"Significance" and RIA
The strengthened Regulatory Impact Analysis regime has been in place since 1 April 2007 and has a number of important differences from the "old" regime. The key differences are outlined in the Cabinet Office Circular CO (07) 3 and discussed further in the Regulatory Impact Analysis Guidelines. Two of the key changes are to the role of the Regulatory Impact Analysis Unit (RIAU) and the increased analytical requirements associated with Regulatory Impact Analysis (RIA).
Significance
The RIAU is now focussed on regulatory proposals that are likely to have a significant impact on economic growth. There has been considerable debate around defining 'significance'. The Cabinet Office Circular contains guidance on significance and despite there being some "greyness" about the definition, our impression is that generally the tests have been applied consistently across different agencies. Over the course of the past seven months we have had a number of discussions with agencies about whether proposals are significant or not. It is important that agencies consider the guidance in the Circular and form their own view before progressing too far.
The RIAU encourages agencies to discuss the question of significance with the unit at an early stage. If a proposal is not significant, it doesn't change the adequacy tests or the process requirements, it simply means that the RIAU will not review the RIA and the Regulatory Impact Statement (RIS) and comment on whether they are "adequate". In a few cases significant proposals proceeded to a very late stage before they were sent to the RIAU for review, which resulted in unnecessary difficulties for both the RIAU and the agencies concerned. Given the importance the government attaches to good quality processes, everyone benefits from early discussions.
The RIA undertaken
The RIAU is able to deem the RIA or RIS inadequate if they:
- Fail to explain why the existing framework would not suffice to deal with the problem being addressed;
- Fail to include an appropriate cost-benefit analysis, risk assessment and statement of compliance costs; or
- Have been subject to manifestly inadequate consultation.
In many cases, all of the analysis supporting major policy proposals will not be contained in an individual RIS (or the associated Cabinet Paper). From the RIAU's perspective, it is the nature and depth of analysis that is important to meet the first two adequacy tests set out above for the RIA. The RIAU has been impressed with the nature and depth of analysis undertaken by some agencies prior to the development of a number of regulatory proposals.
One of the key challenges for the RIAU is undertaking the necessary assessments within the timeframes requested by departments. Wherever possible, the RIAU requires 20 days notice of proposals because of the depth of analysis undertaken - less than 20 days does not allow the RIAU to do the analysis justice. In a few cases work has been undertaken on a RIS to address questions relating to points 1 and 2 above that if provided to the RIAU earlier would have relieved a lot of stress on the unit and the agency concerned. In one or two cases, the RIAU has simply had to report to Cabinet that insufficient time was provided by the department to allow for the RIA and RIS to be reviewed for adequacy.
RIA Evaluation Programme
The RIAU is currently conducting an evaluation of departmental compliance with enhanced RIA requirements. A sample of 8 RIAs and 12 RISs for proposals deemed by agencies as not likely to have a significant impact on economic growth, and considered by Cabinet between 1 April and 30 August 2007, have been selected for review. NZIER has been contracted to study the patterns of experience with the strengthened regime and report on areas where things are being done well and areas where compliance with the RIA requirements can be enhanced.
The aim of the evaluation programme is to identify learnings and possible enhancements to the RIA regime as a whole. It is important to note that it is not the intention of the evaluation programme to, in any way, revisit the final regulatory proposals that were presented to Cabinet or final Cabinet decisions.
The evaluation will be completed by the end of February 2007. The evaluation programme is expected to assist everyone in terms of how the significance tests are applied and in learning from the experiences of the last seven months. In addition, the RIAU is considering how to improve the guidance around significance and welcomes any comments and suggestions which can be forwarded to our email address, RIA@med.govt.nz.
Richard Hawke
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