Wednesday, 21 November 2007
Ceisteanna — Questions
Question 5: To ask the Taoiseach if, in regard to the commitment contained in the Agreed Programme for Government, he will outline his plan for a review of the entire economic regulatory environment; the person who will undertake the review; when it is expected to be completed; and if he will make a statement on the matter. [23678/07]
Question 6: To ask the Taoiseach the plans he has to establish a review similar to the Davidson review on the implementation of EU legislation in the UK; and if he will make a statement on the matter. [23955/07]
I propose to take Questions Nos. 5 to 8, inclusive, together.
The programme for Government contains a commitment to instigate a review of the entire economic regulatory environment. This review will be designed to ensure that the existing regulatory regime is operating efficiently, balancing the needs of users with the requirements of producers and is not imposing excessive costs on the economy.
An interdepartmental group, chaired by my Department, has been tasked with advancing work in this area. Arising from the group's recommendations, the Government has agreed to establish an Oireachtas Committee on Economic Regulatory Affairs whose remit will include the scrutiny of the efficiency and effectiveness of regulators in key economic sectors such as energy, communications, transport, health and safety and financial services. As Deputies will be aware, the committee will be chaired by Deputy Michael Moynihan.
In the medium term, the interdepartmental group has been tasked by Government with examining a range of legislative provisions to enhance accountability and the transparency of regulators' operations. These measures will strengthen oversight of regulators by the new Oireachtas committee. The Government believes that we need stronger international data and benchmarks in order to assess the comparative efficiency and effectiveness of Irish regulators. Terms of reference for such an international study are currently being finalised by the interdepartmental group.
The Davidson report in Britain examined the transposition of EU legislation in the UK by the British Government. While much concern is expressed about the over-implementation of EU legislation — or "gold plating" as it is often called — a key finding of the Davidson report was that these concerns are greatly exaggerated and, in practice, there was very little evidence of gold plating to be found in the UK.
With regard to Ireland, my Department commissioned the ESRI to conduct a survey of business attitudes to regulation which was published earlier this year. This study examined in detail the responses of more than 800 Irish companies, including small and medium-sized enterprises. The study found that regulation ranks behind concerns over labour costs and increased competition in terms of challenges faced by business, but ahead of concerns over infrastructure and staffing issues. In general, firms feel that the overall amount of regulation is about right. This finding is in line with the PricewaterhouseCoopers CEO Pulse Survey 2007, which found that on a worldwide stage, 73% of CEOs see regulation as the main potential barrier to growth compared with the Irish figure of only 3%.
It is important that in examining the burdens imposed by regulation, we do not diminish the protections for citizens and workers that have been put in place. Nevertheless, it is right to see whether there are unnecessary burdens and red tape that could be eliminated without impinging on the core purpose of regulation. With this in mind, I have tasked my colleague, Deputy Michéal Martin, Minister for Enterprise, Trade and Employment with driving our national programme of reducing unnecessary administrative burdens. Deputy Martin has appointed a high level group of officials and representatives of business and trade unions, to look at ways of reducing unnecessary burdens in five priority areas identified by Irish business as the most burdensome.
These are taxation, health and safety, environment law, statistical returns and employment and company law. This is in line with the commitment in the Agreed Programme for Government to ensure direct feedback from business on regulatory burdens. The work of this group will inform Ireland's approach to meeting the commitment contained in the spring European Council conclusions to put in place a national programme to reduce unnecessary administrative burdens.
Regarding the timely transposition of EU legislation into Irish law, my Department has a monitoring role through the interdepartmental co-ordinating committee on European affairs which is chaired by the Minister of State at the Department of Foreign Affairs, Deputy Roche. The transposition of EU directives is a standing item in the work programme of the committee.
Departments are required to provide regular updates on directives applicable to their areas of responsibility. The updates assist in the co-ordination and monitoring of the transposition of all EU directives, including those counted towards the European Commission's Internal Market scoreboard. The Commission has set a 1% transposition deficit target for the Internal Market scoreboard for 2009.
Is the Taoiseach happy with how the various regulatory bodies are operating? Serious concerns arise in respect of a number of them. We touched on the fact that, since we established an energy regulator, most of the companies selling energy raised their prices last year to an extraordinarily high level. This year, having imposed huge increases mistakenly, many of which were unnecessary and drove inflation, the Commission for Energy Regulation is proposing to reduce some prices. However, the reductions will by no means be as great as the increases. The Irish inflation rate is now at the top end of the European scale and a key element in driving it has been the manner in which regulation has taken place in the energy sector. This is but one example.
There was recently an international credit crisis and credit crunch. An extensive system of financial regulation was established in Ireland but it was not enough to prevent a number of spectacular collapses in the International Financial Services Centre and among companies offering special investment vehicles. It turned out that these companies and their investment vehicles were not regulated. Can the review about which the Taoiseach is speaking be in any way meaningful if it does not take account of the effectiveness of regulation, particularly in respect of the prices regulators allow their respective industries or service providers to charge? Does the Taoiseach propose that the review should take account of this?
I do not want to address the issue of public transport but one should consider the role of the Commission for Taxi Regulation. I do not know when the Taoiseach was last in a taxi or whether he noted how dirty and expensive some of them were. Our taxi fares are among the highest in Europe. It costs between €8 and €10, at a minimum, to travel during the day between the canals in this city, a journey of less than three miles. Many taxi drivers offer a great service and a great running commentary on the whole political system. It is great fun——
The Taoiseach does not get that commentary; I do and it is very informative. I do not know what the regulator does because the cleanliness of some taxis leaves a lot to be desired. Is the Taoiseach happy with the regulatory system he has established?
We have a large number of regulators, as the Deputy implied, and the review is designed to ensure the existing regulatory regime operates efficiently, balances the needs of users with the requirements of producers and does not impose excessive costs on the economy. That is exactly what I want to see done.
The regulatory system we have built has reflected international practice for the past 15 years or so. There are regulators for different areas, including the Commission for Communications Regulation, the Commission for Energy Regulation, the Commission for Taxi Regulation and the Financial Regulator. The interdepartmental group which includes my Department is working in this area. It has been very active in recent years and has done a lot of good work, as has been recognised by both unions and employers. Arising from its recommendations, we have agreed to establish an Oireachtas committee on regulation that will give Members a chance to scrutinise the efficiency of regulators in all key economic areas, including energy, communications, transport, health and safety, and financial services.
I agree with the Deputy's point on unregulated special investment vehicles. When dealing with changes affecting the credit unions, for example, with which changes I have been dealing for the past few years, one can get nothing passed if it is not sanctioned by the Financial Regulator. I have no problem with this because there is always a likelihood that someone will hit the dust, thereby causing a big problem. A special investment vehicle allowance which can amount to tens of millions of euro can operate outside the remit of the Financial Regulator. I have said outside the House and reiterate within it that the issue in question was broadly spread. That was my understanding of it and I spoke about it when it arose.
During the term of the last Dáil I answered questions endlessly on how the regulators per se worked. I stated we would review them and included a proposal to this effect in the programme for Government. We also decided to establish an Oireachtas committee to scrutinise them. Needless to say, the regulators work hard to the best of their ability and do their jobs, yet a device is needed, whereby the Oireachtas can question their work. This will be achieved by the interdepartmental group and the Oireachtas committee. For the existing and new regulators, this will allow for far better functioning of the House.
I take it as given that the staff of the Commission for Energy Regulation work from morning until night, but they got the pricing of energy products seriously wrong, with a consequent economic impact.
We discussed the ESB previously. The effect of regulating the ESB and allowing competition under the guidance of a regulator was such that electricity prices were pushed to the top of the EU scale. The Taoiseach stated less than an hour ago that electricity prices had been historically low theretofore. The price increase imposed great burdens on consumers and particularly on industry which at the beginning of the process appeared as if it would gain. The gain did not last.
What is the point in having an oversight system for regulation if the core economic effect of regulation has been to drive up prices and inflation, a key indicator of our economic competitiveness? How quickly do regulators who permit price increases row back and reduce them when they get them wrong? It has taken almost one year for some of the energy price reductions to materialise.
My point on financial services regulation is that credit unions are correctly subjected to much regulation, as the Taoiseach stated. However, there was nothing to advise them not to invest in structured investment vehicles. Very wealthy high rollers in Irish society, and others, invested tens of millions in such vehicles. It is essentially a form of gambling and the only difference between it and Nick Leeson's on-line spread-betting operation for Paddy Power is that the average punter with Paddy Power probably restricts his bets to sums between €2,000 and €5,000. Those investing in structured investment vehicles through the Irish Stock Exchange, on the other hand, are investing tens of millions of euro. Will the Financial Regulator address this issue sooner rather than later? There is a huge hole in our financial regulatory system whereby the regulator has made decisions that certain types of financial activity are outside the remit of regulation. I am sure the Taoiseach is aware that this also includes the prices charged for the purchase of financial investment products sold by insurance companies. Again, we have some of the highest prices in Europe. When somebody goes to buy a PRSA or some other kind of financial insurance investment product, the cost of the purchase of those services is extraordinarily high in this country and seems to be entirely outside the regulation remit. Does the Taoiseach have a view on this because we all want to bring down prices and costs and these are significant cost areas?
I do not want to get into insurance and financial regulation, which are covered by the Tánaiste and the Minister for Enterprise, Trade and Employment. The Government's position is that it has set up the interdepartmental group which will be tasked with examining the range of legislation to enhance the accountability and transparency of regulators' operations in their entirety. These measures will strengthen oversight.
I think Deputy Burton would agree that the fact that we have oversight over these regulators and that the Oireachtas will now have oversight over them is a good thing. I have given her my general view. I have never believed that hedging is not a regulated area.
I do not agree with that position. Hedge funds are not akin to somebody going to Paddy Power. I know one could use this argument in respect of how they are classified. Punting a few hundred euro and punting hundreds of millions of euro into vehicle funds is entirely different. It would not take until lunch time to work out that even if one put a limit on it, all these issues would come into it. George Soros used hedge funds to attack the ERM and the entire financial system over a decade ago. About 20 analyses of this were carried out internationally. This was a regulated end of the market. I have no reason to change my view.
When Deputy Burton asked for my view, I was surprised to see that this vehicle fund of several hundred million euro was not regulated. It would have been in the interest of the individuals involved, regardless of whether they are high rollers, if it was also regulated. Maybe they thought the fact that it was not regulated was a good idea but I think they will change their minds now.
The independent Commission for Energy Regulation, CER, which was established in 1999, has regulated the market here. It has regulated the natural gas market for the past five or six years. Many of these measures came from EU legislation and European decisions and we set it down here by way of legislation. The framework of our legislative policy in which CER functions reflects EU energy policy. All of these areas, by and large, were initiatives and came from EU legislation and directives which we transposed. What we did not do at the time was set up a regulatory and oversight system which is what this measure is doing.
The Davidson review was a very comprehensive report which made a number of recommendations on best practice in the implementation of EU legislation. Is it not the case that this report highlighted unnecessary costs for business in respect of regulatory creep and the over-implementation of regulations coming from Europe? Is it not the case that this is a huge concern not just for the business community in Ireland but for the public in general?
Why has the Taoiseach not included sectors such as agriculture in the review which he has instigated? Is it not the case that we have an upcoming health check in this area next year? This would be an ideal time to review the regulatory impact of European bureaucracy in agriculture and the environment. I know the Taoiseach touched on this area in his initial response.
Our system is inadequate from the perspective of EU scrutiny. What steps will be taken to ensure that this creeping bureaucracy is not introduced in various sectors of Irish society? What specific measures will the Taoiseach put in place in advance of the tabling of the EU reform treaty? Is it not the case that one of the biggest issues that will come up in respect of this treaty is bureaucracy? This is brought on us because Ministers have time and again blamed Europe for introducing rules and regulations when in fact it is the transposition of those regulations by those same Ministers into Irish law that has caused the difficulty. How are we going to address the issue of the interpretation of EU directives by the Government in Ireland, which, in the vast majority of cases, is causing the problem for people when they try to comply with these regulations on the ground?
My question is in the same vein. In the programme for Government, it is stated that the Government will implement procedures to ensure feedback from business in respect of the burden of regulation and publish annual reports on these issues. Have the procedures been introduced and can the Taoiseach tell us what they are? What mechanism is being used to consult with business?
Does the Taoiseach accept that there is a significant burden on small businesses in particular in respect of complying with the regulatory burden emanating from the EU? I offer that question in line with the Davidson review on the implementation of EU legislation and the final report of same in respect of the same matter in the neighbouring island of Great Britain. Is the Taoiseach aware of the detail of the Davidson review? While the report states that the impact is not as great as is generally believed, it nevertheless makes specific recommendations and instances a number of issues in respect of MOT tests, fisheries, insurance and mediation.
In line with those and using the example of the MOT test, would such recommendations as are contained in the Davidson review have application here? Would the Taoiseach consider similar measures in order to relieve the burden and responsibility on business, including small businesses, and the individual citizen?
Given that the Taoiseach will visit Cork later this week, I hope he will announce some good news for the city and that he will honour the commitments given in respect of Cork Airport before the last election. If he can spare a minute or two or a few hours, he might visit west Cork and see what we need there. Maybe I might get a chance to introduce him to his palatial home down there or to his super ocean-going yacht.
I will take the three questions from the Deputies together. A unit in my Department works with representatives of small business, IBEC and the trade unions. It has carried out a survey of 800 companies, including small companies. The PricewaterhouseCoopers Pulse Survey is also available. Worldwide, 73% of CEOs see regulation as the main potential barrier to growth. The figure in Ireland is 3% so we do not have an enormous problem with this. We try to identify the burdens and those put forward by industry include taxation and, increasingly, health and safety, which industry sees as imposing too many rules, regulations and plans. The latest Act addresses some of these concerns. The other areas are environmental law, to which Deputy Naughten was particularly referring, statistical returns and employment and company law. These are the five main areas, the others are small and insignificant. In each of those areas we are working with the industry sector and the Minister for Enterprise, Trade and Employment, Deputy Martin, is examining how we can eliminate as much as we can without impinging on the core purpose of regulation. Much of it involves simplification and using technology in better ways.
When EU legislation is used to enhance matters, by cleaning water, improving the air or addressing issues of safety on roads, people are in favour of it. When EU legislation imposes an obligation on people, they are against it. One group of social partners wants EU law transposed because it improves security of work and the other group points out how it affects one of the five areas outlined. Progress is being made on these issues and if we follow the regulation line, follow reports on business attitudes to regulations and get stakeholders to work together we can get rid of much bureaucracy and forms, as has happened in the past few years. Many of the forms are not necessary and refer to old legislation even though the statutes stipulate what must be done.
The Davidson review examined the transposition of EU legislation and came from Eurosceptics who were trying to argue the case that transposition of EU directives in the UK was causing major concern to British business. Members of the group got their way on how the report should be done but then they found their concerns were greatly exaggerated. The report found there was little evidence of gold plating in the UK, even though the project started from a totally Eurosceptic point of view. That is why one does not hear much about the Davidson review anymore from Eurosceptics. It did not give them the result they sought.
There is no regulator for agriculture, which is done in a different way in the EU. In fairness to Commissioner Fischer Boel, with the Minister for Agriculture, Fisheries and Food we have been able to address most of the issues in agriculture in a satisfactory manner. We must comply with EU regulations and, while we have a review of some of the issues, most of the major obstacles have been overcome by the single payment scheme. The form is still too long and too difficult but we have tried to achieve an understanding with the Commissioner for Agriculture and Rural Development and the Commission on that issue. We must be mindful of the resources we receive. That debate will be continued in the next review.
Regarding the issue in Cork, we will try to ensure they are not regulated.