Presentation on theme: "COAG Regulatory Best Practice and Regulation Impact Statements"— Presentation transcript:
1 COAG Regulatory Best Practice and Regulation Impact Statements Greetings.Introduction self & speakers.Housekeeping – feedback forms.
2 Objectives To improve your understanding of: the rationale underlying regulatory impact analysis (RIA)COAG’s RIA requirements andOBPR’s roleThe rationale underlying regulatory impact analysisWhat the COAG RIA requirements involve and what you have to do.The role of the OBPR in assisting you to meet the RIA requirements.
3 Outline 10 am Part 1 – Regulatory best practice/ COAG requirements 11-11:15am – morning tea11:15am Part 2 – RIS12pm – Questions /FinishGeneral timelines for the training. Aim to be finished around 12pmThis training session will give you a broad outline of the requirements. We have included in your kits a copy of the COAG Guide which will provide you with more information on the COAG requirements.But this is not a case of ‘one size fits all’ and neither this session or the Guide can provide all the answers for every situation.The most important message I can give you is to come and talk to us and consult with us early in your policy development process.But hopefully this session will improve your understanding and awareness of the requirements.
5 Culture of risk avoidance Over-reaction to perceived risksLack of appreciation of costs imposedLack of balance between risks and costs… has resulted in …I don’t want to spend too much time on the history of RIS requirements but it is useful to note why there has been a push for the introduction and enhancement of Regulatory Impact Analysis.There are a number of factors that have been the impetus for RIA.There is a growing view that we have developed a culture of risk avoidance. That there is often an over-reaction or knee-jerk reaction to perceived risks and that in the rush or driving need to address these perceived risks there is a lack of appreciation of the costs imposed by the regulations which are introduced and a lack of balance between the real risks and the costs arising from our actions.This has resulted in an increase in regulatory burden
6 Increasing regulatory burden Unnecessarily complex regulationsExcessive costs of complianceAdverse and unintended effectsUse of substantial taxpayer resourcesBusiness has become increasingly vocal about compliance and other burdens associated with the increase in regulation that Australia has experienced over the last two decades.The COAG RIS requirements were introduced around 1995 to address concerns by business that regulatory regimes were unnecessarily complex, costly, too prescriptive, and that they stifled innovation.These concerns were echoed in a report released last year by the former PM’s taskforce on reducing the regulatory burdens on business – also known as the Banks Report.The Banks Report noted that since 1990, the Australian Parliament passed more pages of legislation than were passed in the first 90 years since Federation. This helps to illustrate the growing volume – and complexity - of regulations.Submissions to the Banks review indicated that up to 25% of senior management time in large companies is taken up with regulatory compliance matters – and the % for smaller businesses is even greater.
7 Productivity agendaBest practice regulation process helps protect and implement the micro-economic reform processThis link is sometimes lost with an officer focusing on ‘requirements’ rather than on what the process is deliveringThe RIA process is a means to an important end rather than a road blockThe wider effects from poorly conceived or poorly designed regulation include slower economic growth, lower employment, and a decline in Australia’s international competitiveness. There are also the costs to the taxpayer of administering regulation.So the best practice regulation process helps protect and implement the micro-economic reform process and at the COAG level a national seamless economy.RIA should be seen as a means to and end rather than a road block.RIA should not require much more than what you should be doing if you have good policy development processes in place.
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 effectsoverlap and inconsistencyexcessive compliance costsA question of balance (costs & risks).This is not about removing all regulation, regulation is an essential part of running a well functioning economyIt is about government regulation needing to be well designed and well managed if it is to be effective and avoid many of the problems that have been experienced in recent times.It is a question of balance.
9 Changing regulatory environment COAGAustralian GovernmentStates and TerritoriesInternational – Netherlands, UK, EuropeThese concerns are not just at the COAG level.The Australian Government has moved to address these concerns through agreeing to most of the recommendations in the Banks report, including by enhancing its RIA processes.States and Territories have introduced their own RIS requirementsInternationally- other countries have introduced initiatives aimed at reducing regulatory burden.
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 2006New COAG Best Practice Regulation Guide released (October 2007)–There have been a number of COAG initiatives on regulatory reform.The 1995 Principles and Guidelines which I’ve already noted.Several COAG communiques which outline the agreed upon National Reform Agenda, enhanced RIA requirements and the establishment of the Business and Regulation Competition Working Group (BRCWG)The former Prime Minister wrote to State premiers advising on the Government’s response to the Banks Report and areas where co-operation between all levels of Government was required and on related reforms agreed to at the July 2007 COAG meeting.
12 Enhanced RIA requirements Increase in the quality of RIACost Benefit Analysis where appropriateCompliance costs –encourage use of Business Cost CalculatorIncrease scope – cumulative burdensGatekeeping mechanismsTransparencyAs I’ve already noted COAG has introduced a number of initiatives on regulatory reform.With respect to regulatory impact analysis, in February 2006 COAG agreed to:increase the quality of RIAbroaden the scope of RIA, where appropriate, to recognise the effect of regulation on individuals and the cumulative burden on businessTo establish and maintain gate keeping mechanisms as part of the decision making process to ensure that the regulatory impacts are made fully transparent to decision makers in advance of decisions being made.Some Secretariats have embedded requirements in templates for meetings and agenda’s, for example, flagging if OBPR has been consulted and whether a RIS is required.Some have instigated meetings with the OBPR to discuss agenda’s for upcoming meetingsCOAG secretariat in PM&C also has a gate keeping role.Transparency - Decision RISs are to be made public as soon as possible.
13 Principles of best practice regulation Establish a case for actionExamine alternatives to regulationAdopt the option with the greatest net benefitsNot restrict competition, unless…Provide effective guidance to regulatorsReview regulation regularlyConsult effectively with stakeholdersEffective action proportionate to the issueCOAG has endorsed a set of principles of good regulatory process. These align with the RIS process.4 Relates to the Competition Principles agreement that legislation should not restrict competition unless benefits of the restriction to community as a whole outweigh the costs and objectives of the regulation can only be achieved by restricting competition.5. Provide effective guidance to regulators and regulated parties in order to ensure that the policy intent and expected compliance requirements of the regulations are clear.6 Review regulation to ensure it remains relevant and effective over time.7 Consult effectively with stakeholders and I will talk more about consultation later8 Government action should be effective and proportional to the issue being addressed. Effectiveness should be judged solely in terms of meeting the specified objective. Proportionality involves ensuring that government action does not ‘overreach’ or extend beyond addressing a specific problem or achieving the identified objective.
14 Definition of regulation Broad range of legally enforceable instruments which impose mandatory requirements upon businesses or individualsGovernment voluntary codes and advisory instruments for which there is a reasonable expectation of complianceSo when we talk about regulation what are we talking about. The definition of regulation for the purposes of RIA is much broader than it is commonly thought.The requirements apply to agreements or decisions to be given effect whether at the Commonwealth or State/Territory level or both, through principal or delegated legislation, administrative directions or other measures which when implemented would encourage or force businesses or individuals to pursue their interests in ways they would not otherwise have done.Includes Quasi regs – wide range of rules or arrangements where govts influence businesses and individuals to comply without explicit regs. Broadly whenever govt takes action that puts pressure on business to act in a particular way.Care needs to be taken with the development of guidelines, guidance material, manuals etc as many of these may be quasi-regulatory – so if in doubt contact us.
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 pointsRIS required at point at which a regulatory decision is made even though regulatory model is still to be determinedOne or several RISs may be requiredMultiple decision makersRIS should be provided for each body that makes a decisionWhen COAG is the decision maker, the responsibility of preparing the RIS sits with the Ministerial Council.Decision making processes and the requirement for regulatory impact analysis is not always clear cut.For multi-staged decision making processes, where a decision is being made that a regulatory option is required but it is not yet clear what the details of the regulation will be a high level RIS may be required for this initial decision and a further RIS may be required on the proposed regulation or regulatory model that is developed.However, in some cases where an adequate RIS is prepared, a RIS may not necessarily be required for follow up or subsequent regulation which implements the original decision, unless significant additional regulation is contemplated.The RIS shouldn’t be prepared at the stage at which you are preparing drafting instructions for the regulation as it is likely that key decisions have already been made and it is too late to prepare the RIS.In some instances there may be multiple decision makers. A RIS should be prepared for each of the Ministerial Councils that are to make a decision on the matter. Where matters go from a Ministerial Council to COAG, the RIS should be prepared for the MCs consideration and to inform the recommendation that they will make to COAG.
17 COAG RIA framework Regulatory proposals: Minor / Machinery Emergency exceptionNot included: government purchasing policy or industry assistance schemesNeed to consult with the OBPR to determine if the regulatory proposal is in minor/machinery category. Need to provide information to OBPR on compliance and other impacts expected for business.OBPR will advise whether the reg proposal is minor/machinery or whether a RIS is required.
18 Regulation Impact Statements Are a key element of best-practice RIAStructured cost-benefit approach to policy developmentAssist transparencyBoth a process and a document
19 COAG RISs are prepared at two stages consultationdecision-makingThe OBPR must assess the adequacy of the RIS at each of these stages.Adequacy must be assessed by OBPR before RISs can be released for public consultation or provided to the decision maker.
20 Consultation RISs – requirements Expected to have strong problem, objective and options section, butImpact analysis may not be as robust as the final RIS – as evidence is still being collectedAssessed by OBPR before public releaseNZ-RIAU should be consulted if relevantWhere there are gaps in data or information, we encourage you to ask questions to elicit that information/data from stakeholders.A consultation RIS should still indicate what is the proposed option.New Zealand Regulatory Impact Analysis Unit should be consulted Trans-Tasman Mutual Recognition issues.
21 COAG Consultation requirements What is adequate consultation?Who needs to be consulted?OBPR unable to post-assess consultation processes.There are no hard and fast rules.The COAG requirements note that consultation should occur as widely as possible but at the least, should include those most likely to be affected by regulatory action (for example, consumer and business organisations)You should consult by placing advertisements in all jurisdictions to give notice of the intention to adopt regulatory measures and to advise that the RIS is available on request and invite submissions.Appendix F of the COAG guide contains some consultation guidelines.Whilst there are no time limits with respect to how long a consultation process should be there is an expectation that it will be commensurate with the impacts of the proposal. So for highly significant proposals a longer consultation period would be expected.The Australian Government Best Practice Regulation Handbook contains a section on Best Practice consultation requirements which may be useful. This handbook is available on our website.But please note that whilst you may have great consultation processes, if a consultation RIS has not been prepared or assessed by the OBPR prior to the consultation being undertaken you will be reported as non-compliant as the OBPR cannot post-assess consultation processes.
22 Decision RIS Final RIS has higher ‘bar’ Assessed by OBPR prior to decision being madeAssessment focuses on whether:RIS Guidelines have been followedType and level of analysis commensurate with impactsRIS demonstrates preferred option results in a clear net benefit to the community
23 Guidelines on length of RISs Quality versus quantityCommensurate with impactsSimple proposal – around pagesComplex proposal – pages
24 Compliance reportingReport annually in the Best Practice Regulation ReportSend out compliance request letters 6 monthlySend out assessment letters advising of compliance by MC/NSSBsEvery 6 months we send out a compliance request letter requesting information on the decisions which have been made by Ministerial Councils and NSSBs and whether RISs were required and prepared.We do some checking of our own, for eg go through meeting communiques, collate the information and provide an assessment letter which indicates how we will be reporting the decisions made in the period. That is whether the COAG requirements were met or not met.We report on compliance in our Best Practice Regulation report which is an annual publication and we report against the decision maker. In those case where there are multiple decision makers we report the issues as joint proposals.
25 Summary of steps in undertaking RIA Consult early with the OBPRPrepare a consultation RISOBPR assesses consultation RISOnce adequate, publish the consultation RIS – consult effectivelyDevelop the RIS in light of information obtainedSubmit the decision RIS to OBPR who will assess it against the COAG requirementsRIS provided to the decision makerProceed with regulatory action consistent with the RISPublish the final RISOBPR reports on complianceThese are the key steps you need to note in undertaking Regulatory Impact Analysis.
26 Role of the OBPR“One-stop shop” for regulators, providing information, advice and training on:Need for RISsFormulation & adequacy of RISsCompliance with the RIA requirements…..Consult the OBPR early in the policy development process.So where does the OBPR fit into this process?Coach: We are here to assist you in complying with the Government’s RIA requirements. We can provide RIS training, CBA training and BCC training.Umpire: We also assess RISs when they are required.Scorer: And we report on Ministerial Councils and National Standard Setting Bodies’ compliance with the RIA requirements, each year, through our Best Practice Regulation Report.OBPR structure – 3 RIA teams and the CBA unitI hope you now have a better understanding of the main elements of the Government’s RIA requirements.Are there any questions?
28 Regulation Impact Statements (RIS) RIS are required where the regulations is likely to result in significant impact. The extent of analysis will commensurate with the impact.Note it is not about policy. But about providing information to the decision maker.
29 Objectives of preparing a RIS Consultation RIS – canvas regulatory options and their costs and benefitsDecision RIS – provide information to the decision makerAlso, provide evidence of the steps taken in good policy developmentAs noted above the RIS process is aimed at helping ensure that regulation meets it objectives and the beneficial outcomes are achieved. In doing this the RIS should show the decision maker which choices should be made including the tradeoffs of making different choices. It also shows that the agency has pursued due process and has considered various ways of addressing the problem.
30 Key elements of a RISProblemObjective(s)OptionsImpact analysisConsultationConclusion and recommended optionImplementation and reviewYou need to adequately address each element to draft an adequate RISThese are the seven areas which a RIS must consider. We’ll go through each of these in due course, but for a RIS to be considered adequate and be ‘cleared’ by the OBPR, it must address each of these elements.Most RISs use these elements as headings. While this works well in most instances, it is still important to consider whether the RIS is coherent and logical. That is, including the headings is no guarantee of a RIS making sense.
31 Element 1. Identifying the Problem What is the problem?Why should Government intervene?to deal with market failureto correct a regulatory failureto address an unacceptable riskIs there existing regulation? If there is, why is further action needed?The first job of a RIS is to identify the problem requiring government intervention. This usually lays the ground work for a good RIS, once the problem is clear, usually the options for addressing it will also follow.Four justifications for government intervention outlined in the slide, the first (market failure) is the most common. Usually such justifications relate to information asymmetries, externalities/public goods, imperfect competition.Second reason (to correct regulatory failure) it is also helpful to consider the underlying need for regulation and the whether there is a reason for the regulation in the first place.Finally, when considering existing regulation it is important to look broadly and consider all Australian Government and state and territory government interventions. It may also be necessary to consider whether the market itself (through such instruments as industry codes or other incentives) will address the problem.It is important to discuss the nature and the magnitude of the problem.
32 Element 2: Objectives of govt action Be specific, link it to the problemBut not be too specific, so as to preclude optionsDo not confuse ‘ends’ with ‘means’ when setting an objectiveThe most important point to remember is to specify WHAT is your goal or you want to provide, not HOW you want to achieve it or provide it.
33 Element 3: Consider a broad range of options Include non-regulatory and regulatory optionsDistinguish feasible options from infeasible optionsExplain why some options are not feasibleDo not confuse infeasible with not preferredDescribe feasible options (but don’t analyse them here)The following couple of slides give an outline of the types of options that you may want to consider.The main point is to identify all feasible options. If some options are ruled out summarily (because they aren’t really feasible), that is fine, but the RIS should explain why. Nevertheless, you don’t need to include options that clearly aren’t feasible.The most important point in the options section is to clearly describe what the option will involve, what it will require.
34 Element 3 cont’d: Examples of options Status Quo or do nothingNon-regulatory optionsSelf regulationQuasi-regulationExplicit government regulationNote there may be sub options within each categoryThe status quo must be an option considered, it is the benchmark against which the other options and measured.Then there are a range of other options that could be included (see slide). It is important to also consider the various forms of regulation if there are multiple ways of addressing the problem. In essence, you need to include these options in order to demonstrate that your proposed approach is optimal.Regulation should be the last resort – not the first one.
35 Element 4: Impact Analysis For each optionIdentify who is affected?How are they affected?To what extent are they affected (costs and benefits)?Quantify where possiblelevel of analysis must be commensurate with level of impactsrestrictions on competition require a higher level of analysisThis section outlines who the various stakeholders or affected parties are and how they are affected.The section should detail all of the costs and benefits of the different options on each of the stakeholder groups.Stakeholder groups are generally business, consumers, government and the community, but within these broad groups you may highlight specific groups for example you may look at the impacts on industry as a whole but also look at the impacts on a particular sector for example the fishing industry.This is the section where you should provide a quantification of compliance costs (unless these are ‘no or low’). You should also quantify other impacts where possible.You should also remember, that the level of analysis should be commensurate with the level of the impacts. Further, we are really applying a ‘reasonable person test’ so if something is really obvious you don’t need to go to too much trouble to prove it.CBA team is here to assist. Can help with consultants – designing collection instruments; methodologies/approaches to CBA- etc. CBA team is a resource at your disposal.
36 Element 4 cont’d: Impact Analysis Examples of costs and benefitsConsumersprices, variety, availability, quality, convenience, safety and risk, access to informationBusinesscompliance costs, uncertainty, complexity, market access, input prices, process modification, restrictions on competitionGovernmentadministration and enforcement costsCommunitypublic 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 websiteChecklist: notification, education, permission, purchase cost, record keeping, enforcement, publication/documentation, procedural and otherInclude compliance costs in RISUse of BCC is not mandated for COAG RISs but can be used as a tool to aid in preparation of compliance estimates.
38 Element 4 cont’d: Restrictions on competition Some examples include:governing the entry or exit of businesses into marketscontrolling input or output pricesrestricting the quality, quantity or location of goods and servicesrestricting advertising and promotional activitiesFor such proposals the RIS must demonstrate that restricting competition will:result in a net benefit for the community; andthe objective of the intervention can not be achieved in any other wayRegulation that restricts competition (see the slide) are usually more significant and have greater affects. As such, the government requires a higher level of analysis for proposals which have this effect. In essence, agencies need to prove that they can not meet the objective (or address the problem) in a manner which will not restrict competition.
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.The consultation section is aimed at demonstrating that the agency has followed procedure and has consulted on the proposed regulation.It also provides an opportunity to alert decision makers to different views of stakeholders which may not have come out in the impact analysis.From an agencies point of view it allows you to prove that you have considered the views of different stakeholders and can show how certain views have been taken into account and the proposal changed as a result.Obviously you cannot agree with everyone – but you must show why it is that you do not agree.
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.The section summarises the rest of the RIS. In it you need to reiterate which is the preferred option; why other options are not preferred; and why the benefits of the preferred option will 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?)Having decided on the preferred option this section is dedicated to discussing how the preferred option will be put into action.Basically you need to outline the procedure moving forward including how the regulation will be checked to ensure that it is meeting its objectives and that it is not causing any unintended outcomes.If elements of the implementation are still unclear, this should be noted in the RIS along with the procedure for resolving these issues (for example regulations associated with legislation).
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 Visit our website - www.obpr.gov.au Consult the Like to know more?Visit our website -Consult theCOAG guideAustralian Government Best Practice Regulation HandbookContact the OBPRorCOAG guidelinesExample RISs