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Administrative costs
- Issue
- EU model for assessing administrative costs of new initiatives
- Measuring administrative costs and reducing administrative burdens
Implementing regulations and laws entails costs. Some costs are linked to legal obligations to provide information either to public or private parties. They are called administrative costs.
Some legal obligations to provide information have become needlessly time-consuming, excessively complicated or useless. Unnecessary and disproportionate administrative costs may hamper economic activity and/or irritate business, citizens and public authorities. By reducing unnecessary reporting requirements businesses can spend more time on their core activities which may reduce production costs and allow additional investment and innovation, which in turn should improve productivity and overall competitiveness.
The Commission introduced in 2006 a distinction between administrative costs and administrative burdens: the latter designate costs specifically linked to information that businesses would not collect and provide in the absence of a legal obligation.
The Commission's Better Regulation strategy is aimed at measuring administrative costs and reducing administrative burdens. According to estimates it would be feasible to reduce administrative costs by as much as 25% by 2012. This would have a significant economic impact on EU economy - an increase in the level of GDP of about 1.5% or around € 150 billion.
Nevertheless, the EU approach to better regulation needs to take into account the overall benefits and costs of EU rules. Information requirements are sometimes necessary, for example, in ensuring consumer, health and environmental protection. It is a question of ensuring a proper balance where administrative burdens are proportionate to the benefits they bring.
EU model for assessing administrative costs of new initiatives
In 2005, the Commission proposed a common EU methodology for measuring administrative costs imposed by legislation - both existing and planned legislation. This methodology is based on the Standard Cost Model applied in several Member States. Adapted to EU needs and resources, this “EU Standard Cost Model” takes into account the fact that EU legislation often replaces 27 different national legislations and thus decreases operating costs at EU level. The Commission has developped the EU model with the help of the High level group of national experts on better regulation.
The benefits of the EU Standard Cost Model include:
- bringing clarity about possible differences in procedures followed by the EU institutions and different Member States;
- facilitating cross-country or cross-policy area comparisons, benchmarking and the development of best practices;
- offering economies of scale in terms of data collection and validation.
An operational manual for applying the EU model has been integrated in the Commission's Impact Assessment Guidelines.
Measuring administrative costs and reducing administrative burdens
In January 2007, the Commission presented a programme for measuring administrative costs arising from legislation in the EU and reducing administrative burdens by 25% by 2012.
In March 2007, the European Council endorsed this Action Programme for Reducing Administrative Burdens and invited the Commission to launch it with the assistance of the Member States. The European Council also invited Member States to set their own national targets of comparable ambition within their spheres of competence by 2008.
The reduction programme is based on an extensive measurement exercise which focuses on a list of legislative and executive acts in 13 priority areas.
In the meantime, the Commission will propose and/or adopt concrete reduction measures for immediate action. In spring 2007, it adopted 10 such fast-track initiatives and more are planned to follow.
In November 2007, the Commission set up a high level expert group on the reduction of administrative burdens to advice it on the implementation of the Action Programme with a three-year mandate.
The 15 members of the Group have first hand experience in Better Regulation and cover the 13 policy areas in which administrative costs are being measured. The group includes the leaders of several bodies charged with fighting red tape at Member State level, representatives from the industry, small and medium sized entreprises (SMEs), trade unions as well as environmental and consumer organisations.
More information, including the group's mandate, is available at DG Enterprise and Industry website.
Detailed results are provided in the Action Programme for Reducing Administrative Burdens in the EU Final Report.
Key consideration
The European Commission proposed in 2007 an ambitious strategy to reduce by 25% administrative burdens in EU law, a target fully achieved in 2012. Commission proposals pending before the EU legislators may still achieve a further 5% reduction.
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