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The SCM – main issues, advantages and challenges of quantificationof administrative costs
Daniel TrnkaRegulatory Policy Division,Directorate for Public Governance and Territorial DevelopmentOECD
28 June 2011, Jerusalem
What is the Standard Cost Model?• Invented by the Dutch Ministry of Economic
Affairs in the mid 90s • A tool to measure administrative costs and
express them in monetary terms• Advantages:
– SCM makes costs ‘visible’ – Easy to measure, monitor & communicate– Uniformity, transparency, reliability and comparability– Commitment & awareness of policymakers– Enables to distribute the target across adminsitration
• Disadvantages:– May be too costly– Focus only on one part of costs, not benefits
Different costs of regulations
The costs of regulation to businesses
Direct financialcosts
Compliancecosts
Long-termstructural costs
Indirect financial costs(substantive compliancecosts)
Administrative costs
What are administrative costs?
• Administrative costs/burdens (AB) are the costs imposed on businesses, when complying with information obligations stemming from government regulation
• Costs of paperwork – e.g. filling in forms, submitting them to the administrative authorities
• But also – gathering, processing and updating data, inspections
The methodology for AC measurement
The Standard Cost Model
Possible to differentiate between particular regulations, ministries, sectors of regulation
Methodological questions
• Business As Usual (BAU) costs • Costs of material, equipment• Statistical relevance• Costs of informing third parties
(customers, trade unions…)
A zero based measurement• Starting point and source of information for a
reduction programme• 4 stages:
– Inventory of legislation– Desk research – sources of regulation, type of IO,
identification of regulated entities– Measurement (interviews, expert meetings, testing)– Reporting
• Should all regulations be included?– Beyond Pareto principle - 10% of the IO’s accounts for
90% of AC– Prioritisation – risk of omitting important areas
Statistical relevance
• SCM based on assumptions, not on precise numbers
• 3 to 5 measurements per IO (and consultations of stakeholders) - a sophisticated rule of thumb
• If results converge, 3 to 5 is enough, if not, need a bigger sample
Simplification proposals• Possible measures:
– Abolishing regulations / information obligations
– Streamlining procedures– Harmonizing definitions (e.g. Wages)– Data sharing inside adminsitration– Reducing frequency of information
obligations (Monthly becomes Quarterly ; Quarterly becomes Annual)
– Altering target groups (e.g. SMEs exemption)
– Using ICT (e.g. e-filling, pre-filled forms)
Inter-agency co-ordination
• One ministry/special agency/centre of government
• Inter-agency co-ordination structures
• Political support, necessary teeth• Distributed targets? Same for
everyone?
Institutional setup
• Example of Viet Nam
Involvement of Stakeholders
• Extremely important throughout the whole project:– Defining priorities– Measuring and testing– Looking for simplification proposals
• Website for submitting ideas• Steering committee, working groups• Advisory committee
Main success factors• Political support, top-level, across
administration• Comprehensive strategies, integration
with other policies• Communication and co-operation with
stakeholders• Targeting, prioritisation• Institutional set up, capacity building• Continuous evaluation, benchmarking
Main challenges• Sustained momentum • Cutting dead wood • Last mile issue• Communication – with stakeholders, of results,
managing expectations• Possible discrepancy between the most
burdensome and the most irritating regulations• Integration with e-government efforts• Evaluation• Potential squeezing-out effect• Integration with other policies• Integration into ex ante impact assessment
For more information see:• OECD Cutting Red Tape series:
– National Strategies for Administrative Simplification– Businesses' Views on Red Tape– Comparing Administrative Burdens across Countries– Progress in Public Management in the Middle East and North
Africa– Why Is Administrative Simplification So Complicated?– Country reviews: the Netherlands, Portugal. Poland, Viet Nam
• Overcoming Barriers to Administrative Simplification Strategies: Guidance for Policy Makers
• SCM Network: http://www.administrative-burdens.com/
New OECD Recommendation2.6 Eliminate unnecessary regulatory costs imposed on users of regulation2.4 Co-operate with stakeholders on developing new and reviewing
existing regulations by … Structuring reviews of regulations around users’ needs, co-operating with them through the whole process …
5.2 Reviews should be scheduled to assess all regulation systematically over time, and reduce regulatory burdens. Priority should be given to regulation with significant economic impacts and/or causing highest irritation among users and/or impact on risk management.
5.5 Programmes of administrative simplification should include measurements of the aggregate burdens of regulation and consider the use of explicit targets as a means to lessen administrative costs for citizens and businesses. Qualitative methods should complement the quantitative methods to better target the efforts.
5.6 Administrative simplification programmes should be evaluated for their “value-for-money”. Evaluation should not only focus on the quantification of administrative burdens reduced but also on other outcomes and effects for society.