OECD researchers analyze the current state of EU regulation.
The European Union (EU) has become a key standard-setter in policy areas such as consumer protection, competition, environment, and workplace safety. At the same time, EU member states remain important policymakers by setting their own domestic regulations as well as through their role in shaping EU laws. When these laws and regulations are well designed, they can promote welfare and boost the economy. Poorly designed laws, however, hinder growth, harm the environment, and put citizens’ health at risk.
For the first time, the Organization for Economic Co-operation and Development (OECD) has assessed across all EU countries and the European Union the use of stakeholder engagement, regulatory impact assessment (RIA), and ex post evaluation to improve the quality of laws and regulations, drawing on its composite indicators of regulatory policy and governance. This recent assessment, entitled “Better Regulation Practices across the European Union,” finds that the EU and its 28 member states exhibit a strong political commitment toward regulatory reform.
According to the report, all of the member states have adopted an explicit policy to promote the quality of regulations. Stakeholder engagement and RIA in the development of laws and regulations are almost universally adopted across the EU and many member states’ have significantly improved their practices over the last decade. Nevertheless, there does exist a gap between the strong overall commitment to regulatory quality of EU member states and the effective implementation of regulatory tools.
Although EU members have heavily invested in tools to consult with citizens and businesses on draft laws and regulations, stakeholders rarely have the opportunity to provide input at an early stage of policy development. Too often it remains unclear how their feedback has been considered. Yet explanations are essential for citizens to perceive government processes as fair. Furthermore, the absence of explanations may lead to unwillingness among stakeholders to participate in subsequent consultations and possibly to less civic engagement and voluntary compliance with regulations—the opposite of what stakeholder engagement ought to achieve.
In addition, to keep pace with rapid changes, EU members must systematically review whether their regulations work in practice. But most EU countries do not systematically evaluate whether regulations actually achieve their objectives or result in unintended consequences, nor do they consider whether better alternative solutions might exist. This finding also applies to OECD countries more generally.
Ex ante impact assessment is much further developed and has been adopted by nearly all EU member states. Yet there exists a substantive gap between the outward commitment to these assessments and their effective use in practice. For example, the use of RIA is often limited to the government’s preferred regulatory option, rather than to a range of possible options. Such analysis also begins only after regulatory proposals have already been developed. Too often the analysis lacks transparency as well.
Incentives for ministries to comply with better regulation policies are weak in most member states. Quality control and oversight usually focus only on RIA, and few oversight bodies can ask ministries to revise their impact assessments when they lack sufficient quality. Although about one third of EU countries report on the implementation of their RIA systems, only a couple of EU member states and the European Union have evaluated their stakeholder engagement practices.
Overall, the European Commission’s own practices compare favorably with most EU members. The Commission renewed its political commitment towards the principles of better regulation with its 2015 Better Regulation Package, further refined in 2017.
The newly established EU Regulatory Scrutiny Board reviews the quality of all impact assessments and major ex post evaluations. Furthermore, the Better Regulation Package strengthens the link between ex ante and ex post evaluation as well as introduces new opportunities for stakeholders to provide input at the early stage of the preparation of RIAs and ex post evaluations.
Yet there remains room for improvement for all parties. The new OECD report raises the issue of how both EU member states and the EU institutions can better complement each other’s regulatory management tools, while at the same time avoiding unnecessary duplication or overlap.
EU laws are developed and implemented in close interaction between EU institutions and EU member states. The quality of laws and regulations in the EU therefore depends on the quality of the regulatory management systems, both in member states and in EU institutions. Anticipated economic benefits at the EU level could easily dissipate wherever regulatory management systems are weak in individual member states.
For example, if EU laws are implemented in a piecemeal manner, the resulting regulatory burdens will likely be higher than they should be, thereby hampering investment and reducing competition, as well as posing a risk to the single market. When EU countries include additional regulatory measures in excess of those provided in EU laws, it is important that these measures be subject to appropriate consultation and impact assessment as part of their design, to ensure that the anticipated gains from EU laws are realized.
EU countries do not usually facilitate the early contribution of their citizens to the development of EU legislation. Only around half of EU member states directly inform domestic stakeholders about the European Commission’s consultation processes. Informing domestic stakeholders, however, can facilitate participation of a broad range of stakeholders in EU consultations and help to identify particular local issues.
Furthermore, most EU member states do not apply their regulatory toolkit to EU law before it is adopted at the EU level. The negotiation phase in the Council of the European Union allows member states to amend European Commission proposals before they become binding EU law. Most EU countries, however, do not rely on impact assessment to define their negotiation position. This means that potential domestic impacts may not be properly identified at this stage. Similarly, the majority of individual member states do not engage with domestic stakeholders to form a negotiating position.
Individual member states generally apply regulatory management tools to support the transposition of EU directives in the domestic context. Both RIA and stakeholder engagement are useful tools at this stage to identify the best implementation solution. EU directives are usually subject to domestic legislative processes and therefore to the same requirements as any other domestic law in most EU countries. Just over half of the member states include a specific assessment of provisions added at the national level which go beyond those established in the EU directive and only eight countries are required to assess the marginal impact that the gold plating provisions have had.
Although there is a strong political commitment towards regulatory reform, countries need to further strengthen their regulatory processes and the institutions involved to make regulatory management tools such as stakeholder engagement, RIA and ex post evaluation work more effectively in practice. The better regulation agendas of EU countries and of the European Union need constant attention—a “set and forget” model does not work, just as it does not work for laws themselves.
Moreover, given the complexity of today’s political environment, governments cannot address regulatory challenges at the domestic level alone. The EU already stands out for the breadth and depth of its regulatory and economic integration. EU Member States and the EU, however, need to further invest into developing complementary regulatory management systems to ensure that EU legislation is developed and implemented in an open and transparent manner, is backed up by sufficient evidence, and is properly applied and reviewed.