LAC Guidelines Chapter 1: Means of achieving the policy objective

Introduction

Part 1: Has the policy objective been clearly defined?

Part 2: Has consideration been given to achieving the policy objective other than by legislation?

Part 3: Has there been appropriate consultation within the Government?

Part 4: Have those outside the Government who are likely to be affected by the legislation been consulted?

Part 5: Have all Cabinet requirements for new legislation been complied with?

Part 1: Has the policy objective been clearly defined?

Part 2: Has consideration been given to achieving the policy objective other than by legislation?

Part 3: Has there been appropriate consultation within the Government?

Part 4: Have those outside the Government who are likely to be affected by the legislation been consulted?

Part 5: Have all Cabinet requirements for new legislation been complied with?

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An essential first step is to clearly define the policy objective/s. The time when the policy is to come into effect, and the transitional measures necessary for its implementation, should also be carefully considered at an early stage.

In an ideal world the policy to be embodied in new legislation should be clearly determined before preparation of the legislation commences. However, in practice this is not always possible, and policy development and preparation of legislation often proceed in tandem.

Nevertheless, before substantive drafting of legislation commences, the broad policy objective/s should be clear, and the relationship of the legislation with existing law (see Chapter 7) and alternative means of achieving the policy objective should have been fully considered.

At an early stage the time of commencement of the legislation, and the transitional provisions necessary to implement it (see Chapter 7), should be considered. The latter issue, in particular, can lead to identification of significant difficulties with the proposed legislation and modifications to the legislation to overcome these difficulties are sometimes necessary.

The commencement date of new legislation requires careful consideration. The Government often wishes to have an early commencement date, but the practical effect of this on the community must be considered. It is easy to underestimate the time it takes the community to become aware of new legislation, and develop measures to comply with it. There are numerous instances where last minute representations from the community have led to a deferral of the commencement date of new legislation.

The policy objective/s of the legislation, and the proposed means of achieving these, can often be clarified by preparing an outline of the proposed legislation including the headings of the principal clauses and brief notes as to their content. Such an outline will help to identify any gaps or inconsistencies in the proposed policy.

At an early stage the transitional provisions necessary to implement the legislation should be considered and prepared in outline form.

The commencement date of new legislation should allow sufficient time after its enactment for the community to become aware of it, and develop measures to comply with it.

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As noted in paragraph 1.1 above, the development and implementation of new legislation can impose significant costs on the community. Accordingly, other means of achieving the policy objective should be identified, and a decision taken as to whether legislation is the most appropriate means.

Early in the policy development process officials should carry out an informed consideration of the options available to deal with an identified problem. The decision about how to intervene may be as important as the decision about whether to intervene. A variety of options are available. These are likely to have very different implications for results, the magnitude of costs and benefits, their distribution, and administrative requirements.

Options for achieving policy objective

In more detail, options available to the Government might include (but not be limited to):

• no government intervention;

• status quo;

• use of existing law;

• increasing enforcement;

• information and education campaigns;

• economic instruments (taxes, subsidies, and tradable property rights);

• voluntary standards/codes of practice;

• self regulation; and

• co-regulation.

No government intervention

This option involves relying on the market in conjunction with existing laws (general liability law). This option is particularly important to consider when undertaking reviews of existing regulation.

By holding individuals and firms responsible for their actions and requiring them to pay damages where liable, for example, incentives may develop for individuals and firms to take appropriate levels of care. Through legal remedies (litigation and the common law), individuals can enforce their rights rather than relying on government action to do so.

This approach is more appropriate where flexibility is needed in the application of the law, such as where there is a heavy emphasis on the circumstances surrounding the case (for example, where the degree of culpability is important).

In many circumstances, however, legal remedy may be too uncertain, slow, or costly (high transaction costs) to be an efficient method of changing behaviour.

Status quo

The status quo is a dynamic concept. It is the situation that will arise if current policy is maintained. Maintaining current policy could lead to deterioration in the public interest, for example, escalating environmental damage in the event allowable maximum pollution discharge limits aren't reduced as the number of polluting factories increases. Equally, evaluation of the status quo should include consideration of the potential for a problem to "self-correct". The status quo should always be considered as an option, to ensure that alternatives are not chosen which would lead to worse outcomes than expected by maintaining the current policy settings. The status quo is frequently the option against which other options should be compared.

Use of existing law

Legislation with proven ability to overcome problems of the nature being addressed may already exist but, in some cases, may not have sufficient coverage to deal with the circumstances under consideration. In these cases it will often be more appropriate to expand coverage of this existing legislation than to attempt to create a new legislative regime. The chief advantages of using existing legislation are that a proven method of addressing the problem is employed, and that consistency between the treatment of the same issue arising in different circumstances is achieved.

In other cases, existing law may be available to achieve the policy objective. For example, the Government has inherent powers to establish new departments and does not need legislative authority to do so. For further discussion on the use of existing law see Chapter 7.

Increasing enforcement

Another approach is to consider the implications of increasing the level of enforcement associated with existing law, rather than implementing new or amended provisions. It may be the case that existing law is adequate in itself but is not enforced adequately.

Information and education campaigns

This approach acts to change the quality and level of the information available, or to change its distribution. This can be achieved by regulating for certain information to be provided, or by government providing the information itself. This may involve requiring information about the attributes of a product, process, or situation (eg dangerous working conditions) be disclosed.

These measures improve markets by allowing people to make decisions that better match their preferences. The main advantage of these strategies over some other approaches is that they allow individuals to choose what is best for themselves given the information available, rather than Government imposing one solution on all.

Economic instruments

Economic instruments seek to influence market behaviour by altering the relative prices of goods and services in a market, or by creating a market where none previously existed. Market behaviour can be influenced either directly (for example, through a tax or user charge), or indirectly (for example, through controlling the level of supply). Economic instruments will generally require a statutory basis. The two main types of economic instruments are:

• Taxes, charges, or subsidies: Government can alter private incentives (and therefore behaviour) by taxing actions it wishes to discourage and subsidising action it wishes to encourage. For example, by taxing pollution or subsidising education to correct for perceived externalities. A tax or charge used to influence behaviour in this way is distinct from a general tax, where the objective is to raise revenue for government spending programmes while seeking to minimise behavioural change.

• Tradable quota (marketable rights): These are a means of controlling, for example, the quantity of some externality produced, or the amount of a scarce resource taken. Tradable quota have been used in the United States to control emissions of sulphur dioxide, and in New Zealand to provide for the sustainability of commercial fisheries. Under tradable quota systems, the government sets an overall maximum supply level for the outcome of a specific activity. Producers must then hold a right to produce (eg, sulphur dioxide) or take (eg, fish), and may not produce or take any more than the level provided for by the quota. Quota is a valuable property right. Providing for tradable quota places strong incentives on the market to use resources efficiently, and ensure the quota goes to where it is valued the most.

Voluntary standards/codes of practice

Positive behaviour can be achieved through instruments such as voluntary standards and codes. The standards can be developed by industry or co-operatively with government as codes of practice or guidelines that seek to detail what is deemed to be acceptable practice.

Voluntary codes maximise the potential for flexibility of response to allow easy adjustment in response to changes in the industry or occupation. They are best applied where there are strong occupational or industry bodies, where the implications of non-compliance do not pose significant or irreversible risks, and where non-compliance with the standard or code is visible (certification, for example, will tell consumers whether their provider complies with specified standards).

Self-regulation

Self-regulation can be defined as an arrangement in which an organised group (such as an industry association or professional body) regulates the behaviour of its members, and where that organised group can impose sanctions. The advantages of self-regulation are; rules are more likely to be observed if they are made by insiders, changes and updating can be more rapid, rules are developed using the expertise of those being regulated, and it is cheaper for the Government as the regulated group bears the costs of regulating (and also have strong incentives to minimise those costs). Compliance is achieved because the players involved may find it in their interest to obey the (non-binding) rules. This can be driven by a concern by individuals and firms about their reputation, or by peer pressure.

As it is the industry that formulates the rules and codes of conduct, there is a risk that self regulation could result in anti-competitive behaviour. That is, unnecessary barriers to entry to an occupation or market, or other undesirable practices such as price fixing may occur.

Co-regulation

Co-regulation refers to a situation where the regulatory role is shared between government and an industry body. Co-regulation can range from simple endorsement of industry self regulation, to providing legislative backing to privately defined rules when industry lacks sufficient sanctions to ensure compliance, thus bordering on traditional regulation.

Co-regulation is used for certain types of occupational regulation (eg, lawyers, doctors, financial advisers). In such cases, the legislature may delegate regulatory authority to an organisation representing members practising that occupation. The organisation makes rules, levies charges, and applies discipline. These can have the same force and legal authority as if the government itself carried them out. Again, care needs to be taken to ensure the interests of consumers are given prominence, and that opportunities for anti-competitive practices are minimised.

The above options for achieving a policy objective should be fully considered on the basis of all relevant information, before a decision is made to prepare new legislation. This consideration should include estimating the benefits and costs of each option that could be used, and comparing those benefits and costs against those of the proposed legislation.

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In the case of Government legislation, all relevant departments and agencies should be properly consulted in regard to the legislation before it is approved by Cabinet.[3]

The lateral thinking necessary to ensure that all appropriate perspectives have been brought to bear on a Government legislative proposal can usefully begin with consultation with other relevant divisions within the initiating department.

Consultation with other Government departments and agencies is the next step and a very important part of the overall process. It reflects the collective responsibility of Cabinet. It is an efficient use of time and resources. It can avoid piecemeal reform. It ensures that possible problems are identified early in the development of a proposal. It may reveal to the initiating department that there are possible conflicts or inconsistencies with legislation being prepared by another department. In this way it can help to produce a positive and constructive approach towards the proposal on the part of those consulted. This can be important in the search for solutions to any problems that subsequently emerge. Conversely, a failure to consult appropriately with other relevant departments and agencies can lead to substantial loss of time and a lot of unnecessary work in resolving problems and disagreements that could have been readily avoided at an early stage before the initiating department became committed to a particular approach.

Another advantage of early consultation with other departments and agencies is that it can help in identifying the groups and organisations outside the Government that should be consulted about the proposal.

These Guidelines are not the place to establish comprehensive checklists for deciding which departments and agencies should be consulted on which issues. The list of relevant departments and agencies must be determined in each case according to the subject matter of the proposal. In many cases the list of the principally interested departments and agencies should be fairly obvious. Thus the Ministry of Justice has broad responsibility in respect of such matters as criminal law, fair procedures and constitutional and human rights, State Services Commission in respect of machinery of government and staffing implications, Treasury in respect of economic policy and financial implications, and Ministry of Foreign Affairs and Trade in respect of international legal obligations and foreign policy implications.

Budget-night legislation (indeed any legislation accorded urgency) is sometimes an example of good process having to be avoided. There are two issues: first whether the legislation must be enacted in that way, and, secondly, if it is, whether there has been adequate consultation within the department and more broadly in the Government (as there is not the same opportunity for public scrutiny).

See paragraphs 5.21 to 5.23 of the Cabinet Office Manual.

See also Cabinet Office circular CO(00)4 on Coalition Consultation Procedures.

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A key aim of systematic public consultation is to make information available to the public, to listen to a wide range of interests, to obtain more and better information from affected parties, and to be more responsive to what is heard. This allows for better information for efficient decision-making.

Consultation is not synonymous with consensus. It is, however, a process that permits and promotes the two-way flow of ideas and information among all sectors of society and between them and the Government. Effective consultation is based on principles of openness, transparency, integrity, and mutual respect. It requires that:

• key information be provided to those being consulted;

• those being consulted are in a position to influence policy formulation;

• sufficient time is allowed for a considered response to be compiled by those being consulted;

• the agency undertaking the consultation has the capability to interpret and use the information derived correctly, for example, consultation with iwi groups will require an understanding of Maori perspectives and issues; and

• the information gained is considered in good faith, that is, the advice obtained cannot be discounted without good reason, and must be sought prior to final decisions being taken.

A well designed and implemented consultation programme can contribute to higher quality legislation, identification of more effective alternatives, lower administration costs, better compliance, and faster regulatory responses to changing conditions. Just as important, consultation can improve the credibility and legitimacy of Government action, win the support of groups involved in the decision process, and increase acceptance by those affected.

Effective consultation is difficult to carry out and can be costly in terms of time and resources. Less well organised, diffuse, or smaller interests can easily be left out. Information received from stakeholders may be one-sided, of poor quality, or irrelevant to the issues at stake. Consultation can also occur too late to allow affected groups to influence key decisions such as problem definition and whether legislation is needed.

Invariably, the costs of consultation are incurred in the short term, while the benefits emerge over the longer-term.

There is currently a wide range of different consultative approaches. These include departmental advisory bodies, secondment of personnel from the private sector, public discussion papers, multi-stakeholder negotiations, focus (consultative) groups, targeted briefings, workshops, questionnaires, public notice and comment, hearings and select committees. The appropriateness of each approach will depend on the issues under consideration, the nature of the group being consulted, and the resources, including time, available for undertaking the consultation.

The following publications are relevant:

The Cabinet Office Manual sets out the Government's procedural requirements in regard to Government legislative proposals.

In the case of Government legislation the procedural requirements set out in Chapter 5 of the Cabinet Office Manual, and Sections 6 and 7 of the Cabinet Office Step by Step Guide, must be observed. These include—

Comply with Chapter 5 of the Cabinet Office Manual and Sections 6 and 7 of the Cabinet Office Step by Step Guide.