15 December 2004

2nd reading public management bill

“The Public Finance [State Sector Management] Bill will maintain New Zealand’s reputation as a transparent democracy and a leader in public governance issues,” Finance Minister Michael Cullen said today.

He was commenting as the Bill returned for a second reading. The Finance and Expenditure Select Committee, which reported back on 6 September, has unanimously recommended a number of mostly technical amendments.

“The Clerk of the House, David McGee, has indicated that the concerns he raised about the Bill have been addressed through the proposed changes,” Dr Cullen said.

“We have also recognised the distinctive nature of the tertiary education institutions by making them a separate category under the Bill. But I cannot accept their argument that defining them as Crown entities either alters their current status in any way or impinges on their autonomy or academic freedom.”

The Bill stems from the 2001 Review of the Centre and represents the first major change to state sector governance in a decade. It integrates the Fiscal Responsibility Act into the Public Finance Act 1989, amends the Public Finance Act and the State Sector Act 1988 and creates a new Crown Entities Act.

Measures to improve transparency and accountability include:
- a stronger differentiation between the Budget Policy Statement and the Fiscal Strategy Report so that the BPS focuses more on the upcoming budget while the FSR concentrates on the government’s short and long-term fiscal objectives;
- a requirement on the Treasury to report every four years on the fiscal outlook and risks over the next 40 years with specific reference to the implications of an ageing population;
- inclusion in the budget of a statement on the impact on revenue flows of recent government tax decisions;
- requiring departments, Offices of Parliament and Crown Entities to report to Parliament annually not just on their finances but also on their intended and actual performance and;
- applying these reporting requirements, with appropriate modifications to recognise special sensitivities, to the Security Intelligence Service and the Government Communications Security Bureau.

Crown entities encompass a diversity of organisations, from schools and hospitals to Radio New Zealand, Te Papa and the Commerce Commission. They account for almost half of the state sector administrative budget and employ two thirds of the state workforce. Most are governed by boards.

The Bill sets a framework for board fees, requires that fee levels and staff remuneration are disclosed in the annual report, outlines board members’ duties and makes it clear that the Minister can remove them for non-compliance and that they are not entitled to compensation should they cease to hold office for any reason.

Provisions in the Bill to provide greater flexibility include:
- allowing more than one minister to be responsible for a Vote while making it clear which Minister is answerable to Parliament for each appropriation;
- making it easier for departments to deliver or contract services on behalf of each other;
- enabling ministers to make fiscally neutral adjustments between departmental output classes covered by the same appropriation without further reference to Parliament, while maintaining accountability by requiring performance reporting on the individual output classes.

Dr Cullen said the proposed amendments to the State Sector Act aimed to foster leadership and staff development within the wider state sector and to build a cohesive sense of values, ethics and standards.

“The New Zealand public service is recognised as one of the least corrupt in the world and the rules which govern it as among the most sophisticated and elegant.

“The changes the contained in the Bill will build on both these strengths and safeguard them into the future,” Dr Cullen said.

ENDS

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