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CO (01) 2

12 March 2001

Business Compliance Cost Statement

Summary of Key Points

From 1 April 2001 all policy proposals submitted to Cabinet which
require a Regulatory Impact Statement (RIS) and which have compliance cost
implications for business should include a Business Compliance Cost
Statement (BCCS) in the Regulatory Impact Statement.

For proposals considered after 1 April 2001 the RIS/BCCS will also be
published and will also be included in the Explanatory Note to Bills
introduced into the House.

A Regulatory and Compliance Cost Unit will be established in the
Ministry of Economic Development to review RIS/BCCSs and provide information
and advice to departments. Departments should consult the Unit in preparing
RIS/BCCSs.

An Officials Committee will be formed to coordinate and monitor the
effectiveness of the government's Business Compliance Cost Programme,
including the RIS/BCCS regime, and report to Cabinet on ways to enhance its
effectiveness.

Introduction

1

The government has agreed to a Business Compliance Cost Programme,
comprising a number of initiatives to minimise compliance costs for business.
In particular, it has agreed to some procedures to ensure that policies which
have compliance cost implications for business are subject to scrutiny at an
early stage. The Business Compliance Cost Statement (BCCS) is a key element in
that scrutiny. This circular outlines the objectives of the BCCS and how
departments should go about meeting them.

2

Ministers' offices and Chief Executives should ensure that:

all staff involved in the preparation of submissions for Cabinet and
Cabinet committees are familiar with the advice in this circular;

the material in this circular is conveyed to all Crown entities or other
State agencies for which their Minister is responsible, which have an
involvement in the preparation of regulatory proposals.

What are Compliance Costs

3

Compliance costs are the administrative and paper work costs to business
in meeting government requirements. They include both the administrative
burdens and all other compliance costs, such as equipment purchases,
retooling, and recurrent production cost. Compliance costs are distinct from
the direct costs of any government requirement, such as the amount of tax
payable.

4

Compliance costs include the costs associated with identifying and
understanding the regulatory requirement and may include costs associated with
buying in specialist services (such as legal training, computer systems,
research) to satisfy regulatory obligations (or employing new staff
generally). At a less tangible level, compliance costs can arise from
increased liability through the establishment of new legal obligations (such
as health and safety requirements).

5

The need to comply with government requirements can also have non-monetary
effects such as stress and anxiety. These effects often arise from uncertainty
about obligations and disproportionately affect smaller businesses with
limited management resources who are most susceptible to such costs.

Principles of Business Compliance Cost Statement

6

Compliance costs arise from most government interventions. However,
businesses and the economy should not incur more compliance costs than are
necessary. At the stage that new administrative processes and measures are
being designed, compliance costs should be given due weight with other costs
and benefits.

7

The following principles underpin the objective of reducing compliance
costs:

Compliance cost assessment should be an integral part of the policy
development process;

The reduction of compliance costs is a dynamic process which includes
ongoing monitoring of existing legislation, regulation, and rules, as well
as assessment of the impact of any substantive change to them;

Recognition that compliance costs are a charge against the scarce
resources of the private sector;

Compliance requirements need to be critically assessed in terms of their
absolute necessity to achieve the objectives of the policy;

Compliance cost assessment is recognised as a clear departmental
responsibility and as such should be an integral part of departmental
management accountability.

Inclusion of the BCCS in RISs

8

At present, all papers on policy issues submitted to Cabinet committees
that result in government bills or statutory regulations, must be accompanied
by a Regulatory Impact Statement (see paragraphs
3.24-3.39 of the Step by Step Guide). Where new policy proposals for bills
or statutory regulations have compliance costs for business, these costs must
be assessed as part of the policy development.

9

At the point that the policy is submitted to Cabinet for consideration, a
new section headed "Business Compliance Cost Statement" is to be
included in the Regulatory Impact Statement. The statement should contain a
description of the business compliance costs (see paragraph 10 below). This
should be a brief statement of no more than a page. If the proposal does not
involve compliance costs for business, a statement should be made in the RIS
to this effect.

Content of Business Compliance Cost Statement

10

The business compliance cost statement should identify:

the source of any compliance costs;

the parties likely to be affected, by sector and size of firm;

quantitative (if possible) or qualitative estimates of compliance costs
(both in aggregate and upon individual firms, persons);

the longer term implications of the compliance cost for business - are
they one-off costs? Will they be reducing over time?

an assessment of the risks associated with any estimates and the level
of confidence that can be placed on the compliance cost assessment;

the key issues relating to compliance costs identified in consultation;

any overlapping compliance requirements with other agencies; and

the steps that were taken to ensure that compliance costs were
minimised.

Requirement for Cabinet Submissions

11

The existing section in the Cabinet submission format headed "Regulatory
Impact Statement" should be amended to read "Regulatory Impact and
Compliance Cost Statement." This section should include a one paragraph
summary of the BCCS contained in the RIS, in addition to the requirements
under the Regulatory Impact Statement heading.

12

Consultation with the Regulatory and Compliance Cost Unit of the Ministry
of Economic Development (see para 20) should be noted on the CAB 100
consultation form, in addition to any other consultation that has taken place
on the submission with the Ministry of Economic Development.

Publication of RIS/BCCS

13

The transparency and openness of the regulation-making process to the
political, parliamentary, and public arenas is intended to improve the quality
of regulatory interventions and ensure compliance costs are fully considered
when regulatory proposals are developed.

14

Cabinet has agreed that for proposals considered after 1 April 2001, the
RIS/BCCS will be published. The RIS/BCCS will be:

attached to the press statement announcing any new policy;

lodged on the responsible department's website, and a dedicated Ministry
of Economic Development website. When the responsible Minister and/or
Cabinet determines the RIS/BCCS is ready for publication, departments must
send an electronic version of the RIS/BCCS, along with the departmental
website reference, to the Ministry of Economic Development at [email-masked];

included in the Explanatory Note to Bills that are introduced into the
House.

15

Departments should ensure that a suitable electronic version of the
RIS/BCCS (in ASCII or Microsoft Word 97 format) is supplied to the
Parliamentary Counsel Office (PCO) in sufficient time to enable it to be
included in the copies of the draft Bill that are printed for submission to
the Cabinet Legislation Committee (LEG).

16

RIS/BCCSs for incorporation in explanatory notes must, so far as possible,
follow the standard format specified by the PCO, as the typesetting process
for the printing of Bills imposes limitations on the format for explanatory
notes to Bills. The PCO will issue those specifications shortly. Departures
from this format, or requests for the inclusion of non-text material such as
tables or graphs, may not be able to be accommodated, or may result in delays
in the production of LEG copies of the Bill.

17

Enquiries about the PCO's requirements for RIS/BCCSs should be directed to
the PCO team leader responsible for the department's legislation.

18

The decision on the precise timing of publication is left to the
responsible Minister and/or Cabinet. Ministers may wish to review and amend
the RIS/BCCS to ensure that it fully reflects the government's position and is
of a high standard. Some changes may therefore take place after Cabinet
consideration of the Cabinet submission to which the RIS/BCCS is attached.

19

There may be instances where it is undesirable to publish the RIS/BCCS;
for example, if the RIS deals with matters which, if disclosed publicly, would
prejudice the security, defence, international relations, or economy of New
Zealand. The criteria set out in the Official Information Act 1982 will guide
decisions to withhold public disclosure of a RIS.

Assistance from the Ministry of Economic Development

20

A Regulatory and Compliance Cost Unit is being established in the Ministry
of Economic Development to review RIS/BCCSs and provide advice to departments
on RIS/BBCS principles and processes. Departments should consult with the Unit
on RIS/BCCSs as part of the interdepartmental consultation process. This is in
addition to consultation with the Ministry of Economic Development on relevant
policy issues.

21

Although the Unit will primarily have an education role, on an exceptions
basis, the Unit can bring to the Chair of the Officials Committee (see below)
concerns that it has with specific RIS/BCCSs.

Officials Committee

22

Cabinet has agreed that an Officials Committee, chaired by the Department
of the Prime Minister and Cabinet, and comprising Treasury, State Services
Commission, Ministry of Economic Development, Ministry for the Environment,
Department of Internal Affairs and other coopted departments, be formed to:

coordinate and monitor the effectiveness of the Business Compliance Cost
Programme, including the RIS/BCCS regime;

ensure that departments are equipped to undertake effective compliance
cost reduction; and

identify and report to Cabinet on changes to the Programme that would
enhance its effectiveness.

Further Information

23

The Regulatory and Compliance Cost Unit is preparing more detailed
guidelines on the preparation of BCCSs. These guidelines will be issued to
departments shortly.

24

Enquiries about the requirements in this circular should be directed to:

Regulatory and Compliance Cost Unit
Ministry of Economic Development

PO Box 1473
WELLINGTON

Marie Shroff
Secretary of the Cabinet

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