Charting a dynamic course for quality regulation

The Labour-led government is committed to a regulatory environment that promotes economic growth, business confidence, globally competitive firms and social well-being.

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The Labour-led government is taking its economic transformation agenda to a new level in a broad review of regulation, Commerce Minister Lianne Dalziel said.

In unveiling details of the Review, Lianne Dalziel said it will:
• introduce fast-track mechanisms for change;
• make life easier for business where multiple regulatory frameworks intersect;
• improve government's own processes for monitoring the impact of regulations; and
• conduct sector studies, starting with food and beverage, wine, retailing and hospitality.

"The framework of the review is horizontal, vertical, fast-track and in-depth. In other words it's dynamic," said Lianne Dalziel.

A Ministerial Group for Quality Regulation has been established to carry out the review. An inter-departmental Quality Regulation Taskforce, which meets for the first time this week, will drive the whole-of-government aspects of the review.

"Nothing of this magnitude has been attempted before but this is a government that has an appetite for working with business to address its concerns, while ensuring that quality regulatory frameworks support New Zealand's international reputation as a quality investment and business destination," Lianne Dalziel said.

"New Zealand already leads the World Bank 'Doing Business' survey, however, we can do better and this exercise is about a continuous drive for quality in regulation. Nobody argues that there should be no regulation - this is a debate about quality. As both Minister of Commerce and Minister for Small Business I have a unique perspective to bring to this review because I know that there are differences between the big and small ends of town," Lianne Dalziel said.

The Quality Regulation Taskforce has been given the job of addressing some of the immediate concerns that have been raised in certain sectors, such as some of the rules in the gaming sector and issues that have been raised around transport rules. Another one is how well we enforce New Zealand standards at the border as products come into New Zealand.

"I am sure that businesses out there know of other instances where small adjustments would make a big difference and I want to know what they are.

"It is often the little things that matter most," she said.

Lianne Dalziel said she hoped the debate would move beyond a simplistic argument about the place of regulation and move to focus on removing barriers to economic growth, supported by quality regulation.

"Everyone knows we need rules - we just want to make sure they are the right rules. I will know we have achieved success when people say that given the importance of quality regulation to a successful and well-functioning economy, the government has adopted the most appropriate framework and enforcement mechanism.

"As Finance Minister Michael Cullen said last week, we are committed to a regulatory environment that promotes economic growth, business confidence, globally competitive firms and social well-being."

The Labour-led government is also examining international best practice to see how it can improve its processes. This review will examine options for assessing the impact of policies more thoroughly at the start of the policy development process and it will examine calculators used in other countries to cost the impact of policies.

"We will also focus on the cumulative effect of regulation because in the same way that small things make a big difference, it's often not one regulation that is difficult or time-consuming, it's the combined weight - we all know the story of the straw that broke the camel's back," said Lianne Dalziel.

"I have asked officials to work with the Law Commission and the Legislation Advisory Committee to develop regulatory and statutory tools to 'fast-track' changes as required.

"People who run or work in SMEs are busy people and the purpose of this review is to ensure that they spend as much time on their business as they can. Getting on with business is about the relationship the government needs to have with business and it is about the government getting its own house in order so that businesses can get on with it too.

"I truly believe that New Zealand is not just a great place to live in - it's a great place to do business and a great place to invest," said Lianne Dalziel.

See www.businessconsultation.govt.nz where problems and solutions can be logged with the government.

Key Points

The Labour-led government is taking a fresh look at regulation to identify constraints to economic growth.

This is a government with an appetite to work with business to identify practical solutions and mechanisms for fast-tracking them.

This is a drive for even more quality and efficiency in regulatory frameworks that are already rating well in international surveys. We are moving forward. This is continuous quality improvement in action.

Regulations will be examined from all angles - horizontal, vertical, in-depth and fast-track.

Small things can make a big difference, especially to SMEs.

Specific sectors will be studied. First up is the food and beverage sector, the wine industry and the retail and hospitality sectors.

A Ministerial Group for Quality Regulation will oversee an inter-departmental Quality Regulation Taskforce. This whole-of-government approach means overlaps between departments can be tackled. The aim is for the many arms of government to extend a single hand to business.

We know businesses are concerned about how things work in practice, not in theory.

The government will do its bit. The review will strengthen the Regulatory Impact Analysis process, and implement a standard cost model to measure compliance costs. The review is looking at setting up a stand-alone group to examine compliance and implementation issues, especially the cumulative effect this has on business.

Balance has to be given to what are sometimes competing interests. There will be instances where self-regulation is appropriate and instances where state-regulation is appropriate. Sometimes flexibility is more important to business, on other occasions it is certainty.

Quality frameworks ensure regulators have a clear purpose, a good understanding of the environment in which they work, good communications and appropriate enforcement mechanisms.

New Zealand is not just a great place to live, it is a great country to invest and a great country to do business.

Quality Regulation - Questions and Answers

Why is the government reviewing regulatory frameworks?

Regulation and regulatory frameworks play a critical role in shaping the business environment. The Labour-led government's economic transformation agenda seeks to remove constraints on economic growth and continuously improve the quality of regulations.

How is this review different to other reviews?

It is broad in scope and has tight timeframes. It has a fast track mechanism to make rapid changes. It will take a whole-of-government approach, which will help examine overlaps in regulations. It will also focus on specific sectors. We're taking both a horizontal and vertical view of regulation and will be getting down to the level of the business.

What can government do about its own processes?

We already have systems in place, but it is clear that these should and can be improved on. We want to be clear to those developing regulation that this government expects sound analysis, effective engagement with parties to be affected and proposals for regulation only where there is a clear case for it. Regulatory Impact Analysis (RIA) is the internationally accepted mechanism for setting out these requirements and we will be looking at strengthening New Zealand's RIA system as part of the review.

How does business get involved in this review?

We will encourage business to use existing business networks, e.g. Chambers of Commerce, Business NZ, NZCTU & industry associations to act as a conduit for the review. We will also use the businessconsultation.govt.nz website to provide information on the review and act as a mechanism for business to lodge specific issues and proposed solutions. A roadshow will be developed with key business organisations and run throughout New Zealand.

Who is involved in the Quality Regulation Taskforce?

The Taskforce will be led by the Ministry of Economic Development, and include officials from the Treasury, the Department of Prime Minister and Cabinet, the Department of Labour, the Accident Compensation Corporation, the Department of Internal Affairs, the Department of Building and Housing, the Ministry of Transport, the Ministry of Agriculture and Forestry and the Ministry for the Environment.

What are you doing to address compliance issues?

We're going to look at any areas of duplication of regulatory requirements that may be giving rise to excessive compliance costs.
We have also raised the idea of a standalone group comprising trade unions, business representatives, academics and government officials that will look specifically at implementation and compliance issues. The idea for such a group was a recommendation made by the Small Business Advisory Group in its first annual report released in August 2004.

Why look at the issue from both a vertical and horizontal perspective?

Regulatory frameworks often intersect within industries and at the individual business level. We often look at how one regulation works across the economy (horizontal) but seldom at the cumulative impact of all regulation on one sector or industry (vertical); for example, how HSE, ACC, HSNO requirements stack up together and impact on business. By looking at both angles, we will develop a richer perspective of the impacts on business and a better understanding of how we can best assist.

How can we ensure that the requirements on firms and engagements with regulators are streamlined when there are multiple regulators?

Businesses express frustration when faced with the overlapping and sometimes contradictory interpretations, forms and numbers of visits by regulatory agencies that deal with related regulatory issues. This indicates that the regulatory activities of government agencies may be neither as well integrated nor as efficient as they could be. This will be a key focus of the review.

What is the appropriate level of regulation or mix between self-regulation, co-regulation and state regulation?

The appropriate balance along this spectrum is based on a choice of processes to develop, administer and enforce particular regulatory frameworks. It may vary from industry to industry depending on its circumstances.

How can we ensure that those firms requiring certainty about their legal obligations are given certainty and that those firms requiring flexibility are given flexibility?

Businesses often look for certainty in terms of outcomes and want reassurance that if they meet pre-defined criteria, they are automatically compliant with the legislation (deemed compliance). A lack of certainty arises, particularly in performance-based regulatory frameworks, where it can be difficult or costly for SMEs to establish the threshold for adequate compliance. At the same time, however, regulatory frameworks may have to provide flexibility so that government rules do not unnecessarily constrain the ability of businesses to innovate and take advantage of emerging opportunities. This may be an issue that requires flexibility in approach between different types of businesses.

How can we ensure that monitoring and enforcement by regulators is appropriately targeted?

The diverse groups making up the regulated sector exhibit different behaviours and pose different risks to the delivery of agreed policy outcomes. The enforcement strategies chosen by regulators need to reflect this lack of homogeneity and be based on the actual level of risk posed by the regulated party.

What are the principles of the review of Regulatory Frameworks?

The review is based on the principles of efficiency, effectiveness, transparency, clarity and equity. These principles are not new, but in this Review there will be a 100 per cent commitment to ensuring they are met.

What is the timetable for the review?

The review will work initially to a 12-month time horizon and will be heavily focused on delivering workable solutions to the business community and society more broadly. There will be a milestone report to Cabinet in late October 2006, and a further progress report in late March 2007.

ENDS

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