Life in the farce lane – again

Troppo readers will know that one of my interests in economic policy is regulation. So with the Banks Report receiving its final response from Government, I wrote a column on it which was published today in The Age. Quite a bit was cut in The Age – something that usually happens at the last moment when they’re fitting things on the page so it left out some things that I thought were important to the argument – which is that we’ve yet to move much beyond tokens in taming red tape. In this respect we’re the same as other developed and reforming countries. No one has cracked the code of how to do it properly.

The Dutch and the English are regarded as setting the pace these days – with regulatory budgets and quotas by which the bureaucracy has to reduce compliance costs. I have my doubts as to whether these initiatives will go anywhere but we’ll have to see – they’re relatively new. In the meantime I have some ideas of my own, but have only hinted at them in the column.

Life in the farce lane

Any discussion of the government’s latest bout of red tape busting should begin with Lord Atkin’s great joke about rowing being the perfect preparation for public life. Why? Because rowing allows you to face in one direction while travelling in the other.

Over the decades a cycle of red tape busting has become evident going back arguably to Malcolm Fraser’s ‘razor gangs’ and certainly to Bob Hawke’s time.

Taking the face of a clock at twelve on the dial, in response to the groans of business about over regulation, politicians get into ‘something must be done’ mode. By 3 o’clock a public inquiry or departmental committee is appointed.

Casting round for ideas it produces a red tape busting plan (remarkably like the previous one). By six o’clock we’re implementing the plan. By nine, things are pretty much back to normal and regulation proceeds apace the spirit and even the letter of our measures to counter red tape are now routinely violated.

So, by the time the big hand points to twelve well . . . ‘something must be done’.

Bob Hawke announced the policy of ‘minimum effective regulation’ in 1986. He established the small secretariat that became the Office of Regulation Review. Its job was to raise the bureaucracy’s awareness of good regulatory principles and to act as a gatekeeper preventing bad regulation being passed.

In 1991 and again in 1994 Keating’s strategists whispered into their bureaucrats’ ears ‘we need something on red tape’. On each occasion the modest role, status and resources of the ORR were (modestly) escalated.

In 1994 bold plans were announced to ensure that Regulatory Impact Statements (RISs) accompanied all business regulation. And a Council on Business Regulation was announced to oversee the battle against red tape.

The announcement having been made, the subsequent implementation of these plans was derisory.

Nearly three years after the announcement, the ORR published the bureaucracy’s compliance with these policies (though several more years passed before individual agencies were fingered with disaggregated reporting). 78 per cent of regulations were non-compliant with another 14 per cent partially non-compliant. That’s not a misprint just one in twelve regulations was fully compliant!

It took over a year for the Council on Business Regulation to meet at all and it managed just one more meeting before rightly and unceremoniously passing into oblivion. Who cared about these transgressions and idiocies? No-one much. There was no scandal, and nothing that anyone said in parliament or outside managed to gain ‘traction’ as they call it these days.

Enter the Howard Government with a bold new promise to cut red tape in half for small business. It appointed the late Charlie Bell then a youthful CEO of McDonalds Australia to tell it how. Charlie didn’t know, but the Canberra bureaucrats working with him rounded up the usual suspects. The report’s recommendations? Strengthen RIS requirements and the gatekeeping role of the Office of Regulation Review.

With Charlie Bell reporting that taxation accounted for three quarters of small business’s red tape burden, the Howard Government accepted most of his recommendations. Oh and it introduced the GST. The GST’s high compliance costs have been widely attributed to the Democrats’ meddling. But administrative burden is implicit in the very nature of the GST in its being itemised on each invoice and tracked through each chain of production.

Here’s a former Commonwealth Treasurer on the subject.

A multi-stage VAT (ie a GST) was rejected fairly quickly because it would have imposed an enormous paperwork burden on both taxpayers and collecting authorities.

The speaker? John Howard in 1981.

In fact no country has yet cracked the riddle of regulating without strangulating. But though we’ve led the world on reform on many fronts, things don’t look too promising here. My hunch is that, if any country ever cracks it, it will find that the art of regulating well is rather like running a very large, complex organisation well.

That requires leadership in which there is more alignment between word and deed between the big and the little picture than has been part of our own political culture for some time. It requires the development of regulatory institutions that are disciplined in their measurement of the costs and benefits of what they do, genuinely responsive to input from those they regulate and for those on whose behalf they regulate.

That is easy to say, but very hard to do. When governments are not ignoring their own less red tape slogans, they’re violating them with casual abandon. Red tape busting plans place great store in the role of Regulatory Impact Statements (RIS) in enforcing a cost/benefit mentality in regulation. But though they’re costly to produce, many are slipshod some triumphantly so.

While Gary Banks and his colleagues beavered away on the latest red tape busting plan probably the best ever the Government’s controversial Work Choices legislation was presented to Parliament complete with its very own RIS (to formally comply with the last red tape busting plan). Its entire analysis of Work Choices’ “costs and benefits to employees” comprises a skimpy paragraph pointing only to its protection of employment standards.

Now you don’t need to oppose Work Choices to recognise that this ‘analysis’ of the packages effects on workers owes more to George Orwell than Adam Smith.

If we aspire to run one day, there’s no time like the present for learning to walk. We could start by holding our politicians accountable for their past undertakings, before imagining that their latest announcements are anything more than tokens.