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Renny Reyes
Renny Reyes
Consultant - Regulatory Policy Expert - Advisor
Published Dec 13, 2021
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Author: Paul Davidson
Fiscal, monetary, and regulatory policy, are the main levers governments use to influence economic activity. Regulatory policy is ultimately about improving the design, implementation, and review of rules with the aim of increasing social well-being. This means changing behaviours of regulatory actors, just as governments do when they tax some things and subsidise others.
At the heart of regulatory policy is an unwavering focus on informed decision making – an issue the OECD has lead global debate on for more than 25 years. The 2012 Recommendation on Regulatory Policy and Governance provides the agreed standards to achieve in rule making. The 2021 Regulatory Policy Outlook, the third edition in the series, provides periodic updates on current and future trends in regulatory policy, countries’ implementation of the Recommendation, and identifies gaps and suggests reforms. Governments have created both the environment and various tools to help improve regulatory policy. Three key elements are engagement, assessment, and evaluation.
·Engagement refers to giving members of the public the opportunity to help shape, challenge, and reform rules. It recognises that citizens and businesses can provide valuable inputs on the feasibility and practical implications of laws and regulations, based on their daily experience. Engagement helps to boost compliance, build trust in government action, and strengthen democratic values.
·Assessment means undertaking an investigation into the potential impacts a policy may have on society, the environment, and the economy. It also means looking into alternatives – including potentially not doing anything – as other ways to solve an identified issue. Knowing who and to what extent impacts are likely can assist decision makers to make more informed policies and reduce the likelihood of unintended consequences.
·Evaluation means checking that rules continue to work as originally intended and continue to provide benefits to society. Regular check-ups – whether they be for personal health, automobile road-worthiness or rules and regulations – are important. Carrying out such check-ups does not imply that anything is wrong; rather, their purpose is to verify whether everything is working as well as it could be and to prevent something going wrong in the future by gathering information. Such information allows us to make decisions now that could avoid costly consequences later on.
The Outlook finds that stakeholder engagement tends to be piecemeal. OECD member countries generally consult with stakeholders only once a draft law or regulation exists. This is a crucially important stage, as stakeholders can see what the proposed rule would look like and mean for them in practice. However less than one-quarter of members systematically engage stakeholders earlier in the process to gather data and ideas on possible solutions to identified problems. Similarly, stakeholders can be more involved in the review of rules. Affected parties can help identify the actual costs of complying with regulations, as well as provide input on aspects that are working well and on challenges that remain.
Policy makers continue to adopt a “regulate by default” mind set. Efforts put into analysing the expected impacts of regulatory proposals are not matched when it comes to assessing feasible alternatives – even other regulatory ones. Where alternatives are assessed, it is usually the minimum necessary to satisfy requirements. The Outlook notes that this risks prejudging that regulation is the correct course of action to take, and moreover means that decision makers are not sufficiently well-informed about alternative solutions. OECD members are however considering a broader range of social and environmental factors, albeit their consideration still lags behind economic considerations. Recent OECD research highlighted that impact assessment still tends to be conducted in silos and called for a more holistic approach.
A “set and forget” mentality to rule making prevails across many OECD countries. A fundamental issue is that governments simply do not know whether rules are working as intended. Less than one-quarter of OECD members systematically assess whether regulations achieve their objectives. Incentives for improvement are currently weak: less than one-third of OECD member countries have a body in charge of checking the quality of reviews of existing rules. Reviewing rules needs to become an engrained part of government’s better regulation toolkits. It would enable the earlier identification of potential problems. It also provides an opportunity to share experiences so as to avoid costly mistakes in the future and to build upon successes of the past.
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