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Better Regulation Freedom Family This draft document is work-in-progress
An FTI presentation on good regulation (draft, work in progress)
Links to useful documents
Victorian Regulation guidelines (including the Victorian Guide to Regulation- VGR)
NSW Guide to Better Regulation
Reform of regulation can proceed in the following ways
Principles The starting premise is "Less is more". We should not have regulations governing the markets or industry as far as possible, except to prevent against fraud, discriminatory practices and collusion. The key principle is "can a freely operating market in the space under consideration take care of most concerns and issues". Govt regulation is necessary only if we answer NO to the above.
We need to get the government out of all areas in India except Defence (protection against external goons), Law and order (protection against internal goons), and common infrastructure which can not be paid for by profit (roads, tubewells, primary education, primary healthcare (although this is debatable), rural electrification). We need to especially get the govt out of meddling in land, through its powers of confiscation. Once you do this, you will end up cutting "public" corruption by 50-75% and private corruption can be dealt more easily by the law. The other benefit of doing this is that "lucrative jobs" and positions of power in the govt will drop dramatically, thereby eliminating the incentive for many of our goons/politicians to contest elections.
Examples Most of the laws relating to industry and competition to be scrapped, except to provide for independent regulators where necessary. All of the laws relating to sports bodies to be scrapped. Most of the laws relating to education policing to be scrapped and to be replaced with competition laws. The Indian Penal code is the only one that will need serious review and maybe building up from fundamental principles of justice and freedom. This is not an exhaustive list.
Discussion: Agreed.
Suggested action: Principles of this sort are used regularly in best practice regulatory regimes in the world. Eg. see the VGR cited above which provides an extensive discussion of such matters. A detailed discussion of these principles is also provided in Breaking Free of Nehru. FTI should elaborate on these principles – maybe a brief brochure.
Reviews Ad hoc reviews commissioned by the government directly or through an independent commission of entire industry areas (eg. Productivity Commission in Australia at the federal level and Victorian Competition and Efficiency Commission at the Victorian level). These reviews can focus on whether current regulation is necessary, whether it is achieving its objective, whether there are better ways to achieve its objectives, and so on. Everything is conducted with sufficient public consultation. These reviews can then conduct a cost-benefit analysis of various options and makes recommendations. The government can then consider the recommendations and makes a public response, followed by action. This is a very expensive exercise, so such reviews should be are phased out over time. A large number of regulations can be repealed or remade in consequence. Eg. the OHS RIS (The task of policy making in this area took over 2 years and about 20 people working full time at a cost of a few million dollars. India can't afford this but India could insist on its regulators starting with existing regulations and policies from the West, and modifiying them to suit.)
Sunsetting clauses Every 'Regulation' ends every 10 years in Australia. At that stage the regulation should be completely reviewed and re-made, else not made again. This duration can be less than 10 years. Full-fledged evaluations should happen every 5 years or so. Eg. THIS LINK
Comment: Review after 5 years is impractical given the lead times involved ..... we will end up in a constant cycle of drafting, review, implementation, review, etc, which will only lead to "analysis paralysis" and expansion of the government, not contraction. I am not in favour of either external consultants or in-house reviewers - their conclusions are invariably slanted by who pays the bill. Having seen how these so-called independent consultants work over the past 15 years, I have scant respect for them. I prefer that each significant piece of regulation gets reviewed by its audience/users on an on-going basis through an online/offline forum. This is true feedback and when the majority of the feedback gets negative (after a cooling off period of say 2 years), then the regulation needs to be reviewed. This will be like an on-going, fairly cheap referendum on policy making.
Discussion: The comment was about mid-term evaluation after 5 years not a full review. Second, the fact that in India we have a terribly corrupt and shoddy government which conducts 3rd rate reviews is purely an Indian problem. The quality of the review of the OHS Act for instance (see link) is an example of the quality of work that can be done by independent experts. FTI should not use India’s shoddy practicies as its benchmark. The suggestion here is based on world best practice, and it works where it is used as intended.
Commitment to internal efficiency in government Such a project can focus on using the most efficient ways to function within government. Expert organisations can be hired to review internal processes and recommend the world-best or most efficient methods.
Internal performance audits Independent world-class consultancies can be hired to review projects and report to the Secretary of the relevant department about improvements. Eg. see http://www.pc.gov.au/study/regulationbenchmarking/stage1/docs/finalreport
External review by Auditor General A large budget can be set aside for the Auditor General to pick up ANY area of government to review and independently report on its functioning. A range of world-best performance meaures can be used for this purpose.
Periodic independent reviews of performance by government These reviews can be commissioned if a government is brave enough!
Two key ingredients a) Wide public consultation at each step of policy design is vital. That includes issue of discussion papers, getting submissions from the public and providing them with a timely and detailed response. If that is not built into the model then bad policy will invariably emerge. Policy and strategy is not a mechanical thing, as all ‘models’ including the balanced scorecard, have found.
b) It is inapproprite to apply any mechanical models. There is no software in the world to sensibly rate policy. Policy analysis is a deeply intellectual task, which requires enormous calibre and understanding. Tools such as RIS can be applied, but in the end, good sense and fundamental principles of freedom and free markets need to be applied.
Incentives of bureaucrats a) Secretaries (and all senior executives) should be hired on 4 or 5 year contracts, and their bonus pay and continuation in the job should be tied to delivery of performance outcomes. If they fail to deliver they should be booted out! - the sooner the better.
b) All officers in government should be strongly monitored for performance. A low (even zero) tolerance for incompetents should be encouraged in departments.
Unfortunately, in India, unless the IAS is disbanded and Secretaries are hired on performance contracts, NO amount of process improvement will help. Zro based budgeting was a farce, for example. There is a ZERO performance culture and a 100% corruption culture in India, the complete opposite of the US/ Western cultures.
India should start by building a world-class performance culture in the bureaucracy in India The rest will follow. When one’s job is on the line if one doesn't deliver the best, then one WILL deliver. If one’s job is on the line if there is even the slightest corruption in one’s department, then one WILL ensure zero corruption!
Comment Given the constraints of how governments must operate, I think it will be difficult to cut out the IAS. I would prefer, instead, that the service contracts be changed and seniority based promotions to be eliminated. Also, the explicit target will be to cut the size of the Federal bureaucracy by 50% over the next 15-20 years.
Discussion: If FTI is to implement world-best policy, then it cannot support any tenured service in India. These are an anachronism. There are no ‘service’ contracts in the IAS anywa, this is a life time tenure. See original appointment letters to the IAS here. This severe problem of tenured services has also been discussed at length in chapter 5 of Breaking Free of Nehru – and also in the TOI article here.
Second, cutting the bureaucracy is not likely to be a key issue as a general principle; its effectiveness is the key principle. Action suggested: A complete set of reforms of public administration need to be articulated. |