MINISTER FOR FINANCE AND DEREGULATION
THE HON LINDSAY TANNER MP
ADDRESS TO THE CENTRE FOR POLICY DEVELOPMENT
MELBOURNE, WEDNESDAY 10 SEPTEMBER 2008
The Future of Regulation: next steps in the Rudd Government’s deregulation agenda
I’m delighted to be here today to address the Centre for Policy Development on the Rudd Government’s plans for regulatory reform.
A little under 10 months ago, I was very pleased to become not only Finance Minister, but also Australia’s first Minister for Deregulation.
There are significant similarities between the role of a Finance Minister and a Deregulation Minister. In both cases you are often seen, fairly or not, as ‘Dr No’. That is, as the first to say no to new spending proposals and no to knee-jerk regulatory responses.
But both my portfolios entail a broader role than merely being ‘Dr No’. Balancing a budget is more than keeping costs down and making the numbers add up. Deregulation is about more than simply reducing the number of regulations on the books.
The focus of the Government’s deregulation agenda this year has been on reducing the regulatory burden on business. We have a number of reform processes underway aimed at rationalising and harmonising the existing stock of business regulation.
Today I want to explain these reform processes and highlight some of the key outcomes we are expecting in the near future.
Reducing the regulatory burden on business, while critical, is only one part of a much bigger and broader reform agenda.
Today I also want to outline the wider dimensions of regulatory reform under the Rudd Government.
Prioritising the ‘how’ question
At its core the Rudd Government’s deregulation agenda is about making government regulation as efficient, adapted and responsive as we can to achieve our policy goals.
To achieve this we need to consider whether existing regulation measures up against these standards, whether the design of new regulation is rigorous and subject to best practice oversight, and whether government has a sufficient dialogue with the citizens and firms who are subject to regulation.
Seen this way, it is clear that better regulation is not always less regulation. Government, after all, exists to regulate. The best regulation is that which delivers on the policy priorities of the government, at lowest cost, with lowest chance of unintended consequences. Often this means getting rid of redundant or poorly implemented regulation. But sometimes this means imposing new regulation when this is necessary to deliver on the Government’s policy objectives.
The starting point here is to recognise that the question of how government regulates is often just as important for good policy outcomes as the question of what government regulates. Sometimes the how question is even more important. Think of tax: the most conceptually rigorous tax regime means little if the regulation enforcing it is poor. Think of education: it is no use legislating for world class universities if we tie them up in red tape. Think of climate change, an issue where how we respond to carbon pollution is the critical question.
Yet outside academia, the bureaucracy and a small, well educated part of the citizenry, the question of how we regulate receives little attention compared to the question of what we regulate. This is despite the huge impact that matters of regulatory design have on the lives of ordinary Australians.
We spend much of our lives interacting with government regulation. The ease with which citizens can fill in a tax return, apply for government support and set up and run a business, makes a big difference not only to the efficiency and productivity of our economy, but also to the way people engage with their government.
The reason that there is so little focus on the process of government can be attributed to a number of factors. The style and substance of the media cycle is one. The ‘Someone Should Do Something’ mentality of many political commentators is another.
But the most significant factor fuelling our contemporary lack of interest in how government regulates is the attitude our predecessors had toward policymaking.
Look at their $10 billion dollar water plan – announced by the government before even being considered by Cabinet. Look at the introduction of the so-called ‘fairness test’ last year, done with both no regard to the capacity of existing workplace institutions to actually administer the test and without the preparation of a regulatory impact statement.
I’ve recently received a major report into the Commonwealth’s use of information and communications technology, completed by UK efficiency expert Sir Peter Gershon. It is an indictment of the haphazard approach to the ICT aspects of policy design under the previous government. The report makes it clear that policies have in the past been announced with no consideration of ICT costs or implementation issues.
This is the ‘pay now, ask questions later’ approach to regulatory design.
This is no way to run government and no way to approach the task of regulating. The creation of a cabinet level minister responsible for making regulation better signals a significant change in approach to this issue by the Rudd government. We see regulating well as core government business.
The progressive side of politics has largely ignored issues surrounding regulation. It’s just assumed that reducing the regulatory burden is merely a device to help the rich and powerful. This perspective is simplistic and misguided. Most of the time it is working people who pay the price for poor regulation.
People investing their retirement savings get no benefit from complex 80 page product disclosure statements full of legalese, but they effectively pay for them. Plumbers and electricians working interstate get no benefit from being forced to pay for a new licence.
Small business people with multiple dealings with different layers of government have to build the costs of doing so into their prices.
Better regulation means lower costs, higher productivity, and greater opportunity. It removes dead weight from economic activity.
Reducing the regulatory burden on business – the state of play
It is easy to parrot statistics or horror stories about poor regulation. Moving beyond admiring regulatory problems to actually solving them is much more difficult.
The hard work which underpins regulatory reform often does not make the headlines. A lot of the work we have been doing this year has gone on behind the scenes. A team of people within my department have been working with their counterparts in other agencies, both Commonwealth and state, to identify high priority reform areas.
Along with the Minister Assisting on Deregulation, Dr Craig Emerson, I have been meeting at least once a month with state and territory officials to progress areas of regulatory reform which require greater coordination between the different levels of government.
We now have over 30 areas of reform on our agenda. By the time we get to COAG in October, we hope to report even further progress on these reform areas, including a new national consumer policy law as agreed by the Ministerial Council for Consumer Affairs.
In the government’s own backyard, I have been working with portfolio Ministers on deregulation partnership projects. Our first project is to clear up the mess made of the Financial Services Reform Act by the previous government.
When financial institutions start offering the new First Home Saver Accounts from next month, customers will be given not a 50 or 80 page Product Disclosure Statement, but a maximum of four A4 pages.
These four pages will contain information potential investors need, in a format that has been road-tested by the government to ensure people can read and understand it.
The Financial Services Reform Working Group that Nick Sherry and I established has now moved on to the next phase of the project, applying the lessons learnt designing the First Home Saver Account Product Disclosure Statement to other financial products such as superannuation and simple managed investments.
We have also been consulting with industry about what are the regulatory and non-regulatory impediments to the provision of simple advice to superannuation fund members on issues relevant to their superannuation investment. This is another example where poorly designed regulation can price working people out of accessing services to assist them in managing their retirement savings.
I have been meeting with my ministerial colleagues to finalise details of a number of further partnership projects and expect to announce a number of new initiatives before the end of the year.
We have deliberately focused on reform projects, rather than a simple target. This approach is different to that adopted by countries such as the UK, Holland and, more recently, a number of state governments.
While we do not have a target, we do recognise the importance of political will.
It is no coincidence that most of the regulatory hotspots agreed after the Banks Review in 2006 were still the burning, but unresolved, regulatory issues we uncovered on coming into government.
The previous Liberal Government only paid lip service to regulatory reform. In 1997 John Howard announced a target to cut red tape for small business by 50% in his first term. But there was no political will to reform and not much happened.
We have a lot of work to do.
An initial stocktake of regulation across the Commonwealth has many items of potentially redundant regulation. Think about this for a moment – regulatory arrangements in various portfolios that are on the Commonwealth’s books, that people need to understand and ensure they are complying with, that even the responsible departments admit are completely redundant.
The Banks Review revisited
After nearly a decade of inaction, in 2006 the Howard Government created the Taskforce on Reducing Regulatory Burdens on Business, headed by Gary Banks. The Banks Review was a useful exercise. In a short timeframe it identified just under 180 areas of regulatory reform across all areas of regulation. It allowed businesses to raise issues of unnecessary regulatory burden that are too often forgotten or invisible to regulators and
Yet a one off review is no substitute for continuous dedicated effort in regulatory reform. In reviewing progress with the large menu of Banks recommendations, we found that a number of recommendations, though accepted by the previous government, have not translated into real improvements for business.
As at the end of March this year, my department found only 40% of accepted recommendations had been completely implemented. Half were still in progress, and no progress had been made at all on the remaining 10%.
A number were, as I’ve already mentioned, languishing in various COAG Ministerial Councils or Taskgroups. The Ministerial Taskforce on reform of chemicals and plastics had not even met at all before we took office. Other recommendations had been shunted off for further review, but nothing had come out the other end.
I am pleased to report the Rudd Government has taken action.
We have actually asked the Productivity Commission to conduct a comprehensive review of anti-dumping policy and legislation, rather than just agreeing to do so. This was not only an outstanding recommendation of the Banks Review, but part of the unfinished National Competition Policy work started by the previous Keating Labor Government.
Senator Jan McLucas, Parliamentary Secretary for Health and Ageing, has recently held consultation sessions with industry and other interested parties on reforms to update and streamline the existing therapeutic goods regulatory framework.
This includes reforms which had stalled when New Zealand withdrew from the proposal to form a new trans-Tasman regulatory body, including those reforms identified by Banks. But it also goes further, including enhancements to information access and speed of the TGA processes, including capacity for electronic lodgement of applications and supporting technical documents.
A broader deregulation agenda
As the projects already underway illustrate, simply removing regulation is a small (but important) part of my agenda. In a lot of areas the focus is not removing unnecessary regulation, but improving necessary regulation.
I see my role as Minister for Deregulation as equipping the Commonwealth with the necessary capabilities and advice to make better regulation.
Better regulation also comes from better harmonisation between jurisdictions, to deliver seamless national markets. With my co-chair, Minister Emerson, I have been working through the Business Regulation and Competition Working Group at COAG to coordinate this harmonisation process.
Better regulation comes from ensuring regulatory impact analysis supports a culture of robust policy development and design, not a tick the box compliance exercise. The Office of Best Practice Regulation remains the independent umpire of whether the best practice regulation principles have been met. And we are working to increase the transparency and awareness of these principles and ensure we maximise opportunities for genuine consultation with stakeholders.
Better regulation comes from streamlining the administrative and compliance burden of regulations, making it easier, simpler and cheaper for people to comply. This can occur on a specific basis for each piece of regulation. Or, as projects such as Standard Business Reporting show, there are large gains to be made by joining up various arms of government so that they extend a single hand to citizens and business.
Standard Business Reporting will join up reporting requirements of the Tax Office, ASIC, the Australian Bureau of Statistics and State Revenue Offices. They will speak a "language" that can be understood by major accounting softwares so that businesses can send their financial reporting straight from their accounting program to the government. This will save businesses up to $800 million per year.
The examples I’ve spoken about this afternoon highlight key points about the future of regulation and its reform that I do not think have been clearly understood.
Fixing up the Financial Services Reform regime has shown that the old-fashioned divide between light-handed market-based or prescriptive heavy-handed regulation obscures important realities.
A so-called light-handed regime can impose a greater burden on business if insufficient attention is paid to implementation and compliance arrangements. When this occurs both business and consumers are worse off.
Most complex policy challenges can only be solved with a range of regulatory tools. Lighthanded or self-regulatory regimes are often the best solution for complex regulatory environments, where direct government intervention and control is often ham-fisted and counterproductive.
But sometimes policy goals can only be achieved by recourse to direct regulation. Unfair dismissal, the Commonwealth Crimes Act, and elements of the eventual Carbon Pollution Reduction Scheme all fall into this category.
We should not have an overly ideological approach to questions of regulatory design. Those on the far left who want to command and control all aspects of government policy are no less wrong than those on the far right who believe all direct regulation is a mortal sin.
Our approach to regulatory design sits squarely in the reforming centre of politics. The question is not what sort of regulation the government should always prefer, but what sort of policy lever will get the job done in the most efficient, adapted and responsive way.
Technology and continuous improvement
A crucial part of making regulation more responsive is paying more attention to the experience and insights of those regulated. This means deepening our current means of consultation and building a culture of continuous regulatory improvement.
This requires an open ongoing relationship between governments, regulators, regulated entities and the wider community.
Business, interest groups, and ordinary citizens have a wealth of knowledge about how regulation works in practice, what regulation is redundant, and how the existing stock of regulation can be applied better. It makes sense to tap this knowledge where it improves regulation in line with the Government’s policy priorities.
To achieve this will be difficult, but we have one very important tool – significant and rapid improvements in technology.
Technology is an enabler for the sort of consultation that will make our regulatory regimes more effective. Blogs, wikis, or even a simple suggestion box at the bottom of an online form, all enable government to enter into a dialogue with citizens about their experience of regulation.
Technology can also enable changes to the way we regulate.
For example, the UK Food Safety Regulator runs a ‘scores on the doors’ program where the results of food hygiene inspections are made publicly available on a government website and can also be displayed by the restaurants themselves. Tech-savvy members of the public have suggested this information be linked into mapping software, so citizens can search for high rating restaurants on their mobile phones.
Experience with these schemes suggests that providing such useful information not only empowers consumers but encourages greater compliance with food standards. This is only one such example of how merely freeing up information flows can have a significant regulatory impact.
I am very interested in exploring opportunities for the Rudd Government to be more open and innovative with government information, and have asked the Australian Government Information Management Office within my department to advise on the potential for domestic application of some of the innovative work being done in this area by other countries.
The mainstay of the Government’s agenda is meeting our commitment to reduce the burden of regulation. Creating seamless national markets with the states through COAG, tackling problem areas of regulation with my Commonwealth colleagues and ensuring new regulatory proposals are subject to proper scrutiny all contribute to this goal.
But the point needs to be emphasised: for the Rudd government deregulation is a lot more than simply striking out poor regulation. We want to ensure that the Commonwealth develops the capability to regulate better. And we want to ensure that all regulation not only meets our policy goals, but does so in the most efficient and responsive way possible.
Achieving this will require the Commonwealth to take a hard look at how we have regulated in the past and the way we control the quality of regulation into the future. It will also require us to open up the regulatory reform process to include the insights of those citizens and firms who are subject to regulation.
I look forward to engaging with think tanks like the Centre for Policy Development as part of this process.