Archive for the ‘SFIT’ Category

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Cable cars. Seriously.

October 17, 2012

There’s a consultation closing today on whether it’s a good idea to apply a reduced rate of VAT to cable cars.  This is because, under the arcane VAT rules (and why do we never talk about setting up a European Tax Simplification Office to simplify THOSE, eh??) cable cars might “count” as public transport – which is zero rated – but the individual cars “count” as the unit of measure and, typically, hold fewer than ten passengers, so “count” as individual vehicles rather than public transport.  And, because the EU won’t let countries introduce new zero rated categories for VAT, the best the government can offer by way of untangling this anomaly is to introduce a new 5% rate of VAT on cable car traffic.

Got that?

Well yes, it’ll go some way to ending an anomaly and will cost nothing, will do some good to Scottish ski lifts and tourists heading up the Great Orme, won’t do anyone any harm, so yes, let’s get on with it, right?

Hmmm.

Well first of all, the government’s ambition is to simplify tax, not make it more complicated, right?  And adding another exception rate band category to VAT will complicate, rather than simplify, the system as a whole.

Secondly, the government is committed (well, at least it was the last time I looked) to using better regulation tools in order to achieve better tax policy.  One of those tools is the tax impact assessment.

Yes.

Let’s look at that one for a bit, shall we?

Exchequer impact – negligible

Economic impact – negligible

Impact on individuals – depends whether the operators choose to pass on the VAT reduction or not.  (Are we taking bets???)

Equalities impact: “no equality groups have been identified as being impacted by this change”.  Uhuh.  Where, exactly, did we look?  I’m sorely tempted to put in a Freedom Of Information Act request for the data underlying this assertion, because I strongly suspect that there was a thought experiment that went something like:

  • “It won’t have an equality impact, will it?”
  • “Nah!”

But I may be being unnecessarily cynical – after all, how could you tell the difference between a bland statement based on real solid research and one based on airy nothing?  Let’s assume that this statement is factually based and simply flag up that maybe there’s something of a flaw in the system there, then, shall we?

Impact on businesses – Now this is the bit that interests me.

There are cable-suspended lifts within the five Scottish ski resorts, and in a further three skiing areas in England. In addition, there are cable-suspended lifts located elsewhere in England and Wales. The reduced rate will only apply to the small number of such systems where they are not subject to the exclusions mentioned in section 2, or covered by the existing zero rate.

Now I’m sorry, but wouldn’t you expect at some point there to be some mention of this?  And by “this” I mean the extraordinary Emirates Airline cable car linking Greenwich peninsula and the Royal Docks Olympics sites.

I mean, am I being just an old cynic in wondering whether this high profile high risk investment was the prime mover behind this “tweak” to the VAT rules?  I have no idea, genuinely – but then I’ve just read the consultation, and I really ought to, don’t you think?

Next there’s the impact on HMRC – negligible, right.

Finally other impacts.  Now, if you read this blog regularly you’ll know I have a bit of a Thing about small business and the government’s warm words about how they’ll “think small first” and how often that is simply ignored in practice.

Well here we say:

Small firms are likely to be affected by this change, and again, we would welcome feedback on the potential impact.

Aw, isn’t that nice?  Warm words again, welcoming our input.

Well, no it isn’t, actually!  This change was announced in the Budget, the legislation is attached to the consultation document, and it’s to become law in, presumably, next Spring.  As the condoc itself says

This consultation is being conducted in line with the Tax Consultation Framework. There are 5 stages to tax policy development:

Stage 1 Setting out objectives and identifying options.

Stage 2 Determining the best option and developing a framework for implementation including detailed policy design.

Stage 3 Drafting legislation to effect the proposed change.

Stage 4 Implementing and monitoring the change.

Stage 5 Reviewing and evaluating the change.

This consultation is taking place during stage 3 of the process.

So this isn’t an early-days “here’s a problem, let’s think how we can solve it” kind of consultation.  It’s a “this is the legislation: does it work in the way we think it does” final stage of policy development, the last stage before the thing goes live.

So at this point HMRC ought to bloody well know what the likely impact on small firms will be, and it shouldn’t have got this far without doing the work of finding out.

Similarly the impact assessment says:

Any policy change will also be tested against the list of possible impacts used in regulatory impact assessments. The full list of these “other impacts” is set out in Annex A of Overview of Tax Legislation and Rates available from http://www.hmrc.gov.uk/budget2012/ootlar.htm

The policy change “will be” tested?  When?  And what earthly use will it be when the change is a fait accompli?  Will the change encourage more people to use cable cars?  Will that encourage people to build more cable cars?  Are cable cars a sustainable form of transport?  So will changing the VAT rate that applies to them have some impact on carbon emissions?

I give up.

I do notice, however, that there’s a more than usually thorough section on evaluation and how and when the change will be evaluated.  Goodness.

I am cynical enough to think that there’s been some shift in the Whitehall Better Regulation methodology that has put a new emphasis on evaluation, at the same time as taking the foot off the pedal with respect to small firms.  I’ll be having a look at the next batch of tax impact assessments with more than usual interest to see if the evidence bears this out.

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Today’s round up

October 5, 2012

We have three consultations closing today.

Let’s start with The Use of Rebated Fuel for Gritting in Rural Areas.  OK then: there’s a kind of fuel (“red diesel”) used in farming etc which has a lower rate of fuel duty applied.  It’s dyed red so that it’s easy to see whether you’re using it or not. Got that?  Well…

In recent winters, during periods of extreme weather, HMRC have, by way of a temporary relaxation, allowed tractors being used to grit rural roads to use red diesel. HMRC is now considering whether to formalise this approach.

This looks so obviously sensible to me that I’m tempted to say, well, what the heck are you consulting about, then?  Just carry on being sensible and don’t muck about “formalising” it.  We’re supposed to want to simplify the tax regime, remember, and avoid unnecessary regulation?

But the consultation document is clearly written and, in particular, has the tax impact assessment written in a way I haven’t seen before, where they simply answer the seven questions involved:

What are you doing?

Why are you doing it?

Why are you doing it this way?

What will it raise?

What will it cost customers?

What will it cost the public sector?

What are the other impacts?

as a readable narrative that actually makes sense.  Bravo!  Here’s the answer I sent:

I’m not responding to your list of specific consultation questions because I neither drive, use red diesel nor live in a rural community. That said, as a citizen stakeholder with a particular interest in consultations, I think this consultation asks the right questions of the right people and I applaud the decision to make its existence public rather than conducting it “informally” without bringing it to the attention of the wider public.

My personal response would be that neither legislation nor any other form of regulation of this is necessary and you should continue to operate under HMRC’s powers to manage the tax system. However if there are any unintended consequences (which I see you are seeking to assess in your final three questions) then perhaps you could proceed by way of an extra statutory concession, if you’re still creating new ones, so it’s clear under what circumstances you’d expect to see it operate.

Kudos to the team involved.  Next!

Well, next we have Inheritance Tax: Simplifying Charges on Trusts Now, see, I have problems with the underlying concept of this.  Because it seems to be all about making life simpler for people who have stuck their assets into a trust in order to avoid (legally) the full weight of inheritance tax.  Remember, in spite of what the Daily Mail and the other tabloids would have you believe, inheritance tax doesn’t affect most of us – you have to leave £325,000 before your estate has to pay anything at all and most of us outside London have houses worth less than that.  And, don’t forget, a married couple gets twice that, because the nil rate band is per person, so houses up to 650k are safe from the taxman.  And, don’t forget as well, that YOU don’t pay inheritance tax, your estate does – and, as I personally don’t believe in inherited wealth – I can’t really see the panic that sets in when people with a couple of million contemplate the possibility of forty per cent of it going back to the public purse after their death as being particularly, well, serious.

So trusts are used to avoid it, and there are rules to stop everyone putting everything into trust, so you have to pay a charge when you put the asset into the trust and then every tenth year after that – and this consultation is about whether it’s possible to simplify the calculation of the charge.

Hmmm.  It’d be a lot simpler to charge a flat rate 20% on entry and then 10% every ten years.  Let’s do that, eh?  No?

Well it’s true that I don’t know enough about trusts and how they work to make any useful contribution to the discussion on this – the problem is, that I don’t trust anyone who does to have the interests of the taxpaying citizenry as a whole in mind rather than the narrow interests of those rich enough to exercise the privilege of tax planning.

Here’s what I sent anyway.

Can I first of all say that I believe that this consultation needs to balance the interests of the wider taxpaying population against the narrow interest of those wealthy enough to exercise the privilege of tax planning via trusts. As one of the former rather than the latter, I’m very much against any simplification which gives a relaxation of the regime. To that end I’d be in favour of achieving simplicity by making the tax charge on entry into a trust a flat rate 20% and keeping the exit and periodic charges at the same rate but without any adjustments for reliefs or historic values or other adjustments. In other words, simplify the whole regime so that any distribution is charged at the same flat rate (whether capital or revenue) and the periodic and exit charges are also flat rate on the current asset value. Presumably calculating what this flat rate should be to arrive at roughly the same charge as if the trust did not exist would be do-able? If trusts are entered into for legitimate, non-tax reasons then a result which gives roughly the same result as you would get without the trust is eminently reasonable. And if trusts are entered into for tax planning reasons… why on earth is it a legitimate object of policy to facilitate legal avoidance?

Finally, your tax impact assessment says you have no evidence to suggest the measure will have any adverse equalities impacts: I cannot agree. You say there are only some 900 trusts affected by ten yearly or exit charge calculations each year. You have not given due consideration to equality if you have not considered the privilege accorded to these 900 taxpayers in contrast to the treatment of the rest of the population.

And finally, we have the technical consultation on Delivering a cap on income tax relief.  This, you will remember, is the proposal to stop rich people claiming all the reliefs that exist (on their investments in start up companies, for example) so that they reduce their income down to nothing and pay no tax for the year.  There was a bit of a furore over the inclusion of charitable donations in this and the proposal has now been revised to exclude charitable giving from the cap.  This seems fairly reasonable to me, although I would point out that in a democracy we have this thing called a government, which we elect, which is charged with collecting a contribution from everyone and then deciding on where the priority areas for spending are – the NHS or the army?  Street cleaning or child support?  The arts or sciences?  Bread or roses?  Allowing millionaires to opt out of this and decide to fund their own priorities is… well, Not Cool.

Nevertheless, I haven’t really got anything to add to the actual consultation, per se.  The impact assessment is really good, too, until you get to the end…  well, anyway, here’s what I sent to them.

Since this is a technical consultation I find I don’t have any useful insights to contribute in response to the specific questions on page 16 of the condoc. However I have a few comments in response to your final question, on the tax impact assessment.

I thought the TIA was exemplary in its clarity, particularly in the impact on individuals and households and in the consideration of equalities impacts. Well done.

However I think I might have to take issue with your assessment of the possible impacts on small businesses. I’m not clear from the consultation document how many of the reliefs now to be capped are designed to enable the funding of start up enterprises which are likely to come into the category of “small”. The section on “other impacts” in the TIA rather glosses over any substantive analysis of the effect on small firms and I wonder whether you have done any proactive consultation (with small firms who have benefited from early trade losses reliefs or qualifying loan interest relief, for example?) to make sure these proposals won’t have any unintended consequences. In an era where we are constantly being told we are in such a financial crisis that benefits, pensions and public sector salaries need to be frozen or cut and that austerity plus growth is the only policy that will save us, I would find it very strange if the proposal were to be legislated without some clearer assurance that this change will not impact negatively on growth by impacting on the flow of finance to start ups.

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Citizens are stakeholders. Discuss.

September 7, 2012

I have blogged before that I think there’s something fundamentally awry in the tax consultation process.  While it’s entirely laudable that the government wants to make tax changes in a considered way, taking account of the views of people who know about the subject, I think they need to look again at Tax Policy Making: A New Approach and be explicit with us.  There’s little or no debate on the Finance Bill any more, partly because all the supposed kinks in the wording have been worked out in the consultation process – but then that means there’s little or no input from MPs in their capacity as representatives of the Ordinary Citizen – or their capacity as stakeholders for Great Britain’s fiscal and economic health and welfare.  So is the point of the New Approach just to give those affected by a tax – the people who will pay it – a chance to say something about how it’s designed?  Or is it also intended to give those affected by the outcome of a tax – the people who pay their own taxes and who rely on the tax base to provide them with the common services the country uses tax receipts to provide, but who may not pay this particular tax?  Bluntly, are we trying to crowd-source (free of charge) the paid work that policy-making civil servants in the Treasury and HMRC used to do?  And are we doing so by asking the turkeys how to administer Christmas?

So I’m replying to all the tax consultations I can, even the ones where I’m not invited to do so – because I believe that the citizen is a stakeholder in all these matters.  And the other consultation which closed yesterday, the consultation on Life Insurance: Qualifying Policies said it only wanted to hear from “Insurance companies, Friendly Societies and Advisers involved in the sale or management of Qualifying Life Insurance Policies”.  Tough.

Here’s what I sent:

This is an individual’s response and will be posted, with commentary, on my blog, http://tiintax.com

You say that the people who should read the consultation are “Insurance companies, Friendly Societies and Advisers involved in the sale or management of Qualifying Life Insurance Policies”. I believe that the government’s intention in Tax Policy Making: A New Approach was to establish a methodology for making good tax policy which included consultation as its key element, and as a matter of principle I believe that all citizens are stakeholders in the design and operation of the tax system and therefore have a stakeholding in its development.

I have concentrated on the tax impact assessment as the best way of understanding the expected outcomes of the policy change and I see that the measure is expected to have a negligible impact on the exchequer and on the wider economy and I wonder therefore what the scale of the problem identified – of life insurance being used as a tax exempt savings vehicle – might be and whether it is cost effective to legislate. It seems very strange that, at this stage in the consultation process, you are not able to give a ball park figure of the kind of tax loss you are looking to stem and it is hard to see a justification for the enactment of legislation without this.

I also see that there is expected to be a “relatively small number” of individuals and households affected but no indication is given of how these investors fall on the spectrum of protected characteristics under the equality legislation. Is this a type of investment with a broad spread of investors where the closure of the opportunity to invest and gain higher rate tax relief will impact across the board or is it used primarily by any particular group? I am surprised you feel you have given due regard to equality issues without this information, particularly since the number of providers seems small enough that I would have expected there to be little difficulty in having or obtaining good quality information.

Nor am I at all clear what you think the impact will be on small firms. You admit there will be several providers who are small firms within the meaning of the government’s small firms impact test – have you held specific discussions with them on whether their customers are more or less likely to make use of the proposed limit? I’m not at all clear from the tax impact assessment therefore that the case for legislation is made.

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This is not a consultation

September 3, 2012

There was another consultation which closed last week, on the Office of Tax Simplification’s proposal that there should be a “disincorporation relief”.  This is aimed at the one and two person businesses which were advised by their accountants to form themselves into companies to take advantage of the lower rate of corporation tax and who now find themselves mired in the red tape of running a company and would like to get out of it.

It’s a worthy idea, I’m sure – but a damn fool way of legislating it.  If you want to ascertain the views of small businesses, you don’t find out by sticking a formal consultation document onto the HMRC website.  You might just as well put the condoc in the bottom drawer of a filing cabinet in a disused basement office marked “beware of the leopard”.

Here’s what I sent, although I made a mistake in the third paragraph where I said that the audience for the consultation wasn’t specified – the desired consultees are in fact listed in 1.4:

The Government is interested in views from a range of audiences, including individual businesses and their representatives, as part of this consultation. It is also interested in views from insolvency practitioners reflecting the links to the Companies Act.

But then, since my email (sent to the address cut and pasted from the condoc) never actually reached its destination as the address is “not found”, it probably doesn’t make much difference either way.

Delivery to the following recipient failed permanently:

disincorporation@hmtreasury.gov.uk

Technical details of permanent failure:
DNS Error: Domain name not found

So, waves hopefully to HM Treasury, (you DID pay your broadband bill this month, right?) and…

This is an individual’s response and will also be published in due course, with commentary, on my blog, http://tiintax.com.

I’m afraid I’m completely confused by this consultation. You say in chapter 7 (7.2) that “the consultation is a call for evidence regarding how to help small companies disincorporate”, but I cannot see how you are going to acquire such evidence. The consultation is written in a technical register suitable for communicating with fellow tax professionals and not in the plain English you would use to communicate effectively with micro businesses.

You do not specify at what readership the consultation is aimed, but you appear only to have published it on the government website where – if you’ll forgive me – it’s only likely to be read by “the usual suspects” – professional and interest groups (I am attempting to respond to all the government’s tax consultations as part of a blog project so would include myself in the “interest group” category here). But what you’re not going to do, is reach the small businesses who would be affected by any disincorporation relief.

Given the costs involved (both for the government and for professional and interest groups) in conducting a proper consultation exercise I have to say that I feel this initial stage of consultation would have been better served by an alternative methodology such as the government’s own Small Firms Impact Test. I would be interested to learn whether any such group was in fact convened?

As I said, this isn’t a consultation, this is box-ticking.

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Regulated justice

August 14, 2012

You might be remember that I blogged a while ago about the changes to legal aid and suggested the new regulations might be vulnerable to judicial review because the MoJ hadn’t dotted the “i”s and crossed the “t”s in passing the regulations, in both the impact assessment (of the enabling legislation) and SFIT (the conclusion that the specific reg wouldn’t impact on small firms, when the IA to the enabling legislation clearly says that it does).

I mentioned I was trying to track down the Regulatory Policy Committee’s independent assessment of quality of the IA for the enabling legislation (The Legal Aid, Sentencing and Punishment of Offenders Act 2012).  The RPC secretariat told me I would have to ask the MoJ.  The MoJ sent me this letter in response to an FoI request for sight of the Opinion.

Freedom of Information Request 

Dear Ms Bradley

Thank you for your email of 20 July 2012, in which you asked for the following information from the Ministry of Justice (MoJ):

  • I am seeking the Regulatory Policy Committee’s opinion on the Impact Assessment no MoJ088 entitled “Central Funds”. 

I understand that you did not receive an acknowledgement letter to your request, please accept my apologies this was due to an administrative error within the department.

Your request has been handled under the Freedom of Information Act 2000 (FOIA).

I have searched the MoJ’s correspondence system and I can confirm that the Ministry of Justice (MoJ) does not hold the information that you have requested.

However, I can confirm that the Regulatory Policy Committee’s (RPC) opinion was not required on the Impact Assessment in your request as the policy did not amount to regulation.

You can find out more about information held for the purposes of the Act by reading some guidance points we consider when processing a request for information, attached at the end of this letter.

You can also find more information by reading the full text of the Act, available at http://www.legislation.gov.uk/ukpga/2000/36/contents and further guidance http://www.justice.gov.uk/guidance/foi-step-by-step.htm

You have the right to appeal our decision if you think it is incorrect. Details can be found in the ‘How to Appeal’ section attached at the end of this letter.

Yours sincerely

So the response is – there isn’t one, because it *isn’t a regulation*!!!

Um…

The coalition actually defined regulation when they started regulating the way regulations are made: the definition is at annex A (bottom of page 19) in the impact assessment guidance:

Definition of Regulation
A rule with which failure to comply would result in coming into conflict with the law or being ineligible for funding and other applied for schemes. This includes: EU regulations; Acts of Parliament; Statutory Instruments; rules, orders, schemes, regulations etc. made under statutory powers by Ministers or agencies; licences and permits issued under Government authority; codes of practice with statutory force; guidance with statutory force; codes of practice, guidance, self-regulation, partnership agreements with Government backing; approved codes of practice; bye-laws made by Government.

so… legislation that requires that the Lord Chancellor “must secure that legal aid is made available” doesn’t put him into conflict with the law if he fails to comply?

See, this is why I was a Civil Servant and not a barrister!

The only get out clause I can think of is that the Act isn’t published with an impact assessment, and the impact assessment isn’t connected specifically with the Act – the connection comes from the Explanatory Memorandum to the Statutory Instrument (The Costs in Criminal Cases (General)(Amendment) Regulations 2012) which says

10. Impact

10.1 The impact on business, charities or voluntary bodies was set out in the final Impact Assessment that was published with the Legal Aid, Sentencing and Punishment of Offenders Act 2012 which can be found at http://www.justice.gov.uk/downloads/legislation/bills-acts/legal-aid-sentencing/ia-central- funds.pdf

Maybe the MoJ have deluded themselves that publishing an impact assesssment at round about the same time as a piece of legislation covers them in case someone says “where’s the impact assessment” but doesn’t oblige them to take into account any of the rules around what an impact assessment is supposed to contain or how the legislative process is supposed to be governed?  I don’t know.  But if some stroppy legal aid lawyers would care to arrange a judicial review of the regulations I’d love to be in the public gallery.  With popcorn!

Seriously, when the coalition took over with its brave new world of deregulation and cost cutting and asked serving civil servants for their suggestions I made a serious suggestion that they should abolish my job (at the time) and the jobs of all the people working in Better Regulation teams across Whitehall and simply let the legislative process take its course.  The requirement to publish an impact assessment and to conduct a small firms impact test, where appropriate, is enshrined in Statutory Instrument Practice, the bible of how to make regulations (well, it wasn’t in the actual SIP last time I had access to a copy, because it hadn’t been updated for… well, that’s a whole other story, but it was there in one of the supplements).

So MPs ought to know, when they debate a bill (or at least when they let a Statutory Instrument go by on the nod) that it should have an impact assessment and it should tell you what its impact will be on small firms in the EM.

Let them ask questions in Parliament if they aren’t happy with the quality of the legislation they’re getting put in front of them.  Because so far as I can see, all the mechanisms they’ve put in place to raise legislative quality have become mechanisms for explaining why – although it’s a jolly good idea, Minister – it doesn’t actually, you know, apply in this case…

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Response on behalf of Mark Prisk. Sort of.

July 20, 2012

You may remember that, on 26 June, I published an Open Letter To Mark Prisk about the small firms impact test, in which I wondered whether he actually knew that such a thing existed, and that he was the Minister responsible for it.  I suggested that he ask his officials to arrange for him to sit in on the next SFIT focus group that was organised, and that he might find it was a long time in coming.

Because I thought it was only polite, as well as publishing it as an open letter I also sent him a copy via his Department, BIS, the Department for Business, Innovation and Skills.  Here is the reply I received yesterday

Dear Ms Bradley

Thank you for your e-mail of 26 June to Mark Prisk about Impact Assessments and the Small Firms Impact Test. I have been asked to reply and I apologise for the delaying in replying to you.

I was very interested to read your perspectives on the SFIT – and indeed other aspects of regulatory and tax appraisal mentioned on your website. As you will be aware from your previous career, assessing the impact of new regulatory proposals on small firms is not straightforward, and we are always looking to improve our approach both domestically and in the EU. I am sure that the independent scrutiny of IAs through the Regulatory Policy Committee should in the medium term help drive up the quality of appraisal. We are of course always interested in new research or initiatives in this area that would be helpful in improving how things work in the future.

You’ll also be aware that aside from appraisal the Government has taken a number of other actions to minimise new regulatory burdens on small business, including the micro-business moratorium and parallel initiatives at the EU level.

Many thanks again for your email. I hope the new novel is also making good progress.

Yours Sincerely

Well, let’s look at the work of the Regulatory Policy Committee for a moment then.  Their latest report (which covers the calendar year 2011) is published here (although you may find that the link on their website doesn’t actually work but you can get at it via google).  And a quick word search of the document (no, I’m not claiming to have speed read all 63 pages, sorry) finds no entries for the terms “small firms impact”, “small firms” or “SFIT”.  The RPC’s own website explains that

The RPC assesses impact assessments against well established guidance set out by the BRE IA Guidance, IA Toolkit, One-in, One-out Methodology, and HM Treasury’s Green Book.

and we all know that the SFIT – the small firms impact test – is a mandatory part of the “well established guidance” – you can find it in the IA toolkit, with a link to the BIS page here.

Does the RPC think that checking whether impact assessments contain a reasonable assessment of the impact on small firms is part of their remit?  I’d be interested to know.

 

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Self defence?

July 19, 2012

I am grateful to Ian Brownhill for his article on the Justice Gap blog with the news that the government is changing what happens if you are accused of a crime.  From this autumn, if you are accused and found innocent, you will no longer be able to claim reasonable costs of your defence but only an amount equivalent to the amount which would have been paid out if you’d been on legal aid.  So no fancy forensic work and no high profile barrister and you might at some point have to make a Sophie’s Choice between keeping your house and keeping out of prison.

Where does this come from?  The legislation is in The Costs in Criminal Cases (General)(Amendment) Regulations 2012.  So, yes, I thought I’d have a look for the impact assessment.  And, no, there isn’t one.  This is what the Explanatory Memorandum says:

10.1 The impact on business, charities or voluntary bodies was set out in the final Impact Assessment that was published with the Legal Aid, Sentencing and Punishment of Offenders Act 2012 which can be found at www.justice.gov.uk/downloads/legislation/bills-acts/legal-aid-sentencing/ia-central- funds.pdf

OK, so there’s no impact assessment for this particular statutory instrument, but the impacts were taken into account in the IA for the enabling legislation.

Let’s look there, then.

What is the problem under consideration?  Why is government intervention necessary? Individuals who are found not guilty (or acquitted) in criminal cases and who have paid privately for their defence may have their expenses reimbursed, including legal costs, from central funds.  The central funds budget is a Ministry of Justice budget.  The problem under consideration is that central funds spending has exceeded its set budget, which cannot be extended because of the Government’s fiscal deficit reduction objectives.  Government intervention is required to maintain central funds within budget.

All right, that’s plain enough.  There’s no more money.  The budget is fixed.  The problem is how to stay within a fixed budget with a fluctuating and presumably increasing set of costs.

The impact assessment should then go on to consider the options available to meet that objective. (para 58 of the IA toolkit:)

it is Government policy to regulate only as a last resort, having demonstrated that satisfactory outcomes cannot be achieved by alternatives, self-regulatory or non- regulatory approaches. These options should be considered during this step.

What do we think?  “The government should give them more money” is one obvious option that’s ruled out by the way the question is framed; what we’re looking at is ways to stay within the set budget limit.  Well what about using money that we get from elsewhere?  Fines and penalties, for example?  There was a spare 59.5 million from the Barclays fine that was only going to be used to lower the fees the other bankers paid for self-regulation, as I recall – couldn’t we use that?

The impact assessment doesn’t contain any options other than cap the fees or do nothing.  Hmmmm.

It also suggests that the amount to be raised by making the change is about fifty million a year – hey, Barclays could pay for this year and we could set a higher budget next year?  No??  Just a thought!

Legal Aid Clients and Providers: An estimated loss of up to £50m in nominal cash from central funds payments. £10m of this is from companies being excluded from central funds on the basis that they might be able to buy insurance. £40m is from paying only legal aid remuneration rates. The burden would be shared between providers and clients depending on whether clients choose to pay their provider over and above legal aid rates.

All right then – this is the important bit.  The change means that companies can’t claim back their expenses any more but are expected to have (or obtain) insurance, which saves around £10m a year.  The remaining £40m is shared between providers and clients.  Track that thought, it’s important.

Because impact assessments are all about the impact on businesses.  The theory is that if the state makes you and me fill in a form on a Sunday afternoon, well, we’re annoyed but we haven’t lost anything financially.  But if the state makes a business fill in a particular form, then – the theory goes – the business has suffered an “administrative burden” – has been forced to pay someone to spend some time doing something that doesn’t earn them profits.

And that’s why impact assessments are all about the costs and benefits to business – you and I, as citizens, may think that it’s unconscionable that we wouldn’t be reimbursed our legal fees were we to be falsely accused of something but, in Impact Assessment terms, that doesn’t matter.  What does matter here, I think, is that the government hasn’t followed its own rules.

Part of the impact assessment, as I’ve said before, is to look at the impact on small businesses.

Now, it says clearly that the burden of this change will fall on both “clients and providers” – both the people wrongly accused and the people who defend them.  The people who defend them who might be solicitors or barristers, in small or large firms.

Because what is a “small firm” for the purposes of the small firms impact test?  It’s a firm with fewer than 20 employees.  Not partners, not members; employees.

How many solicitors are in small firms within that definition?  I don’t know, but I’d suspect a large number.  How many barristers?  I don’t know, but I’d suspect nearly all of them.  And the government has made this regulatory change without taking that into consideration.

Look at clauses 56-60 on the impact assessment for the main legislation.  Most of it is about the removal of repayment provisions for companies accused of wrongdoing: the only consideration of small firms who are legal services providers is in paragraph 60:

Small firms which are legal services providers may be affected by these proposals if their income and/or levels of business is lower in future.

Well big hairy woo – how many of them might be affected and in what way?  We don’t know and we don’t care, seemingly.  But look again at the explanatory memorandum to the actual SI making the change:

11. Regulating small business

11.1 The legislation does not apply to small business.

I put it to you that this is nonsense.  The statutory instrument fixes “the amount to be paid to the accused”: how many wrongly accused people are also small business owners (one man or “micro businesses” in the jargon)?  We don’t know, and MoJ doesn’t care.  How much of the impact of this change will affect legal services providers who are also small businesses?  Again, we don’t know, and MoJ doesn’t care.

Yes, I agree, I’m finding a piece of legislation I don’t like and trying to find a way of overturning it on a technicality.  But for heaven’s sake, the government makes these rules to regulate its own conduct, because it knows that some of its members and servants think it appropriate to say “Yes, Minister” when they ought to be saying “are you sure, Minister?”

One final thought.  I had a not tremendously helpful response from BIS to my Open Letter to Mark Prisk on the subject of the small firms impact test.  It tells me that “independent scrutiny of IAs through the Regulatory Policy Committee” ought to drive up the quality of IAs in the medium term.  I did look on the RPC site for their opinion on the Central Funds IA but couldn’t find it, and to date they haven’t answered my phone message or email asking them for  a link.  But if you look here, at their last annual report, and turn to pages 60-62, you’ll see the MoJ has a less than stellar record of having not one impact assessment scored as “green” on the RPC’s red/amber/green ratings grid at its first attempt, and it only managed to get two of its twenty eight listed IAs through the “green” hurdle on the second attempt.  Maybe a nice little judicial review of whether this legislation should be sent back and its impact on small firms given proper consideration might encourage them to pay more attention in future?