Policy & Positions Manual
Policy Priority Area - Competitive Taxation and Regulation
The Next Phase of Regulatory Reform (2006)
The effectiveness and quality of regulation and the institutions that enforce it are a major determinant of a jurisdictions prosperity.
Well-designed and efficiently enforced business regulation improves the functioning of the economy by providing certainty for the business community. In addition, they also achieve environmental and social policy goals without imposing significant compliance costs on firms or weakening the ability of businesses to adapt to changing economic conditions, technologies and consumer preferences. Regulations that create high compliance costs or restrict competition have been shown to damage investor confidence, increase costs and reduce investment in technology and innovation.
Many of the costs of regulation are not immediately visible. Regulation can result in higher prices and costs, a reduction in consumer choice and a reduction in flexibility. In the USA the total gross cost of federal regulation alone has been estimated at almost 8% of GDP.(1)
In this context, the Chamber believes that the Provincial Government has an impressive record in reducing the regulatory burden faced by BC business, by cutting 154,000 regulatory requirements since June 2001, a total reduction of 40.31%.(2)
Despite this progress, regulatory reform has not gone far enough. The Chamber believes that there are a number of other policy directions that BC could utilize to ensure it achieves a more business-friendly regulatory and policy development climate.
Too frequently, governments at all levels make regulations pertaining to business without considering the total cost of compliance, or they initiate arbitrary changes to legislation without due consideration of the impact on the business community. We do not deny the necessity for certain regulations; however, many demands on business made by government can be a deterrent to the establishment of new enterprises and the operation of existing enterprises.
As we move towards the next phase of regulatory reform the Chamber sees a system of “smart” regulatory reform where the emphasis will be more on addressing particularly onerous or costly regulations rather than a simple numeric reduction. To achieve this goal, the public and businesses must have access to information that is readily available and current. (For example, the Chamber sees no reason why the Provincial Government does not publish regulations on its website.)
This process of public dialogue cannot stop with a simple printing of a list of government regulations, government must be proactive in developing a mechanism for providing qualitative analysis through the publication of regulatory indicators to better measure the cumulative administrative and compliance cost on business, and SME’s in particular, from regulation.
The operation of government is a public activity. Public policies ought to be shared with all members of the public, who are the customers and owners of the Government.
The focus of this process must be a move towards a “risk-based” approach to regulatory enforcement to replace general requests for information from industry with more targeted enforcements as has been undertaken in the UK.
The UK Government initiated a review of regulatory inspection and enforcement that identified risk assessment as a method of reducing administrative burdens for business. A risk-based approach argues that scarce resources should not be used to inspect, request or assess data from companies that are low risk or that are operating within inherently safe regulatory regimes. Such a system would involve the removal of general requests for information from industry and replace them with more targeted enforcement mechanisms. The UK’s risk-based approach is expected to reduce the number of forms regulators send out by 25%, and the need for inspections by up to a third.
THE CHAMBER RECOMMENDS
That the Provincial Government:
- give business and the public access to information that is readily available and current regarding the cost and impact of regulations by publishing regulations on its website;
- must be proactive in developing a mechanism for providing qualitative analysis through the publication of regulatory indicators to better measure the cumulative administrative and compliance cost on business, and SME’s in particular, from regulation;
- ensure that all government departments strengthen their programs that review existing legislation and regulations pertaining to business and eliminate those measures which result in an unnecessary cost to small business (and, ultimately, the consumer);
- continue to provide ample notice of intention to modify its laws, regulations and policies, not just to interest groups, but to the public generally as a matter of practice; and
- introduce a risk-based approach to regulation that ensures scarce resources are not used to inspect, request or access data from companies that are low risk or operating in a safe regulatory regime.
Footnotes
“Regulation in a Regional Economy” Michael J Sullivan, Idecon Public Policy Lecture, 15 September, 2005 |
BC Regulatory Reform Initiative, Quarterly progress Report, February 2006 |
