4. Key Findings

1.    Did savings initiatives effectively reduce red tape?

In this section we assess whether the red tape savings target effectively reduced red tape.

The NSW Government’s claim to have reduced the impact of red tape on businesses and the community by $896 million is not based on robust assessments of the value of savings initiatives, and at least half of this claimed achievement is based on weak or unverified assumptions, or has demonstrably not been fully achieved.

While many savings initiatives would likely have reduced the time spent by some businesses and individuals in complying with government regulation, the information used to calculate their overall value was not always based on primary evidence or data. We determined that $369.1 million of the claimed savings from the sample we assessed was based on weak and untested assumptions or poorly described benefits. In addition, we found evidence that $71.2 million in savings claimed in this sample were cost transfers, and a further $27.5 million were as yet not fully realised due to delayed implementation.

Target-setting did not drive new reform resulting in the removal or reduction of legislative and non-legislative regulation. Because administrative costs were within scope of the initiative, savings were often based on streamlining or digitising processes required to comply with regulation, rather than removing or rolling back the regulation itself. Many of these initiatives had been previously identified by departments or DPC and already commenced. That said, the targets and reporting requirements may have expedited delivery of some initiatives.

Red tape savings continue to be made despite there being no current target. A new framework is required to support departments’ red tape reduction efforts.

Recommendations

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
    • performing 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.

1.1      Claimed red tape savings were innacurate

In June 2015, the NSW Government reported that it had exceeded its $750 million red tape reduction target by $146 million (Exhibit 5). 

Exhibit 5: Reported red tape savings

Year

Reforms (no.) Business savings ($m) Community savings ($m) Total Savings ($m)
2011

18

13.5

5.2

18.7

2012

56

179.7

31.0

210.7

2013

91

204.1

55.2

259.2

2014

93

109.2

217.2

326.4

2015

44

38.7

42.1

80.8

Total

302

545.2

350.7

895.8

Note: figures may not add due to rounding.

Source: Department of Premier and Cabinet, 2011-2015, Implemented Reforms – Red Tape Reduction Target.

However, we found that over half of the assessments of savings claimed were not robust and often overestimated savings (see Exhibit 6). The problems with these assessments are:

  • key assumptions were not adequately verified
  • the link between reforms and benefits was not clearly explained
  • cost transfers were claimed as savings
  • full projected savings were claimed immediately but not always realised.

In reviewing the assessments we were mindful of DPC’s principles for estimating savings which included that:

  • cost savings are indicative estimates, but areas of uncertainty should be highlighted
  • cost savings should be presented transparently
  • data sources and assumptions should be clearly stated
  • a consistent methodology should be applied across all cost savings
  • double-counting should be avoided
  • consultation with relevant stakeholders is recommended to help ensure claimed savings are reasonable and representative.

We assessed 23 savings initiatives, which collectively comprised 73 per cent of total dollar savings gained from the 303 red tape reduction initiatives (Exhibit 6). In selecting this sample, we focused on higher-impact initiatives (in dollar terms), and those which were externally verified by DPC’s consultant because they were valued at over $5 million. We assessed the robustness of the assessment as either weak or reasonable based on the information available to DPC and its consultant. Appendix 3 summarises our assessment of savings initiatives.

Exhibit 6: Audit Office confidence in savings

Assessment

Number of initiatives (No.) Savings ($m) Percentage of savings (%)
Reasonable

12

187.5

21

Weak

11

467.8

52

  • key assumptions were not adequately verified

5

276.9

31

  • the link between reforms and benefits was not clearly explained

2

92.2

10

  • cost transfers were claimed as savings

2

71.2

8

  • full projected savings were claimed immediately but not realised

2

27.5

3

Total assessed

23

655.3

73

Not assessed

280

240.7

27

Total

303

896

100

Note: The Audit Office has applied rounding to some figures.

Source: Audit Office analysis.

Key assumptions were not proven and verified adequately

In many cases, the external consultant’s verification improved the robustness of agencies’ estimates by revising down estimates that lacked supporting data, or by correcting errors of fact. For example, the agency submission on the time saved by businesses and individuals from the abolition of registration stickers was revised down by the consultant, reflecting a lack of data to support the claim that businesses would save an average of 15 minutes as a result of the change. The consultant also corrected the agency’s use of light and heavy vehicles in its estimation of savings, given the policy change only applies to light vehicles. This reduced the overall savings claim by $7.4 million, and we assessed this lower savings figure as reasonable.

However, there were still many key assumptions in the agencies’ savings assessments that were not based on primary evidence including research, data and surveys, and which were also not verified by DPC’s consultant.

For example, 80 per cent of vehicle owners who undertake regular service were assumed to benefit from the extended validity of pink slips from six weeks to six months, according to the consultant’s verification of the agency’s savings estimate. This figure is taken from an Independent Pricing and Regulatory Tribunal (IPART) report which assumes that motorists benefit from avoided trips to the mechanic by increasing the opportunities for pink slips to be completed at the same time as a service. While this is a genuine reform that is likely to have benefited a significant proportion of motorists, IPART did not cite any research, consultation or primary data in support of the assumption that as many as 80 per cent of people who regularly service their cars would not already have combined a regular service with a pink slip inspection prior to introduction of the reform.

The link between reforms and benefits was not always clearly explained and quantified

In some cases, the project description did not clearly explain how the initiative resulted in claimed benefits. For example, the State Environmental Planning Policy initiative (2014) claimed savings of $52.4 million from reduced time delays due to the replacement of Development Approvals with Complying Development Certificates for certain developments. In 2014–15, Complying Development Certificates were three times faster than Development Approvals, on average.

However, it is not clear which developments are now eligible to be assessed under Complying Development Certificates and the number of transitioned developments completed per year.

Similarly, the Service NSW Accelerated Distribution Strategy – Digital Migration initiative claimed savings of $39.8 million resulting from travel time savings for transactions performed digitally rather than face-to-face. The assessment claims that benefits will be derived faster because of the initiative, however, it does not explain how this occurs.

Cost transfers were incorrectly claimed as savings

In two cases we found that transfers in costs between groups were incorrectly claimed as savings.

First, the Agency Housing Diversity Package claimed savings of $8.4 million largely from avoiding land holding costs to developers. Holding costs were avoided by allowing the settlement of land before construction completion. However, holding costs – which are an established and readily quantifiable cost for any land holder – were merely transferred to home buyers as they awaited their home to be built. So, net savings for business and the community is nil.

Second, removing the supplier fee on state contracts initiative claimed $62.8 million in savings. However, there is evidence that suppliers were previously recouping this fee in their charges to government, resulting in a nil net change to red tape when the fee was abolished. We found an example of this occurring in our June 2014 performance audit of government telecommunications purchasing power. The report notes that telecommunications suppliers were passing on supplier fees to government agency purchasers, and in some cases continued to do so after the fee was abolished.[1] 

Full projected savings were claimed immediately but not realised

The scope of the red tape reduction target enabled full implementation savings to be claimed immediately. For example, if an initiative was projected to deliver $1 million worth of saving after the tenth year, then $1 million savings could be claimed in the current year of reporting on red tape savings. The Online TAFE Enrolments and Learning Management and Business Reform (LMBR) Parent Portal – Online Payment initiative are examples which used this approach.

This approach is problematic for two reasons:

  • claiming of future savings does not give a true indication of actual savings realised
  • project delays presents a risk to actual savings.

For example, the LMBR Parent Portal – Online Payment claimed savings of $11.4 million per year from, in part, avoided travel time by the assumed 25 per cent of parents that pay school fees face-to-face. This estimate was based on the portal being rolled-out to all NSW Government schools by December 2014. However, as we reported in our December 2014 report on the Learning Management and Business Reform program, the project has encountered a number of delays and technical issues meaning that projected savings were not realised.[2]

The net burden of red tape was not fully accounted for

The NSW Government has not undertaken a stocktake of the total red tape burden in New South Wales, and does not know how high the overall costs of its regulations are to businesses and individuals. This means that it is not possible to assess the impact of the government’s claimed savings under the red tape reduction target within the context of the overall costs of NSW Government regulation to businesses and the community.

That said, at a specific initiative level, where information was available, attempts were made to account for both the costs and the savings from those initiatives. For example, DPC’s consultant estimated net savings of $4.4 million resulting from changes to the Child Protection (Working with Children) Act 2012. This assessment accounted for additional costs such as introducing a fee for a Working with Children Check Clearance and additional savings such as reduction in delay costs. 

1.2      Targets did not drive new reform

As allowed within the scope of the red tape reduction program, the majority of initiatives that contributed to the target had been previously identified by departments or DPC and already commenced. As such, the target was rarely the driver for regulatory reform, but rather, counted benefits related to reforms that were instigated by other policy priorities. In addition, red tape reduction initiatives largely aimed to improve the efficiency of administrative processes for complying with existing regulation rather than to remove or significantly overhaul regulation itself.

Extending the validity of Pink Slips was one of the few examples of the target driving a new reform to be identified and delivered. IPART initially proposed this reform in its September 2014 report, ‘Reforming licensing in NSW.’ The NSW Government requested this review to help achieve its red tape target.

Conversely, major projects such as LMBR, Opal cards and Service NSW were all developed as a result of other priorities or commitments. It is likely that the targets and reporting requirements gave agencies incentives to expedite delivery of some initiatives such as these. However, given there were not significant new regulatory changes as a result of the red tape reduction program, the benefits of the program to businesses and the community are diminished because the focus of the program was in seeking reports on existing activity from line agencies, rather than establishing and driving new regulatory reform priorities.

Some new reforms were identified through DPC’s targeted industry sector reviews of cafes and restaurants, clothing retail, housing construction, print manufacturing, and road freight. The reviews involved ‘standing in the shoes’ of a new business to understand the cumulative burden of regulation and practical problems faced by business, and recommending practical solutions. These reviews provided useful and targeted information by taking a user perspective of reform impacts. Overall, 40 per cent of recommendations from these reviews related to simplifying requirements. However, it appears that few of these recommendations were progressed as part of the red tape reduction program, and opportunities to capitalise on this work may have been missed.

In administering the program, DPC effectively targeted areas of red tape significance as identified by business (Exhibit 7). DPC allocated targets to portfolios based on the following criteria:

  • community contact using number of licences as a proxy
  • historical record of red tape reform
  • confidence in savings initiatives identified by the department and DPC.

However, two areas that were overlooked but identified as significant were environment and industrial relations.

Exhibit 7: Priority of portfolios

Rank Complex regulators Complex portfolios Portfolios with the highest targets
1 Planning Planning and development Finance and services (including WorkCover)
2 Environment Workplace health and safety and workers compensation Transport
3 Industrial relations Employee wages, conditions and superannuation Planning

Sources: NSW Business Chamber 2013, Red Tape Survey, p. 3; Department of Premier and Cabinet, Departmental targets.

1.3      A new red tape reduction framework is required

A more focused framework for reducing red tape would bring New South Wales into line with comparable work underway in other jurisdictions to reduce the impact of unnecessary or overly burdensome regulation. Departments continue to give priority to red tape reductions despite the initiative’s completion and the absence of a current target. Between June and December 2015, DPC reported additional savings of $83.5 million.

A framework will build on this work and provide departments with clearer guidance and impetus to reduce red tape in the future. The framework would benefit from a greater understanding of the stock of regulation and cost of complying with regulation to:

  • ensure transparent reporting of the net impact of any red tape reduction achievements
  • ensure focused effort on areas with high red tape burden
  • provide a benchmark against which departments can track red tape reduction performance.

A recent Victorian Auditor-General’s Office report on red tape reduction initiatives in Victoria highlights the risks to transparency and public accountability of continuing to report on red tape reduction measures in the absence of a baseline measure and clear focus on genuine regulatory rollback:

"The significant level of uncertainty around these estimates of red tape and the significant changes in the scope of red tape programs undermine the validity and clarity of these targets:

  • Such targets convey a level of precision that is misleading and that, at the very least, needs to be fully explained to each program’s intended beneficiaries.
  • The breadth and diversity of those now covered by red tape programs makes a single, unexplained target of little meaning to these intended recipients.”[3]    
  • No jurisdiction, with the exception of the Australian Government (Exhibit 9), has fully accounted for the number and cost of regulation. This is largely due to the presumed complexity and cost of a comprehensive stocktake. Exhibit 8 shows the Australian Government’s framework for reducing red tape, which combines outcomes-based KPIs, measures of good regulatory performance and transparent public reporting on the change in regulatory burden in an annual report.

    Exhibit 8: Australian Government’s red tape reduction framework

    The Australian Government’s performance framework consists of the following elements:

    • Outcomes-based key performance indicators (KPIs), including:
      • regulators do not unnecessarily impede the efficient operation of regulated entities
      • communication with regulated entities is clear
      • actions undertaken by regulators are proportionate to the risk being managed
      • compliance and monitoring approaches are streamlined and coordinated
      • regulators are open and transparent in the their dealings with regulated entities
      • regulators actively contribute to the continuous improvement of regulatory frameworks.
    • Measures of good regulatory performance – used by regulators to assess their achievement of KPIs.
    • Annual red tape reduction report – this reports on:
      • net change in regulatory burden from regulatory decisions taken, implemented and yet to be implemented
      • number of regulatory impact statements, the percentage of compliance with Regulatory Impact Analysis, requirements.

    Sources: Australian Government 2014, Regulator Performance Framework, p. 5; The Australian Government 2015, Annual Deregulation Report.

    A best practice approach to reducing red tape would include a stocktake to establish a baseline measure of regulatory burden. New South Wales could re-establish a red tape reduction program in the absence of a stocktake. However, savings targets have been shown to be an ineffective feature of any program lacking a baseline measure or a strong focus on genuine regulatory reform and rollback.

    An alternative option could be to build on past work with targeted reviews. This could involve a focus on improving performance in areas of disproportionate regulatory burden by monitoring the number and scale of regulators, performance against regulatory impact assessment requirements and better regulation principles.

    Exhibit 9: Australian Government’s stocktake of regulation

    The first Annual Deregulation Report (2014) conducted a stocktake of Commonwealth regulations to estimate the number of regulations and cost of complying with them.

    In 2013, there were 85,719 regulations consisting of:

    • quasi regulation (84 per cent) – rules developed by administrative agencies, such as codes of practice, guidance and accreditation schemes
    • subordinate instruments (14 per cent)
    • primary legislation (two per cent).

    The cost of compliance was estimated at $65.4 billion or 4.2 per cent of Gross Domestic Product. This estimate was based on a sample of burden rather than estimating the cost of individual regulation.

    The measure includes the cost incurred by businesses, community organisations, families and individuals to comply with the essential rules and regulations that every society needs to operate effectively. However, as well as appropriate and necessary regulation, inside the total figure are costs of complying with unnecessary red tape.

    Sources: The Australian Government 2014, Annual Deregulation Report, pp. 26 – 34.

    2. Did the ‘one-on, two-off’ initiative effectively reduce red tape?

    In this section we assess whether the ‘one-on, two-off’ initiative effectively reduced red tape.

    The ‘one-on, two-off’ initiative did not effectively reduce red tape.

    Net legislative red tape burden increased by $16.1 million over the life of the initiative. While this increase was driven by three legislative instruments deemed to be in the public interest, this increase was not offset by a significant reduction in overall legislative regulatory burden. The NSW Government met its numeric target, with approximately four legislative instruments repealed for every one introduced. However, most were repeals of redundant legislation with little or no regulatory impact.

    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 statutory complexity – increased over the life of the policy by 1.4 per cent per year on average. Over the preceding ten years, the number of pages of legislation had decreased by 1.1 per cent per year on average.

    DPC accounted for and verified changes in the net number of legislative instruments and regulatory burden across NSW Government. External review, conducted by a consultant, improved the robustness of underlying assumptions and savings estimates. The consultant also categorised the level of confidence in the estimate as strong, medium or weak to account for uncertainties.

    Recommendation

    By July 2017, the Department of Premier and Cabinet should re-establish a program of reductions in unnecessary regulatory instruments, including non-legislative instruments, informed by targeted reviews of areas of disproportionate regulatory burden.

    2.1      Overall regulatory burden increased over the life of the initiative

    In 2015, DPC reported that overall net legislative regulatory burden in New South Wales had increased by $16.1 million since 2011. 

    Exhibit 10: ‘One-on, two-off’ initiative reporting

    Year

    Added legislation Repealed legislation Numeric test met? Regulatory burden constraint met? Change in regulatory burden
    2011

    14

    152

    Yes

    Yes

    - $1.8 m

    2012

    13

    37

    Yes

    No

    $17.2 m

    2013

    10

    16

    No

    Yes

    - $2.1 m

    2014

    13

    24

    No

    No

    $2.8 m

    2015

    4

    8

    Yes

    Yes

      No  change
    Total

    54

    237

    Yes

    No

    $16.1 m

    Source: Department of Premier and Cabinet 2015, Overview – Red Tape Reporting.

    The following new and amended legislative instruments drove this increase:

    • Public Health Regulation 2012 ($14 million) – required the owners of commercial public swimming pools and spas to improve water treatment and testing to reduce the risk of transmission of diseases.
    • Fair Trading Regulation 2012 ($5.3 million) – required new product information standards for petrol stations to display the price of all fuels sold.
    • Tattoo Parlours Act 2012 ($0.5 million) – introduced a licensing scheme to mitigate risks of outlaw motorcycle gang involvement in the tattoo industry.

    The introduction of these instruments was assessed as being in the public interest because they addressed emerging or uncontrolled risks with proportionate controls. However, the overall reduction in legislative regulatory burden through ‘one on, two off’ was not enough to offset this proportionally small increase.

    2.2      The numeric test was met, but most repeals related to redundant legislation

    The NSW Government met its numeric test –at least two legislative instruments are repealed for every one introduced in any year – in all years except 2013 and 2014 (Exhibit 10). Over the life of the initiative, 237 instruments were repealed and 54 were introduced – an overall ratio of approximately four repeals for every new instrument.

    Although 237 instruments were repealed, this did not lead to significant red tape reduction because most related to redundant instruments which were repealed under the Parliamentary Counsel’s Office Staged Repeal of Statutory Rules. The aim of that program is to simplify legislation by identifying and repealing unnecessary instruments.

    In terms of oversight of the ‘one-on, two-off’, initiative, DPC accurately accounted for and verified changes in the net number of legislative instruments and regulatory burden on behalf of NSW Government agencies. External review, conducted by DPC’s consultant, improved the robustness of regulatory burden estimates. The consultant also specified its level of confidence in the estimate as strong, medium or weak to account for uncertainties.

    2.3      Legislative complexity increased over the life of the initiative

    The ‘one-on, two-off’ initiative did not assist in reducing legislative complexity. According to the Parliamentary Counsel’s Office, minimising the stock of legislation that is unnecessary or out of date is a principle of good regulation because it makes it easier to navigate legislative requirements. Exhibit 11 shows the number of legislative instruments and pages in force between 2000 and 2015. The shaded area represents the life of the ‘one-on two-off’ initiative (2011 to 2015).

    During the initiative, the number of instruments fell from 346 to 340 – a decrease of 0.4 per cent per year on average. However, this reduction was slower than the preceding ten years. Between 2000 and 2010, the number of instruments fell from 502 to 351 or 3.5 per cent per year on average.

    Exhibit 11: Number of legislative instruments and pages in force

    Graph depicting falling trend in legislative instruments in force

    Note: As at 1 September each year.

    Source: New South Wales Parliamentary Counsel’s Office.

    In addition, the number of pages of legislation – another proxy indicator for statutory complexity – increased from 7,450 to 7,876, or an average of 1.4 per cent per year, over the life of the policy. Over the preceding ten years, the number of pages of legislation had decreased by 1.1 per cent per year on average.

    2.4      The initiative did not account for non-legislative (quasi) regulation

    Quasi regulations are the rules developed by administrative agencies or bodies that help to achieve the overarching principles set out in principal acts and regulations. These can include (but are not limited to) codes of practice, guidance, industry-government agreements and accreditation schemes.

    As the initiative’s scope was limited to principal legislation, quasi regulation was not accounted for. However, if the proportion of quasi regulation in New South Wales is similar to that administered by the Australian Government (84 per cent of the total number of regulations) then it is significant. We were not able to estimate quasi regulation in New South Wales as it is not tracked on a whole-of-government basis.

    3.    Does DPC effectively review regulatory proposals to ensure they prevent and reduce red tape?

    In this section we assess whether DPC effectively reviews regulatory proposals to ensure they prevent and reduce red tape.

    DPC checks regulatory proposals to ensure they meet minimum requirements, however, there is no up-to-date framework or mandate for DPC to quality-assure proposals to ensure they undertake genuine regulatory enquiry and reduce red tape.

    Most regulatory impact assessments in the 11 proposals we reviewed did not apply best practice regulatory principles. Opportunities to effectively minimise reduce red tape through this process were not taken up. The regulatory assessment process is considered by agencies to be a ‘tick-the-box’ exercise which adds little value to the decision-making process, particularly in the following circumstances:

    • election commitments or government decisions where the regulatory outcome is unlikely to change
    • complex proposals where understanding and assessing costs and benefits is difficult and time consuming
    • legislative remakes.

    There is no central oversight of regulatory reform or red tape minimisation. Since the abolition of the Better Regulation Office in mid-2013, responsibility for ensuring compliance with regulatory principles rests solely with departments. This arrangement is unique to New South Wales as most jurisdictions have a designated unit for checking compliance. This arrangement also does not effectively manage conflicts of interest. For example, departments may not adequately consider regulatory proposals contrary to their policy position.

    Recommendations

    By July 2017 the Department of Premier and Cabinet should:

    • renew and update the Guide to Better Regulation so that it
      • establishes more clearly the roles and responsibilities for the Department and line agencies in assessing new and amended regulatory proposals for red tape burden
      • 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 Act 1989
    • 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.

    3.1      Regulatory assessments did not adequately minimise red tape or demonstrate that additional burden was justified

    No genuine regulatory inquiry

    In the sample of regulatory proposals we assessed, regulatory impact assessments developed by NSW Government departments did not represent a genuine regulatory inquiry.

    Under DPC’s Guide to Better Regulation (the Guide), all new and amending regulatory proposals must demonstrate that the better regulation principles have been applied. According to the Guide, these principles are the cornerstone of the government’s commitment to good regulation and minimisation of red tape.

    Current practices do not operate to support this commitment and are considered a ‘tick-the-box’ exercise by agencies responsible for addressing the better regulation principles in regulatory proposals, which adds little value to the decision-making process. We found this in a number of cases, including the following:

      1. for government commitments where the regulatory outcome is unlikely to change. Some proposals claimed an exemption from regulatory process because it was an election commitment. However, under the Guide, no such exemption exists
      2. for complex proposals where understanding and assessing costs and benefits is difficult and resource intensive
      3. for legislative remakes. Notably, remakes of Regulations require a Regulatory Impact Statement under the Subordinate Legislation Act 1989, with some exceptions such as machinery of government changes, direct amendments or repeals, and legislation that is uniform or complements Commonwealth legislation or another State or Territory.

    Similar issues were raised in a 2012 Productivity Commission report that found the regulatory process was ‘merely a formal framework for consultation’ or a requirement to be ‘ticked-off’.

    In a number of proposals we assessed, it appeared that a full account of the likely regulatory impact would not have added value because a policy decision had been made that the regulation needed to proceed regardless. In comparison to this situation in New South Wales, the Australian Government’s Guide to Regulation recognises that full and immediate regulatory impact assessments do not add value in every situation. It outlines circumstances where exemptions are reasonable and post-implementation reviews may be used instead.

    Exhibit 12: The Australian Government Guide to Regulation

    The Australian Government requires all Cabinet Submissions, including regulatory proposals to undertake a Regulatory Impact Statement (RIS). Where a RIS is deemed non-compliant, or compliant but not prepared for, then a Post Implementation Review (PIR) must be completed.

    The framework also allows exemptions for circumstances where the immediate completion of a RIS would not be worthwhile. These exemptions include:

    • Prime Minister’s exemptions – the following circumstances may be exempt from an assessment, but a post implementation review should be completed within two years of the decision:
      • urgent and unforeseen events requiring a decision before an adequate assessment can be undertaken
      • matters of Budget or other sensitivity and the development of a RIS could compromise confidentiality or cause unintended market effects
    • costing extension – where a RIS is complete apart from costings and the agency requires additional time to complete costings. Once costs are agreed they are published
    • independent reviews – where an independent review or other similar mechanism has undertaken a process and analysis equivalent to a RIS
    • election commitments – a RIS covering matters subject to an election commitment will not be required to consider a range of policy options. In this situation the assessment should focus on the commitment and the manner in which the commitment is implemented. A PIR may be required
    • carve-outs – can be used when anticipated regulatory changes are minor, likely to occur on a regular basis, or are machinery in nature
    • Cabinet Secretary exemptions – where costs are identified but not offsets
    • revenue raising and protection measures – in this case the RIS need only address the best means of implementing the measure, as full cost benefit analysis is not possible without knowing how the revenue will be spent.

    Sources: Australian Government 2014, The Australian Government Guide to Regulation; Australian Government 2016, Guidance Note: Post-Implementation Reviews.

    Not all regulatory principles were met

    We assessed 11 regulatory proposals against regulatory principles established in DPC’s Guide to Better Regulation (the Guide). All of the proposals were Cabinet-in-Confidence and therefore we are only able to present our aggregate findings.

    Most of the regulatory proposals we assessed did not meet the following principles:

      1. The development of viable options – almost half of the proposals we assessed did not develop a range of viable options as required by the Guide (Exhibit 13). These options should include no action and maintaining status quo.
      2. Costs and benefits are identified – almost half of the proposals did not adequately identify the costs and benefits. The Guide requires that compliance, economic, social and environmental costs be identified as well as direct and indirect impacts. However, most proposals only qualitatively described the impact to those directly affected.
      3. Costs and benefits are evaluated – none of the proposals had evaluated costs and benefits, despite reasonably expecting many to have done so based on their significance. Under the Guide, quantitative or dollar values for costs and benefits must be determined where possible. But the level and depth of analysis applied should depend on the significance of the problem, the type of impacts and availability of data on cost and benefits, and techniques available.
      4. Performance monitoring and reporting is considered – only two proposals set performance indicators. Under the Guide, outcomes and output indictors should be set and reported to determine whether the regulation’s objectives are achieved. Setting these indicators is vitally important for the periodic review of effectiveness and efficiency.
      5. Government action considers effectiveness and proportionality – only one of the proposals considered that objectives would be achieved without imposing undue costs as required under the Guide. The development of a number of viable options would provide a reference point for proposals to demonstrate effectiveness and proportionality.
      6. The option of simplification, repeal, reform or coordination of existing regulation is considered – improving the efficiency of existing regulation was considered for proposals related specifically to the harmonisation of legislation with other jurisdictions and repeals of existing legislation. They were generally not considered for new proposals.

    However the proposals consistently met the following principles:

      1. Consultation with business and the community informs regulatory development – almost all proposals consulted widely and effectively which led to improved regulation design.
      2. Those affected were identified – most proposals identified the stakeholder groups affected.
      3. The objective of government action was clear – most proposals outlined the intended outcome of the regulation.
      4. The need for government action was established – all proposals outlined the reasons for action. However, the Guide did not provide sufficient information on how to assess whether the need for action was legitimate. For example, that the reasons were related to a risk to public health and safety that could best be addressed with a regulatory response.

    Exhibit 13: Number of proposals that met better regulation principles out of 11 reviewed

    Principle

    Number
    The need for government action was established

    11

    The objective of government action was clear

    10

    The impact of government action was understood and costs and benefits were considered

     

    • viable options were developed

    6

    • those affected were identified

    10

    • cost and benefits were identified

    6

    • costs and benefits were evaluated

    0

    • monitoring and reporting of performance was considered

    2

    The effectiveness and proportionality of action was considered

    1

    Consultation with business and the community informed regulatory development1

    8

    The simplification, repeal, reform or consolidation of existing regulation was considered2

    6

    Regulation was periodically reviewed and, if necessary, reformed to ensure its continued efficiency and effectiveness3

    1

    1. Out of nine proposals as information on two proposals was not available.

    2. Out of ten proposals – information was not available for one proposal.

    3. Out of one proposal as only one proposal was a result of a periodic review.

    Source: Audit Office analysis.

    Regulatory proposals’ level of significance was not clear

    It was difficult to determine whether regulatory proposals met the requirement that a Better Regulation Statement (BRS) be completed to accompany significant proposals, because the definition lacks specificity in quantifying significance (see below).

    Under the Guide, all significant new and amending regulatory proposals are required to demonstrate that the better regulation principles have been met through a BRS, and responsible ministers are to determine significance. This is in addition to requirements of portfolio ministers under the Subordinate Legislation Act 1989 to determine whether a RIS is required and ensure the requirements of the RIS are met. For non-significant proposals, application of the principles needs only to be provided in the Cabinet Minute.

    Under the Guide portfolio ministers should generally assess a proposal as significant if it:

      1. introduces a major new regulatory initiative
      2. has a significant impact on individuals, the community, or a sector of the community
      3. has a significant impact on business, including by imposing significant compliance costs
      4. imposes a material restriction on competition
      5. imposes a significant administrative cost to government.

    In contrast to the approach in New South Wales of requiring the responsible minister to determine significance, one of the Queensland Productivity Commission’s Office of Best Practice Regulation’s roles is to determine whether a proposal is significant and therefore requires a Regulatory Impact Statement, or whether a Preliminary Impact Assessment is sufficient. The Victorian Department of Treasury and Finance’s Guide to Regulation also has a clear guideline on what is a significant social/economic burden ($2 million per year). These approaches improve the clarity around requirements and overcome any conflicts of interest.

    3.2      No designated oversight of continued regulatory reform and red tape minimisation

    Under the Guide, DPC, through the then Better Regulation Office, had a role in cutting red tape and advising on whether the principles were met and whether proposed regulatory burden was justified. Since the abolition of the Better Regulation Office, the impetus and accountability for ongoing regulatory reform has not been wholly transferred to other units within DPC or to another agency.

    We were advised that DPC no longer consistently assesses and comments on whether principles are met or proposed regulatory burden is justified. In an arrangement unique to New South Wales, this role is now the responsibility of regulators themselves. The arrangement lacks adequate scrutiny due to potential for conflicts of interest. For example, departments may 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.

    Other jurisdictions have a designated unit, which in some cases is independent to policy-makers and regulators, to advise on whether principles are met and whether regulatory burden is justified (Appendix 5).

    DPC still advises Cabinet on whether it agrees with regulatory proposals, including checking whether the requirement for assessing regulatory burden has been met. However, the advice provided did not consistently consider key regulatory principles in detail for most of the regulatory proposals assessed. We were advised that time constraints on processing Cabinet proposals were a key factor impacting on the quality of advice provided by DPC. 

    Guidelines are out dated

    The regulatory guideline requires updating. It was last updated in 2009, whereas Victoria, Queensland and the Australian Government’s guides were updated in 2014, 2014 and 2013 , respectively. It contains references to ministers and bodies that no longer exist such as the Minister for Regulatory Reform and the Better Regulation Office, and therefore does not assign clear and delineated roles in the present context.

    Regulatory decisions are not transparent

    DPC does not publish in one place, or hold in a central repository, an exhaustive list of final regulatory decisions, RISs and BRSs. Public access improves regulatory outcomes and accountability by allowing the community to scrutinise government decisions. In contrast, the Australian Government publishes a listing of all its decided regulatory proposals, and those decided by Council of Australian Governments and Ministerial Councils, on its Best Practice Regulation Updates website (http://ris.dpmc.gov.au). This website is maintained by the Office of Best Practice Regulation. The website publishes non-compliant RISs regardless of whether they may attract unfavourable scrutiny.

    We were advised that Consultation RISs are made available on departmental websites for a fixed period of time and in the government Gazette. DPC only publishes a selection of RISs on its website once a decision has been made.

    The Australian Government also publishes an annual best practice regulation report which outlines the number of proposals exempted, including the reasons for exemption, and the number of non compliant proposals. The report provides information on whether regulations have been subjected to a post-implementation review as required under the guidelines.

    [1] Audit Office of New South Wales 2014, Making the most of government purchasing power – telecommunications, p. 13.
    [2] Audit Office of New South Wales 2014, The Learning, Management and Business Reform Program.
    [3] Victorian Auditor-General’s Office 2016, Reducing the Burden of Red Tape, p.18.