Federal Government Sidesteps Best Practice Regulation

The Annual Report of the Office of Best Practice Regulation (OBPR) confirms the Business Council of Australia’s recent assessment of the declining performance of the Commonwealth Government in complying with its own rules on regulation-making.

In November, the BCA released its 2010 Scorecard of Red Tape Reform, which showed an assessment that the Commonwealth’s performance on regulation-making had gone backwards since our previous scorecard.

This assessment was based on the reduced checks and balances in place around regulation-making processes, such as diminished independence arrangements, and less than perfect regulatory impact statement (RIS) processes and consultation processes.

“Despite coming to office promising to target the regulatory burden on business as a way to boost productivity, the government’s red tape performance continues to deteriorate,” BCA Chief Executive Katie Lahey said.

“The OBPR’s report is particularly disappointing because it not only shows the government’s performance on a negative trend, but it also highlights the government is not following its own rules.

“The Commonwealth Government administers some of the most important economic laws, such as those dealing with tax, trade, competition and corporations. This makes it especially important that regulation-making complies with best practice processes including cost–benefit analysis, evidence-based decision making and consultation.

“However, proposals to change significant economic laws are continuing to be announced with little or no consultation including price signalling, employee share schemes, termination payments, fuel watch and mining tax proposals,” Ms Lahey said.

It was disappointing to see from the OBPR’s Annual Report that the Commonwealth’s compliance with best practice regulation requirements fell from 85 per cent in 2008–09 to 84 per cent in 2009–10, after having already fallen from 90 per cent in 2007–08.

Additionally, the report found the publication of regulation impact statements fell from 84 per cent in 2008–09 to 80 per cent in 2009–10. Compliance with RIS requirements stood at 91 per cent in 2007–08.

The OBPR Annual Report highlights that to “address this trend” the federal government has amended the RIS processes with effect from 1 July 2010.

“The answer to these developments however, is not to water down the rules for regulation-making to make it easier for governments to comply with its own requirements,” Ms Lahey said.

“For example, the creation of an ‘election commitment’ RIS would focus the analysis on the manner of implementation of an election commitment rather than all the options available to achieve the desired outcome.

“And it is unclear why RISs are no longer required to compare options, as this would normally highlight the option with the greatest net benefit to the community.

“If anything, this red tape performance underscores the imperative to reinvigorate rules around regulatory best practice so that governments are obliged to improve.

 “That is why the BCA has recommended that the RIS processes such as the newly created election commitment RISs should be reviewed, so that we can all be comfortable that good process, including cost–benefit analysis, is undertaken for all significant regulatory proposals. Election promises should not be exempt,” she said.

The OBPR Annual Report also identifies a number of regulatory proposals which for ‘exceptional’ reasons meant they were not subject to a regulatory impact assessment before being introduced. This included a number of significant Bills relating to the implementation of the NBN and income tax measures.

“These Bills will have significant impacts on the economy and business and therefore a full assessment of their costs and benefits was warranted,” Ms Lahey said.

“The government’s best practice requirements require post-implementation reviews to start within one or two years of the regulations being implemented. Given the nature of those proposals it is essential that this requirement is properly met. We will monitor these reviews.

“It is especially disappointing that the Treasury continues to be the worst offender against the best practice requirements. This department, more than any other, should be able to assess the range of viable options – including non-regulatory options – and their costs and benefits.

“With Australia’s productivity performance flagging it is imperative that the government do all it can to support improvements in the efficiency of the economy. Unless its performance in regulation making is improved businesses will be increasingly held back by a red tape ball and chain.

“Shackling business is no way to lift our productivity,” Ms Lahey said.