Benchmarking regulatory burdens

1. Benchmarking regulatory burdens Roundtable11-12 December 2006

2. Session 1 Background to benchmarking regulatory burdens

3. Background:What were we asked to do? • Conduct a feasibility study (Stage 1) • to develop feasible performance indicators and options for benchmarking regulatory burdens on business • Subject to COAG consideration, proceed to an implementation study (Stage 2)

4. Background:Why benchmark regulatory burdens? • Benchmarking to improve regulatory regimes • understanding nature and size of burdens leading to: • yardstick competition • greater accountability and transparency • continual improvement • Reducing unnecessary burdens could improve economic performance

5. Background:What could be benchmarked? • Benchmark regulatory burdens associated with: • becoming and being a business (licensing and reporting) • doing business (obtaining approvals) • doing business interstate • Benchmark regulatory environment • changes to stock of regulation over time • quality of design, administration and enforcement • benchmark against policy targets and monitor reform progress

6. Background:What cannot be done? • Construct a ‘meta’ indicator of overall performance • too complex and subjective • Estimate aggregate compliance costs for a regulation or industry • indicators of direct incremental cost unavailable • incidence of regulation not always known • Benchmark economic costs of regulation • counter-factual usually unknown

7. Background:What do the studies tell us? • Few examples of regulation benchmarking • not directly applicable to Commission study, but do provide some insights • Key insights • benchmarking regulatory burdens is feasible • importance of making assumptions and caveats explicit • basis for inter-jurisdictional comparison required (‘reference business’) • subjecting information and data to robustness tests

8. Background:What are administrative compliance costs?

9. Background:How might the data be collected? • Different approaches to suit the circumstances • surveys, case studies, use of existing records • Reference business approach will be prominent • businesses with standardised characteristics (size, industry) • cost-effective, focussed, and comparable • Not a statistically representative sample • non-probability, judgemental sampling of a limited number of businesses

10. Session 2 Benchmarking regulatory compliance costs

11. Becoming and being a business:Which regulations? • Regulations that require licences, permits and registrations • State taxes • Commonwealth taxes over time • OHS • covering safety plans and incident reporting • distinction between prescriptive and performance-based compliance

12. Becoming and being a business:What are the objectives? • Reveal existence and source of any unnecessary burdens for regulation with common objectives • after adjusting for any activities justified by a specific regulatory objective and benefit • Monitor changes over time

13. Becoming and being a business:Which burdens? • Administrative compliance activities required by regulation • involving one-off, recurring and ongoing costs • Includes certain non-paperwork costs

14. Becoming and being a business:Which indicators? • Administrative compliance costs • price x time x quantity + other non-paperwork costs • indirect measures • businesses assumed to be ‘normally efficient’ and fully complying • Compliance complexity • proxies for cost

15. Becoming and being a business:How would indicators be measured? • Face-to-face interviews • SCM and BCC used • Reference businesses • range of reference business sizes to account for any differences in activity costs

16. Doing business:Which regulations? • Regulations requiring approvals and setting out approval processes • State and local government • Australian Government

17. Doing business:What are the objectives? • Reveal existence and source of any unnecessary burdens for approval processes • with common objectives and similar complexity • Identify opportunities to improve processes • Monitor changes over time

18. Doing business:Which burdens? • Delays and uncertainty which can result in capital holding costs • Administrative compliance activities associated with the approval process

19. Doing business:Which indicators? • Measures of timeliness and certainty • Contextual information • which could also be used as indicators • Administrative compliance cost indicators • Choice of indicators to depend on the regulation • Indicators should not be interpreted in isolation of the other indicators

20. Doing business:How would indicators be measured? • Use existing government data collections as far as possible • to minimise burden on government • Information collected for reference activities • Provide criteria for indicators involving subjective assessment by experts

21. Doing business interstate:Which regulations? • Areas of regulation where governments have agreed a national approach would reduce regulatory burden, for example: • occupational health and safety (OHS) • personal property securities • consumer product safety • Other areas of regulation could be benchmarked for similar reasons

22. Doing business interstate:What are the objectives? • Reveal existence and source of any unnecessary burdens for interstate business or trade • Identify opportunities for greater harmonisation • Monitor changes over time

23. Doing business interstate:Which burdens? • Administrative compliance activities that arise because of regulatory duplication and inconsistency across jurisdictions • Other economic costs would be excluded from the benchmarking • such costs might be considered in choosing area to benchmark

24. Doing business interstate:Which indicators? • Number of duplicate or inconsistent requirements, depending on area of regulation • ‘Notional’ business as the basis of comparison • Proportions out of total compliance requirements • compliance ‘inflator’ from operating or trading interstate

25. Doing business interstate:How would indicators be measured? • Detailed analysis of regulation in each jurisdiction by industry experts • methodology agreed among interested parties appropriate to area of regulation • agree the ‘notional’ business(es) or business activities • Existing work by Ministerial Councils or other groups charged with harmonisation

26. Session 3 Benchmarking the regulatory environment:(quantity and quality)

27. The quantity of regulation:Which regulations? • All regulations applying to business • by the form • primary legislation • subordinate legislation • quasi-regulation • Regulations applying to a particular business type • number of regulations and regulatory requirements

28. The quantity of regulation:What are the objectives? • Reveal potential unnecessary burdens resulting from the growing amount, complexity and reach of regulation • Provide contextual information for interpretation of results generally • Monitor over time • Track reform progress • against baseline measure • against targets set by governments

29. The quantity of regulation:Which indicators? • Primarily count indicators • for the total stock • for a particular business type • Primarily contextual information • rather than indirect indicators of unnecessary burden

30. The quantity of regulation: How would indicators be measured? • Most indicators would be measured through an assessment of the relevant regulation • criteria might be required to ensure consistency • Government agencies could be used to attain further information • Reference businesses and business activities used for a particular business type

31. The quality of regulation:Which regulations? • All regulations applying to business • specifically, how they are designed, administered and enforced • Do not need to have the same objectives to be comparable

32. The quality of regulation: What are the objectives? • Reveal the potential for unnecessary regulatory burdens due to departures from accepted best practice • Identify systemic problems in regulatory processes • Monitor over time

33. The quality of regulation:Which indicators? • Characteristics of regulation • design • administration • enforcement • Mainly qualitative indicators

34. The quality of regulation: How would indicators be measured? • Many indicators would require expert assessment • which could be subjective • criteria required to guide assessments • Government agencies would have to be involved • Legal experts could be consulted

35. Session 4 The way forward

36. The way forward:Which regulations? • Prioritisation is essential • COAG’s ‘hot spots’ first • areas of greatest concern to business • capacity for benchmarking to identify unnecessary burdens • possible inclusion of New Zealand

37. The way forward:Program scheduling • Periodic, rolling program more cost effective than annual reporting • Periodically to allow changes in performance to occur and reforms to be introduced • More complex areas could be scheduled after year 1 • Focus could change reflecting changing priorities

38. The way forward:Benefits and costs • Likely costs and benefits • costs would be significant, although difficult to estimate in advance • even greater uncertainty over benefits, but the benefits could be substantial and orders of magnitude greater than the costs • cost effectiveness cannot be determined until experience gained

39. The way forward:Key program elements • Key elements of the suggested program: • modest coverage initially (but all types of burdens) • focus on ‘hot spots’ early on • periodic, rolling program

40. The way forward:Implementation issues • Consult and involve business and government • Decide how many and which indicators to report • Develop data collection methods and standards • including the selection of reference businesses • Identify appropriate caveats • Develop templates • Ensure momentum and commitment

41. The way forward:Discussion points • Is benchmarking likely to offer net benefits? • What are the highest priority regulatory areas to benchmark? • How should any program be scheduled? • What are the key implementation issues, concerns and possible pitfalls?