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Regulatory Impact Analysis Handbook

Part 2: Undertaking RIA

This section provides guidance on undertaking the regulatory impact analysis (RIA) that will ultimately be summarised in the Regulatory Impact Statement (RIS) accompanying Cabinet recommendations.

1  The Regulatory Impact Analysis (RIA) Steps

This section describes the key elements of good Regulatory Impact Analysis (RIA). These elements should underlie the development of any policy for Cabinet consideration to which the RIA requirements apply, and should be summarised in the RIS.

This guidance is detailed because RIA is expected to deal with various policy problems and a ‘one-size-fits-all' approach is not possible. Good RIA is essentially just robust policy development within a transparent framework, so several factors will be relevant to particular regulatory proposals. The detail in this guidance should not suggest that a resulting RIS (as a summary of the RIA) should be lengthy and overly detailed.

2  Describe the status quo

RIA involves assessing one or more policy options against the situation expected to occur in the absence of any further government action or decisions (the status quo).

The description of the status quo should cover the following key features of the current situation.

2.1  Features of the market or relevant social arrangements

The description of the status quo should include consideration of the relevant prevailing market conditions or social arrangements. This may, for example, include expected demand and supply trends, and other features or characteristics such as relevant market participants or agents. This means identifying the producers, suppliers, retailers, consumers, beneficiaries, regulators, any other interested parties, and describing their interests.

RIA needs to be forward-looking in order to assess alternative options for dealing with a problem over time. It is therefore useful to identify how the status quo is likely to change over time without further intervention - rather than simply providing a static snapshot.

2.2  Existing legislation/regulations

The status quo should describe any existing legislation/regulations, or other relevant government interventions or programmes that are in place.

If there are non-regulatory, self-regulatory, or co-regulatory arrangements in place, these also form part of the status quo. The description should be detailed enough to enable an interested (but non-expert) member of the public to understand:

  • who are the relevant parties and institutions - both public and private, regulators and regulatees, quasi-governmental, unions or clubs, and charitable organisations, etc
  • what are the different incentives and observed behaviours of those parties and institutions, and
  • what are the tools or resources those parties and institutions currently have available.

2.3 Any relevant decisions that have already been taken

Any relevant decisions that have already been taken should also be taken into account, including decisions that have been agreed by Cabinet but for which the legislation has not yet been passed.

If Cabinet has previously considered a proposal, for instance by directing or limiting scope for officials starting work on an issue which is in its early stages, prior decisions should be described in the status quo of the RIS. Previous related RISs should be briefly summarised and referenced so that the public can follow the overall RIA.

2.4 Confidence and supply agreements

Confidence and Supply agreements generally commit to specific policy options to achieve set objectives. These commitments are outside the Cabinet decision making process.

The analysis undertaken by Agencies in these situations usually focuses on design and implementation issues for the stipulated option. However, the RIS should at a minimum include information on:

  • the merits of the policy objectives (if any) sought to be achieved by the specific commitment in the confidence and supply agreement
  • the nature of the policy problem that is being addressed, and
  • any alternative options for achieving the objectives / solving the problem that were not considered because of directions as to the scope of the policy process, and whether any of them might better achieve the objectives / solve the problem.

In some circumstances a full analysis will be both feasible and desirable - and may already have been undertaken by the Agency. In such cases, and where the issues at stake are significant, the RIS should include the full analysis. RIAT should be consulted where there is any doubt about the RIS to be prepared in these circumstances.

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