Self-Regulatory Model and RIAU Involvement
Departments Responsible for Meeting the Requirements
19. As with the previous RIA regime, departments are responsible for meeting all of the requirements. In the new regime, the Regulatory Impact Analysis Unit (RIAU) in the Ministry of Economic Development (MED) will have a focussed role; it will only be involved in the relation to proposals that are "likely to have a significant impact on economic growth" (see paragraph 24), including assessing for adequacy the RIA analysis and the RIS. For other proposals, departments need to assess the adequacy of the RIA analysis and the RIS.
What Systems Should Departments Have in Place to Meet the RIA Requirements?
20. Departments need to ensure that they comply with the RIA requirements. They need to indicate in Cabinet papers whether the RIA requirements apply and whether they have complied with the requirements, particularly whether the analysis and the RIS are adequate (see paragraph 59). Departments may achieve this in different ways, for example:
- having an in-house expert or central unit who can advise people in the department and check for compliance (a central unit may be the most efficient and effective way of ensuring compliance and quality);
- having all policy managers or at least one member of each policy team fully conversant with the requirements so they can advise their team.
21. Departments can contact the RIAU for further information on the requirements, but need to take ownership for implementing the regime.
Role of RIA Reference Group
22. The RIA Reference Group (RIARG) is part of the new self-regulatory RIA regime. It is made up of representatives from departments at deputy secretary/general manager level. RIARG has two parts to its role.
- First, it will oversee the implementation of the new RIA regime. As with any new regime there will be issues that become apparent on implementation that may need to be resolved and lessons that should be systematised.
- Second, as with best practice self-regulatory bodies, the role of RIARG is to hold members to account for the quality of their regulatory impact analysis. There are a variety of mechanisms that could be used to support this role including benchmarking, stocktakes and auditing a sample of RISs on an annual basis. It was agreed that given the strategic oversight and governance nature of the group, the RIARG's focus would be on general issues (such as aspects of policy development that can be improved across the board), not the quality of individual RISs.
RIAU Has Involvement If the Proposal Is "Likely to Have a Significant Impact on Economic Growth"
23. The Regulatory Impact Analysis Unit needs to be involved in the development of proposals that are likely to have a "significant impact on economic growth" (it will not have involvement in the development of any other proposals). This involvement consists of:
- commenting on discussion documents to ensure that the design of the discussion document is likely to enable the department to do adequate analysis after stakeholder feedback has been received;
- reviewing the analysis to determine whether it is adequate (see paragraph 40); and
- reviewing the RIS to determine whether it is adequate (see paragraph 43).
24. To determine whether proposals fit into this category, departments, in consultation with the RIAU, must apply the following tests.
A - Will the proposal affect:
- businesses' ability or incentives to innovate, invest or operate; or
- competition in markets, the ability to enter markets, or the structure or make-up of any markets; or
- the degree of international connection between New Zealand and overseas markets, particularly the single economic market between New Zealand and Australia; or
- the cost or availability of infrastructure or related services; or
- the availability of, or access to, finance for business growth?
If No: Agency responsible
If Yes:
Is the impact on the above factors large?
if Yes: Reviewed by RIAU
If No:
B - Is the proposal:
- from an economic point of view, novel or contentious or in a novel or contentious area; or
- likely to have a disproportionate impact on a sector, region or part of the economy; or
- likely to create inconsistency between New Zealand's domestic law and the Trans-Tasman Mutual Recognition Arrangement; or
- likely to restrict economic activity (for example, requires licensing for or bans an economic activity)?
If Yes: Reviewed by RIAU
If No: Agency responsible
Significance Tests - Frequently Asked Questions
1. What is the relative importance of boxes A and B?
Box A should be given more emphasis than Box B.
2. What does "large" mean?
Whether an impact is large is necessarily a judgement call, but an impact is likely to be found to be large if, when quantified, the impacts total $1 million or more, or affect 15,000 or more businesses. This includes all impacts, whether social, economic, cultural or other.
3. What does "novel or contentious" mean?
This should be interpreted narrowly. By their nature, almost all changes to the law impact on someone and impose costs and are therefore contentious to a degree. "Novel and contentious" should be interpreted as covering proposals that are particularly novel or contentious, such as a proposal to licence in an area in which no other country has a licensing (or a similar) regime or a proposal to accept goods as "safe" based on compliance with another country's standards, even if the standards are lower than New Zealand's standards.
4. What does "disproportionate impact on a sector, region or part of the economy" mean?
This should be interpreted narrowly. A "disproportionate impact" has to be more than merely treating one sector, region or part of the economy different from another sector, region of part of the economy. The difference in treatment has to be such that the sector, region or part of the economy disproportionately affected faces a substantially higher burden.
5. What if I am still unsure about whether my proposal is "likely to have a significant impact on economic growth"?
If you are unsure whether your proposal is "likely to have a significant impact on economic growth", contact the RIAU.
Timeframes for Review by the RIAU
25. Discussion documents: Generally the RIAU will need 10 working days to comment.
26. Analysis and RIS: Briefing of the RIAU on the policy development process and/or discussing the draft analysis should begin 20 working days (if possible) before the department requires the RIAU to provide an "adequacy" statement for inclusion in the Cabinet paper and RIS. The analysis should be submitted to the RIAU as soon as it is completed (in whatever form it is available - departments are not expected to compile new documents). The RIS needs to be submitted to the RIAU 10 working days before the "adequacy" statement is to be provided.
27. Being kept informed during the development of the policy will make it easier for the RIAU to review the analysis and will help the department ensure that it receives an "adequate" statement from the RIAU at the end of the process. Where the RIAU has seen discussion documents early in the policy process, the review process at the end is likely to take less time.
Timeline - RIAU Timeframes
RIAU timeframes for commenting on discussion documents and advising on the adequacy of the analysis and RISs:
- Discussion document drafted
- Discussion document submitted to RIAU
(5-10 days needed for the RIAU to comment)
- Discussion document submitted to Cabinet (where applicable)
- Discussion document circulated to stakeholders
- Submissions received
- Submissions analysed
- Further analysis conducted, pulling together of final advice
- A. Discussions with RIAU on RIA analysis and RIS begin
(at least 20 working days before adequacy required)
- B. Analysis submitted to RIAU
(as soon as possible after discussions have begun)
- C. Draft RIS (with Cabinet paper) submitted to RIAU and other departments
(10 days before RIS needs to be adequate)
- RIAU provide statement as to whether analysis and RIS are adequate
- Proposal submitted to Cabinet
28. At A, the RIAU, to plan its review process, will collect information on the form in which the analysis will be conveyed to the RIAU by the department (discussion documents, summary of submissions, discussions with RIAU, any relevant data, and so on) and seek general information on the policy development and the proposal.
29. At B, the RIAU will begin testing the analysis against the adequacy criteria, and will start building up a list of the areas in which it has questions for the departments. Up until adequacy is finally assessed, the RIAU and the department will engage in an iterative process, with the RIAU indicating issues to be addressed or requiring clarification.
30. At C, the department will send the RIS to the RIAU for assessment of adequacy.
If the RIS or the Analysis Is Inadequate
31. Where the RIS and/or RIA analysis are inadequate (either determined by the department or the RIAU), the RIS and Cabinet paper will need to state this and will need to indicate the ways in which they are inadequate. Where the RIAU has reviewed the RIA analysis and the RIS and one or both is inadequate, the RIAU will also inform the Minister of Commerce of this. Inadequacy does not stop the proposal going to a Cabinet Committee or Cabinet, though the likelihood of the recommendations being agreed to is reduced.
32. Note that if the RIAU determines that the RIA analysis or the RIS are inadequate, this decision is final.
Consequences of Not Complying with the Requirements
33. The RIA requirements are Cabinet requirements, so failure by an agency to comply means the responsible Minister is in contravention of Cabinet processes.
34. The RIARG is proposing to convene a panel to carry out an annual audit of compliance with the RIA requirements. Any non-compliance is likely to be picked up in the audit.
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