Goldsmith, Seymour eye more robust regulatory analysis

The measures form part of the government's response to a 2014 Productivity Commission report.

Regulatory Reform Minister Paul Goldsmith and his under-secretary David Seymour want government officials to provide more robust regulatory analysis under a tighter framework to avoid poor advice typically undermined by seeking a preordained solution.

The government today announced changes to the regulatory impact analysis (RIA) requirements to boost the use of economic and cost-benefit analysis, ensuring the work is fit for purpose, increasing its transparency and encouraging earlier and broader consultation, Goldsmith and Seymour said in a statement. The measures form part of the government's response to a 2014 Productivity Commission report on regulatory practices and draw on an independent review by consultancy Castalia.

"At the core of the regulatory management strategy is the government agencies' role as regulatory stewards and the expectation that they will actively monitor and maintain regulation to ensure it delivers the intended benefit," Goldsmith said. "While we have a well-established reputation for our fiscal management and reporting disciplines, the challenge is to build that same level of discipline around government regulation."

In its 2016 annual report, the Treasury found 78 percent of significant regulatory impact statements (RIS) met the required levels in the year ended June 30, 2016, an improvement from the 63 percent level a year earlier but falling short of the department's 90 percent target. The government's financial adviser said there were a number of reasons why the reports fell short of expectations and it was investigating ways to improve other departments' performances.

Castalia's review found an even split of 'high quality' and 'low quality' assessments, with the difference between the two mainly influenced by policy processes that didn't embed the regulatory impact analysis requirements.

Lower quality assessments tended to view the regulatory impact statements as a "tickbox" exercise, and "was most prevalent when RIS authors or ministers had already decided on the nature of the problem or the preferred solution, leading to RISs with poor problem definitions and weak options analysis," Castalia said. "In several instances, officials had already presented 'high-level' policy papers to their minister and sought a steer before drafting a RIS; this created difficulties when a full RIA analysis undermined the original preferred option."

Castalia recommended the regulatory impact analysis team in the Treasury work with departments to help them lay groundwork when formulating policy, and outline the expected level of analysis and resourcing expected for different types of analysis.

Seymour said the changes were in line with Castalia's findings and would help make regulation more robust.

"The changes also reflect feedback from the business community suggesting costs of regulation are insufficiently considered," he said.

Earlier this month, Chapman Tripp partner and chair Victoria Heine said the expansion of regulatory regimes and increased budgets was pushing government oversight to a "tipping point" where the costs start outweighing the public benefits, when releasing a report on dispute resolution in New Zealand.

At the time, New Zealand Initiative senior fellow Bryce Wilkinson said governments tend to regulate in response to the public demanding a response to something "without enough checks and balances to make sure that the response to that public anxiety is a sensible one in terms of the essential wellbeing of the community."

Wilkinson said one of the tensions was that ministers need to rely on their department's expertise to provide cost-benefit analyses, but that it's "hard for a department to produce an assessment which is critical of a preannounced policy of its own minister."


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