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Why the COVID-19 crisis calls for a revamped Better Regulation agenda

Better regulation / COMMENTARY
Johannes Greubel , Richard Doherty

Date: 04/02/2021
The von der Leyen Commission has pledged to strengthen better regulation principles further – a promise it has not been able to deliver so far. The Commission should waste no time to launch a revamped Better Regulation programme, to improve its effectiveness and help EU governance adapt to the post-COVID-19 ‘new normal’.

Better regulation: A non-priority?

When Ursula von der Leyen became European Commission President in 2019, she pledged to put better regulation (BR) at the heart of her Commission’s work. It was an overarching principle in all Commissioners’ mission letters. Furthermore, Vice-President Maros Sefcovic was tasked with overseeing the Commission’s BR efforts, introducing a new ‘one in, one out’ (OIOO) principle, and using the Commission’s new strategic foresight initiative to strengthen its BR approach.

However, the frequent postponement of the Commission’s Communication on BR means that little changed in 2020. The Commission should seize the opportunity to launch a revamped, effective BR programme, to help EU governance adapt to COVID-19’s ‘new normal’ and improve law-making. 

First steps have been taken

Since the early 1990s, the Commission has come a long way in improving regulatory principles and reducing unnecessary burdens for businesses and citizens. Today, its BR mechanisms are among the world’s most advanced: the Commission’s practices concerning stakeholder engagement, impact assessment and ex-post evaluation are already far more developed than those of any EU member state.

The von der Leyen Commission has pledged to develop these instruments further, but no proposals have appeared yet. While the Commission’s central document in this effort – a Communication on BR – was supposed to be published in May 2020, its appearance (after several postponements) is now only set for 17 March 2021. The pandemic clearly downgraded the urgency of BR.

Nevertheless, not all stood still last year. The Commission published its first Strategic Foresight Report in September 2020 – and foresight is now an important element of the Commission’s BR toolbox. By using foresight to develop and tailor policies better, the Commission seeks to “ensure that EU policies draw on a clear understanding of possible future trends, scenarios, and challenges, especially in policy areas subject to rapid structural change.” This is crucial, given the large-scale challenges of our time, especially the dual green and digital transitions. Assessing policy proposals with the benefit of the foresight material will future-proof them more than in the past and be a worthwhile addition to the Commission’s BR toolbox.

Another positive step was last November’s launch of the Fit for Future Platform: a broad representation of interests providing expert input to the Commission. The expert group will advise the Commission on opportunities to simplify and reduce burdens in EU legislation, propose adaptations in line with global developments, and promote digital means to reduce burdens.

These are important first steps to an extensive reform of the BR agenda. Business associations, trade unions, and regulatory advisory bodies have long called for an overhaul of the EU’s BR practices, which the Commission has pledged to address. The Commission’s new BR proposals will “engage stakeholders more effectively, increase transparency and reduce the potential burden from EU legislation” – all practical challenges today. It is now time for the Commission to put the initiatives into practice.

It’s not only on the Commission

However, improving law-making and reducing burdens for businesses and people is not only the Commission’s job. BR must be an interinstitutional effort, with the European Parliament and Council also sharing responsibility. Sefcovic has rightly called for increased efforts from co-legislators. Their response could bring real change and set the direction for future interinstitutional cooperation in BR.

The Parliament has stepped up its methods in recent years, by creating a Directorate for Impact Assessment and European Added Value within its European Parliamentary Research Service, and developing occasional impact assessments. Still, it could do more, such as evaluating and quantifying the likely impact of a greater number of its own proposed legislative amendments.

First and foremost, BR must become a felt responsibility among the Council and member states, which have a very mixed performance in applying BR practices so far. The Council’s efforts remained low-key, lacking effective measures such as producing its own impact assessments. This general lack of investment in BR limits the EU’s ability to improve the quality of legislation by considering experience on the ground. Member states should become more active by identifying real burdens facing its regional and local businesses and, in special cases, producing credible impact assessments of national contexts. This would both strengthen the quality of European legislation and encourage inactive member states to become involved, for the sake of their economy and businesses.

There is no time to waste. The renewed BR agenda will play an important role in the next phase of the COVID-19 crisis.

Kickstarting the EU’s post-COVID-19 economy

The pandemic has already had stark consequences for citizens and businesses; the EU27 will continue to face a severe economic situation in the coming years. A meaningful BR agenda with effective burden reduction for companies would support the EU’s economic recovery. There is no shortage of non-critical administrative and compliance tasks that divert or prevent businesses from focusing on their core (rebuilding) agenda. This can occur when authorities do not reuse their collected data for other purposes or are slow to digitalise information gathering and reporting flows. The Commission’s planned OIOO principle could be another important cornerstone for reducing both compliance and reporting costs.

2021 should also see the Commission deliver on its promise to promote more streamlined consultations using digital means.

Even though small and medium-sized enterprises (SMEs) overwhelmingly dominate the EU business community, the Commission still struggles to understand their views and interests. The Commission’s SME Test is theoretically good at assessing the likely impact of regulation on small business, but has major implementation challenges in practice. Broader regional and national efforts could make a real difference in understanding and adapting regulation to business realities. Given the sluggishness of bottom-up information flow from SMEs to regulators, new ways of (digitally) capturing businesses’ needs and the impact of new legislation on business time and costs (through analytical and predictive work at the regional or national level) should be used to understand the situation on the ground better. Digitalisation brings great opportunities to make BR more inclusive, and improve policymakers’ understanding of local realities.

Using BR to achieve the Green Deal and digital objectives

Beyond the pandemic, both the Green Deal and digital reforms will create major implementation challenges in the coming years. Effective BR processes will support these priorities by facilitating new legislation to deliver effective and achievable policy solutions. More inclusive stakeholder engagement, which improves the bottom-up flow of information by using digital monitoring and analytics, will make implementation challenges clearer and help to devise solutions which take stakeholders’ interests into account in a better way. Thorough impact assessment before and throughout the legislative co-decision will show what EU legislation can achieve. And systematic ex-post evaluation will create an incentive for set targets to be achieved.

To succeed, the institutions should carry out more detailed evaluations of need and of prior legislation or regulation’s impact, ensuring that the designing of laws benefits from maximum insight. The Council’s and Parliament’s key revisions to legislative proposals should also be impact-assessed (ideally by the proposing institution) as the legislative process proceeds. To facilitate these improvements, greater financial means should be made available, and the Council and Parliament challenged to back up their recommendations with trustworthy evidence.

The Commission’s OIOO challenge

The new approach of an OIOO commitment for every newly created legislative burden will be a major challenge for the Commission. More EU regulation will be needed in many cases to drive the green and digital transitions. Nonetheless, this could be a positive development if the Union (i) uses the opportunity to rationalise and pool existing legislation, and (ii) reduces overall burden by replacing national provisions and choosing Regulations over Directives.

An effective OIOO approach should consider not only the legislative burden of EU level laws, but also the overall cumulative burden, including the national level as well. Perhaps OIOO could also mean ‘one in, 27 out’. In this way, the BR agenda “as a driver for Single Market integration would provide harmonised common rules, a level playing field and a safe legal environment for businesses to operate and grow in the EU.”

The Commission has already clarified that it does not seek to apply the OIOO principle “in a mechanical way”. The initial focus should not be on less regulation per se, but on using OIOO to improve policy delivery through more effective regulations.

Stakeholders have high expectations of these initiatives, and the Commission should lose no more time in fully kickstarting its Better Regulation agenda. However, it is equally important that all institutions co-own this agenda and consider BR to be an interinstitutional effort. The Commission’s launch of the agenda should be used to step up the dialogue on improving the delivery of BR in all institutions.

Richard Doherty is Senior Adviser on Better Regulation to the EPC and a Senior Fellow of the German Marshall Fund.

Johannes Greubel is a Policy Analyst of the European Politics and Institutions programme.

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