Motivation for deregulation
Parliamentary Secretary to the Prime Minister, Christian Porter, has been tasked with removing $1 billion of red tape from business annually.
He has plenty of material with which to work with estimates that 85,000 regulations cost business and individuals about $65 billion annually in compliance and related costs.
Porter this week revealed that senior public servants across the bureaucracy now have a powerful motivation to enthusiastically join him in that task – their remuneration and performance bonuses have been linked to their deregulatory successes.
He told a Business SA forum that deregulation units established inside all of the Commonwealth’s portfolio areas had set targets for red tape reduction and the remuneration of senior officials, including departmental chief executives, was now linked to their performance on those targets.
“So there are senior executives in every portfolio areas that now have their remuneration linked in a substantive way to meeting targets on deregulation,” Porter said.
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“We think it is a really substantive motivator of people in terms of cutting through red tape,” he said.
“The scheme is in its first year. So I will come back to you next year with who’s been naughty and who’s been nice, who has done well and got their bonuses.”
In a wide-ranging presentation on the regulatory environment, Porter said the Federal Government’s plan to devolve environmental approvals to a one-stop shop arrangement with the States would have saved the resources sector more than $400 million a year if it had been in place over the past decade.
“The one-stop shop environmental approvals process is, I think, a revolutionary reform – it’s the Commonwealth Government exiting a compliance field but still maintaining standards by engaging State civil servants,” Porter told Business Insight after his presentation.
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“We looked back over the past decade of major projects, what their net present values were, and how much time would have saved under this process, (and calculated) what the increase in their net present values would have been.”
Porter said that using very conservative criteria the Government estimated the cost of delays for previous projects and then extrapolated that forward and looked at what projects are on the horizon.
He said the cost savings “were huge” at $417 million a year.
“In total, its $426 million in savings –$417 million for delay costs and the rest of it is not forcing (developers) to go through the same process twice in terms of forms and applications,” he said.
Porter cited several examples including Rio Tinto’s Cape Lambert iron ore port development in Western Australian in 2010-11 which had an original net present value (NPV) of $2.8 billion that was delayed by 175 days by the dual approvals regime. He said the new approach would have added $104 million to the NPV of that project
“Each year that reform alone is saving large scale projects $417 million worth of saved time and that’s money which brings down the overall cost of a project and could very often tip a project into the viable category where previously it might have been speculative.”
Porter said the total cost of regulations imposed by the Federal Government was $65 billion a year with the Treasury portfolio (which includes the Australian Taxation Office and Australian Securities and Investments Commission) imposing 72 per cent of the total.
He said the Coalition Government had achieved a reduction in regulations costing $2.4 billion since taking office.
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