not comparable. There is some evidence that the costs of achieving additional Open Europe, ‘Still out of Control? Measuring Eleven Years of EU Regulation’, June 2010 TheCityUK 42 Review of the Balance of Competences between the United Kingdom and the European Union: The Single Market integration may be rising as more integration is achieved27. Open Europe argued in 2010 that 72% of the regulatory costs imposed in the UK over 1998 – 2009 came from EU legislation28. TheCityUK notes that there are forty pieces of legislation relevant to them in the pipeline and that the UK’s influence is vital in getting them right29. There is recognition that reducing the burden is a more visible political issue within the EU and with the Commission than in the past, with more political energy behind it: for example, the British Chambers of Commerce say that “the EU Impact Assessment Board is making welcome progress in recognising the costs to SMEs from EU business”30. But there is also evidence, especially from small firms, of what appears to be unnecessarily burdensome regulation. The Commission itself summarised the results of a recent consultation of SMEs across Europe in a communication31 highlighting the most burdensome pieces of legislation.
3.21 Sometimes it is argued that participation in the Single Market disadvantages the large number of UK firms who do not export, by forcing them to abide by EU regulatory standards without their ever wishing to do the selling into wider markets which this facilitates. The evidence is not clear-cut and of course it depends very much on what assumptions are made about the likely degree of UK-level regulation in the absence of EU rules.
3.22 On the one hand, the FSB notes that UK SMEs have different views on this point, but argues generally that standards need to be cheap to implement and easy to use for SMEs.34 TheCityUK notes that financial services companies largely focused on the UK get fewer benefits and that these can be “offset by the challenge of dealing with the pattern, extent, and characteristics of EU legislation”.35
3.23 On the other, some firms and bodies operating at this level highlighted that a well-designed regulatory framework can be an advantage to regional or global competitiveness. BAE Systems said “there can be substantial market benefits from the establishment of technical standards for new products driven by collaborative research; and to the extent that those standards are exported to other countries or contribute to wider international agreements, they can enhance industry competitiveness outside the EU”.36 The Bioindustry Association noted that “The European Medicines Agency headquarters are based in London, giving the UK access to, and the opportunity to influence, regulatory affairs across the whole of Europe. The Central Division of the Unified Patent Court that covers the pharmaceutical and life sciences industries is to be based in London. This will enhance the UK’s pre eminent position in the provision of legal expertise for European life science IP. This will reduce costs and time for companies looking to defend or enforce their patents across Europe.”37 Europe Economics (2013), p75 Open Europe, ‘Still out of Control? Measuring Eleven Years of EU Regulation’ June 2010 Evidence submitted by TheCityUK Evidence submitted by BCC p4 COM(2013)122 and SWD(2013)60 final Evidence submitted by BCC p3 Evidence submitted by Trades Union Congress para 12 Evidence submitted by FSB p6 Evidence submitted by TheCityUK Evidence submitted by BAE Systems
3.24 It is also important to note that the effect of regulation is not only to be assessed by its impact on existing firms. The intent of much EU regulation is to liberalise markets and reduce barriers to entry by new players, for example allowing firms from one Member State to operate in another. This would have pro-competitive effects, bring down costs overall, and benefit consumers38.
3.25 Enforcement is also cited by many as an issue. Much of the evidence to this report suggests that there is a significant problem with enforcement across the Single Market, with standards being applied differently in different Member States39. The Centre for European Reform highlights problems caused by differential enforcement by national courts of the e-Commerce Directive40. The British Retail Consortium argues that many Member States take advantage of the ambiguous drafting of the Services Directive to create barriers to new retail investment41. BAE contends that “implementation of the existing EU Data Protection Directive, and in particular the operation and functioning of national DP regulators, appears to differ greatly from Member State to Member State.”42 The Bioindustry Association says there are “issues with the implementation and interpretation by Member States creating obstacles to the free movement of medicines in the EU market”43.
3.26 There is also a view that the UK plays by the book more consistently, placing UK firms at a competitive disadvantage to companies in other jurisdictions. The Convention of Scottish Local Authorities argues that UK scrutiny bodies such as the Audit Commission and Audit Scotland monitor and scrutinise local authorities more thoroughly than the authorities in other Member States44. The British Banking Association claims that the former Financial Services Authority had stronger sanctions than other Member States’ regulators45.
Vodafone argue that the UK is more rigorous in enforcement than other Member States46.
The British Chambers of Commerce argues that other Member States are much less A point made by Europe Economics (2013), p75 and conclusions 38 Evidence submitted by CBI p4, Vodafone para 34 39 Evidence submitted by CER p5 40 Evidence submitted by BRC p5 41 Evidence submitted by BAE p3 42 Evidence submitted by BIA 43 Evidence submitted by The Convention of Scottish Local Authorities, see also Consumers for Health Choice 44
Evidence submitted by Vodafone para 50 46 44 Review of the Balance of Competences between the United Kingdom and the European Union: The Single Market rigorous in enforcing state aid rules than the UK47. The Road Haulage Association argues that “several operational requirements are more onerous on UK operators, including a lower limit on certain vehicle weights, periodic maintenance inspections, operating centre requirements and the threat of revocation of an operating licence.” However, Kingfisher notes that it is over-enforcement of REACH and the Late Payments Directive in France, not the UK, which causes them difficulties.48
3.27 Gold-plating of EU legislation, i.e. over-implementation in the UK of rules set at EU level when transposing nationally, is a further, related, issue that emerges from the evidence.
Gold-plating can occur because of a deliberate policy decision to exceed the minimum requirement required by an EU Directive, to extend the rules in a Directive to additional areas not strictly governed by it, or to go into more detail than the Directive in order to try to avoid uncertainty as to the domestic legal requirements.
3.28 There are different perspectives on the extent to which the UK gold-plates EU legislation.
(i) Gold-plating occurs and is damaging. The Davidson Review in 2006, cited by many respondents, found that “there are...some cases of over-implementation in the stock of existing legislation that should be addressed.”49 A 2011 survey by the Financial Services Practitioner Panel found that over 80% of firms felt that the UK had transposed EU directives into UK legislation in more detail than necessary50. The CBI and British Chambers of Commerce argue that the Agency Workers Regulations implementing the Agency Workers Directive, and the Working Time Regulations, have been goldplated51. The Institute of Directors, in their recent report The Midas Touch52, argues that the Agency Workers Directive, the Parental Leave Directive, the Evidence submitted by BCC p5 47 Evidence submitted by Kingfisher 48 BIS, The Davidson Review, 2006; Road Haulage Association 49 Financial Services Practitioner Panel, 6th Survey of the FSA’s Regulatory Performance, February 2011 as cited 50 in City of London Corporation evidence Evidence submitted by CBI, p6 51
European Works Council Directive, and several others have been gold-plated. The National Farmers Union says that the UK over-implemented the Tether and Sow Stall Ban, the Good Agricultural and Environmental conditions within Cross Compliance, the Welfare of Meat Chickens Directive, and the Environmental Liability Directive53.
(ii) Gold-plating is sometimes necessary or even desirable. The CBI notes that in some cases it is essential to provide extra detail over and above the broad text of Directives54. The Trades Union Congress argues that the UK does not gold plate and indeed does not implement effectively where it should take opportunities to improve protection for workers55. The City of London Corporation notes that the decision to extend the scope of the Market Abuse Directive was welcomed in the City56.
(iii) Evidence for gold-plating is limited. The Davidson Review also noted that “inappropriate over-implementation of European legislation may not be as widespread as is sometimes claimed.” A BIS review published in March 2013 examining draft UK regulations prepared between July 2011 and December 2012 found that there was no evidence of new gold-plating that placed additional burdens on business.57 Vodafone also found limited evidence of gold-plating in their sector.58
3.29 The Institute of Directors summarises the case by noting that “the extent and cost of ‘gold plating’ is an unresolved empirical question. There is however considerable anecdotal evidence of it.”59
3.30 With all this in mind, it is the Government’s policy to minimise regulatory burdens when implementing EU legislation and to ensure that the UK does not go beyond the minimum requirements of EU legislation when transposing it into UK law. The Coalition Agreement included a commitment to “end the so-called ‘gold-plating’ of EU rules, so that British businesses are not disadvantaged relative to their European competitors”. This was implemented through the Government’s Guiding Principles for EU Legislation, published in June 2011 and recently revised, which aim to prevent gold-plating of EU legislation by putting in a strong scrutiny and challenge process in assessing how EU legislation is implemented in the UK. This includes the principle that the Government will always copy out the Directive for transposition where possible, except where doing so would adversely affect UK interests e.g. by putting UK businesses at a competitive disadvantage compared with their European counterparts. The Government is also committed to rooting out historic gold-plating with a view to removing any unnecessary gold-plating from the stock of UK legislation.
3.31 To conclude, the EU Single Market brings with it legislative and regulatory obligations that are necessary to make the market work. These may perhaps have grown in recent years, and weigh more heavily on SMEs than larger companies, but there have also been renewed and increased efforts to reverse the process at EU level. There is mixed evidence of domestic gold-plating, but a clear Government policy to avoid this for the future. The standard of implementation and enforcement varies greatly across the EU and this forms a significant barrier to UK firms’ ability in practice to take advantage of the Single Market’s opportunities.
Evidence submitted by NFU 53 Evidence submitted by CBI, BCC 54 Evidence submitted by TUC paras 31-33 55 Evidence submitted by City of London Corporation p9 56 https://www.gov.uk/government/publications/gold-plating-review-operation-of-the-transposition-principles-in 57 the-government-s-guiding-principles-for-eu-legislation Evidence submitted by Vodafone 58 Evidence submitted by IoD 59 46 Review of the Balance of Competences between the United Kingdom and the European Union: The Single Market The impact on broader integration
3.32 The existence of the Single Market has had a significant influence on political and economic debate across the EU. Two aspects have been particularly prominent.
3.33 The first of these stems from the interaction between different Member States’ policy preferences. A single market project enables a Member State such as the UK, if it can exert influence effectively, to set policy so that ways of doing things familiar in the UK can become the norm across the EU. Equally, of course, other Member States can do the same and impose, through EU legislation, policies which do not suit the UK or which would not be chosen nationally. There are also subsidiarity costs with a large market: i.e.
costs which are intrinsically associated with centralised policy-setting, making any final policy less likely to be optimal in any given area.
3.34 Much of the evidence highlights the strong influence the UK has had in practice on the development of the Single Market, in particular its evolution in a broadly liberalising direction. Vodafone, for example, cites the influence of UK privatisations in the 1980s on the “European Commission, led first by a Belgian and then by an Italian Competition Commissioner, [which] forced other Member States to follow Britain’s lead in the late 1990s. This was part of a Single Market programme which itself owed much to British leadership in the 1980s and 1990s.” The development of financial services legislation is another area where UK practice has – at least until recently – been influential in establishing EU-wide norms60. Indeed, the UK’s own relative economic success over the period in which the Single Market has been developing has been a powerful soft power element in projecting the UK’s influence more broadly.61