COAG Regulatory Best Practice and Regulation Impact Statements

1. COAG Regulatory Best Practice and Regulation Impact Statements

2. Objectives To improve your understanding of: • the rationale underlying regulatory impact analysis (RIA) • COAG’s RIA requirements and • OBPR’s role

3. Outline • 10 am Part 1 – Regulatory best practice/ COAG requirements • 11-11:15am – morning tea • 11:15am Part 2 – RIS • 12pm – Questions /Finish

4. Rationale underlying regulatory impact analysis

5. Culture of risk avoidance • Over-reaction to perceived risks • Lack of appreciation of costs imposed • Lack of balance between risks and costs … has resulted in …

6. Increasing regulatory burden • Unnecessarily complex regulations • Excessive costs of compliance • Adverse and unintended effects • Use of substantial taxpayer resources

7. Productivity agenda • Best practice regulation process helps protect and implement the micro-economic reform process • This link is sometimes lost with an officer focusing on ‘requirements’ rather than on what the process is delivering • The RIA process is a means to an important end rather than a road block

8. The need for best practice regulation • Regulation is an essential part of running a well functioning economy, but it must be carefully designed to avoid: • unintended and/or distortionary effects • overlap and inconsistency • excessive compliance costs A question of balance (costs & risks) .

9. Changing regulatory environment • COAG • Australian Government • States and Territories • International – Netherlands, UK, Europe

10. COAG initiatives on regulatory reform • Principles and guidelines for national standard setting and regulatory actions by MCs & NSSBs (1995) • COAG communiqués (2006 and 2007) • PM wrote to State Premiers in August 2006 • New COAG Best Practice Regulation Guide released (October 2007) –

11. COAG RIA Requirements

12. Enhanced RIA requirements • Increase in the quality of RIA • Cost Benefit Analysis where appropriate • Compliance costs –encourage use of Business Cost Calculator • Increase scope – cumulative burdens • Gatekeeping mechanisms • Transparency

13. Principles of best practice regulation • Establish a case for action • Examine alternatives to regulation • Adopt the option with the greatest net benefits • Not restrict competition, unless… • Provide effective guidance to regulators • Review regulation regularly • Consult effectively with stakeholders • Effective action proportionate to the issue

14. Definition of regulation • Broad range of legally enforceable instruments which impose mandatory requirements upon businesses or individuals • Government voluntary codes and advisory instruments for which there is a reasonable expectation of compliance

15. COAG RIA requirements apply to • The decisions of COAG, MCs and inter-governmental standard setting bodies, however they are constituted. • INCLUDES bodies established statutorily or administratively by government to deal with national regulatory problems.

16. Multi-staged decision making • Multi-staged decision making points • RIS required at point at which a regulatory decision is made even though regulatory model is still to be determined • One or several RISs may be required • Multiple decision makers • RIS should be provided for each body that makes a decision • When COAG is the decision maker, the responsibility of preparing the RIS sits with the Ministerial Council.

17. COAG RIA framework • Regulatory proposals: • Minor / Machinery • Emergency exception • Not included: government purchasing policy or industry assistance schemes

18. Regulation Impact Statements • Are a key element of best-practice RIA • Structured cost-benefit approach to policy development • Assist transparency • Both a process and a document

19. COAG RISs are prepared at two stages • consultation • decision-making • The OBPR must assess the adequacy of the RIS at each of these stages.

20. Consultation RISs – requirements • Expected to have strong problem, objective and options section, but • Impact analysis may not be as robust as the final RIS – as evidence is still being collected • Assessed by OBPR before public release • NZ-RIAU should be consulted if relevant

21. COAG Consultation requirements • What is adequate consultation? • Who needs to be consulted? • OBPR unable to post-assess consultation processes.

22. Decision RIS • Final RIS has higher ‘bar’ • Assessed by OBPR prior to decision being made • Assessment focuses on whether: • RIS Guidelines have been followed • Type and level of analysis commensurate with impacts • RIS demonstrates preferred option results in a clear net benefit to the community

23. Guidelines on length of RISs • Quality versus quantity • Commensurate with impacts • Simple proposal – around 10-20 pages • Complex proposal – 20-30 pages

24. Compliance reporting • Report annually in the Best Practice Regulation Report • Send out compliance request letters 6 monthly • Send out assessment letters advising of compliance by MC/NSSBs

25. Summary of steps in undertaking RIA • Consult early with the OBPR • Prepare a consultation RIS • OBPR assesses consultation RIS • Once adequate, publish the consultation RIS – consult effectively • Develop the RIS in light of information obtained • Submit the decision RIS to OBPR who will assess it against the COAG requirements • RIS provided to the decision maker • Proceed with regulatory action consistent with the RIS • Publish the final RIS • OBPR reports on compliance

26. Role of the OBPR “One-stop shop” for regulators, providinginformation, advice and training on: • Need for RISs • Formulation & adequacy of RISs • Compliance with the RIA requirements …..Consult the OBPR early in the policy development process.

27. Any questions on Part 1- COAG RIA?

28. Regulation Impact Statements (RIS)

29. Objectives of preparing a RIS • Consultation RIS – canvas regulatory options and their costs and benefits • Decision RIS – provide information to the decision maker Also, provide evidence of the steps taken in good policy development

30. Key elements of a RIS • Problem • Objective(s) • Options • Impact analysis • Consultation • Conclusion and recommended option • Implementation and review You need to adequately address each element to draft an adequate RIS

31. Element 1. Identifying the Problem • What is the problem? • Why should Government intervene? • to deal with market failure • to correct a regulatory failure • to address an unacceptable risk • Is there existing regulation? If there is, why is further action needed?

32. Element 2: Objectives of govt action • Be specific, link it to the problem • But not be too specific, so as to preclude options • Do not confuse ‘ends’ with ‘means’ when setting an objective

33. Element 3: Consider a broad range of options • Include non-regulatory and regulatory options • Distinguish feasible options from infeasible options • Explain why some options are not feasible • Do not confuse infeasible with not preferred • Describe feasible options (but don’t analyse them here)

34. Element 3 cont’d: Examples of options • Status Quo or do nothing • Non-regulatory options • Self regulation • Quasi-regulation • Explicit government regulation • Note there may be sub options within each category

35. Element 4: Impact Analysis For each option • Identify who is affected? • How are they affected? • To what extent are they affected (costs and benefits)? • Quantify where possible • level of analysis must be commensurate with level of impacts • restrictions on competition require a higher level of analysis

36. Element 4 cont’d: Impact Analysis Examples of costs and benefits • Consumers • prices, variety, availability, quality, convenience, safety and risk, access to information • Business • compliance costs, uncertainty, complexity, market access, input prices, process modification, restrictions on competition • Government • administration and enforcement costs • Community • public health and safety, environmental quality/ESD, economic growth, innovation, employment

37. Estimating compliance costs • Use of BCC to estimate compliance costs is encouraged (but not mandatory) • IT tool available from the OBPR website • Checklist: notification, education, permission, purchase cost, record keeping, enforcement, publication/documentation, procedural and other • Include compliance costs in RIS

38. Element 4 cont’d: Restrictions on competition • Some examples include: • governing the entry or exit of businesses into markets • controlling input or output prices • restricting the quality, quantity or location of goods and services • restricting advertising and promotional activities • For such proposals the RIS must demonstrate that restricting competition will: • result in a net benefit for the community; and • the objective of the intervention can not be achieved in any other way

39. Element 5: Consultation • Who has been consulted? • How was consultation conducted? • What are stakeholders views (highlight dissenting views)? • How did these views affect the outcome? • If stakeholder views were not addressed, explain why.

40. Element 6: Conclusion / recommended option • Provides a summary of the options and their impacts. • Identifies which option is preferred and why others options are not preferred. • Reiterates why the benefits of the preferred option outweigh the costs.

41. Element 7: Implementation and review • How will the preferred option be implemented? • Transitional arrangements? • Who will administer the regulation? • How will it be enforced? How will compliance costs be minimised?) • Will it be subject to sunset provisions? • Will it be reviewed? (if so, by whom and according to what criteria?)

42. Analysis is the key • “ … the goal of evidence-based policy-making is unquestionably important, and it is encouraging that it has received vocal support at the highest political levels. However, measured against the various ingredients for an effective approach, it seems clear that current practice continues to fall short. Addressing this is now largely up to the public service. Not only is there a need to improve the capacity of the public service to deliver evidence-based policy advice, there is a need for it to improve political understanding of what that entails.” Gary Banks - Evidence-based policy-making: What is it? How do we get it? 4 February 2009

43. Like to know more? • Visit our website - www.obpr.gov.au • Consult the • COAG guide • Australian Government Best Practice Regulation Handbook • Contact the OBPR • helpdesk@obpr.gov.au or 6215 1955

44. RIA or RISs • QUESTIONS?