Session 3 General RIA Training 6–8 July 2009 EuropeAid/125317/D/SER/TR Regulatory Reform and RIA 1

Broad arguments for regulatory reform Enhance the competitiveness of the economy Reduce costs to the economy and society Facilitate market openness Minimize information asymmetries Avoid regulatory capture Gain support and interest from the public/civil society Improve transparency

What is meant by regulatory reform? OECD says: ’The goal of regulatory reform is to improve national economies and enhance their ability to adapt to change.’ Regulatory reform involves Policies to improve governance Approach to ensure well drafted, crafted and implemented regulations

International Trends in Regulatory Reform Initial phases included deregulation of industries. Deregulation, however, in most cases was re-regulation The OECD, began to give attention to how regulations were made, i.e. formulation of policies, drafting, implementation and reviewing Many countries have adopted policies focusing on improving the quality of regulations and the quality of governance

Main elements of regulatory reform Institutions Improve quality of new regulations Flow Regulatory management system Upgrade quality of existing regulation Stock 5

Principles for OECD agenda on regulatory reform I. Build a regulatory management system Strategic medium-term regulatory reform policy (5 years) Engines of reform at the centre of government II. Build the institutions to carry out good regulation Inspections reforms Due process III. Improve the quality of new regulations (flow) RIA Transparency and Stakeholder consultation IV. Upgrade quality of existing regulations (stock) Targeted deregulation, simplification, codification Reducing administrative burdens (SCM)

Principles for EU Better Regulation Necessity This principle demands that, before putting a new policy into effect, the public authorities assess whether or not it is necessary to introduce new regulations Proportionality Any regulation must strike a balance between the advantages that it provides and the constraints it imposes. It is the responsibility of the Member States and the Commission to identify those regulatory instruments which are most proportionate to the aims Subsidiarity Accountability Accessibility Simplicity Transparency

UK – 5 principles on better regulation Proportionate: intervene when necessary, remedies appropriate to the risk, costs identified and minimised EX: All the options for achieving policy objectives must be considered – not just prescriptive regulation. Alternatives may be more effective and cheaper to apply Accountable: justify decisions, and be subject to public scrutiny EX: Clearly explain how and why final decisions have been reached Consistent: rules and standards must be joined up and implemented fairly EX: Regulators should be consistent with each other, and work together in a joined-up way Transparent: be open, and keep regulations simple and user friendly. EX: Policy objectives, including the need for regulation, should be clearly defined and effectively communicated to all interested parties. Targeted: be focused on the problem, and minimise side effects EX: Regulations should focus on the problem and avoid a scattergun approach

Some tools used in regulatory reform Regulatory impact assessment Consultation Simplification Reducing administrative burdens Alternatives to regulation

RIA is a evidence-based process for regulatory decision making This involves: Asking questions in a structured format Transparent policy debate Empirical justification Systematic examination of potential impact Coherence in legislation Communication with decion-makers and stakeholders A learning process to solve problems

The goals of using RIA Transparency Better communication Alternative ways of regulation to enhance efficiency Improve decision making Improve regulatory quality Positive macroeconomic effects

Steps in the RIA Process Problem Definition and Risk Profiling Define and refine problem (to get broadest range of potential solutions) Profile magnitude, risk levels and distribution (groups, sectors etc) Describe the current situation Setting objectives Selecting Options and Assessing Impacts Initial consultation (to validate previous steps) Select options Select method, scope and depth of analysis Collect data on cost and benefits Prepare Analysis, Consult and Refine Proposal Analyze, compare options and present it to stakeholders Refine and finalize RIA and proposal after consultation

Example UK: What a regulatory impact assessment is expected to cover Identifies the objectives of the regulatory proposal Assesses the risks that the proposed regulations are addressing Identifies the benefits of each option including the "do nothing" option Looks at all costs including indirect costs Identifies options for action – securing compliance Impact on small businesses Takes the views of those affected, and is clear about assumptions and options for discussion Establishes criteria for monitoring and evaluation Summarises and makes recommendations to Ministers, having regard to the views expressed in public consultation Source:Cabinet Office,August 2000,Good Policy Making:A Guide to Regulatory Impact Assessment. Executive

Where RIA made a difference? EXAMPLE: EU – REACH Regulation on the European Chemical Industry RIA used to discuss various alternatives Revision was made to make compliance easier (based on feedback) Revisions done without significantly changing the benefits RESULT: Cost reduced from €10 billion to €2 billion

Introducing effective RIA – good practices identified in OECD countries Maximise political commitment to RIA Allocate responsibilities for RIA programme elements carefully Train the regulators Use a consistent but flexible analytical method Develop and implement data collection strategies Target RIA efforts Integrate RIA with the policy-making process, beginning as early as possible Communicate the results Involve the public extensively Apply RIA to existing as well as new regulation