New Deal for Business Group: progress report and recommendations

3. Subgroup One: Business Regulation

Overview

The Joint Business Regulation Taskforce was established in December 2022 following the Emergency Budget Statement in response to the cost crisis, on 2 November, where the former Deputy First Minister committed to "establishing a Taskforce with COSLA, local authorities, our regulatory agencies and business to consider the differing impacts of regulation on business and drive early progress on the commitment made in the National Strategy for Economic Transformation to review and improve the process of developing, implementing and reviewing regulation to meet our economic and societal aims for the longer term."

The Taskforce met for the second time in February this year and following the changes at Ministerial level, the group was chosen to become the sub-group of the New Deal for Business Group, focussing on regulations, with an objective to identify recommendations to improve the way we as a government develop and implement policy proposals which have an impact on business and how business engages with that process.

The purpose of the Taskforce, now sub-group, is to provide a forum to discuss and where possible take action, on concerns raised by businesses, regulators and other stakeholders. The ongoing cost crisis highlighted the cumulative impact of not only increased costs generally, but also the resource required to understand, plan and invest to comply with the range of regulations in development, both at UK and devolved level. This is especially difficult for small and micro businesses.

The Scottish Government made a commitment in the NSET to review and improve our process of developing, implementing and reviewing devolved regulation to meet our economic, environmental and societal aims for the longer term, while also supporting our international commitments. This work will help us meet that commitment.

Issues considered

• Discussing specific issues with specific regulations and ensuring these concerns are being fed back to relevant officials for consideration. Issues discussed include the need for policy leads to find out what businesses are doing already to address the issues and if they could voluntarily do more, before moving straight to regulation;
• Ensuring the cumulative impact of devolved regulation on businesses is understood by Ministers and officials by developing a "matrix" of upcoming regulations, with a commitment to continually updating this tool and making it available to business and regulatory stakeholders;
• Reviewing, improving and strengthening the guidance and templates for Business and Regulatory Impact Assessments (BRIAs), with a particular focus on early engagement and co-design where possible;
• Agreeing the terms of reference, remit and priorities for a reconstituted Regulatory Review Group;
• Working with local government to ensure officials are cognisant of the challenge of resourcing compliance, support and enforcement and the need for early identification and engagement with regulators tasked with this role;
• Identifying regulations currently in development as a test of the new processes we want to develop;
• Developing a Best Practice Policy Cycle which highlights the key steps officials should take when developing policy options with an impact on business, including BRIAs and the Regulatory Reviews Group, to provide better system design, strategic overview and tighter governance of policy development with an impact on business.

Recommendations

Short-term recommendations (6 months)

Policy Development Process

1. Scottish Government teams should provide clarity on the policy objective and supporting evidence, to provide the context for why we need to take action.

2. If business is identified as impacted by or can help meet the objective, early engagement must take place to understand what sectors are doing already. These could be direct via roundtables, discussion papers, via existing sector groups etc.

3. Officials need training and support to engage. We talk about engaging earlier and improving data but not necessarily how it's done. Continuing Professional Development (CPD) for officials in this and to be more radical in how we traditionally go about standard policy engagement should be considered.

4. Small businesses especially are time poor so this must be considered to enable businesses of all sizes to engage in proposal development.

5. Note that there are some specific exclusions to this e.g. public health policy in relation to tobacco. However, it should be clear what the basis is for any exclusion.

6. Officials should look at regulatory policy initiatives underway or proposed in other devolved administrations and at UKG level, and consider alignment where this will have an impact on businesses operating across the UK.

7. Voluntary action, codes of practice and standards and other forms of voluntary self-regulation from sectors should be explored before regulation. This must be balanced with policy intent, risk of harm and consideration of the availability of data to monitor self-compliance. Voluntary regulation should be considered in line with the good practice in the SRC's Framework for Government Sponsored Voluntary Regulation

8. Appropriate consideration of possible unintended consequences for any new proposals.

9. Early engagement with UKG and devolved administrations on proposed activity which will include Internal Market Act considerations.

10. In the course of any engagement with business about developing new policy proposals, we should be clear on what wider action is being undertaken by the public sector alongside any requirement on businesses.

11. There should be a presumption that Government will take ownership of policy measures which impact on consumers (as was the case with the single-use carrier bag and minimum unit pricing of alcohol).

Business and Regulatory Impact Assessments (BRIAs)

12. BRIAs should be started at the earliest point of the policy development process.

13. Policy teams completing BRIAs should explicitly set out:

• Who will be responsible for complying with requirements
• Relevant delivery bodies and their roles
• Enforcement bodies and enforcement expectations

14. Partial BRIAs should be published with every consultation which has an impact on business. It should be clear how the responses to the consultation exercise will be used to update and improve the BRIA.

15. The impact on consumers should be given more prominence given the cost crisis we are currently experiencing.

16. Better data should be sought from sectors that may be impacted.

17. The Scottish Government should not lose sight of valuable work from previous years, revisiting reviews which have been undertaken prior to the pandemic, and the recommendations and actions which came from those, particularly around regulatory enforcement.

Governance

18. There should be a formal escalation route to the Cabinet Secretary for the Wellbeing Economy, Fair Work and Energy on issues businesses have concerns about but aren't getting any traction through direct engagement. This will allow the Cabinet Secretary and Ministers to articulate business concerns with Ministerial colleagues – supported by parallel processes between officials.

19. The Regulatory Review Group, previously chaired by Professor Russel Griggs, should be reinstated and reinvigorated, as the main forum for working through the detailed impact of implementation of regulations.

20. Other areas of the Scottish Government consider that a policy proposal does not require completion of a BRIA should require input from Economic Policy leads before sign-off. The role of Cabinet Secretary Economy (or equivalent) in terms of all BRIAs that impact on business should be considered to ensure Economic Ministers and officials have sight of work early in development to support Business engagement.

21. There should be a lessons-learned process to ensure issues that have arisen with recent regulations are addressed for future regulation development.

22. Co-develop a Regulatory 'vision statement' – what will good look like? – building on the framework set out in the Regulatory Reform (Scotland) Act 2014 and taking account of subsequent action, particularly including lessons learned from the Covid-19 pandemic response.

Communication

23. To ensure that clear expected implementation timescales are in place for all proposed regulations, alongside clear communication and guidance for businesses and regulators alike. We must utilise lessons-learned from Covid on the need for clear accessible communications via findbusinesssupport.scot, for example. Technology has a fundamental role, alongside making the business support landscape clearer and more accessible for business. A whole system approach to improvement is required which includes business regulation.

Medium-term recommendations (12 months)

BRIA

24. There needs to be explicit consideration of the impacts on small businesses as part of the impact assessment process. Consideration should be given to the introduction of a standalone Small Business Impact Assessment, as is already employed by administrations in England and Northern Ireland.

25. The BRIA template, toolkit and training should be overhauled to provide officials with the tools and support to engage with businesses effectively, understand impacts, and consider appropriate mitigating action and enforcement.

26. The BRIA section on 'Compliance and Enforcement' should identify prospective regulators and key bodies at the earliest stage, and guidance should set out the engagement required to fully understand the impact of additional enforcement activities on regulators.

27. There should be a Quality Assurance process for BRIAs in development to ensure that partial and full robust BRIAs are published in accordance with the guidance.

Governance

28. There should be a clear and published Matrix of consultations, bills and regulations in development, continually updated, to provide better strategic oversight of all policy proposals and regulations in development to better assess the cumulative impact on businesses and regulators, and to provide businesses with the information and timescales they need.

29. The recommendations from this work, particularly on cumulative impact, should be considered each year in the development of the Programme for Government.

Communication

30. Improved, clear communications and updates on regulations with an impact on business to support better understanding across government, parliament and the wider public.

Regulatory Policy Development

31. The Scottish Government should develop a process for identifying, considering and removing regulations no longer required, driven by active engagement with business.

32. Further work with business should be undertaken to identify 'proactive' regulations which will support business, especially small businesses.

33. A review should be carried out of the provisions in relation to better regulation in the 2014 Act, and the scope for further use of those provisions.

34. Implementation of Primary Authority provisions in the 2014 Act should be considered.

Long-term recommendations (18 months)

Governance

35. Improved strategic oversight of all Impact Assessments (IAs), including BRIAs, to enable Directors, Directors General and Ministers to assess full impacts across all IAs, understand the unintended consequences, trade-offs and make decisions based on a full understanding of both intersectional and conflicting impacts.

36. Improved monitoring and reviewing of the impact of regulations in place, and revisiting BRIAs to assess how accurate the BRIA forecast was and take action to mitigate impacts.

Communications

37. More joined up signposting across relevant bodies to provide support and guidance, and communicate additional information.

38. Where regulations require a registration process, actively consider single points of registration/engagement and re-use of existing data and processes.

Regulatory Policy Development

39. Consideration of common commencement dates each year for devolved regulation so businesses have a single date to work toward for any changes required to their premises, policies or practices.

Subgroup membership

The core membership of the Regulation Taskforce/NDBG Regulation subgroup is listed below with contributions provided through these subgroup members. Additional attendees have been invited/will be invited to the Regulation Taskforce, as required, to contribute to discussions on specific issues or regulations.

• Co-Chair, Minister for Small Business, Innovation and Trade, Richard Lochhead MSP
• Co-Chair, COSLA Spokesperson on Environment and Economy, Cllr Gail Macgregor
• Chair of Regulatory Review Group, Professor Russel Griggs OBE
• NDBG is represented by Colin Borland and Stacey Dingwall, Federation of Small Businesses (FSB)
• Elaine Morrison, Business Support Partnership
• James Fowlie and Fiona Richardson, COSLA
• Maggie Sandison, SOLACE
• David Mackenzie, Chair of SCOTSS
• Brian Lawrie, Chair of SOCOEHS
• Stacey Dingwall, FSB
• Leon Thompson, UK Hospitality Scotland
• Ewan MacDonald-Russell, SRC
• Catherine McWilliam, IoD
• Joe Hind, Food and Drink Scotland
• Paul Togneri, Scottish Beer and Pub Association
• Colin Wilkinson, Scottish Licensed Trade Association
• Marc Crothall, Scottish Tourism Alliance
• Clare Reid, SCDI
• Dr Liz Cameron & Charandeep Singh, Scottish Chambers
• Rob Dickson, Visit Scotland
• David Thomson, Food and Drink Federation
• Jane Wood, Homes for Scotland
• Susan Love, ACCA