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Extent of impact analysis available

Further impact analysis

There is no existing obligation for agencies to prepare updated impact analysis as the policy is refined and the implementation details are resolved. Nonetheless, a good policy agency will keep a careful eye on the potential impacts and risks as design and implementation issues are fully worked through.

The policy agency needs the ability to assure or alert Ministers during the detailed design phase as to whether the policy proposals are likely to deliver as originally intended, and to advise on the opportunity or need for policy or operational changes. This is particularly important where only limited information on likely impacts was available at the time the key policy decisions were taken.

Identifying costs, benefits, and those incurring substantial losses

Regulatory impact statements provided to Cabinet rarely include estimates of the benefits (unless they come in the form of cost savings), and frequently do not include estimates of the different types of costs that may be incurred. Nor are they always clear about the potential for a policy option to cause a substantial loss of income or wealth to a group of people, unless the impact is both very obvious and direct.

Sometimes this is because the benefits, costs and other indicators of impact are inherently difficult to estimate. But in others it is because the agency:

  • lacked the data or time to do the analysis; or
  • had not yet developed the policy in sufficient operational detail to allow meaningful or credible estimates or projections to be made.

Both of these latter problems may be able to be resolved by further work and consultation by the agency, including discussion with those who would be responsible for implementation.

It is therefore not unreasonable to expect that estimates of at least some categories of cost and benefit could be available, and the potential impacts for particular affected groups could be clearer, by the time a Bill is ready for introduction, even if this information was not available earlier. A reader is likely to be interested in these estimates and projections - or interested that these are not available at this late stage in the process.

Identifying expected levels of compliance and regulator effort

Amending the law does not guarantee compliance with the law. But if the law imposes obligations or sets standards, the benefits able to be achieved from the legislative change are likely to be affected by the level of effective compliance with those obligations or standards by the regulated parties. Alternatively, non-compliance may give rise to additional costs. If so, conclusions reached about likely levels of compliance or non-compliance will be important to an assessment of the likely benefits and costs of the policy being given effect.

Further, the achieved levels of compliance with legal obligations or standards are likely to be influenced by the nature and level of action taken by a regulatory authority to support compliance. Effort aimed at encouraging and securing compliance would therefore be expected to increase benefits or lower costs, and will itself give rise to costs.

It follows that a discussion of likely compliance or non-compliance levels, and expected regulatory compliance activity, should be an important feature of most regulatory impact analysis.

In practice, regulatory impact statements do not always explicitly discuss anticipated levels of compliance, the nature and level of proposed regulatory compliance activity, and whether these projections are likely to be consistent with each other.

But certainly by the time a Bill is ready for introduction, it is not unreasonable to expect that these questions will have been given proper attention, and the conclusions explicitly factored into the analysis of benefits, costs and risks. Again, a reader is likely to be interested in this information - or in the fact that it is not available when relevant.

Question 2.4

2.4.  Has further impact analysis become available for any aspects of the policy to be given effect by this Bill? [YES/NO]

What matters are covered by the question?

This covers updated, extended or additional impact analysis, beyond that covered in any of the regulatory impact statements identified earlier.

For the purposes of this question, impact analysis simply means analysis of the costs, benefits, risks and other potential impacts of the policy to be given effect by the Bill. The less specific term is used here to indicate that it need not encompass all the other formal elements associated with the Cabinet requirements for regulatory impact analysis.

You might like to look at this disclosure as an opportunity to pre-empt questions or concerns that external parties may seek to voice about the quality of analysis undertaken, especially if there is limited analysis available in any RIS, or important policy changes have been made since the last RIS was finalised.

Note that impact analysis could be valuable even if there was no earlier RIS required. For example, a regulatory proposal might have qualified for an exemption on the grounds that it was expected to have no or only minor impacts outside of government, but the potential impacts on the government itself might be enough to justify some analysis of likely costs and risks.

Only significant bits of analysis, either produced or commissioned by relevant government agencies, are expected to be reported. However, that analysis need not be comprehensive - it might only examine selected policy elements or selected impacts or risks.

“Become available” here simply means able to be publicly released. It is up to you whether to proactively publish any of the reports.

What is the nature of the further information sought?

If the answer is YES, please provide:

  • a suitable description or citation for each piece of further impact analysis released (title, date, authoring agency, etc);
  • a sentence or two indicating the scope of, and status to be accorded to, that analysis;  and
  • if possible, an active hyperlink to where that analysis can be accessed for free. 

If the answer is NO, no further information is required.

Question 2.5

2.5.  For the policy to be given effect by this Bill, is there analysis available on:  
(a)   the size of the potential costs and benefits? [YES/NO]
(b)   the potential for any group of persons to suffer a substantial unavoidable loss of income or wealth? [YES/NO]

What matters are covered by the question?

This is a two-part question. For the question in part (a):

  • Costs and benefits are viewed from the perspective of national cost benefit analysis. They are not limited to the fiscal impacts for the government, but cover all gains and losses in value wherever they arise within New Zealand - noting that this nets out transfers or redistributions of resources between different parties within the economy.
  • The relevant costs and benefits are not just those directly attributable to the specific terms of the Bill. They should also include costs and benefits arising from the way in which the legislation is expected to be applied or implemented, including the likely requirements of delegated legislation enabled by the Bill, and from other discretionary actions facilitated by the legislation.
  • Any discussion of size requires judgements about amounts or numbers. They need not be expressed in dollar terms. They need not even be point estimates - they could be expressed as a range, a probability distribution, or an order of magnitude.

For the question in part (b)

  • The focus is on identifying any groups of people that might suffer substantial adverse effects from the policy given effect through the Bill.
  • The particular adverse effects of interest for disclosure are uncompensated losses in the market value of existing property, or losses in the value of an existing income stream (if these losses would not already be captured in changes to the market value of the person's tradable property, such as a business).
  • These losses of income or wealth might arise from the loss of a valuable property right, or the loss of a right to supply certain goods or services. However, any losses arising from undertaking illegal activity, including the effect of legal penalties that might be imposed, should be ignored.
  • Only substantial losses need to be identified. Whether or not a loss is “substantial” is to be judged from the point of view of an affected individual. It should take some account of their remaining income or wealth, and perhaps also the impact on them relative to others.
  • The disclosure relates not only to losses directly attributable to the specific terms of the Bill, but also to the potential for losses arising from the way in which the policy of the Bill is expected to be applied or implemented, including the likely requirements of delegated legislation enabled by the Bill, and from other discretionary actions facilitated by the Bill.

What is the nature of the further information sought?

If the answer to (a) is YES, please indicate where to find, or otherwise provide a concise summary of:

  • the most up-to-date estimates of the categories of benefit and cost for which estimates are available;  and
  • the categories of identifiable cost or cost savings for which no estimates are available.

This should ideally be a reference to particular pages or parts of a report (such as a RIS) for which an active hyperlink has already been supplied elsewhere in the disclosure statement. Alternatively, use Appendix One to set out a summary of the available estimates, along with any information necessary to interpret or put those estimates in context.

If the answer to (a) is NO, please indicate briefly why there are still no estimates available for any of the costs or benefits.

If the answer to (b) is YES, please indicate where to find, or otherwise provide a concise summary of the most up-to-date analysis of this potential.

This should ideally be a reference to particular pages or parts of a report (such as a RIS) for which an active hyperlink has already been supplied elsewhere in the disclosure statement. Alternatively, use Appendix One to set out a summary of the analysis.

If the answer to (b) is NO, no further information is required.

Question 2.6

2.6.  For the policy to be given effect by this Bill, are the potential costs or benefits likely to be impacted by:  
(a)   the level of effective compliance or non-compliance with applicable obligations or standards? [YES/NO]
(b)   the nature and level of regulator effort put into encouraging or securing compliance? [YES/NO]

What matters are covered by the question?

This is a two-part question. For the question in part (a)

  • The matters of interest might be levels of compliance with new obligations or standards, or changes to levels of compliance with existing obligations or standards, depending on the nature of the policy.
  • It is possible that both levels of compliance and levels of non-compliance matter, as different types of costs can arise from each. The former obviously gives rise to compliance costs, while the latter is likely to give rise to costs (or reduced benefits) attributable to the problem the legislation is trying to fix.
  • Effective compliance is not always the same thing as technical or legal compliance. Motivated people will often find creative ways to circumvent the effect of the law, while technically meeting the legal requirements, if the potential exists to do so. Predictions or assumptions about levels of compliance would ideally take account of the potential behavioural response of those expected to comply.

For the question in part (b)

  • Strategies used by regulatory authorities to encourage and secure compliance usually encompass a range of actions, such as the provision of information and guidance, education and training, inspection, and enforcement actions and sanctions.
  • There may be various agencies involved in efforts to encourage compliance, all of which should be viewed as “regulator effort”.

What is the nature of the further information sought?

If the answer to (a) and/or (b) is YES, please indicate where to find, or otherwise provide a concise summary of the most up-to-date information or analysis available relating to:

  • likely levels of compliance and/or non-compliance (as appropriate) with key obligations that are likely to materially impact on costs and/or benefits; and/or
  • the likely nature and level of regulator effort to be put into encouraging and securing compliance.

This would ideally be a reference to particular pages or parts of a report (such as a RIS) for which an active hyperlink has already been supplied elsewhere in the disclosure statement. Alternatively, use Appendix One to set out a summary of the information or analysis, along with any other information necessary to interpret it or put it in context.

In relation to part (a), only compliance with significant obligations or standards need be considered - those likely to have real influence on the benefits or costs of the policy underlying the Bill.

Note that specific information regarding compliance could take the form of expectations or assumptions, rates or levels, changes to rates or levels, and could be defined in terms of either compliance or non-compliance, as appropriate.

In relation to part (b) consider whether the expected nature and level of regulator effort is likely to be sufficient to secure the predicted or assumed levels of compliance.

If the answer to (a) and/or (b) is NO, please explain why not.

In some cases the reason the answer is NO will be because the legislation does not create new obligations or standards, or impact on existing obligations or standards.

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