Speech: “Regulatory burden: why Europe needs to get smarter to do better”

Maroš Šefčovič – Vice-President of the European Commission

International Regulatory Reform Conference (IRRE) / Berlin

Berlin, 1-2-2013 — /europawire.eu/ — Minister, ladies and gentlemen

I want to talk to you today about being smart, and I hope you’ll forgive me if I start with some words of wisdom from someone far smarter than me – the Greek philosopher Plato.

He said: “Those who are too smart to engage in politics are punished by being governed by those who are less smart.”

Whether this was really true in Plato’s day or not I can’t say, but I am pretty certain that there are plenty of people today who would share Plato’s sentiment. Not least, of course, those in the business community, who often tend to see politicians as the people whose job it is to make their jobs harder by adding layers of regulation onto markets that they consider worked pretty well without them!

I’m not suggesting that we do no not need regulation – we do. Regulation is a vital part of the European ‘project’ – ensuring a level playing field from which everyone can benefit. Indeed, in many areas, EU regulation is more effective than a patchwork of national regulations: this is true for instance for the Single Market, consumer protection, financial regulation, environmental protection or economic governance.

But we need to be smart in the way we regulate – to see what works and what does not, to understand that one size does not necessarily fit all, and to embrace the modern technological advances that allow us to do things better.

Despite Plato’s pessimistic point of view, I’m glad to say that we have indeed become smarter in the way in which we regulate.

Indeed, smart regulation and cutting red tape has been a major focus of the European Commission’s efforts for the last decade or so. We have put in place a first-class impact assessment system. Each proposal that we discuss at Commission level has been through a rigorous assessment – looking at costs, benefits or the impact on SMEs. The assessment has been quality-controlled by an independent board. This means that when we take decisions at the political level we can be sure that they are much better informed decisions than would be the case if our services were not doing such assessments. We are also very transparent – we consult, we discuss, we seek expert views.

And we cut red tape. In 2007, we launched an ambitious programme to cut red tape and have managed to exceed the initial reduction target of 25% in 13 priority areas, which in the medium-term is expected to lead to a rise of 1.4% in EU GDP, equivalent to €150bn.

These savings have come from a wide range of policy areas

in the area of Taxation and Customs, for example, the switch to a fully electronic VAT invoicing system will remove obstacles to company’s electronic billing for more than 22 million enterprises and could cut costs by around €18bn.

Meanwhile, measures allowing Member States to exempt micro-entities from EU accounting obligations may benefit more than 5 million small businesses and generate savings for businesses worth €3.5 billion.

And in the area of agriculture, the measure adopted reducing inspection costs related to marketing standards for fruit and vegetables amounts to a potential burden reduction close to €974 million.

Now that we have adopted these proposals we need to make sure that they bring results on the ground – which brings me to our recent Regulatory Fitness and Performance Programme initiative, or REFIT for short.

The economic crisis has, naturally, focused our minds even more on the need to generate jobs and stimulate economic development and on the urgency of putting in place the Europe 2020 reforms. Smart Regulation is part of this. We need to reinvigorate and strengthen our efforts to reduce regulatory burden. That is what REFIT is all about – to review, to reinvigorate and to refit if necessary.

We commit to mapping and reviewing our entire acquis – all of our regulations – to systematically identify regulatory burdens and transparently launch initiatives that will result in significant regulatory cost reduction and simplification. We will look across sectors – in other words, reviewing EU regulations from the perspective of the end user – to identify all the layers of overlap and duplication that lead to additional and unnecessary costs for the business community. And we do not have the luxury of time: this mapping and scoping will be completed by mid-year so that actions can be taken.

Reducing the burden of existing regulation is our focus. But at the same time we will continue with our rigorous impact assessment to make sure that any new legislation does not add to the burden either. We will continue to strengthen our impact assessment system, honing our techniques to assess costs and benefits, as well as providing short summary overviews and revising our guidelines.

Moreover, we will ensure that all of this is done transparently. We have a system in place that allows stakeholders to share their views on the likely effect of new legislative proposals through consultations. Over the last three years, we have held more than 300 of these consultations via the ‘Your voice in Europe’ website. The response has been largely positive, but there are still improvements to be made: consultations do not always ask the right questions at the right time and sometimes fail to reach those directly affected who cannot always be addressed in their native languages.

To extend the reach of consultations, the Commission will publish a rolling calendar of planned consultations on the website, as well as making better use of communication channels in the Member States and using more innovative consultation tools, among other methods. We’ve also extended the consultation period from 8 to 12 weeks to give stakeholders more time to react.

But we also need to focus on implementation. Of course, it is up to the Member States to implement, but we can do more to facilitate and support them, for example by working out support initiatives in advance, by providing platforms for exchange of best practice or by better assessing where problems of conformity with EU legislation arise.

And in all of this we are paying special attention to SMEs.

There are some 20.7 million SMEs in Europe, accounting for more than 87 million jobs – that’s 67% of the EU employment total. They are the life blood of the EU economy: if we want Europe 2020 to succeed, to stimulate growth and create jobs, it’s clear that much of our focus will have to be on helping SMEs. Reducing the administrative burden alone will not be enough to help SMEs, of course, but it nonetheless has a major role to play.

That’s why we have a special focus on SMEs with the Smart Regulation approach. For example, the Commission consults widely with SMEs on the issue of regulatory burden: in 2012 alone, we held conferences with SMEs from Germany, the Netherlands, Sweden, the UK, Poland and Italy.

In addition, we will take action on the Top Ten most burdensome EU regulatory measures on the basis of a list drawn up by SMEs themselves. Among the legislation considered most burdensome by the SMEs surveyed were the REACH chemical regulations, VAT legislation, health and safety at work rules, most of the waste-related legislation and the rules on the recognition of professional qualifications, to name just a few.

We will take action in these areas – in some cases legislation will be revised; in others, we will carry out thorough reviews. It’s clear that a ‘quick fix’ will not be found in every case. But I believe that business needs a stable regulatory framework in which to invest and plan; we need action – but it must be ‘smart action’.

Let me give you some specific examples of what we have done so far. Under the Directive on Electric and Electronic Waste, small shops selling electrical goods are exempt from the requirement to take old electrical goods from consumers and send them for recycling. This take-back obligation, which requires shops to set aside space for the storage of old electrical goods as well as the sale of new ones, is only applicable to shops larger than 400m².

We are also proposing that companies with fewer than 250 employees should be exempt from the requirement to employ a data protection officer, or that car manufacturers with fewer than 500 new passenger car registrations per year should not be obliged to meet a specific CO² emissions target.

Even in cases where SMEs have not been exempted from EU rules, then we have tried to ensure that the regulatory burden on them remains light or that there is sufficient financial and other support to help them meet their obligations. For example, SMEs wishing to participate in public procurement are not obliged to provide all the documentation showing that they meet the selection criteria and can provide self-declarations instead. Only in the event of them winning the bidding process would the necessary documentation be required.

And I’m pleased to say that our efforts are appreciated – at least here in Germany! During the recent Top Ten initiative I just mentioned, we also received some positive feedback from German SMEs on measures already introduced, such as the EU-wide Community Trademark protection, through which SMEs can protect their trademarks in one go and for a one-off cost of around €900.

The simplification of the public procurement rules I mentioned earlier have also given German SMEs better business opportunities, while new rules on the registration of cosmetic products in a central EU portal have also improved the situation for many German SMEs.

Before I finish, I want to highlight one further point about Smart Regulation: it is a collective effort.

I’ve focused today on the work of the Commission, as is natural, but we are by no means alone in wanting to tackle this issue. The European Council and European Parliament have repeatedly called for more collective efforts to reduce the administrative burden, and national governments have made their own efforts to pursue a similar agenda with national legislation.

We can do more together. Let me give you an example: as I said at the beginning, we have met the target of a 25% reduction in burden by 2012, but the Commission has in fact tabled proposals with a burden reduction potential closer to 33% – that’s around €41 billion in monetary terms.

However, some of this potential (estimated at more than €3 billion) was lost in the legislative process as the Commission proposals were amended by Parliament and Council. Furthermore, we are still awaiting the adoption by the legislators of pending proposals that could generate additional savings of €6.8 billion.

Nor do these figures take into account the fact that proposals from Brussels do not always make it onto the national statute books in the same form – some are ‘gold-plated’ by national legislators with country-specific add-ons. It is often these, rather than EU proposals, that contribute to the administrative burden.

Indeed, this problem of perception is one that persists among Member States. How often do we hear criticism of the ‘Brussels bureaucracy’, forcing regulation upon citizens and business, when the reality, as we all know, is that the Commission merely initiates proposals while the decisions are taken by the Council and by the European Parliament.

This is one the reasons why we encourage additional impact assessments on any substantial amendments to our proposals, and welcome in this regard the recent decision by the European Parliament to set up its own impact assessment unit.

In fact, the vast majority of legislation made in Brussels is done in the form of directives which allow Member States to decide how to implement the policies in line with local circumstances. Regulations, which are directly applicable in Member States are used only in fully harmonised areas such as in the area of agriculture which is a common policy. This can hardly be said to be ‘Brussels’ imposing its will!

Whatever the reason or the source, it’s clear that there is unnecessary red-tape in EU legislation, and I hope I’ve shown that we are working hard to reduce it. But the blame for that red tape cannot be laid solely at the door of the Commission; nor can the Commission be expected to tackle it alone.

We need to work together, but in the most appropriate way. Many Member States are looking to reduce their own national burdens, often with great success: I could cite, for example, the amendment of 18 tax laws in 2012 that led to a massive €2.5bn reduction in the overall burden on German businesses! But approaches that work at the national level are not always appropriate at the EU level, where the process is more complicated, not least because EU directives are implemented in a different way in each Member State. While we all share the same goals, we must be ready to give each other the freedom to reach them by whatever means are the most effective for us.

Ladies and gentlemen

If Plato were with us here today, I hope I would have been able to restore a little bit of his faith in politicians, to show him that we are indeed capable of being smart, at least when it comes to regulation.

We can be proud, I believe, of our efforts so far. But we cannot rest on our laurels. As technology develops, so will our ability to do things more easily and effectively at lower cost, and we should constantly be on the lookout for ways to adapt our laws accordingly.

That is why we are open to advice and support. It is not for nothing that the mandate of the High Level Group on Administrative Burdens, chaired by Dr. Edmund Stoiber, has been extended to October 2014: the advice of experienced practitioners strengthens our efforts to regulate well. We cannot afford any let up in our efforts to reduce regulatory burden; we will keep the focus on meeting our goal of simple, relevant and effective regulation.

In short, we’ll keep on getting smarter!

Thank you for your attention.