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The Big Picture

2. Regulatory quality is an important part of providing a competitive and stable domestic business environment, which is necessary to improve New Zealand's economic performance. There is a balance between actions designed to work through improving the regulatory system, and those intended to achieve specific regulatory priorities.

3. Clear overall regulatory goals, maintained over time, matter because of the difficulty of obtaining a clear line of sight from Ministers overall goals to the coalface where regulators enforce requirements on the regulated community, including firms (Annex A). Ministers can influence the coalface but the instruments available are high level and take time to work. Those instruments include accountability and performance management mechanisms built into the public sector management system, and interfaces with local government. Evidence from Performance Improvement Framework (PIF) reviews to date illustrates the challenges ahead.

PIF Reviews assess agency performance in delivering government priorities and core business activities, as well as their capability to do so in future. Ratings range from green=strong to red=weak. Below are the results to date for two elements of capability strongly linked to regulatory performance.

Figure: PIF Results
PIF Results.

4. PIF reviews have highlighted inadequacies in agency evaluation and review capabilities. International rankings of the regulatory environment show a relative decline for New Zealand (although the regulatory environment remains sound). Our basic regulation standards are high: but there are concerns about performance in designing and delivering key regulatory regimes consistently and in a manner that supports competition and growth.

5. There is a solid foundation in place for ensuring the quality of new regulation through the operation of the Regulatory Impact Analysis (RIA) regime. Agency performance is improving and a community of interest growing based on the value of RIA to agencies.

Cabinet's Regulatory Impact Analysis (RIA) requirements apply to policy processes - RIA is used for the structured exploration of options to address policy issues. Agencies embarking on policy work with potential regulatory implications should complete a Preliminary Impact and Risk Assessment (PIRA) and engage with Treasury to confirm if RIA requirements apply and whether the proposal is significant.

Significant proposals require Regulatory Impact Analysis Team (RIAT) involvement while agencies themselves provide quality assurance for other proposals. Agencies are also encouraged to use the RIA framework to analyse proposals without regulatory implications.

When regulatory proposals go to Cabinet a Regulatory Impact Statement (RIS) outlining the RIA undertaken is attached. The RIS provides a summary of the agency's best advice to their Minister and to Cabinet on the problem, objectives, identification and analysis of the full range of practical options, and information on implementation arrangements. The RIS and attached disclosure statement is the responsibility of the agency, while the paper focuses on the Minister's proposal. Ministers certify whether a proposal is consistent with the Government Statement on Regulation. The paper will include a statement by RIAT or the agency on the adequacy of the RIS - whether it meets/does not meet/partially meets the RIA quality assurance criteria.

All RISs must be published and the link included in the Explanatory Note to Bills. Any significant proposal not meeting RIA requirements requires a post-implementation review.

6. Future system work is envisaged as embedding norms through:
  • promoting principles of best practice regulation backed up by regime assessments (Annex D)
A set of principles has been developed based on international practice and consultation. These are intended to serve both as a test for new regulatory proposals and a diagnosis tool for possible problems with existing regimes. An assessment process has been used to refine the principles and obtain an initial “heat map” of New Zealand's regulatory regimes.

  • improving regulatory scanning and planning, and adding a medium term perspective

Regulatory scans have been used to build up a complete set of primary (statute), secondary (statutory regulation) and tertiary (other) regulation, identifying responsible agencies and whether review is underway or proposed.

Annual regulatory plans cover the actions agencies propose to take in the next year, and a new medium term plan is now being introduced to give a higher level view of what is intended over the next 2-3 years.

  • building regulatory goals into Chief Executive and agency performance expectations, and
  • supporting departments to develop and share best practice.
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