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Benchmarking regulatory burdens

This report explores the feasibility of benchmarking regulatory burdens on businesses and presents options for performance indicators. It highlights the benefits of benchmarking and the limitations it faces. The report also examines the regulations that can be benchmarked and the methods for data collection.

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Benchmarking regulatory burdens

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  1. Benchmarking regulatory burdens Roundtable11-12 December 2006

  2. Session 1 Background to benchmarking regulatory burdens

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

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

  5. Background:What could be benchmarked? • Benchmark regulatory burdens associated with: • becoming and being a business (licensing and reporting) • doing business (obtaining approvals) • doing business interstate • 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? • Construct a ‘meta’ indicator of overall performance • too complex and subjective • Estimate aggregate compliance costs for a regulation or industry • indicators of direct incremental cost unavailable • incidence of regulation not always known • Benchmark economic costs of regulation • counter-factual usually unknown

  7. Background:What do the studies tell us? • Few examples of regulation benchmarking • not directly applicable to Commission study, but do provide some insights • 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? • Different approaches to suit the circumstances • surveys, case studies, use of existing records • Reference business approach will be prominent • businesses with standardised characteristics (size, industry) • cost-effective, focussed, and comparable • 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? • Regulations that require licences, permits and registrations • State taxes • Commonwealth taxes over time • OHS • covering safety plans and incident reporting • distinction between prescriptive and performance-based compliance

  12. Becoming and being a business:What are the objectives? • 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 • Monitor changes over time

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

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

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

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

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

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

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

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

  21. Doing business interstate:Which regulations? • 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 • Other areas of regulation could be benchmarked for similar reasons

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

  23. Doing business interstate:Which burdens? • Administrative compliance activities that arise because of regulatory duplication and inconsistency across jurisdictions • 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? • Number of duplicate or inconsistent requirements, depending on area of regulation • ‘Notional’ business as the basis of comparison • Proportions out of total compliance requirements • compliance ‘inflator’ from operating or trading interstate

  25. Doing business interstate:How would indicators be measured? • 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 • 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? • All regulations applying to business • by the form • primary legislation • subordinate legislation • quasi-regulation • Regulations applying to a particular business type • number of regulations and regulatory requirements

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

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

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

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

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

  33. The quality of regulation:Which indicators? • Characteristics of regulation • design • administration • enforcement • Mainly qualitative indicators

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

  35. Session 4 The way forward

  36. The way forward:Which regulations? • 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 • Periodic, rolling program more cost effective than annual reporting • Periodically to allow changes in performance to occur and reforms to be introduced • More complex areas could be scheduled after year 1 • Focus could change reflecting changing priorities

  38. The way forward:Benefits and costs • 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 • 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 • Consult and involve business and government • Decide how many and which indicators to report • Develop data collection methods and standards • including the selection of reference businesses • Identify appropriate caveats • Develop templates • Ensure momentum and commitment

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

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