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Guide to Cabinet's Impact Analysis Requirements

3. The purpose of Impact Analysis and Cabinet’s Impact Analysis Requirements

The purpose of Impact Analysis is to improve the quality of policy by ensuring that policy proposals are subject to careful and robust analysis. Impact Analysis is intended to provide assurance about whether problems might be adequately addressed through private or non-regulatory arrangements—and to ensure that particular policy solutions have been demonstrated to enhance the public interest.

The Impact Analysis framework is recommended for any form of policy development process. It is also complementary to other approaches to improve policy quality, such as the Policy Project's Policy Quality Framework and agency-specific policy quality processes.

Impact Analysis is a formal requirement for regulatory proposals taken to Cabinet for approval.

Cabinet's Impact Analysis Requirements support and inform decisions by Ministers on regulatory proposals. The requirements and this Guide are intended to help advisers and decision-makers avoid the potential pitfalls that arise from natural human biases and mental short-cuts, including by seeking to ensure that:

  • the underlying problem or opportunity is properly identified, and is supported by available evidence
  • all practical options to address the problem or opportunity have been considered
  • all material impacts and risks of proposed actions have been identified and assessed in a consistent way, including possible unintended consequences
  • it is clear why a particular option has been recommended over others.

The requirements also contribute to the transparency and accountability of government through the routine publication of Regulatory Impact Assessments.

In April 2017, the government published its strategy for the Regulatory Management System, Building Effective Regulatory Institutions and Practices. This included a revised set of expectations for the public sector's responsibilities for regulation. Cabinet's Impact Analysis Requirements incorporate these expectations.

3.1. Expectations for designing and implementing regulation

The Government Expectations for Good Regulatory Practice outline how agencies should design and implement regulation. These expectations form the basis of the Impact Analysis framework:

Before a substantive regulatory change is formally proposed, the government expects regulatory agencies to provide advice or assurance on the robustness of the proposed change, including by:

  • assessing the importance of the issue in relation to the overall performance and condition of the relevant regulatory system(s), and how it might fit with plans, priorities or opportunities for system improvement already identified;
  • clearly identifying the nature and underlying cause of the policy or operational problem it needs to address, drawing on operational intelligence and available monitoring or review information;
  • undertaking systematic impact and risk analysis, including assessing alternative legislative and non-legislative policy options, and how the proposed change might interact or align with existing domestic and international requirements within this or related regulatory systems;
  • making genuine effort to identify, understand, and estimate the various categories of cost and benefit associated with the options for change;
  • identifying and addressing practical design, resourcing and timing issues required for effective implementation and operation, in conjunction with the regulator(s) who will be expected to deliver and administer the changes;
  • providing affected and interested parties with appropriate opportunities to comment throughout the process and, in the right circumstances, to participate directly in the regulatory design process (co-design); and
  • use of “open-book” exercises to allow potential fee or levy paying parties to scrutinise the case for, and structure and level of, proposed statutory charges.
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