Regulation – once more

Here’s an op ed just published in today’s Fin.

John Howard has form on cutting red tape like Paul Keating had on making tax cuts the L.A.W.

Having won government promising to cut red tape by 50 per cent, Howard then introduced a new tax which, as Treasurer in 1981, hed rejected as a nightmare of red tape for business. The GST managed to spark the only red tape revolt in our history.

Now, against the backdrop of an inexorably rising red tape burden and business anger, every galah in the pet shop is talking about it. There was the Banks Review of red tape released last year. Cutting red tape has become a major plank of the ALPs economic policy. The PC has been asked to benchmark regulatory burdens. And regulation reform is a new priority for the BCA.

Here we go again. As the British Chambers of Commerce recently commented, both Labour and Conservative governments approach regulation reform with apparent enthusiasm, learn little or nothing from previous efforts and have little if anything to show from each initiative.

For two decades since Bob Hawke announced minimum effective regulation the core strategy has been to create gatekeeping mechanisms like regulatory impact statements (RISs) designed to prevent bad regulation being promulgated. One decade after Hawkes announcement, compliance with the new policies remained derisory.

Today, another decade on, formal compliance is much better. But what does that count for when push comes to shove? As the Banks Committee beavered away on its report which would recommend (yet another) strengthening of gatekeeping mechanisms, WorkChoices was pushed through parliament with an RIS which read more like a corporate brochure than a piece of analysis.

But our failures arise not just from the brazen disconnect between what our politicians say in general and do in particular (and our own complicity in the process I dont recall the BCA objecting to the dodgy WorkChoices RIS).

It is true that Michelangelo once said that he simply removed unnecessary marble to reveal the masterpiece within, but even so, trying to prevent bad regulation from passing (even if we could achieve that limited goal) is a pretty incomplete recipe for regulating well.

So far our approach has focused on top down direction. Thus the BCA issues red tape report cards to state governments based largely on correspondence with Premiers detailing their gatekeeping policies. As if the proof of a pudding was in the recipe rather than in the eating. As if there was much evidence that all that strengthening weve done in two decades has worked.

And when the Banks Report descends into minutiae for instance recommending some more minor changes to the BAS form isnt that like asking head office to fix some glitch on the assembly line?

Our regulatory system is like a factory from the bad old days, driven from the top and so, simply unresponsive to the thousands of improvements minor and major that might emerge if those in the system, both regulators and the regulated behaved as if optimising it were a high priority.

RISs offer little on the small details that together determine so much regulatory design. Though regarded as exemplary at the time, the RIS for the GST offered no analysis of the original (disastrous) BAS. And how could it have itemised the costs and benefits of all the possible options and their respective design combinations and permutations?

To the contrary, RISs can actually get in the way. Giving evidence to a PC inquiry, the Federal Office of Road Safety told me that it couldnt update automotive design requirements to accommodate new anti-theft technology because it wasnt resourced to do an RIS!

Still, there are some chinks of light from perhaps unexpected quarters. Politicians as ever on the prowl for electoral pleasure without pain have embraced measures which, even if they wont reduce regulation, will make governments more helpful.

The budget announced that wed copy other countries and have the Tax Office pre-populate our tax returns with all the information they already collect on us obviating the need for millions of Australians to file a return at all.

And the Opposition wants to follow other countries like Sweden in setting up a clearing house for employers to cut through the red tape of sending fortnightly super contributions to scores of different super funds chosen by their employees. Theyll pay the clearing house which will do the rest.

Shouldnt the reform boosters have highlighted these ideas as low hanging fruit years ago? Perhaps were too used to thinking of reform as simple deregulation rather than optimising the way our institutions work together.

No-one can quibble with minimum effective regulation, but while we wait for our political culture to acquire the bottle to minimise unnecessary regulation, lets look out for ways to make governments more effective.