A regulatory impact assessment (RIA) is a document created before a new government regulation is introduced. It provides a detailed and systematic appraisal of the potential impact of a new regulation in order to assess whether the regulation is likely to achieve the desired objectives.
RIAs promote evidence-based policy-making as new regulations typically lead to numerous impacts that are often difficult to foresee: a RIA provides a detailed study and consultation with affected parties.
The central purpose of RIA is to ensure that regulation is welfare-enhancing from the societal viewpoint, i.e., that benefits will surpass costs.
Governments that use RIA have identified four main objectives concerning regulatory costs and impacts:
- Improve understanding of the real-world impact of governmental action, including both the benefits and the costs of action;
- integrate multiple policy objectives;
- improve transparency and consultation; and
- improve governmental accountability.
"A RIA is a policy tool which assesses the impact in terms of costs, benefits and risks of any proposed regulation which could affect businesses, charities or the voluntary sector."(1)
An RIA may also be performed to measure the gender impacts of a proposed policy or regulation in terms of its costs, benefits and risks to gender equality and the advancement of women in society and the economy.
RIA is a form of regulatory best practice and, as such, enshrines the following principles of regulatory best practice:
- Proportionality – regulators should only intervene when necessary. Remedies should be appropriate to the risk posed, and costs identified and minimised.
- Accountability – regulators must be able to justify decisions, and be subject to public scrutiny.
- Consistency – governmental rules and standards must be coherent and implemented fairly.
- Transparency – regulators should be open, and keep regulations simple and user-friendly.
- Targeting – regulation should be focused on the problem, and minimise side-effects.
Methods that inform good policy-making
RIA is not a technocratic tool that substitutes or replaces other decision methods in the regulatory process, but it can play an important role in strengthening the quality of debate and understanding in the decision-making process.
The methods used by policy-makers to reach decisions on regulation can be classified into five categories:(2)
- Expert – where the decision is made by a trusted expert, perhaps an appointed regulator, who uses professional judgement to decide what should be done.
- Consensus – where the decision is reached by a group of stakeholders who reach a common position that balances their interest.
- Political – where the decision is reached by political representatives based on partisan issues of importance to the political process.
- Benchmarking – where the decision is based on reliance on an outside model, such as international regulation.
- Empirical – where the decision is based on fact-finding and analysis that defines the parameters of action according to established criteria.
RIA meets the following criteria for good policy-making:
- Improve understanding of benefits and costs of government action – RIA is an evidence-based approach to decision-making, and often draws on economic empirical evidence in assessing benefits and costs.
- Integrate multiple policy objectives – RIA can be used as an integrating framework to identify and compare the linkages and impacts between economic, social, gender, and environmental regulatory changes.
- Improve transparency and consultation – RIA is closely linked to processes of public consultation, which enhances the transparency of the RIA process, provides quality control for impact analysis, and improves the information provided to decision-makers.
- Improve government accountability – RIA can improve the involvement and accountability of decision-makers by reporting on the information used in decision-making and demonstrating how the decision impacts on society.
The OECD has identified the following principles for regulatory quality and performance – principles that RIA aims to contribute to:
- Adopt at the political level broad programmes of regulatory reform that establish clear objectives and frameworks for implementation.
- Assess impacts and review regulations systematically, in order to ensure that they meet their intended objectives efficiently and effectively in a changing and complex economic and social environment.
- Ensure that regulations, regulatory institutions charged with implementation, and regulatory processes are transparent and non-discriminatory.
- Review and strengthen where necessary the scope, effectiveness, and enforcement of competition policy.
- Design economic regulations in all sectors to stimulate competition and efficiency, and eliminate useless regulations except where clear evidence demonstrates that they are the best way to serve broad public interests.
- Eliminate unnecessary regulatory barriers to trade and investment through continued liberalization and enhance the consideration and better integration of market openness throughout the regulatory process, thus strengthening economic efficiency and competitiveness.
- Identify important linkages with other policy objectives and develop policies to achieve those objectives in ways that support reform.
(1) Government of the United Kingdom, Cabinet Office: Good Policy Making: A Guide to Regulatory Impact Assessment (London, 2000).
(2) Organisation for Economic Co-operation and Development: Regulatory Impact Analysis: Best Practices in OECD Countries (Paris, 1997).