Submission to the Productivity Commission to IMPROVE REGULATION-MAKING

PETER DAY, of Peter Day Consulting provides a summation of the CMPA’s submission to the Australian Government on the process of Regulatory Impact Analysis in Australia.

THE Federal Government’s Productivity Commission is conducting a study of the process of Regulatory Impact Analysis in Australia. An effective RIS is crucial to the development of regulations over industry and in that sense the Association was keen to present its views and proposals for change to the Commission.

The following is a summary of the key points in our submission. As required the submission responded to specific questions posed by the Commission. The submission is included on the Productivity Commission’s website.

The CMPA has seen no evidence of the quality of regulation improving.

Despite repeated, evidenced-based calls by the Association for legislative reform of unsustainably costly controls in Victoria of the restrictions contained in the Extractive Industries Development Act 1995, they were continued with the passing of replacement legislation in 2009. Since its inception in 2000 the Association cannot point to any element of regulation over the industry that has been improved, reduced or influenced by the RIS process.

Typically the RIS provides an argument for greater regulation rather than coming from a position where regulation is the intervention, and therefore needs to be justified.

The scope of RIS process should be directed to the development of policy at the broadest level rather than being confined to subordinate legislation.

All policy development requires a rigorous assessment. ‘Policy’ must include all actions taken by Governments that impact on the economy. This includes proposals for major capital investments, adoption of Codes of Practice, mandatory guidelines, legislative and regulatory proposals and other instruments. The RIS process should apply to local government as well as State and Federal Government.

Government agency heads should be held personally accountable for policy developments and required to publicly explain the rationale used when the RIS assessment process is not undertaken.

The incentive-based approach used effectively in the occupational health and safety legislation across the country should be adopted for all policy development (which includes development of legislation and regulation).

The CMPA has seen no evidence that the RIS process has been effectively integrated into policy development.

Only with the commitment of Governments and Parliaments to balance social and environmental objectives with the ability of the economy to pay (through a competitive business sector) will effective outcomes in policy development be achieved. Clearly, regulatory gate-keeping arrangements have failed and in themselves, act to legitimise their inadequacies while imposing additional costs.

The most prevalent weakness in RIS’ reviewed by the Association is a general lack of identification of the costs associated with options for regulatory intervention.

A far greater emphasis must be given to researching and assessing the impact costs of proposed regulation and other options on industry and the general community. A corresponding weakness of the RIS process is the lack of quantification of the benefits of the options. Typically, benefits are expressed in only qualitative terms and are exaggerated.

For example, new requirements for Cultural Heritage Management Plans required in aboriginal heritage legislation were estimated in the relevant RIS to cost $20,462 each. In practice, the costs of preparing these plans range from $25,000 for a desktop plan to in excess of $300,000 for a comprehensive plan prepared by a consultant for a small operation. These costs do not include the proponent’s time or the holding costs of stalling the project. The quality of the RIS and the oversight arrangements were clearly incompetent in this case.

The draft Model Work Health and Safety Regulations Mining and associated Draft Code of Practice for the Work Health and Safety Management Systems in Mining are a recent example where the national RIS process has failed.

The draft Regulations and Code were promulgated for comment without the required RIS and the draft Model Regulations had been given in-principle endorsement by the Ministerial Council without assessment of the costs and benefits and impacts for industry.

In its submission on this matter the Association argued this was blind policy development that had no regard for the drivers of the economy – business and industry.

The Premier of Victoria recently released a supplementary report of the impact of the proposed national work health and safety laws in Victoria which revealed that Victorian businesses would face additional costs of more than $3.4 billion over the next five years which would ‘impact severely on the productivity of the State’s small businesses’. These costs were to be expended without the corresponding value of benefits.

Clearly the current arrangements for independent scrutiny of compliance with RIS processes are inadequate.

In most cases performance monitoring of the RIS processes in each jurisdiction involves a Government agency (eg Federal Office of Regulation Reform) overlooking the work of another Government agency. This is only partial ‘independence’.

A more independent model, such as a Policy & Regulatory Advisory Council or board comprising representatives from business and industry, relevant consumer groups and relevant Government agencies should be adopted to advise on the performance of the RIS process in each jurisdiction.

The P&R Council would report to the relevant Ministerial Council annually on the performance of the RIS process. The Council would audit selected policy instruments/RIS’ and advise on the adequacy of the process and rigour of its analysis. Where policy instruments/RIS’ are found to be inadequate the relevant Minister would be advised with a recommendation to amend the instrument accordingly.

This approach should be developed for the broad scope of policy development including for legislative and regulatory instruments. The model should be used for both national and State/Territory jurisdictions so that savings can be achieved by dismantling the range of existing oversight bodies with the creation of one body.

Consultation documents should be precise, targeted and not be issued unless they include some evidence of cost assessment.

Often it appears the ‘consultation’ process is undertaken to merely ‘tick the box’ rather than used to gather informed input. Where cost information is being elicited, estimations of costings should be available of Government administration and enforcement while indicative estimations of potential industry costs can be made – certainly within categories of costs such as application and renewal of approval costs and record keeping.

Open-ended consultative documents that seek unsubstantiated wish lists from the community are of little value – most people want the best but when faced with the question about willingness to pay, will quickly reach a compromise solution they are prepared to pay for. Wish list documents also raise unrealistic expectations that, when not achieved result in aggrieved citizens. They can also ignite frivolous or vexatious submissions of complaint which have the potential to misguide or delay the process.

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