Regulatory Reform Lessons from the Land Down Under

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1 Ex-post regulatory review some lessons from down under Dr Warren Mundy Presiding Commissioner Productivity Commission Regulatory Studies Centre George Washington University 7 May 2015 Productivity Commission About the Productivity Commission The Productivity Commission is the Australian Government s principal review and advisory body on microeconomic policy reform and regulation Our role is to help governments make better policies in the long term interest of the Australian community. As an advisory body, we don t make decisions, our influence depends on the power of our arguments and the efficacy of our public processes. We have 11 Commissioners appointed for fixed terms (typically 5 years), around 180 staff and a budget of around AUD 35 million Productivity Commission 2 1

2 Antecedents A widening remit 1921 Tariff Board -Trade focus - Manufacturing industry development objectives 1974 Industries Assistance Commission - All sectors - Facilitate adjustment 1990 Industry Commission plus - Infrastructure - Barriers to competition - Social & environmental implications 1998 Productivity Commission plus -Human capital & regulation - Social, environmental & economic interaction Productivity Commission 3 Recent projects with a strong regulatory flavour Regulator Engagement with Small Business (2013) Electricity Network Regulatory Frameworks (2013) Major Project Development Assessment Process (2013) Role of Local Government as a Regulator (2012) Regulatory Impact Assessment Benchmarking (2012) Structure and Performance of Retail Industry (2011) Identifying and Evaluating Regulatory Reforms (2011) Regulatory Burdens on Business: All major sectors ( ) Regulatory Benchmarking: Occupational Health & Safety (2010), Zoning and Planning (2011), Food Safety (2009), Business Registration (2008). Productivity Commission 4 2

3 Approaches to reforming regulation: three broad categories Programmed reviews Ad hoc reviews Ongoing management Sunsetting Embedded in statute Post implementation reviews process failure catch all Public stocktakes economy wide sectoral Principles based reviews Benchmarking In depth reviews Regulator strategies Stock flow linkages Budgets In Out / Offsets RIA based consideration Red tape reduction targets Productivity Commission 5 Effort versus impact: which tools? Productivity Commission 6 3

4 A good system ensures quality control across the regulatory cycle Productivity Commission 7 We are increasing our focus on how regulators do their work Productivity Commission 8 4

5 The Australian Government regulatory system now has necessary elements in place, but the states dont Productivity Commission 9 Where to focus reform efforts? Systematise routine improvements Complete existing reforms! When prioritising new areas, include the cost of undertaking reform and consider sequencing of effort Reviews should first inform current agenda and then build evidence for future Share the findings of reviews and response to recommendations (central database) Coordinate and share consultations, with better earlier communication Build skills to support better evaluation of reforms (ex ante and ex post) Productivity Commission 10 5

6 Some general lessons Horses for courses Different approaches are needed to identify different regulatory problems Good governance is fundamental Clear objectives and scope, accountability for undertaking the review, good process, and requirements to respond to recommendations Skilled people are needed Recognise competing demands for them, and build skills Transparency matters Especially effective consultation mechanisms Prioritisation and filtering are important for costeffectiveness Productivity Commission 11 Thank You Productivity Commission 12 6

7 Example: Embedded statutory reviews If significant uncertainties about key impacts (intended and unintended but possible) Insurance needed to get policy accepted Specify areas in question Set timing for when sufficient experience Make provision for data collection Set out key governance requirements (independence, consultation etc) Productivity Commission 13 Example: Public stocktakes Accumulation of regulation can impose unintended burdens (inconsistent, overlapping, redundant etc) Significant change in regulatory regime, industry structure Efficient way to harness businesses input Independent leadership & supporting secretariat with analytical capacity Efficient multi-layer process for assessment of complaints, testing solutions, including publishing draft recommendations Specific industry business panel approach General cross jurisdictional cooperation Not too often (10 yearly for general stocktakes) Productivity Commission 14 7

8 Example: Sunsetting Regulation often has a use-by date loses relevance, effectiveness etc Forces attention to the stock of regulation Triage early assess what level of review is required Publish intent early for feedback Take the opportunity for a comprehensive review of all related regulation including primary legislation Recognise the resource implications of retaining regulation (RIS), bundle revised regulation for RIS process Productivity Commission 15 Example: Red tape targets Little attention paid by agencies with regulatory responsibilities to the costs of compliance If there is considerable scope for reducing compliance costs Encourage self-assessment by agencies using cost-calculator type tools Target agencies with greatest scope for savings Publish targets Provide rewards (such as keeping own savings) Conduct ex post validation of the savings for businesses Encourage consideration of other costs imposed such as through market distortions Productivity Commission 16 8

9 Example: regulator management strategies Business identify the greatest unnecessary costs come from how a regulation is administered Considerable scope for reducing compliance costs More work is needed to develop guidelines on best practice for regulators Some possible approaches: Require self-assessment by regulators of compliance costs, including feedback from regulated businesses Establish performance agreements between Ministers and regulators Publish self-assessment, performance targets and achievements Productivity Commission 17 9