1 Expectations for regulatory stewardship

1.1 Regulatory stewardship

The concept of stewardship embodies active planning and management of resources or assets that are held on behalf of someone else. The formal decision rights over those assets may be held by someone else, and the assets may be held for the benefit of someone else.

In the case of regulatory stewardship, the formal decision rights over legislation generally rest with Ministers or Parliament, and the beneficial interests in the legislation usually rest with society as a whole. Departments have a stewardship role in the legislation they administer.

Like other assets, regulatory regimes are intended to deliver a stream of net benefits over time and should be managed with that idea in mind. Recent significant regulatory failures in New Zealand demonstrate that how well regulatory regimes are implemented, monitored, and maintained is just as important for regulatory performance as the policy design. Poor administrative management can undermine even the best regulatory frameworks.

Cabinet has agreed that the concept of regulatory stewardship be included in proposed changes to the State Sector Act 1988 in the State Sector and Public Finance Reform Bill currently before Parliament. The proposed changes would require the chief executive of a department[1] to be responsible to the appropriate Minister for the stewardship of the department, including the legislation administered by the department.

1.2 The initial regulatory expectations

On 4 March 2013, Cabinet agreed to a set of initial expectations for departments in exercising their stewardship role over government regulation [CAB Min (13) 6/2B refers].

The regulatory expectations outline at a high level how departments should be designing and implementing regulatory regimes, and their stewardship role in administering those regimes. The expectations are that departments will:

• monitor, and thoroughly assess at appropriate intervals, the performance and condition of their regulatory regimes to ensure they are, and will remain, fit for purpose
• be able to clearly articulate what those regimes are trying to achieve, what types of costs and other impacts they may impose, and what factors pose the greatest risks to good regulatory performance
• have processes to use this information to identify and evaluate, and where appropriate report or act on, problems, vulnerabilities and opportunities for improvement in the design and operation of those regimes
• for the above purposes, maintain an up-to-date database of the legislative instruments for which they have policy responsibility, with oversight roles clearly assigned within the department
• not propose regulatory change without:
  • clearly identifying the policy or operational problem it needs to address, and undertaking impact analysis to provide assurance that the case for the proposed change is robust
  • careful implementation planning, including ensuring that implementation needs inform policy, and providing for appropriate review arrangements
• maintain a transparent, risk-based compliance and enforcement strategy, including providing accessible, timely information and support to help regulated entities understand and meet their regulatory requirements, and
• ensure that where regulatory functions are undertaken outside departments, appropriate monitoring and accountability arrangements are maintained, which reflect the above expectations.

1.3 Annual review of the regulatory expectations

Treasury has been tasked with progressively developing more specific regulatory expectations and guidance covering key aspects of regulatory management. We will do this in close consultation with major regulatory departments.

International practice in this area is evolving so we will be learning from emerging experience on what specific approaches appear to have the most promise.

We expect that the regulatory expectations will be reviewed annually and adjusted as necessary. Treasury, working with DPMC and SSC, will be responsible for the review process, and ongoing guidance and training.

1.4 Monitoring and reporting

Although the regulatory expectations have never been systematically outlined and monitored, they are not new ideas. Departments undertaking good regulatory practice will already be meeting many of the expectations, although it is possible that no department will currently be meeting all of the expectations.

The regulatory expectations are a starting point that signals the direction we need to take to improve regulatory performance in New Zealand. Ministers recognise that it is likely to take departments some time to develop a more systematic and comprehensive approach to the management of existing regulation, particularly under resource pressure. In some cases it may require revised capabilities, processes, and information systems.

Central agencies will be monitoring and reporting progress towards the expectations over time. Reporting will be integrated as far as possible with existing agency reporting and central agency oversight arrangements, and will be developed over time alongside the regulatory expectations.

This year Treasury is seeking information through the Regulatory System Report that departments have provided in previous years on current regulatory management arrangements. This information will provide useful baseline data for future monitoring and reporting against the regulatory expectations.

The regulatory expectations and system report also complement the ongoing development of the Performance Improvement Framework. The regulatory component of this assessment tool is scheduled to be updated and expanded in late 2013.