Meeting of the High Level Group on Administrative Burdens

Dr. Johannes Ludewig Chairman of the Nationaler Normenkontrollrat

Brussels, 23 July 2013

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Background:

• End of 2012, NKR commissioned Prognos to conduct the study.

• In the German RIA system, the expected costs are quantified, the benefits of the regulatory proposal are described in a

qualitative way.

• Thus, the focus is on the cost side in the RIA process.

• This makes it more difficult to appraise whether the regulatory proposal shows an appropriate cost-benefit ratio.

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Objectives:

• Analysis of the international practice of quantifying and monetising the benefits of regulatory proposals (special focus

on non-market impacts)

• Four RIA systems were selected as basis for the study:- Australia- European Commission- United Kingdom- United States

• Stock-taking of different existing methods

• Lessons learnt for the German RIA system

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Approach:

• Review of relevant documents and academic literature

• Assessment of a sample of RIAs

A sample of 21 good practice RIAs were selected and reviewed.

• Research interviews with country experts

10 interviews had been conducted in order to validate previous findings and to gather assessments of the actual practice.

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Example 1: Americans with Disabilities Act

• Objective: Adopting accessibility standards which aim at non-discrimination on the basis of disability by public and commercial facilities.

• RIA considered two main benefits:

1) The time saved – monetisation by using average hourly wages

2) More independence and safety as well as avoided stigma and humiliation – cannot be directly quantified

• Solution: - Costs are well-known; they outweigh the benefits calculated from the time saved by 19 mio. USD per year

- IA asked if the value disabled people put on benefit 2) at least equals this difference in monetary values.

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Example 2: Tobacco Control Act

• Objective: Introduction of pictorial warning labels on cigarette packages and cigarette advertisements

• RIA considered a number of benefits, e.g. smoker‘s life-years saved, health status improvements, medical expenditure reduction

• Exemplary calculation: increased life expectancy

- Estimates of „Value of a Statistical Life Year“ from literature and previous analysis (100,000 – 300,000 USD) were used for calculating the WTP for a year of life saved;

- this value is multiplied by the expected amount of people who will stop smoking;

- estimated benefits between 1.45 and 22.56 billion USD.

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Main results (1):

• There is a wide variety of methods for quantification and monetisation of non-market impacts.

• Different forms of „Willingness to Pay“ is most common approach:

A market price is simulated by identifying the maximum amount of money a person is likely to pay to receive a certain

good.

• Further used forms/methods are: Willingness to Accept, Value of Statistical Life, Value of a Statistical Life Year, …

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Main results (2):

• In practice, the extent and level of quantification and monetisation is far lower than the guidelines and other documents would suggest.

• Between less than a quarter and just about half of the RIAs contained substantive monetisation and quantification of

impacts.

• Reasons for the lack of quantification often refer to problems in data availability and methodological difficulties in assessing and monetising social impacts.

• Costs and economic impacts were more frequently quantified.

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Main results (3):

• There are no reliable estimates available for the costs of conducting RIAs in general and quantifying and monetising benefits in particular.

• There is only patchy and anecdotal evidence that RIAs have a positive impact on the policy making process.

• But: Impact on the administrative part of the policy formulation process through a more systematic approach, transparency and openness.

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Lessons learnt for Germany (1):

• There is no easy to apply, standardised methodology available.

• One option could be the development of sector specific instruments and tools which could cover aspects of benefits partially and serve as indicator for the overall impact.

• Another, more feasible, option would be the strengthening of benefit assessment within an integrated approach by

- using potentials for standardisation

- increasing the degree of monetisation

- consistent application of methods within specific policy areas

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Lessons learnt for Germany (2):

• Preconditions:

- sufficient political commitment

- specific analytical capacities and competences

- integration of RIA into the policy making process

- independent quality assurance and oversight

- acceptance both within and outside government

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Next steps:

• Establishment of a Task Force composed of representatives of interested ministries, Better Regulation Unit and NKR

• Mandate of the Task Force would be to develop the basis for decision if and how benefits should be quantified in regulatory proposals.

• Organisation of a national as well as an international workshop in August

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ContactNationaler NormenkontrollratWilly-Brandt-Straße 110 557 Berlin

Internet: http://www.normenkontrollrat.bund.deE-Mail: nkr@bk.bund.de