Cutting the red tape

Exploring the political commitment to reduce traditional regulation constraints within the water industry, enabling utilities to have greater freedom

In the general election all parties wooed business by showing how tough they would be on 'red tape' that constrains wealth creation (the government), or already has it on the ropes (the opposition). This is good because general elections are our chance to debate the kind of future we want and the trade-offs we are prepared to accept.

That's the theory. In practice, set-piece political conversation seldom does justice to big issues of this kind. Look at what happened to education, transport and environment. Instead of real debate, we seem to hear little or be fed what it is assumed we want to hear.

This is disappointing, if understandable, given the nature of modern elections. But that aside, do you sometimes feel the red tape debate suffers in the same way and formulaic complaints are trotted out so frequently they risk losing their bite? To avoid misunderstanding, the water industry is fully committed to regulation that is 'simpler, more efficient and risk-based'1. We work for a less burdensome, more flexible and transparent regime, but the national debate can seem stuck with blanket condemnation on one side, optimistic promises on the other. The danger is pragmatic solutions can be lost to huffing and puffing and standard responses.

Perhaps we should start by acknowledging regulation ought to be (and for the most part is) the friend, not the enemy, of successful business. Rich, complex societies that welcome new ideas and commercial opportunities, also raise citizens' expectations about fair treatment, for example, or clean air, or safety at work. From this perspective, enterprise and regulation are two sides of the same coin. Wise regulators are as integral to dynamic business environments as good doctors, teachers, tax inspectors, or transport operators. Ah, wisdom. There is the rub. It is not regulation itself, the lobbyists say, but unnecessary and time-consuming administration that causes problems. This is true, but will slogans such as 'not better regulation, but deregulation' improve things? Or simplistic solutions like 'one in, one out', which may help influence attitudes, but could also create a situation some said would follow the use of quotas to control economic migration.

None of this is easy. There are no alternatives to dialogue and collaboration between regulator, regulated and other stakeholders. Continual review and evaluation are better than a one-off blitz when the pressure becomes unbearable. Water UK is supporting several attempts to improve things and is hopeful about all.

Look first at our sponsor, the Department for Environment, Food and Rural affairs. Its strategy2 is about changing the way it does business, especially by regulating better. It seeks to cut the red tape for which it is responsible by at least 25% (their italics) over five years. This is serious stuff. Defra is one of Whitehall's biggest regulators and particularly exposed to the present high tide of criticism.

The question is will it work? Let us ignore the 25%. The test is when business feels a lighter touch, not when a target is reached. But the answer is a tentative 'yes'. Water is an early case study. Companies are advising on regulatory overlaps, duplications and other problems. Defra's approach, involving regulators, looks sensible. Also good is that a report is due in the summer, so we shall soon know.

Next, the Environment Agency - although it has achieved a lot through what it calls 'traditional' regulation, many would agree it has not always been a model. But in the past three years a fresh strategy has been quietly cooking - Delivering for the Environment, A 21st Century Approach to Regulation3.

Scepticism may be in order - WWT readers probably have more reason than most. Yet there are grounds for optimism. A long and wide consultation led to the final strategy in March. The authors have absorbed the thinking of the Better Regulation Task Force; have listened to the frustrations and have produced what might be called a handbook of modern regulation. The difficulty of reaching common positions is addressed. There is a strong commitment to risk and outcome-based regulation. It recognises new approaches are needed to deal with diffuse pollution. Sector plans will help neutralise 'one-size-fits-all' rules. Naturally everything rests on how the plans are implemented, but some early signs are positive.

Water industry/EA liaison is feeling the difference, for example in discussions on the role of industry self-monitoring and greater transparency in setting charges. Finally Water UK has contributed to and supports the Hampton Review4 of non-sector-specific regulators (including the EA). Risk assessment is again paramount; accountability is centre-stage; form-filling gets the treatment; consolidation of regulators aims to simplify reporting. Important questions must be answered, especially about the merger process, but consultation is promised. Reform is in the air and a bill is planned for this parliament. But what really matters is that the sides talk to each other and their stakeholders and don't forget that one person's red tape may del-iver another's expectations.

References: 1. Election Statement, Water UK, April 2005. 2. Delivering the Essentials of Life, Defra, December 2004. 3. Environment Agency, March 2005. 4. Reducing Administrative Burdens: Effective Inspection and Enforcement, HM Treasury, March 2005.

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