Victorian Competition and Efficiency Commission · Middle cover image reproduced courtesy of the Department of Education and Early Childhood Development. ISSN 1833-9689 Victorian

Victorian Competition and Efficiency Commission

Annual Report 2012-13

© State of Victoria 2013

This publication is copyright but may be reproduced free of charge provided that the reproduction is accurate and not misleading and this publication and the copyright held by the Victorian Government is acknowledged.

Published by the Victorian Competition and Efficiency Commission.

Middle cover image reproduced courtesy of the Department of Education and Early Childhood Development.

ISSN 1833-9689

Victorian Competition and Efficiency Commission GPO Box 4379 MELBOURNE VICTORIA 3001 AUSTRALIA

Phone: (03) 9092 5800 Fax: (03) 9092 5845 www.vcec.vic.gov.au

An appropriate citation for this publication is: Victorian Competition and Efficiency Commission 2013, Annual Report 2012-13, Melbourne, September.

About the Victorian Competition and Efficiency Commission

The Victorian Competition and Efficiency Commission (VCEC), which is supported by a Secretariat, provides the Victorian Government with independent advice on business regulation reform and opportunities for improving Victoria’s competitive position.

The VCEC has three core functions:

undertaking inquiries into matters referred to it by the Victorian Government

reviewing regulatory impact statements, measurements of the changes in the regulatory burden and business impact assessments of significant new legislation

operating Victoria’s Competitive Neutrality Unit.

For more information on the VCEC, visit our website at: www.vcec.vic.gov.au

17 September 2013

Hon. Michael O'Brien MP Treasurer 1 Treasury Place MELBOURNE VIC 3002

Dear Treasurer

VICTORIAN COMPETITION AND EFFICIENCY COMMISSION 2012-13 ANNUAL REPORT

The Victorian Competition and Efficiency Commission is pleased to present to you its 2012-13 annual report. The report addresses the matters required by the State Owned Enterprises (State Body–Victorian Competition and Efficiency Commission) Order 2004. The Minister for Finance has exempted the Commission from preparing separate financial statements and report of operations under section 53 of the Financial Management Act 1994.

Yours sincerely

MATTHEW BUTLIN DEBORAH COPE BILL MOUNTFORD Chair Commissioner Commissioner

Level 37, 2 Lonsdale Street Melbourne Vic 3000 GPO Box 4379 Melbourne Vic 3001 T (03) 9092 5800 F (03) 9092 5845 E [email protected] www.vcec.vic.gov.au

CONTENTS V

Contents Contents v Foreword vii 1 Consultation and the quality of impact assessment 1

1.1 RIA public consultation practices 1 1.1.1 Victoria’s requirements for public consultation 2

1.2 Consultation on regulatory impact assessment in practice 4 1.2.1 Number of RISs prepared in Victoria 4 1.2.2 Pre-RIS consultation 5 1.2.3 RIS consultation 8

1.3 Improved outcomes from RIS consultation 11 1.4 Opportunities for improvement 14

2 The Victorian Competition and Efficiency Commission 17 2.1 Role of the Commission 17

2.1.1 Inquiries 17 2.1.2 Regulation review 18 2.1.3 Competitive neutrality 18

2.2 About the Commission 18 2.2.1 The Commissioners 18 2.2.2 The Commission’s secretariat 21

2.3 The Commission’s operating principles 22 2.3.1 A community-wide perspective and transparency 22 2.3.2 Independent and rigorous advice 24

2.4 Performance reporting 25 2.4.1 Performance indicators 26 2.4.2 Allocation of resources across functions 28

3 Inquiries 29 3.1 Introduction 29 3.2 New inquiries on social policy issues 30

3.2.1 Inquiry into social and economic costs of problem gambling 30

3.2.2 Inquiry into school devolution and accountability 31 3.2.3 Inquiry into aspects of the Wrongs Act 1958 (Vic) 32

3.3 Regulatory improvement studies 33 3.3.1 Liquor licensing regulation 33 3.3.2 Regulation of contaminated sites 34

3.4 Inquiries completed/ responses to final inquiry reports 34 3.4.1 Government response to the inquiry into distributed

generation 34 3.4.2 Government response to the inquiry into Victoria’s

tourism industry 35 3.4.3 Government response to the inquiry into local

government regulation 35 3.5 Measuring and assessing outcomes 36

VI ANNUAL REPORT 2012-13

3.5.1 Quality of outputs 36 3.5.2 Quality of consultation 39

3.6 Costs and timeliness of Commission inquiries 41 3.6.1 Timeliness 42

4 Regulation review 43 4.1 Introduction 43 4.2 The Commission’s regulatory review roles 44

4.2.1 The Commission’s advisory role 44 4.2.2 The Commission’s training role 45

4.3 Performance reporting 46 4.3.1 Quantity of regulatory review activities 46 4.3.2 Average cost of independent advice 48 4.3.3 Quality of analysis 49 4.3.4 Timeliness of the Commission’s processes 52 4.3.5 Quality of the Commission’s processes 53

4.4 Current directions and priorities 55 4.4.1 Victorian Guide to Regulation rewrite 55 4.4.2 Early engagement, capability building, and the

development of a ‘community of practice’ 56 4.4.3 Better targeting of the Commission’s advice 57

5 Competitive neutrality 59 5.1 Introduction 59 5.2 The Commission’s competitive neutrality role 60 5.3 Performance reporting 61

5.3.1 Informing businesses and investigating complaints 61 5.3.2 Assisting with compliance 62

5.4 Developments in competitive neutrality 63

APPENDICES A Financial statements and workforce data 67 B Regulatory Impact Statements assessed in 2012-13 71 C Bills introduced into Parliament in 2012-13 that were subject to

Business Impact Assessments 73 D Sunsetting regulations in 2013-14 and 2014-15 75

References 83

FOREWORD VII

Foreword Last year was a busy time for the Commission. The highlights include a significant rise in the volume of regulatory impact assessments, continuing external recognition of the quality of Victoria’s regulatory system, expansion of our inquiry functions into further areas of social policy and economics and a prototype of a new regulatory improvement study.

Victoria’s regime for testing the impact of sunsetting and new regulations and legislation has served the state well over many years and is well-regarded among other Australian jurisdictions and overseas. The Commission’s regulatory review function is an important part of that regime in assessing the adequacy of impact assessment and verifying claimed reductions in regulatory burdens. Delegations and individuals from Cambodia, the Philippines and Japan visited the Commission during 2012-13 seeking information about how Victoria does this work.

The benefits from regulatory impact assessment come primarily from two sources. The first source is improved regulatory design that results from rigorous analysis and evaluation of the impact of different options. Attention to this area has, in the Commission’s experience, resulted in Victoria avoiding substantial, unnecessary costs to its economy. The large benefits from the impact assessment process that were identified and measured in the Commission staff paper (VCEC 2011a) come mainly from this source.

The second source is effective consultation with stakeholders on options, both to understand better their likely costs and benefits, and to improve implementation. Such insights help to improve the design of regulation and the quality of the advice to ministers. This also is the case in public inquiries that engage effectively with stakeholders. Chapter 1 sets out the Commission’s views on areas for improving external consultation in regulatory impact assessment, as well as providing some new analysis of the use of consultation in this area. We plan to pursue this further.

Last year the level of activity in the Commission’s regulation review function lifted to close to the historical trend level. The Commission delivered 41 outputs in 2012-13 — assessing 23 Regulatory Impact Statements (RIS), eight Business Impact Assessments (BIA) and two Supplementary Impact Assessments (SIA), and verifying eight Regulatory Change Measurements (RCM) — compared with a total of 19 in the previous financial year. The numbers increased in every category, and the average unit costs of the Commission’s advice fell in all groups.

Looking ahead, a quick scan of the regulations that will sunset in 2013-14 suggests about the same number of sunsetting regulations as in the year just past are likely to meet the threshold for a RIS. In addition, the number of RCMs seems likely to increase further in 2013-14 as the date nears for meeting the Victorian Government’s target for reducing red tape and regulatory burdens. New regulations are the unknown at this point.

The output of the regulation review function in 2012-13 and the indications for the 2013-14 work program appear to reverse the drop in regulation review activity that occurred in 2010-11 and 2011-12. Prior to that point the annual average of outputs was around 45. The Commission examined the reasons for this earlier decline and found the main cause for the fall appeared to be that fewer sunsetting regulations and statutory rules met the threshold for impact assessment introduced in 2010. This change, which arose as part of the amendments to the Subordinate Legislation Act enacted in 2010, has meant that regulatory impact analysis is now better targeted and encourages a more proportionate approach in RISs and BIAs by departments and agencies.

VIII ANNUAL REPORT 2012-13

The Commission’s inquiry function occupies much of the time of all Commissioners. Over the nine years of its existence, the Commission has completed 18 inquiries and begun a nineteenth. The range of subjects has broadened significantly. In doing this work Commissioners have set out to contribute fresh insights and apply a broad range of analytical tools and more effective methods of engaging with stakeholders to provide advice and recommendations to the Victorian Government in the interests of the Victorian community.

2012-13 saw some important further developments in the inquiry function. The focus on social policy in the Commission’s work increased with three inquiries directed to these areas. The first was the inquiry into the social and economic costs of problem gambling, the final report for which was submitted to the Victorian Government on 14 December 2012. A second inquiry was into school devolution and accountability and the final report was submitted on 31 July 2013. In addition, in June the Commission began an inquiry into the personal injury provisions of the Wrongs Act 1958 (Vic).

This extension further into social policy areas is welcomed by the Commission. Such inquiries require it to take a multidisciplinary approach, drawing on economic, legal, management, governance and other expertise. Moreover, it also must engage with new stakeholders including school principal and educational associations, medical specialists, the legal profession, gambling experts and social welfare groups, to name just a few.

The Commission’s inquiry work last year also included the completion of the inquiry into feed-in tariffs and distributed generation on 27 July 2012, following a short extension to digest over 1100 submissions. The final report was released by the Victorian Government within two months, the fastest response for any Commission inquiry report, and all recommendations were supported.

The Commission’s main innovation last year was to start what is expected to be a program of regulatory improvement studies with participating regulators, designed to cut regulatory burdens and improve the efficiency of regulatory administration. The Commission expects these studies to identify opportunities for participating regulators to act within their existing mandates to improve their efficiency and effectiveness, and cut red tape burdens. The Commission considers that such studies can generate substantial improvements relatively quickly, and early work supports this view.

During the year, a pilot study was undertaken with the Environment Protection Authority, focused on contaminated land. The Victorian Treasurer issued the Commission with its first reference for a regulatory improvement study, with the Victorian Commission for Gaming and Liquor Regulation being the participating regulator.

As in previous years, I would like to record the Commissioners’ appreciation of the time and efforts of the stakeholders that engaged with us in the various tasks the Commission undertook last year. Our work relies heavily on the input and feedback from a wide body of people and organisations. While the Commission’s independence means we do not always agree with the views put by stakeholders, the evidence, information and insights from these contacts, conversations and submissions are invaluable and materially improves the rigour, robustness and relevance of the Commission’s work.

Finally, on behalf of the Commissioners I particularly thank the people of the Commission Secretariat for their efforts and commitment. A significant body of quality outputs has been delivered to the Victorian Government with fewer resources, while achieving further innovations in the Commission’s activities.

M W Butlin Chair

CONSULTATION AND THE QUALITY OF IMPACT ASSESSMENT 1

1 Consultation and the quality of impact assessment

It is widely accepted that public consultation is an important contributor to both the acceptance by community and business of public policy proposals, including new regulation, and to the quality of policy design and implementation.

While consultation on the design of new regulation can take many forms, the Organisation for Economic Co-operation and Development (OECD) has highlighted the contribution consultation makes to regulatory impact assessment (RIA)1 quality, including acting as a cost-effective means of data gathering, contributing to a better understanding of the likely dynamics of regulating in the relevant market, enhancing the legitimacy of government action by acting as a vehicle for citizen and stakeholder participation and testing the acceptability of regulatory proposals.

Since the introduction of regulatory impact statement (RIS) processes in 1985, and particularly over the last decade, Victoria has invested heavily in improving the quality of RIA, partly to enhance opportunities for community and business engagement in the design of regulation. Relevant investments include creation of the Victorian Competition and Efficiency Commission (the Commission), which incorporated the former Office of Regulation Review, to advise on the quality of the analysis in RIA, and broadening the scope of impact assessment to include primary legislation (through Business Impact Assessments (BIAs)) and legislative instruments (by extending the RIS framework).

Despite these investments in RIA, there is limited public information on the role public consultation plays in the development and review of regulation. This chapter partly fills the gap by answering three main questions. Has the increase in the quality and scope of RIA resulted in greater public engagement? Has public consultation on RIAs led to changes to regulatory proposals that have improved outcomes? Are there opportunities to enhance the effectiveness of RIA through improved consultation?

In addressing these questions, the focus is on the benefits of public consultation, rather than the costs. It assumes that consultation tools tend to be cost-effective in achieving better regulatory design and outcomes. Effective consultation contributes to, and complements, robust and comprehensive analysis in RIA that can lead to the identification of cost savings without compromising outcomes. The Commission found that the RIA process in Victoria saved around $900 million in the gross cost of regulation over a 5 year period (2005-06 to 2009-10); some of these savings were identified as a result of consultation with stakeholders (VCEC 2011a, 15).

1.1 RIA public consultation practices Effective RIA consultation with stakeholders can help to inform the development of regulatory proposals and assist government agencies to understand their likely impacts before making decisions.

Consultation may be necessary at a number of different points during the regulatory development process. Conducted early in the process, it can help to properly define a

1 RIA refers to both regulatory impact statements (RISs) prepared for statutory rules and legislative instruments and business impact assessments (BIAs) prepared for primary legislation.

2 ANNUAL REPORT 2012-13

problem and determine viable regulatory or non-regulatory options to deal with it. Consultation can help government fully understand all the risks and impacts (intended and unintended) of regulatory and other options. Both government and stakeholders should understand that consultation does not always lead to consensus, as governments often need to balance competing considerations when deciding on the best option to follow.

Consultation can take many forms, including discussion papers, questionnaires and stakeholder meetings, and involve different groups, such as individuals, community groups, businesses and other government agencies. Moreover, consultation can occur at several key stages of a RIA:

Defining the policy problem — consultation may help accurately identify and define a problem, including understanding the impacts on various groups.

Identifying the feasible options — consultation can help identify options and provide information on their feasibility and cost. For example, consultation with stakeholders can help determine the kinds of information and/or penalties that they will respond to.

Assessing the impacts — the information required to estimate impacts can come from a range of sources, including consultation with businesses, industry associations and peak bodies and surveys or data from organisations such as the Australian Bureau of Statistics.

Implementing the option(s) — consultation can be used to test practical implementation issues and may identify ways to reduce transition costs.

Enforcing and administering the preferred option — potential compliance issues may be identified and addressed.

1.1.1 Victoria’s requirements for public consultation

In Victoria, public consultation is a formal requirement of the RIS framework. The Subordinate Legislation Act 1994 (Vic) (SLA) and associated Guidelines require initial (‘pre-RIS’) consultation within government and with a ‘sector of the public’ affected by the proposed regulation. Once a RIS has been prepared, it must be publicly released for consultation for at least 28 days. The Government policy is that public consultation be undertaken for 60 days where practicable (Government of Victoria 2011, 56). Once the public consultation process is completed, the responsible minister is required to consider and respond to all submissions and comments received in deciding whether to make (or revise) the proposed regulations (box 1.1).

The formal public consultation requirements of the SLA do not apply to BIAs prepared for primary legislation, although public consultation is regarded as good practice (Government of Victoria 2011, 40). However, there may be circumstances where prior consultation may not be appropriate — for example, where consultation may reduce the likely effectiveness of proposed legislation. BIAs are not directly released for public consultation unless this is agreed among the Premier, Treasurer and responsible minister; the Commission is not aware of a BIA being released for public consultation over the past nine years.


Box 1.1 Victoria’s RIS consultation requirements The Subordinate Legislation Act 1994 (Vic) (SLA) specifies initial and formal consultation requirements for proposed statutory rules. In addition, the SLA Guidelines and Victorian Guide to Regulation (VGR) outline a number of ‘good consultation practices’, including preparing and publishing a statement of reasons, publishing stakeholder submissions and responding to submissions.

Initial consultation requirements

The SLA requires the responsible minister for a proposed statutory rule to ensure there is consultation in accordance with the SLA Guidelines. This includes consultation with other ministers (s 6(a)) and any sector of the public on which a significant economic or social burden may be imposed by a proposed statutory rule (s 6(b)). This consultation should consider the need for, the type and scope of, the proposed response and any alternative options (Government of Victoria 2011, Appendix E, 57-59).

Formal Regulatory Impact Statement (RIS) consultation requirements

Where a RIS must be prepared for a statutory rule the responsible minister must ensure that a notice about the proposed statutory rule is published in the Government Gazette and a daily newspaper (s 11(1)). The notice must, amongst other things, summarise the results of the RIS, specify where a copy of the RIS and of the proposed statutory rule can be obtained, and invite public comments or submissions within a specified time of not less than 28 days (s 11(2)). The responsible Minister must ensure that all comments and submissions are considered before the statutory rule is made (s 11(3)).

The responsible minister must publish a Notice of Decision of his or her intention to make, or not make, the relevant statutory rule. The SLA Guidelines provide that the notice should include a statement of reasons for the direction taken in the final statutory rule and address any general issues raised in submissions (Government of Victoria 2011, Appendix E, 71).

The responsible Minister must ensure that all comments and submissions received on the RIS are submitted to the Scrutiny of Acts and Regulations Committee (SARC) of the Victorian Parliament (s 15A(1)(c)(ii)). Any failure of a department or agency to adequately address any valid criticisms or suggestions made may be highlighted by SARC (Government of Victoria 2011, Appendix E, 71).

The Guidelines also provide that the statement of reasons should be published on the relevant agency or government website to allow those who have made submissions to see how their submissions have been addressed in the final version of the statutory rule (Government of Victoria 2011, Appendix E, 71).

SARC has indicated that it expects departments and agencies to send responses ‘to those who have taken the time and effort to send in a submission’ (SARC 2006, 13). These responses should provide a clear demonstration that matters raised in submissions have been considered (Government of Victoria 2011, 57). The VGR also recommends that stakeholder submissions are considered public documents and are available to other stakeholders or should be posted on the agency’s website (Government of Victoria 2011, 56). Note: The discussion above specifically refers to the requirements for statutory rules and similar

arrangements apply for legislative instruments.


1.2 Consultation on regulatory impact assessment in practice

RIA provides an important means for stakeholders to understand and influence the design of new regulatory proposals. As noted, such engagement can occur in the process of developing new regulations before a preferred option is determined, or at later stages such as through consultation on regulatory impact statements (RISs) and the accompanying draft regulations (sections 1.2.2 and 1.2.3).

1.2.1 Number of RISs prepared in Victoria

The trend in the number of RISs being prepared provides one, albeit imperfect, indicator of the extent of opportunities for public consultation in the design and implementation of regulation.

The number of RISs prepared in Victoria has declined in recent years. There are several explanations for the trend, including changes to the applicable thresholds for the application of the RIS requirement that were intended to improve targeting of the requirement to prepare RISs from 1 July 2011 (figure 1.1). The trend may, however, be reversed in future due to the broadening of the RIS process to include legislative instruments.

Number of RISs and BIAs assessed by VCEC Figure 1.1

Source: VCEC annual reports (various).

Figure 1.1 shows a gradual decline in the number of RISs being completed in the period 2004-05 to 2009-10 to around 30 in 2009-10. The number of RISs completed then declined to 11 in 2010-11, before increasing slightly in the following years. The number of RISs completed for statutory rules in 2012-13, at 16, remains only approximately 55 per cent of the number recorded in 2009-10; however in 2012-13 a further seven RISs were prepared for legislative instruments, for a total of 23 RISs completed (chapter 4).

Setting aside 2010-11, the overall decline in the number of RISs prepared partly reflects the change in threshold to prepare a RIS from 1 July 2011 and the full implementation of


the RIS framework to legislative instruments from 1 July 20132. These changes have probably not adversely affected consultation as targeting RIS requirements to more significant regulatory proposals is a better use of consultation efforts.

1.2.2 Extent of pre-RIS consultation

Analysis of RISs published between 2009-10 and 2012-13 shows consultation on the development of regulatory proposals prior to a RIS being prepared is common (occurring in 84 per cent of RISs released for public consultation) (table 1.1). The SLA Guidelines require initial consultation with affected parties, but this was not undertaken for approximately one-sixth of RISs for which data were available. The limited cases where initial consultation did not occur were confined to fees proposals, such as fees charged by the courts and tribunals.

Frequency of use of specific pre-RIS Table 1.1consultation tools (2009-10 to 2012-13)

Consultation tool Share of RISs (percentage) Consultation within government 34.9 Informal ‘1 on 1’ consultation 31.7 Public discussion paper 23.8 Stakeholder discussion paper 17.5 Public request for comment 4.8 Stakeholder request for comment 22.2 Public forums 9.5 Stakeholder forums 28.6 Advisory Council 14.3 Survey/questionnaire 17.5 Data request 4.8 Publish stakeholder submissions 1.6 Multi-stage notice and comment 9.5 Outsourced consultation 14.3 No pre-RIS consultation 15.9

Source: Derived from VCEC archive of published RISs by examining the consultation section in 63 RISs prepared over 2009-10 to 2012-13. This includes only those consultation tools that were disclosed in the RIS so the actual number of consultation tools used could be higher than indicated.

2 Prior to 1 July 2011, the effective threshold for preparing a RIS was where the proposed statutory rule would impose an ‘appreciable economic or social burden on a sector of the community’. From 1 July 2011 this was revised to a ‘significant economic or social burden’, where an impact of $500 000 per annum is ‘significant’ (Government of Victoria 2011). From 1 July 2013, the RIS framework was fully applied to both statutory rules and legislative instruments.


Such consultation can take a number of forms, including: informal discussions, surveys, and formal processes such as public discussion papers and submissions. The most common forms of pre-RIS consultation involve targeted consultation, such as consultation within government, informal consultation with individual stakeholders, stakeholder forums or requests for stakeholder comment. More open forms of consultation, such as public discussion papers and public forums, are less common but are still used relatively frequently. It is also common for more than one type of consultation to occur at the pre-RIS stage (table 1.2).

Average number of consultation tools used Table 1.2

Year Number of RIS

assessed Average number of consultation tools

Average tools excl. consultation inside

government

2009-10 28 2.4 2.1

2010-11 8 2.8 2.3

2011-12 12 2.4 1.9

2012-13 15 2.1 1.7

Source: Derived from VCEC archive of published RISs. For 2012-13, the data are based on the number of RISs published at the time the review was undertaken, not the total number of completed RISs.

In addition to the tools mentioned above, online consultation tools are increasingly being used as a low cost means of engaging with the broader community. They include websites, blogs, and social networking sites, such as Facebook and Twitter, as well as interactive community consultation forums. Online consultation tools complement traditional approaches, such as formal submissions, and enable a wider range of views to be canvassed, including those of affected individuals and the broader public. Other benefits include more timely responses to data and information requests and providing an interactive platform for stakeholders to debate key issues.

While online tools may offer potential benefits, engaging people in online discussions can be challenging. Therefore, it may take some time before online consultation tools become standard practice. However, there are some practical examples in the Victorian Public Service — for example, the recently completed Taxi Industry Inquiry used social media, primarily through the use of Facebook and Twitter, to reach non-traditional groups (box 1.2).

The consultation process used for the Environment Protection (Vehicle Emissions) Regulations 2013 RIS, provides a good practice example of how initial consultation processes can be used to gather data and information, consider options and develop regulatory proposals (box 1.3).


Box 1.2 Victorian Taxi Industry Inquiry experience with social media

The recent Taxi Industry Inquiry was conducted over May 2011 to January 2013 and sought to provide a comprehensive investigation into all aspects of the taxi and hire car industry and recommend a set of reforms to the government focused on achieving better outcomes for the travelling public.

The inquiry undertook a significant consultation and engagement program over 16 months which included considerable use of social media to support traditional engagement platforms such as regional road shows, releasing discussion and technical papers and face to face meetings. Consultation sought to promote input from key stakeholders including taxi and hire car users, industry participants, the business sector, the tourism sector, government agencies and disabilities agencies. The inquiry received over 1300 formal submissions on its draft report. In addition, over 11 000 comments were received on social media and these were treated as submissions.

The key objectives of using social media in the Taxi Industry Inquiry were to:

reach a broader audience than traditional methods would allow by targeting groups that do not normally make submissions, such as taxi drivers and the general public

provide more timely communication. Social media enables people to participate whenever it suits them, for example at home or work.

improve evidence and recommendations by providing a mechanism for distributing issues papers, testing draft recommendations, and blogging on more significant recommendations.

A key lesson from using social media in a public inquiry was the ability to generate ideas and obtain information to inform recommendations in a low cost way from a large and diverse group of stakeholders. However, for individuals and groups to participate, they need to know that social media channels exist. Accordingly, advertising on traditional media and the inquiry website was used to promote online discussions. Source: Taxi Services Commission.


Box 1.3 Proposed Environment Protection (Vehicle Emissions) Regulations 2013 pre-RIS consultation

The Environment Protection Authority (EPA) Victoria employed the following consultation approach to gather data and information from affected stakeholders to use in the RIS, including to identify the problem and to identify feasible options and their likely impacts. The consultation ultimately influenced the nature of the proposed regulatory response.

The EPA used the following consultation tools:

Internal to government

Stakeholder Reference Group comprising experts from various government agencies who administer the Regulations and had a broad interest in the strategic direction of the review.

Public engagement

Discussion Paper to promote discussion and seek input from stakeholders, in particular on improvements to the Regulations and possible options for reform

one-on-one briefings with stakeholders, including site visits (e.g. vehicle testers)

roundtable workshops targeted to key stakeholders to promote submissions to the Discussion Paper

interactive submissions in response to specific questions.

The EPA considered the consultation provided key benefits and lessons:

Key relationships built early in the policy development process meant that input and data could be effectively and efficiently gathered. It also assisted with early identification of stakeholder concerns that could be addressed in RIS analysis.

Roundtable workshops contributed to higher quality submissions and increased the number of submissions.

One-on-one briefings allowed stakeholders to raise concerns in a ‘safe’ environment which proved useful in identifying their concerns.

Online forums allowed EPA to engage a wider audience in a manner that was convenient for the stakeholder, although this requires significant promotion and consideration of the level of interest in the topic.

Source: Case study provided by EPA.

1.2.3 Extent of RIS consultation

Formal public consultation occurs once a RIS has been prepared and is released for public comment, along with the draft regulations. Two indicators of the extent of consultation are the amount of time for stakeholders to provide submissions and the number of submissions received for RISs. Measures of the accessibility of RISs are also relevant to assessing the extent and effectiveness of consultation to enable stakeholders to readily understand and engage with the policy process.

Public consultation period

A longer consultation period should provide further opportunities for stakeholders to participate more effectively in public consultation processes, including through more time to consider and prepare a response to the analysis and recommendations in a RIS.


As noted above, the SLA requires a minimum public consultation period of 28 days for a RIS and it is government policy that public consultation be for 60 days wherever possible.

Access Economics, in their review of the Victorian RIS process in 2010, found mixed views on the appropriate length of RIS consultation processes (Access Economics 2011, 38–39). The business groups spoken to by Access Economics favoured mandatory consultation periods and preferred ‘more consultation to less’, primarily via early, targeted engagement through a two-stage RIS process. Victorian Government departments considered the minimum 28 day consultation period to generally be appropriate, but there were mixed views on the desirability of a two-stage RIS process. More broadly, the Productivity Commission recently commented that RIS consultation periods in Australia generally (including Victoria) are very short by international standards (e.g. 60 days by the United States Federal Government and 12 weeks by the European Commission and United Kingdom) (PC 2012b, 220).

Despite the Government’s policy of favouring a 60 day RIS consultation period where feasible, there appears to have been little change in practice since the policy was introduced in 2005 (table 1.3). Following an initial increase in the number of RISs being publicly released for longer than 28 days, since 2008-09 most RISs have been publicly released for the statutory minimum. The average public consultation period for RISs has been broadly constant since 2006-07.

RIS consultation periods Table 1.3Number of days public consultation

28 days 29–42 days 43–59 days >60 days Average no.

of days

2006-07a 10 17 1 1 33

2007-08 8 18 2 1 33

2008-09 23 2 1 2 31

2009-10 20 4 2 2 33

2010-11 5 2 2 0 32

2011-12 8 1 1 2 36

2012-13 15 2 1 3 34

Note: a One RIS was released for 25 days public consultation.

Source: VCEC annual reports (various).

A key factor enabling a 60 day consultation period is commencing the RIS process early to enable enough time at the end of the process for a longer formal consultation period, before the regulations were due to sunset. The Victorian Guide to Regulation (VGR) recommends starting the process around six months before regulations are due to sunset (Government of Victoria 2011, 60). In some cases 12 months may be more appropriate to allow for delays and sufficient initial and formal consultation. However, the Commission is aware of many examples of the RIS process not commencing early enough, which then results in a minimum 28 day public consultation period.


On the other hand, other factors may mitigate the need for a lengthy public consultation process following the release of a RIS. For example, where effective ‘pre-RIS’ consultation has been undertaken and all relevant stakeholders have had the opportunity to contribute to the policy development process there may be fewer benefits from a longer RIS consultation process.

Ultimately, however, the justification for a longer RIS consultation period is based on the extent to which it contributes to greater stakeholder participation in the RIS process. One measure of the extent to which this occurs is the number of submissions received following the public release of a RIS.

Number of submissions received

In addition to the length of the public consultation period, the number of submissions received in response to a RIS will reflect a variety of factors, including the nature of the regulation and the breadth of impact across the community.

The Commission reviewed a sample of 36 RISs published between 2008-09 and 2012-13 for which data were available on the number of public submissions received during the RIS consultation period. Excluding three RISs as outliers, which accounted for 82 per cent of the total number of submissions received, an average of 12.5 submissions were received for each RIS.

Further examination of the sample identified 26 RISs where both the consultation period and the number of submissions received were available. Again excluding one RIS as an outlier, the data showed 19 RISs were released for a public consultation period of 28 days and received an average of 9.1 submissions, while the six RISs released for more than 28 days received an average of 27.5 submissions.

Although these results are based on a small sample size, they indicate a link between the length of the public consultation period and the level of public engagement. However, this measure does not capture the nature or influence of public submissions on the design and implementation of the regulatory proposal subject to public consultation. For example, a large number of pro-forma submissions may indicate stakeholder interest (and good organisation) on an issue but add little value to policy analysis; in contrast a small number of detailed and thoughtful submissions may be highly influential.

RIS analysis and accessibility

The quality and accessibility of the analysis in a RIA document to diverse stakeholders can also influence the level of involvement in post-RIS consultation. The RIA must serve two important objectives: providing a robust analysis of the decision to regulate, and enabling stakeholders to engage with, and comment on, the policy options.

In some circumstances, these objectives may conflict. A detailed and technical analysis, which justifies the decision to regulate in a particular way, may be lengthy and more difficult to comprehend. It is not clear that those involved in preparing a RIS are generally aware of this problem or that they have tried to address it. Access Economics found that the technical nature of the RIS documents too often renders them unsuitable for public consultations (Access Economics 2011, 3).

Access Economics found that:

Accessibility, structure and length of documents could be substantially improved in order to enhance their value as instruments for consultation.


While they included the analysis required by the RIS process, most documents were not well structured. This may have hindered stakeholders in their ability to identify conceptual and practical shortcomings in the policy proposals, and risked undermining one of the key components of the RIS process. In one instance, a very complex RIS document was poorly structured, lengthy and deemed inadequate, yet was still made available for public consultation. Poorly written communication and inadequate analysis are hardly conducive of stakeholder engagement. (Access Economics 2011, 4)

One indicator of RIS accessibility is the average length of a RIS. The length of a RIS has significantly increased since 2004-05, increasing by more than 100 per cent from an average of 35 to 74 pages (excluding appendices). This has coincided with an increase in the quality of RIA analysis as indicated by the increase in quantification of the extent of the problem, and expected costs and benefits over time, as shown in chapter 4.

The length of executive summaries over this period has also significantly increased by 300 per cent from two to nine pages, which likely reflects an intention for summaries to be more accessible and stand-alone to stakeholders, given the increased average RIS length. Reflecting this, the Commission’s regulatory framework inquiry proposed making RIS summaries more accessible to a wider range of stakeholders, including by preparing a one page pro forma summary sheet (VCEC 2011b, 73–74). The Commission understands that the pro forma sheet will be included in the revised Victorian Guide to Regulation which is expected in late 2013.

These observations suggest a more concerted effort is needed to improve the readability of RISs for relevant stakeholders. The Commission recognises that while its advice to departments is intended to improve the quality of analysis in RISs, it may add to the complexity of published RISs. The Commission therefore endeavours to work with agencies early on in the RIS process to understand various stakeholder needs and discuss ways to improve the accessibility of the information and analysis. Ultimately, however, it is the responsibility of agencies preparing RISs to draft the RIS to communicate clearly to stakeholders.

Ensuring that the RIS has a clear and concise summary, which provides a high-level overview of the analysis, would help. Moving analytical detail and background data to appendices would also assist, as would publishing these as separate ‘appendices’ documents, to shorten the main body of the RIS. These practices have been used in a limited number of cases for high impact proposals which affect diverse stakeholder groups, such as the Marine Safety Regulations 2012 RIS and the Public Health and Wellbeing Regulations 2009 RIS. The Wildlife Regulations 2013 RIS published a separate document — summary and guide to the RIS — to assist stakeholders to understand the key issues.

1.3 Improved outcomes from RIS consultation The Commission has sought to establish the extent to which public consultation has contributed to changes in regulatory proposals and ultimately to improved regulatory outcomes. Under the SLA, the responsible minister must ensure that all comments and submissions received in response to a RIS are considered before a regulation is made. However, while public submissions must be genuinely considered, the responsible minister is not obliged to amend a draft regulation in response to stakeholder feedback.

The Commission therefore sought information on the nature and extent of stakeholder feedback on RISs released for public consultation and subsequent changes to regulatory proposals. This involved examining the publication of stakeholder submissions


and of a ‘statement of reasons’ by departments as set out in the SLA Guidelines and the VGR. The Commission also reviewed a sample of the Notices of Decision that must be published by the responsible minister to explain the reasons for the direction taken in the final statutory rule or legislative instrument and address general issues raised in submissions.

The Commission has previously found that compliance with requirements in the SLA Guidelines and VGR to publish stakeholder submissions and prepare and publish reasons for change is not systematically met in Victoria (VCEC 2011b, 73). A survey of departments by the Commission regarding RISs released for public consultation in 2012-13 found that for 45 per cent of RISs the department published stakeholder submissions and that for 80 per cent of RISs departments responded to individual stakeholder submissions. In 55 per cent of cases a statement of reasons was prepared.

Although stakeholder submissions may not be routinely published by departments, all stakeholder submissions are required to be forwarded to the Scrutiny of Acts and Regulations Committee (SARC) of the Victorian Parliament. If the responsible minister does not adequately consider stakeholder feedback following public consultation, SARC may comment on this (Government of Victoria 2011, Appendix E, 71). SARC has also commented that their overall experience with the consultation process in relation to statutory rules has been thorough and appropriate (SARC 2012, 10).

The Commission identified and reviewed 41 Notices of Decision published in the General Government Gazette from 2008-09 to 2012-13 where a RIS was prepared and a regulation was subsequently made. From the Commission’s review, Notices of Decision do identify changes between the draft and final regulations and generally list the number of submissions received. However, there was generally insufficient detail to assess how stakeholder comments directly contributed to changes in the final regulations, or to estimate the impact of such changes. Nor did the Notice of Decision always explain the reasons for not changing the regulations in response to stakeholder concerns.

The Commission did, however, examine the relationship between the number of submissions received and the proposed regulations being amended following consultation on the RIS. Of the 41 Notices of Decision reviewed by the Commission, five did not identify the number of submissions received, while a further three were excluded as outliers due to the large number of submission received.

In 17 cases, the Notice of Decision described substantive3 amendments to the draft regulations presented in the RIS, while in 16 cases the draft regulations were stated to either be subject to only minor or technical amendments or passed without amendment. Of those regulations subject to substantive amendment, the average number of submissions received was 19, which is more than three times the average number of submissions received for regulations that were either not amended or subject to only minor or technical amendments (average 5.5 submissions received).

3 In reviewing the Notices of Decision, the Commission identified three categories of amendments after RIS consultation: (i) ‘substantive amendments’ were those where the Notice stated that a number of changes — usually several — had been made and, in most cases, described these changes in the Notice of Decision; (ii) ‘minor or technical amendments’ were those where the Notice used one or both of these terms to describe changes to the draft regulations, or where it was clear that the change described fitted this description, and (iii) ‘without amendment’ were those where the Notice stated that there were no amendments to the draft regulations.


Substantive amendments were made to regulatory proposals following RIS publication in over 50 per cent of cases reviewed by the Commission.

This data indicates a positive relationship between the number of submissions received and likelihood of amendment. Specifically, data suggests that, where larger numbers of submissions are received in response to a RIS, the probability of the proposal being amended is substantially higher.

It has not been possible to systematically verify that all of these amendments to draft regulations are improving regulatory quality and outcomes in terms of reduced costs and/or higher benefits. However, from its review of Notices of Decision and other material, the Commission sought to identify examples where RIS consultation has resulted in improvements to regulatory proposals (box 1.4).

The Commission’s research was not able to establish a conclusive link between effective public consultation through RISs and improved regulatory outcomes in Victoria: although the indications appear positive. There does appear to be scope for greater transparency in stakeholder views and the government response to these views before final regulations are made. That said, the available data indicate that the Government is responsive to stakeholder views and that stakeholder input contributes to changes in the design and implementation of regulatory proposals. This observation underlines the potential benefits of further enhancing stakeholder participation in the RIS process.

Box 1.4 Changes to Residential Tenancies (Rooming House Standards) Regulations 2012

The objectives of the proposed Regulations were to prescribe privacy, safety, security and amenity standards with which rooming house owners must comply.

The RIS was advertised on 15 August 2011 for 60 days seeking public comment and 37 submissions were received.

Following the formal public consultation period, the Department of Human Services changed the Regulations to reflect practical considerations and lessen the cost of the new requirements to rooming house owners. These included changes to kitchen and dining room standards to:

reduce the ratios of ovens and cooktops required per person in communal kitchens, from a ratio of 1:10 for ovens and 1:5 for cook tops, to 1:12 for ovens and cook tops

reduce the minimum size of lockable food storage cupboards from 0.13 to 0.10 cubic metres

replace ratios for chairs and tables to residents in common areas to a requirement for a table and chairs based on the maximum number of residents able to be accommodated in the largest room.

The commencement of the new standards was also delayed until 31 March 2013 to enable proprietors more time to adjust to the new requirements. Source: Notice of Decision prepared for the Residential Tenancies (Rooming House Standards)

Regulations 2012 RIS.


1.4 Opportunities for improvement The available indicators, including the number of pre-RIS consultation tools, number of stakeholder submissions and average public consultation period, suggest the extent of public consultation for RISs in Victoria has been stable over time. It has not been possible to benchmark these Victorian data against other comparable jurisdictions, but the level of consultation appears to be low as indicated by the average number of submissions received per RIS. However, consultation has influenced regulatory design and outcomes, as indicated by the large number of regulatory proposals that have been amended following consultation. This suggests that consultation has been influential in improving regulatory design and implementation.

The analysis in this chapter indicates several areas for improvement in RIS consultation, primarily to increase awareness of, and compliance with, existing consultation practices in the SLA Guidelines rather than imposing any new requirements. A key focus appears to be promoting greater awareness of existing consultation practices and the benefits of effective consultation to agencies preparing RIA. This could involve:

building on the Commission’s ongoing early engagement with departments to encourage more open and extensive consultation at the start of the RIA process

disseminating information on best practice consultation principles and processes though guidance notes and training

building links across departments undertaking RIA, such as through a community of practice, to create a network of RIA experts to share examples and experience (chapter 4)

encouraging greater transparency through more consistent publication of stakeholder submissions and government responses at the end of the RIS process, which would also enable ongoing monitoring of the effectiveness of public consultation processes.

The potential net benefits of other reforms that may improve the nature and extent of public consultation is less clear. For example, introducing a formal two-stage RIS requirement would respond to concerns identified by some stakeholders that consultation occurs too late in the regulation-making process. Similarly, mandating a 60 day consultation period would allow stakeholders more time to respond to the issues canvassed in a RIS. While these approaches have merit, they are also costly and may not represent a proportionate approach in all cases.

In the year ahead, the Commission intends to work collaboratively with departments to communicate the benefits of effective consultation and improve awareness of, and compliance with, the existing practices.

THE VICTORIAN COMPETITION AND EFFICIENCY COMMISSION 15

2 The Victorian Competition and Efficiency Commission

2.1 Role of the Commission The Victorian Government established the Victorian Competition and Efficiency Commission (the Commission) in 2004 to be ‘the State’s foremost advisory body on business regulation reform and opportunities for improving Victoria’s competitive position’ (Government of Victoria 2004a, 25). The Commission carries out its advisory role through three complementary functions:

(1) undertaking inquiries into matters referred to it by the Victorian Government

(2) reviewing and advising on the economic impact of significant new legislation and regulation and the adequacy of estimates of the measurements of the regulatory burden of regulation

(3) operating Victoria’s Competitive Neutrality Unit.

The Commission is established under the State Owned Enterprises (State Body — Victorian Competition and Efficiency Commission) Order 2004 (Government of Victoria 2004b). The Order prescribes how the Commission should undertake its activities and the independent role of its Commissioners. The Order also outlines the principles with which the Commission must comply, stating that it must demonstrate:

an overarching concern for the wellbeing of the community as a whole, rather than the interests of particular industries or groups

the provision of analysis and advice that is independent and rigorous.

The Order requires the Commission to report annually on its performance against its work program. Chapters 3, 4 and 5 provide this report for each of the Commission’s three functions. Section 2.4.1 provides information on the Commission’s performance indicators.

The Commission is serviced by a Secretariat, and its independence is supported by the arrangements under which the Commissioners and Secretariat staff operate. Section 2.2 discusses this further.

2.1.1 Inquiries

Inquiries enable the Commission to examine, in detail, areas of the Victorian economy referred to it by the Treasurer on behalf of the Government. During 2012-13, the Commission submitted two final reports: Inquiry into Feed-in Tariffs & Barriers to Distributed Generation; Inquiry into the Social & Economic Costs of Problem Gambling; released one draft report for public consultation: Inquiry into School Devolution and Accountability; and commenced one inquiry: Inquiry into Aspects of the Wrongs Act 1958. Three Government responses to Commission inquiries were released during 2012-13: Inquiry into Feed-in Tariffs & Barriers to Distributed Generation; Inquiry into Victoria's Tourism Industry; and Inquiry into Streamlining Local Government Regulation. Chapter 3 provides more information about inquiries.

The Commission also received its first terms of reference from the Victorian Treasurer for a regulatory improvement study into the Victorian Commission for Gambling and Liquor Regulation. In addition, the Commission and the Environment Protection Authority


Victoria conducted a joint pilot study to identify opportunities to improve risk-based regulation in environmental auditing of contaminated environments and landfills under the Environment Protection Act 1970 (Vic).

2.1.2 Regulation review

The Commission’s second function is to advise on the adequacy of the analysis in Regulatory Impact Statements (RISs) and Business Impact Assessments (BIAs). These documents are prepared by departments or agencies proposing new or amended regulations (in the case of RISs) or legislation (in the case of BIAs). RISs are required only when regulation imposes a significant economic or social burden on a sector of the public, and BIAs are required for legislation expected to have a significant effect on business or competition. Ministers determine whether their regulatory proposal meets the relevant threshold tests.

The Commission’s role was extended in October 2010 to verify measurements of changes in the burden of regulation (Government of Victoria 2010). The Regulatory Change Measurement (RCM) methodology is used to measure changes in administrative, substantive compliance and delay costs.

Chapter 4 reports on the Commission’s activities in 2012-13 and explains how it is assisting agencies to develop RISs, BIAs and RCMs.

2.1.3 Competitive neutrality

The Commission’s third function is to advise government businesses and departments on how to comply with the Government’s Competitive Neutrality Policy (Government of Victoria 2012d) and raise awareness of their competitive neutrality responsibilities, and to investigates competitive neutrality complaints. The aim is to improve efficiency by ensuring government businesses competing with private businesses do not enjoy a competitive advantage simply because they are publicly owned. The policy is applied only where it is in the public interest to do so. Chapter 5 reports on the Commission’s competitive neutrality activities.

2.2 About the Commission

2.2.1 The Commissioners

The Commission’s Order in Council states that Commissioners:

are responsible for managing the affairs of the Commission

may exercise the powers of the Commission.

The Commission consists of a chair (who is a Commissioner) and two to four additional Commissioners, all of whom must have experience as business leaders, academics and/or public policy practitioners. The Government has appointed two full-time Commissioners and one part-time Commissioner from diverse backgrounds (boxes 2.1, 2.2 and 2.3), which fosters the provision of broadly based, independent advice as required by the Order. Commissioners come to their own views about the issues raised in all three of the Commission’s functions.

While most of the Commissioners’ time is spent on work related to public inquiries, Commissioners also approve all competitive neutrality investigation reports. In addition, the Commission has also authorised the executive members of the VCEC's Secretariat to provide advice on the adequacy of RISs, BIAs and RCMs, under their guidance and


direction (VCEC 2011c). Commissioners are consulted on RISs, BIAs and applications of the RCM where input is needed on the adequacy of the analysis. The Commission approves the RIS/BIA review procedures and monitors their implementation by the Secretariat. Eight Commission meetings were held during 2012-13, with each meeting attended by all Commissioners.

Box 2.1 Chair Matthew Butlin

Dr Matthew Butlin was appointed Chair of the Victorian Competition and Efficiency Commission for a period of three years, from 1 October 2008, and reappointed for a further three years until 30 September 2014.

Dr Butlin’s business and private sector experience includes senior executive roles in Newcrest Mining, CRA (now Rio Tinto), management consulting and the Business Council of Australia. His public policy experience includes senior executive roles in Commonwealth departments, and as a Commissioner of the Productivity Commission. He was a visiting economist at the Japanese Government’s Economic Planning Agency and was an external member of the Defence Department’s Defence Executive between 1998 and 2000. Dr Butlin was trained at the Australian National University and the Massachusetts Institute of Technology and has published in the fields of economics, economic history and management consulting, including innovation. He is currently Chair of the advisory board of the Melbourne Institute for Applied Economic and Social Research, a member of the council of Leadership Victoria (LV) and a Director of the LV Foundation, and is President of the Economic Society of Australia.

At the Commission, Dr Butlin has presided on the inquiries into a State-based reform agenda, school devolution and accountability, aspects of the Wrongs Act, Victoria’s manufacturing industry, Victoria’s regulatory framework, environmental regulation, financial services, and streamlining local government regulation. He has been a participating Commissioner on the inquiries into feed-in tariffs and barriers to distributed generation, the costs of problem gambling, Victoria’s tourism industry and the sharing of government and community facilities.

The Commission is accountable to the Treasurer. The following arrangements support its capacity to develop an independent view:

The Governor-in-Council appoints Commissioners, and their appointments can be terminated only on the grounds of misbehaviour, physical or mental incapacity, or bankruptcy.

A framework agreement exists between the Secretary of the Department of Treasury and Finance and the Chair of the Commission to ensure the


independence of the Secretariat’s advice to the Commission. The agreement covers the direction of staff, information sharing, ministerial briefing, and administrative policies and procedures, and is published on the Commission’s website.

The transparency of the Commission’s processes are established by the Order, which specifies that:

– the content and action taken in respect of any direction made by the Treasurer to the Commission must be reported in the annual report, which the Treasurer should publicly release within three months of receiving it

– the Treasurer should publicly release final inquiry reports within six months of receiving them from the Commission.

Box 2.2 Commissioner Deborah Cope

Deborah Cope was appointed as a part-time Commissioner in November 2008 and converted to full time on 1 September 2010. In 2011, she was reappointed for a further three years until 30 September 2014. Ms Cope has nearly 30 years’ experience in public policy, including 15 years with the Commonwealth Government and over 10 years as a consultant to public sector and other clients. Her consulting business, PIRAC Economics, provided economic analysis and policy advice to clients in Australia and overseas, in areas that include regulatory reform, competition policy, consumer policy, infrastructure regulation, and competitive neutrality.

Ms Cope was the Deputy Executive Director of the National Competition Council, Deputy CEO of the Office of Northern Development and previously worked with the Productivity Commission, the Industry Commission and the Industries Assistance Commission.

Ms Cope was a Board member for the Centre of Social Research (Darwin) and the Co-operative Research Centre (CRC) for Tropical Savannas. She also chaired the industry consultative committee for the CRC for Tropical Savannas.

Ms Cope presided on the inquiry into feed-in tariffs and barriers to distributed generation and the inquiry into Victoria’s tourism industry. She has contributed to the inquiries into school devolution and accountability, a State-based reform agenda, Victoria’s manufacturing industry, Victoria’s regulatory framework, the sharing of government and community facilities, and financial services. She is currently contributing to the Commission’s work on regulatory practice projects, working with selected regulators to improve regulation administration.


Box 2.3 Commissioner William Mountford

Bill Mountford was appointed as a Commissioner in October 2010. He has a wide range of experience in both the private and public sectors, including running a number of Government agencies, most recently the Victorian WorkCover Authority where he was CEO until 2003. He was Executive Director of the Australian Manufacturing Council, a tripartite advisory body to the Minister for Industry, Science and Technology from 1988 until 1994. He was also a Ministerial Advisor to the Victorian Minister for Industry, Commerce and Technology from 1984 until 1985.

Mr Mountford spent many years working as a consultant focused on strategic and organisational issues including board reviews. He started as a consultant with Pappas Carter Evans and Koop, now the Boston Consulting Group, and was a Director of Australian Consulting Partners and a Partner with Arthur Andersen in Business Consulting.

Mr Mountford is currently a Director of Insight Economics, which provides public policy and business strategy advice to governments and businesses. He provides advice to corporate boards, typically through evaluations of their performance. He is also a director of Melbourne Health, the State Government’s metropolitan health network based around the Royal Melbourne Hospital.

Mr Mountford graduated from Monash University with a Bachelor of Economics (Honours) and has a Master of Philosophy in Economics from Cambridge University. He has also completed the Advanced Management Program at the Harvard Business School.

Mr Mountford presided on the inquiry into the social and economic costs of problem gambling and has contributed to the inquiries into a State-based reform agenda, Victoria’s manufacturing industry, Victoria’s tourism industry and school devolution and accountability. He is currently contributing to the inquiry into aspects of the Wrongs Act.

2.2.2 The Commission’s Secretariat

The Commission is supported by a Secretariat of approximately 18 full-time equivalent staff (appendix A) as at 30 June 2013. The Secretariat has specialist expertise in economic and regulatory analysis and competitive neutrality policy, and dedicated legal and administrative support. It comprises employees of the Victorian public sector, who are bound by the employment and conduct principles contained in the Public Administration Act 2004 (Vic). The Secretariat selects its own staff and appoints independent consultants and contractors who assist the Commission through the Secretariat’s Executive Director.


The Secretariat is solely dedicated to servicing the Commission and is not subject to direction by the Department of Treasury and Finance on matters relating to the Commission’s functions. Its Executive Director is subject to the direction of the Chair when preparing advice and analysis on issues raised by the Commission’s inquiries, reviews and competitive neutrality functions (figure 2.1).

Management structure, 30 June 2013 Figure 2.1

Source: Commission data.

Material provided by agencies or the public that the Commission accepts on a confidential basis is not provided to the Department of Treasury and Finance (or any other part of government) without the express permission of the information source. The Department, however, keeps the Commission and its Secretariat abreast of policy and other relevant developments necessary for the Commission to undertake its role.

To ensure the Commission operates efficiently, and to help it gain access to the Department’s facilities and expertise, the Secretariat operates within the Department’s administrative policies and procedures. The Department provides support functions to the Commission, such as information technology, finance, procurement, human resources and library services, and assigns a pro rata share of those overheads when reporting in the State Budget output, on Regulatory Services—Business Environment Policy Advice (Government of Victoria 2013, 297–298).

2.3 The Commission’s operating principles

2.3.1 A community-wide perspective and transparency

The Commission is required to adopt a community-wide perspective and this has important implications for the way it conducts itself.

Public inquiries

The Commission is required by its Order in Council to act with an overarching concern for the well being of the community as a whole (Government of Victoria 2004b). Accordingly, the Commission considers long-term and indirect effects across the

Commissioners Matthew Butlin Bill Mountford

Deborah Cope

Executive Director Secretariat Jeff Hole

Assistant Director Reviews

Andrew Walker

Assistant Director Inquiries

Glen Hepburn

Assistant Director Inquiries

Nick Voukelatos


community, not only the direct effects on particular groups. Broad-based research and consultation assist this process. The inquiry process commonly involves:

circulating an issues paper that sets out the Commission’s initial views on the key issues

inviting submissions from all interested parties and actively seeking views from those with different perspectives

posting all submissions and highlights of some roundtable discussions on the Commission’s website

publishing a draft report that enables interested parties to respond

taking submissions and conducting further meetings and analysis

submitting a final report to Government.

The Commission seeks, from time to time, external expert review of selected parts of its inquiry reports.

Regulation review

The Commission’s review function encourages proponents of legislative or regulatory proposals to analyse thoroughly the nature and extent of each policy issue that requires intervention. Moreover, the Subordinate Legislation Act 1994 (Vic) and the Victorian Guide to Regulation (Government of Victoria 2011) require an assessment of the economic, social and environmental costs and benefits of any proposal, consistent with a community-wide view.

The Commission independently advises on whether the analysis in RISs is adequate to facilitate public consultation about the merits of a regulatory proposal. The Subordinate Legislation Act requires a community-wide approach, stating that any sector of the public on which a proposed regulatory measure may impose a significant economic or social burden must be consulted. The responsible Minister must provide a Certificate of Consultation to Parliament’s Scrutiny of Acts and Regulations Committee, detailing who was consulted in the RIS process.4 Through its role in the RIS and BIA processes, the Commission assists departmental officers to specify options to address identified problems and identify solutions that yield the highest net benefit for the whole Victorian community. Since July 2011, the Commission has been required to verify all RCM reports.

The Commission advised on all RISs and BIAs against the relevant requirements of the Subordinate Legislation Act, the Subordinate Legislation Act Guidelines and the Victorian Guide to Regulation. The criteria used to verify compliance of RCM reports are specified in the Regulatory Change Measurement Manual. This process helps the Commission follow a transparent process and provide consistent, unbiased and rigorous advice. The Commission publishes all the RISs that were released for public consultation on its website, allowing stakeholders to assess the Commission’s approach. The Commission also publishes RCMs that it verified and that were released publicly.

4 The relevant guidelines are made under the Subordinate Legislation Act 1994 and published in the Victorian Guide to Regulation, Appendix E.


Competitive neutrality

The Commission advises a range of stakeholders — including government businesses, local government, private business operators and members of the community — about competitive neutrality. The Commission assesses competitive neutrality issues against the Government’s Competitive Neutrality Policy and publishes the results of investigations of complaints on its website. A description of how the Commission implements its competitive neutrality function is set out in conventions published on the Commission’s website.

Social media

As part of making its activities, particularly its inquiries, more accessible to a wider range of groups in the community, the Commission established a Twitter account, @VCEC_Victoria, in February 2011 to provide a new avenue to raise awareness and receive input from stakeholders. As at July 2013, the account had 663 followers and 315 tweets. This additional input complements the role of extensive meeting programs and deliberate, evidence-rich submissions in underpinning the Commission’s inquiries function. The Commission has also established several inquiry-specific Twitter accounts and Facebook pages, which are discussed further in chapter 3.

2.3.2 Independent and rigorous advice

The Order requires the Commission to provide independent and rigorous advice. Independence enables the Commission to analyse issues raised in inquiries, RISs, BIAs, RCMs, or matters relating to competitive neutrality, impartially and without interference. The Commission places the highest priority on maintaining its independence, particularly given that participants in any of its functions expect the Commission to give them a fair hearing, independent of any sectional perspective. In addition, the Commission takes account of the Charter of Human Rights and Responsibilities Act 2006 (Vic) and considers that its work is consistent with the human rights set out in the Charter.


Box 2.4 The Commission’s role The Commission’s role and authority are outlined in its Order in Council and the Subordinate Legislation Act 1994 Guidelines. There are some common misunderstandings about the boundaries of the Commission’s role, which are discussed below.

Inquiries

The Commission conducts inquiries on terms of reference referred by the Treasurer. Once a final inquiry report is submitted to the Treasurer, the Commission’s formal role ceases. The Order states that:

The Treasurer should publicly release the final report within six months of receiving it from the Commission.

The Government should publicly release a response to the final report within six months of the Treasurer receiving that final report from the Commission, regardless of the date of release of the final report by the Treasurer.

In practice, the Commission’s advice may be sought by policy makers about the reasoning behind its recommendations prior to decisions by the Victorian Government.

Regulation review

The Commission advises on the quality of the analysis in a Business Impact Assessment (BIA) and Regulatory Impact Statement (RIS). It does not comment on the merits of the policy proposal.

The Order states:

The Commission will review the quality of business impact assessments and regulatory impact statements having regard to relevant guidelines issued from time to time by the Government, and provide comment on these assessments and statements to the Department of the Minister responsible for the proposed legislation.

The Commission’s role ends after the RIS is finalised and released for public consultation. For a BIA, the Commission’s role ends once the BIA is submitted to Cabinet or the relevant Cabinet Committee.

Competitive neutrality

The Commission is required to achieve awareness of and compliance with competitive neutrality policy, including complaints investigation. The Commission’s role is confined to education through the provision of information, and assessing complaints. The Commission cannot initiate an investigation without a formal complaint. The complaints system is an important incentive for compliance. Source: Government of Victoria 2004b; 2011.


2.4 Performance reporting Performance reporting measures the relationships between resources, outputs and outcomes. The Government expects the Commission to deliver an outcome specified in Budget Paper no. 3 under the heading Regulatory Services—Business Environment Policy Advice:

This output provides advice on ways the Government can improve the business environment. The output contributes to guiding Government actions to increase Victoria’s productivity and competitiveness. It does this by:

reviewing Regulatory Impact Statements, Business Impact Assessments and Regulatory Change Management assessments;

undertaking inquiries into matters referred to it by the Government; and

operating Victoria’s competitive neutrality unit. (Government of Victoria 2013, 297)

The Commission contributes to increasing Victoria’s productivity and competitiveness by advising the Government on how it can improve the regulatory and policy environment. The Commission is required to ’maintain and improve competition and efficiency in the Victorian economy’ (Government of Victoria 2004b), and aims to fulfil this through the quality and timeliness of its advice. It is not a decision-maker on public policy. Its performance is, therefore, best measured by the extent to which its advice leads to more informed decision-making, rather than by direct economic outcomes. Chapter 3 records the recommendations that the Government has accepted from the Commission’s inquiries. Chapter 4 assesses where the Commission’s activities have improved the decision-making process for new regulation and legislation. While it is difficult to demonstrate a causal connection between these indicators and improved economic outcomes, they show how the Commission contributes to government policy formation. Chapter 5 examines competitive neutrality activity and the outcomes of investigations.

2.4.1 Performance indicators

The Commission reports on indicators relating to the quantity of its outputs for its inquiry and regulatory review functions, the quality of its three outputs taken together, and the timeliness of its regulatory review activities in Budget Paper no. 3 (table 2.1). Quality is measured by a service provision rating from the Commissioners; this measure rates the quality of the Secretariat’s output. The Commission has also developed a more comprehensive set of subsidiary performance indicators in addition to those listed in table 2.1 (reported in chapters 3, 4 and 5).


Budget paper performance measures and final Table 2.1outcomes, 2012-13

Performance measures Unit of

measure Target Outcome

Quantity

Public inquiriesa no. 3 4

Reviews of RISs, BIAs and RCMsb no. 45 39

Quality

Service provision rating (Commissioner assessment of Secretariat performance)c

% 80 82.5

Timeliness

Complete the initial assessment phase of BIAs within 10 working days of receipt

% 90 100

Complete the initial assessment phase of RISs within 10 working days of receipt

% 90 90

Complete the initial assessment phase on RCMs within 10 working days of receipt

% 90 92

Completion of inquiry reports by due dated % 100 100

Notes: a For 2013-14, this performance measure will be renamed Number of final inquiry reports submitted to Government. The new measure reports on the same activity as the previous measure but has been amended to increase clarity. b For 2013-14, this performance measure will be renamed Advice on adequacy of final RISs, BIAs and RCMs prepared by departments. It has been replaced to more accurately reflect the adequacy of advice provided. As part of the 2013 budget process, the target for advice on RISs, BIAs and RCMs has been revised to 35 for 2013-14, to reflect the demand driven nature of the activity. c This is a subjective assessment by the Commission of the quality of services provided by the Secretariat to the Commission. d Of the two final reports submitted to Government, one of these was granted an extension by the Treasurer. The report was submitted in time for the revised due date.

Sources: Government of Victoria 2013, 297–298; Commission data.


2.4.2 Allocation of resources across functions

The Commission’s staff allocation and expenditure by function have been estimated below.

Resource use, 2012-13 Table 2.2

Inquiries

Regulatory improvement

studies Regulation

Review Competitive

Neutrality Total

Staff (full-time equivalents)a

12.2 2.4 5.9 1.7 22.1c

Total expenditureb

$2.28m $0.53m $1.01m $0.27 $4.09

Notes: a Average staffing over the year, includes Commissioners and Secretariat staff. b Includes Commissioner remuneration, expenditure on Secretariat salaries and related staff costs, and expenditure directly related to each function, such as printing and travel. The breakdown across functions for some expenditure (such as recruitment, office supplies and rent) is estimated because it cannot be directly attributed to each function. Excludes some support services provided by the Department of Treasury and Finance, such as library services, human resources and information technology. c Total figures do not add up due to rounding.

Source: Commission analysis.

INQUIRIES 27

3 Inquiries

2012-13 highlights As well as completing the inquiry into feed-in tariffs and barriers to distributed generation, this year saw the Commission’s inquiries program diversify into several important social policy and regulatory areas. The Commission:

completed an inquiry into the social and economic costs of problem gambling

largely completed an inquiry into school devolution and accountability, including releasing a draft report

commenced an inquiry into the personal inquiry and compensation provisions of the Wrongs Act.

The Commission also commenced a program of regulatory improvement studies that involve working with participating Victorian regulators to identify improvements in regulatory administration. Accordingly, the Commission:

completed a pilot project with the Environment Protection Authority into regulation of contaminated environments

commenced a project with the Victorian Commission for Gambling and Liquor Regulation on liquor licensing processes.

Focus in 2013-14 In the coming year, the Commission will:

complete inquiries into School Devolution and Accountability, and the Wrongs Act, and commence at least one other inquiry

commence and complete a number of regulatory improvement studies.

3.1 Introduction The Commission conducts inquiries on terms of reference provided by the Treasurer. A public inquiry is a robust process for creating the analysis, advice and recommendations reported to the Government, and helps to improve public policy outcomes by engaging with participants. Initially, the Commission consults stakeholders and receives evidence to support and develop draft views and following the release of the draft report participants can provide additional comment.

The process helps to:

promote an understanding among participants, and the general public, of the case for policy change

assess the probable impact of the inquiry recommendations, through feedback on draft recommendations

explain how policies work in practice and where, based on the experience of participants, practical improvement opportunities exist.

Engagement with the community also creates an expectation that the Government will respond to the inquiry. Where such action is not forthcoming, or is significantly delayed, the willingness of participants to contribute in the future is diminished.


In 2012-13 there were three particularly noteworthy developments relating to the Commission’s inquiry function:

(1) The Commission undertook inquiries into a number of significant social policy issues.

(2) The Commission’s remit extended into the area of regulator performance, through the start of regulation improvement studies.

(3) The Victorian Government released responses to three inquiry reports.

In addition to reporting on these developments, this chapter summarises the available performance information for Commission inquiries.

3.2 New inquiries on social policy issues Since its establishment in July 2004, the Commission has completed 18 inquiries into a variety of economic and regulatory issues, and has begun its nineteenth inquiry. While the Commission has examined social policy issues in the past, during 2012-13 the Commission commenced or completed three inquiries into major areas of social policy, namely problem gambling, education and personal injury law (table 3.1).

Inquiries undertaken 2012-13 Table 3.1Inquiry Date commenced Date completed Inquiry into Distributed Generation 13 January 2012 27 July 2012 Inquiry into the Social and Economic Costs of Problem Gambling

14 June 2012 14 December 2012

Inquiry into School Devolution and Accountability 17 September 2012 Due 31 July 2013

Inquiry into the Wrongs Act 30 May 2013 Due 28 February 2014 The inquiries on social policy issues provided opportunities for the Commission to engage with a wider range of stakeholders. In the school devolution and accountability inquiry, for example, the Commission met with a large number of individuals and organisations in the education sector including many school principals, education researchers and training institutions such as the Melbourne Graduate School of Education and the Bastow Institute. Likewise, on the Inquiry into the Social and Economic Costs of Problem Gambling, the Commission held discussions and received input from social welfare groups, researchers and individuals with direct experience in diagnosing, treating and preventing problem gambling.

3.2.2 Inquiry into social and economic costs of problem gambling

On 14 June 2012, the Victorian Treasurer directed the Commission to undertake an inquiry into the social and economic costs of problem gambling in Victoria. The Commission released a draft report in October 2012 and provided a final report to the Treasurer on 14 December 2012. The final report had not been released by the Victorian Government at the time this report was finalised.

The Commission’s draft report found that the obstacles to quantifying the true social and economic costs of problem gambling included data gaps, methodological issues and a lack of consistency among existing data sources, and the intangible nature of

INQUIRIES 29

particular costs. Based on the best available information and approaches applied in previous studies for Australia, the Commission estimated that the social and economic costs of problem gambling in Victoria were likely to be between $1.5 billion and $2.7 billion in 2010-11.

The Commission also examined research priorities for addressing gaps in information on the social and economic costs of problem gambling. The draft report identified three main priorities for future research:

(1) improving the design and conduct of prevalence studies to create a sound and up-to-date fact base on the nature and extent of problem gambling, to support decisions on industry regulation and treatment services

(2) better identification of people in the health, social welfare and justice systems who have gambling problems through improved screening of clients

(3) evaluating the effectiveness of measures designed to reduce harms from problem gambling, including treatment programs and regulatory measures.

3.2.3 Inquiry into school devolution and accountability

In September 2012, the Commission received a public inquiry into school devolution and accountability. The terms of reference required the Commission to identify the issues that arise in giving effect to a more autonomous and accountable school system and to analyse specific governance and accountability options.

The draft report, released in May 2013, found that increasing the degree of autonomy that schools have could contribute to realising the Victorian Government’s goal of lifting the performance of Victoria’s schools into the top global tier — including by allowing schools to better tailor services to the needs of their students and school communities; and by helping to improve school leadership and teaching quality, the key drivers of better student outcomes.

The draft report argued that for these benefits to be realised, a number of conditions must be met:

Principals must be able to focus on the things that matter for better student outcomes and not be hobbled by inflexible centralised controls or red tape.

The school system as a whole must have access to appropriate leadership skills.

The governance framework must hold schools and principals to effective account and ensure that the Department of Education and Early Childhood Development (DEECD) supports schools to operate autonomously, but does not control their day-to-day operation.

To support the school education reforms currently underway, the Commission proposed a number of initiatives, including:

actions to clarify the role of the principal and more sharply focus that role on improving the performance of students in the school

a strategy to enhance the supporting role of the middle level of the school system in promoting collaboration and information sharing across schools

an improved performance appraisal system for principals and teachers, and making more information on the performance of schools available to the public


modification of school council arrangements to increase the capacity of councils to provide governance in a more autonomous system.

The Commission also identified constraints that reduce the scope for principals to recruit and more effectively manage staff in a more autonomous system, and indicated how these might, over time, be addressed.

The draft report also explored the benefits of establishing multi-school independent boards as a governance option for the new autonomy regime. It argued that this framework would have some significant advantages compared with one based on individual schools, and proposed that the approach be explicitly tested via a governance review underway in DEECD.

The Commission looked closely at the implications of a more autonomous school system for disadvantaged students. If the new regime is well implemented, disadvantaged students could benefit significantly. But this will require effective leadership in schools; that funding supplementation for disadvantaged students recognises their higher needs; and that principals and schools are held to effective account for the learning outcomes of these students. These outcomes would also be examined as part of a wider proposed review of the new autonomy arrangements after 10 years of operation.

The Commission sought and received a six week extension to consult on the draft report and respond adequately to participants’ feedback. The final report was submitted on 31 July 2013.

3.2.4 Inquiry into aspects of the Wrongs Act 1958 (Vic)

On 30 May 2013, the Victorian Treasurer, in conjunction with the Attorney-General, directed the Commission to undertake an inquiry into aspects of the Wrongs Act 1958 (Vic). The final report is due on or before 28 February 2014.

The Commission was directed to make recommendations on the regime governing personal injury damages, including:

the limits placed on available damages for personal injury or death, for both economic and non-economic loss, by the Act

the impairment thresholds for personal injury imposed by the Act in relation to damages for non-economic loss

discount rates applicable to lump sum damages awarded for future economic loss

limitations on damages for gratuitous attendant care.

The Commission has also been requested to make recommendations on the appropriateness of, and possible reforms to, the existing strict liability regime for aircraft owners (Part VI of the Act).

The terms of reference exclude the Commission from revisiting the underlying objectives of tort law reforms in 2002 and 2003. These changes limited some common law rights to compensation with the aim of reducing the price of, and increasing the availability of, public liability and professional indemnity insurance. Accordingly, in undertaking its task, the Commission proposes to take as given the need for certain limitations (in the form of impairment thresholds and caps), but consider recommendations to clarify or alter the circumstances in which they are applied to address any anomalies, inconsistencies and inequities.

The terms of reference also exclude the Commission from inquiring into the operation of provisions in the Act dealing with proportionate liability for economic loss and property

INQUIRIES 31

damage. Other aspects of the Act not relevant to the inquiry include criminal defamation, occupiers’ liability, Good Samaritan protection, contributory negligence and liability of public authorities.

The Commission released an issues paper in July 2013 on the scope of the inquiry, the information sought, and the process and timetable for the inquiry. A draft report is scheduled for release in November 2013, with a final report due by the end of February 2013.

3.3 Regulatory improvement studies The Victorian Government’s economic statement Securing Victoria’s Economy indicated that the Commission would undertake a series of regulatory practice projects. In this activity the Commission works with selected regulators to improve regulation administration on the ground (Government of Victoria 2012f).

Improvement studies conducted by the Commission are determined by the Treasurer, in consultation with other ministers. The terms of reference outline the scope of the study and the process of the study, such as whether it will be a public inquiry and the reporting timeframe.

This is a new area of work for the Commission which builds on its experience in reviewing regulatory impact analysis and undertaking inquiries into broad areas of regulation. The Commission considers that these studies provide significant opportunities for pro-active engagement with regulators, resulting in an improved focus on efficiency among regulators, richer understanding of implementation issues by the Commission and reduced regulatory burden for business.

3.3.1 Liquor licensing regulation

On 28 June 2013, the Commission received its first terms of reference from the Victorian Treasurer for a regulatory improvement study into the Victorian Commission for Gambling and Liquor Regulation (VCGLR). The terms of reference state that the study is a joint activity between the Commission and the VCGLR led by the Commission.

The terms of reference ask the Commission to:

(1) assess how the VCGLR deals with risk in a specific area of their operations, including the extent to which current practices are risk-based

(2) identify opportunities and make recommendations to improve the efficiency of VCGLR’s regulations, including through greater use of risk-based approaches to regulation within existing legislative and regulatory frameworks

(3) identify and make recommendations on priorities for addressing any impediments to adopting more efficient regulatory approaches, and identify those requiring legislative or other changes outside the VCGLR’s direct control

(4) quantify in preliminary terms the impacts of its recommendations, including initial estimates of cost savings to businesses and households, where possible.

The Commission is to provide a final study report as soon as possible, but no later than 31 December 2013. Publication of the final study report by the VCGLR and the Commission will be at the Treasurer’s discretion, in consultation with the Minister for Liquor and Gaming Regulation.


3.3.2 Regulation of contaminated sites

The Commission and the Environment Protection Authority (EPA) conducted a joint pilot study to identify opportunities to improve risk-based regulation in environmental auditing of contaminated environments and landfills under the Environment Protection Act 1970. The study was led by the Commission with a joint study team comprising Commission and EPA staff with input from Deloitte Touche Tohmatsu.

The study sought to identify changes that would:

reduce the burden of regulation on businesses and households without compromising environmental objectives

free up EPA resources from lower value activities so more time can be spent on the things that will improve environmental outcomes the most.

The study team identified a package of 15 actions to address issues raised during consultations. The package focuses on introducing a more risk-based approach to the management of contaminated environments and groundwater regulation and improving the audit process more generally.

The work commenced in September 2012 and the final report was provided to the EPA in December 2012. The final report had not been publicly released by the Victorian Government at the time of printing of this annual report.

3.4 Inquiries completed/ responses to final inquiry reports

Three final inquiry reports and government responses were released in 2012-13. If implemented, these government responses have the potential to make major changes to feed-in tariffs and connection processes for distributed generation, the development of new tourist accommodation and facilities, and local government regulation.

3.4.1 Government response to the inquiry into distributed generation

On 13 January 2012 the Commission received terms of reference to conduct a six month inquiry into feed-in tariff arrangements and barriers to distributed generation. The terms of reference asked the Commission to:

assess the design, efficiency, effectiveness of feed-in tariff (FiT) schemes

recommend any changes to current FiT arrangements (although any changes to existing arrangements are not to be applied retrospectively)

identify state and/or local and other barriers to the development of a network of distributed renewable and low emissions generation.

The Commission received 200 submissions, 100 short submissions and comments and 844 proforma submissions through Environment Victoria. Due to the significant interest in the inquiry, the Commission sought and received a two week extension to 27 July 2012 for the final report.

The Commission recommended closing the transitional FiT and establishing a new FiT based on the wholesale price of electricity; investigating whether, and how, payments could be made from distribution network service providers to distributed generators

INQUIRIES 33

based on the network value; and streamlining connection processes for small- and medium-scale distributed generators.

The Victorian Government responded to the Commission’s final report Power from the People: Inquiry into Distributed Generation in September 2012. Of the Commission’s 17 recommendations, nine were accepted in full, five in part and three were supported in principle. No recommendations were rejected.

3.4.2 Government response to the inquiry into Victoria’s tourism industry

On 23 September 2010, the former Treasurer, the Hon. John Lenders MP, asked the Commission to inquire into Victoria’s tourism industry. The terms of reference directed the Commission to focus on three areas:

(1) state and local regulatory barriers to the development of the tourism industry and the creation of new tourist infrastructure

(2) opportunities to improve the management of state assets to better meet the needs of the tourism industry without compromising their primary management objectives

(3) the impact of international and domestic aviation policy on the Victorian tourism industry and broader economy.

The Commission submitted its final report, Unlocking Victorian Tourism, to the Treasurer on 1 June 2011. The Commission’s final report was released by the Treasurer on 23 August 2012, with the Government’s response supporting the Commission’s key recommendations for reform of land-use planning provisions and the management and use of public land. The Government supported 10 recommendations, and supported-in-principle or supported-in-part a further five recommendations. One recommendation was referred to the Taxi Industry Inquiry, and another was superseded by recent Victorian legislative changes.

3.4.3 Government response to the inquiry into local government regulation

In August 2010 the Commission completed an inquiry into local government regulation in Victoria. The Commission’s final report, Local Government for a Better Victoria: An Inquiry into Streamlining Local Government Regulation was released publicly by the Treasurer on 14 August 2012.

The report made 37 recommendations to improve local government regulatory frameworks and processes, with particular emphasis on streamlining local government regulation. The recommendations included land-use planning, building and construction regulation and local government procurement. Some recommendations related to the relationship between local and state government. In particular, the report identified a need for more clearly delineated roles and responsibilities for delivering objectives.

The Government response supported 17 recommendations, and supported-in-principle or supported-in-part 16 recommendations. One recommendation was not supported and three were under review. The response stated that:

Actions to be undertaken as part of this response are expected to assist local governments across Victoria to deliver on both state and local


objectives. In particular, planning and building regulation and regulatory processes will be streamlined, minimising uncertainty and delays for businesses and the community.

Savings to businesses from implementation of this response and related reforms are expected to make an important contribution to delivering the Government’s commitment to reducing red tape by 25 per cent. (Government of Victoria 2012c, 1)

3.5 Measuring and assessing outcomes The Commission’s role in inquiries is to provide independent advice on matters referred to it by the Victorian Government. As such, the extent to which the Commission’s advice and recommendations are accepted is a relevant but partial indicator of the relevance and practicality of the Commission’s inquiry outputs. It is only a partial indicator because the Commission does not expect all of its recommendations will be accepted. Indeed, many recommendations may be challenging for governments to implement because of criticism from parties that are likely to be adversely affected in some way.

Even where the government accepts the recommendations of Commission inquiries, other advice may be considered by government in reaching a decision, making it difficult to draw a straightforward link between the Commission’s advice and subsequent policy changes. Moreover, the impact of each inquiry may take time to become fully apparent, and challenging recommendations may become easier to implement as circumstances change. This suggests an assessment of the Commission’s performance should take into account the indirect links between Commission inquiry reports and the eventual implementation of options and recommendations, and the lags that may occur in implementation.

Reflecting the challenges of measuring the outcomes of particular inquiries, the Commission judges its performance based on indicators relating to:

the quality of the analysis and recommendations contained in its outputs

the extent of consultation

use of the outputs to inform Parliament and government decision-making

the efficiency of resources used to deliver outputs, including that outputs are delivered on time.

3.5.1 Quality of outputs

While it is difficult to draw a definitive link between the Commission’s advice and subsequent government decisions, a number of indicators provide a broad perspective on the quality of the Commission’s inquiry outputs. The majority of recommendations have been supported, to some degree (figure 3.1).

Generally, it is difficult to assess exactly the current status of implementing the Government’s responses because work is simultaneously performed in related areas by a number of agencies. Furthermore, in many cases, options that the Government supported in principle in its response to final reports have been addressed fully or partly by other initiatives. For some other options, no immediate action was required and it is too early to assess their implementation. In general, however, and as noted in the Commission’s draft report into Victoria’s regulatory framework, the amount of public information on the implementation of the Government’s response is limited.

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Government’s response to inquiry recommendations Figure 3.1

Notes: Excludes the inquiry into the Labour and Industry Act (one recommendation). The draft report for the inquiry into Social and Economic Costs of Problem Gambling, made no draft recommendations.



One other overall measure of quality is the Commission’s assessment of the Secretariat’s service. As reported in chapter 2, the rating of 82.5 per cent in 2012-13 exceeded the target of 80 per cent. This rating primarily reflected the successful completion of a substantial work program of public inquiries, regulatory improvement studies and the regulatory impact assessment work of the Commission.

The usefulness of the inquiries’ contribution to policy-making and public understanding is also indicated by the use made of inquiry outputs in decision-making and reporting processes, in Victoria and elsewhere. Some examples of the use that has been made of recent Commission inquiry reports follow:

In September 2012, the Victorian Government released a consultation paper outlining proposed changes to controls on the clearing of native vegetation (Government of Victoria 2012e). These controls were examined in the Commission’s inquiry report on A Sustainable Future for Victoria: Getting Environmental Regulation Right. The consultation paper outlined a proposal to adopt a risk-based approach to assessing native vegetation permits as recommended by the Commission.

On 21 December 2012, the Victorian Government released an economic statement that committed to:

– water reform consistent with the Commission’s draft state-based reform agenda inquiry

– review the costs of local government administration, consistent with recommendations in the Commission’s local government inquiry

– incorporate the finding of the Commission’s school inquiry into DEECD’s review of school governance.

In January 2013, the Department of Treasury and Finance released Guidelines for preparing reducing red tape Statements of Expectations for regulators consistent with the Commission’s inquiry into Victoria’s regulatory framework.

In July 2013, the Victorian Government released a tourism industry strategy that noted progress in implementing the Government’s response to the Commission’s inquiries into Victoria’s tourism industry and local government regulation, including:

– a policy change allowing sustainable private investment in National Parks

– release of a planning zone reform package for public comment, allowing greater flexibility for tourism development proposals

– reform of Victoria’s environmental impact assessment processes to provide certainty about procedures, considerations and timeframes

– working with the Municipal Association of Victoria (MAV) and other stakeholders of the planning system to develop best practice guidance on the planning assessment process.

The Victorian Government supported the Commission’s recommendations in the inquiry into distributed generation change feed-in tariffs for solar panels and other renewable energy. That is, that the fairest outcome would be to base feed-in tariff rates on the wholesale price for power, with a new rate of 8 cents per kilowatt-hour introduced on 1 July 2013.

The number of references to the Commission in Parliament can also illustrate the extent to which the Commission informed Parliament (table 3.2).

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References to the Victorian Competition and Table 3.2Efficiency Commission in Hansard 2012-13

Inquiry 2012-13 Feed-in tariffs 9 Tourism 6 Housing construction 2 Manufacturing 10 Schools 1 Transport congestion 3 Other 11

Total 42

Notes: Based on word search of Hansard documents. Other includes references to the Commission annual reports, regulatory impact assessment and other activities.

Source: Parliament of Victoria, Hansard.

3.5.2 Quality of consultation

The Commission is required to operate efficiently and act with concern for the well-being of the community as a whole. The Commission has interpreted these requirements as meaning it should encourage stakeholders and the public to participate in its inquiries. The Commission considers there is a strong relationship between the number and quality of direct consultations and submissions, and the quality and the robustness of inquiry recommendations.

Roundtable discussions, individual meetings, submissions and other means of engaging participants, such as the website, are essential to the Commission’s inquiries (figure 3.2). Participant views shape the Commission’s analysis and inquiry recommendations.

One trend that has affected the way the Commission operates is the long-run decline in the propensity of participants to provide written submissions. This trend continued in 2012-13 with the inquiry into school devolution and accountability receiving 34 submissions, despite a high level of stakeholder interest. The number of submissions depends on the particular inquiry, but the Commission has generally observed that participants prefer more informal methods of engaging and are often faced with demands on their time from concurrent inquiries.

The Commission has responded by increasingly offering less formal and more collaborative methods of engagement such as emails, social media, face-to-face meetings and roundtables. For example, during the inquiry into school devolution and accountability, the Today Show posted a question on its Facebook page drawing on the draft report and received over 100 responses and over 200 likes.

Participants may prefer direct forms of communication because they involve less burden than preparing a detailed submission. More meetings and roundtables impose additional time and cost on the Commission but also provide greater opportunities to directly understand issues and test solutions. If these trends continue it will impact on the duration and cost of undertaking inquiries, reinforcing the importance of harnessing different forms of social media to raise awareness and involvement in inquiries.


Consultation process as at 30 June 2013 Figure 3.2


INQUIRIES 39

3.6 Costs and timeliness of Commission inquiries The costs of running public inquiries vary depending on the nature and complexity of the issues, the amount of public consultation and participation in the inquiry, and the inquiry duration (table 3.3). Such factors limit opportunities to benchmark the Commission’s performance against that of other bodies. Some other bodies with public inquiry processes (such as the Victorian Essential Services Commission and the Independent Pricing and Regulatory Tribunal of New South Wales) do not report the costs of individual inquiries.

Salary cost of inquiries 2012-13a Table 3.3Inquiry Cost ($) Wrongs Act 147 000 School devolution and accountability 1 103 000 Feed-in tariffs 647 000 Social and economic costs of gambling 653 000

Total 2 550 000

Notes: a Estimates the share of total Secretariat salary costs (including related costs such as payroll tax and superannuation) directly related to the inquiries. Note that the time period for an inquiry ranges from six to 12 months, which influences the total salary cost. Costs to the nearest thousand.


The Productivity Commission, however, reports the costs of its inquiries. The total cost (including estimated overheads) per inquiry or commissioned research study completed by the Productivity Commission in 2011-12, for example, varied from $130 000 (for a commissioned research study on Council of Australian Governments (COAG) Regulatory and Competition Reforms) to $2.8 million (for an inquiry into disability care and support) (PC 2012a, 106).

Although wages and salaries are the largest component of the cost of inquiries, the Commission also incurs costs associated with travel, contractors and consultants, and printing and design services (table 3.4). The latter category of costs has diminished significantly as the Commission reduces the numbers of reports printed and moves increasingly to electronic forms of dissemination.


Administrative expenditure of inquiries 2012-13a Table 3.4Cost item Cost ($)

Travel and venue hire 200

Printing, design and editing 5 900

Consultants and contractors 14 200

Othera 1 900

Total 22 000

Notes: a Includes other direct costs such as advertising hearings, media monitoring, transcription and editing services, and purchases of other miscellaneous items. Excludes additional general Secretariat administrative expenses such as recruitment, rent, office supplies and telephones, which were allocated to the costs of the inquiry functions in table 2.2.


3.6.2 Timeliness

The 2012-13 Budget Papers specify that the annual output target for the Commission is three public inquiries commenced or completed (Government of Victoria 2012b, 321). During 2012-13, the Commission completed two inquiries and commenced two others. The Commission completed all of its inquiry reports by the dates specified by government. During 2012-13, the Commission sought and was granted a short extension for the inquiry into school devolution and accountability.

REGULATION REVIEW 41

4 Regulation review

Highlights The Regulatory Impact Statement (RIS) and Business Impact Assessment (BIA) processes continue to lead to improvements in Victorian regulatory proposals. Lower-cost or more effective alternatives continue to be identified through these processes, while still achieving the Victorian Government’s policy objectives.

Five of eleven new and amending regulatory proposals the Commission provided advice on in 2012-13, were revised during the RIS process to be more effective and/or reduce the costs for affected parties.

Seven of twelve ‘sunsetting’ regulations the Commission provided advice on in 2012-13 were remade to be more effective and/or reduce the costs for affected parties compared to the regulations they replaced.

Throughout the year, the Commission:

– provided final advice on 23 RISs, eight BIAs and eight Regulatory Change Measurements that were completed in 2012-13

– conducted six training workshops to assist agencies to improve the quality of analysis in RISs and BIAs — these workshops, which included improved guidance on applying threshold tests, were attended by 78 participants.

Focus in 2013-14 In the coming year, the Commission will focus on:

continuing to promote early engagement with departments

building capability internally and externally, including investigating opportunities to develop a ‘community of practice’ for policy officers involved in policy design and preparing RISs and BIAs

developing new organisational models and processes to better focus Secretariat resources on areas where it can add the most value.

4.1 Introduction The Victorian Government promotes the rigorous assessment of regulatory proposals to ensure that Victorian regulation best serves the community:

Regulatory Impact Statements (RISs) assess proposals for new, sunsetting or amending regulations and legislative instruments (subordinate legislation).

Business Impact Assessments (BIAs) assess proposals for Bills that provide for new or amending primary legislation.

Regulatory Change Measurements (RCMs) measure the change in administrative, substantive compliance and delay costs of regulatory reforms.

The RIS and BIA processes aim to improve the quality of regulatory proposals by providing high quality information and analysis. BIAs provide this information to ministers and Cabinet. RISs inform key stakeholders and the general public, as well as ministers and Cabinet, and allow stakeholders to comment on the information and analysis provided. This helps ensure that the Government’s objectives for ‘good regulation’ are met, and the regulatory measures are the minimum necessary to achieve the Government’s objectives (Government of Victoria 2011, 23–24). The Commission has


found the RIS and BIA processes have led to significant savings in the costs imposed by Victorian legislation and regulation, relative to a situation with no regulatory review process (VCEC 2011a).

4.2 The Commission’s regulatory review roles

4.2.1 The Commission’s advisory role

Advising on the adequacy of RISs, BIAs and RCMs

The Commission provides independent advice to ministers about whether RISs comply with the Subordinate Legislation Act 1994 (Vic) and BIAs comply with the Victorian Guide to Regulation (VGR). The Commission also verifies RCM compliance with the Regulatory Change Measurement (RCM) Manual.

In 2012-13, the Commission provided final advice on 23 RISs, eight BIAs and verified eight RCMs.

What the Commission’s advice means

The Commission will advise that a RIS or BIA complies with the relevant requirements if the following are satisfied:

(1) the problem to be addressed by any legislation or regulation is clearly specified, and appropriate data on the extent of the problem are provided

(2) a range of feasible options to address the problem is considered

(3) the assessment of costs and benefits of each option is robust and includes appropriate data and transparent assumptions and judgements.

The Commission’s advice does not indicate endorsement of the policy proposal, or of any subjective judgements made in determining the best option for implementing the policy objectives. The Commission advises whether the analysis in a RIS or BIA is sufficiently robust and transparent to enable scrutiny of the costs and benefits of the proposal and feasible options by the public or by Cabinet.

If the Commission advises that a RIS does not meet the requirements of the Subordinate Legislation Act and the Subordinate Legislation Act 1994 Guidelines (SLA Guidelines), the Minister can still release the RIS publicly and proceed to make the regulations, but must attach the Commission’s advice to the RIS. This happened on one occasion in 2012-13.

In response to the Commission’s inquiry into Victoria’s regulatory framework, the Government supported the Commission’s recommendation that its final advice letters be attached to all RISs to improve transparency of any qualifications the Commission includes in its advice (Government of Victoria 2012a, 13).

The Water (Lake Eildon Recreational Area) (Houseboats) Regulations 2013 was the second published RIS the Commission has assessed as inadequate. The Commission’s view was the RIS had not adequately considered the merits of other options as required by section 10(1)(e) of the Subordinate Legislation Act . The Commission considered the analysis of the proposed greywater requirements to be comprehensive and robust as it quantified all the key costs and benefits to society.


In the case of a BIA, if the Commission advises that one does not meet the requirements of the VGR, the minister can still put the proposed legislation and BIA forward for consideration by Cabinet and the Bill can still be passed by Parliament. However, details of the Commission’s concerns must be attached to the Cabinet submission for the Bill.

For an RCM to be verified as adequate it must meet the requirements of the Regulatory Change Measurement Manual. The Commission’s advice is, again, focused on the quality of the analysis rather than on the merits of the regulatory change.

Assisting with COAG RISs and supplementary impact assessments

The Commission has no formal role in the development of Council of Australian Governments (COAG) RISs or the decision to exempt Victorian legislation or regulations that have been subject to a COAG RIS from the Victorian BIA or RIS process. This is for the relevant Victorian minister to decide. However, the Government supports departments preparing advice for their minister seeking the Commission’s advice on whether the analysis contained in the COAG RIS would meet the requirements of the VGR, as reaffirmed in the government response to the Commission’s regulatory framework inquiry. This advice can be taken into consideration when developing Victoria’s response to a COAG proposal (Government of Victoria 2012a, 25).

Departments can request the Commission to review Supplementary Impact Assessments. These are additional assessments of the specific impact of proposed regulatory changes on Victoria and supplement COAG RISs. The Commission provided advice on two Supplementary Impact Assessments completed in 2012-13.

Assisting with interpretation of the Subordinate Legislation Act

Ministers decide whether their proposals meet the threshold tests for a RIS (in practice, whether a proposed regulation would have a significant economic/social burden on a sector of the public) or a BIA (significant effect on business and/or competition) (Government of Victoria 2011, 46–51). The Commission has no formal role in this decision. The Government, in its response to the Commission’s regulatory framework inquiry, supported early consultation by agencies with the Commission when considering the threshold test as the Commission is well-placed to assist based on its experience in providing advice on RISs and BIAs (Government of Victoria 2012a, 13). In 2012-13, the Commission’s advice was sought on the application of the threshold test on over 20 separate matters.

4.2.2 The Commission’s training role

The Commission’s training role is a means of promoting best practice regulation and improving regulatory analysis, based on the principles set by the Government (Victorian Government Gazette 2004). In its training role, the Commission:

distributes information about the requirements for RISs, BIAs and RCMs to be considered adequate (and when they are required)

trains departmental and agency staff and advises on best practice regulatory principles

publishes information about Victoria’s business regulators in The Victorian Regulatory System

publishes completed RISs on its website.


The Government acknowledged, in its response to the Commission’s regulatory framework inquiry, the Commission’s key role in providing training and capability development through its provision of training workshops on impact assessments to departmental policy officers (Government of Victoria 2012a, 7).

Training workshops

Table 4.1 outlines topics covered in RIS/BIA workshops. Sections 4.3.1 and 4.3.5 contain quantity and quality measures for these workshops.

Workshop topics Table 4.1Better policy making using RISs and BIAs

principles of good practice regulation applying threshold tests defining the policy problem identifying the policy objectives options to address the problem introduction to cost benefit analysis (CBA), including multi-criteria analysis small business and competition impacts implementation and enforcement evaluation strategy importance of consultation.

Source: Commission training material.

The Commission did not provide any cost-benefit analysis workshops in 2012-13 but may consider doing so in the future subject to demand.

The Commission also conducts customised training for individual departments. This includes, for example, training on the RCM process. In 2012-13, secretariat staff conducted two workshops for the then Department of Planning and Community Development (DPCD). These workshops were designed to build the capability of participants in applying the RCM methodology. This includes working interactively with departmental officers through case studies of actual regulatory changes they were considering, helping to identify, map and quantify potential reductions in regulatory burden.

4.3 Performance reporting

4.3.1 Quantity of regulatory review activities

Independent advice on RISs, BIAs and RCMs

The Commission provided final advice on 23 RISs, eight BIAs and eight RCMs during 2012-13, which is more than double the outcome in 2011-12, but still just below the 2012-13 performance target contained in Budget Paper 3 (table 4.2). This includes significant increases across all three outputs, in particular the number of BIAs. The total output has moved closer to the longer term average in the years 2005-06 to 2009-10 of 46 per annum. This illustrates the limited control the Commission has over the number of RISs, BIAs and RCMs received. Chapter 1 discusses the trend in the number of RISs


prepared and potential factors that may have affected this. As part of the 2013-14 Budget process, the 2013-2014 target has been revised down to 35 to more accurately reflect the demand driven nature of the activity.

Appendix B lists the 21 regulations for which a RIS was prepared in 2012-13 and where the RIS was publicly released. Two RISs have not been published at the time of producing the Annual Report. The appendix includes information on the estimated costs and benefits of these proposals, consultation periods, and publication of the Commission’s final advice letters. Appendix C lists the bill considered by Parliament in 2012-13 for which a BIA was prepared and on which the Commission provided advice. The Commission provided advice in 2012-13 on the adequacy of five further BIAs, but the relevant Bills had not been introduced into Parliament by the time this Annual Report was finalised.

Number of RISs, BIAs, and RCMs completed Table 4.22011-12 to 2012-13

Outcomes

Output Target 2011-12 2012-13

Regulatory Impact Statements

45a

13 23b

Business Impact Assessments 2 8c

Regulatory Change Measurements 3 8

Total 45 18 39

Notes a This target is based on historical data and discussions with the Department of Treasury and Finance’s Cabinet and Parliamentary Services section. The Commission has no control over the number of RISs, BIAs or RCMs received. b This figure includes seven legislative instruments under the Subordinate Legislation Act. c In addition, the Commission also provided final advice on two Supplementary Impact Assessments of proposed changes to primary legislation in 2012-13. Including these would increase the total number of deliverables to 41.


Appendix D lists regulations that expire in the next two years, some of which are expected to be remade, and outlines whether a RIS is likely to be prepared. Fourteen regulations expected to be remade in 2013-14 are also expected to require a RIS. The Commission also expects the number of RCMs completed to continue to rise in 2013-14. As noted above, the number of RISs for new and amending regulations and BIAs for primary legislation cannot be forecast with any accuracy.

Training workshops

The Commission’s training workshops continue to be well attended. In 2012-13, the Commission held six RIS/BIA workshops, attended by 78 participants (table 4.3). The Commission targets workshops at participants likely to be involved in developing regulatory proposals that require either a RIS or a BIA.


Training workshops, 2011-12 and 2012-13 Table 4.3 Outcomes

2011-12 2012-13

RIS/BIA training workshops 7 6

CBA training workshops 3 0

Total attendees at workshops 157 78


4.3.2 Average cost of independent advice

Approximately $1 million of the Commission’s 2012-13 expenditure was allocated to the regulatory review function, an increase of 24 per cent compared with 2011-12.

Indicative unit cost of the Commission’s advice, Table 4.42011-12 and 2012-13a

Output Number Average unit cost of Commission’s

advice ($)

Total cost of Commission’s advice ($)a

2011-12

RISs 13 42 800 556 500

RCMs 3 28 200 84 700

BIAs 2 30 200 60 500

Total 18 38 800 701 700

2012-13

RISs 23 31 100 715 000

RCMs 8 17 700 141 300

BIAs 8 28 100 224 500b

Total 39 26 400 1 080 800

Notes: a Total costs may not add up due to figures being rounded to the nearest hundred dollars. Total does not equal the Commission’s expenditure allocated to the regulatory review function as some of each year’s expenditure is allocated to RISs, RCMs and BIAs that were not completed at the end of that financial year. b In addition, the Commission also provided final advice on two Supplementary Impact Assessments of proposed changes to primary legislation in 2012-13. Including these would further reduce the average cost of the Commission’s output.



The average cost to the Government of the Commission’s advice, training and related support was approximately $31 100 for each RIS, $17 700 for each RCM and $28 100 for each BIA (table 4.4). The average cost for RISs, RCMs and BIAs have decreased relative to the previous year by 27, 37 and 7 per cent respectively. The overall average cost of the Commission’s advice was $26 400 which is a 32 per cent reduction on the previous year. The cost reductions are driven in part by the significantly higher number of RISs, RCMs and BIAs on which the Commission provided final advice in 2012-13.

Notably, the average cost of RCMs continues to fall — from $51 900 in 2010-11, to $28 200 in 2011-12, to $17 700 in 2012-13. This might reflect continuous learning and improvements in the preparation of RCMs by departments, as well as, in the provision of advice and verification of RCMs by the Commission.

4.3.3 Quality of analysis

The quality of the RIS/BIA process can be measured by the extent to which it helps to improve the quality of regulatory proposals. The Commission’s contribution is difficult to assess in isolation, as a number of parties contribute to improving regulatory analysis. In particular, the agencies preparing a RIS or BIA carry the responsibility for these documents. The Commission works with these agencies to help them to improve the quality of their analysis, where necessary. Effective consultation with stakeholders can further improve the analysis. The Commission has developed indicators of the overall impact of the RIS/BIA process on the quality of analysis, which are outlined below.

Improvements in regulatory proposals

The RIS/BIA process has three elements: structured analysis of the options being considered by the policy agency; independent advice on the resulting analysis by the Commission; and external consultation, publicly in the case of a RIS or within government for a BIA. Each element contributes to more effective and/or less costly regulatory proposals. Box 4.1 provides an example of changes made to a regulatory proposal as a result of the RIS/BIA process, and the associated quantifiable impacts. The example involves changes made to sunsetting regulations, which highlights the importance of evaluating the effectiveness of existing regulations.


Box 4.1 Changes to regulatory proposals The Commission monitors the changes in regulatory proposals from its first involvement and, where possible, seeks to quantify the impact of any changes. An example of changes made to a regulatory proposal subject to the RIS processes during 2012-13 is below.

When reviewing sunsetting regulations, agencies use the RIS process to evaluate the ongoing need for government regulation and consider alternative government responses to the identified problem that takes into account changes over time.

WorkSafe Victoria identified several options to reduce the cost of the Dangerous Goods (Storage and Handling) Regulations 2012 as part of the sunsetting process. These include removing requirements to undertake, record and review risk assessments, reducing the range of incidents that trigger the need for occupiers to report to emergency services, removing requirements to make and store records of induction and training activities, and clarifying acceptable labelling requirements. Overall, the preferred option was expected to reduce the net present value of costs imposed on business by 50 per cent from $170 million to $85 million over 10 years without substantially affecting the achievement of objectives.

Source: VCEC

Improved analysis in RISs and BIAs

The Commission aims to increase the capacity of departments and agencies to improve continuously the quality of analysis in RISs and BIAs. Quantifying the extent of the problems regulation seeks to address and estimating the costs and benefits of proposals in RISs improves the capacity for effective public scrutiny. The indicators below are used to assess changes in the quality of analysis over time. The Commission continues to help agencies to identify more relevant and robust data sources, and to improve the transparency and rigour of estimates of costs and benefits.

Quantifying the extent of the problem

In 2012-13, 96 per cent of RISs on which the Commission provided final advice had some quantification of the extent of the problem requiring regulatory action, an eleven percentage point increase from 2011-12 (figure 4.1).


Quantifying the extent of the problem Figure 4.1


Quantifying the costs and benefits of all policy options

Twenty one of the 23 RISs the Commission provided final advice on in 2012-13 were published at the time this report was finalised. These RISs estimated the present value of costs of the proposed regulation over ten-years would be almost $24 million for new regulations, $111 million for amending regulations and $890 million for sunsetting regulations — a total of $1 024 million. These RISs estimated the present value of benefits of the proposed regulations over ten years, where they could be quantified, would be about $23 million for new regulations, $98 million for amending regulations and $2 307 million for sunsetting regulations — a total of about $2 428 million (appendix B).

The extent of cost quantification of regulatory proposals continues to remain strong. All of the RISs on which the Commission provided final advice in 2012-13 quantified some of the predicted costs of the proposal (figure 4.2), an increase of eight percentage points from 2011-12. The feasibility of quantification and the availability of data vary across proposals, which can contribute to the variation between the years.

0

20

40

60

80

100

0

20

40

60

80

100

Solelyqualitativediscussion

Quantification ofsome aspects,

but obviousgaps

Comprehensivequantification of

most aspects,using available

data

Rigorousquantificationof all aspects,supported byrobust data

Total withsome

quantification

Level of quantification

2008-09 2009-10 2010-11 2011-12 2012-13


Quantification of expected costs in RISs Figure 4.2


It can be far more difficult to quantify the benefits of regulatory proposals. Nevertheless, in 2012-13, 83 per cent of RISs on which the Commission provided final advice quantified some of the predicted benefits of the regulatory proposal, up by six percentage points from 2011-12 (figure 4.3).

0

20

40

60

80

100

0

20

40

60

80

100



but obviousgaps



data


Total withsome

quantification


2008-09 2009-10 2010-11 2011-12 2012-13


Quantification of expected benefits in RISs Figure 4.3


4.3.4 Timeliness of the Commission’s processes

The Commission provided advice on 19 (of 21) first drafts of RISs, 10 (of 10) first drafts of BIAs, and 10 (of 11) first drafts of RCMs within 10 working days of receipt, meeting or exceeding its target of 90 per cent (table 4.5). The number of first drafts reviewed by the Commission in 2012-13 exceeds the number of completed RISs, BIAs and RCMs as some of these documents were not completed by the end of the year or the regulatory proposal was withdrawn. It is not uncommon for the Commission to provide advice on a regulatory proposal that does not proceed or where a RIS or BIA is not completed. For example, the Commission also provided advice in 2012-13 on applying the threshold test for around 20 regulatory proposals that did not meet the requirements for a RIS or BIA.

The Commission surveys policy officers responsible for completed RISs, BIAs, SIAs and RCMs (see below) to get feedback on the Commission’s performance. In 2012-13, all of the respondents to the surveys rated the timeliness of the Commission’s advice on their completed RISs, BIAs, SIAs and RCMs as either ‘good’ or ‘very good’ (table 4.6), no change from 2011-12. However, the proportion rating the Commission’s performance as ‘very good’ increased from 56 to 67 per cent (table 4.6).

0

20

40

60

80

100

0

20

40

60

80

100



but obviousgaps



data


Total withsome

quantification


2008-09 2009-10 2010-11 2011-12 2012-13


Proportion of advice on initial drafts provided Table 4.5within 10 working days (per cent)

Outcomes

Target 2011-12 2012-13

Regulatory Impact Statements 90 100 90

Business Impact Assessments 90 100 100

Regulatory Change Measurements 90 100 92


Regulatory agency staff rating of the Table 4.6

Commission’s response time for drafts (per cent) Very poor Poor Average Good Very good

2011-12 0 0 0 44 56

2012-13 0 0 0 33 67

Source: Commission feedback surveys.

4.3.5 Quality of the Commission’s processes

The Commission’s performance in providing advice on RISs, BIAs, SIAs and RCMs and training can be measured, in part, by the level of satisfaction with the Commission’s support. The Commission surveys policy officers responsible for completed RISs, BIAs, SIAs, and RCMs, and training workshop attendees.

Forty one surveys were sent to the policy officers responsible for RISs, BIAs, SIAs and RCMs completed in 2012-13 and 39 responses were received (a 95 per cent response rate).

All 78 participants attending training workshops were surveyed; 72 responses were received (92 per cent response rate).

Satisfaction with advice

Secretariat staff advise agencies on the analysis required for specific proposals. In 2012-13, all of the survey respondents rated the Commission’s response to queries as ‘good’ or ‘very good’. In addition, they all rated the Commission’s overall performance as ‘good’ or ‘very good’, no change from 2011-12 (table 4.7).


Regulatory agency staff rating of the Table 4.7Commission’s overall performance (per cent)

Very poor Poor Average Good Very good

2011-12 0 0 0 37 63

2012-13 0 0 0 36 64


Training seminars and workshops

The Commission’s training workshops continue to be rated very highly by participants: 99 per cent of training participants in 2012-13 rated these sessions as ‘good’ or ‘very good’ (table 4.8).

Rating of the Commission’s training workshops Table 4.8(per cent)

Poor Satisfactory Good Very good

RIS/BIA 2011-12 0 1 43 56

RIS/BIA 2012-13 0 1 43 56


According to the Commission’s RIS feedback survey, 74 per cent of respondents responsible for preparing RISs, BIAs or RCMs in 2012-13 had attended one of the Commission’s RIS/BIA training workshops, up from 60 per cent in 2011-12. Around 33 per cent of respondents were preparing a RIS, BIA or RCM for the first time, up from 30 per cent in 2011-12, and therefore were likely to get more value from training opportunities.

In 2012-13, 67 per cent of respondents indicated that they prepared the RIS, BIA or RCM with the assistance of external specialists, down from 75 per cent in 2011-12. This is also a decrease from earlier trends, for example, 85 per cent reported in a report produced for the Commission’s regulatory framework inquiry (Access Economics 2011).

It is not clear what has been driving the reduction in the proportion of RIS, BIA and RCMs that used external consultants. Consultants can add value in certain circumstances, when technical knowledge and specialised skills are not available in departments. However, the skills required to prepare a RIS or BIA are in principle no different from the core skills of policy advisors. As departments continue to build and retain these capabilities internally the demand for consultants may decrease. The Commission will continue to assist departments to develop their capabilities through early engagement, training, and development of a community of practice (section 4.4). Furthermore, if agency staff are not preparing RISs themselves, the skills that they acquire in the training workshops can be used to develop the proposal (using the principles of good policy development), and to support and analyse external specialists’ work.


4.4 Current directions and priorities The 2011-12 annual report identified priority areas for improvement in 2012-13:

supporting the implementation of the Government’s response to the Commission’s inquiry into Victoria’s regulatory framework

improving the quality and accessibility of the advice the Commission provides to Departments on the analysis of regulatory proposals.

The Commission made progress in these areas and will build on this in 2013-14.

In addition to internal operational improvements, the Commission also considered opportunities to improve the broader regulatory impact assessment (RIA) practices in Victoria (box 4.2).

4.4.1 Victorian Guide to Regulation rewrite

With regard to supporting the Department of Treasury and Finance (DTF) implementation of the Government’s response to the Commission’s inquiry into Victoria’s regulatory framework, in 2012-13 the Commission focussed on providing input and advice to DTF on a new version of the Victorian Guide to Regulation (recommendation 2.1 of the inquiry).

DTF is considering the response from departments on drafts of the new VGR and will seek to finalise the revised VGR in 2013-14.

A key aspect of the new VGR will be enhanced guidance on evaluating high impact regulations, in particular, proposals to remake sunsetting regulations.


Box 4.2 Comparison of Victoria’s RIA practices In 2012-13 the Commission considered potential performance measures and improvements in the regulatory impact assessment (RIA) practices in Victoria.

This included considering the study of RIA practices across Australian jurisdictions in the Productivity Commission’s report, Regulatory Impact Analysis: Benchmarking (November 2012). The Productivity Commission compared the consistency of the RIA practices implemented in each jurisdiction with the OECD and COAG best practice principles. It found ‘substantial and fundamental differences between jurisdictions in the way, and the extent, to which appropriate practices were implemented… to put these into effect’ (PC 2012b, 5).

On this basis, the Productivity Commission found that Victoria’s RIA practices compares very favourably against the other jurisdictions, having fully or partially implemented measures in accordance with 11 of the 14 best practice principles.

Two practices that were considered to have not been implemented in Victoria include:

Two-stage RIS process

Publish RISs — primary legislation

Further examination suggests that Victoria already has substitutes for, or are considering implementation, of these practices.

In practice, Victoria’s RIA process is not dissimilar to a formal two-stage RIS process. Rather than having the publication of a ‘consultation RIS’ and a second stage to finalise the RIS, as discussed in chapter 1, it is common practice in Victoria for agencies to consult with stakeholders before and during the preparation of the RIS, followed by further consultations on the publication of the finalised RIS. Agencies are also required to prepare a statement summarising their response to the formal consultations and reasons for changing the proposal after consultation. This generates similar benefits to a two-stage RIS process in providing ‘timely engagement with stakeholders’; scope to demonstrate consideration of stakeholder views; and enhanced transparency’ (PC 2012b, 15).

The publication of impact assessments for primary legislation (a BIA in Victoria) was recommended in the Commission’s regulatory framework inquiry (VCEC 2011b). The benefit of adopting this practice would be to provide greater transparency on the basis of proposed new and amending primary legislation. The Government is considering its response to this recommendation (Government of Victoria 2012a). Source: VCEC.

4.4.2 Early engagement, capability building, and the

development of a ‘community of practice’

The Commission has been improving the quality and accessibility of its advice by encouraging early engagement with departments on the RIS/BIA process, through capability building, and developing constructive relationships with and between departments involved in the RIS/BIA process.

The benefits of the RIS/BIA process have been most evident when departments or agencies have engaged early with the Commission, and used the RIS or BIA to determine, or refine, the preferred option.


In 2012-13 the Commission continued to improve engagement through mechanisms and at different levels of the organisation including:

RIS/BIA training, and other targeted training delivered to departments

providing guidance to policy officers

developing bilateral relationships between Commission staff and departmental policy/regulatory officers

periodic meetings between the Chair and departmental secretaries.

The expanded scope of the Subordinate Legislation Act to cover a wider range of regulatory instruments with full effect from 1 July 2013 means that a new set of entities may be required to prepare RISs (for ‘legislative instruments’) but may not have had previous experience of the process. The Commission’s advisory, training and relationship building activities will, in 2013-14, be extended to cover these new entities. The Commission’s approach to advice will remain focussed on the substance of the regulation regardless of its legal form. However, it is the Departments responsibility to seek legal advice on whether proposed new or amending rules are considered ‘legislative instruments’.

The Commission is investigating the demand for, and potential shape of, a ‘community of practice’ among departmental policy advisors involved in preparing RISs and BIAs. This would complement the Commission’s ongoing efforts to promote early engagement and facilitate capability development by increasing awareness and accessibility of information on the RIS/BIA process, as well as, providing a platform for departmental officers to share their knowledge of and experience in preparing RISs within and across agencies. If there is demand for a community of practice, and if the Commission is best placed to lead its development, the Commission expects work to begin in 2013-14 to establish one.

4.4.3 Better targeting of the Commission’s advice

The Commission, as part of its continuous improvement process, is investigating and developing alternative organisational models and internal processes for handling, assessing and delivering advice on RISs, BIAs and RCMs. In particular, the Commission is considering the scope to increase efficiency and maximise the value the Commission adds by better targeting and scaling the level of advice provided according to the nature and significance of the regulatory proposal.

However, because the current internal processes generally work very well and have evolved to provide a range of other efficiencies (for example, for quality assurance, risk-management and capability development), the Commission will need to design the framework in a way that achieves better targeting without compromising these benefits. The framework will be developed over the course of 2013-14.

COMPETITIVE NEUTRALITY 57

5 Competitive neutrality

Highlights and developments The Commission assisted 18 state and local government businesses and

agencies with competitive neutrality issues, and advised 23 private businesses and other parties with an interest in Victoria’s Competitive Neutrality Policy.

The queries received by the Commission from Victorian Government businesses show a general awareness of the need to comply with Victoria’s Competitive Neutrality Policy.

The Commission received seven new competitive neutrality complaints in 2012-13. It assessed and determined that each complaint was outside the scope of the complaint investigation process. A more focussed approach to the pre-investigation assessment of complaints may have contributed to the high rate of non-acceptance by the Commission.

The Commission published its Competitive neutrality inter-jurisdictional comparison paper on its website. The paper identifies different approaches as to how competitive neutrality is managed across Australia.

The Commission is considering applying a dollar threshold to help determine whether to accept competitive neutrality complaints for investigation. The proposal would provide greater clarity as to the application of Competitive Neutrality Policy and is consistent with a risk-based approach that focusses investigations on government business activities with potentially significant economic and social impacts, using other tools, such as information provision, to address other issues.

5.1 Introduction Under the Competition Principles Agreement, Victoria is obliged to apply competitive neutrality policy and principles to all significant state and local government business activities that compete with private businesses (NCC 1995). The objective of competitive neutrality, which is set out in clause 3(1) of the Competition Principles Agreement, is:

… the elimination of resource allocation distortions arising out of the public ownership of entities engaged in significant business activities: Government businesses should not enjoy any net competitive advantage simply as a result of their public sector ownership. These principles only apply to the business activities of publicly owned entities, not to the non-business, non-profit activities of these entities. (NCC 1998, 17)

The policy and guidance documents used by Victorian government agencies and local government to apply competitive neutrality principles are available on the Commission’s website.

The Commission has also published Commission Conventions for the Competitive Neutrality Function (the Conventions Paper), setting out the scope of the Commission’s competitive neutrality role, the complaints process, actions taken to achieve awareness of competitive neutrality, and reporting requirements. The Commission has also published a number of guidance notes.


5.2 The Commission’s competitive neutrality role The Commission is required under its Order in Council to ‘achieve awareness of and compliance with the competitive neutrality policy of the Victorian Government currently in force’ (s. 3(3)(d)). To perform this function, the Commission:

(1) advises government businesses and departments on how to comply with the policy and raises awareness of their competitive neutrality responsibilities and developments in competitive neutrality

(2) investigates competitive neutrality complaints, including assisting private businesses and their advisers to determine whether a concern is related to competitive neutrality.

Box 5.1 sets out of the types benefits that have resulted from the Commission performing its competitive neutrality function.

Box 5.1 Benefits of competitive neutrality Victorian state and local government implementation of the Commission’s competitive neutrality complaint investigation report recommendations have led to a range of economic and community benefits. For example, recommendations have resulted in:

Increased market contestability — the removal of exclusive promotional material from the website, call centre and on a statutory notice issued by a Victorian corporatised utility operating an activity that competes with the private sector, which encouraged consumer choice and increased business confidence to participate in the market.

Improved performance by government business — correct application of competitive neutrality pricing to the business activity and the government entity applying competitive neutrality pricing to a range of other activities believing this would improve overall performance.

Clarifying commercial objectives — clarifying the core non-commercial and commercial objectives of activities enabled the government agency to apply competitive neutrality processes to commercial services and monitor performance in delivering both services, optimising economic and community benefits.

In addition to these specific benefits, applying competitive neutrality to government businesses gives private businesses confidence that they are competing on an equal footing. Source: Commission competitive neutrality investigation reports.

In 2012-13, the Commission was consulted by the Department of Treasury and Finance as part of an update of the Competitive Neutrality Policy. The update did not make any significant changes to how Victorian government agencies and local government are expected to apply competitive neutrality, but recognised the Commission as the entity ‘responsible for achieving awareness of and compliance with competitive neutrality policy, including its interpretation and application’ (Government of Victoria 2012d).


5.3 Performance reporting Given the available evidence (the number and nature of queries from government businesses and the results of its investigations), the Commission considers overall compliance with Victoria’s Competitive Neutrality Policy is acceptable.

The following sections outline the Commission’s competitive neutrality activities for 2012-13. Chapter 2 reports the estimated expenditure on this function; unit cost measures are not reported for individual activities, given that this function is comparatively small.

The Commission’s performance reporting uses activity and proxy outcome measures to indicate performance, including the number of complaints (and the outcomes of those complaints).

5.3.1 Informing businesses and investigating complaints

The Commission received 23 queries from private businesses, their representatives or other interested parties during 2012-13 (table 5.1) which is two more than last year.

When it receives a query, the Commission identifies the nature of the concern and explains what competitive neutrality is and the Commission’s role. If the concern is outside the scope of the Competitive Neutrality Policy, the caller is advised why and the Commission suggests an alternative contact in government (such as the Office of the Victorian Small Business Commissioner or the Office of the Ombudsman Victoria) that may be able to help resolve the issue.

Assistance to private businesses and their Table 5.1representatives

Source of queries 2011-12 2012-13

Private businesses 12 16

Lawyers advising private businesses 2 0

Consultants 2 2

Private individuals 1 3

Parliamentarians on behalf of constituents 1 1

Community groups 1 0

Industry groups 2 1

Total 21 23

Note: The data exclude multiple queries about the same issue from one party.


If the concern is within the scope of the Competitive Neutrality Policy, the caller is advised of possible options to resolve the issue. The Commission suggests that the caller raise the concern with the relevant government agency if the caller has not already done so. However, it is not mandatory to contact the relevant government agency


before lodging a complaint. This year, concerns raised with the Commission included the pricing and subsidisation of services offered by government agencies.

Table 5.2 tracks the number of complaints considered by the Commission in 2012-13, and how they were handled. No complaints were under investigation at 30 June 2013.

The Commission received seven competitive neutrality complaints in 2012-13 but all were assessed to be outside the scope of the Competitive Neutrality Policy and did not lead to an investigation. The Commission advised these complainants in writing why their complaints were not accepted:

One complaint related to fees for regulatory services, not competitive neutrality. The Commission does not have the authority to investigate such concerns.

Four complaints were directed at government businesses, but the Commission formed the view they were not significant business activities within the meaning of the Competitive Neutrality Policy and therefore were outside the scope of the complaint investigation process.

One complaint against a government activity which operates as a significant business was not accepted because insufficient evidence was presented to support the complaint. Publicly available information also indicated that the government agency complied with the Competitive Neutrality Policy.

One complaint against a government activity which operates as a significant business was not accepted because the agency was able to demonstrate how it applies the Competitive Neutrality Policy.

To help make these determinations the Commission conducted thorough assessments that included desktop research, obtaining information from six of the agencies identified in the complaint application and seeking legal advice.

Competitive neutrality complaints Table 5.2 2011-12 2012-13

Investigations carried over from last year 2 0

Number of new complaints received 4 7

Number of complaints not accepted 4 7

Number of complaints finalised through non-investigative approaches

0 0

Number of complaints finalised through investigation 2 0

Investigations carried over to next year 0 0


Information about the number of investigations completed before 2012-13 has been published in previous annual reports, which are available on the Commission’s website.

5.3.2 Assisting with compliance

The Commission provided formal and informal advice to Victorian state and local government agencies on 17 issues related to competitive neutrality compliance during 2012-13, down from 24 in 2011-12 (table 5.3). Councils raised queries about:


documenting council competitive neutrality assessments; the application of the Competitive Neutrality Policy to council residential and commercial waste collection services; setting fees for childcare centres; and the application of the Competitive Neutrality Policy where community groups use council facilities to provide childcare services. State government agencies raised general queries about the application of the Competitive Neutrality Policy, including the identification of activities that might be in scope of the policy.

Assisting compliance Table 5.3Source of queries 2011-12 2012-13

Councils 9 5

State government departments 15 12

Commonwealth government 0 0

Advisers to government businesses 0 1

Interstate jurisdictions 4 1

Total 28 19


In 2012-13, the Commission delivered presentations on competitive neutrality to the Chief Financial Officers of metropolitan public hospitals as well as three presentations to Executive Officers from the education sector.

In 2013-14, the Commission will continue to identify opportunities to deliver presentations or conduct workshops for interested state government agencies and councils to improve their understanding of the requirements of Victoria’s Competitive Neutrality Policy.

5.4 Developments in competitive neutrality The level of complaint activity and queries received from the business community in 2012-13 shows an ongoing awareness of competitive neutrality and a willingness to test government agencies and councils that private businesses consider may not be complying with the Competitive Neutrality Policy. The Commission expects that this trend is likely to continue.

The Victorian Government has been introducing market-based reforms in which private businesses may compete with government entities for the delivery of a range of services. Two areas of such reforms include education and health. The objective of the reforms is more efficient use of society’s scarce resources to generate economic and community benefits. Adhering to competitive neutrality principles is an essential feature of such change.

In this environment, it is important for government agencies, and councils, to remain vigilant in their application of the Competitive Neutrality Policy.

In 2012-13, the Commission identified three key issues for ongoing improvement: awareness raising; non-investigation-based approach to complaints; and complaint investigation time-lines.


Awareness raising

The Commission applies two broad approaches to its awareness raising activity, one by taking a proactive approach in raising specific issues with relevant government agencies and through producing and publishing guidance material.

The Commission has continued to analyse competitive neutrality queries and complaints data to assess those areas in which it might better focus awareness raising activities. Due to the diverse nature of competitive neutrality queries and complaints, identifying areas to target awareness-raising activities can be difficult. As discussed in Section 5.3.2 the Commission delivered several presentations in areas where competitive neutrality application had immediate relevance.

The Commission’s awareness raising function overlaps to some degree with its complaint handling mechanism. In 2012-13, the Commission concluded that although investigation was not an appropriate response to the complaints it received, several government agencies could give further consideration to documenting how competitive neutrality is applied or applying competitive neutrality in the event that the business status of the activity changed. Subsequent awareness raising activities included writing to five agencies and meeting with relevant personnel. The Commission also provided specific advice on the application of Competitive Neutrality Policy to a business activity undertaken by an agency.

The Commission has noted that some businesses referred to the Commission’s guidance material to help develop complaints subsequently lodged with the Commission, indicating an awareness of the competitive neutrality resources available on the Commission’s website.

Further, it is the Commission’s intention by publishing its Competitive neutrality inter-jurisdictional comparison paper on its website to raise interest in, and awareness of, competitive neutrality more broadly. The study looks at how competitive neutrality is managed across Australia.

Non-investigation-based approach to complaints

The Commission stated in its Conventions Paper that it would consider appropriate opportunities to apply non-investigation based approaches to complaint resolution.

While the Commission considered seven competitive neutrality complaints in 2012-13, none was accepted for investigation or considered in context of a non-investigation based approach to resolution. However, the complaint handling process enables the Commission to raise concerns or potential issues in a non-investigative environment, which complements its awareness raising function. As noted above, the Commission did follow-up with five of the agencies subject to complaint to provide advice.

Complaint investigation timelines

The Commission reviewed the investigation process against the investigation timelines to identify and test opportunities to improve processes to meet or reduce timelines. In 2012-13 the opportunity to improve processes has been tested in the ‘complaint assessment’ stage of the complaint investigation process only. The target for assessing a complaint is four weeks from the date a complaint is received by the Commission to the date the letter advising whether a complaint is accepted is issued.


The Commission met the four week time line in six of the seven complaint assessments undertaken in 2012-13. The average time taken to assess each complaints was 3.7 weeks, ranging between 1.9 weeks and 4.8 weeks. Factors that the Commission considers in assessing complaints include whether the government activity is a significant business, the evidence of a potential breach of Competitive Neutrality Policy and, if found in scope of the Policy, what steps the government agency has taken to apply the policy.

Many factors can influence the time required to properly assess a complaint including the type of government activity subject to complaint, the complexity of the complaint and the availability of information to assess the complaint. Necessarily some complaints will take longer to assess than others which helps to explain the difference in the observed timelines.

The Commission has also focused on greater upfront testing of complaints against its acceptance criteria — set out in the Conventions — to ensure complaints are accepted for investigation only where they are in scope of the Competitive Neutrality Policy and an investigation is warranted. This may have contributed to some complaints not being accepted that in previous years might have been investigated. The Commission considers that more thorough screening of complaints will benefit complainants who are informed early in cases where an investigation is likely to conclude that their complaint is outside the scope of the Policy or competitive neutrality is already being applied appropriately and avoids unnecessary costs incurred by government agencies involved in investigations.

The Commission did not proceed beyond stage one of the complaint investigation process so preparation and distribution of an investigation report was not required. The Commission was therefore unable to test these latter stages of the investigation process against the stated timelines.

Threshold for complaint investigations

As noted above, in 2012-13 the Commission received four complaints directed at government businesses that were not significant in the context of the Competitive Neutrality Policy. The Commission has also been considering how to target its investigation activity to issues where the benefits from investigating a complaint are potentially significant. Therefore, to provide more guidance to complainants and assist its assessment of potential complaints the Commission is considering applying a dollar threshold to help determine acceptance of competitive neutrality complaints for investigation.

In developing this proposal, the Commission considered Victoria’s Competitive Neutrality Policy and the revenue thresholds applied in other jurisdictions, which range from approximately $2 million to $24 million per annum. A dollar threshold of $500 000, based on the annual revenue of a government activity, is under consideration, and the Commission is consulting with interested parties on the matter.

For complaints against government entities whose annual turnover is above $500 000 the existing investigation process will be applied. For complaints lodged against smaller government business activities, more proportionate approaches to handling complaints are likely to be appropriate. For example, consistent with its role to raise awareness of their competitive neutrality obligations the Commission may advise the government agency directly of the relevant issues and propose ways of addressing these as appropriate.


The proposed $500 000 threshold is a guide to whether an investigation is warranted or not but is not considered absolute. In a limited number of circumstances an investigation may be warranted for activities below $500 000 — for example, where a new government activity currently below the threshold is expected to experience significant growth.

FINANCIAL STATEMENTS AND WORKFORCE DATA 65

Appendix A: Financial statements and workforce data

This appendix details the costs of the Commission’s operations and its workforce data during 2012-13. The Commission is supported by a Secretariat employed through the Department of Treasury and Finance (DTF). In supporting the Commission, the Secretariat operates independently from the rest of DTF, although it shares administrative resources (human resources, information technology, legal services, etc.) and is subject to DTF policies. A formal agreement between the Commission’s Chair and the Secretary of DTF (available on the Commission’s website) was put in place in August 2005 to ensure that the Commission is able to provide independent, high-quality analysis and advice to the Government in the most cost efficient manner.

Consistent with these arrangements, the Minister for Finance exempted the Commission from preparing separate financial statements and report of operations under section 53 of the Financial Management Act 1994 (FMA). The financial activities of the Commission have been consolidated and audited within the financial statements of DTF. DTF’s annual report provides aggregated financial statements and report of operations, and other matters required under the FMA.

Information on freedom of information and protected disclosures are provided on the Commission’s website. The Commission complies with, and promotes, public sector values and human rights. It complies with obligations to avoid conflict, disclose documents under the Freedom of Information Act and report gifts. Merit and equity principles are applied to all human resources policies and practices in relation to the Secretariat and the Commission.

Financial statements

Cost of operationsa Table A.1Expenses from operating activities 2011-12 ($) 2012-13 ($)

Employee benefits (note 1) 3 244 382 3 285 081

Supplies and services 1 015 343 573 704

Depreciation and amortisation 51 677 49 407

Capital assets charge 18 996 16 380

Other expenses 4 887 1 707

Other economic flows included in net result

18 829 167 125

4 354 114b 4 093 404

Notes: a In addition to the direct expenditures of the Commission and its Secretariat recorded above, the Commission receives a range of support services, such as information technology, finance, procurement, and human resources support from DTF, consistent with the arrangements for other similar agencies in the portfolio. b Total expenses for 2011-12 have been revised from last year’s estimate to include other economic flows included in net result.



Note 1: Commission and Secretariat employee costs Employee benefitsa 2011-12 ($) 2012-13 ($)

Salaries and wages 2 533 284 2 557 365

Superannuation 246 982 244 227

Annual and long service leave expense 291 195 316 683

Other on-costs 172 921 166 806

Total employee costs 3 244 382 3 285 081

Notes: a Includes the remuneration of the Commissioners (who are appointed by Governor-in-Council) and the Secretariat staff who are employees of DTF (but whose work is governed by a formal agreement between the Commission’s Chair and the Secretary of DTF).


Workforce data

Commission’s Secretariat employees, 30 June Table A.22013

Total Secretariat employees — Victorian Public Service (VPS) and executive officers

Full-time 17

Part-time 3

Total number 20

Total full-time equivalenta 18

Breakdown by gender

Male Female Total

Full-time 14 3 17

Part-time – 3 3

Total 14 6 20

Notes: a The Commission also funds a part-time (0.6 full-time equivalent) legal adviser who is employed and supervised by the Department of Treasury and Finance’s Legal Unit. This legal adviser is outposted on a dedicated basis to the VCEC Secretariat.


FINANCIAL STATEMENTS AND WORKFORCE DATA 67

Commissioners, 30 June 2013 Table A.3 Male Female Total

Full-time 1 1 2

Part-time 1 – 1

Total number 2 1 3

Total full-time equivalent 1.5 1 2.5


Profile of Victorian Public Service (VPS) Table A.4employees of Commission’s Secretariat, 30 June 2013

Full-time Part-time

Class Male Female Male Female Total

Grade 6 5 1 – – 6

Grade 5 2 1 – – 3

Grade 4 1 1 – 1 3

Grade 3 1 – – 2 3

Grade 2 1 – – – 1

Grade 1 – – – – –

Total 10 3 – 3 16


Profile of executive officers of Commission’s Table A.5Secretariat, 30 June 2013

Ongoing Special projects

Class Male Female Male Female Total

EO-1 – – – – –

EO-2 1 – – – 1

EO-3 3 – – – 3

Total 4 – – – 4


REGULATORY IMPACT STATEMENTS ASSESSED IN 2012-13 69

Appendix B: Regulatory Impact Statements assessed in 2012-13a

Regulations by department Table B.1

Costsbc ($m)

Benefitsbcd ($m)

Consultation (days)

Assessment Lettere

Department of State Development, Business and Innovation

Electricity Safety (Bushfire Mitigation) Regulations 2013

29.4 nq 28

Retail Leases Regulations 2013 36.0 nq 28

Department of Education and Early Childhood Development

Education and Training Reform Act 2006 Ministerial Fees Order (VRQA Fees)f

37.9 37.9 28

Victorian Institute of Teaching feesf

12.7 12.7 28

Department of Justice

Associations Incorporation Regulations 2012f

24.3 19.7 28

Magistrates' Court (Fees) Regulations 2012 and Juries (Fees) Regulations 2012f

244.5 244.5 28

Retirement Villages Amendment (Records and Notices) Regulations 2013 and Retirement Villages Amendment (Contractual Arrangements) Regulations 2013

5.2 nq 65

Supreme Court (Fees) Regulations 2012 and County Court (Court Fees) Order 2012f

140.6 140.6 28

Victorian Civil and Administrative Appeals (Fees) Regulations 2013f

39.2 39.2 60

Working with Children (Fees) Amendment Regulations 2011f

8.0 8.0 28

Department of Transport, Planning and Local Infrastructure

Safe Driving Program Feef 5.5 5.5 40


Costsbc ($m)

Benefitsbcd ($m)

Consultation (days)

Assessment Lettere

Department of Environment and Primary Industries

Code of Practice for the Operation of Breeding and Rearing Businesses

3.6 nq 28 g

Fisheries (Fees, Royalties and Levies) Further Amendment Regulations 2013f

32.0 32.0 60

Wildlife (Game) Regulations 2012f

30.1 16.7 28

Lake Eildon (Houseboats) Regulations 2013

27.5 14.5 32

Model By-laws (Recreational Areas)

0.3 nq 28

National Parks Regulations 2013 17.2 nq 28

Waterways protection by-law 219.2 1788.0 45

Wildlife Regulations 2013f 23.0 63.7 28

Department of Treasury and Finance

Dangerous Goods (Storage and Handling) Regulations 2012

83.0 nq 28

Supervision charge on gaming venue operatorsf

5.3 5.3 28

TOTAL 1024.5 2428.3 - 19

Average 48.8 115.6 34 -

Notes: a Two additional RISs were assessed during 2012-13 but is not included in this table as they had not been released for public consultation at the time this report was finalised. b nq = not quantified. c Costs and benefits are calculated in net present value terms at a discount rate of 3.5 per cent over the life of the regulations (up to 10 years). Where a range of costs and benefits has been quantified in a RIS, the mid-point value has been provided in this table. This table only details costs and benefits that were quantified in the RIS. Non-quantified costs and benefits may also be outlined in the RIS. d Benefits from fees RISs derive from fees collected to fund the administration and sometimes the enforcement of the regulations. e The Commission’s final assessment letter was published with the RIS on the agency’s website. As of March 2012, it is government policy that the letter be published. f Includes fees revenue. g The Department has since made the assessment letter available on its website, but was not available during the consultation period.

Source: Commission RIS database.

BILLS INTRODUCED INTO PARLIAMENT THAT WERE SUBJECT TO BUSINESS IMPACT ASSESSMENTS 71

Appendix C: Bills introduced into Parliament in 2012-13 that were subject to Business Impact Assessments

Bills by departmenta Table C.1Bill Year assessed

Department of Justice

Gambling Regulation Amendment Act 2013 2012-13

Department of Environment and Primary Industries

Catchment and Land Protection Amendment Bill 2013 2012-13

Water Legislation Amendment Act 2013 2012-13

Notes: a A Bill for five Business Impact Assessments assessed in 2012-13 have not been included because they were not introduced into Parliament when this report was finalised.


SUNSETTING REGULATIONS IN 2013-14 AND 2014-15 73

Appendix D: Sunsetting regulations in 2013-14 and 2014-15

All regulations covered by the Subordinate Legislation Act 1994 (Vic) are revoked or ‘sunset’ after 10 years. This process of regular review has been in place in Victoria since 1985 and has contributed to the removal of unnecessary regulation.

The Victorian Guide to Regulation notes the importance of the 10-yearly review:

In order to replace sunsetting regulations, it is important to provide a strong and clear demonstration that each restriction imposed by regulation is still required. When replacing sunsetting regulation, whether in similar or modified form, particular attention should be given to the following requirements during the preparation of the Regulatory Impact Statement (RIS):

demonstrating that the nature and extent of the problem still require a regulatory response

evaluating the actual effectiveness of the existing regulatory regime

substantiating that the particular regulatory response remains the best solution

conducting the cost-benefit analysis in terms of a comparison with the base case of an unregulated situation. (Government of Victoria 2011, 52)

The aim of this appendix is to assist stakeholders to identify regulations that will sunset between or expire between 1 July 2013 and 31 December 2015, particularly those that will require a RIS. All government departments were asked to verify and amend, where necessary, a list of sunsetting regulations based on information provided by the Office of the Chief Parliamentary Counsel. They were also asked to provide other relevant information about the regulations, including whether a RIS might be required. This process also served to identify agencies that might benefit from workshops the Commission offers on preparing RISs and encourage early planning. All information was current at 31 July 2013.

Ninety-seven regulations will sunset between 1 July 2013 and 31 December 2015. A RIS will be prepared, is currently underway, completed or is expected to be developed for 39 of these regulations. A RIS will not be prepared or is not expected to be prepared for 40 regulations. Departments identified 4 regulations that will not be re-made or have been revoked. There are also 14 regulations where the need to prepare a RIS is yet to be decided.


Regulations that sunset or expire between 1 July Table D.12013 and 31 December 2015

Regulation

Responsible department/

agency Minister Sunset or

expiry date? RIS required?

Cancer (Breast Screen Victoria Registry) Regulations 2003

DOH Health 1/07/2013 No

Partnership (Limited Partnerships) Regulations 2003

DOJ Consumer Affairs

22/07/2013 No. Regulations were revoked

Health Services (Private Hospitals and Day Procedure Centres) Regulations 2002

DOH Health 9/09/2013 Completed

National Parks (Park) Regulations 2003

DEPI Environment and Climate Change

23/09/2013 Completed

Supreme Court (Corporations) Rules 2003

DOJ Attorney-General

30/09/2013 No

Planning and Environment (Fees) Interim Regulations 2013

DTPLI Planning 20/10/2013 Underway

Subdivision (Fees) Interim Regulations 2013

DTPLI Planning 20/10/2013 Underway

Outworkers (Improved Protection) Regulations 2003

DTF Industrial Relations

21/10/2013 To be decided

Mineral Resources Development Regulations 2002

DSDBI Energy and Resources


Public Record Regulations 2003

DPC Premier 25/11/2013 No

Victims of Crime Assistance (Delegation) Regulations 2003


16/12/2013 No

Valuation of Land (General and Supplementary Valuation) Regulations 2003

DTPLI Planning 16/12/2013 Expected

Charter of Human Rights and Responsibilities (Public Authorities) Regulations 2009




Regulation




Environment Protection (Vehicle Emissions) Regulations 2003



Country Fire Authority Regulations 2004

DOJ Police and Emergency Services


Parliamentary Allowances Regulations 2003

DPC Premier 29/01/2014 No. Regulations were revoked

Parliamentary Committees Regulations 2003

DPC Premier 29/01/2014 No. Regulations were revoked

Police Regulation (Fees and Charges) Regulations 2004


3/02/2014 Expected

Australian Crime Commission (State Provisions) Regulations 2004


25/02/2014 No

Health Services (Prescribed Regions) Regulations 2004

DOH Health 2/03/2014 No

Survey Coordination Regulations 2004


Local Government (Finance and Reporting) Regulations 2004

DTPLI Local Government

20/04/2014 Expected

Financial Management Regulations 2004

DTF Finance 18/05/2014 Not expected

Architects Regulations 2004 DTPLI Planning 21/05/2014 To be decided

Supreme Court (Administration and Probate) Rules 2004


27/05/2014 No

Child Employment Regulations 2004

DSDBI Employment and Trade

8/06/2014 Expected

Crimes (Confiscation) Regulations 2004


8/06/2014 No


Regulation




Drugs, Poisons and Controlled Substances (Confiscation) Regulations 2004

DOJ DH

Mental Health

8/06/2014 No

Drugs, Poisons and Controlled Substances (Volatile Substances) Regulations 2004

DOJ DH

Mental Health

22/06/2014 Not expected

Tertiary Education (Fees) Regulations 2004

DEECD Education and Skills

22/06/2014 No

Monetary Units Regulations 2004

DTF Treasurer 29/06/2014 Not expected

Forests (Fire Protection) Regulations 2004


29/06/2014 Expected

Prisoners (Interstate Transfer) Regulations 2004

DOJ Corrections 29/06/2014 No

Freedom of Information (Access Charges) Regulations 2004


29/06/2014 Expected

Parole Orders (Transfer) Regulations 2004


Port Management (Local Ports) Regulations 2004

DTPLI Ports 29/06/2014 Expected

Subordinate Legislation Regulations 2004

DPC Premier 13/07/2014 Not Expected

Treasury Corporation of Victoria (Prescribed Agencies) Regulations 2004


Court Security Regulations 2004



Corrections (Victims Register) Regulations 2004


Subdivision (Registrar's Fees) Regulations 2004


Instruments (Fees) Regulations 2004

DTPLI Planning 21/09/2014 No

Property Law (Fees) Regulations 2004

DTPLI Planning 21/09/2014 No


Regulation




Transfer of Land (Fees) Regulations 2004


Sex Offenders Registration Regulations 2004


28/09/2014 No

Sex Work (Fees) Regulations 2004

DOJ Minister for Consumer Affairs

26/10/2014 Yes

Local Government (General) Regulations 2004

DTPLI Minister for Local Government


Crimes (Search Warrant) Regulations 2004


16/11/2014 No

Wildlife (State Game Reserve) Regulations 2004

DEPI Agriculture and Food Security and Minister for Environment and Climate Change

30/11/2014 Expected

Royal Botanic Gardens Regulations 2004



Agricultural Veterinary Chemicals (Control of Use) (Infringement Notices) Regulations 2004

DEPI Agriculture and Food Security

7/12/2014 No

Environment Protection (Environment and Resource Efficiency Plans) Regulations 2007


31/12/2014 Noa1

Co-operative Housing Societies Regulations 2005


Credit Regulations 2004 DOJ Consumer Affairs

24/01/2015 No

Credit (Administration) Regulations 2004


31/01/2015 No

Surveying (Registration Fees) Regulations 2005


Heritage (General) Regulations 2005

DTPLI Planning 12/04/2015 To be decided


Regulation




Casino Control (Licence Fees) Regulations 2005

DOJ Liquor and Gaming Regulation

27/04/2015 Expected

Sale of Land Regulations 2005


10/05/2015 No

Wrongs (Part VBA Claims) Regulations 2005



Planning and Environment Regulations 2005

DTPLI Planning 17/05/2015 Not Expected

Casino Control (Boundary Redefinition Fee) Regulations 2005


24/05/2015 Expected

Meat Industry Regulations 2005


7/06/2015 Expected

Surveying (Cadastral Surveys) Regulations 2005


Magistrates' Court (Occupational Health and Safety) Rules 2005


16/06/2015 No

Gambling Regulation (Signage) Regulations 2005


21/06/2015 Expected

Gambling Regulation Regulations 2005


21/06/2015 Expected

Road Management (General) Regulations 2005

DTPLI Roads 21/06/2015 Expected

Road Management (Works and Infrastructure) Regulations 2005

DTPLI Roads 21/06/2015 Expected

Audit (Public Bodies) Regulations 2005

DTF Treasurer 28/06/2015 Not Expected

Cemeteries and Crematoria Regulations 2005

DOH Health 28/06/2015 Expected

Major Crime (Investigative Powers) Regulations 2005

DOJ Attorney- General

28/06/2015 Not Expected


Regulation




Private Security Regulations 2005

DOJ Police and Emergency Service

28/06/2015 Yes

Transport (Conduct) Regulations 2005

DTPLI Public Transport

28/06/2015 Expected

Transport (Passenger Vehicles) Regulations 2005


28/06/2015 Expected

Transport (Taxi-Cabs) Regulations 2005


28/06/2015 Expected

Electricity Safety (Electric Line Clearance) Regulations 2010

DSDBI Energy and Resources

29/06/2015 Expected

Safe Drinking Water Regulations 2005

DOH Health 19/07/2015 Expected

Dangerous Goods Regulations 2005

VWA Treasurer 2/08/2015 To be decided

Local Government (Electoral) Regulations 2005

DTPLI Local Government

9/08/2015 Expected

Corrections (Police Gaols) Regulations 2005


Agricultural and Veterinary Chemicals (Control of Use) (Fertilisers) Regulations 2005



Metropolitan Fire Brigades (General) Regulations 2005


25/10/2015 Expected

Supreme Court (Adoption) Rules 2005


27/10/2015 No

Non-Emergency Patient Transport Regulations 2005

DOH Health 8/11/2015 To be decided

Food (Forms and Registration) Regulations 2005

DOH Health 22/11/2015 Not Expected

Charities Regulations 2005 DOJ Attorney-General


Supreme Court (General Civil Procedure) Rules 2005


24/11/2015 No


Regulation




Domestic Animals Regulations 2005


29/11/2015 Expected

Legal Profession Regulations 2005



Agricultural and Veterinary Chemicals (Control of Use) (Ruminant Feed) Regulations 2005



Transport (Taxi-Cab Licences - Market and Trading) Regulations 2005


13/12/2015 Expected

Magistrates' Court (Judicial Registrars) Rules 2005


15/12/2015 No

Land Tax Regulations 2005 SRO Treasurer 20/12/2015 To be decided

Public Administration (Review of Actions) Regulations 2005

DPC Premier 20/12/2015 To be decided

Estate Agents (Exemption) Regulations 2005


20/12/2015 No

Liquor Control Reform (Prohibited Supply) Regulations 2005


20/12/2015 Expected

Note: a To be allowed to sunset

Sources: OCPC 2013a; OCPC 2013b; OCPC 2013c; VCEC 2012.

REFERENCES 83

References Access Economics 2011, Reviewing the Effectiveness of the Regulatory Impact

Statement (RIS) Process in Victoria, Report prepared for the Victorian Department of Treasury and Finance. Melbourne.

Government of Victoria 2004a, Victoria Leading the Way: Economic Statement April 2004, Melbourne, Department of Premier and Cabinet.

——— 2004b, State Owned Enterprises (State Body — Victorian Competition and Efficiency Commission) Order, Melbourne, Victorian Government Gazette, No. G 27, Thursday 1 July 2004.

——— 2010, Amendment to the State Owned Enterprises (State Body — Victorian Competition And Efficiency Commission) Order 2003.

——— 2011, Victorian Guide to Regulation, 2nd ed, Melbourne, Department of Treasury and Finance.

——— 2012a, Victorian Government Response to the Victorian Competition and Efficiency Commission’s Final Report — Strengthening Foundations for the Next Decade: An Inquiry into Victoria’s Regulatory Framework.

——— 2012b, Service Delivery Budget Paper No. 3, Melbourne. ——— 2012c, Victorian Government Response to the Victorian Competition and

Efficiency Commission’s Final Report — Local Government for a Better Victoria: An Inquiry into Streamlining Local Government Regulation, Melbourne.

——— 2012d, Competitive Neutrality Policy, Melbourne, Department of Treasury and Finance.

——— 2012e, Future Directions for Native Vegetation in Victoria: Review of Victoria’s Native Vegetation Permitted Clearing Regulations, Melbourne, http://www.dse.vic.gov.au/__data/assets/pdf_file/0007/145528/Future-directions-Consultation-Paper-September-2012.pdf.

——— 2012f, Securing Victoria’s Economy. http://www.premier.vic.gov.au/ images/stories/documents/mediareleases/2012/December/SecuringVictoriasEconomy.pdf.

——— 2013, Service Delivery Budget Paper No. 3, Melbourne, Department of Treasury and Finance.

NCC 1995, Competition Principles Agreement, Canberra. ——— 1998, Compendium of National Competition Policy Agreements. 2nd edn.

Melbourne, June. OCPC (Office of the Chief Parliamentary Counsel) 2013a, Statutory Rules Which Expire

in 2013, as at 24 June 2013, Melbourne, OCPC. ——— 2013b, Statutory Rules Which Expire in 2014, as at 24 June 2013, Melbourne,

OCPC. ——— 2013c, Statutory Rules Which Expire in 2015, as at 24 June 2013, Melbourne,

OCPC. PC (Productivity Commission) 2012a, Annual Report 2011-12, Annual Report Series,

Canberra. ——— 2012b, Regulatory Impact Analysis: Benchmarking, Canberra, Productivity

Commission. SARC (Scrutiny of Acts and Regulations Committee) 2006, Annual Review 2006:

Regulations 2006, Melbourne. ——— 2012, Annual Review 2011: Regulations 2011, Melbourne. VCEC 2011a, Cost-Effectiveness of Regulatory Impact Assessment in Victoria, Staff

Working Paper. ——— 2011b, An Inquiry into Victoria’s Regulatory Framework: Part 1 — Strengthening

Foundations for the Next Decade, Draft Report, Melbourne. ——— 2011c, Commission Conventions for the Regulatory Reviews Function,

http://www.vcec.vic.gov.au/CA256EAF001C7B21/WebObj/CommissionConventionsforReviews-


FINAL17March2009/$File/Commission%20Conventions%20for%20Reviews%20-%20FINAL%2017%20March%202009.pdf.

——— 2012, VCEC Annual Report 2011-12, Melbourne. Victorian Government Gazette 2004, Order Establishing the Victorian Competition and

Efficiency Commission.

Documents

Victorian Competition and Efficiency Commission · Middle cover image reproduced courtesy of the Department of Education and Early Childhood Development. ISSN 1833-9689 Victorian