Step changes towards a holistic approach for limiting costs effectively and for better regulation Photo: NKR/StBA
September 2006 – Ex ante transparency with regard to red tape incurred by legislation
In April 2006 the Federal Government presented a consistent overall concept in its programme for "Bureaucracy Reduction and Better Regulation". In doing so, it set itself the goal to measurably and verifiably reduce the cost of bureaucracy arising from existing information obligations. The intention was, furthermore, to avoid any new information obligations for citizens, businesses and public authorities – by ensuring complete transparency of such costs as early as at the drafting stage of new legislation. A minister of state was appointed at the Federal Chancellery as the Federal Government’s Representative for Bureaucracy Reduction.
In September 2006, the NKR was instituted by law as an independent body in order to advise and support the Federal Government – in a critical and constructive manner – during the implementation of the government programme. Since then, the NKR has been involved as an independent authority in every draft regulation of the Federal Government and reviews the ministries’ estimates of the impacts for citizens, the business sector and public authorities. These estimates and the discussions with the NKR have led to a change in the culture of legislation, i.e. to an increased transparency and cost-awareness with regard to the consequences of the legislation.
Measures for cutting red tape
In 2006, with the support of the Federal Statistical Office, the Federal Government conducted a "baseline measurement" of administrative costs arising from statutory information obligations for businesses in order to provide a starting point for verifiable cost reductions. Used for this purpose was the internationally recognised Standard Cost Model. Its finding: businesses in Germany had a burden of around EUR 49 billion a year to bear due to information obligations under Federal law. The intention was to reduce these costs noticeably – by 25 per cent net, i.e. by roughly EUR 12 billion. Any increase in these costs as a result of new laws was also to be avoided or offset by additional cost reductions.
It is with this objective in mind that the Federal Government representative, ministries, federal states, associations and the NKR initiated concrete steps to implement this net reduction target which has been subsequently achieved in 2012. The Bureaucracy Cost Index on the website of Germany’s Federal Statistical Office sees to it that the development of these costs continues to be transparent and, in turn, that the lower burden level achieved can in future be maintained or even further reduced in relation to 2006.
NKR projects – Reviewing and simplifying existing law
In coordination with the Federal Government, the Federal States and the competent enforcement bodies, the NKR has conducted cross-cutting simplification projects under the heading “Facilitating the Application for...” on parental benefits, housing subsidy, student funding under the Federal Education and Training Assistance Act (BAföG), the work and residence permit for foreign specialised personnel, and the reduction of bureaucracy in the everyday life of surgeries. The focus of these “Facilitating the Application for...” projects has been on implementing federal legislation across the different levels of the Federation, the Länder and the municipalities. The NKR has, in cooperation with the Federal Government, the Federal Statistical Office, interested Länder and municipalities, reviewed existing administrative procedures with the aim of making them simpler and faster – with notable success: It has been possible to develop and agree numerous proposals on how to simplify administrative procedures and reduce the burden for the parties concerned.
July 2011 – Extending the ex ante transparency to the entire regulatory burden (compliance costs)
The experience gained in the first few years has also shown that bureaucracy costs ensuing from information obligations account for only a small part of the compliance costs incurred by Federal regulations. Where, for instance, a statutory reduction of industrial emissions under the old mandate was concerned, it would have been necessary to state only the cost of transmitting the measured emission figures to the authorities (information obligation), but not the cost of modifying the industrial facility to reduce the emissions. Since 2011, these compliance costs of Federal regulations have also been made transparent. The ”Bureaucracy Reduction and Better Regulation“ programme has thus been significantly expanded, as has been the mandate of the NKR. Thanks to the now consistently practiced disclosure of all compliance costs, decision-makers in government and parliament today know, prior to the issuance of regulations, what cost burdens will ensue from their decisions for those concerned.
January 2013 – Ex post evaluation
In January 2013, the competent Secretaries of State Committee, on a recommendation by the NKR, decided to systematically evaluate all regulatory initiatives every three to five years whose compliance costs exceed EUR 1 million. Such a systematic review of laws with significant impacts has been unprecedented in Germany to date. In this respect, the decision also made legal history. In its 2013 annual report, the National Regulatory Control Council described this decision as historical for the German legislative culture.
June 2014 – Life situations of citizens and businesses
The Better Regulation 2014 work programme adopted by the Federal Government on 4 June 2014 sets out the better regulation measures and projects by the Federal Government for the 18th legislative period. One of these measures comprises a new approach for determining and initiating noticeable simplifications. In order to better understand in which situations citizens and businesses find legal provisions and procedures to be particularly complicated and burdensome, the Federal Government has tasked the Federal Statistical Office with conducting interviews concerning life and business situations. The interviews were conducted for the first time in 2014 and 2015 (so-called first round), and the intention is to repeat this exercise every two years. Citizens’ life situations which were covered by the survey included - but were not limited to - university education, unemployment and birth of a child. The business situations surveyed were – amongst others - starting a business, taxation and finance, and recruitment. The findings of the survey - e.g. regarding the comprehensibility of application forms or availability, professional expertise, but also the integrity of public administration officials - shall provide starting points for better regulation.
January 2015 – ‘One-in, one-out-rule’
The ‘one-in, one-out’-rule, which was introduced in mid-2015 on a recommendation by the NKR, is intended to effectively limit the burdens imposed by laws on the business sector. A new regulation which leads to compliance costs to businesses must always be offset by a similar reduction in costs elsewhere. Thus, a mechanism for limiting the compliance costs was introduced for the first time after the compliance costs had been introduced. With the State Secretary decision as of January 2016, the implementation of the ‘one-in, one-out’-rule was brought forward from 1 July 2015 to 1 January 2015. The NKR had declared its consent at an early date.
January 2016 – Determination of compliance costs for EU law
Based on a recommendation of the NKR, the Federal Government considers the costs resulting from the draft regulations of the European Union systematically and at an early stage by employing the EU ex ante-procedure, which was implemented in January 2016. The most important change is that the Federal Government will in future conduct its own cost assessment for Germany if the estimated annual Europe-wide compliance costs for a regulatory proposal exceed EUR 35 million. In line with the new procedure for cost assessments the NKR may issue an opinion.
The NRK deems the new EU ex ante procedure of the Federal Government an important step towards the systematic recording of the costs accruing to Germany from the implementation of the legislative acts of the European Union. The NKR supports the Federal Government in this procedure and will contribute its experience from the evaluation of impact assessments of national projects in a constructive manner.
December 2016: Implementation-focused policy-making
The way in which the Länder and local authorities enforce legislation also offers opportunities for improving regulation. In the federal system of the Basic Law, legislative and enforcement competences are divided between the Federal government and the Länder as follows: By way of their administrative structures, the Länder do not only enforce their own laws, but also the laws of the Federal government. It is obvious, therefore, that enforcement (at the Länder and local government level) should also be considered during the legislative procedure (Federal government level). In order for legislation to achieve its objectives, the federal legislature must take account of the realities of implementation and enforcement at local level. Federal legislators rely local practitioner knowledge and must quantify the subsequent costs of personnel and material to the Länder and local governments in a comprehensible manner and based on reliable information already at the draft legislation stage. In order to ensure that this is done, it is necessary to establish a procedure for collecting information at the enforcement level that is as simple and as effective as possible.
At the initiative of the NKR, a discussion forum assembling representatives of the Federal government, all Länder governments, local umbrella organisations and the Federal Statistical Office has agreed upon a procedure for the determination of the cost of compliance across all levels of government. The agreed procedure complements the regulations for involving the Länder and local governments in the legislative process in accordance with the practical requirements. It is supported by the electronic ERBEX data collection tool, which was developed by the Federal Statistical Office and the NKR for this purpose.
The suitability for implementation includes also the legal provisions’ suitability for eGovernment. With the review guidelines for eGovernment, the NKR and the IT Planning Council have provided an instrument which is intended to assist in the prevention of legal obstacles – e.g. unnecessary written form requirements.
November 2019: Focus on one-off compliance costs, evaluation quality and benefit quantification to improve new legislation
In November 2019, the federal government adopted new rules to limit the one-off compliance costs associated with new legislation, to systematically evaluate legislation and, if possible, to quantify the benefits of legislation. The State Secretaries Committee on Bureaucracy Reduction and Better Regulation has passed the following three resolutions:
The one-off compliance costs, which are often caused by new legislation and particularly burden small and medium-sized businesses, should be limited.
The evaluation of existing legislation will be further developed. For example, federal ministries have committed themselves to better involve federal states, local governments and associations in evaluations and to publish the findings. In addition, the quality of evaluations carried out by the ministries themselves will in future be checked by an independent body. Thus, the quality of the systematic evaluation process, which was first introduced in 2013, will be improved. The NKR believes that it is crucial that evaluations provide insights that can help to remedy possible shortcomings in existing legislation, and that they provide a valid basis for possible amendments.
A third resolution aims to better present the benefits of new legislation in the explanatory memorandum. The federal ministries, in particular, often face considerable challenges with the quantitative presentation of the benefits. Advice from the Federal Statistical Office should bring improvements here.
The NKR has long been promoting not only quantifying the cost impacts of legislation, but also its expected benefits. As early as 2014, the NKR commissioned a study that summarizes the experience of "quantifying the benefits of regulatory proposals" in those countries that have extensive practical experience in this area.