Wednesday 19 February 2014

Victoria leads the way in regulatory impact analysis (but there is room for improvement!)

A recent parliamentary committee inquiry into the Regulatory Impact Statement (RIS) process has found that the Victorian system of regulatory impact analysis is highly regarded across Australia and on par with leading practice internationally.

Regulatory impact analysis is the process by which certain regulation proposed to be introduced through subordinate legislation is subjected to scrutiny. It involves an assessment of whether the regulation is necessary, and whether it is in the least burdensome and most cost-effective form possible. The rationale behind the process is to encourage the testing of alternative regulatory approaches and to require consultation with the public and stakeholders to make sure all relevant information is obtained to assist good decision making.

The types of subordinate legislation that are subject to regulatory impact analysis include regulations, statutory rules, court rules, orders in council and codes of practice. The threshold set by the Subordinate Legislation Act 1994 for when a RIS needs to be prepared is that the piece of subordinate legislation is likely to impose 'a significant economic or social burden on a sector of the public.'

A similar scrutiny process - a business impact assessment (BIA) - now also applies to certain primary legislation. The threshold for when a BIA is required is that the legislative proposal (ie a Bill) has 'potentially significant effects for business and/or competition in Victoria.' BIAs are based on the same methodology as the RIS process but are not governed by legislation; rather, the content and processes of BIAs are agreed by Cabinet and set out in the Victorian Guide to Regulation.

The Inquiry into the Regulatory Impact Statement Process (Inquiry) conducted by the Environment and Planning Legislation Committee (Committee) concluded that although there was some evidence that the RIS process is perceived to be overly burdensome, time consuming and costly, the benefits of conducting regulatory impact analysis outweigh the costs. In addition, the weight of evidence put to the Committee indicated that the Victorian system is working well and the rigour and standard of analysis of RISs produced in Victoria is higher than in other jurisdictions.

However the Inquiry did find that there are still ways in which the system can be made more effective and the Committee made a number of recommendations as to how the RIS process in Victoria can be improved. Four key areas flagged for improvement are outlined below.

Making the RIS process more efficient by increasing departmental involvement

The Committee found that Victorian departments are engaging consultants to prepare RISs much more frequently than in other jurisdictions. In 2012-13, 77 percent of Victorian RISs and BIAs were prepared either wholly or partially by consultants. Evidence before the Inquiry suggested widespread and consistent use of consultants can limit the accrual of skills, expertise and experience within the department or agency. It also risks distancing the regulatory process from the policy-making process, which is contrary to the rationale behind the RIS system.

The Committee concluded that consultants have an important role in regulatory impact analysis in terms of advising departments on technical matters relating the regulatory proposal. However, it recommended that departments should endeavour to develop their own in-house skills with the aim of building the capacity of the department to undertake the bulk of the non-technical aspects of regulatory impact analysis. To help facilitate this, the Committee also recommended a number of improvements to Victorian Guide to Regulation to better support departments and local councils.

Bringing the BIA process into line with the RIS process

Although many of the steps involved in the BIA process are similar to those in the RIS process, the 'threshold' test for a BIA is different and significantly narrower than for a RIS. To make the BIA process more effective, the Committee recommended that the threshold test for when a BIA is required be changed to bring it into line with the RIS threshold, and that the term 'business impact assessment' be replaced with the more accurate term 'legislative impact assessment.'

Independent quality assessment and compliance monitoring

At present, the oversight body for the regulatory impact analysis system is the Victorian Competition and Efficiency Commission (VCEC) which is attached to the Department of Treasury and Finance. The VCEC provides the final independent assessment of whether RISs and BIAs are compliant with their requirements.

The Committee found that leading practice suggests oversight bodies with a greater degree of independence are likely to operate with more objectivity and transparency in implementing regulatory impact analysis requirements. Accordingly, the Committee made two recommendations: First, that the Victorian Auditor-General conduct bi-annual evaluations of the VCEC's assessments of RISs and BIAs; and second, that the VCEC be established as a fully independent body reporting to the Parliament.

Recommended change to the planning system

Planning scheme amendments are currently exempt from the RIS process, largely because a requirement to prepare an RIS for these amendments would create duplication of existing assessment and consultation requirements under the Planning and Environment Act 1987 and potentially increase unnecessary delay.

However, the Committee found that the rigorous cost-benefit analysis required by the RIS process has the potential to improve policy making in all areas, including in the planning system. As such, the Committee recommended that a requirement for a cost-benefit analysis be introduced for any significant changes to a planning scheme.

If you are in the Victorian Government and would like more information about this report, please contact:

Retta Berryman
Trainee Lawyer
t 8684 0468


  1. This is such a big step for Victoria and hopefully other areas follow suit.

  2. Hopefully Victoria will changing the planning system