1. Executive Summary
Red tape refers to unnecessary costs to the community, business and government resulting from poorly designed and implemented regulation. Indicators suggest that the extent of red tape nationally is significant and has increased over time. In 2015–16, the World Economic Forum ranked Australia 80 out of 140 countries on the extent of regulatory burden as perceived by business executives, down from 60 in 2010–11 (Exhibit 1). According to the Queensland Competition Authority (2013), the estimated cost of regulation in New South Wales is 0.91 per cent of Gross State Product – compared to 0.96 in Victoria and 1.00 in Queensland.
Between 2011 and 2015 the NSW Government committed to a program of red tape reductions aimed at improving business competitiveness. The program comprised:
- a red tape reduction target of $750 million by June 2015
- a ‘one-on, two-off’ initiative, between 2011 and 2015, requiring the number of repealed legislative instruments to be at least double the number of new instruments.
In addition to these now completed commitments, the NSW Government continues to require new and amending regulatory proposals, with some exceptions, to meet regulatory best practice. The aim is to prevent and reduce red tape by ensuring regulation provides the greatest benefit to the community relative to the costs imposed.
This audit assessed whether government initiatives and processes to prevent and reduce red tape were effective. To make this assessment the audit answers the following questions:
- Did savings initiatives effectively reduce red tape?
- Did the ‘one-on, two-off’ initiative effectively reduce red tape?
- Does the Department of Premier and Cabinet effectively review regulatory proposals to ensure they prevent and reduce red tape?
Overall, NSW Government initiatives and processes to prevent and reduce red tape were not effective. Reported red tape savings were inaccurate and the regulatory burden of legislation increased. Without a full stocktake of regulation, the NSW Government does not know the impact of its regulations on businesses and individuals, or how effectively it has reduced this impact.
Red tape reduction targets resulted in some savings. However, estimates of these savings were, in some cases, based on unverified or unsubstantiated assumptions, cost-transfers, or pre-implementation projections that are yet to be achieved. The targets also did not drive new reform or significant rollback of regulation. The scope of the red tape reduction program allowed for time saved from changes to administrative processes to be the primary driver of the total value of red tape reduced.
Despite the NSW Government meeting the numerical target for reducing the number of legislative instruments, legislative complexity and regulatory burden increased during implementation of the ‘one-on, two-off’ regulation reduction initiative.
The government’s red tape reduction principles are not consistently applied to regulatory impact assessments for new and amending regulatory proposals. There is also a lack of up-to-date guidance to agencies and no central oversight of the assessment process to ensure all options and alternatives are genuinely considered. Clarity on functions is needed to underpin improvements in this area.
Claimed red tape savings were inaccurate
Agencies were required to estimate the value of red tape savings initiatives contributing to the $750 million red tape reduction target. Individual submissions claiming savings of more than $5 million were externally verified by a consultant. In June 2015, the NSW Government reported that it had exceeded its $750 million red tape reduction target by $146 million based on these submissions. However, our examination of savings estimates in the sample we assessed found the following key problems:
- key assumptions were not supported by evidence and data, nor adequately verified
- the link between reforms and benefits was not clearly explained and quantified
- cost transfers were sometimes claimed as savings
- full projected savings were claimed immediately but not always realised in implementation.
The net burden of red tape, and the overall impact of claimed savings, was not accounted for in an overall stocktake of legislative and non-legislative regulatory burden. Accordingly, the impact of the claimed $896 million savings in reducing the overall burden of red tape in New South Wales is unknown.
Targets did not drive new red tape reforms
The scope of the red tape reduction initiative allowed for the majority of initiatives that contributed to the target to be underway or proposed in response to other policy commitments. As such, the target was rarely the driver for new reform, but rather, accounted for benefits related to reforms that were progressed through other mechanisms and commitments. Initiatives also largely aimed to improve the efficiency of administrative processes, rather than remove, reduce or significantly change regulation itself.
Overall legislative regulatory burden increased, despite the numeric test being met
Over the life of the ‘one-on, two-off’ initiative, the Department of Premier and Cabinet (DPC) reported that overall net legislative regulatory burden increased by $16.1 million. Changes to the Public Health Regulation 2012 ($14 million), Fair Trading Regulation 2012 ($5.3 million) and the Tattoo Parlours Act 2012 ($0.5 million) drove this increase and the added regulatory burden from these changes was not significantly offset by reduced burden in other areas.
The numeric test was met with 237 instruments repealed and 54 introduced – an overall ratio of roughly four repeals for every new instrument. However, most of these repeals related to redundant legislation with little or no regulatory burden.
Legislative complexity increased
The ‘one-on, two-off’ initiative did not reduce legislative complexity, as the stock of legislative regulation increased. The number of pages of legislation – a proxy indicator for statute complexity – increased over the life of the policy by 1.4 per cent per year on average. By comparison, over the preceding ten years, the number of pages of legislation had decreased by 1.1 per cent per year on average.
A new red tape reduction framework is required
Given the completion of the red tape reduction commitments, a new framework for reducing red tape is required. This would benefit from a stocktake of the existing number and cost of regulation, and establishing and reporting against red tape minimisation performance targets. This best-practice approach would bring New South Wales in line with other Australian jurisdictions.
Regulatory impact assessments do not consistently demonstrate that red tape reduction principles have been applied
Regulatory impact assessments, developed by departments to accompany regulatory proposals, do not consistently provide a considered assessment of the impacts, benefits and costs of introducing regulation. The analyses and information included in these assessments does not fully justify the additional regulatory burden or consider viable alternatives, and opportunities to minimise red tape are often missed. The current process for regulatory assessment is seen as a ‘tick-the-box’ exercise which adds little value to the decision-making process – particularly in the following circumstances:
- for election commitments or government decisions where the regulatory outcome is unlikely to change
- for complex proposals where understanding and assessing costs and benefits is problematic and time consuming
- for legislative remakes.
No designated oversight function for red tape reform or red tape reduction
Since the abolition of the Better Regulation Office, responsibility for ensuring compliance with regulatory principles and driving regulatory reform rests primarily with departments. This arrangement is unique to New South Wales, as comparable jurisdictions have a designated unit for this purpose. This arrangement also does not effectively manage conflicts of interest. Departments could implement regulation as a means to advance their policy goals without independent and objective oversight of the impact of such approaches on the overall regulatory burden on businesses and individuals.
Regulatory decisions are not transparent
Unlike the Australian Government, the NSW Government does not publish in one place an exhaustive list of final regulatory decisions and assessments. Public access improves regulatory outcomes and accountability by allowing the community to scrutinise government decisions as they are being made.
Responsibilities for oversighting red tape reduction initiatives and regulatory assessment frameworks that were previously undertaken by the Better Regulation Office have yet to be completely transitioned to other units either within DPC or line agencies. Accordingly, while we assign responsibility for these recommendations to DPC, they may be transferred to other agencies once responsibilities are clarified.
By July 2017 the Department of Premier and Cabinet should:
- set a framework for reducing red tape which includes:
- allocating responsibility for the development and oversight of red tape and regulatory reform programs to a dedicated unit within a central agency
- setting departments’ outcomes-based performance indicators for reducing red tape and reporting on departments’ performance against these indicators
- conducting a comprehensive stocktake of the number and cost of existing regulation with a review every five years
- reporting the annual net change in regulatory burden using costs reported in regulatory impact assessments and departmental performance reports
- re-establish a program of targeted reductions of unnecessary regulatory instruments, including non-legislative instruments, informed by reviews of areas of disproportionate regulatory burden
- amend the Guide to Better Regulation so that it:
- establishes more clearly the roles and responsibilities for DPC and line agencies in assessing new and amended regulatory proposals
- requires that regulatory proposals include an assessment of the overall change in regulatory burden
- requires non-compliant proposals to be subject to a post-implementation review
- sets minimum requirements for regulatory assessment and review of expedited regulatory proposals, such as for government commitments and sensitive and urgent matters, where these proposals otherwise would not have been exempt
- establishes more clearly the processes and requirements specific to low, medium and high significance proposals, and in doing so minimises overlap and inconsistency with requirements in the Subordinate Legislation Act1989
- maintain a central public repository for all final regulatory decisions and regulatory impact assessments
- report on completed regulatory assessments, exemptions and non-compliant proposals in an annual report.