Why measure red tape?
Administrative burdens are obstacles in the life of our enterprises. In order to fulfil obligations from public authorities, enterprises are forced to allocate resources to administrative activities rather than investing them in more productive activities. This is not only a costly affair for the business community in each country. It also inhibits economic growth and prosperity in society.  Countries have an obligation to create the best possible conditions for our business community.
Many countries have already taken important measures towards improving the conditions for businesses. Results have been achieved, but we have to acknowledge that we have not yet achieved the desired results. Administrative burdens are still a huge obstacle to a progressive and dynamic business environment. We seem to be in the need of stronger methods that can give us a greater understanding and knowledge of the costs stemming from administrative burdens. These insights will allow us to tackle the administrative burdens and to get a firm grip on monitoring progress.
A common methodological approach
Developing a common methodological model is a logical starting point. We all face the same challenges when dealing with administrative burdens, so it makes sense to employ the same methodological approach towards this shared problem. This way we will also be able to benefit from the potential economies of scale in e.g. sharing methodological experience and economic co-operation.
A common approach allows for a systematic analysis of administrative burdens within each country. This can be used to monitor the development of burdens over time, and to pinpoint where the effort towards reducing burdens should be focused.
Moreover, a common methodological model will make comparisons between our countries possible. Such benchmarks will not only provide each country with fresh ideas for reducing its own burdens. It will also give us a tool to highlight the impact of international legislation, especially EU regulation. With these insights, we can make joint efforts towards reducing the burdens of such legislation. All in all, using a common methodological tool, it will be possible for us to work systematically towards reducing the administrative burdens for businesses by: - creating awareness with policy makers
- setting out a focused reduction strategy with well defined targets
- getting commitment and approval from various authorities
- monitoring the administrative burdens
- creating uniformity, transparency, reliability and comparability
- simulating ex-ante the administrative effects of draft legislation, in order to design regulation where costs and benefits are more carefully balanced.
Top How to measure red tape?
The Netherlands is a forerunner in Europe in terms of the quantitative measurement and monitoring of the development of administrative burdens. Proper insight into the size of the administrative burdens, particularly with regard to the distribution across the various pieces of legislation and regulations, is the first step towards tackling the problem. This fact is also recognised within Europe and the Netherlands is currently exchanging knowledge on this issue with a growing number of countries, the European Commission, OECD and Worldbank. Methodology for determining the size of administrative burdens
The Netherlands developed a methodology to quantify administrative burdens - the so-called standard cost model (SCM) - by identifying the demands in legislation and putting a price tag on these demands consisting of time and money spent to fulfil the requirements.
The SCM is both a reduction tool to quantify administrative burdens arising from existing legislation (stock) as a design tool to limit administrative burdens stemming from new legislation (flow) as much as possible. The SCM approach allows for either a measurement concentrating on some specific fields of existing regulation or –as part of impact assessment procedures- an ex-ante measurement of administrative burdens resulting from new legislation. The SCM is suitable for both a limited and full scale measurement (all legislative areas). The limited scale approach can be used to first build up some technical knowledge and practical experience with the methodology, before deciding whether to proceed or not at a full scale level. Like the Netherlands, also Denmark and more recently the UK, the Czech Republic and Norway have chosen to adopt the Dutch red tape approach in an integral way, that’s to say on a full scale level. This is not a coincidence, as all these countries share ambitious reduction targets. As a matter of fact, if you want to identify systematically where and how administrative burdens can best be reduced, you basically have to measure all national legislative areas.
To quantify the red tape effect, the time normally spent on fulfilling an individual information requirement is valued at the going labour costs rates (tariff). This shows how much the individual information requirement costs (P = time x tariff). By multiplying the price with the frequency of the information obligation (e.g. monthly, annually) and the amount of companies involved (Q) the total burden is calculated.
Within this methodology the administrative costs are identified at a detailed level of individual information demands and their price. When measuring administrative burdens, it is impossible to avoid making assumptions. It is important to handle these assumptions in a uniform manner. In 2003, the involved Dutch Ministries, working together with the Dutch Advisory Board on Administrative Burdens (ACTAL) and other research agencies specialised in administrative burdens, laid down a standard to be used for all new measurements, the SCM. The assumptions contained in existing measurements have been made explicit. The size and composition of all the administrative burdens are visible and the methods for monitoring progress have been established. Businesses participated in the investigations concerned with measuring the administrative burdens. Detailed information about the methodological ins and outs of red tape quantification can be found in the manual “The Standard Cost Model; a framework for defining and quantifying administrative burdens for businesses”, a guide for defining and quantifying national administrative burdens for businesses. Appendix 3 of the 2004 Cabinet letter “More leeway for businesses thanks to fewer burdens” and FAQ also provide more understanding on how to measure administrative burdens. Methodology for determining the origins of administrative burdens
All Ministries have established the origins of information obligations (national/international). The information obligations have been divided into three categories: - Category A: The information obligations and the way they should be implemented were imposed at European or international level. This means that the regulations state which information businesses are obliged to supply, as well as the way in which this should be provided.
- Category B: The information obligations ensue from European and international regulations, but the way in which they should be implemented is left to the Netherlands. This means that the regulations state which information businesses are obliged to supply, but the Netherlands is free to prescribe how this should be provided.
- Category C: The information obligations are purely the result of Dutch legislation and regulations. The Netherlands is free to prescribe both the content of the information obligation and the way in which the information should be provided.
Information obligations were identified on the basis of the zero measurements and the Ministries divided them into the three categories. The policy staff and/or lawyers involved were responsible for doing this and in some cases, an extra check was made on the basis of source texts (international legislation and regulations). The size of the administrative burdens was ascertained using the SCM.
The results provide a good indication of the origin of the regulations and form a sound basis for deciding which dossiers are eligible for a European approach. Expansion of the SCM
While the Dutch approach is specifically concerned with reducing administrative burdens on business, there is no reason why a similar approach should not be taken to reduce administrative burdens on the public sector or on the voluntary work and community sector. Everyone can benefit from a reduction in unnecessary paperwork.
In addition to the administrative burdens that the Dutch central government imposes on business, central government regulations often have an impact on other parts of government and the public sector. Regulations are also made by provincial and local government and questions have also been asked in the Netherlands about the burden the state puts on the private citizen. Given these concerns, the Dutch Cabinet has been extending the use of the SCM as follows: - Burdens on citizens are measured and monitored by the Ministry of the Interior. This started in January 2005
- The Ministry of Education uses the methodology to reduce burdens on schools
- The Ministry of Finance looks at using the model to reduce the burdens government departments put on each other
- Administrative burdens imposed by local and regional governments have also been measured using the SCM.
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