Smart Regulation: a critical analysis

The European Commission’s 8 October communication on smart regulation closes was awaited as a key document concluding a cycle of reflection and consultation on the new contours of regulatory quality and a roadmap of future steps to achieve it at the European level.

As a contribution to a book to be published at the end of the year, I have drafted a full-length critical analysis of this “year I of smart regulation”, outlining the origins of the change and the relevance and impact of the changes. Here are some of the points that I develop in my article:

Better regulation had not yet achieved its full impact: the simplification effort had not yet truly reduced the perceived overgrowth and complexity of European law, in spite of the claim that the number of legal texts had been reduced. In spite of the few major successes (the VAT reform to introduce electronic invoicing for instance) the cutting red tape program which is supposed to run until 2012 needs to deliver significant additional measures in a greater number of areas of legislation, like statistics, accounting, environment, etc. All in all, in no way can it be said that better regulation had already reached the objectives set for it by its initial promoters: EU law still gives an impression of complexity and bureaucracy, the decision making process has not been made that much more transparent;

In this context the innovations introduced by smart regulation can be welcome if they do not undermine or slow down the sustained delivery of ongoing better regulation results. The two main changes in SR are 1/ the broadening of the ambition of the strategy to “make markets work for people” which is wider than “simplify the regulatory environment for business”; 2/ the new emphasis on the content of policy and legislation, which must become “smart”, i.e. deliver effectively on the full range of public policy objectives, rather than reducing the volume of legislation and its burden on companies.

This new approach will have to avoid running into some well-known pitfalls. By giving more attention on the content of regulation and requiring more evidence to justify reform, it opens the way for additional bureaucratic prerequisites, running the risk of focusing more on the process, and not enough on the outcome. The shift is not exempt from technical challenges, as the evaluation methods will need to be adjusted to accommodate SR goals. By insisting on the technical evaluation of evidence in support of decision making, SR may dilute the political initiative and further insulate the regulators from the pressure of the stakeholders. These will be some of the challenges facing smart regulation and also the criteria against which to assess its future achievements. Comments welcome !