The downside of requiring justifying data

Requesting data as justification for new legislation is useful, but has an important downside. Requesting justifying data can delay or render impossible the new legislation. It can also be extremely costly, bind too much manpower, increase the influence of lobby groups and reduce the choices of political decision-makers. In a view of this downside, it is preferable to establish a pragmatic case-by-case approach that takes account of the situation of the sector in the respective jurisdiction.

New legislation needs to be justified. But to what extent is it beneficial that regulatory policies require justifying data, e.g. on economic impacts of new legislation?

It is relatively easy to draft a justification in abstract terms. Most new legislation is therefore accompanied by a good text rationale. But even when the text rationale sounds well-founded, the economic impact of the new legislation can be disastrous. Hence several jurisdictions have set-up requirements for underpinning the rationale of new legislation by data. In some jurisdictions, these requirements have even been extended to regulation other than legislation, meaning regulation that has not been adopted by a parliament.

Whilst being generally justified, regulatory policies setting-up these data requirements can have important negative impacts:

– Collecting relevant data takes time, and sometimes even more than one year. Is the added value of the data collection always justifying the delay in the adoption of the new legislation?

– Collecting data requires substantive human resources and this even when external consultants are assisting. If there is scarcity of human resources in the respective ministry or department, the task of collecting data is binding manpower that might be better used elsewhere, e.g. to find good regulatory solutions or to work on enforcement.

– Sometimes it is clear from the outset that the statistic quality of the data will be insufficient. Collecting data becomes thus an exercise that has no added value.

– Sometimes, it is simply not possible or disproportionately costly to obtain justifying data. The data requirements can than lead to a standstill of the adoption procedure. More often, however, the responsible officials will anticipate that they cannot deliver data and will not start the new legislative project. Is this always to the benefit of the respective jurisdiction?

– The data requirements can increase the influence of lobby groups representing stakeholders and namely of industry. The lobby groups may aggregate the data in such a way that the data justify the lobby groups’ position with regard to the legislative project. Lobby groups may threaten not to deliver data unless the legislative project is re-designed in accordance with their wishes. Finally, lobby groups may expect something else in return for doing the favour of delivering data.

– Data requirements can limit the choices of political decision-makers by a subtle mechanism: the officials preparing the new legislation may – for reasons of feasibility or simply to save work time – refrain from disclosing all regulatory options if they are requested to justify with data the favoured option. (By the way, this phenomenon can already be observed when the several dozens or hundreds of regulatory choices which could be combined in even more ways are artificially squeezed into a handful of “scenarios” in documents assessing the impact of new legislation.)

In the light of this, it might not be appropriate to request justifying data in all cases. Instead it seems preferable to establish a pragmatic case-by-case approach that takes account of the situation of the regulatory sector in the respective jurisdiction.

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