CO (01) 2
12 March 2001
Business Compliance Cost Statement
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Summary of Key Points
- From 1 April 2001 all policy proposals submitted to Cabinet which require a Regulatory Impact Statement (RIS)
and which have compliance cost implications for business should include a Business Compliance Cost Statement
(BCCS) in the Regulatory Impact Statement.
- For proposals considered after 1 April 2001 the RIS/BCCS will also be published and will also be included in the Explanatory Note to Bills introduced into the House.
- A Regulatory and Compliance Cost Unit will be established in the Ministry of Economic Development to review RIS/BCCSs and provide information and advice to departments. Departments should consult the Unit in preparing RIS/BCCSs.
- An Officials Committee will be formed to coordinate and monitor the effectiveness of the government's Business Compliance Cost Programme, including the RIS/BCCS regime, and report to Cabinet on ways to enhance its effectiveness.
Introduction
1
- The government has agreed to a Business Compliance Cost Programme, comprising a number of initiatives to minimise compliance costs for business. In particular, it has agreed to some procedures to ensure that policies which have compliance cost implications for business are subject to scrutiny at an early stage. The Business Compliance Cost Statement (BCCS) is a key element in that scrutiny. This circular outlines the objectives of the BCCS and how departments should go about meeting them.
2
- Ministers' offices and Chief Executives should ensure that:
- all staff involved in the preparation of submissions for Cabinet and Cabinet committees are familiar with the advice in this circular;
- the material in this circular is conveyed to all Crown entities or other State agencies for which their Minister is responsible, which have an involvement in the preparation of regulatory proposals.
What are Compliance Costs
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- Compliance costs are the administrative and paper work costs to business in meeting government requirements. They include both the administrative burdens and all other compliance costs, such as equipment purchases, retooling, and recurrent production cost. Compliance costs are distinct from the direct costs of any government requirement, such as the amount of tax payable.
4
- Compliance costs include the costs associated with identifying and understanding the regulatory requirement and may include costs associated with buying in specialist services (such as legal training, computer systems, research) to satisfy regulatory obligations (or employing new staff generally). At a less tangible level, compliance costs can arise from increased liability through the establishment of new legal obligations (such as health and safety requirements).
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- The need to comply with government requirements can also have non-monetary effects such as stress and anxiety. These effects often arise from uncertainty about obligations and disproportionately affect smaller businesses with limited management resources who are most susceptible to such costs.
Principles of Business Compliance Cost Statement
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- Compliance costs arise from most government interventions. However, businesses and the economy should not incur more compliance costs than are necessary. At the stage that new administrative processes and measures are being designed, compliance costs should be given due weight with other costs and benefits.
7
- The following principles underpin the objective of reducing compliance costs:
- Compliance cost assessment should be an integral part of the policy development process;
- The reduction of compliance costs is a dynamic process which includes ongoing monitoring of existing legislation, regulation, and rules, as well as assessment of the impact of any substantive change to them;
- Recognition that compliance costs are a charge against the scarce resources of the private sector;
- Compliance requirements need to be critically assessed in terms of their absolute necessity to achieve the objectives of the policy;
- Compliance cost assessment is recognised as a clear departmental responsibility and as such should be an integral part of departmental management accountability.
Inclusion of the BCCS in RISs
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- At present, all papers on policy issues submitted to Cabinet committees that
result in government bills or statutory regulations, must be accompanied by
a Regulatory Impact Statement
(see paragraphs 3.24-3.39 of the Step by Step Guide). Where new policy proposals for bills
or statutory regulations have compliance costs for business, these costs must
be assessed as part of the policy development.
9
- At the point that the policy is submitted to Cabinet for consideration, a new section
headed "Business Compliance Cost Statement" is to be included in the Regulatory Impact Statement. The statement should contain a description of the business compliance costs (see paragraph 10 below). This should be a brief statement of no more than a page. If the proposal does not involve compliance costs for business, a statement should be made in the RIS to this effect.
Content of Business Compliance Cost Statement
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- The business compliance cost statement should identify:
- the source of any compliance costs;
- the parties likely to be affected, by sector and size of firm;
- quantitative (if possible) or qualitative estimates of compliance costs (both in aggregate and upon individual firms, persons);
- the longer term implications of the compliance cost for business - are they one-off costs? Will they be reducing over time?
- an assessment of the risks associated with any estimates and the level of confidence that can be placed on the compliance cost assessment;
- the key issues relating to compliance costs identified in consultation;
- any overlapping compliance requirements with other agencies; and
- the steps that were taken to ensure that compliance costs were minimised.
Requirement for Cabinet Submissions
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- The existing section in the Cabinet submission format headed "Regulatory Impact Statement" should be
amended to read "Regulatory Impact and Compliance Cost Statement." This section should include a one paragraph summary of the BCCS contained in the RIS, in addition to the requirements under the Regulatory Impact Statement heading.
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- Consultation with the Regulatory and Compliance Cost Unit of the Ministry of Economic Development (see para 20) should be noted on the CAB 100 consultation form, in addition to any other consultation that has taken place on the submission with the Ministry of Economic Development.
Publication of RIS/BCCS
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- The transparency and openness of the regulation-making process to the political, parliamentary, and public arenas is intended to improve the quality of regulatory interventions and ensure compliance costs are fully considered when regulatory proposals are developed.
14
- Cabinet has agreed that for proposals considered after 1 April 2001, the RIS/BCCS will be published. The RIS/BCCS will be:
- attached to the press statement announcing any new policy;
- lodged on the responsible department's website, and a dedicated Ministry of Economic Development
website. When the responsible Minister and/or Cabinet determines the RIS/BCCS is ready for publication,
departments must send an electronic version of the RIS/BCCS, along with the departmental website reference,
to the Ministry of Economic Development at ris-bccs@med.govt.nz;
- included in the Explanatory Note to Bills that are introduced into the House.
15
- Departments should ensure that a suitable electronic version of the RIS/BCCS (in ASCII or Microsoft Word 97 format) is supplied to the Parliamentary Counsel Office (PCO) in sufficient time to enable it to be included in the copies of the draft Bill that are printed for submission to the Cabinet Legislation Committee (LEG).
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- RIS/BCCSs for incorporation in explanatory notes must, so far as possible, follow the standard format specified by the PCO, as the typesetting process for the printing of Bills imposes limitations on the format for explanatory notes to Bills. The PCO will issue those specifications shortly. Departures from this format, or requests for the inclusion of non-text material such as tables or graphs, may not be able to be accommodated, or may result in delays in the production of LEG copies of the Bill.
17
- Enquiries about the PCO's requirements for RIS/BCCSs should be directed to the PCO team leader responsible for the department's legislation.
18
- The decision on the precise timing of publication is left to the responsible Minister and/or Cabinet. Ministers may wish to review and amend the RIS/BCCS to ensure that it fully reflects the government's position and is of a high standard. Some changes may therefore take place after Cabinet consideration of the Cabinet submission to which the RIS/BCCS is attached.
19
- There may be instances where it is undesirable to publish the RIS/BCCS; for example, if the RIS deals with matters which, if disclosed publicly, would prejudice the security, defence, international relations, or economy of New Zealand. The criteria set out in the Official Information Act 1982 will guide decisions to withhold public disclosure of a RIS.
Assistance from the Ministry of Economic Development
20
- A Regulatory and Compliance Cost Unit is being established in the Ministry of Economic Development to review RIS/BCCSs and provide advice to departments on RIS/BBCS principles and processes. Departments should consult with the Unit on RIS/BCCSs as part of the interdepartmental consultation process. This is in addition to consultation with the Ministry of Economic Development on relevant policy issues.
21
- Although the Unit will primarily have an education role, on an exceptions basis, the Unit can bring to the Chair of the Officials Committee (see below) concerns that it has with specific RIS/BCCSs.
Officials Committee
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- Cabinet has agreed that an Officials Committee, chaired by the Department of the Prime Minister and Cabinet, and comprising Treasury, State Services Commission, Ministry of Economic Development, Ministry for the Environment, Department of Internal Affairs and other coopted departments, be formed to:
- coordinate and monitor the effectiveness of the Business Compliance Cost Programme, including the RIS/BCCS regime;
- ensure that departments are equipped to undertake effective compliance cost reduction; and
- identify and report to Cabinet on changes to the Programme that would enhance its effectiveness.
Further Information
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- The Regulatory and Compliance Cost Unit is preparing more detailed guidelines on the preparation of BCCSs. These guidelines will be issued to departments shortly.
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- Enquiries about the requirements in this circular should be directed to:
Regulatory and Compliance Cost Unit
Ministry of Economic Development
PO Box 1473
WELLINGTON
Marie Shroff
Secretary of the Cabinet
