From October, it will be all but impossible for most Australians to vape — largely because of Canberra’s little-known ‘homework police’

After a misstep, it’s about to become illegal to import e-cigarettes without a prescription, which means that, for most Australians, it’ll become all but impossible to vape from October 1.

The misstep tells us a lot about how the Australian government works behind the scenes — most of it good.

Mid last year, Health Minister Greg Hunt announced plans to ban the import of nicotine-containing e-cigarettes and refills without a doctor’s prescription. Border force would be checking parcels.

To Hunt, the decision made sense. It was already illegal to buy and sell such products without a prescription in every Australian state and territory, and it was illegal to possess them without a prescription in every state but South Australia.

All Hunt was doing was closing a (very wide) loophole.

Government backbenchers revolted, Hunt pointed to a doubling of nicotine poisonings over the past year and the death of a toddler, the prime minister offered less than complete support, saying he was keeping an “open mind”, and Hunt put the idea on the backburner.

That’s the way it played out in public.

But beneath the surface, something impressive was swinging into gear. It’s called the Office of Best Practice Regulation, OBPR, an apolitical body nestled within the prime minister’s department.

Canberra’s ‘homework police’

So what did this little-known entity do that will effectively stamp out vaping from next month? Its executive director, Jason Lange, revealed the back story at an Economic Society of Australia meeting in Canberra earlier this year.

Set up during the 1980s to ensure government decisions didn’t needlessly tie up business in red tape, the office gradually was given other things to consider, including the effect of government decisions on citizens, on the environment, and on the distribution of burdens throughout society.

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Read more: Vaping is glamourised on social media, putting youth in harm's way

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Then in 2013 Prime Minister Tony Abbott moved it out of the Department of Finance into his own department: Prime Minister and Cabinet.

Prime Minister and Cabinet is the traffic cop: it decides what gets put forward for cabinet to decide, and when. So suddenly the office was working at the centre of government decisions, getting to view every one of the 1,800 or so things put to senior ministers to decide each year.

Seven questions shaping new decisions

For the few hundred proposals it thinks might have significant unintended impacts, the office demands an impact statement.

It doesn’t tell the department or authority putting forward the idea what to put in the statement. But as Lange explained, it “marks the homework”. The proposals behind statements that aren’t good enough find it hard to get to cabinet.

Hunt’s decision on e-cigarettes wasn’t accompanied by an impact statement the first time around. Lange’s office made sure it was on the second.

Each OBPR analysis has to address seven questions.

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Office of Best Practice Regulation

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The first is what problem the agency is trying to solve. Maybe it’s not really a problem. Merely working that out puts what follows into focus.

The second is why government action is needed. Maybe the problem isn’t very big, or maybe it will solve itself.

The third is what options the agency is considering. The agency has to put forward at least three options, including one that isn’t a regulation. In the case of e-cigarettes, that option was a public awareness campaign.

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Read more: Vaping: As an imaging scientist I fear the deadly impact on people’s lungs

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Then it has to estimate the likely benefits and costs of each option, including the costs to people the option wasn’t intended to hit, such as under-the-counter retailers and people using vaping to give up smoking.

The fifth question is the range of people and organisations to be consulted (which is a way of making sure it happens). The sixth is to identify the best option from the list, which includes making no regulation whatsoever.

The seventh is the means by which the measure would be implemented and (importantly) later evaluated.

Grading government ideas, from ‘insufficient’ to ‘exemplary’

Once in, and usually after being sent back for further work, the analysis is graded on a scale from “insufficient” to “adequate” to “good practice” to “exemplary”.

Very few are graded exemplary, and very few that we know about are graded inadequate, because if such a proposal does get adopted by cabinet, the impact statement gets published along with the grade and a statement that describes its failings — a “nuclear option” Lange says can be deeply embarrassing.

All impact statements attached to proposals the government adopts get published along with its OBPR rating. It is often the best opportunity the public has to read about the thinking behind the proposal.

Tellingly, only about 80 of the hundreds of impact statements started each year get to decision makers, which means the process itself knocks out poorly thought out proposals.

But if an idea has merit, as did the ban on importing e-cigarettes without a prescription, the 180-page impact statement can make all the difference.

It sets out the problem clearly, sets out a number of possible solutions and identifies the winners and losers from each, and shows how they were consulted.

It demonstrates someone in the government has thought it through clearly, and provides material for the government to use when selling its decision.

On the Office of Best Practice Regulation website are hundreds of impact analyses on topics as diverse as food standards, protection for car dealers, and the redress scheme for child sexual abuse.

Vaping becomes harder on October 1

That’s why from October 1 it will become illegal to import without a prescription nicotine-containing e-cigarettes, and illegal to supply any liquid nicotine that isn’t in child-resistant packaging.

Behind the scenes, the government got it right.

Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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'Repeal day'. It's easier than fixing problems

I'm going to enjoy ''repeal day''. That's on Wednesday week when the Prime Minister's parliamentary secretary introduces a blizzard of legislation and regulations aimed at sweeping away thousands of pieces of useless legislation and regulations.

Nifty, eh? It'll doubtless sweep away the laws that prevent newsagents competing with newsagents, that prevent pharmacies (and supermarkets) competing with pharmacies, and prevent taxi drivers collecting who they want.
It won't? But Josh Frydenberg, the Prime Minister's parliamentary secretary, says he wants to attack the red tape that is "cutting jobs, impeding innovation and deterring investment". Last Friday the head of the Productivity Commission nominated the red tape tying up newsagents, pharmacies and taxis as among the last shards unattacked by the wave of competition reforms set off by the Hawke government in the early 1990s.

His back-of-the-envelope calculations put the benefits of the so-called Hilmer reforms at $20 billion. He said the remaining reforms would probably be worth $5 billion.

Frydenberg will be attacking easier targets. He is set to take on weights and measures acts that he says set the standards for calibrating imperial measuring equipment during the 1960s transition to the metric system, and a war service homes regulation that set rates of interest charged in the '60s.

Repeal day is a stunt copied from the US. It would be fair to say that repealing these types of laws - and they are the only types Frydenberg mentions - will achieve nothing whatsoever when it comes to repealing red tape that matters.

"It might remove irritants, but it's actually fictitious; it's ghosts, red-tape ghosts," was the assessment of the father of the competition reforms, Professor Fred Hilmer, at the same seminar last Friday.

"I'll give you a silly example," he said referring to his own experience as vice-chancellor of the University of NSW. "Under the Audit Act, a university has to file accounts to the Parliament for every one of its subsidiaries. That would be a book centimetres thick. We don't. No one does it. And they'll repeal it. "

Removing laws that cause actual damage is harder.

Newsagents are forbidden by restrictive agreements from poaching each other's customers. The former prime minister John Howard went out on a limb to persuade the Australian Competition and Consumer Commission to back off on its plan to allow competition, declaring the restrictions "part of our way of life".

The Community Pharmacy Agreement between the government and Pharmacy Guild prevents a new pharmacy from opening up within 1.5 kilometres of an old one (unless it's in a shopping centre). When a qualified pharmacist tried to open up in the ACT suburb of Hackett in 2012, she was told she couldn't because there was already a pharmacy in Watson, 1.345 kilometres away.

Had her shop been 155 metres to the south she could have served the suburb and provided competition.

If the red tape mollycoddling existing pharmacies was removed altogether supermarkets would be able to dispense medicines at all hours of the day using qualified pharmacists. They could force down prices.

It would be in the spirit of the Hilmer reforms, but whenever a politician suggests pharmacists should face the same sort of competition as other businesses, friendly chemists hit their customers with petitions to sign while they are waiting for prescriptions.

And there's taxis. At the seminar to commemorate the 21st anniversary of the Hilmer reforms, Productivity Commission chief Peter Harris noted similarities.

Existing businesses in all three areas have been protected by red tape for so long that they are under attack in any case.

For newsagents he said the decline in circulation and the rise of social media had done "what regulatory reform could not".

Taxis face a $3.5 billion threat from Uber. That's how much Google has just paid for an app that connects passengers directly to drivers at the touch of a button.

"Three point five billion looks remarkable for a taxi booking app," Harris said.

"This suggests that there is much more scope for reform gains than just a convenient online booking service. I am not going to speculate what they might be.

"Without taking sides I merely note that Google is not the sort of entity that will go away quietly."

Even chemists are feeling "the hot breath of technology-driven competition".

"I will not comment on the position in Australia, but both Canada and the United States are experiencing the impact of online competition jumping over regulatory boundaries," he said.

"According to media reports, Canada's much cheaper regulated pricing of pharmacy products - a 200 per cent cost difference in the 10 most prescribed drugs in New York state - attracts scripts from the US to the extent that parcels are now being scrutinised by border agencies."

Tony Abbott has just commissioned the first full-scale review of competition policy since Hilmer 21 years ago. What he does in response to it will say far more about what he really thinks of red tape than will ''repeal day''. It'll show whether he hates red tape enough to take on his friends.
In The Age and Sydney Morning Herald

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Saturday Forum: Deregulation, the Spice Girls way

Lindsay Tanner may not realise it, but the Minister for Finance and Deregulation has just appointed a Spice Girls fan as his deregulation advisor.

And even more bizarrely that advisor uses a Spice Girl’s lyric – Tell Me What You Want, What You Really, Really Want – as a metaphor for how he sees the future of regulation and the Australian economy.

He uses it to open the draft of his as yet unpublished book, Reimagining Economic Reform.

In another life Dr Nicholas Gruen would be an academic. He is in fact a visiting fellow at both the Melbourne and Australian National Universities. But his interests have always been broader than that.

He engages in passionate debates on blogs about all manner of economic questions (as a sort of unpaid academic), runs a discount mortgage broking company and works for anyone interested in ideas.

Among his former employers are the 1980’s Labor Industry Minister John Button, the 1990’s Treasurer John Dawkins, the Business Council of Australia, where he was the Assistant Director in charge of its ideas unit and the Productivity Commission where he used to conduct inquiries.

Many of his ideas involve cars, a legacy of working for Senator Button with whom he developed the Button Car Plan.

One of his favourite regulatory war stories - one that the Spice Girl’s lyric helps illustrate – explores why Australia didn’t make the world’s first keyless car...

In the 1970s NRMA mounted a campaign against the ease with which thieves could steal cars. As Dr Gruen says, “just insert coat hanger and drive away”.

The Australian subsidiary of the German firm Bosch had became a world leader in the manufacture of cutting edge technologies such as engine immobilisers and keypads. They supplied them for Falcons in Australia and exported them to Europe for use in luxury cars such as Fiats, Volvos, Porsches and Ferraris.

By then, he says, car keys were pretty much dispensable.

Why didn’t Australia go the next step?

Dr Gruen says it didn’t help that selling a keyless car would have been illegal.

Design Rule 25 required car manufactures to install mechanical door, ignition and steering locks. It even specified the number of tumblers in each lock.

While Gruen was at the Productivity Commission in the 1990s it recommended that the design rule be repealed.

Nothing happed until six years later when the design rule was expanded to require engine immobilisers as well as locks.

Gruen’s point isn’t merely that the regulation was stupid.

It is that regulations will always be stupid for as long as regulators are doing the regulating.

He envisages a different world in which, when faced with such a plainly silly regulation, car manufacturers could say to the authorities, “tell us what you want, what you really, really want.”

The answer would have to be “cars that are difficult to steal”.

Gruen believes that, armed with that answer, the manufacturers should be able to ignore the letter of the regulation and instead fall in behind its intent.

He is proposing deregulation in the most literal sense.

If Lindsay Tanner runs with his ideas, as he is inclined to, it would make Lindsay Tanner Australia’s first Minister for Deregulation in the most literal sense.

As he put it in an interview with the Canberra Times, “The old idea that you just sit around allowing life to go on and then every now and then dip into it and say ‘oh my goodness there’s all this red tape you better do something about it’, and then change a few things here and there and then go back to sleep again, just isn’t good enough.

How would Tanner describe a Gruen world? As one in which the regulatory systems as essentially self-cleansing?

“Yes, essentially that’s right,” the Minister replied.

Australia has embraced the concept of deregulation repeatedly over the last 20 years. Bob Hawke as Prime Minister declared that Australia should have “minimum effective regulation” in the 1980’s and introduced a new regulation to make sure it did.

Proposed new regulations should be accompanied by a Regulatory Impact Statement (RIS) before they were passed into law. In subsequent decades a report presented to the Howard Government by Charlie Bell, then the head of McDonalds in Australia and a report presented by Garry Banks of the Productivity Commission recommended the same thing.

Gruen points out that while these reports were being considered, the Howard Government introduced the GST, whose poorly designed reporting requirements sparked the only red tape revolt in Australian history, and later WorkChoices whose rules infuriated even the businesses they was meant to help.

The WorkChoices RIS read “more like a corporate brochure than a piece of analysis”.

One Tuesday night while announcing Gruen’s appointment to a business audience Tanner promised to make sure that the RIS process really was real and mandatory.

And he promised a “one-in one-out” rule. No Minister in the Rudd government will be able to introduce a new regulation without specifying which old one they would remove.

But to Gruen himself these promises are beside the point.

He retells another of his favourite stories in the forward to a report he prepared for the Victorian government last year.

In 1994 while conducting an inquiry for the Productivity Commission he asked the Federal Office of Road Safety why they wouldn't change Australian Design Rule 61 to allow vehicle manufacturers to cut their costs and improve security by replacing aluminium compliance plates with self-voiding plastic stickers.

It’s response, captured in the transcript of the inquiry’s hearing:

“It’s not that easy. We would have to do a regulatory impact analysis and that takes time and resources we don’t have.”

In Gruen’s ideal world manufactures wouldn’t have to wait for changed regulations or for Regulatory Impact Statements. They could go ahead and do things properly.

He admits that it’s a big ask.

For one thing businesses themselves might not be keen.

As he warned the Victorian government last year: “Businesses’ business is business. Though businesses must comply with regulation, contributing to its improvement has so far proven a long, uncertain and generally unrewarding process. And if it is successful in improving regulation, a business will have done so for all
its competitors.”

He suggested that the Victorians start by exempting from general regulations those firms whose internal systems can demonstrate (and continue to demonstrate) their own commitment to excellence.

Would he eventually like to see all firms exempt form the black letter law of regulations, and required only to abide by their spirit as the Spice Girl’s lyric implicitly suggests?

“That’s one end of a spectrum,” he replies. “I think you’ve got to get somewhere between the two alternatives.”

The weak alternative is to merely let businesses suggest improvements to the wording of regulations. The strong one is to let them ignore the wording of regulations.

“In a sense we have already tried the weak alternative,” he adds. “I would say we have already tried the weaker version and what we now have to do is to try something stronger.”

He likens the idea to what Toyota and other car manufacturers did in Japan. They didn’t merely involve workers in decision making by putting a suggestion box in the corner, they continually asked workers for their ideas about how to do things better and gave them the power to do so, even if it meant stopping the production line and retooling of their own accord.

He describes it as “harmonising aims” rather than regulation. It would do away with the need for much regulation.

The Deregulation Minister Lindsay Tanner is making no commitments – yet – about how far to run with Gruen’s ideas. But he says Gruen is one of the few people in the country who has them.

It might run in the family. 35 years ago as a youthful advisor to Gough Whitlam his late father Fred Gruen ignited a revolution by convincing the new Prime Minister to cut Australian tariffs by 25 per cent across the board.

His son has set his sights about as high.


Lateral Economics, Beyond Taylorism: Regulating for innovation. Some ideas for discussion for the National Innovation Agenda, August 2007

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Prepare for a Gruen world

Dr Nicholas Gruen has lots of good ideas. Ross Gittins wrote about several of them this week.

Ross, and me as well, think he would he great at the 2020 Summit.

But bigger, more important things are already happening. Nicholas has thought a lot about the scourge of regulation and how to smartly tame it. A Gruen world would be different to the one we are in. The default would be no regulation.

Last night, in a speech on deregulation, Australia's first Minister for Finance and Deregulation Lindsay Tanner said:

"A key to our success in advancing this deregulation agenda will be our capacity to be open with the community and facilitate compliance rather than just waiting to punish breaches.

Even small changes to practices can make a big difference. Regulators should work with industry to identify improvements to regulatory practices.

I want to encourage a culture of continuous regulatory improvement in the same way manufacturers seek to continuously refine production processes.

As US diplomat and economist Chester Bowles once remarked “government is too big and too important to be left to the politicians”.

I have asked leading economist, Nicholas Gruen, to work with me on this. Nicholas has championed the application of continuous improvement and total quality management processes to regulation."

Congratulations, Nicholas Gruen.

Below the fold is my story for this morning's CT:


The Treasurer Wayne Swan has signaled that his first budget due in eleven weeks time will cut entire government programs rather than just shave the cost of administration.

Addressing the Business Council of Australia in Melbourne last night Mr Swan said that in order to deliver high quality programs he was prepared “to cut or reprioritise” poor quality ones.

It is the first time that the Treasurer has confirmed that entire government programs are under the axe.

Declining to identify any particular government programs Mr Swan said that he was determined to ease the burden that had been placed on interest rates by undisciplined government spending.

“Let’s be honest – the previous government’s lax fiscal policy made the Reserve Bank’s job harder,” he said.

“We want to make it easier, with a new era of fiscal discipline.”

The already-promised surplus of $18 billion or 1.5 per cent of GDP was just the beginning. In addition ,Mr Swan would “let the automatic stabilisers that are built into the budget do their job”. That meant that any upward surprises in revenue would be banked, rather than spent as the previous government had done.

Previous upward surprises in revenue have been in the order to $8 billion to $12 billion, suggesting that the surplus unveiled on budget night could be as big as $30 billion.

The Treasurer stressed that the tax cuts promised during the election would be delivered despite continuing criticism from economists, most recently a former Reserve Bank board member and ANU economist Bob Gregory who claimed on Monday the cuts were “bad news”.

“Nobody in their right mind would be having these tax cuts,” he told Dow Jones Newswires.

Mr Swan said the tax cuts would add an extra 2.5 million hours of work to the economy each week as a result of the 64,000 people they would entice into the workforce.

Professor Gregory told Dow Jones that “the idea that the tax cuts will boost participation, and therefore you don't have to worry, is a story that doesn't have any serious credibility.”

He said the best way to boost labour supply was to keep economic growth strong by containing inflation, which meant canceling the tax cuts.

In Sydney last night the Minister for Finance Lindsay Tanner indicated that the budget would include an attack on red tape.

He said that every new measure that was presented to Cabinet would have to come with a Regulatory Impact Statement and satisfy a “one-in one-out” rule.

Ministers proposing new a regulations would have to specify which existing regulations they would remove.

Among the results of excessive regulation were 50 and 80 page financial product disclosure statements and a requirement that pesticide manufacturers lodge an application to change the colour of their product labels.

Mr Tanner announced the appointment of a private-sector economist Dr Nicholas Gruen to work with him on changing the nature of regulation. Dr Gruen is an advocate of contestable regulation, whereby businesses have the ability to object to regulations they can demonstrate have no point.

The government also announced the appointment of the former head of Ansett and British Airways Sir Rod Eddington as the first head of Infrastructure Australia, the new body that would prioritise infrastructure needs.

Mr Swan told the Business Council that Australia's ports, roads and railways were straining under the weight of the commodities boom.

“You see this lack of foresight in the ships sitting off our ports or the job ads that fill our papers,” he said.

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