The Dutch approach offers a pragmatic way to reduce paperwork and administrative costs, saving businesses money and freeing up people for more productive activities. It’s first of all an opportunity for the Government to help increase innovation, productivity and growth of business; secondly a mechanism for increasing the quality and efficiency of Government through increasing the effectiveness of regulation; and last but not least a robust method for the Government to improve its control over the flow of new regulation (impact assessments) and a driver to reduce the burdens imposed by the stock of existing legislation (simplification programme).
One of the most unfortunate things about administrative burdens is that those imposing them often do not consider or cannot see the true costs which they are imposing on others.  To overcome this, an ‘awareness mechanism’ is strongly needed: a strict way to measure those costs and a clear target to reduce them.
The Dutch ‘recepy’ for achieving tangible burden reduction consists of three vital ingredients – measurement of the burden, political commitment to a target and an organisational structure to achieve that target. The following describes how these are implemented in the Netherlands. Red tape in a broader context
During the past few decades, the Government has tried single-handedly to find solutions for all the problems, be they large or small, arising from our increasingly complex society. The resulting volume of legislation and regulations has had enormous implications for society, particularly with regard to the freedom of movement for private individuals and businesses. The current Dutch Cabinet advocates a rigorous approach working together with the corporate sector, whereby the Government is more critical and detached with respect to the steps it takes and how it takes them.
Good regulation does not mean ‘no regulation’: “it fulfils instead the task of essential controls of business without imposing unnecessary regulatory burdens on businesses” (Doing Business in 2004: Understanding Regulation, World Bank, 2004).
Although this will create room for new perspectives and opportunities, it may also lead to a certain degree of confusion. For some, it could even be quite painful when the Government stops trying to solve all the problems and starts issuing less-detailed instructions and supplying fewer ‘tailor made’ solutions for specific situations or special interests groups. This new guiding philosophy will require more participation, more self-organisation and therefore more individual responsibility on the part of the corporate sector. Administrative burdens are a reliable estimate of a country’s regulative efficiency. However, there is more to better regulation and regulatory pressure than administrative burdens for companies. The impact of regulation on businesses is wider than the red tape scope.
In the Netherlands, administrative burden reduction has become the primary focus of the regulatory agenda. At the same time this has forced Government to take broader better regulation issues seriously and listen to business suggestions for improvement. Thanks to an improved transparency of the legislative process, the attention for the burden of the other compliance costs on businesses grew as well. The Dutch Ministry of Economic Affairs is currently studying the possibilities of it.
In this way the reduction of administrative burdens is everything but an ‘isolated’ operation. It’s rather part of a more comprehensive approach and a stepping-stone for the improvement of regulation in a broader context: a broader Cabinet policy aimed at boosting the economy and aiding the recovery of the Dutch competitive position. It’s closely associated with the way in which the Cabinet defines and substantiates its ambitions in all areas. In order to fulfil this ambition, Parliament must always consider the aim of reducing administrative burdens while weighing up interests for any other decisions it may make.
Once the target has been met and much of the excessive administrative burden cut, Government may need to consider whether a further target for administrative burden might distort other priorities, but the evidence from the Netherlands suggests that a multi year campaign to meet a target provides a healthy focus for better regulation. Support for this comprehensive approach is increased by: The Business People’s Sounding Board on Regulatory Pressure, led by Professor L.G. Stevens, has been charged with identifying the most serious regulatory pressure for companies, and suggesting ways of dealing with them. The “Stevens committee” primarily examines the effects of regulatory pressure at company level. The committee consists of individuals drawn from all areas of the business community, and may furnish the Cabinet with advice, whether solicited or not. The identified bottlenecks will be expanded upon in hearings with business people and other involved parties and, where possible, translated into concrete solutions. At the start of June 2005, the committee organised a first hearing on reducing regulatory pressure in the area of financial services. The committee has been installed for a 2-year period. Reinforcement of the existing assessment of the effects on the corporate sector, the environment and feasibility and enforceability of the intended regulations, introduced in 2003 (RIAs). The business effects test is used to make an inventory of the effects of new legislation on the business community. Other compliance expenses are also part of this. Addressing conflicting regulations, which also hamper enterprises in the Netherlands. Tackling these is also one of the spearheads of the policy directed at improving the business climate in the Netherlands. Fewer other burdens for businesses: a number of specialist Ministries has extended the scope of the operation for reducing administrative burdens by taking a critical look at other (compliance) costs faced by the corporate sector, such as the Ministry for Agriculture, Nature and Food Quality (revision of the system of regulations on manure), the Ministry of Transport, Public Works and Water Management, the Ministry of Justice (reduction in transaction costs in contract law; correlating the burdens relating to procedures laws), the Ministry of Economic Affairs, the Ministry of Finance (financial markets) and the Ministry of Housing, Spatial Planning and the Environment. The reduction of administrative burdens at the Ministry of Housing, Spatial Planning and the Environment is linked to a re-evaluation operation, the aim of which was to consider the entire range of its regulations and ascertain whether the policy targets set by this Ministry could not be better achieved by means of fewer, simpler and more streamlined rules (also serving to benefit the implementation and enforcement of said rules and regulations). Fewer administrative burdens for citizens : one of the aims of the Alternative Public Service programme is to reduce administrative burdens for citizens. Improving the efficiency of official Government bodies: The Ministry of Education, Culture and Science tackles red tape for schools.
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Top Measuring the administrative burden
Besides raising awareness of administrative burdens and generating ideas for their reduction, an added benefit of carrying out the measurement exercise is that it encourages officials to take a fresh and systematic look at regulations. This allows them to highlight problems and potential improvements to policy and implementation in general, rather than just administrative burden reduction. As a matter of fact the process of measurement has led to a culture change in how Dutch departments interact with those they regulate, improving the efficiency and quality of government actions. Every government department used the Standard Cost Model (SCM) to measure the administrative burden which it imposed on businesses through its regulatory activities. This measurement includes all the administrative obligations imposed by central government departments and regulatory agencies under both national and EU legislation.
Top Commitment to a target
Setting a target is a political decision because it requires political agreement and leadership if it is to succeed. A target encourages departments and regulators to innovate and to do things they would not normally do, such as engaging with others in joint projects to reduce burdens. Reducing administrative burdens requires sustained effort and a target will help ministers and departments to keep focused over the medium to long term. Dutch ministers agreed that one of the priorities for their term in office was to reduce the administrative burden across the whole of government regulation and they set a reduction target of a quarter. The target is a net target, meaning that the quarter reduction must be achieved after taking into account any new burdens from regulations brought in by the government or the EU during the period of the target. The Dutch Cabinet aims to achieve the target over four years with the reductions delivered by the end of 2006. The Dutch Cabinet has now determined the ministerial ceilings for 2005, 2006 and 2007. This concerns an annual net burden ceiling that is maintained parallel to the budget cycle.
It means that ministries will have to compensate any increases whereby phased in compensatory measures may in time differ from the ceiling overrun. The ministerial ceilings are intended as firm support in realising the reduction objective.
Top Organisational structure
Measuring and setting a target are two of the three essential aspects of the Dutch approach. Neither of these will work without an organisational structure to incentivise achievement of the target. The Dutch approach requires political commitment at the highest level in order to drive delivery of the target. As a matter of fact in the Netherlands the burden reduction target represents one of the government’s top three priorities to improve the national economic structure. In order to incentivise the attainment of the target, the government set up an organisational structure to oversee the process. The Dutch Minister of Finance takes responsibility for achieving the administrative burden reduction target and delivers a progress report to Parliament every six months. He monitors the reduction programme progress via the annual budgetary cycle and sensors the performances of other ministers. The Ministry of Finance co-ordinates the programme with a cross departmental team – the Interministerial Project Unit for Administrative Burdens (IPAL), in co-operation with the Ministry of Economic Affairs. The government established an independent public body called ACTAL (Dutch Advisory Board on Regulatory Burden). Departments are obliged to send ACTAL details of all new legislative proposals, including a calculation of its administrative burden. ACTAL reviews the administrative burden calculation before the proposed legislation is sent to the Dutch Council of Ministers and to the Dutch Parliament. ACTAL also evaluates the administrative burden reduction programmes that all departments are obliged to present annually to Parliament and makes its evaluation public. The Council of Ministers (Dutch Cabinet) considers ACTAL’s comments when deciding whether to endorse a new piece of legislation. If the Council of Ministers approves the new legislation, ACTAL comments are made available to the Dutch Parliament when it debates the bill. Each department has set up a small unit of civil servants dedicated to supporting the reduction of administrative burden in that department. Each department has set up a joint commission of senior civil servants and business representatives to make and scrutinise administrative reduction proposals, checking that they will really reduce burdens rather than simply change processes.
Top Existing red tape
Each Minister submitted to Parliament a list of proposals to revise the existing Ministerial legislation and reduce the administrative burdens. These proposals were identified and elaborated in close cooperation with businesses. The reductions will be realized during this government’s term. Analyzing the proposals one can identify the following types of revisions: Simplifying the information requirements by getting rid of unnecessary and in terms of administrative cost too expensive requirements Measurements to make it easier to fulfil the requirements by using modern information and communication techniques Reorganizing the information requirements through more intensified cooperation between Ministries and Switching to less burdensome alternatives of regulation.
Together the submitted proposals form an impressive list of measurements to reduce administrative burdens. To secure a net reduction by a quarter however requires also a permanent search for new reduction opportunities. This search is done by intensively analyzing the inventory of the departmental administrative burdens, looking for new opportunities to reduce the burden by using ICT and inter-Ministerial cooperation across sectors. As mentioned above complaints brought in at the website are also used. Top Regulatory impact assessments
The second main line deals with the administrative burdens in new legislation. To improve the awareness of lawmakers a questionnaire about administrative costs is added to the national RIAs requirements for new legislation. Accordingly the proposal has to mention the amount of administrative cost involved. The Ministry also needs to clarify whether the least burdensome way of regulation is used. Because the reduction target is a net target any new administrative burdens have to be compensated elsewhere.
The Cabinet aims to avoid administrative burdens relating to new regulations as much as possible; in cases where this is not possible, they will be kept to a minimum and any new burdens will be compensated by extra reductions on existing regulations. New regulations will therefore be assessed during the inter-Ministerial preparation phase with regard to their effects on businesses and the environment and the quality of the legislation. The Dutch Advisory Body for Administrative Burdens (ACTAL) will carry out a specific assessment of the potential administrative burdens. Top Cooperation with businesses
This operation centres on businesses, which were intensively involved in the realisation of the plans in a variety of ways: through mixed committees and working groups that made an inventory of reduction measures for each ministry, through an inventory of bottlenecks within so-called model companies but also through over 800 reports to the Dutch website www.administratievelasten.nl and the many letters sent to the Cabinet either directly or through branch organisations. By measuring administrative burdens one does not identify the way entrepreneurs experience the information requirements. This is a subjective qualification influenced by the value they attach to collecting, administrating and providing information. Companies feel irritated by information requirements especially if the required information is already given (to another governmental institution) or if the frequency of the information requirements is considered excessive. Any effective programme aiming at the reduction of the administrative burdens on businesses also has to take these qualifications into account.
The majority of the business reports seem to relate to the policy areas Finance, Social Affairs and Employment and Statistics.
The nature of the reports concerns the following number of categories of complaints, among others: Businesses indicate that they are not always sure exactly what information is being requested and how it should be provided; Businesses are not always clear why the government asks them to provide this information and / or (therefore) feel that they are being asked for unnecessary information; The information requested does not always correspond to the details collected by businesses in the standard running of the business; The same information is requested again and again from different sides of the government; The frequency with which legislation changes so that the terms and data based upon it in information systems need to be adjusted (again); Many businesses complain about the sheer amount of forms used by the government. There seems to be a different one each time, many of which are almost identical, and call for much of the same data; Concerning risks in particular, businesses state that they have the feeling “that bad companies give the good ones a bad name”: legislation is the exception to the rule with which everyone, even the vast majority of cooperative businesses, has to meet the requirements just to keep a minority on the straight and narrow.
For a detailed explanation of the found solutions check out appendix 1 of the October 2006 Cabinet letter "We want to get rid of this too …”. The Sounding Board on Regulatory Pressure The Companies’ Sounding Board on Regulatory Pressure, led by Professor L.G. Stevens, has been charged with identifying serious regulatory pressures for companies, and suggesting ways of dealing with them. The “Stevens committee” primarily examines the effects of regulatory pressure at company level. The committee consists of individuals drawn from all areas of the business community, and furnishes the Cabinet with advice, whether solicited or not. The identified bottlenecks will be dealt with in hearings with business people and other involved parties and, where possible, translated into concrete solutions. At the start of June 2005, the committee organised a first hearing on reducing regulatory pressure in the area of financial services. The committee has been installed for a 2-year period. |
Top Model companies
This project, organised by the Ministry of Economic Affairs and the Ministry of Finance, identifies bottlenecks of statutory information obligations from the perspective of businesses. Working from the information obligations a company has to fulfil for various legislative domains, the aggregate effect of rules, and a lack of coherence of the rules, can be seen from the company’s perspective. Tackling these bottlenecks doesn’t just generate lower administrative burdens but also saves companies from irritation caused by ‘useless and unnecessarily complicated’ information obligations. The inventory of these bottlenecks has been completed in sectors among others the greenhouse cultivation, companies in the food chain and the hotel and catering industry. The inventory has yielded over 300 proposals for adjustments to the rules. It also shows how government bodies such as pension insurers and employment conditions services impose additional information obligations on businesses. Furthermore, for a number of sectors the project shows the difference in the actual burden and perceptions of the information obligations as experienced by large companies and small and medium-sized businesses. The proposals have led to adjustments in regulation. The merits of the new proposals for adjusting the rules are currently being examined by the ministries in consultation with the companies and sector organisations involved. Top Mechanisms causing red tape
In the end we work on lowering administrative burdens on a long-term basis. So, for example, the Dutch Cabinet deploys the mechanism of an administrative burdens ceiling per ministry. This mechanism gives an incentive to prevent the introduction of new administrative burdens, or at least keep them to a minimum. Because rises must be compensated elsewhere, new administrative burdens have been given ‘a price’. This promotes long-term attention for administrative burdens.
Besides ‘mechanisms’ and ‘rules of thumb’, it’s critical that a long-term focus on red tape should be embedded in the infrastructure of ministries.
In the first phase of the operation, separate project departments and project bureaus were set up in ministries to give reducing red tape focused attention and to be able to make rapid progress. The ministries are now embedding these ‘temporary structures’ in their ‘normal’ operations.
The long-term management of red tape calls for more than just mechanisms, incentives and organisational capacity. It also requires attention for the underlying causes that lead to the creation of red tape: the need to steer developments – sometimes in detail – from the government and a desire to offer a solution for every possible problem.
Simplifying and reducing the information obligations for the corporate sector means that government can and should no longer attempt to resolve problems and incidents with customised solutions in all cases – in other words, it should ‘dare to let go’. This demands a more active attitude, more self-organisation and greater responsibility on the part of the business community. A further reduction of administrative burdens thus demands determining how to deal with the desire to manage risks in society.
In a nutshell, it can be said that an increase of administrative burdens is caused to a great extent by policy measures and the choice of policy instruments that aren’t in line with the situation and target group. Further, if several policy instruments are used simultaneously for the same goals, there is a considerable chance that they will be applied with another steering style which will lead to confusion among the target group, a resulting decrease in efficacy and simultaneous increase in the size of administrative burdens. Top |
