Reducing administrative costs

The European Commission has set itself the objective of alleviating the bureaucratic constraints with which the business sector is faced. In order to achieve this, it proposes reducing administrative costs by 25% within five years. A reduction of this kind should create a 1.5% increase in GDP, i.e. almost EUR 150 billion.

ACT

Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions "Action programme for reducing administrative burdens in the European Union" [COM(2007) 23 final - Not published in the Official Journal].

SUMMARY

In order to achieve the objectives of the revised Lisbon Strategy and the "Better lawmaking" programme, the Commission realised that the administrative costs * borne by the business sector needed to be reduced. Companies need to devote a lot of time to meeting certain requirements to provide information, rather than spending this time on their main activities.

The administrative costs stem from the obligations to provide information which are set out in the legislation. The programme to reduce administrative costs is based on these obligations to provide information. In fact, it is easier to compare obligations to provide information than entire pieces of legislation. The measures to reduce administrative costs are limited to simplifying the requirements to provide information and do not change the fundamental principles of the basic legislation.

The administrative costs result from international law, Community law, national law or regional law. International law and a certain proportion of Community law need to be transposed into national law. It is therefore a shared responsibility which will call for sustained partnership between the EU institutions and the Member States.

Measuring administrative costs at EU level

The present action programme uses an EU administrative cost model. This model is based on the SCM method (Standard Cost Method) and includes a number of variants. The SCM was developed by the Netherlands. It seeks to identify information requirements contained in the regulations which require companies to make certain pieces of information available to the public authorities or third parties. It also involves evaluating the internal and external resources used by companies to produce the information required.

The SCM method is applied by a network of 17 Member States. However, the Commission felt that it was necessary to develop a true European administrative cost model (EU SCM). The EU SCM is based on the SCM but differs from it with regard to the range of groups to which information requirements apply. This group is bigger and includes companies, the voluntary sector, the public authorities and members of the public. The main innovation of the EU SCM model is therefore the fact that it evaluates overregulation *.

The aim of the action programme is to measure the administrative costs imposed by Community legislation by November 2008 at the latest. The measuring of administrative costs at EU level must meet three objectives:

accurately identify all the information obligations which are derived from legislative acts. The programme for reducing administrative costs is based on the information requirements and not on the legislative texts as a whole. The information requirements must be classified clearly at Community and national levels;
harmonise the information requirements which need to be measured. A minimum level of harmonisation is necessary in order to compare the data from the Member States and establish joint reduction targets. Several parameters should be harmonised, including the following: the classifications by origin of information requirements, the standardised cost ratios, the type of administrative activities concerned and the populations affected, the definition of an "efficient business" and the entities concerned. For practical reasons, harmonisation should focus initially only on the measures aimed at companies;
select the information requirements which need to be measured. For practical reasons, the Commission proposes measuring only Community regulations and directives and the provisions adopted in order to transpose them into national law. The Commission also proposes that only those information requirements in the following priority areas be measured: company law, pharmaceutical legislation, working environment/employment relations, tax law (VAT), statistics, agriculture and agricultural subsidises, food safety, transport, fisheries, financial services, environment, cohesion policy and public procurement. The Commission plans to deal as a matter of priority with those areas in which administrative costs are the highest.

Establishing a Community strategy to reduce administrative burdens

The Commission proposes first of all that the overall objective should be to reduce administrative costs by 25% throughout the EU. This objective should be achieved within five years.

In order to pursue this objective, the Commission plans to reduce certain charges in areas in which action can be taken immediately. A few minor changes to the existing legislation would make it possible to achieve significant results quickly and easily. The Commission has identified 11 sectors in which administrative burdens could be reduced by EUR 1.3 billion.

The Member States should also take decisions which would allow them to reduce costs since a significant proportion of these costs stems directly from national and regional legislation.

In order to meet these objectives, the Commission proposes drawing up the following common principles in order to reduce administrative burdens:

reduce the frequency of reporting requirements to the minimum levels necessary;
review whether the same information requirement is not requested several times;
encourage web-based reporting;
limit the constraints imposed on small and medium-sized enterprises by introducing thresholds for information requirements;
target those operators which are most likely to incur administrative costs in certain sectors;
reduce or eliminate information requirements where these relate to legislative requirements which have since been dropped or modified;
provide clarification of complex pieces of legislation which may slow down business activities.

Organisation

The Commission specifies the organisational structure of the programme. It will, for example, call in external consultants to measure the administrative costs associated with Community legislation. It will work closely with the Member States in order to implement the programme.

Next steps

The Commission calls on the Member States to complete their measurement exercise by 2009 and to set targets for reducing administrative burdens at national level by October 2008 at the latest.

It proposes to the European Parliament and the Council that they adopt measures on priority areas as soon as possible.

Lastly, it will report regularly on the progress achieved in implementing the programme.

Key terms used in the act

Administrative costs: costs incurred by enterprises, the voluntary sector, public authorities and citizens in meeting legal obligations to provide information on their action (or production), either to public authorities or to private parties.
Overregulation: overregulation occurs when an authority transposes a piece of legislation by creating or expanding the requirements for which provision was originally made.

Last updated: 12.02.2007