Regulatory Impact Assessment and SMEs Test
Transcript of Regulatory Impact Assessment and SMEs Test
Regulatory Impact Assessment and SMEs Test
March 16, 2017 - h. 17.00-19.00 Mario MARTELLI, Economist, expert on public policies and regulatory assessment, Italian Presidency of the Council of Ministries ([email protected])
Jean Monnet Module EU Approach to Better regulation
Increase two-way dialogue
with the outside world
on better regulation;
showing what the govt
are doing and how we
can all work together
to change things
Work with departments and
regulators to simplify
and modernise existing
regulations
Work with regulators
and departments to
change attitudes and
approaches to
regulation to become
more risk based
Work with departments
to improve design of
new regulations and how
they are implemented Flow
Comms
Culture
Stock
Better Regulation – the interlinking Pillars (Berr 2008-09)
Role of RIA
in the light of the programming
objectives
The new regulatory provisions have to be evaluated not
only vis-à-vis their abstract coherence with values
considered worthy to be carried out, but as well, and
especially, with regards to the pros and cons for citizens,
enterprises, and the public sector,
Tools to improve the flow of regulations: Impact Assessment
• IA is a systematic, and comparative appraisal of the impact of proposed rules.
• In short, the IA process moves from the general strategy underlying the logic of intervention (the definition of the problem), to the identification of relevant options, and finally to the in-depth analysis of options that are feasible. Finally, the comparison of the impact of options (including the so called do nothing) is intended to identify a option “preferred” because the benefits outweigh the disadvantages.
The classic Table of Contents of an IA
1 Problem definition
2 Measuring the baseline
3 Options (alternatives)
4 Consultation
5 Decision criteria
6 Data-gathering
7 Analysis of the (economic) impact of different options
8 Choice of an option or presentation of 2-3 options each of them ‘optimal’ according to different criteria
9 Monitoring, evaluation
10 Reporting
• Problems and needs to be tackled by
regulation
• Objectives and expected results
• Regulatory and non regulatory options
• Relevant options: analysis of criticalities
and assumptions
• Economic assessment of feasible options
• Preferred option: the reasons why
Data
Consulta
tion
What is the RIA Process
RIA = Informed decision
Regulatory lmpact Assessment
- Does NOT replace the need for a political decision – rather, it provides some of the factual information essential for a good
policy development process and a well-informed final decision
• Assessment of a specific category of costs affecting a category of stakeholders
• Given the goal set by the political system, IA determines the most effective way to reach that goal
• Assessment of a wide range of costs and benefits affecting different categories of stakeholders
• Assessment of a wide range of costs for the public sector (‘regulation within government’)
Tools to improve the flow of regulations: Impact Assessment 2
Problems identification
OBJECTIVES GENERAL SPECIFIC
EXPECTED RESULTS
ACTIVITY
RELEVANT OPTIONS
FEASIBLE OPTIONS
Ex ante evaluation
ECONOMIC
assessment
(CBA, costs effectiveness)
PREFERRED OPTION
The RIA Strategy
15
Relevant Options
FEASIBLE OPTIONS
Analysis of Assumptions/conditions (organizational and financial, economic, social)
Analysis of criticality
Feasibility
PREFERRED OPTION
Economic analysis
Option choice
Conditions and Assumptions to be Assessed in a RIA
Regulation = Compliance Costs (for the End-Users)
Direct financial costs Substantive
compliance costs Administrative costs
Compliance costs
Monetary transfers to public administration
(taxes, duties, etc.)
Modification of productive process or
output
- Arising from administrative activities businesses would conduct even in the absence of a regulation - Arising from activities businesses realize
simply because there is a regulatory requirement.
Administrative burdens
Opportunity Cost
Is what you give up to get something or to
do something. SCARCITY
Examples:
Keeping cash in closet for one year
Sitting in classroom listening to lecture
Queuing in a Public office dealing with bureaucracy.
IA: Some classic misunderstandings
• It is not cost-benefit analysis. CBA is a component of RIA in
some countries (even in the US CBA is mandated for some
agencies-topics but not others)
• It is used to raise the right questions, it is not an
algorithm which churns out solutions
• It is not a decision-making method, it supports the
process of collective choice together with other
components of decision-making
Exercise: Overview
Challenging an Italian icon:
The moped and personal freedom The case concerns the introduction of mandatory
helmet requirements for moped drivers in Italy, a change from the previous legislation that required helmets only for drivers under 18 years.
This case study examines an impact assessment developed in 2000 within the ‘Special RIA Project’ organized by the Italian Presidency of the Council of Ministers. The special RIA Project introduced RIA for the first time in Italy.
Exercise: The End of Freedom: Content of the Helmet Law
The regulation mandating helmets for everybody (Law 472/99) became effective on 1 April 2000.
Consumers
Fines for those who drive without a helmet range from €0 to € 120. The driver is responsible for the passenger. If the driver is a minor, the vehicle is seized for 30 days
Producers
Fines are possible for those importing and selling ‘non compliant helmets’: from € 600 to € 2400
Exercise: What was the problem? The cost of accidents…
• Total cost of road accidents (estimated 1997) was equal to 22 billion Euros per year
• Medical costs of road accidents, estimating ordinary hospitalization expenses, in 1994 found an average cost of ITL 5.3 million (Euro 2,700) per injured
Also counted:
• Society’s total costs and expenses due to fatality, injuries and damages to property caused by road accidents
• “Parameters adopted by countries with mobility and road accident conditions not different from Italian ones, corrected on the basis of sanitary cost analysis by the Italian Health Institute and of data relative to total number of the accidents”
… particularly head injuries.
(Source, The Italian Health Institute exploratory studies on the hospitalization cost estimates [on a
sample of 396 cranial traumatized during the period 1984-92]
The medical costs for head-injuries on mopeds were estimated at 131 billion Liras a year (or 65
million Euro), while indirect costs (based ‘on epidemiologic data of head-injured mortality and invalidity from road accidents on mopeds’), were
estimated at 700 billions Liras, a year at minimum (or 350 million Euro)
Options and RIA
Objectives/ Expected Results
Relevant Options
Do-nothing option
Deregulation and simplification
Voluntary options
Self-regulation
Market-based options
Information disclosure
Command and control regulation
A RIA Process: The Typical 4 Steps
Think!
Identify policy options to meet the objectives.
Consider the most appropriate delivery mechanisms (regulatory/non-regulatory approaches).
Begin to narrow the range by means of screening for technical and other constraints, and by measuring against criteria of effectiveness, efficiency and consistency.
Draw up a shortlist of potentially valid options for further analysis.
Assess Alternatives
• We have less experience with alternatives in most fields, so anticipating the reaction of consumers and businesses to different incentives is difficult to do empirically.
• Alternatives often require the involvement of new or unfamiliar institutions and agents whose past performance is not clear.
• Alternatives often involve more uncertainty than “commands” (although in practice the degree of uncertainty is not likely to be very different).
Exercise: Other Evidence Considered
There is empirical evidence from other countries that
indicate similarities to the Italy’s experience that
demonstrates the effectiveness of requirements for
helmet use.
In the USA, mandatory helmet use
brought a 30% decrease in fatal
road accidents.
Smart regulation: policy mix and regulatory pyramids
It is rarely based on one option, but on the combination of different options that produce a coherent, self-reinforcing policy mix
It is often responsive, based on an escalation of options on scales of threat or reward:
“the regulator offers trust, if the regulatee complies she is given reward, if not there is the threat of command and control regulation up to criminal enforcement of the law for the bad apples”
Exercise: Coercive Regulation ... Appeared to be the Best
• “Direct regulation” seemed to regulators to be the best choice. The rule provided for mandatory helmet use for all moped and motorcycle drivers, regardless of age and vehicle cylinder capacity, as well as for possible passengers, with fines to promote compliance.
• Coercion appeared to be a suitable tool to reach the objectives.
The choice to impose mandatory helmets is also based on the assumption that, in this case (the contrary of what is done for many other dangerous activities) the ‘freedom to take risks’, and the personal freedom of choice should be reduced for public purposes. The inconvenience arising from drivers’ change of behaviour was not included in relevant costs. Was this the correct approach?
Assess Alternatives – consultation ...
Do not switch off your brain here: you can always learn details about alternatives…
... and even re-consider the order of options further to the results of the consultation exercise
... Finally, consultation may reveal options that were not considered initially or suggest breaking down one option into two different ways to go about the option
Regulator
Citizens, Business, Representatives of regulatees
Representatives of regulatees
1) INFORMATION
2) CONSULTATION
3) NEGOTIATION
Citizens
REgRef – public consultation
Decision
Decision
Regulator
Decision
Regulator
Why does consultation matter/1?
Info about problems, alternatives, impacts
Affected stakeholders (for new or existing rules)
Input for rulemaking
Why does consultation matter/2?
•
Consultation
Brings into the discussion the
expertise, perspectives, and
ideas of those directly affected
Helps regulators to
balance opposing interests Increases
citizens’ participation
Improves implementation
: a) “sense of ownership”; b)
reduces enforcement
problems Reduces
unintended consequences
Raises transparency of decision-
making
Exercise: Some People will be Harmed by the Regulation
e.g. Some stakeholders who fall under the category of ‘sick people on a waiting list for organ transplants’: for them, the PROS of the direct beneficiaries are to be considered CONS.
Different stakeholders will have different opinions and points of view about costs
and benefits
Exercise: Are There Other Relevant Stakeholders?
Motorbike and motorcycle dealers, importers or producers
Motor vehicles (3/four wheels) dealers, importers or producers (remarkable ex-post unforeseen effect on this category after the new regulation)
Building companies active in public works (roads)
PR and publicity agencies (regulation through information for a public campaign)
Insurance companies (huge decrease in disbursements)
Associations of civil society representing ‘victims for road accidents’
Persons and entities representing biomedical research and special medical services
Exercise: Summarizing Costs and Benefits
Regulatory costs are composed of direct compliance costs from the purchase of the protective helmet (with the exclusion of motorcycle drivers already obliged by the previously enforced norm), and the increase of supervision costs by authorities.
Direct benefits are the decrease of fatality, morbidity and invalidity caused by head injuries in moped road accidents, with a consequent relative cost decrease for the people.
Indirect benefits are the decrease of health costs borne by the National Health System, as well as rehabilitation costs for social assistance and social/labour reintegration of the disabled.
OCSE – Proportionality, IA: risk
When framing regulations, the burdens imposed and penalties for non-compliance are proportionate to the risks.
It is useful to consider whether the costs for a particular group (e.g. SMEs) of complying with an administrative procedure are proportionate to the benefits to
society resulting from the new procedure.
Implementing regulation with particular reference to business (controls and audit). This implies particular attention to low risk firms which are usually the majority of the regulated population (J. Black, 2008)
Italian IA – DPCM 170/2008
Needs
Do Nothing
Objectives
Definizione dell’ambito di intervento
Impact Assessment
Options (Alternatives)
Co
nsu
ltat
ion
Preferred Option
Relazione AIR
3 Issues to be considered:
1. Regulatees – the SMEs
2. Impacts on the SMEs
3.Alternatives wich mitigate impact on SMEs
Over the whole process: Consultation
1. Preliminary Assessment of the End Users: SMEs
Needs – Regulatees From the beginning, the analyst need to check wheter or not SMEs will be affected by the regulation to be, no matter if apparently they are not official regulatees. Focus on:
No. of companies and dimension
Work-force
Relevance of the SMEs for the area of regulation
Inter-connections with other sectors, subcontracting
Basic analysis and then in depth analysis if a SMEs risk (regulatory options) arises
SMART Regulation - ‘end-user’. Anyone affected by the foreseen regulation.
2. Measurement of the impact on SMEs
IA with particular focus on
REGULATORY COSTS
Regulatory costs (see slide 16) are regressive
Emphasis over administrative burdens
Competition assessment: credit availability, behaviour of competitors, barriers.
3. Impact of the analysis: mitigating options for SMEs
Esenzione totale/parziale per le PMI da certi obblighi/costi della regolazione
Riduzione/esenzione temporanea da certi obblighi/costi della regolazione (intervalli temporali più lunghi
Riduzione fiscali o aiuti finanziari diretti per compensare costi di regolazione (in compatibilità con articoli del Trattato CE)
Riduzione della parte di costi finanziari (ad esempio, diritti che hanno una base di costo fisso elevato che quindi costano più per i piccoli)
Rendicontazione contabile/amm.va semplificata per microimprese e PMI
Campagne di informazione, formazione e Help-Desk dedicati alle PMI
Ispezioni e controlli semplificati, basati su considerazioni legate al rischio regolatorio
If previous steps show a SMEs risk, then PROPORTIONALITY. In the
Italian scenario: