Presentation by Prof. Gary Banks, Chair of the OECD Regulatory Policy Committee and Dean of the Australia and New Zealand School of Government, Australia, at the 8th Conference on Measuring Regulatory Performance: Realising Impact: The Role of Institutional Frameworks in Regulatory Policy, which took place in Sydney 15-16 June 2016. Further information is available at www.oecd.org/gov/regulatory-policy/measuring-regulatory-performance.htm.

1. Regulatory performance: the
role of Institutions
Gary Banks
Presentation to OECD’s 8th Expert Meeting on Measuring
Regulatory Performance
15 June 2016
Sydney, Australia

2. From the OECD Council 2012 ‘Recommendation’
• “Establish mechanisms and institutions to
provide oversight of regulatory procedures
and goals, support and implement regulatory
policy & foster regulatory quality.”
2
2

3. What is ‘good’ regulation?
3
• A sound rationale and clear objectives
• Targets the main source of a problem
• Proportionate to scale/risk
• Avoids undue prescription
• Complements other regulations
• Understandable and consistent
• Can be effectively administered and enforced
• ( and remains ‘fit for purpose’)

4. The Regulatory Life-cycle
4
4
DeliveryReview
Development
Consultation

5. Obstacles to ‘good’ regulation
5
• Technical complexity
− assessing impacts can be difficult
• Political and societal pressures
− vocal interest groups can be hard to resist
• Bureaucratic ‘inertia’
− appeal of controls and status quo

6. A case of ‘bad’ regulation: 2011 cattle export ban
• 30 May 2011: National TV exposé of alleged maltreatment
of Australian live cattle in Indonesia
• 8 June 2011: Australian Government bans exports
• 9+ June 2011: Protests by exporters and Indonesian
Government
• 6 July 2011: Ban removed, ‘protocols’ developed
• 2012 - 2013: Indonesia imposes its own import
restrictions against Australia
• 2014: Indonesian Government reconsiders
following ‘soaring’ domestic beef prices
6

7. The ‘regulate first’ syndrome
1. An ‘issue’ or problem emerges
2. A knee-jerk response to regulate
3. Then analysis to justify it
4. A poorly informed decision to proceed
5. Poor statutory guidance to the regulator
6. Risk averse implementation/enforcement
7

8. Much existing regulation needs reform
“Do agencies often have to work with legislation that
is out of date or not fit for purpose?” (NZPC Survey, 2013)
8
Strongly agree
Agree
Neutral
Disagree

9. The costs add up …
• PC 2010 estimated $8bn in ‘red tape’ costs alone
= $12bn GDP foregone
• ‘Seamless National Economy’ gains = $6bn (2011)
• Potential welfare losses from all cost categories
could (greatly?) exceed 5 per cent of GDP
9

10. Productivity and participation matter most for
living standards over time
10
-9.8
3.3
-14.6
17.0
-10.7
1.2
-3.1
0.5
-2.2
3.9
-20
-15
-10
-5
0
5
10
15
20
GDPpercapita2049-50
comparedwithIGRforecast
(%)
Participation
rate
Productivity
rate
Hours
Per week
Unemployment
rate
Working
Age share
BestWorst BestWorst“Best”“Worst” “Best”“Worst” “Best”“Worst”
2.0%1.2% 3.57%63%55% 3430 86%81%
10

11. 11
Incentives
• Liberalise trade regulation
• Terminate anti-competitive regulation that fails ‘the public
benefit test’
• Phase out government local procurement preferences
Capabilities
• Human capital
− enhance school governance, VET provision, …
• Innovation system
− re-focus on market failures …
• Infrastructure
− utility governance, access regimes, …
• Government services
− extend choice and contestability, …
Flexibility
• Workplace regulation ‘rebalanced’
• Environmental regulation (native vegetation, …)
• Occupational licensing coherence
• Zoning, development approvals simplified
• Reduce sectoral red tape (chemicals, …)
• Strengthen ‘mutual recognition’
• Etc
Key productivity & participation reforms are
regulatory
11

12. Evidence-based policy
12
Best Practice Common Practice
Detailed design
Implementation
Decision
Assessment
Options
Decision
Detailed design
Implementation
Review
Issue Issue
vs ‘policy-based evidence’

13. • It helps with the ‘what?’ and ‘why?’ questions
• It enlightens the potential beneficiaries about
what is at stake
− thereby building public/political support
− as well as enabling more ‘inclusiveness’
• It provides governments with ammunition
− against interested and political opposition
• It reduces ‘unintended consequences’
− including political ones!
13
An evidence-based approach has ‘technical’ and
‘political’ roles

14. • First, understand the problem
• Then explain why government action should
help
• Assess merits of different options -- regulatory
and non-regulatory
• Develop implementation and review strategy for
preferred option
• ‘Consult, consult, consult’ throughout
14
The tasks of Regulation Impact Assessment

15. “Formal process requirements are in place” (OECD)
Source: 2015 Regulatory Policy Outlook
15
28
24
28
ConsultationRIA Ex-post evaluation of
existing regulation
21
24
20
3433
29
35

16. The OECD on principle vs practice
16
• “The OECD’s first survey (2015) shows that countries
have come a long way in improving the way they
regulate. … Nevertheless implementation varies
greatly in both scope and form.”
• (Translation: Big gaps remain between principles and
practice.)

17. 0
20
40
60
80
Exempted
Non-compliant
Compliant RIS
Number of
proposals
'Highly significant' proposals Other proposals
Australian RIA survey (2012) found compliance
lowest for most important regulatory actions
17

18. Types of institutions to support regulatory
performance
18
• Research and evaluation bodies
• Bodies to promote adherence to good process
• Regulators
• Bodies responsible for system design and review

19. Institutional requirements for evidence bodies
19
• Analytical capability (including quantitative)
• Ability to test work with stakeholders
• Ability to avoid ‘undue influence’
• Direct linkage to regulation-making processes

20. Assessing key evidence/evaluation bodies
Institutions Analytical
capability?
Linkages? Transparency? Independence?
Units within
Ministries
✔✔ ✔✔✔ ✔ ✔
Private consultants ✔✔ ✔ ✔ ✔✔
Government
research and
advisory bodies
✔✔✔ ✔✔ ✔✔✔ ✔✔✔

21. ‘Productivity Commissions’ of Australia and NZ
21
• Independent statutory bodies advising on key areas
of policy/regulation
• In-depth research and public inquiries
• Transparent processes (hearings, draft reports)
• Economy/Community-wide decision criteria

22. Reports by the APC on regulation
22
• Regulatory issues
− Labour laws, public utilities, consumer protection,
gambling, insurance, intellectual property etc
• Sectoral ‘stocktakes’ of red tape
− Resource industries, chemicals, transport, etc..
• Benchmarking studies
− OHS, Planning/zoning, local government, etc..
• Reviews of Regulatory Policy
− RIA framework, Ex post review methods, regulator
governance, etc..

23. OECD recommendation on ‘oversight’
23
• A standing body charged with regulatory oversight
should be established close to the centre of
government… The specific institutional solution must
be adapted to each system of governance.

24. Functions of oversight institutions
24
• Foster awareness of good practice
• Provide training and guidance to regulators
• Monitor observance
• Ensure quality control of RIA/RIS
− reporting
− challenging/vetoing
• Oversee ex post reviews of existing regulation

25. The range of institutions
25
• Parliamentary level
• Cabinet level
• Individual portfolio level
• Whole-of-government administrative level
− within a central agency
− a separate (statutory) body

26. Key design issues for central oversight bodies
26
• How much ‘power’?
− breadth of role (across the 'cycle')
− watchdog or gatekeeper?
• How independent?
− location, staffing, resourcing, etc
• How transparent?
− when and about what?
• How accountable?
− reporting, review

27. • Reducing harms vs raising costs
• Public interest vs fair private treatment
• Consulting/engaging vs capture/clientelism
27
The ‘balancing act’ for regulators

28. Reviews of regulator performance in Australia and
NZ. Some findings:
28
• Lack of risk-based enforcement
• Excessive information demands
• Lack of transparency, consultation
• Poor internal communication to enable ‘learning by
doing’
• Training needs

29. Key ‘design’ matters for regulators
29
• Clarity of role and mandate (in statute)
• Appropriate independence (‘undue influence’)
• Effective internal governance and management
• ‘Adequate’ resourcing
• Mechanisms for consultation/engagement
• Review processes for decisions
• Reporting and accountability requirements

30. The Australian Government’s new ‘Regulator
Performance Framework’
• “to encourage regulators to undertake functions with
minimum (cost) impact necessary to achieve objectives and to
effect positive ongoing cultural change…”
• KPIs in six areas:
1. ‘Facilitating efficient operation of regulated entities’
2. ‘Communication: clear, targeted, effective’
3. ‘Actions proportionate to issues’
4. ‘Inspection/monitoring streamlined and coordinated’
5. ‘Open and transparent dealings’
6. ‘Contributing to improved regulatory frameworks’’
30

31. Stewardship of the ‘system’ is also needed
31
• Systems, like regulation, are experimental (and need
keep up with other changes)
• Monitoring and review are essential
• A function distinct from ‘quality control’
• Belongs in a central agency, with capacity to collect
data, review overall framework, advise government
• But political leadership remains crucial to sustained
regulatory performance