Enda Kenny
Ceist:1 Mr. Kenny asked the Taoiseach if he will report on the implementation of the recommendations of the OECD report on regulatory reform; and if he will make a statement on the matter. [19904/02]
Ceisteanna – Questions. - Regulatory Reform.
Trevor Sargent
Ceist:2 Mr. Sargent asked the Taoiseach if he will report on the progress of implementing the recommendations of the OECD report on regulatory reform; and if he will make a statement on the matter. [22437/02]
Caoimhghín Ó Caoláin
Ceist:3 Caoimhghín Ó Caoláin asked the Taoiseach his views on the recommendations of the OECD report on regulatory reform; the position with regard to the report as far as the State is concerned; and if he will make a statement on the matter. [22438/02]
Denis Naughten
Ceist:4 Mr. Naughten asked the Taoiseach the recommendations in the OECD report on regulatory reform which have been implemented to date. [22450/02]
Pat Rabbitte
Ceist:5 Mr. Rabbitte asked the Taoiseach the progress made to date by the high level group on regulatory reform; and if he will make a statement on the matter. [22457/02]
Joe Higgins
Ceist:6 Mr. J. Higgins asked the Taoiseach his views on the recommendations of the OECD report on regulatory reform; the progress to date on the implementation of said recommendations; and if he will make a statement on the matter. [23552/02]
I propose to answer Questions Nos. 1 to 6, inclusive, together.
As I informed the House in my reply of 24 April, considerable progress has been made by the high level group on regulation since its establishment in May 2001 following publication of the OECD review on regulatory reform in Ireland. As I stated when the report was published, the Government was broadly in agreement with its overall findings and one of the tasks of the high level group was to test the validity of its recommendations in specific areas. The group has met 13 times to date and will shortly report to Government on progress.
The group has focused on two areas of work in particular. First, it has begun the process of framing a national policy statement on better regulation through the publication of the public consultation document, Towards Better Regulation. The consultation document, which I was pleased to launch in February of this year, was designed to highlight the key issues that are likely to feature in the national policy statement and to promote public debate and awareness in relation to better regulation. The consultation document sets out the key questions we need to address in considering why we regulate, what we need to regulate and new approaches to governance in a global economy. It is important to emphasise that this process is not about resolving micro-level regulatory issues or specific market problems, but about giving us a set of core principles to guide future regulation and policy making.
The consultation process was widely publicised in the media through Government websites, seminars and presentations. Approximately 4,000 copies of the consultation document were distributed and 89 submissions were received from a wide variety of interested parties. A full list of submissions is available on the Internet. To inform the subsequent formulation of the national policy statement, these submissions have been studied and analysed. My Department will shortly publish two papers, the first summarising the submissions received and the second offering an independent analysis and commentary on the submissions by an independent economist. A drafting group composed of officials from key Departments will meet shortly to commence preparation of a draft national policy statement. It is anticipated that the draft text of the policy statement will be submitted to the Government early next year with a view to publication before the end of June 2003.
The second priority of the high level group has been the development of a system of regulatory impact analysis as recommended by the OECD in its report. As Deputies may know, this is a systematic, rigorous assessment of proposed regulations before they are enacted. The introduction of RIA will help to improve the policy-making process and complement other regulatory reform initiatives with positive effects on the economy, on systems of governance and on the quality of the public service. At EU level, the European Commission has announced its intention to apply impact analysis to all its major proposals for draft directives on a phased basis from 2003, with full implementation by the end of 2004.
After examining a range of the RIA models used by other countries and taking account of developments at EU level, the group has proposed a model of regulatory impact analysis specifically suited to the Irish policy-making processes and structures. This model will be submitted to Government shortly with a view to piloting it in a small number of Departments in the first instance. This pilot phase will be an opportunity to refine the model and address practical issues, such as training, guidelines and supports.
The high level group on regulation has made significant progress since its establishment last year. I look forward to continued progress on the issue of better regulation as part of the overall process of public service modernisation.
The OECD report specifically refers to opening up the gas and electricity markets in Ireland. When the report was published, the Taoiseach correctly referred to it as a highly impressive and important document. However, the pace of deregulation is painstakingly slow. Does the Taoiseach accept that such slow progress has the potential to seriously undermine the economy, particularly in view of the recent publication of the world economic forum on competitiveness which states that Ireland's overall ranking in terms of competitiveness has fallen from 11th position in 2001 to 24th position in 2002? What is the Taoiseach's analysis of that? How does he propose to expedite deregulation in view of the critical importance of this report?
I accept Deputy Kenny's comments about regulatory control. We were privileged to be part of the OECD report because it chose only two countries a few years ago to become involved in it. We had not been involved in such work before. An enormous amount of effort was required by officials across Departments. It is better understood within the system. That report has now moved to the implementation phase. I have spelt out the action being taken. A number of areas were mentioned in the OECD report, such as gas, telecommunications, electricity, pharmacies, pubs and professional services. Each of those is moving on under the Departments and action is being taken. Some have moved further than others and Ministers have been answering questions on those.
While regulatory control is not the only issue, it is a very important one and I am convinced, having been involved in the discussions on the OECD report and having met the experts involved, that good regulatory reform and good regulatory impact analysis helps competitiveness. What we propose in legislation and decisions regarding changes we wish to make will be assessed according to regulatory impact analysis to ensure that regulation is meaningful. That is not to say that the process is against regulation, it is to ensure that if we do regulate, the effect is not simply to add a large cost to business. If the impact of regulation is to add a price tag, there has to be a good social reason behind it. I accept that we were slow to get into this area. We have never been involved in regulatory impact analysis and our legislation has traditionally been drafted on the basis of ignoring these kinds of issues. Perhaps it is not correct to say it never dawned on people, but it was certainly never part of the process in the way it is now. I am pressing this on and I am not here to defend against claims that we are being slow about it. We can move on with it and within the high level group I am pressing for the report to come to Government to be published this year and for the regulatory impact analysis to be produced early in the new year. I am also asking people in the Departments to get on and introduce this in their areas because it will have economic benefits.
Is the Taoiseach concerned that electricity generating capacity is almost at breaking point at peak times when the inability to deliver the service is potentially catastrophic economically? Given that European Union regulations do not allow for further development of power stations by the ESB, how is it proposed to introduce competition in a market that is significantly small in European terms? Is it proposed to privatise the ESB, or are reports of that untrue?
I do not wish to get into individual issues in individual areas. There is no proposal to privatise the ESB, though the Deputy knows there has been discussion about it for a number of years and analysis has been done. There is no immediate decision on that. In the past three years, the ESB has only been stretched on two or three occasions and the company is working to improve its grid. It is looking at wind power and other forms of generation where it sees significant potential for the future. It needs to improve investment in its grid and that is happening though I do not claim to have all the facts about it.
Regarding regulation, the ESB is pressing on with work on regulatory analysis, but the primary question for the company is one of infrastructure. It requires infrastructure to improve its grid because of the enormous growth in the economy. The capacity it must have now is far beyond what was believed would be the case previously, but that is being addressed and some of the investment proposals being examined are quite exciting.
Tá trí cheist agam don Taoiseach faoin ábhar seo.
Does the Taoiseach agree that regulatory reform is very much market led and can he address the need for regulatory reform which does not apply only to the financial cost, but to the environmental cost as well? Will the lesson of the tanker Prestige be learned and will the Taoiseach address the need for regulatory reform in the area of environmental protection?
Can the Taoiseach ensure there is a level playing pitch vis-à-vis the State funding that went into Moneypoint to connect it to the grid and the lack of State funding to connect offshore wind farms? If that is to be part of the regulatory reform will he ensure a level playing pitch between what practices were State funded then and what should be State funded now to maintain parity? Does he believe the Irish financial services regulatory authority will be truly independent when Dr. Liam O'Reilly, director general of the Central Bank, has been appointed as new chief executive and given that the Central Bank did not cover itself in glory regarding the Ansbacher scam and allowed the Minister for Finance, Deputy McCreevy, to run off with €610 million of its money?
Brevity please, Deputy.
Is it correct to say this will not be a fully independent body?
While I wish to keep to the areas for which I am responsible, the Deputy's last question is not one of them. Deputy Sargent will agree that if there is an open competition and a person from an agency is successful in that competition, just because he or she is from an agency that may have had a particular view should not in any way disqualify him or her. The agency is to be fully independent. It is pulling together two organisations that will be fully independent – a new one and the Central Bank that has been independent since 1946. The problem we usually hear about in the House is that it is a pity it is so independent. I do not think we can argue about that.
In his first question Deputy Sargent raised an important issue. The whole idea of regulation is not just about the costs and I agree totally with him. We are committed to better regulation. The idea is that it recognises the fact that State regulation is excessive in quantity or is an unnecessary burden on economic and social activity. The approach to regulatory reform adopted by the Government is, I hope, pragmatic and it is not based on either ideological preference for deregulation per se. Two reasons have been set out in all of the work done in preparation for the OECD work a few years ago – the OECD report Towards Better Governing and the paper that will now be presented. One is the better contribution which regulation can make to sustained economic growth and competitiveness in a non-inflationary way. The issue for us is that regulators are facing a different set of challenges than was the case in the recovery years. The economic challenges are related to capacity, infrastructure, competitiveness and counter-inflation to economic performance and it is not just an instrument for the market. All the work has been put it and that is not the intention. It is about providing a better service and a better society and environmental and other issues will be taken into account.
In terms of the economy, regulatory reform involves freeing up markets, making it easier to enter and exit, minimising regulatory burdens on business, entrepreneurship and promoting greater competition for the benefit of the consumer. The consumer is uppermost in the minds—
Prices are going up.
Hopefully not. That is not the case with the telecommunications regulator as prices have not gone up.
The price of electricity will go up.
Deputy Sargent, please.
It simplifies the regulatory environment, the trade environment and investment. The second one is public service modernisation. This is about the need to improve the way Government collects information, administers service and intervenes in social and economic life so there is transparency, accountability and accessibility in our public services. At best, the barriers created by poor regulation are frustrating and inhibiting. At worst, they can contribute to a loss of credibility and effectiveness in Government structures. They are the two reasons for regulatory reform going forward. This document was the outcome of a consultation process which has been widely used by consumer and investor groups and broader public opinion and it will affect what we do in the future. It is a slow process but it has worked well in other countries.
Is the Taoiseach concerned that the thrust of regulatory reform as set out by the OECD is almost entirely business-oriented and takes no heed of the social obligations of corporations? Is it not the reality that this puts trade and markets before democracy? That is one of the key concerns people will have about this. The OECD says that while Government regulations generally aim to achieve justified objectives in the areas of health, safety, environment and so on, they may distort international trade. Is this not a very negative model for the State to follow? Does the Taoiseach share my concern that this process is being driven by privatisation and the desire of multinational corporations to make profits regardless of the social and environmental costs? Will the Taoiseach tell us his position on the proposed privatisation of our State airline, Aer Lingus?
The Deputy is wandering from the question.
It is no different from any of the others addressed by Deputies Kenny and Sargent in terms of the ESB and so on. We are faced with what is potentially a major national scandal where the national airline, having come through difficult years, is again in profit.
The Deputy should ask a question.
I have asked the Taoiseach whether he agrees that this is the case and what his personal position is on what the Minister for Transport is currently pursuing.
I do not think that arises out of this question.
On the question generally, I do not disagree with the Deputy that the whole question of regulatory reform is driven by markets. The question I am answering relates to the work being carried out by a high level group within the Civil Service based on a report drawn up by officials across a range of Departments and OECD officials some years ago with a view to making markets more attractive and more efficient for consumers. It was very much driven by the consumer. For many years legislation was driven by whatever the purpose of the Act was, without reference to the consumer. Legislation was always built around what we were trying to do, whether in relation to gas, electricity or whatever. There was no reference to the consumer.
The high level group on regulation is trying to see where regulation makes sense and, where it does not, to see whether matters could be simplified. We should not go back to the old eastern European philosophy of complicating procedures. They should be streamlined as much as possible and the consumer should be taken fully into account and should have a say. That is our aim here. If Deputy Ó Caoláin does not want to do this, it means he is happy to have cartels in pharmacy, in professional life, in relation to liquor licences and in other areas. However, we want to get best value for money out of systems that are not over-complicated. We do not want to make life complicated for consumers and busi ness people. If there are simpler ways of doing things we should adopt them.
To answer the Taoiseach's question—
Allow the Taoiseach to answer.
The Taoiseach asked a question. All I am asking is that he consider the central proposition, which is the obligations of corporations.
It is not appropriate to interrupt when the Taoiseach is replying.
As I stated in reply to Deputy Sargent, the whole point of regulatory impact assessments is to see everybody's point of view and avoid over-bureaucratic systems of regulation. We must also make sure the consumer and those who have to operate the system are dealt with and that we do not have restrictive practices. Many members of the public want to start up some operation. In some areas we may not have enough regulation. The regulatory impact analysis does not say we should get rid of everything. It wants to look at each case and decide what is best practice.
Following what Deputy Kenny said with regard to electricity supply being virtually at breaking point, is the Taoiseach aware that many data centres in Dublin are requested to shut down at peak times because of the pressure on the electricity system? Will we see the opening up of regulation in regard to telecommunications and local loop unbundling? With regard to the regulatory impact analysis is there any analysis of existing regulations, for example in regard to agriculture, company law, health and the CSO? There is a huge burden put on small businesses in regard to paper work and bureaucracy in that area. Will the Taoiseach reform the existing legislation also?
Most of the issues raised by the Deputy arise in the OECD report which sets out what is happening in those areas. Individual Ministers will follow through. Before we get to the middle we must go to the start. As I pointed out we want to complete the national policy statement which comes directly from the OECD report and to get the regulatory impact analysis. We will have one of these before Christmas and the other after it. Both have generated a great deal of debate, these questions and recent written articles.
Deputy Naughten asked about updating the existing law. Legislation on statutory law revision is before this House or the Seanad. The statutory law revision unit has been working on improving the clarity, coherence and accessibility of statutory law – that is all our existing legislation and regulation. In other countries this is an important part of the regulatory reform process and statutory law revision accompanies and supports programmes of simplification. We have not done that since the foundation of the State.
The last Attorney General drafted a statutory law revision Bill and based on what a predecessor, Attorney General Mr. Gleeson, did on the technology aspect, it has been brought to the stage that when we pass this legislation we will be able to update present legislation and make simple changes. That will lead to better regulation and will be helpful to business. Not alone will we be able to update and consolidate legislation but we will be able to remove or simplify legislation. Rather than having to take ten Bills in the House to regulate gas, electricity etc. – in one area there are something like 33 Bills – this Bill will update, codify and remove fallen or cumbersome mechanisms from legislation. That will be helpful to practitioners in business, to accountants, to legal people and to consumer groups.
This high level group was set up in April or May 2001 with the promise that it would deliver its report within a year. Is there any reason it has not managed to do that? What is the Taoiseach's view of the multiplicity of regulatory authorities? Is the high level group looking at this issue and is there a case for a single regulatory authority? Does the Taoiseach think we need to develop expansive bureaucracies to support each regulator? This scenario seems to be emerging and I am not sure it is necessary. Is the high level group expected to report on the issue and does the Taoiseach agree that we could have a number of divisions of a regulatory authority – whether they are gas, telecommunications, electricity or airports – because the theory as to why regulation is necessary is the same, especially in monopolistic situations? When will the high level group report?
I will take the second question first. The group's two main functions are to look at the regulatory impact assessment and to develop a national policy. In devising a national policy, the question the Deputy raises is key – should we continue to have a separate regulator in each area and the necessary staff and infrastructure around each regulator? I do not want to pre-empt the report of the high level group but it has spent a great deal of time on it. For good reasons, a decision was made that, where the State was a shareholder – in part or whole – it should not also be the regulator. I can see the sense in that. The straight answer to the Deputy's question, is that we should not continue to have separate regulators in every area. Much of what a national strategy and regulatory impact analysis does in fixing rules, codes, prices or standards is what we should have always done. Down through the decades, in the normal course of work, we should have worked through the official system.
However, if we were to continue in this way, in every State service and agency there would be a separate regulatory system. I do not have a problem with a separate regulatory system. However, the Deputy suggests in his question that they could all be different departments in a regulatory system and that should be possible. Having a separate system where regulators become very important people is not a good idea. However, the whole focus is on that and we must work our way through it. There are probably areas which have a large workload and where it is not possible to divide them up, but there are not many. If we have a national system – which is the direction in which we are moving from the OECD where we had no system – and work to a proper regulatory impact analysis, which means that we set something up a system incorporating the proper rules, guidelines and codes, there should be no problem in the future.
I ask Deputy Rabbitte to accept that these are my views and are not necessarily shared by everyone in this debate. Otherwise, we would make the system almost a third system – we already have an Executive and Departments and now, 20 years on, we will end up with a regulatory department. I do not think that is desirable or good and it will cause problems down the road.
With regard to the first question raised, the report has been prepared in three phases, the first of which was on the work of the OECD. As the group prepared the report, it gave aspects of it like pharmacy, professional and other services, to individual Departments and Ministers are now working on it. The report will be with the Cabinet before Christmas. The group has not lost time, it is being independently worked on. The report concerns the areas to which I have referred and while the group is made up of people working in other areas, they are putting a huge amount of effort into this. We can get a flexible, user-friendly and appropriate system for the Irish context and we can do it quickly. While it may need primary legislation and, ultimately, secondary legislation, I hope that, within the next year, a great deal of progress can be made on this end of the work as well as what is going on in other Departments.
Is the Taoiseach saying the regulatory system is now up for grabs, following the report of the high level group, and that it might indeed be possible to look at a different configuration of regulation? Is he saying it would be possible to disestablish some of the regulators already in being? Will that not become more difficult the more time elapses, if it were considered desirable?
I am not saying that. Obviously, regulators are needed in certain areas, but there is a question as to whether they are needed in each separate area under a totally separate system. I am indicating that I do not think that is necessary. As Deputy Rabbitte will have noted, I said this originated from pressure on the State not to be both shareholder and regulator, not to be involved in price fixing or controlling all the issues. Out of this process, I believe we will get the first examination of this situation since moves were initiated in the past ten years in relation to regulators. In the first instance, we will hear what the committee has to say. We will also get a national system that fits the Irish context. In my view, the Irish context does not necessitate a separate system in every area because, as I outlined earlier, that approach would create many difficulties into the future.
I have spoken to experts from the ESB on this subject and they claim that private operators will not—
Has the Deputy a question?
Yes. Does the Taoiseach accept that private operators will not – indeed cannot – enter the market because they see electricity prices as being too low and that, therefore, privatisation will inevitably lead to a hike in prices for consumers?
Deputy Kenny's earlier comments answer that question – one can keep people out of the market because of low prices. We have to deal with the deficiencies of the system as the grid no longer has the capacity to cater for an economy which has doubled in the past decade or so. The reality is that a small country such as this, especially our regional areas, must have the capacity to take on new industries. For example new, modern industries such as the Wyeth plant represent an achievement which any country would be proud of and there will be many further such developments in the next five years in pharmaceuticals and other related plants. We must ensure we have the capacity to secure such industries. Although the new Abbott Laboratories plant in the west has a relatively small consumption of electricity compared to some other industries, it exceeds that of the rest of the county in which it is situated.
In moving forward in that context, we must be in a position to generate sufficient electricity and I fully support the concept of alternative energy sources. Over the past year or two, I have read numerous reports and seen videos on wind energy, including developments in Denmark where it is hoped to produce 15% to 20% of total electricity generation from wind power by 2007. There are also developments in Germany in that regard. I do not claim expert knowledge other than what I have read on this subject. However, if it is the case that the wind energy generation capacity of the Irish Sea is three times greater than that of other seas where that system is in operation and we only produce about 1% of our electricity from that source, there would appear to be enormous capacity for utilisation. The ESB is doing this but it also needs the private sector, which will not get involved if the return on the investment is not big enough. I do not think the State, either this year or even in a good year, would be able to do it. I am not advocating that we continue with our present electricity capacity but if we must have a large increase, as Deputy Kenny said, we should look at ways of doing it that are within the Kyoto pact and within what we have signed up to do. Wind power seems to be one of these.
I understand the heat wastage in electricity power generating stations is about the equivalent of 21 million barrels of oil every year. Is there any plan to reduce that heat wastage? Also, in the context of provision of electricity, proper regional development, spatial strategy and fair play for provincial Ireland, a stable supply of power for electricity generation is critical for the placement of industry. Does the Taoiseach share my view that the proper development of the Corrib field in accordance with due planning—
The Deputy is wandering a little from the second question.
—would be a very important element of capacity for electricity generation to aid Government objectives to meet proper regional development and balance?
Wastage of resources in any area is bad and inefficient. The question of Moneypoint and the technical issues which the Deputy has raised are obviously ones for the ESB and our technical people want to get beyond them. The second question, about BMW regions and rural Ireland generally, raises the important issue that the necessary capital programme and resources are available, in whatever form, for the ESB to upgrade and extend its grid so that the capacity will be available, particularly in regional areas, to attract industries. There is considerable potential to do this and if there is not telecommunications and power they will not be attracted. This is what we have to do and it is what the ESB infrastructural plans propose for the future. As to how we do that, the ESB is examining investment in wind power, which will greatly help its capacity.
Does the Taoiseach agree that in the case of the banking and the financial services sector more and better regulation, not less, including Government controls, is needed to properly address the exorbitant charges that banking and insurance companies are imposing on an ever more fleeced consumer base in this economy?
The new regulatory authority for the financial services sector will ensure there is better and tighter regulation because of the flow of money in the international domain and where that money comes from. All the regulations about money laundering and criminality in some parts of the world about the supply of money will be examined. Equally important are the changes that arose, not mentioning any institution because it would be wrong to do so, due to what happened in some institutions where consumers' interests were not protected. The new agency will have the power, control and ability to implement and improve regulation, particularly to protect the consumer. It was felt the Central Bank Act, 1946 did not give it such a remit. The agency had a job to do for the industry to ensure the good name of the country was protected in the financial derivatives and other markets but it did not include the consumer.
The new authority, however, has a consumer dimension and retains all the other aspects that have been mentioned. This is particularly important as a consequence of the enormous amounts of money that flow through our society, thankfully, as a result of the success of the IFSC over 15 years or so. The financial services sector has to be run to a high standard, as the huge amount of employment it provides will be undermined at international level if it is not. I assure the Deputy that the agency will ensure the sector will meet best practice, as a result of the legislation we have enacted.
The Green Party is thrilled that the Taoiseach is looking at videos and reading books about wind power. It is the most encouraging news I have heard since I came into this House. Does the Taoiseach agree that the regulator should give preferential treatment, in terms of how the transmission grid network is developed, to encourage the development of offshore services, particularly wind generation? The State backed the transmission connection when Moneypoint was being developed. Should the State take a positive and proactive role in supporting the transmission connections to offshore wind farms and other wind farms?
I do not want to take the job of the Minister for Communications, Marine and Natural Resources, but it is obvious the State has to take a position on this matter. I am sure the Deputy will agree with me that the ESB is unlikely to be able to provide the money and other resources necessary to complete this project and that private sector involvement will be needed. It seems to me, if all I read and hear is true, that this country has the potential not alone to generate a far higher proportion of the ESB's necessary capacity within the State, but also that we have the ability to export the energy we generate. I have read what the ESB and others have had to say about this matter and it is clear an opportunity exists. I am sure the Deputy is more familiar than I am with the report that makes a good case for increased use of wind power. In regard to regulation, all the reports states that if we are to have a good return, the present level of costs does not make it attractive enough. It seems this is one of the areas where we have to increase the costs for people to get in, so it can be made to work. As currently structured, we will not get the necessary level of investment. The experts in this field have to deal with that issue. I hope the Department takes a proactive view of the matter, as officials are also examining the reports I have mentioned.