Part 1 - Regulatory Impact Statements: Cabinet Office Requirements
Introduction
1. All policy proposals submitted to Cabinet which result in government bills or statutory regulations must be accompanied by a Regulatory Impact Statement (RIS), unless an exemption applies.
2. The requirement for a RIS has been introduced to improve the quality of regulation making, primarily through ensuring that regulatory proposals are cost-effective and justified.
3. The requirement for a RIS [as set out in CO (98) 5] expands on the requirement to include a Compliance Cost Statement in Cabinet submissions to include information on the total regulatory impact of a proposal for regulatory action. It therefore replaces Cabinet Office Circular CO (95) 14, "Compliance Cost Assessment Framework", 29 November 1995, which sets out the compliance cost assessment requirements.
What is a Regulatory Impact Statement?
4. A RIS is a tool to assist decision-making. It is a method of systematically and consistently examining potential impacts arising from government action and communicating the information to decision-makers. Both the analysis and communication aspects are important. Completion of a RIS will help provide the government with an assurance that new or amended regulatory proposals are subject to proper analysis and scrutiny as to their necessity, efficiency, and net impact on community welfare. This will enhance the government's ability to make well-based decisions.
5. The RIS should be easily incorporated into the assessment process used by policy agencies, as most of the information required should already be considered in the current processes. The RIS formalises and provides evidence of the steps that should be taken in policy formulation, and provides consistency in the presentation of this information in summary form.
Content of a Regulatory Impact Statement
6. The RIS should contain the following information:
- a statement of the nature and magnitude of the problem and the need for government action;
- a statement of the public policy objective(s);
- a statement of feasible options (regulatory and/or non regulatory) that may constitute viable means for achieving the desired objectives(s);
- a statement of the net benefit of the proposal, including the total regulatory costs (administrative, compliance, and economic costs) and benefits (including non-quantifiable benefits) of the proposal, and other feasible options; and
- a statement of the consultative programme undertaken.
At What Stage Should a Regulatory Impact Statement be Prepared?
7. The department, agency, or statutory authority responsible for a regulatory proposal should prepare the RIS, following consultation with affected parties. The RIS is required at the time "in principle" or final decisions on policy are sought from Cabinet, and before the preparation of drafting instructions on the bill or statutory regulations. It does not need to be resubmitted to Cabinet with the actual bill or regulations.
8. A RIS is not necessary for Cabinet submissions that are not seeking in principle or final decisions from Cabinet, although it may be prudent to provide a "work in progress" RIS when intermediate decisions are being sought.
9. To obtain the maximum benefit from the RIS process for new regulation (including amendments to existing regulation), the RIS should be prepared by officials once an administrative decision is made that regulation may be necessary, but before a policy decision is made by the government that regulation is necessary. This means the analytical framework underpinning a RIS will be used throughout the policy development process.
10. For reviews of existing regulation, the terms of reference for the review should reflect the key elements of the RIS, with any reports using a RIS framework. This ensures that the RIS framework is incorporated in the early stage in regulation reviews and is used until a final RIS is prepared, prior to policy decisions being made.
Should a Regulatory Impact Statement be Prepared for all Bills/Regulations?
11. A RIS is required for all policy proposals submitted to Cabinet with legislative implications (leading to government bills and statutory regulations). The RIS should be attached to all Cabinet papers proposing a statutory rule unless the proposal comes within the exemptions listed below.
12. A RIS will not be required if the proposal falls within one of the following specific exemptions:
- where the proposal is of a minor or machinery nature and does not substantially alter existing arrangements;
- where it deals with administrative procedures within or between departments, and does not impact on business, consumers, or the public;
- where it is required to meet an obligation under an international agreement and the regulation primarily repeats or adopts the terms of the agreement, or part of the agreement;
- where it is to give effect, in terms announced in the Budget, to a specific Budget decision, where the decision is to:
- repeal, impose, or adjust a tax, fee or charge; or
- confer, revoke or alter an entitlement; or
- impose, revoke or alter an obligation;
- where it is an Order in Council that provides solely for the commencement of enabling legislation or a provision of enabling legislation.
13. A separate statement, under the heading "Regulatory Impact Statement", should be made in the body of the Cabinet submission indicating that the RIS attached to the submission complies with the requirements set out in Cabinet Office Circular CO (98) 5, or, alternatively, the RIS is not required as it falls within one of the exemptions (specifying which one).
14. In the case of proposals involving Supplementary Order Papers (SOPs), which can lead to significant changes to legislation before a select committee or the House, it is intended that a RIS will not be required. However, the submission to Cabinet on the proposal should identify whether the SOP would alter the content of the RIS that was the basis of Cabinet's decision on the original policy/legislation, and if so, in what way.
Length of Regulatory Impact Statement
15. A RIS should succinctly explain the objectives of government action and why the proposed regulations are the most efficient means of achieving the objectives. The length of the RIS will depend largely on the complexity of the problem under consideration, the number of alternatives to be considered, and the extent of the cost benefit analysis conducted on the regulatory proposal and the alternatives. Typically, the greater the impact and the more complicated a regulation, the more detailed a RIS will become.
16. As a general rule of thumb, the length of a RIS should be no more than 3 pages. The number of pages constituting the RIS is excluded from the 10 page limit prescribed for Cabinet papers.
17. Care should also be taken, when preparing a RIS, to avoid the following:
- discussing peripheral matters and missing or disguising the central issue;
- forgetting the audience the RIS is being prepared for, and assuming prior knowledge of the topic;
- using industry jargon, without explanation, which may not be understood by a lay-person; and
- getting bogged down in technicalities.
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