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Smart Regulation to generate outcomes, not outputs: no better social protection versus a better business environment dilemma


30 Jun 2010

- Regulatory reforms needs to go beyond simply cutting red -urges global accountancy body.

Europe can be a more enterprising place without sacrificing protection for the public, says ACCA (the Association of Chartered Certified Accountants) today.

With that in mind, the European Commission is continuing its work towards better regulation in tackling now the way the Commission-and the other EU institutions- work. Smart regulation will be instrumental if we want to achieve the ambitious objectives of Europe 2020 - especially those targeting Small and medium enterprises- but wide public consultations and proper impact assessments must first become an inherent part of the legislative process, says the accountancy body

According to an EU Executive Public Consultation on the topic, smart regulation is not about more or less legislation but about delivering results in the least burdensome way. "This vision is shared by ACCA, who says in its consultation reply that the Commission should resist being drawn into a false dilemma of better social protection versus a better business environment" Manos Schizas, Senior policy adviser at ACCA, points out.

For ACCA, smart regulation should achieve the following four objectives.

- First, to maximise the public benefits delivered to society for each Euro of cost imposed on regulated parties;

- second, to ensure that regulatory cross-subsidies (whereby the parties bearing the final cost of regulation are not the same as those that benefit from it) are fair, transparent and sustainable;

-thirdly, to oversee the development of a healthy regulatory services industry, including government bodies, enforcement agencies and private sector advisers-which delivers genuine value to regulated parties and the wider public;

- last but not least, to ensure harmonisation of legislation and facilitate the development of a Common Market.

ACCA says it is critical that regulation complies with the Think Small First principle. According to Manos Schizas, "This does not mean that SMEs need to be "left alone" or exempt from all regulation; nor does it mean that they should be subsidised at every opportunity. It means that regulatory structures must be designed to suit the circumstances of the smallest businesses first, and then adjusted to the greater resources and impact of larger firms. This "bottom-up" approach is hard to implement but essential to Smart Regulation. In Europe, we've all been talking about "Thinking Small First" for the last 16 years. Last year the Commission finally gave us its definition of the principle; we now look forward to its implementation."

ACCA is concerned that the obsession with administrative burdens could limit the scope and relevance of smart regulation. The professional body notes in its response that the flow of new regulation is a much bigger problem for small businesses than the stock of existing regulation, and the policy costs of regulation are much more important than the administrative costs. Compliance resources and behaviour - not the actual content of regulations themselves - determines the final cost of regulation for small businesses. Mr Schizas adds:  “Until these issues are tackled head-on by the EU institutions and the member-states, small businesses are unlikely to report any concrete improvements."

ACCA also asserts that progress in smart regulation must be measured against outcomes, not outputs. Savings in terms of administrative burdens - a typical output measure - are important, but more important is whether regulation is discouraging business startups, employment, innovation or investment; or whether it is helping create safer workplaces, higher quality standards or innovative products and services. 

As a necessary first step, ACCA has called for a serious response to the recent review of impact assessment by the European Court of Auditors. The Council and the European Parliament need to follow the Commission’s lead in carrying out Impact Assessments.

However, the ECA’s recent audit of IAs found that Parliament only carried out seven Impact Assessments between 2005 and 2008, while the Council only carried out one…

"If we're honest, the fact that "Impact Assessment" is still used to denote a document rather than a process is proof that we're not taking the concept seriously enough" Manos Schizas concluded.

- ends -

For further information, please contact:

Cecile Bonino
tel:+32 (0) 2 286 11 37
mob: +44 (0) 7809595008

Notes to Editors

    1. ACCA is the global body for professional accountants. We aim to offer business-relevant, first-choice qualifications to people of application, ability and ambition around the world who seek a rewarding career in accountancy, finance and management. We have 362,000 students and 131,500 members in 170 countries worldwide.
    3. ACCA has worked with governments, national organisations and development agencies in emerging economies- for over 20 years- promoting the accounting profession, to create value for the communities, businesses and individuals it serves.
    4. ACCA believes that globalisation of business means that one set of reporting standards is essential. We favour the principles-based IFRS.
    6. ACCA understands the real issues facing small businesses as 63,000 of our members work in SMEs or small partnerships worldwide. 


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