Red tape reduction a long, bloody and fruitless quest or a noble adventure?

Introduction
While it takes 201 less days to start a business in Australia, than it does in Haiti, there is a perception that our governments are too quick to go for blunt regulatory fixes, when sometimes there are better alternatives: education or in some cases nothing at all.
Like Arthur’s knights the Commonwealth Government has sent a taskforce off after the Holy Grail of “alleviating the compliance burden on business from Commonwealth Government regulation” [http://www.regulationtaskforce.gov.au/media/index.html]. The Taskforce has now finalised its report and provided it to the Prime Minister and Treasurer.
Regulation reform is also being considered on a number of other fronts including COAG’s review of National Competition Policy, the Board of Taxation’s review of aspects of taxation legislation, and the Financial Services Reform Refinements project.
To many people our laws at state, commonwealth and local government levels are too draconian, too prescriptive and too rules-bound. That said ministers and their departments are anxious to preserve the regulatory outcomes on which they have been elected. Most regulations are designed to achieve goals such as better safety or a cleaner environment but that leaves a lot of regulation that is just reporting and red tape.
Better regulation can do away with a lot of the load on business freeing capital for more productive investments. Regulation reform promises many benefits. Not only would it save companies money and increase their competitiveness, but more competitive and prosperous companies add more to government revenues.
The current regulatory environment
The Business Council of Australia (BCA) has identified characteristics of the current regulatory environment that underlie these costs:
 Conflicting, overlapping and inconsistent regulation.
 Constantly changing laws.
 Multiple and uncoordinated licensing and approval processes.
 Lack of clarity regarding the roles, powers and objectives of regulators.
 A “zero-tolerance” attitude displayed by regulators.
 The excessive focus on the personal liability of directors and officers.
There are a number of straightforward steps that could be taken by governments to reform the basic structures of regulation making and compliance.
There is scope for a proper assessment and consultation processes that allows business and others to identify overlapping regulation and unintended consequences before new regulation and legislation comes into effect.
A number of bodies and procedures have been in place in an attempt to manage the introduction and operation of regulation. Australia has built in regulatory reform by including “sunset” provisions in new regulations, with the regulation automatically expiring after a certain period unless renewed by Parliament. Additionally, the Office of Regulation Review vets each proposed regulation using a “minimum necessary regulation” principle.
In 1996, the Office of Regulation Review was charged with cutting the regulatory burden on small businesses in half, with annual reviews of progress achieved. One issue that the Regulation Taskforce will need to address is why the Office of Regulation Review has not been able to make any real headway to wards this goal.
Recommendations for Further Change
A number of organisations are calling for a far more significant and widespread overhaul of the current Australian business regulatory environment.
In response to the major causes of excessive compliance costs identified above, the BCA has made the following recommendations:
 To prevent the adoption of conflicting, inconsistent or overlapping regulations, a stricter regulatory assessment process should be introduced which would include standardised methodology for measuring the likely costs to business. Standardised definitions and commonly used clauses should also be developed.
 To minimise the burden of frequent changes in the law, there should be one date per year when all new legislation comes into force. Transition periods for new regulations should be extended.
 One-stop shops for project facilitation and approval should be created to avoid dealing with multiple and uncoordinated processes.
 The role and aims of regulators need to be clarified. Interaction between regulators should be increased.
 The zero-tolerance approach to regulation and compliance needs to be modified.
 To avoid a heavy focus on personal liability and the associated high costs of compliance, individual liability should only be introduced in exceptional circumstances.
Other suggestions include structural impediments to the slow the proliferation of regulation throughout government like a mandatory review of the utility and effect of regulation at a fixed time after coming into force, and a practice of releasing draft regulatory impact statements for public perusal and comment. A two-tiered impact assessment process has been advocated whereby all proposals would be assessed and those likely to have a significant effect upon business would then be subject to further in depth assessment. Whilst it seems simplistic, maybe government could agree to remove an existing rule for each new one that it introduces. Mayber ministers ought to pledge to measure the administrative cost of existing regulation and set reduction targets?
A final important suggested change is a move towards a single, consistent national regime in areas of regulation where there is shared responsibility across multiple jurisdictions.
Another good idea is from the National Institute of Accountants (NIA) who has called for the establishment of a one-stop shop to gather information from businesses that can be accessed by state and federal government agencies.
The idea is that such a move would eliminate the duplication of government requests with which businesses are expected to comply. What the NIA are suggesting is a “lodgement portal” where information could be housed, with state and federal agencies being given access, as well as being a place for lodgement of regulatory payments and information.
This idea if acted upon could avoid business having to provide the same information in different forms to different government authorities.
Indeed, many of the government’s regulatory requirements could be channelled through such a one-stop shop to reduce duplications while passing on cost savings to business.
What should the government be doing?
Good regulation does not mean zero regulation. The government needs to be involved in various aspects of control of business. The World Bank has recognised that government regulation should be able to impose essential controls on business without imposing an unnecessary burden.
The optimal level of regulation is not none, but may be less than what is currently found. We know that changes like Basle, the Financial Services Reform Act, anti money-laundering legislation and many others are a huge cost for everyone to bear when a very small minority are fraudsters and we know that more rules are not going to stop lying and cheating and stealing money.
In Australia, where private markets are functioning, competition is a suitable substitute for much of the need for regulation. By combining simple regulation with good governance and the protection of property rights, it should be possible to have government regulators serve as “public servants, not public masters”.
The Government can and should make a contribution to better regulation. For example agencies and arms of government should employ standard definitions across all regulation and legislation, look for self-regulatory models where appropriate, use uniform national legislation where possible, and develop a drafting style emphasising the spirit rather than the letter of the law.
As James Surowiecki wrote recently in The New Yorker [http://www.newyorker.com/talk/content/articles/051212ta_talk_surowiecki] poor regulations can and do have significant effects inflicting what economists call “social costs” on the economy as a whole. Look at the distortions caused in the builders’ insurance market by HIH’s unsustainable market practices. We accept that regulation has a role not just to punish fraud but to prevent it from happening in the first place and that in a lot of cases the law's costs are a lot more visible than its benefits. It’s all a question of balance.

References/links
 See “A vow to cut red tape? It's just a pink elephant” Katey Lahey The Age 13/12/05 http://www.theage.com.au/news/business/a-vow-to-cut-red-tape-its-just-a-pink-elephant/2005/12/12/1134236003905.html
 “The Regulatory Balancing Act” Senator The Hon. Helen Address to the Financial Services Accountants ssociation Annual Conference 17 May 2004 http://assistant.treasurer.gov.au/atr/content/speeches/2004/008.asp
 Sarboxed In? http://www.newyorker.com/talk/content/articles/051212ta_talk_surowiecki
 The World Bank Doing Business 2004 and 2005 reports on "Understanding Regulation" http://rru.worldbank.org/Documents/DoingBusiness/2004/DB2004-full-report.pdf
 Office of Regulation Review http://www.pc.gov.au/orr/
 Taskforce on Reducing the Regulatory Burden on Business http://www.regulationtaskforce.gov.au/
 The Boardroom Report Volume 3, Issue 24, December 16th, 2005. http://www.companydirectors.com.au/StaticContent/boardroomreport/051216/item01.html
 One-stop-shop will cut red-tape burden says NIA 20/12/2005 http://www.nia.com.au
 AICD submission http://www.companydirectors.com.au/Policy/Submissions/2005/
 BCA submission http://www.bca.com.au/content.asp?newsID=99412