Better regulation in Denmark Presentation by Flemming N. Olsen Senior Advisor, Division for Better Regulation Ministry of Finance, Denmark Conference on Better and Simpler Regulation for Business and People, Reykjavik, June 6 th 2006

Facts about Denmark Population: 5.4 million Electoral system based on proportional representation Coalition and minority governments Levels of government: - State ( ) -16 regions ( ) -271 municipalities (416.00) -(due to an ongoing reform changing to 5 regions and 98 municipalities)

Political culture Welfare state ideology Participation Consensus Informality Strong ministerial autonomy

Types of regulation Primary regulation – Laws passed by the Parliament Secondary regulation – Regulations issued by ministers: –1 st. Level: Regulations binding for both citizens and authorities –2 nd level: Regulations binding for authorities

What is Good Regulation? Regulation that obtains its goals without unnecessary or unintended consequences (content) Regulation that is transparent and legitimate (process) Regulation that is dynamic

Regulatory Reform: Key areas Structures Impact assessment Consultation Access to regulation Simplification

Structures Fragmented structure: 4 key ministries involved in the work on better regulation Regulation committee Division for better regulation, Ministry of Finance Division for quality in business regulation, Ministry of Business and Industry Legislation Technique Division, Ministry of Justice Digital Task Force

Regulation Committee (structure II) 4 permanent secretaries Manage the legislative agenda for the coming year Develops policy on legislative quality Division for Better Regulation and Prime Ministers Office act as secretariat for the committee Parallel committee of less senior officials

Division for Better Regulation (structure III) Set up in Ministry of Finance in 2002 as part of government platform No formal powers Responsible for promoting and supporting regulatory reform Coordinating simplification programme Conducting analysis of areas of regulation, for example regulation aimed at small businesses or municipalities

Regulatory Impact assessments (RIA) RIA’s are applied to all draft bills Mandatory to assess: Financial impacts on national an local government Administrative impacts on national and local government Economic and administrative impacts for companies Administrative impacts for citizens Environmental impacts A new handbook on RIA Two phases: a)Preliminary RIA when legislative agenda is prepared b)Full RIA when draft law is presented to Parliament

Consultation Normal (but not legally binding) to consult affected parties Consultation document to parliament –Consulted parties –Resume of replies –Answer to suggestions and complaints No minimum period for consultation – normally minimum 2 weeks

Access to regulation Laws and regulations under preparation published on a consultation portal; Draft laws and parliament debates on parliament’s website; Website containing consolidated regulation (laws and regulations); –Mandatory for ministries to update content –Access free of charge

Simplification Priority in the government platform November 2001 Experience with deregulation in the 80’s was negative Focus today on administrative burdens/red tape and regulation restricting competition Three target groups: –Businesses –Municipalities and regions –Citizens

Method for simplification Instruments for improvement of existing regulation: Modification or abolishment of obligations Thresholds for obligations Co-ordination between obligations Administrative simplification Better communication and guidance Use of ICT for easier compliance Approach: Ownership in each Ministry Strong involvement of target groups Strategic selection of areas by the Ministry of Finance

Rolling action plan for simplification Three action plans published in Contains initiatives covering the regulation of all line ministries Three target groups: citizens, companies, and authorities Both simplification of rules and procedures (frequently by use of ICT) All initiatives have a clear goal and a deadline Initiatives chosen in cooperation between line ministries and the division for better regulation

Simplification and measurements of administrative burdens Target of reducing the administrative burdens for business with 25 percent by 2010 From 1998 and until 2003 the overall development in the administrative burdens in Denmark was measured with a survey method Denmark has recently shifted from using the survey method to the Dutch-inspired Standard Cost Model (SCM). Full scale measurement in

Main results of the SCM- measurement Total administrative burden on companies: 32 billion DKK – equals 2,2 pct. of GDP 7 ministries responsible for approx. 97 pct. of the burdens ”Top Ten” for the 7 ministries with most business regulation accounts for approx. 87 pct. of the total burden (28 billion DKK)

New approach to the Action Plan for Simplification SCM-measurements as point of departure Link to the goal of 25 percent reduction in 2010 Long-term action plans from most relevant ministries (June 2006) Systematic simplification of larger regulations

New Action Plan for Simplification Ministry of Taxation [constructed example] Plan for simplification of Top Ten most burdensome regulations Law or regulation Administrative burden (2004)Start of simplification analysis End of simplification analysis Target All businesses (mio. DKK) Share of ministry’s total (pct.) Mio. DKKShare of ministry’s total (pct.) 1. Regulation on minimum standards for accounting etc ,038,0Okt. 2005April ,39,2 2. Law on tax control 1.353,617,0Jan. 2006Okt ,13,2 3. Law on VAT 1.041,813,1Sept. 2005Feb ,95,6 … (Tba) 10. …(Tba) TOTAL7.582,495,01.979,024,8

Costs Benefits Concentrated Diffused ConcentratedIII DiffusedIIIIV Incentives and deregulation/simplification