victorian competition and efficiency commission · 2015-10-07 · november 2014, the premier became...

Victorian Competition and Efficiency Commission

Annual Report 2014-15

© State of Victoria 2015

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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 2015, Annual Report 2014-15, Melbourne, August.

31 August 2015 The Hon Daniel Andrews MP Premier of Victoria 1 Treasury Place MELBOURNE VIC 3002 Dear Premier

VICTORIAN COMPETITION AND EFFICIENCY COMMISSION 2014-15 ANNUAL REPORT

The Victorian Competition and Efficiency Commission is pleased to present you with its 2014-15 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 under section 53 of the Financial Management Act 1994. Yours sincerely

MATTHEW BUTLIN ANNA CRONIN Chair Commissioner

CONTENTS V

Contents Foreword VII 1 The Victorian Competition and Efficiency Commission 1

1.1 About the Commission 1 1.1.1 Reallocation of VCEC’s functions 1 1.1.2 The Commissioners 1 1.1.3 The Commission’s Secretariat 2 1.1.4 Performance reporting 2

2 Inquiries and improvement studies 5 2.1 Inquiries 5

2.1.1 Inquiries undertaken in 2014-15 5 2.1.2 Other advice to Government 5

2.2 Improvement studies 5 2.2.1 Improvement studies undertaken in 2014-15 6 2.2.2 Regulators’ Forum 8

3 Regulation review 11 3.1 Introduction 11 3.2 The Commission’s regulatory review roles 11

3.2.1 The Commission’s advisory role 11 3.2.2 The Commission’s support role 13 3.2.3 Improvements to regulatory proposals 15

3.3 Improving broader regulatory practices 16 3.4 Performance reporting 17

3.4.1 Timeliness of the Commission’s processes 17 3.4.2 Quality of the Commission’s processes 17

4 Competitive neutrality 19 4.1 Introduction 19 4.2 The Commission’s competitive neutrality role 19 4.3 Performance reporting 20

4.3.1 Informing businesses and investigating complaints 20 4.3.2 Assisting with compliance 21

Appendix A: Financial reporting directives 23 References 27

FOREWORD VII

Foreword The year just past saw some profound changes for the Victorian Competition and Efficiency Commission. As part of new administrative orders after the election held in November 2014, the Premier became the Minister responsible for the Commission, and its Secretariat was transferred to the Department of Premier and Cabinet.

Subsequently, the Victorian Government decided that the Commission would no longer be a separate entity and that its inquiry functions and staff would be absorbed into the Department of Premier and Cabinet. All of the Commission’s other functions have been retained under different administrative arrangements. These had not been finalised at the time of writing.

Over the eleven years since the VCEC was established in July 2004, it has made a significant contribution to the wellbeing of Victoria. The Commission’s work has

saved Victoria more than $1.2 billion (around $200 per Victorian) in avoided regulatory costs as a result of VCEC’s regulatory impact assessment work, which has been consistently acknowledged as Australia’s best by other jurisdictions and stakeholders

made hundreds of recommendations for improvements – most of which were adopted by successive Victorian Governments – across a broad range of areas including traffic congestion, environmental regulation, tourism, local government food regulation and Victoria’s regulatory framework.

The Commission has also made independent assessments of the impacts of new and sunsetting regulations and legislation, and administered Victoria’s Competitive Neutrality Policy.

In all, VCEC assessed 398 Regulatory Impact Statements, Business or Legislative Impact Assessments and Regulatory Change Measurements and undertook 19 public inquiries, seven Victorian Regulatory System surveys, six regulatory improvement studies and one Commissioned Review.

We have been pleased to have had the opportunity to play this role.

As in previous years, I would like to record my appreciation of the time and efforts of the stakeholders who engaged with us on the various tasks the Commission was assigned. The effectiveness of our work relied heavily on interactions with many people and organisations and their contributions have greatly strengthened our work.

I also thank my colleagues, Commissioners Anna Cronin and Deborah Cope, whose term finished on 15 March 2015. Finally, on behalf of all Commissioners I particularly acknowledge the effort and commitment of staff of the VCEC Secretariat throughout the Commission’s eleven years.

M W Butlin Chair

THE VICTORIAN COMPETITION AND EFFICIENCY COMMISSION 1

1 The Victorian Competition and Efficiency Commission

1.1 About 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 change in regulatory burden of regulation

(3) administering Victoria’s Competitive Neutrality Policy.

These functions and the Commission’s outputs are discussed further in the subsequent sections of this report.

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.

1.1.1 Reallocation of VCEC’s functions

On 14 May 2015 the Government announced that the Commission would cease to exist as a single entity, although its functions would continue to operate in the day-to-day operations of the Department of Premier and Cabinet.

The Commission’s regulatory impact assessment and competitive neutrality functions continue to be undertaken independently. The Commission’s inquiry functions (including regulatory improvement studies) were embedded in the Department of Premier and Cabinet from May 2015.

A number of projects which were underway at the time of transfer were completed.

1.1.2 The Commissioners

The Commission consists of a chair (who is a Commissioner) and one to four additional Commissioners, all of whom must have experience as business leaders, academics and/or public policy practitioners. During 2014-15, the Commission consisted of Chair Matthew Butlin, Commissioner Anna Cronin (appointed in August 2014) and Commissioner Deborah Cope (completed term in March 2015); as at 30 June 2015 the Commission consists of two full-time Commissioners.

2 ANNUAL REPORT 2014-15

1.1.3 The Commission’s Secretariat

The Commission is supported by a Secretariat of approximately 9.2 full-time equivalent staff (appendix A) as at 30 June 2015. 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. The Secretariat selects its own staff and appoints independent consultants and contractors who assist the Commission as needed 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 nor the Department of Premier and Cabinet on matters relating to the Commission’s functions. The 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 1.1).

Organisation structure, 30 June 2015 Figure 1.1

1.1.4 Performance reporting

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 1.1). Quality is measured by a service provision rating from the Commissioners; this measure rates the quality of the Secretariat’s output.

Commissioners Matthew Butlin (Chair)

Anna Cronin

Executive Director Secretariat

Andrew Walker (A/g)

Regulation Review and Administration Teams

THE VICTORIAN COMPETITION AND EFFICIENCY COMMISSION 3

Budget paper performance measures and final Table 1.1outcomes, 2014-15

Performance measures Unit of

measure Target Outcome Quantity Number of final inquiry reports submitted to Governmenta no. 2 0 Advice on adequacy of final RISs, BIAs and RCMs prepared by departmentsbc no. 35 25 Number of regulatory improvement studies submitted to Governmentd no. 2 4

Quality Service provision rating (Commissioner assessment of Secretariat performance)e % 80 80 Timeliness Complete the initial assessment phase of BIAs within 10 working days of receiptc % 100 100 Complete the initial assessment phase of RISs within 10 working days of receipt % 100 100 Complete the initial assessment phase on RCMs within 10 working days of receipt % 100 100 Completion of regulatory improvement studies by due datef % 100 50

Completion of inquiry reports by due datea % 100 0 Notes: a The Government did not direct the Commission to undertake any inquiries to be completed during

2014-15. (Terms of reference for an Inquiry into Freight Logistics was received, but was withdrawn following the state government election in November 2014.) b This target is demand driven and is dependent on the number of RISs/LIAs/RCMs received for assessment. c BIAs were renamed LIAs (Legislative Impact Assessments) in July 2014. d The Government sent VCEC terms of reference for four regulatory improvement studies to be completed between 1 January and 30 June 2015. e This is a subjective assessment by the Commission of the quality of services provided by the Secretariat to the Commission. f Two regulatory improvement studies were not submitted by the due date due to the need to collect additional information and complete consultations with stakeholders.

Sources: Government of Victoria Budget Paper No. 3 2014a, 285-286; Commission analysis.

INQUIRIES AND IMPROVEMENT STUDIES 5

2 Inquiries and improvement studies 2.1 Inquiries Inquiries enable the Commission to examine, in detail, areas of the Victorian economy referred to it by the Treasurer, and subsequently the Premier, on behalf of the Government. During 2014-15, the Commission submitted no new final inquiry reports. The Commission commenced one inquiry which was subsequently withdrawn by the incoming Government. In addition, the Commission completed two major pieces of advice to government and four regulatory improvement studies.

2.1.1 Inquiries undertaken in 2014-15

On 4 November 2014 the then Victorian Treasurer issued a terms of reference for an inquiry into opportunities to increase the efficiency of import and export distribution and logistics chains. The terms of reference had been authorised by the previous government.

Subsequently, the Premier of Victoria, as the new Minister responsible for the VCEC, withdrew the terms of reference and directed the Commission to cease work on the inquiry. This advice was received by the Commission on 8 January 2015.

2.1.2 Other advice to Government

Commissioned review

On 19 February 2014, the Commission received a terms of reference from the Victorian Treasurer to conduct its first commissioned review into improving the efficiency and performance of Victorian regulators. Amongst other things, the study team was tasked with identifying specific actions to achieve at least $30 million of annual budget savings from 2015-16.

The commissioned review was submitted to the Victorian Government on 31 July 2014.

Incoming government brief: supplementary advice

In March 2015 the Commission provided advice to the new government entitled Jobs and inclusive growth: meeting Victoria’s economic challenges. This document supplemented the Commission’s incoming government brief to the new Victorian Government. The advice, taking the Government’s economic plan as a starting point, identified additional opportunities to meet Victoria’s economic challenges and support future policy development.

The review was submitted to the Premier on 17 March 2015.

2.2 Improvement studies During 2014-15, the Commission completed four regulatory improvement studies: two undertaken with the former Department of Environment and Primary Industries; one with the Victorian Commission for Gambling and Liquor Regulation; and one with the State Revenue Office.


2.2.1 Improvement studies undertaken in 2014-15

Department of Environment and Primary Industries

On 7 January 2014, VCEC received terms of reference for two regulatory improvement studies with the then Department of Environment and Primary Industries (DEPI) from the Victorian Treasurer.

The first study examined the regulation of the sea urchin fishery in Victoria, with a view to developing a framework that could be applied more broadly to other commercial fisheries. The terms of reference directed the Commission to develop a regulatory framework to:

assess appropriate access entitlement options

determine the process for allocating the access entitlement to current incumbents and new participants

determine an appropriate quota to be allocated to the fishery

review management arrangements for the fishery, including the relative roles of government and industry in developing the fishery

determine the cost recovery regime

quantify in preliminary terms the impacts of its recommendations, including initial estimates of benefits to businesses and households, where possible

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

identify opportunities and make recommendations on regulator savings opportunities

develop a framework or set of principles that can be applied to other commercial fisheries.

The study team undertook targeted consultation with stakeholders. The sea urchin fishery report contained five recommendations and was submitted to the Premier on 6 January 2015.

The second study examined invasive species compliance. The terms of reference required that the regulatory improvement study would:

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

identify opportunities and make recommendations to improve the efficiency of associated regulations, including through greater use of risk-based approaches to regulation within existing legislative and regulatory frameworks

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 regulator’s direct control

identify and make recommendations on regulator savings opportunities

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


The study team consulted with 13 stakeholders who had direct experience with the Victorian invasive species regulatory framework. The invasive species report contained 12 recommendations and was submitted on 27 January 2015.

Victorian Commission for Gambling and Liquor Regulation

On 4 November 20141, the then Victorian Treasurer issued terms of reference for VCEC to conduct a regulatory improvement study with the Victorian Commission for Gambling and Liquor Regulation (VCGLR). The emphasis of this study was on reducing regulatory burdens and red tape, including (but not limited to) better risk-based regulation.

The terms of reference for the study required the Commission to:

assess how the VCGLR deals with risk in determining the suitability of gaming industry participants, including the extent to which current practices are risk-based

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

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 VCGLR's direct control

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

The study involved detailed consultation with nine organisations and a risk-based regulation workshop with VCGLR staff. The report contained five recommendations.

The final report was provided to the Premier on 6 May 2015.

State Revenue Office

On 4 November 20141, the then Victorian Treasurer issued terms of reference for VCEC to conduct a regulatory improvement study with the State Revenue Office (SRO). The study was to identify opportunities to consolidate revenue functions in Victoria, thereby reducing collection costs and improving service delivery. The study did not examine the design, structure or overall level of taxation.

The terms of reference for the study required the VCEC to examine the framework for revenue collection in Victoria, with a particular focus on gaming taxes and mineral royalties. The Commission was requested to make recommendations on matters including:

opportunities to centralise common business functions to reduce the cost of duplicating these services across government

opportunities to gain cost efficiencies and improve the customer experience by providing a central payment solution and a single point of contact for Victorian taxpayers

opportunities for reducing compliance costs by streamlining reporting, payment and record keeping requirements across revenue streams.

1 The terms of reference were received by the Commission on 6 November 2014.


The study involved detailed consultation with the New South Wales Office of State Revenue and the Queensland Office of State Revenue in view of their experience in assuming responsibility for collecting gaming taxes and mineral royalties respectively. The report contained two recommendations.

The final report was provided to the SRO and the Premier on 24 June 2015.

2.2.2 Regulators’ Forum

The Commission also convenes a Regulators’ Forum which provides regulators with a regular gathering to:

identify and discuss common issues of interest, including current government priorities for improving regulator performance and efficiency

share expertise, practical experience and insights on current and future developments in regulatory performance

catalyse interest in, and actions on, broader initiatives of importance to participating regulators.

Current members are the chief executives of 16 regulators plus senior officials from key departments (box 2.1).

The group met seven times during 2014-15. Issues discussed included:

(1) how regulators can collaborate effectively to improve community outcomes

(2) implementing regulator Statements of Expectation

(3) implications of privacy legislation on regulators

(4) implementing risk-based approaches to regulation

(5) implications of the collaborative economy for regulation and regulators

(6) intelligence gathering, compliance and improving community outcomes

(7) Service Victoria and modernising government transactions with the public.

The Regulators’ Forum complements arrangements in other agencies such as the Department of Economic Development, Jobs, Transport and Resources.


Box 2.1 Regulators’ Community of Practice members

Consumer Affairs Victoria Council of Legal Education and Board of Examiners

Dairy Food Safety Victoria Department of Economic Development, Jobs, Transport and Resources

Department of Premier and Cabinet Department of Treasury and Finance

Energy Safe Victoria EPA Victoria

Essential Services Commission Department of Health and Human Services

Game Management Authority PrimeSafe

Taxi Services Commission Transport Safety Victoria

VicRoads Victoria Police

Victorian Building Authority Victorian Commission for Gambling and Liquor Regulation

Victorian Institute of Teaching WorkSafe Victoria

REGULATION REVIEW 11

3 Regulation review 3.1 Introduction The Victorian Government promotes the independent assessment of regulatory proposals to ensure that Victorian regulation best serves the community. Victoria’s impact assessment approach requires:

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

Legislative Impact Assessments (LIAs) to assess proposals for Bills that provide for new or amending primary legislation

Regulatory Change Measurements (RCMs) to measure the savings from regulatory reforms which can contribute to the Government’s red tape reduction target.

The impact assessment framework for RISs and LIAs aims to improve the quality of policy proposals by ensuring that the relevant information and analysis associated with the proposals enable fully informed discussion and decision-making. LIAs provide this information to Ministers and the Cabinet while RISs inform key stakeholders and facilitate their participation in consultation. These requirements are in line with the Government’s objectives for ‘good regulation’ (Government of Victoria 2014b).

3.2 The Commission’s regulatory review roles The Commission’s impact assessment activity has both an advisory and support role. The Commission advises decision makers on the quality of a RIS, LIA or RCM and supports departments and agencies which are analysing policy proposals.

3.2.1 The Commission’s advisory role

Advising on the adequacy of RISs, LIAs and RCMs

The Commission provides independent advice to Ministers about whether RISs and LIAs comply with the Subordinate Legislation Act 1994 and the Victorian Guide to Regulation (VGR) respectively (Government of Victoria 2014b). The Commission also verifies RCMs to ensure that they meet requirements in the Regulatory Change Measurement Manual (Government of Victoria 2013).

What the Commission’s advice means

The Commission will advise that a RIS or LIA meets the Government’s 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 are identified with appropriate data and transparent assumptions and judgements.


The Commission advises on the adequacy of a RIS as required under sections 10(3) and12H(3) of the Subordinate Legislation Act 1994. The Commission’s role in LIAs is as prescribed in the Victorian Guide to Regulation. In doing so, the VCEC’s advice refers to the adequacy of the evidence and analysis presented in a RIS or LIA. Therefore in providing its advice the VCEC does not express a view on the merits of a proposal. Rather, the Commission assesses a RIS or LIA on the extent to which the best available information, evidence and data have been used to fully inform decisions – this in turn helps Ministers and the community to understand and select options that best achieve the community outcomes.

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.

In 2014-15, the Commission provided final advice on 13 RISs, one LIA and verified 11 RCMs (table 3.1).

Number of RISs, LIAs, and RCMs completed Table 3.12013-14 to 2014-15

Outcomes Output Target 2013-14 2014-15

Regulatory Impact Statements

35 19b 13b

Legislative Impact Assessmentsa 5 1 Regulatory Change Measurements 4 11

Total 35 28 25

Notes: a Legislative Impact Assessments were previously called Business Impact Assessments in 2013-14 b These figures includes five and three legislative instruments under the Subordinate Legislation Act in 2013-14 and 2014-15 respectively.

Source: Commission data.

The number of RISs, LIAs and RCMs the Commission reviews is variable. Key drivers of workload include:

the regulatory program of the Government

the number of regulations that sunset in any given year

the threshold test for requiring a RIS, LIA or RCM

Ministers’ decisions to prepare a RIS, LIA or RCM.

This variability in workload makes it difficult to benchmark outputs against previous years or the performance target in Budget Paper No. 3.

Box 3.1 lists, by responsible department, all 13 regulatory proposals for which a RIS was prepared, reviewed by the Commission and publicly released in 2014-15. One LIA was prepared in 2014-15, but the relevant Bill had not been introduced into Parliament prior to the State election.


Box 3.1 Regulatory impact statements completed in 2014-15

Department of Economic Development, Jobs, Transport and Resources Electricity Safety (Electric Line Clearance) Regulations 2015

Port Management (Local Ports) Regulations 2015

Road Management (Works and Infrastructure) Regulations 2015

Specification for Taxi Fare Devices

Transport (Compliance and Miscellaneous)(Conduct on Public Transport) Regulations 2015

Department of Environment, Land, Water and Planning Environment Protection (Scheduled Premises and Exemptions), (Industrial Waste Resource) and (Fees) Amendment Regulations 2015

Wildlife (State Game Reserves) Regulations 2014

Department of Health and Human Services Safe Drinking Water Regulations 2015

Southern Metropolitan Cemeteries Trust – mausoleum, burial and cremation memorial fees

Southern Metropolitan Cemeteries Trust – burial and cremation memorial fees

Department of Justice and Regulation Country Fire Authority Regulations 2014

Crime Statistics (Fees and Charges) Regulations 2015

Gambling Regulations 2015

Departments can also request the Commission to review Supplementary Impact Assessments (SIAs), which assess specific impacts of proposed regulatory changes on Victoria and supplement Council of Australian Governments (COAG) RISs.

Advising on the adequacy of Policy Impact Assessments by the Environment Protection Authority (EPA)

The Commission formally reviews Policy Impact Assessments (PIAs) prepared by the EPA for State Environment Protection Policies and Waste Management Policies and assesses adequacy against the requirements of section 18C (1) of the Environment Protection Act 1970 and the appropriate sections of the VGR. By doing this, statutory policies are subjected to the same rigour and transparency of analysis as required under the Subordinate Legislation Act 1994.

3.2.2 The Commission’s support role

The Commission provides support to departments and agencies to promote best practice regulation and stronger regulatory analysis. It does this by engaging with departments and agencies to distribute information and facilitate discussion about policy and regulatory analysis, including the requirements for RISs, LIAs and RCMs to be considered adequate.

The Commission’s support role also includes tailored training for departments on policy analysis and on how to prepare impact assessments, as well as workshops on specific policy issues.


Providing information and assistance on regulatory analysis

The Commission provides information to departments and agencies about the requirements for RISs, LIAs and RCMs. It engages in an iterative and consultative way with departments and agencies to assist them to achieve a necessary standard in their regulatory analysis by:

identifying improvements to the analysis (which aids consultation and thus community acceptance of the need for regulation but does not necessarily lead to changes in regulatory proposals)

suggesting additional options which may be more effective or achieve the same outcomes at a lower cost including whether there is a need for the proposed regulation.

The Commission offers considerable assistance throughout the drafting of a regulatory impact assessment if requested. Early engagement with departments and agencies is a crucial step in the impact assessment framework. The Commission endeavours to work with agencies as early as possible once it knows that a regulatory proposal or change will require a RIS, LIA or RCM.

Providing advice on whether a RIS is required for a regulatory proposal

The Commission supports departments and agencies even when a RIS, LIA or RCM has not formally commenced. This includes assistance with:

determining whether a regulatory proposal meets the threshold test to require a RIS or an LIA (in practice, whether a proposed regulation or bill would have a significant economic/social burden on a sector of the public) (Government of Victoria 2014c, 3–6)

assessing whether analysis contained in a COAG RIS meets the requirements of the VGR to be exempt from the Victorian RIS and LIA requirements.

Whether the thresholds are met is decided by the relevant Minister. However, the Commission’s assistance supports departments and agencies preparing advice for Ministers on whether impact assessments are required for a policy proposal.

Training workshops

The Commission conducts training to build the capability of policy officers throughout government on impact assessments. Box 3.2 outlines topics covered in recent impact assessment workshops. The Commission’s delivery of training is constantly reviewed to ensure that content is relevant to meet client requirements.

This training was commended in the Government’s response to the Commission’s regulatory framework inquiry (Government of Victoria 2012, 7) as well as the Victorian Environment Planning Legislation Committee’s Inquiry into the Regulatory Impact Statement Process (EPLC 2013). Feedback from attendees also highlights that the workshops are very well received (See Performance Reporting - table 3.5).


Box 3.2 Impact assessment workshops Topics covered in recent impact assessment workshops included:

principles of good practice regulation

defining the policy problem

identifying the policy objectives

options to address the problem

introduction to cost benefit analysis, including multi-criteria analysis

small business and competition impacts

implementation and enforcement

evaluation strategy

stakeholder consultation. Source: Commission training material

The Commission also produces and runs other customised training. In 2014-15, this included a workshop for Victorian Public Service (VPS) staff undertaking the Graduate Recruitment and Development Scheme (GRADS) as well as department-specific training – four sessions for the EPA (jointly with the Department of Environment, Land, Water and Planning) and three sessions for WorkSafe Victoria.

Training workshops continue to be well attended, with 141 attendees in 2014-15 (table 3.2).

Training workshops, 2013-14 and 2014-15 Table 3.2 Outcomes

Output 2013-14 2014-15 Impact assessment workshops 7 5 VPS GRADS workshops 2 1

Department-specific workshops n/a 7

Total attendees at workshops 108 141


3.2.3 Improvements to regulatory proposals

The Commission’s involvement — through its training, advice and other support —improves the quality of analysis in impact assessments. This then contributes to tangible improvements in regulatory proposals such as:

identification of more effective or lower cost options

adjustments to the preferred option to increase net benefits

not proceeding with new regulation if the analysis indicates that the regulation is likely to be ineffective or impose a net cost on the community, or if a non-regulatory solution can meet the same objectives.


The Commission monitors changes in regulatory proposals from its first involvement and, where possible, quantifies the impact of any changes. Box 3.3 provides an example of improvements to regulatory proposals due in part to the Commission’s involvement in 2014-15, and the associated quantifiable savings or benefits in practice.

Box 3.3 Changes to regulatory proposals using the impact assessment framework

A particular focus of the Commission is to suggest new and alternative analytical frameworks, data sources and other options to improve the analysis of specific policy issues. This can lead to the identification of more effective or lower cost options.

Evolving taximeters – New Specifications for Fare Devices

The Taxi Services Commission (TSC) used the RIS framework to develop a new specification for taximeters in response to the Taxi Industry Inquiry. The initial proposal built on existing traditional taximeters, but with additional features such as real-time data collection and transmission to the regulator, confirmation of trip and fare information and automatic calculation of tolls. This had an estimated cost to industry and government of $30.5 million over ten years, some of which would likely be passed through to consumers.

Following discussions between VCEC and the TSC which highlighted the pace of technological change and the scope for a performance-based option to be examined, the TSC developed a new option which, after further analysis, was adopted as the preferred option in the final RIS.

This option is for a more technologically neutral, performance-based specification which allows for different approaches to be implemented, for example, by enabling fares to be calculated using GPS (rather than counting wheel rotations) and enabling ‘fare devices’ to utilise software applications on ‘smart devices’ (rather than a dedicated taximeter). The proposed specifications are therefore more likely to provide greater choice for taxi operators and foster more innovation and competition in fare devices. The TSC believes that this option is significantly less burdensome than those considered previously (estimated to be less costly than the initial option by about $27.4 million or 90 per cent over ten years). Source: Commission analysis, Taxi Services Commission 2015.

3.3 Improving broader regulatory practices The Commission works to improve broader regulatory practices by engaging with the public and key stakeholders to explain in plain English the impact assessment framework and generate ideas on best-practice regulatory and policy design.

In 2014-15 the Commission improved discussion and information on the wider impact assessment process by:

presenting to international delegations from Korea, Malaysia and China

sharing knowledge with other jurisdictions such as the Western Australian Department of Premier and Cabinet, Queensland Productivity Commission and the annual meeting of Australasian regulatory reform units

publishing RISs on the Commission’s website and social media channels.


Generating ideas on best practice regulatory and policy design

The Commission’s Regulatory Hub (RegHub) is a community of practice for VPS staff on the Victorian Government’s intranet. Initiated in 2013-14, the RegHub is a platform to facilitate discussion among policy officers on best practice regulatory process, and to share lessons and experiences across departments to assist with in-house regulatory design.

Another initiative, the Victorian Behavioural Insights Network (VicBIN), was created in September 2014 through collaboration between the Victorian Departments of Premier and Cabinet and Treasury and Finance and the Commission. VicBIN serves as a forum for sharing experiences and insights from the application of behavioural science to public policy, hosting monthly seminars and highlighting cases of good practice across the public service. There are now over 400 members, including practitioners, policy-makers and experts both within and outside of government.

Risk-based regulation guidance

The Commission’s work on impact assessment, improvement studies and engagement with regulators has provided significant insights into what risk-based regulation means and the challenges faced by regulators in moving to more risk-based approaches. The Commission’s experience is that many regulators want to adopt ‘smarter’, more risk-based approaches and this is made easier when they can draw on the experience of others.

The Commission has therefore captured its insights in two papers on Smart regulation: Grappling with risk:

A guidance note, which is intended to be a practical handbook for policy officers and regulatory staff outlining how to use risk-based systems to develop policy and to design, administer and enforce any ensuing regulation.

A supporting paper that discusses in further detail broader concepts and issues underpinning the guidance note as well as practical challenges in applying risk-based approaches.

These papers were published in August 2015 on the Commission’s website as a resource upon which policy officers and regulators can draw in developing their own risk-based approaches to regulation.

3.4 Performance reporting

3.4.1 Timeliness of the Commission’s processes

In 2014-15, the Commission continued to provide advice on all first drafts of RISs, RCMs and LIAs within ten working days of receipt, meeting its target of 100 per cent.

The Commission sent surveys to the policy officers responsible for all 25 RISs, LIAs and RCMs completed in 2014-15 to get feedback on the Commission’s performance and received 24 responses (a 96 per cent response rate).

Ninety-six per cent of respondents rated the timeliness of the Commission’s advice on their completed RISs, LIAs and RCMs as either ‘good’ or ‘very good’ in 2014-15 (table 3.3). This continues the strong ratings received in the previous year.


Regulatory agency staff rating of the Table 3.3Commission’s response time for drafts (per cent)

Very poor Poor Average Good Very good 2013-14 0 0 4 16 80 2014-15 0 0 4 46 50

Source: Commission feedback surveys.

3.4.2 Quality of the Commission’s processes

The Commission’s performance in providing advice on RISs, LIAs 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 completing RISs, LIAs and RCMs, along with training workshop attendees.

The Commission’s overall performance in providing advice and running training remained very strong in 2014-15. Over 90 per cent of survey respondents rated the Commission’s performance as ‘good’ or ‘very good’ across all areas, a result which was broadly similar to 2013-14 (table 3.4).

Regulatory agency staff rating of the Table 3.4Commission’s overall performance (per cent)

Very poor Poor Average Good Very good 2013-14 0 0 4 28 68 2014-15 0 0 4 46 50

Source: Commission feedback surveys.

Training seminars and workshops

All participants that attended the Commission’s training workshops were given the opportunity to provide feedback. Fifty-two of the 57 participants that attended RIS and LIA training workshops and all 19 participants who attended GRADS training in 2014-15 responded(table 3.5).

Feedback from participants in other department-specific training was also obtained although using different indicators. Qualitative feedback suggested that these workshops were very well received, highly useful and relevant to participants’ work.

Rating of the Commission’s training workshops Table 3.5(per cent)

Poor Satisfactory Good Very good RIS/LIA 2013-14 0 0 46 54

GRADS 2013-14 0 3 14 83 RIS/LIA 2014-15 0 0 37 63 GRADS 2014-15 0 0 16 84

Source: Commission feedback surveys

COMPETITIVE NEUTRALITY 19

4 Competitive neutrality 4.1 Introduction Under the Competition Principles Agreement, Victoria is obliged to apply competitive neutrality principles to all significant state and local government business activities that compete with private businesses (NCC 1995). The objective of competitive neutrality is to ensure that Government businesses do not enjoy any net competitive advantage as a result of public ownership over private businesses.2

In Victoria, the Competition Principles Agreement is implemented through the Competitive Neutrality Policy. The Policy and related guidance documents are used by Victorian government agencies as well as local government to apply competitive neutrality principles.

4.2 The Commission’s competitive neutrality role The Victorian Competition and Efficiency 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 Competitive Neutrality Policy and raises awareness of their competitive neutrality responsibilities

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

The Commission’s work assists Victorian state and local governments to comply with the Competitive Neutrality Policy. The benefits of Competitive Neutrality Policy include:

enhancing business confidence to make investment decisions and create new employment opportunities

promoting business innovation to develop new products that in turn provide consumers with a wider choice.

For government agencies, the application of the Competitive Neutrality Policy can improve accountability and transparency when operating business activities. This can strengthen the capacity of state and local governments to distinguish between commercial and non-commercial outputs and to deliver these in an efficient and effective manner.

2 The objective of competitive neutrality as 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)


4.3 Performance reporting The Commission’s performance reporting uses activity and proxy outcome measures to indicate performance, including the number of complaints assessed.

4.3.1 Informing businesses and investigating complaints

The Commission provides advice to businesses seeking guidance about competitive neutrality.

The Commission received 13 queries from private businesses, their representatives or other interested parties during 2014-15 which is two less than the previous year (table 4.1).

Assistance to private businesses and their Table 4.1representatives

Source of queries 2013-14 2014-15 Private businesses 12 8 Lawyers advising private businesses 1 0 Consultants 1 1 Private individuals 1 1 Parliamentarians on behalf of constituents 0 0 Community groups 0 1 Industry groups 0 2 Total 15 13

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

Source: Commission data

The Commission received three formal competitive neutrality complaints in 2014-15 of which two were assessed to be outside the scope of the Competitive Neutrality Policy and did not lead to an investigation. The Commission accepted one complaint for investigation. Table 4.2 reports the number of complaints considered by the Commission in 2014-15, and how they were handled. No complaints were under investigation as at 30 June 2015.

Competitive neutrality complaints Table 4.2 2013-14 2014-15

Investigations carried over from last year 0 0 Number of new complaints received 3 3 Number of complaints not accepted 3 2 Number of complaints finalised through investigation 0 1 Investigations carried over to next year 0 0


COMPETITIVE NEUTRALITY 21

Investigation completed in 2014-15

Hobsons Bay City Council — operation of long-day childcare centres

The Commission received a formal complaint on 8 September 2014, directed at Hobsons Bay City Council. The complaint alleged that the Council had not applied fully cost-reflective pricing to its long-day childcare services at the Altona North and Altona Meadows children’s centres.

The Council provided the Commission with a range of financial data and other information to assist with the investigation. The data showed that the two centres operated with a substantial Council subsidy and had not priced services to reflect full cost recovery. On 28 January 2015, the Commission issued its final investigation report which found that the Council was not compliant with the Government’s Competitive Neutrality Policy.

The Commission concluded that the Council could bring its operation of long-day child care facilities into compliance with the Competitive Neutrality Policy by either:

(1) implementing a plan to adjust the prices it charges for long-day childcare services to fully recover costs (inclusive of net competitive neutrality cost adjustments), or

(2) completing a public interest test to demonstrate why a subsidy is warranted (successful completion of such a test would meet the requirements of the Competitive Neutrality Policy).

Subsequently, the Council decided on 10 March 2015 to cease its involvement in long-day childcare provision by the end of 2015. The Council intends to outsource the management and operation of the service to a not-for-profit entity. If the Council chooses to stop direct provision of long-day childcare services it will no longer be operating a business and the Competitive Neutrality Policy will no longer apply.

4.3.2 Assisting with compliance The Commission provided formal and informal advice to Victorian state and local government agencies on 20 compliance issues during 2014-15 (table 4.3).

Assisting compliance Table 4.3Source of queries 2013-14 2014-15

Councils 5 10 State government departments 18 6 Advisers to government businesses 0 4 Commonwealth government 1 0 Interstate jurisdictions 0 1 Total 24 21


The Commission assists with compliance through meetings and conducting workshops and presentations with state and local government agencies to advise on competitive neutrality matters. In 2014-15, the Commission met with personnel from five state government agencies which sought its assistance. The Commission provided advice about how to: undertake a significant business assessment, apply competitive neutrality pricing principles, and when and how to conduct a public interest test.

APPENDIX A: FINANCIAL REPORTING DIRECTIVES 23

Appendix A: Financial Reporting Directives A.1 Financial statements This appendix details the costs of the Commission’s operations during 2014-15. The Commission is supported by a Secretariat located in the Department of Premier and Cabinet (DPC). In supporting the Commission, the Secretariat operates independently from the rest of DPC, although it shares administrative resources (human resources, information technology, legal services, etc.) and is subject to DPC policies. These arrangements 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 under section 53 of the Financial Management Act 1994. The financial activities of the Commission have been consolidated and audited within the financial statements of DPC.

Table A.1 Cost of operationsab Expenses from operating activities 2013-14 ($) 2014-15 ($) Employee benefits (table A.2) 3 049 827 3 214 000

Supplies and servicesc 518 296 428 785

Depreciation and amortisation 32 029 34 504 Capital assets charge 12 831 14 288 Other expenses 1 345 1 399 Other economic flows included in net result 1 660 (4 113) 3 615 988 3 688 863

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 DPC, consistent with the arrangements for other similar agencies in the portfolio. b Includes costs relating to the inquiries function (seven inquiries staff relocated to DPC in May 2015) which cannot be disaggregated from the total cost of operations. c Includes expenditure on contractors and consultants, which is reported in the DPC Annual Report.



Table A.2 Commission and Secretariat employee costsab Employee benefits 2013-14 ($) 2014-15 ($) Salaries and wages 2 422 784 2 557 349 Superannuation 219 320 230 190 Annual and long service leave expense 251 923 284 591 Other on-costs 155 800 141 870 Total employee costs 3 049 827 3 214 000

Notes: a Includes the remuneration of the Commissioners (who are appointed by Governor-in-Council) and the Secretariat staff who are employees of DPC. Commissioner Deborah Cope completed her term on 15 March 2015. b Includes costs relating to the inquiries function (seven inquiries staff relocated to DPC in May 2015) which cannot be disaggregated from the total cost of operations.


A.2 Workforce data

Table A.3 Commission’s Secretariat employees, 30 June 2015 Total Secretariat employees — Victorian Public Service (VPS) and executive officers Full-time 7 Part-time 4 Total number 11

Total full-time equivalenta 9.2

Male Female Total

Full-time 5 2 7 Part-time 0 4 4 Total 5 6 11


Table A.4 Commissioners, 30 June 2015 Male Female Total

Full-time 1 1 2 Total full-time equivalent 1 1 2


APPENDIX A: FINANCIAL REPORTING DIRECTIVES 25

Table A.5 Profile of Victorian Public Service (VPS) employees of Commission’s Secretariat, 30 June 2015

Full-time Part-time Class Male Female Male Female Total

Grade 6 1 1 1 3 Grade 5 1 1 Grade 4 1 1 2 Grade 3 1 1 2 4 Grade 2 Grade 1 Total 4 2 4 10


Table A.6 Profile of executive officers of Commission’s Secretariat, 30 June 2015

Ongoing Special projects Class Male Female Male Female Total

EO-1

EO-2a 1 1

EO-3 Total 1 1

Notes: a Acting Executive Director


A.3 Freedom of Information statement The Commission is a prescribed authority under the Freedom of Information Act 1982 (Vic) and as such its documents, other than an exempt document, are accessible by the public, under the Act. The Commission received no requests under the Act during 2014-15.

A.4 Further requirements under the Financial Management Act 1994

Occupational Health and Safety The Commission and its Secretariat comply with relevant occupational health and safety requirements. WorkCover There were no WorkCover claims during 2014-15. Private interest declarations Declarations of private interest were completed by all relevant officers. Employee relations No employee time was lost in 2014-15 due to industrial disputes.


National Competition Policy The Commission promotes and complies with the National Competition Policy. Shares No shares are held by a senior officer as nominee or held beneficially in a statutory authority or subsidiary. Research and development No major research and development activities were undertaken by the Commission in 2014-15. Building works The Commission does not have any buildings under its direct control and did not enter into works that required compliance under the Building Act 1993. Overseas visits There were no overseas visits undertaken during the financial year of 2014-15. Changes in prices, fees, charges, rates and levies No prices, fees, charges, rates or levies were charged by the Commission in 2014-15. Major external reviews No major external reviews were carried out on the Commission in 2014-15. Major promotional, public relations and marketing activities No major promotional, public relations and marketing activities to develop community awareness were undertaken by the Commission in 2014-15. Sponsorship of major committees No major committees were sponsored by the Commission in 2014-15.

A.5 Compliance with the Protected Disclosure Act 2012

The Commission has adopted Making and Handling Protected Disclosures procedures which explain how a person — such as a whistle blower — may make a protected disclosure about the conduct of the Commission and Secretariat employees. The procedures are set out on the Commission's website at vcec.vic.gov.au.

There were no protected disclosures made to the Commission in 2014-2015.

A.6 Statement of consultancies Consultancies over $10 000

The Commission did not engage any consultancies during the 2014-15 financial year, where the total fees payable to the consultant exceeded $10 000.

Consultancies under $10 000

The Commission did not engage any consultancies during the 2014-15 financial year, where the total fees payable to the consultant was under $10 000.

REFERENCES 27

References EPLC (Environment and Planning Legislation Committee). 2013. Inquiry into the Regulatory Impact Statement Process.

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

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

Government of Victoria. 2012. 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.

Government of Victoria. 2013. Victorian Regulatory Change Measurement Manual.

Government of Victoria 2014a. 2014-15 Budget Paper No. 3 Service Delivery. Melbourne: Department of Treasury and Finance. May.

Government of Victoria 2014b. Victorian Guide to Regulation. Melbourne: Department of Treasury and Finance. December.

Government of Victoria 2014c. Victorian Guide to Regulation - Toolkit 3: requirements and processes for making subordinate legislation. Melbourne: Department of Treasury and Finance. December.

National Competition Council (NCC). 1995. Competition Principles Agreement. Canberra.

National Competition Council (NCC). 1998. Compendium of National Competition Policy Agreements. 2nd edn. Melbourne, June.

Taxi Services Commission (TSC), 2015, New Specification for Fare Devices – Regulatory Impact Statement, Melbourne. (http://www.taxi.vic.gov.au/__data/assets/pdf_file/0004/279787/Fare-Device-Functional-and-Technical-Specification-Regulatory-Impact-Statement-RIS.pdf accessed 24 August 2015)

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