Regulatory impact analysis: Benchmarking

Report

Research report

Released 13 / 12 / 2012

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Regulatory impact analysis (RIA) requirements in all Australian jurisdictions are reasonably consistent with OECD and COAG guiding principles. However, shortcomings in system design and a considerable gap between agreed RIA principles and what happens in practice are reducing the efficacy of RIA processes.
- The number of proposals with highly significant impacts that are either exempted from RIA processes or are not rigorously analysed is a major concern.
- Public consultation on policy development is often perfunctory or occurs only after development of draft legislation.
- Public transparency - through advising stakeholders of revisions to policy proposals and information used in decision making, or provision of reasons for not subjecting proposals to impact analysis - is a glaring weakness in most Australian RIA processes.
While RIA processes have brought some isolated but significant improvements from more thorough consideration of policy options and their impacts, the primary benefits of RIA have been forfeited through a lack of ministerial and agency commitment.
- One of the main challenges in implementing RIA requirements is the announcement of policy decisions and an associated closing off of policy options by ministers or ministerial councils prior to commencement of the RIA process.
- Where ministers or ministerial councils do not adhere to RIA principles, agencies see RIA as an administrative burden that adds no value and as a 'retrofit' justification of the policy decision.
In all jurisdictions, greater attention to leading practices for monitoring, reporting and accountability would go a long way toward improving the efficacy and rigour of RIA processes. In particular:
- transparency measures such as a draft regulation impact statement (RIS) for early consultation, and publishing all RISs and RIS adequacy assessments, would better inform stakeholders of regulatory impacts and motivate rigour in analysis
- requiring ministers to provide reasons to parliament for non-compliance with the RIA process and for the granting of exemptions, could encourage greater commitment to the RIA process and facilitate further discussion on the impacts of proposals
- accountability measures such as: the auditing of agency decisions on the need for a RIS; the auditing of regulatory oversight body adequacy assessments; and post implementation reviews undertaken through an independent process, would, in time, invoke more effective scrutiny of regulatory proposals.
The efficiency of RIA processes would also be improved by more effective targeting of RIA resources through: streamlined assessment of the need for a RIS; devolving responsibility for determining the need for a RIS to agencies (subject to appropriate oversight); and review of subordinate legislation in conjunction with its overarching primary legislation.

Improving Regulation Making Processes

There is considerable scope to improve the way that regulations are developed and scrutinised in Australia, according to the Productivity Commission's newly released report on Regulatory Impact Analysis: Benchmarking.

Regulatory impact analysis processes adopted by all governments should improve policy development and ultimately ensure that regulations (or other policy initiatives) provide the greatest benefit to the community, relative to the overall cost imposed.

'While these processes are reasonably well designed and supported in all jurisdictions, there are some shortcomings and a significant gap between agreed and actual practice that must be addressed', said Commissioner Robert Fitzgerald.

Regulatory impact analysis processes are failing to deliver on their potential due to inadequate ministerial and agency commitment. The Commission found evidence that proposals with the largest impacts on communities are often not rigorously scrutinised.

The Commission has identified a number of leading practices in regulatory impact analysis that, if more widely adopted, would improve the efficacy of policy development processes, including:

publication of all regulation impact statements and compliance assessments by oversight bodies
the use of a two stage impact analysis process, with stakeholders being able to comment on all draft regulation impact statements
reducing opportunities to avoid assessment
more effective targeting of regulatory impact analysis resources
ensuring that post implementation reviews are undertaken through an independent process.

'More widespread and consistent adoption of the leading practices identified by the Commission, particularly in relation to transparency and accountability, would create stronger incentives for governments to demand and officials to deliver policies that are well considered and supported by rigorous analysis of different options and their impacts', according to Commissioner Fitzgerald.

Preliminaries
Cover, Copyright, Terms of reference, Foreword, Contents and Abbreviations
Overview
Chapter 1 Introduction
1.1 What is regulatory impact analysis?
1.2 Recent reviews and changes to RIA processes
1.3 The Commission's study
Chapter 2 Efficiency and effectiveness of regulatory impact analysis
2.1 Introduction
2.2 How effective are RIA processes?
2.3 Costs of RIA
2.4 Conclusion
Annex RIA practices by jurisdiction
Chapter 3 Institutions involved in regulatory impact analysis
3.1 Institutions subject to RIA requirements
3.2 Regulatory oversight bodies
3.3 Cabinet offices with a formal RIA gatekeeping role
3.4 Parliamentary scrutiny committees
Chapter 4 Scope of regulatory impact analysis
4.1 Regulation subject to RIA
4.2 Trigger for RIS requirements
4.3 Who assesses whether a RIS is required?
Chapter 5 Exceptions and exemptions
5.1 Introduction
5.2 Exceptions to RIA
5.3 Exemptions from RIS requirements
Chapter 6 Analytical requirements and impact assessment
6.1 The elements of a RIS
6.2 Problem identification and objectives
6.3 Consideration of options
6.4 Assessment of impacts
6.5 RIS conclusion and recommended option
6.6 Implementation, monitoring and enforcement
6.7 Assessing national market implications
6.8 Conclusion
Chapter 7 Transparency and consultation
7.1 What is transparency and why is it important?
7.2 Transparency of regulatory impact analysis undertaken by agencies
7.3 Transparency of regulatory oversight body adequacy assessments
7.4 Transparency of ministers' regulatory decisions
7.5 Conclusion
Chapter 8 Accountability and quality control
8.1 What is accountability?
8.2 Are government agencies accountable for the quality of their regulatory impact analysis?
8.3 Regulatory oversight body accountability
8.4 Executive government accountability
8.5 Conclusion
Chapter 9 Regulatory reviews
9.1 RIA's role in promoting integrated regulatory policy
9.2 'Late RISs' and post implementation reviews
9.3 Reviews and evaluations flagged in RISs or in legislation
9.4 Reviews associated with sunsetting requirements
9.5 Conclusion
Chapter 10 Improving integration
10.1 What is integration?
10.2 Jurisdiction progress on integration
10.3 Barriers to integration
10.4 Better integration of RIA into policy development
Appendix A Study participants
Appendix B Jurisdiction guidance material
Appendix C Best practice principles for RIA
Appendix D Surveys of agencies and regulatory oversight bodies
Appendix E Analysis of regulation impact statements
References