Better regulation in Denmark

Presentation by Flemming N. Olsen

Senior Advisor, Division for Better RegulationMinistry of Finance, Denmark

Conference on Better and Simpler Regulationfor Business and People,

Reykjavik, June 6th 2006

Facts about Denmark

• Population: 5.4 million• Electoral system based on proportional

representation • Coalition and minority governments• Levels of government:

- State (158.000)- 16 regions (173.000)- 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:– 1st. Level: Regulations binding for both

citizens and authorities

– 2nd level: Regulations binding for authorities

Annual growth in regulation 1900-1999

0

200

400

600

800

1000

1200

1900

1909

1918

1927

1936

1945

1954

1963

1972

1981

1990

1999

LawsRegulationsTotal

Total volume of regulation 2004

0

2000

4000

6000

8000

10000

12000

14000

2004

RegulationsLaws

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 preparedb) 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; www.Danmark.dk

• Draft laws and parliament debates on parliament’s website; www.folketinget.dk

• Website containing consolidated regulation (laws and regulations); www.retsinfo.dk – 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 2002-2004• Contains 100-200 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 2004-2005

Main results of the SCM-measurement

ØEM28%

SKM26%

MINFF22%

BM13%

MIM3%

FVM3%

Other3%

J M2%

•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 regulationAdministrative burden (2004) Start of

simplification analysis

End of simplification analysis

Target

All businesses(mio. DKK)

Share of ministry’s total (pct.)

Mio. DKK Share of ministry’s total (pct.)

1. Regulation on minimum standards for accounting etc.

3.030,0 38,0 Okt. 2005 April 2006 733,3 9,2

2. Law on tax control

1.353,6 17,0 Jan. 2006 Okt. 2006 253,1 3,2

3. Law on VAT

1.041,8 13,1 Sept. 2005 Feb. 2006 446,9 5,6

… (Tba) (Tba) (Tba) (Tba)

10. … (Tba) (Tba) (Tba) (Tba)

TOTAL 7.582,4 95,0 1.979,0 24,8

Costs

Benefits

Concentrated

Diffused

Concentrated

I II

Diffused III IV

Incentives and deregulation/simplification