Office of Best Practice Regulation

COAG Regulatory Best Practice and

Regulation Impact Statements

Office of Best Practice RegulationObjectives

To improve your understanding of: the rationale underlying regulatory impact

analysis (RIA) COAG’s RIA requirements and OBPR’s role

Office of Best Practice RegulationOutline

10 am Part 1 – Regulatory best practice/ COAG requirements

11-11:15am – morning tea 11:15am Part 2 – RIS 12pm – Questions /Finish

Office of Best Practice Regulation

Rationale underlying regulatory impact analysis

Office of Best Practice RegulationCulture of risk avoidance

Over-reaction to perceived risks Lack of appreciation of costs imposed Lack of balance between risks and costs

… has resulted in …

Office of Best Practice RegulationIncreasing regulatory burden

Unnecessarily complex regulations Excessive costs of compliance Adverse and unintended effects Use of substantial taxpayer resources

Office of Best Practice RegulationProductivity 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

Office of Best Practice Regulation

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)

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Office of Best Practice Regulation

Changing regulatory environment

COAG Australian Government States and Territories International – Netherlands, UK, Europe

Office of Best Practice Regulation

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)

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Office of Best Practice Regulation

COAG RIA Requirements

Office of Best Practice RegulationEnhanced 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

Office of Best Practice Regulation

Principles of best practice regulation

1. Establish a case for action

2. Examine alternatives to regulation

3. Adopt the option with the greatest net benefits

4. Not restrict competition, unless…

5. Provide effective guidance to regulators

6. Review regulation regularly

7. Consult effectively with stakeholders

8. Effective action proportionate to the issue

Office of Best Practice RegulationDefinition 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

Office of Best Practice RegulationCOAG 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.

Office of Best Practice RegulationMulti-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.

Office of Best Practice RegulationCOAG RIA framework

Regulatory proposals:

Minor / Machinery

Emergency exception

Not included: government purchasing policy or industry assistance schemes

Office of Best Practice RegulationRegulation 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

Office of Best Practice Regulation

COAG RISs are prepared at two stages

consultation decision-making The OBPR must assess the adequacy of the RIS at each of

these stages.

Office of Best Practice Regulation

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

Office of Best Practice Regulation

COAG Consultation requirements

What is adequate consultation? Who needs to be consulted? OBPR unable to post-assess consultation

processes.

Office of Best Practice RegulationDecision 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

Office of Best Practice RegulationGuidelines on length of RISs

Quality versus quantity Commensurate with impacts Simple proposal – around 10-20 pages Complex proposal – 20-30 pages

Office of Best Practice RegulationCompliance 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

Office of Best Practice Regulation

Summary of steps in undertaking RIA

1. Consult early with the OBPR2. Prepare a consultation RIS 3. OBPR assesses consultation RIS 4. Once adequate, publish the consultation RIS – consult effectively5. Develop the RIS in light of information obtained6. Submit the decision RIS to OBPR who will assess it against the COAG

requirements7. RIS provided to the decision maker8. Proceed with regulatory action consistent with the RIS9. Publish the final RIS10. OBPR reports on compliance

Office of Best Practice RegulationRole 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.

Office of Best Practice Regulation

Any questions on Part 1- COAG RIA?

Office of Best Practice Regulation

Regulation Impact Statements (RIS)

Office of Best Practice RegulationObjectives 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

Office of Best Practice RegulationKey elements of a RIS

1. Problem2. Objective(s)3. Options4. Impact analysis5. Consultation6. Conclusion and recommended option7. Implementation and review

You need to adequately address each element to draft an adequate RIS

Office of Best Practice Regulation

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?

Office of Best Practice Regulation

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

Office of Best Practice Regulation

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)

Office of Best Practice Regulation

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

Office of Best Practice Regulation

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

Office of Best Practice Regulation

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

Office of Best Practice Regulation

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

Office of Best Practice Regulation

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

Office of Best Practice Regulation

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.

Office of Best Practice Regulation

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.

Office of Best Practice Regulation

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?)

Office of Best Practice RegulationAnalysis 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

Office of Best Practice RegulationLike 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

Office of Best Practice RegulationRIA or RISs

QUESTIONS?