4.3  New Zealand‘s regulatory quality regime

New Zealand’s regulatory quality regime is still in an early stage of development, but is already demonstrating the same issues as overseas jurisdictions.

4.3.1  Development

Cabinet originally agreed to Compliance Cost Assessment (CCA) requirements in November 1995 with CCA guidelines released by the Ministry of Commerce in January 1997. The Government agreed in 1997 to a Code of Good Regulatory Practice (the Code), based on the principles of effectiveness, efficiency, equity, transparency, and clarity, and a Generic Policy Development Process (the Process) (MoC, A and MED, B). It also agreed to require a Regulatory Impact Statement (RIS) with any policy proposal to Cabinet that would result in government Bills or statutory regulation unless an exemption applied (MoC, 1999 and Cabinet Office, A). This superseded the Compliance Cost Assessment Framework of 1995.

Table 6 – Regulatory impact statement requirements

When is an RIS required?

An RIS is required for any policy proposal with legislative implications that is submitted to Cabinet. There are a number of exemptions but these are (or are intended to be) for mechanical measures that do not raise significant policy issues. [10]

What does it cover?

As a general rule of thumb, an RIS should not exceed 3 pages (plus a BCCS if it has compliance cost implications for business). It must contain statements of:

• the nature and magnitude of the problem and the need for government action;
• the public policy objective(s);
• feasible options (regulatory and/or non regulatory) that may constitute viable means for achieving the desired objective(s);
• the net benefit of the proposal, including the total regulatory costs (administrative, compliance, and economic costs) and benefits (including non-quantifiable benefits) of the proposal, and other feasible options; and
• the consultative programme undertaken.

In 1998 a Regulatory Responsibility Package was developed which covered a Regulatory Task Force; a Regulatory Responsibility Act,[11] and incorporating the Code and the Process into departmental performance assessment with a reference to the Code in the Cabinet Office Manual. This package did not proceed.

In August 1999 the Government announced the Five Steps Initiatives including small business test panels for new laws, removing redundant law (aiming to eliminate 12.5 to 25% of the existing regulatory stock, reducing tax compliance costs; keeping laws up to date (annual compliance cost reduction bill and more use of sunset or review clauses), better information on laws; and facilitating electronic commerce. Some test panels were established but little other progress was made.

In 2000 several initiatives were taken to reinvigorate the regulatory quality regime in New Zealand. The RIS was expanded to an RIS/BCCS from 1 April 2001 with the inclusion of a Business Compliance Cost Statement (BCCS) where appropriate. In 2003 to reduce the length of BCCSs, the Government agreed to include only a summary of key information on compliance costs in BCCSs covering the sources of costs, the parties affected, estimated costs and steps taken to minimise costs.

An RIS does not have to provide details of implementation or monitoring strategies, or refer to implications of the proposal for the Trans-Tasman Mutual Recognition Arrangement (TTMRA). These are potentially significant gaps in the current regime.

4.3.2  Reviews of New Zealand’s regime

In 2001 the Ministerial Panel on Business Compliance Costs was set up to report on measures to reduce compliance costs (MED, A and Cabinet Office, B)[12] and Tasman Economics were commissioned to review the RIS regime (Tasman Economics, 2001).

The issues identified in these reviews (see Table 7) are discussed below in the same groupings used in Section 3.3.

The core of regime design is coverage. The most significant issue here is the exclusion from the RIS/BCCS regime of quasi-regulatory measures such as guidelines and rules. The regime currently covers only regulation promulgated through Acts and Statutory Regulations made by Order in Council.[13] This sort of gap in coverage creates incentives for regulators to use whichever regulatory mechanism is subject to the least procedural controls and scrutiny.

The other coverage issue outstanding is how to ensure regulatory quality in the operation of powers delegated to local government. This was addressed in the Local Government Act 2002[14]. The remaining design issue identified in the review was a need for earlier preparation of RIS/BCCSs and greater use of test panels to evaluate proposed regulations. The government agreed to encourage these moves.

Transparency is one of the strongest incentives for improved regulatory quality as it makes failures more open to scrutiny both by those responsible for assessing bureaucratic performance and by those affected by the regulation. The latter are therefore better placed to challenge low quality regulation.

Recent measures to increase transparency should therefore improve incentives. Those measures include (1) electronic public access to current versions of legislation and regulations and increased use of plain English drafting, and (2) automatic release of RISs that contain a BCCS and the inclusion of RIS/BCCS issues or a draft RIS/BCCS in consultation documents.

The government has established a compliance cost unit within the Ministry of Economic Development to handle support, monitoring and publication of RISs.[15] This unit’s work includes an education campaign to improve awareness of the requirements and improve the ability of agencies to meet them.

One issue not directly addressed to date is whether there should be centralised approval or “vetting” of an RIS. This can be seen as the ultimate step in a process that begins with imposing the RIS requirement, secondly requires publishing the results, and then involves public assessment of performance before finally introducing formal controls or sanctions on RIS preparation. Whether and how quickly to move along this process is a question of judgement based on the costs and benefits at each stage. There are trade-offs in the short term between widening and deepening of the regime.

Another issue was whether to adopt the approach used in some overseas jurisdictions of having a central regulation register, with inclusion a prerequisite for enforcement and revocation of instruments not listed. This may become less relevant with improved public access to legislation and regulations online, but issues could remain for quasi-regulation.