Regulatory impact analysis

The role and purpose of regulatory impact analysis

The government wants to ensure that proposals involving regulatory options are subject to careful and robust regulatory impact analysis (RIA) to be certain that the problem cannot be adequately addressed through private arrangements, and that a regulatory solution is required in the public interest.

The government’s RIA framework encourages an evidence-based approach to policy development which helps ensure that all practical options for addressing the problem have been considered and the benefits of the preferred option not only exceed the costs, but will also deliver the highest level of net benefit.

RIA should be undertaken for any policy work involving regulatory options that may result in a paper being submitted to Cabinet.  "Regulatory options" means the potential introduction of new legislation (bills or regulations) or changes to/the repeal of existing legislation.  This includes:

  1. work that may result in a government bill (or work on a Member's Bill that the government supports or adopts) or statutory regulations (as defined in the Regulations (Disallowance) Act 1989);
  2. the development of discussion documents that include options that may lead to legislative or regulatory changes;
  3. "in principle" policy decisions and intermediate policy decisions, particularly those where options are narrowed down (eg limiting options for further work or consideration);
  4. decisions to introduce legislative changes that are merely enabling, and the substantive decisions as to whether and what sort of intervention will be made later;
  5. when regulations are made by individual Ministers under an enabling power in an Act and the Minister's decision is referred to Cabinet for noting.

This analysis involves the preparation of a Regulatory Impact Statement (RIS) that summarises the RIA that has been undertaken.  Certain information about the RIA undertaken must also be included in the Cabinet paper.

A RIS is normally provided when papers are submitted to Cabinet committees for policy approval.  In rare circumstances, the policy proposal and draft regulations may be submitted together.  In these cases, the usual procedure is for the paper to be submitted to the relevant 'policy' Cabinet committee, rather than directly to the Cabinet Legislation Committee.

During the parliamentary process, it often becomes necessary to amend a bill.  The policy content of the amendments may be such that further approvals from Cabinet are needed for new policy or to alter existing policy approvals.  If so, the original RIS should be updated to indicate how the changes affect the impact analysis (eg how they alter the nature and/or magnitude of the impacts).

All multilateral treaties or "major bilateral treaties of particular significance" concluded by New Zealand require the preparation of a national interest analysis (see paragraphs 7.112-7.122 of the Cabinet Manual and Standing Orders 388-391).  An "extended NIA", which must be prepared for all treaties with regulatory impacts, includes all the requirements otherwise considered in an RIS, so a separate, standalone RIS is not required in these circumstances.  Further information about NIAs is provided in the CabGuide section on international treaty-making.

Detailed practice guidance regarding RIA and the preparation of RISs is available in the Treasury's Regulatory Impact Analysis Handbook, which is available at http://www.treasury.govt.nz/publications/guidance/regulatory/impactanalysis.

Exemptions from the regulatory impact analysis requirements

The RIA requirements do not apply where the proposal:

  1. involves technical “revisions” or consolidations that substantially re-enact the current law in order to improve legislative clarity or navigability (including the fixing of errors, the clarification of the existing legislative intent, and the reconciliation of inconsistencies);
  2. is suitable for inclusion in a Statutes Amendment Bill;
  3. would repeal or remove redundant legislative provisions;
  4. provides solely for the commencement of existing legislation or legislative provisions;
  5. needs to be authorised in an Appropriation Bill, an Imprest Supply Bill, or a Subordinate Legislation (Confirmation and Validation) Bill;
  6. implements deeds of settlement for Treaty of Waitangi claims, other than those that would amend or affect existing regulatory arrangements;
  7. is essential (the minimum necessary) in order to comply with existing international obligations that are binding on New Zealand; or
  8. has no or only minor impacts on businesses, individuals or not-for-profit entities (such as might be the case for certain changes to the internal administrative or governance arrangements of the government, like the transfer of responsibilities, staff, or assets between government agencies).

Preliminary impact and risk assessment, and the involvement of the Treasury Regulatory Impact Analysis Team

The Regulatory Impact Analysis Team (RIAT) in the Treasury must be involved in any proposal that is likely to have a significant impact or risk.  This means that the regulatory option being considered is likely to have:

  • significant direct impacts or flow-on effects on New Zealand society, the economy, or the environment; and/or
  • significant policy risks, implementation risks, or uncertainty.

In order to determine RIAT's involvement:

  1. the agency should complete a preliminary impact and risk assessment (PIRA) at the earliest possible stage of policy development;
  2. the agency submits the PIRA to the relevant Treasury policy team;
  3. the Treasury policy team confirms the PIRA, whether the RIA regime applies, and whether RIAT involvement is required.

If RIAT involvement is not required, the agency is responsible for ensuring the provision of independent quality assurance.

If RIAT's involvement is required, agencies undertaking RIA should engage with RIAT at an early stage to determine the nature of RIAT's involvement.  RIAT's role will depend on the characteristics of the proposal and the policy development process, as well as the internal quality assurance arrangements of the agency.  RIAT may be involved in:

  • working alongside the authoring agency to assist in meeting the RIA requirements;
  • providing independent quality assurance of the the RIS;
  • referring proposals to other departments, agencies, or specialists who have relevant expertise in regulatory quality issues or the subject matter.

The PIRA template is available from the Treasury website at http://www.treasury.govt.nz/publications/guidance/regulatory/impactanalysis.

Post-implementation review

Significant regulatory proposals that do not meet the government's regulatory impact analysis requirements, but that are ultimately agreed to, will be subject to a post-implementation review, with the nature and timing of the review to be agreed by the responsible agency, in consultation with the Treasury, and signed off by the responsible Minister, in consultation with the Minister of Finance and the Minister for Regulatory Reform.

Requirements for regulatory impact statements

The RIS is a government agency document that sets out the agency's best advice on the problem definition, objectives, identification, and analysis of the full range of practical options.  The RIS should be prepared before the Cabinet paper.

The required information and a suggested RIS template is provided on the Treasury website at http://www.treasury.govt.nz/publications/guidance/regulatory/impactanalysis.  Agencies will be able to depart from this template if there is an obviously clearer and more concise way to present the information that needs to be covered.

The RIS must, however, contain the following information:

  • an agency disclosure statement;
  • a description of existing arrangements and the status quo;
  • a problem definition;
  • objectives;
  • regulatory impact analysis - including identification of the full range of practical options, and analysis of the costs, benefits and risks of options;
  • consultation;
  • conclusions and recommendations;
  • implementation issues, including risks; and
  • arrangements for monitoring, evaluation, and review.

The authoring government agency is required to complete a disclosure statement on the front of the RIS, which:

  • discloses information to highlight any key gaps, assumptions, dependencies, and significant constraints, caveats, or uncertainties in the analysis;
  • indicates whether any of the policy options are likely to have effects that may not align with the commitment in the Government Statement on Regulation;
  • is signed by the person with responsibility for the preparation of the RIS.

Independent quality assurance of regulatory impact statements

Independent quality assurance must be undertaken on all RISs.  This assessment will be undertaken by either the authoring agency or the RIAT.  The assessment criteria are available on the Treasury website at http://www.treasury.govt.nz/publications/guidance/regulatory/impactanalysis.  A government agency opinion on the quality of the RIA must be provided in the Cabinet paper (see next section).

If the quality assurance is undertaken by the authoring agency, it must be done by a person or group not directly involved in preparing the RIS, nominated by the authoring agency's chief executive.

Regulatory impact analysis requirements for Cabinet papers

Cabinet and committee papers that contain policy proposals to which the RIA requirements apply must contain a section entitled Regulatory Impact Analysis.  This section should contain three parts:

1.  Regulatory Impact Analysis Requirements:

A statement explaining whether or not the RIA requirements apply, and whether a RIS has been prepared and is attached to the Cabinet paper.  If not, it should explain why.

2.  Quality of Impact Analysis:

An agency opinion on the quality of the analysis that states the following:

"[Name of team or position of person completing opinion] has reviewed the regulatory impact statement prepared by [name of agency] and associated supporting material; and

[Statement on whether the reviewer considers that the information and analysis summarised in the RIS meets/does not meet/partially meets the quality assurance criteria]

[Comment on any issues that have been identified in relation to any of the dimensions of quality set out in the quality assurance guidance]"

3.  Consistency with the Government Statement on Regulation:

Ministers are required to certify in the Cabinet paper that they have considered whether the proposal(s) in the paper are consistent with the expectations set out in the Government Statement on Regulation.  Guidance on preparing this text is provided on the Treasury website at http://www.treasury.govt.nz/publications/guidance/regulatory/impactanalysis/11.htm#_toc7.3.

    Role of officials' committees

    Officials' committees, which have been established to support Cabinet committee chairs, also have a role to advise the chairs on whether regulatory proposals meet the government's regulatory standards and the commitments in the Government Statement on Regulation and, if they do not, what could be done to address this.  A draft RIS must be included with draft papers when they are submitted to officials' committees.

    Publication of regulatory impact statements

The full text of all RISs must be published on the websites of both the authoring agency and the Treasury (RISs on the Treasury website are located at http://www.treasury.govt.nz/publications/informationreleases/ris).

    In relation to bills, the Explanatory Note in the bill should include the web address (URL) to the RIS's location on the agency's website.  Hard copies of the RIS must also be provided to the select committee, or to the House if the bill is to be introduced under urgency.
    When an RIS is ready for publication, agencies must send the agency website link for each RIS and an electronic (Microsoft Word) copy of the RIS to the Treasury at ria@treasury.govt.nz.
    There may be some instances where it is not appropriate to publish the RIS or sections of the RIS.  The provisions of the Official Information Act 1982 should guide decisions about whether an RIS or part of an RIS should be published.
    The decision on the precise timing of publication of RISs prior to the introduction of a bill or the gazetting of regulations is left to the responsible Minister and/or Cabinet.

Related pages

The Government Statement on Regulation (on the Treasury website)

Regulatory Impact Analysis Handbook (on the Treasury website)

The standard format of Cabinet papers

The standard format of papers seeking approval for treaty actions

The standard format of papers for bills

The standard format of papers for items for Executive Council

Information about the officials' committees that support Cabinet committees

Flow chart on the preparation of regulations following policy decisions

National interest analysis requirements for international treaties (on the Ministry of Foreign Affairs and Trade's website)