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Tag: RegRef

International Review of Regulatory Impact Analysis Guidance

Published by Gordon D. Bonnar on 2018-08-31

Note from the Editor

New draft guidance and templates have been developed to support the newly released Cabinet Directive on Regulation which comes into force tomorrow, September 1, 2018.  The research for this post was researched and largely developed prior to seeing the draft updated policy and template.  I will post this as it represents my thinking at a moment in time, and will follow up with my thoughts on the new templates and policy guidance for developing RIASes.

Overview of Regulatory Impact Analysis

One of the vital components to developing regulations is to inform Government, stakeholders, and the public about the issue, context/background, options considered, and the impacts, economic and otherwise, as well as their distributional impacts to aid in decision making.

The OECD defines Regulatory Impact Analysis (RIA) as “… a systemic approach to critically assessing the positive and negative effects of proposed and existing regulations and non-regulatory alternatives1.”

As of 2014, 32 of 35 OECD member countries have implemented some form of formal RIA as part of the regulatory development process2.

Review of RIA guidance

Of interest to me is the varied requirements, templates and implementations of RIA around the world.  Specifically, the guidance available to regulators to direct the analysis is of particular importace.  I think we can learn a lot from a review of the applicable guidance from similar jurisdictions. Canada’s main RIA Guidance document is the “RIAS Writer’s Guide,” which will be eight years old this year.  As Canada is currently in the final stages of it’s five year regulatory policy suite renewal exercise, it is likely that this guide will be updated in the next year to meet the requirements of the new directives.  During this update, there is much we can learn from a review of what others are doing.

I have selected the following countries for my initial guidance review with links to their guidance documents:

Commonalities

All of the above-mentioned countries require, to varying degrees, significant impact analysis, written in plain language, explaining the problem, historical context, policy options, as well as the costs/benefits of the various approaches.  The level of detail and place in the regulatory development continuum may vary by country, but all of the nations have implemented a mandatory and standardized reporting regime for describing and analyzing impacts of proposed regulatory action.

Fast-track for simple/technical amendments

Canada

Canada has an expedited process for correcting errors, omissions, and inconsistencies (commonly linguistic inconsistencies between the English and French) in regulations.  These simple technical/housekeeping amendments are known as Miscellaneous Amendments Regulations (MARs).

The MAR process is significantly faster as it uses the low impact (minimal requirements) RIAS, is generally exempt from pre-publication in the Canada Gazette, Part I.  Additionally, communication plans, and many other components are not required.

The criteria for a MAR is a proposed regulation with no triaged impact which corrects one of the following:

  • Errors in format, syntax, spelling, and punctuation
  • Typographical errors, archaisms, anomalies, and numbering errors
  • English/French inconsistencies which are non-substantive
  • Obsolete regulations
  • Spent regulations

In my experience, the most significant use of MARs is to address issues raised by the Standing Joint Committee for the Scrutiny of Regulations which are triaged as having no impact.

United Kingdom

The UK has a process for “trivial or mechanical” amendments which keep the regulations in line with the original intent of the policy.  This allows exempts the regulations from requiring “collective agreement,” which is to say approval of the relevant Cabinet Committee and the RRC. Additionally, the UK RIAS policy provides for a “Fast Track” process for deregulatory measures that meet certain criteria.

One-for-One and Two-for-One deregulatory efforts

Canada

Canada’s regulatory regime incorporated a system of requiring one regulatory title to be removed for every new regulation published and for an equivalent or greater administrative burden to be removed for every administrative burden imposed by new or amended regulations. These reconciliation must take place within 24 months and the requirements are enshrined in the Red Tape Reduction Act and Red Tape Reduction Regulations.

United States

Executive Order 13771 “Reducing Regulation and Controlling Regulatory Costs” directs regulatory agencies to repeal two existing regulations for every new regulation while ensuring that the total costs of regulation do not increase.  This policy builds on top of Circular A-4 and all subsequent Executive Orders.

United Kingdom

The UK has a policy of One-in-Two-Out (OITO) which requires every pound of additional net cost imposed on business by regulation must be offset by two pounds of net savings from deregulatory measures.[

What can we learn?

Clear defined purpose

Australia provides a clearly defined series of seven questions which must be answered by the RIA (or RIS in AU terms):

  1. What is the problem you are trying to solve?
  2. Why is government action needed?
  3. What policy options are you considering?
  4. What is the likely net benefit of each option?
  5. Who will you consult about options and how will you consult them?
  6. What is the best option from those you have considered?
  7. How you will you implement and evaluate your chosen option?

These questions may look extremely familiar for anyone involved in policy analysis as these seven questions frame the key questions that a strong policy paper should seek to answer.  While Canada clearly advocates the same complete analysis, I believe clearly defined policy questions like these placed prominently within the RIAS Guidance send the signal that you cannot avoid the policy work necessary to strong, evidence-based, and transparent regulatory action.

Post-Implementation or Ex Post Facto Regulatory Review

The United Kingdom, Australia, New Zealand, and Israel mandate departments review regulations on a period basis.

Canada and the United States have all regulations referred on a permanent basis for review.  In Canada, all regulations are permanently referred to the Standing Joint Committee for the Scrutiny of Regulations which is reviews regulations against thirteen criteria, but does not review to ensure regulations are achieving the intended goals.  The United States requires various departments to post a plan for regulatory review of all regulations which impose burdens on businesses.

Canada current has no central requirement for regulating departments to review regulations on an ongoing basis (although this is highly encouraged in policy).  With the coming-into-force of the Cabinet Directive on Regulations, these requirements are expected to change and once the policy is official, I will outline my thoughts.  I believe that the best practice would be to require Ex Post Facto reviews of all regulations on an ongoing basis.  I believe that the American policy of requiring a regulatory review plan to be published for each planned regulation would be ideal for the sake of transparency.  Additionally any post-implementation review should consider whether or not the regulation is achieving the desired policy outcomes, impacts to stakeholders through consultation opportunities, and should seek to reduce burden and barriers to trade through regulatory cooperation wherever possible.

Emphasis on analysis of impacts to Small Businesses

All of the guidance reviewed placed a specific emphasis on determining the effects on small businesses, developing flexible options, and in the case of the UK and Canada formalized an increased burden on completing the RIAS with respect to small businesses.

Given that small businesses comprise that vast majority of Canadian businesses, it is essential to understand the impacts of proposed regulations on the small businesses.  Additionally, providing flexible options for small businesses can offset the potentially disproportionate impact of regulation on these businesses.

Cost-Benefit Analysis

All reviewed guidance contained clear requirements to provide in-depth Cost-Benefit Analysis of regulatory proposals.

The UK guidance went a step further (emphasis mine):

“Government will regulate to achieve its policy objectives where the analysis of costs and benefits demonstrate that the regulatory approach is superior by a clear margin to alternative, self-regulatory or non-regulatory approaches.”

The importance of the Cost-Benefit Analysis to the decision-making process cannot be overstated.  We need strong policy and challenge functions to ensure it is objective and does not selectively include criteria that supports the policy objective to regulate.  All options must be considered thoroughly, including status quo, policy alternatives, self-regulation, etc.

Conclusions

The vast majority of guidance was consistent on all major requirements for Regulatory Impact Analysis.  Each jurisdiction approached the RIAS in different ways.  Australia, used the RIAS to ensure the policy was complete and all of the best public policy practices had been thoroughly researched and discussed.  The United Kingdom uses a much more formal structure for regulatory proposals based on a series of flow charts which lead to various committees or groups reaching agreement on the princples of the regulations.

I feel confident that Canada is well-positioned among its peers in the regulatory guidance it provides and the requirements necessary to complete a RIAS.  I will provide an update once the Cabinet Directive on Regulation and all associated policy material is publicly released in the next few weeks.

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Regulatory Reform Series – One-for-One Rule

Published by Gordon D. Bonnar on 2018-08-01

This post is part of an ongoing series on the Government of Canada’s regulatory reform efforts. This post will discuss the One-for-One rule.

One-for-One Rule

In 2012, the Government of Canada introduced the “One-for-One” rule to “reduce administrative burden (i.e., the time and resources spent by business to show compliance with government regulations)” through the implementation of the following two elements of the rule:

  • When a new or amended regulation increases the administrative burden on business, regulators are required to offset – from their existing regulations – an equal amount of administrative burden cost on business.
  • It requires regulators to remove a regulation each time they introduce a new regulation that imposes new administrative burden on business.
    • Regulators are required to provide offsets within two years of receiving final approval of regulatory changes that impose new administrative burden on business.
    • The value of the administrative burden cost savings or cost increases to business are made public in the Regulatory Impact Analysis Statement when the regulatory change is published in the Canada Gazette.

The One-for-One Rule was implemented along with the other systemic reforms in the Red Tape Reduction Action Plan.”3

International Context

Many countries work to limit administrative burden on businesses.  The Standard Cost Model used in the calculation of One-for-One rule burdens was developed in the Netherlands and is used by many jurisdictions.  The United Kingdom and Australia both use models which have compulsory offsets to introduced regulation.  Additionally, the UK and the Netherlands have regulatory burden reduction targets.  Canada was the first country to legislate the control of administrative burden through a mechanism similar to the One-for-One rule4.  In the United States,  President Donald Trump signed Executive Order 13771 “Presidential Executive Order on Reducing Regulation and Controlling Regulatory Costs,” colloquially known as the Two-for-One rule as it requires two rules (regulations) be repealed for every regulation introduced.

Canada’s Implementation

The core of Canada’s regulatory reform designed to reduce burden on business is the One-for-One Rule.  The rule was introduced in January 2012 and quickly implemented by the Treasury Board Secretariat of Canada (TBS) on April 1, 2012.  Departments and agencies began implementing the One-for-One rule and in the first year of implementation had reduced administrative burden to businesses by $20 million dollars annually.  The Government committed to enshrining the rule in legislation in the 2013 Speech from the Throne5.  The Government introduced the Red Tape Reduction Act on January 29, 2014 and it received Royal Assent on April 23, 2015.  Subsequently, the Red Tape Reduction Regulations were introduced providing explicit instructions on the calculation of administrative burden to ensure that calculated values would be comparable over time.

Finally, the Government began reporting on the effects of the rule starting with the 2014-2015 Annual Report on the Application of the One-for-One Rule, summarizing the impact of Canada’s regulations on administrative burden over the fiscal year and listing all regulations which triggered the rule as well as the individual impacts on the balance of regulatory burden imposed on businesses.

In practice every regulating department or agency must use the Standard Cost Model to analyse the net administrative benefit to Canadian businesses during the Triage stage.  If the One-for-One rule applies (there is an impact to businesses), then a detailed and substantiated calculation of administrative costs and benefits is performed in consultation with impacted stakeholders and reported in the Regulatory Impact Analysis Statement(RIAS) in a dedicated section.  In addition to publication of the effects of the regulation on administrative burden in the RIAS, the regulating department or agency my submit a template describing the impact to Canadian businesses and whether a carve-out (non-discretionary, tax, or emergency) applies.  If the regulation is new and imposes burden (IN), the regulating department or agency (or portfolio, in the case of portfolio departments) has 24 months to remove a regulation from the stock of regulations (OUT) to offset the increase.  Additionally, for every dollar of burden imposed, the agency has 24 months to offset the additional cost. Regulations removed or administrative burden reduced (OUTs) remain on the balance sheet to offset future burdens (INs).

Assessment of Current Implementation

What is working well?

  • Since the introduction of the rule, Canadian regulators have reduced administrative burden on Canadian businesses by $24.7 million annually. 6
  • More emphasis is placed by TBS on calculating and documenting administrative burden in the Triage and RIAS, which in turn means that regulators are spending more time determining administrative impacts of proposed regulations.
  • Ministerial accountability over a 24-month period ensures that senior management is keenly aware of administrative burden imposed on regulated businesses in their purview.

Potential issues that should be addressed

  • There are two components to the rule: Element A (every dollar of imposed administrative burden must be offset by removing a dollar of administrative burden) and Element B (every new regulation must be offset by the repeal of a regulation.) . Element A places strong limits on the growth of the administrative cost to regulated businesses.  Element B doesn’t directly relate to the burden experienced by business.  Some individual regulations may count as several INs, while a larger regulation would count as a single IN, but impose more burden.  Additionally, while review of regulatory stock and removal of expired or unnecessary regulations is necessary, I do not believe there is evidence to suggest that a one-for-one ratio should exist for regulatory titles.  Innovation and changing regulated landscapes drive the need for new regulations to protect the health and safety of Canadians and do not necessarily mean that existing regulations are burdensome and should be remove.  I would suggest Element A be retained, and element B be retired in favour of strong language requiring ex post facto regulatory review and reporting.
  • While consultations are a mandatory component of regulatory development, the One-for-One Rule implementation could benefit from guidance directing regulating bodies to consult on administrative costs and benefits.
  • Departments and agencies publish One-for-One results and do not perform any ex post facto regulatory review of assumptions and costs/benefits used in the One-for-One Rule to validate impacts.

Recommendations

  • The One-for-One Rule is, in my opinion, one of the most successful regulatory reforms introduced as part of the Red Tape Reduction Action Plan.
  • The Element B (Title Stock) component does not seem to provide a rein on administrative burden, but does increase work for departments and agencies and encourages single monolithic regulations over smaller and clearer regulations.  I recommend eliminating the Element B component and replacing it as a component of a newly introduced mandatory ex post facto regulatory review.
  • Departments and agencies should be encouraged to evaluate assumptions of administrative costs and benefits after implementation of regulations to ensure that claims about reducing administrative burden are real and validated by industry and not theoretical.
  • While annual reporting is good (and required by the Act), I would like to see a website hosted by TBS which lists all regulatory actions and their associated impacts.  One could search by Department or Agency and time period.  One could look at a regulation over time and see the cumulative impact to administrative burden.  The data is already all held by TBS, all that is required is a user-interface, and most likely a better backend to store One-for-One data.  I believe Canadian businesses, media, and even average Canadians would benefit from the transparency of being able to determine where the greatest increases/decreases in administrative burden are coming from, which industries are most heavily impacted, which regulations impose the most administrative burden, etc.
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Regulatory Reform Series – Forward Regulatory Plans

Published by Gordon D. Bonnar on 2018-07-04

This post is part of an ongoing series on the Government of Canada’s regulatory reform efforts. This post will discuss forward regulatory plans.

Forward Regulatory Plans

In 2012, the Government of Canada committed to “give Canadians, business and trading partners greater opportunity to inform the development of regulations and to plan for the future” by requiring departments to publicly post forward regulatory plans of “anticipated regulatory changes that a regulator intends to bring forward over a 24 month period.”3

International Context

The Organization for Economic Cooperation and Development’s (OECD) “Recommendation of the Council on Regulatory Policy and Governance” (OECD, 2012) “sets out the measures that Governments can and should take to support the implementation and advancement of systemic regulatory reform to deliver regulations that meet public policy objectives and will have a positive impact on the economy and society.” From these recommendations came a call to governments to be more open and transparent in the regulatory process.  Many jurisdictions have implemented or improved existing mechanisms of notifying businesses and the public of planned regulatory actions.  For example, the United States’ regulatory oversight body, the Office of Information and Regulatory Affairs maintains the Unified Agenda which “provides uniform reporting of data on regulatory and deregulatory activities under development throughout the Federal Government” 7 The US does a great job of providing two major portals: reginfo.gov for forward regulatory planning and ex-post facto regulatory review and regulations.gov for stakeholders to review and comment on proposed regulations.

Canada’s Implementation

One of Canada’s solutions to increasing transparency and predictability in the regulatory sphere is the Forward Regulatory Plan (FRP).  Departments and agencies are required to post planned regulatory actions which are expected to be completed in a 24-month period to the “Acts and Regulations” section of their public website.  The posting is governed by a specific template which includes the following elements8:

  • Title or Working Title of the Regulatory Initiative
  • DescriptionConcise description of the regulatory initiative including the objective and the enabling Act.
  • Indication of Business ImpactsOne of two pre-determined statements on whether there are expected impacts to business.
  • Public Consultation OpportunitiesHow and when will Canadians be consulted.
  • Departmental ContactContact information to reach a specific contact who should be able to deal with questions personally.

The Forward Regulatory Plan is posted annually on April 1st and formally updated October 1 of every year.  As a best practice, departments and agencies make updates to the Forward Regulatory Plan on an ad hoc basis as changes occur, such as when consultation opportunities arise or are concluded.

Departments and agencies are responsible for maintaining a section of their public website devoted to Forward Regulatory Plan (e.g. Canada Border Services Agency Forward Regulatory Plan 2017-2019).  Treasury Board of Canada Secretariat hosts a list of all available Forward Regulatory Plans by providing links to the department and agencies’ FRPs.

Assessment of Current Implementation

What is working well?

  • FRPs Improve transparency and gives stakeholders earlier notice of proposed regulatory actions.
  • The Public Consultation Opportunities section provides early notice of upcoming consultation opportunities
  • Allows interested parties who may not be captured in stakeholder communications to learn of proposed regulatory actions.
  • The requirement that the Departmental Contact be a specific contact who can personally answer questions related to the initiative reduces the frustration in trying to determine who to reach with respect to planned regulatory changes.
  • Departmental hosting of Forward Regulatory plan reduces time and complexity in posting and updating the FRP.

Potential issues that should be addressed

  • Distributed hosting of Forward Regulatory Plan data as websites makes any form of aggregation, categorization, or searching across departments and agencies nearly impossible.
  • Distributed hosting implies that stakeholders will be aware of which agencies are responsible for any regulatory areas they are interested in.  Sometimes several agencies regulate a given sector (e.g. Immigration, Refugees, and Citizenship Canada and the Canada Border Services Agency jointly administer many aspects of the immigration sector, but a stakeholder may not think to check planned regulations at the CBSA when trying to determine the planned regulatory changes related to immigration.
  • The TBS-hosted list relies on agencies and departments updating them when URLs change.  As this doesn’t always happen, there are often inaccessible (HTTP 404) FRPs linked in the list.
  • Once the regulations are published, the regulatory initiative is removed from the forward regulatory plan, but plans may also be removed if priorities or regulated sectors change and an initiative is no longer needed.  Users of the Forward Regulatory Plan have no indication as to what happened to an initiative.

Recommendations

  • Centralized hosting of all FRPs on the TBS website would eliminate many of the issues identified above.  It would allow a single portal to be developed which would facilitate searching by department/agency, subject, regulation being amended, enabling authority, or even by subject (FRPs could be tagged with subjects to assist with this).
  • Moving to a better data model for FRP data (such as a simple XML-based model). To retain the ease of control/updating, departments could post the XML which would be aggregated by TBS and stored in a database which would be the backend for the regulatory planning portal.  Additionally, the XML schema I propose links into the XML schema used by the Department of Justice for posting legislation.  This would allow closer integration between proposed changes and existing legislation.  Without needing to implement an XML or other machine-readable solution, TBS could start by centralizing the hosting of Forward Regulatory Plans and require submission from departments in a strict format to allow easy importing into a database.
  • As we begin to use Consulting with Canadians more often, we should ensure that consultation opportunities are linked to in the FRP AND that the consultation on Consulting with Canadians links back to the FRP.
  • We should “close the loop” on FRPs, updating them to identify them as published, cancelled, etc.  Initiatives could be viewed by status and there would be a historical record of an agency or department’s planning versus actual performance improving accountability.  Additionally, when regulations are published, the Forward Regulatory Plan could be updated with a link to the published changes.
  • Going forward we should look at creating virtual “dockets” as with the US model where all details about a regulatory initiative from early planning, through implementation and including ex-post facto review are viewable in one place.

Conclusion

Canada is doing exceptionally well with regards to regulatory transparency, the OECD ranked Canada 3rd for Stakeholder Engagement and Transparency in developing subordinate legislation in 20159 behind only Mexico and the United States.  That majority of my suggestions revolve around improving the accessibility and transparency through the adoption of technology that would vastly improve the user experience.  As regulators we often focus on the known stakeholder groups.  Our goal should be to ensure that everyone who might be impacted, or even interested in potential regulatory changes is able to quickly and easily identify planned regulatory initiatives.

I’m interested to hear any comments or thoughts you have on our current model, my assessment and recommendations, or anything else related to forward regulatory planning. The next post in my series covers the One-for-One Rule.

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Budget 2017 – Commitment to Regulatory Modernization

Published by Gordon D. Bonnar on 2018-02-28

February 27th was a great day for policy wonks and regulatory modernization enthusiasts across Canada.  The Government of Canada proposed in Budget 2018 to “provide $11.5 million over three years, starting in 2018–19, for the Government to pursue a regulatory reform agenda focused on supporting innovation and business investment.”10.

This extraordinary commitment to modernizing Canada’s regulatory regime is unprecedented during my decade in regulations.  While Canada consistently ranks near the top of OECD rankings of regulatory regimes, we all know there are ways that we can make things less burdensome, more agile, and responsive to the increasingly dynamic landscape we’re regulating.

The changes stem from three priority areas identified in the December 2017 report of the Advisory Council on Economic Growth “for establishing an agile regulatory system designed for the new economy”11:

  • Catalyze innovation across the economy through regulations that accommodate emerging technologies and business models, especially in high-potential sectors.
  • Drive coordination between agencies and jurisdictions, both within Canada and internationally.
  • Promote efficient and predictable regulation.

In response to these three priorities, the Budget put forward the following approaches12:

  • Targeted reviews, over the next three years, of regulatory requirements and practices that are bottlenecks to innovation and growth in Canada, with an initial focus on agri-food and aquaculture, health/bio-sciences, and transportation and infrastructure, including emerging technologies such as autonomous vehicles.
  • Canada’s leadership on internal trade at the Canadian Free Trade Agreement Regulatory Reconciliation and Cooperation Table.
  • Developing an e-regulation system—an online platform modelled on the successful U.S. Office of Information and Regulatory Affairs website Regulations.gov—to engage Canadians on regulation in order to improve the transparency and efficiency of the overall rule-making process.

To best understand how to enact reforms which will catalyze and support innovation while increasing regulatory coordination, the first point is essential.  Canada, and indeed, the world’s, regulatory system is growing increasingly more complex every day.  A thorough review with targeted assessments of individual regulatory system components would be essential before proposing changes.

I have the least experience with the second bullet, but I can see how continuing our current trajectory of increased focus on regulatory coordination and cooperation will only benefit the Canadian regulatory system and reduce burden on businesses.

The final point has been one of my passions for several years now.  I am very excited to see the development of a single window into Canada’s regulatory system.  I have long advocated having everything from forward regulatory plans, to notice of intent, to consultation opportunities, to summarized feedback, to initial and final publications and retroactive regulatory review all in one location.  This would vastly reduce the burden of determining what regulations may impact businesses, especially in industries without a strong stakeholder association.  Additionally, it would allow clustering of regulatory initiatives by subject matter, thus breaking down the existing departmental regulatory silos.  You could look up changes occurring to import regulations for plants or food and see changes happening at the Canada Border Services Agency, Canadian Food Inspection Agency, and Health Canada in one location.

Needless to say I will be following the work of the team assembled to tackle this important task closely.  We have amazing regulators in Canada and strong fundamental basis for undertaking this modernization effort.  I strongly believe that we are on the cusp of being one of the world leaders in regulatory innovation and transparency.

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