Benchmarking regulatory burdens Roundtable December 2006

2 Session 1 Background to benchmarking regulatory burdens

3 Background: What were we asked to do? n Conduct a feasibility study (Stage 1)  to develop feasible performance indicators and options for benchmarking regulatory burdens on business n Subject to COAG consideration, proceed to an implementation study (Stage 2)

4 Background: Why benchmark regulatory burdens? n Benchmarking to improve regulatory regimes  understanding nature and size of burdens leading to: yardstick competition greater accountability and transparency continual improvement n Reducing unnecessary burdens could improve economic performance

5 Background: What could be benchmarked? n Benchmark regulatory burdens associated with:  becoming and being a business (licensing and reporting)  doing business (obtaining approvals)  doing business interstate n Benchmark regulatory environment  changes to stock of regulation over time  quality of design, administration and enforcement  benchmark against policy targets and monitor reform progress

6 Background: What cannot be done? n Construct a ‘meta’ indicator of overall performance  too complex and subjective n Estimate aggregate compliance costs for a regulation or industry  indicators of direct incremental cost unavailable  incidence of regulation not always known n Benchmark economic costs of regulation  counter-factual usually unknown

7 Background: What do the studies tell us? n Few examples of regulation benchmarking  not directly applicable to Commission study, but do provide some insights n Key insights  benchmarking regulatory burdens is feasible  importance of making assumptions and caveats explicit  basis for inter-jurisdictional comparison required (‘reference business’)  subjecting information and data to robustness tests

8 Background: What are administrative compliance costs?

9 Background: How might the data be collected? n Different approaches to suit the circumstances  surveys, case studies, use of existing records n Reference business approach will be prominent  businesses with standardised characteristics (size, industry)  cost-effective, focussed, and comparable n Not a statistically representative sample  non-probability, judgemental sampling of a limited number of businesses

10 Session 2 Benchmarking regulatory compliance costs

11 Becoming and being a business: Which regulations? n Regulations that require licences, permits and registrations n State taxes  Commonwealth taxes over time n OHS  covering safety plans and incident reporting  distinction between prescriptive and performance-based compliance

12 Becoming and being a business: What are the objectives? n Reveal existence and source of any unnecessary burdens for regulation with common objectives  after adjusting for any activities justified by a specific regulatory objective and benefit n Monitor changes over time

13 Becoming and being a business: Which burdens? n Administrative compliance activities required by regulation  involving one-off, recurring and ongoing costs n Includes certain non-paperwork costs

14 Becoming and being a business: Which indicators? n Administrative compliance costs  price x time x quantity + other non-paperwork costs  indirect measures  businesses assumed to be ‘normally efficient’ and fully complying n Compliance complexity  proxies for cost

15 Becoming and being a business: How would indicators be measured? n Face-to-face interviews  SCM and BCC used n Reference businesses  range of reference business sizes to account for any differences in activity costs

16 Doing business: Which regulations? n Regulations requiring approvals and setting out approval processes n State and local government n Australian Government

17 Doing business: What are the objectives? n Reveal existence and source of any unnecessary burdens for approval processes  with common objectives and similar complexity n Identify opportunities to improve processes n Monitor changes over time

18 Doing business: Which burdens? n Delays and uncertainty which can result in capital holding costs n Administrative compliance activities associated with the approval process

19 Doing business: Which indicators? n Measures of timeliness and certainty n Contextual information  which could also be used as indicators n Administrative compliance cost indicators n Choice of indicators to depend on the regulation n Indicators should not be interpreted in isolation of the other indicators

20 Doing business: How would indicators be measured? n Use existing government data collections as far as possible  to minimise burden on government n Information collected for reference activities n Provide criteria for indicators involving subjective assessment by experts

21 Doing business interstate: Which regulations? n Areas of regulation where governments have agreed a national approach would reduce regulatory burden, for example:  occupational health and safety (OHS)  personal property securities  consumer product safety n Other areas of regulation could be benchmarked for similar reasons

22 Doing business interstate: What are the objectives? n Reveal existence and source of any unnecessary burdens for interstate business or trade n Identify opportunities for greater harmonisation n Monitor changes over time

23 Doing business interstate: Which burdens? n Administrative compliance activities that arise because of regulatory duplication and inconsistency across jurisdictions n Other economic costs would be excluded from the benchmarking  such costs might be considered in choosing area to benchmark

24 Doing business interstate: Which indicators? n Number of duplicate or inconsistent requirements, depending on area of regulation n ‘Notional’ business as the basis of comparison n Proportions out of total compliance requirements  compliance ‘inflator’ from operating or trading interstate

25 Doing business interstate: How would indicators be measured? n Detailed analysis of regulation in each jurisdiction by industry experts  methodology agreed among interested parties appropriate to area of regulation  agree the ‘notional’ business(es) or business activities n Existing work by Ministerial Councils or other groups charged with harmonisation

26 Session 3 Benchmarking the regulatory environment: (quantity and quality)

27 The quantity of regulation: Which regulations? n All regulations applying to business  by the form primary legislation subordinate legislation quasi-regulation n Regulations applying to a particular business type  number of regulations and regulatory requirements

28 The quantity of regulation: What are the objectives? n Reveal potential unnecessary burdens resulting from the growing amount, complexity and reach of regulation n Provide contextual information for interpretation of results generally n Monitor over time n Track reform progress  against baseline measure  against targets set by governments

29 The quantity of regulation: Which indicators? n Primarily count indicators  for the total stock  for a particular business type n Primarily contextual information  rather than indirect indicators of unnecessary burden

30 The quantity of regulation: How would indicators be measured? n Most indicators would be measured through an assessment of the relevant regulation  criteria might be required to ensure consistency n Government agencies could be used to attain further information n Reference businesses and business activities used for a particular business type

31 The quality of regulation: Which regulations? n All regulations applying to business  specifically, how they are designed, administered and enforced n Do not need to have the same objectives to be comparable

32 The quality of regulation: What are the objectives? n Reveal the potential for unnecessary regulatory burdens due to departures from accepted best practice n Identify systemic problems in regulatory processes n Monitor over time

33 The quality of regulation: Which indicators? n Characteristics of regulation  design  administration  enforcement n Mainly qualitative indicators

34 The quality of regulation: How would indicators be measured? n Many indicators would require expert assessment  which could be subjective  criteria required to guide assessments n Government agencies would have to be involved n Legal experts could be consulted

35 Session 4 The way forward

36 The way forward: Which regulations? n Prioritisation is essential  COAG’s ‘hot spots’ first  areas of greatest concern to business  capacity for benchmarking to identify unnecessary burdens  possible inclusion of New Zealand

37 The way forward: Program scheduling n Periodic, rolling program more cost effective than annual reporting n Periodically to allow changes in performance to occur and reforms to be introduced n More complex areas could be scheduled after year 1 n Focus could change reflecting changing priorities

38 The way forward: Benefits and costs n Likely costs and benefits  costs would be significant, although difficult to estimate in advance  even greater uncertainty over benefits, but the benefits could be substantial and orders of magnitude greater than the costs  cost effectiveness cannot be determined until experience gained

39 The way forward: Key program elements n Key elements of the suggested program:  modest coverage initially (but all types of burdens)  focus on ‘hot spots’ early on  periodic, rolling program

40 The way forward: Implementation issues n Consult and involve business and government n Decide how many and which indicators to report n Develop data collection methods and standards  including the selection of reference businesses n Identify appropriate caveats n Develop templates n Ensure momentum and commitment

41 The way forward: Discussion points n Is benchmarking likely to offer net benefits? n What are the highest priority regulatory areas to benchmark? n How should any program be scheduled? n What are the key implementation issues, concerns and possible pitfalls?