Business and Regulatory Impact Assessment (BRIA) - Toolkit

Section 1: Background, aims and Options

Background to policy area

Any government action should have a clear rationale, which should be articulated at the earliest possible stage of policy development. Analysis of the rationale (such as market failure or other objectives) should underpin the evidence base for policy development. It also provides a guide to the likely additional costs and benefits that may occur because of any proposed intervention.

Officials should look to set out any relevant background to the current situation in the policy area and the evidence of need for action. It is expected that the BRIA will be published alongside other policy documentation, and officials can look to avoid repetition by linking to relevant information available elsewhere. However, a brief summary should be included within the BRIA to ensure those reading the document have sufficient context.

Relevant background may include where any existing policy frameworks, guidance, regulations or ongoing action relevant to the subject exist, particularly where it also affects businesses. This will include both Scottish Government policy as well as industry owned voluntary action.

The background should make clear why the options under consideration are being proposed – for example to address specific issues or market failures, in response to stakeholder feedback, or to meet other requirements.

Purpose/ Aim of action and desired effect

Given the reasons for action noted, officials should clearly set out the desired effects and outcomes of the actions. This should include how they will contribute to wider Scottish Government strategic or economic aims and objectives.

Consideration of the rationale for the policy intervention should also be outcome-focused, taking account of the National Performance Framework and the Government's National Strategy for Economic Transformation. Officials should consider the impact of the proposals on the outcome to deliver a shared understanding of how government and business work together on achieving a Wellbeing Economy.

Desired outcomes should be set out with as much specificity as possible to ensure businesses understand the aims, and the benefits and impacts can be measured. Outcomes that are too generic or undefined will make it difficult to assess both the impacts on business and other stakeholders, and how effectively the policy proposal has been once implemented. Officials should consider what the outcomes would be if no action was taken. While taking no action may not be a reasonable option (or possible where there are statutory/ international requirements), it will provide a baseline to demonstrate why action is needed.

When considering action, officials should identify both what the ideal outcome would be as well as what a minimum acceptable result would be to address the issue/ concern that prompted the action. In some situations, these may be the same; however, in other cases once the impacts of options are considered, certain outcomes may be judged to have too significant a cost compared to less extensive but still acceptable outcomes.

Options (considered so far/ still open)

At the preliminary stages of policy development all the options should be identified, together with their potential for achieving the stated objectives. Officials should set out which options have been proposed so far to address the identified issue/ concern and achieve the desired outcomes. All robust and reasonable options under consideration which may be taken forwards should be considered. Options must be assessed against the status quo or 'do minimum' situation. This will help draw out the implications of no or minimal action and act as a baseline against which to assess the other options. If doing nothing is not a valid option (for example there are statutory/ legal requirements to act), this should be clearly set out.

When identifying options, officials should consider different ways to reach the desired outcomes with voluntary action being considered first. The BRIA should set out each option, how it could achieve the desired outcome, and what type of action it is.

Actions may include:

• Scottish Government guidance/ policy statement
• voluntary/ self-regulation by businesses
• Co-developed codes of practice
• SG influence via other routes (provision of grants, new requirements on existing grants/ procurement)
• new Regulations via primary/ secondary legislation

Officials are recommended to consider at the start alternative approaches such as codes of practice or voluntary regulation whenever a legislative approach is under consideration. This will ensure that impacts on businesses are appropriate to the outcome required, but also that Scotland aligns with relevant international obligations (see further sections below). Officials should also consider how options fit with the Scottish Government's 'Better Regulation' approach which states that all regulation should be:

• Transparent – with clearly understood reasoning and scope
• Accountable – with clarity on who is responsible for the regulation
• Proportionate – with only enough requirements to meet the desired outcome
• Consistent – applied fairly to different businesses/ stakeholders^[2]
• targeted where appropriate – only applying to those that need to meet the requirements to meet the desired outcome

Voluntary regulation is a mechanism that can be used within a regulatory framework as an alternative to statutory regulation, to achieve a particular outcome through a change in behaviour. It typically involves industry and/or professionals developing voluntary agreements or standards, pledges, codes of practice, certification and accreditation schemes, to regulate behaviour or standards to achieve a particular outcome. The Scottish Government's involvement may vary from no involvement to the measure being government-sponsored. It can be a more agile form of regulation in that it can be put in place faster, can be more flexible and adaptable to introduce and update, and requires a commitment from those involved. It does not preclude later introduction of statutory regulation, for example where it is determined the voluntary regulation has been ineffective in meeting desired outcomes.

For regulations that affect business, it is vital to also consider alternative approaches, flexibilities or exemptions for regulating small and micro-firms. In considering whether alternative approaches may be appropriate, ensure early and appropriate discussion with relevant businesses, consistent with the New Deal for Business and Business Engagement Principles. The Engagement section contains more information on consulting businesses and the types of issues to explore in assessing whether alternative approaches may be appropriate.

Sectors/ Groups affected

Officials should look to identify which business sectors/ groups will be affected by or are in scope of the different options set out above, so that the impact of each option can be better evaluated. Options may have beneficial impacts on some groups and negative impacts on others. It is important to be as specific as possible and to work with stakeholders to validate assumptions. All significant groups affected by the options should be considered, particularly businesses, and informal consultation can be used at an early stage to help identify groups.

Relevant groups may include:

• Businesses – A core focus of the BRIA. The Scottish Government is committed to ensuring appropriate understanding of the impact of policy (both intended and unintended consequences) to make decisions that meet objectives without unduly impacting the economy.
• Organisations in the third sector – policy proposals may also affect voluntary and charitable sectors, either through their role in delivery or by affecting these groups in a similar way to businesses. It is important that these are duly considered. Colleagues elsewhere in the Scottish Government may already have links with these organisations. Alternatively, officials can contact organisations directly, and the Scottish Council for Voluntary Organisations may be a useful starting point.
• Local Authorities – the roles and responsibilities of local authorities are many and diverse and include a range of regulatory roles. Early and ongoing engagement with COSLA and a range of local authorities is likely to be an essential element of developing options and assessing their relative impact. Local Authority regulators can also be engaged via the Society of Chief Officers of Trading Standards in Scotland and the Society of Chief Officers of Environmental Health in Scotland
• Regulators – including consideration of the impact on existing activities and performance, and the resource and skills implications of the assorted options. Local Authorities deliver a considerable proportion of regulatory activity in Scotland, but other regulators may be relevant.
• Consumers / Competition Assessment - The impact on consumers should be noted, for example when their access to goods or services is restricted or is likely to become more expensive. When considering the impact of policies, the effect on the ability of businesses to compete in the market and what effect this might have on consumers should be considered. Introducing competition in the delivery of policy may add value.

When considering affected groups, officials should ensure that they include both those directly affected and those who may be subject to indirect impacts. Impacts on groups/ sectors will not necessarily be negative, - when assessing impacts, officials are expected to consider benefits as well as costs. Identifying who these will apply to is important in considering options.

Directly affected sectors will be easier to identify – for example, any businesses subject to the requirements/ guidance that is proposed. However, officials should consider how broadly these are applied. Where regulations are to be drafted, these will need to clearly define who is/ is not subject to the requirements in a way that meets the Better Regulation principle of targeted regulation. This means avoiding application to business/ sectors where it would not contribute to the desired outcomes/ objectives of the policy/ regulation.

Indirectly affected groups may be harder to identify. Key groups to consider are:

• Consumers affected by the changes
• Businesses which provide goods/ services to those directly affected
• Businesses which rely on goods/ services from those directly affected
• Business operating in related/ parallel activities not directly subject to the requirements

While indirect impacts may be harder to identify and detail, they should not be ignored. They will be important in considering the overall impact to businesses and the economy that result from different options.