ACT releases policy on red tape
Rodney Hide
Tuesday, 19 April 2005
Press Releases - Economy

ACT Leader Rodney Hide today outlined his party’s plan to unshackle New Zealand business from the red tape that is strangling them.

Mr Hide announced ACT’s policy on compliance costs in a speech to the New Zealand Large Herds Association Conference in Christchurch this afternoon.

“Business in New Zealand is now more over-governed and overburdened by regulation than ever before. ACT believes action to address this is long overdue. It’s time to give business the freedom to grow and succeed.

“Survey after survey among business shows compliance costs to be right up there with taxation as one of the biggest problems facing small business. Yet Labour continues to slam business by introducing more and more red tape.

“It’s outrageous that hard-working New Zealanders who produce and work get taxed to destruction to pay for over-zealous bureaucrats whose only job is to hassle them”.

“Fewer compliance costs and lower taxes are the keys to higher growth and an improved standing of living for all New Zealanders”.

Mr Hide said ACT will:

· Introduce a Regulatory Responsibility Act, requiring government to answer some tough questions before signing any new regulation into force. Questions like whether a regulation pinches property rights; whether there’s compensation; and whether the regulation is necessary.

· Gut legislation that impose the greatest level of compliance costs on business, including the Resource Management Act, the Employment Relations Act, the Health and Safety in Employment Act and the Holidays Act, by returning to the basic principles of the sanctity of private property rights and the freedom to contract.

· Reduce taxes. A simpler, flatter tax scale reduces complexity of the tax system and the cost of complying with it.

* Full text of speech follows

ACT's plan to cut red tape

Rodney Hide
Tuesday, 19 April 2005

Address to New Zealand Large Herds Association Conference; Christchurch Convention Centre; Christchurch; Tuesday, 19 April 2005.

It’s a pleasure to be addressing your conference today on the subject of compliance costs.

ACT is pro-free enterprise and pro-growth. We oppose the red tape that is killing off productive New Zealand.

When I see what business has to put up with from our own government I am amazed anyone is left standing let alone prospering.

Like your own industry.

New Zealand’s dairy industry today is a world leader. Its success is built on the innovation and hard work of the individuals involved.

But just imagine how much better it could be if you didn’t have government deep in your pocket and heavy on your back?

Governments hassle and damage productive industries like yours through hefty regulations and compliance costs.

They then turn around and claim credit for your success. That’s because they have tossed out a few grants and talked about innovation a lot in ministers’ speeches.

Survey after survey among business shows compliance costs to be right up there with taxation as one of the biggest problems facing small business.

But what do governments do about it? Make it worse. That’s what they do.

Recently, the Labour Government commissioned a study of compliance costs with the supposed aim of reducing costs to business. The study identified over 150 potential actions. The Government chose a few easy actions – mostly things already planned. One of the great triumphs announced by Finance Minister Michael Cullen was that businesses would no longer have to attach stamps to their tax returns.

Great – a compliance cost saving of 45 cents.

Over the same time as the study was carried out, Labour has busied itself ramping up compliance costs in all facets of New Zealand business.

The new Employment Relations Act makes it harder to do business. It makes it more difficult to hire staff and more difficult to fire them if things don’t work out. It imposes very real risks and costs on employers. It’s now easier for a man to marry and divorce the boy next door than it is to hire and fire him.

The Health and Safety in Employment Act does the same, as does the Holidays Amendment Act.

These legislative changes have not been driven by any desire to lift the productivity and success of New Zealand’s business sector. They have been driven through Parliament purely and simply to appease Labour’s union backers. They move New Zealand back in time, not forwards. They make New Zealand less competitive internationally when we need to be more.

They impose costs on businesses when the Government should be looking to remove costs from business.

The reality is that politicians, by and large, know very little about what makes your industry tick, and care even less. Labour is drawn predominantly from two groups – union officials and academics.

Very few have actually held down real jobs in the real world. They think they can regulate for every eventuality. A regulation is their answer to every problem – real or imagined.
And if a regulation isn’t the answer, a tax probably is.

ACT fought very hard against the fart tax. This crazy tax on livestock methane emissions could only be dreamt up by a bunch of academics divorced from the real world – Labour’s front bench.

ACT MP Gerry Eckhoff travelled the length and breadth of the country in the ACT bus, campaigning against the fart tax. Ultimately we won, and forced a humiliating backdown from the Government.

The problem is that for every new tax or spurious regulation that is successfully opposed, there are at least four more that sneak through under the radar.

Much of the compliance cost is increasingly in the form of regulation rather than legislation itself. This conveniently allows ministers to make regulations affecting an industry if the minister ‘deems it necessary’, or if the ‘minister is satisfied’ of something or other. Such vague tests allow a myriad of regulations to be passed in a setting removed from the scrutiny of Parliament.

And pass them they do.

In 1908, the entire body of public acts made up five volumes totalling 4,221 pages. That seems a lot.

By 1978 our laws had grown tenfold: 60 volumes totalling 48,000 pages. Since then, Parliament has passed around 4,000 pages of statute and regulations a year. We pass more new rules in a year than we had in total 100 years ago.

We are now more over-governed and overburdened by regulation than ever before. The amount of regulation doubles every 10 years, and because no-one knows enough to know all regulations affecting an industry, there is an ever-growing army of bureaucrats paid by your taxes to keep track and ensure compliance.

But if even the bureaucrats don’t know all the regulations, what hope has the small businessperson got? They are too busy running their business and trying to make a buck. For many, the first they know is when they unwittingly or innocently breach some regulation and get the book thrown at them.

And with many of the new laws Labour has enacted, the concept of what constitutes a breach of the law is incredibly vague. Much of the legislation is poorly drafted and capable of various interpretations.

How can one be sure they have taken ‘all practicable steps’ to ensure safety of those around them for example. Even if you think you have, how can you be sure a bureaucrat will take the same view? Honest businesses just have to ‘fly blind’, unable to ensure they are compliant with the law.

This situation is unacceptable from whichever perspective you take.

As someone running a business, you need to have certainty in the rules you are facing. Compliance should not be onerous or subject to vague interpretation.

From the government’s perspective, it is not good to have poor understanding of the rules, or differences in how they are interpreted and applied. This suggests having fewer rules, but clearer and better written.

From the ‘good of the nation’ point of view, it is simply a waste of resources to have an army of taxpayer-funded bureaucrats busy administering regulations and hampering the country’s economic performance.

What good does it do?

As an aside, in 1908, the total cost of running the government – all up, amounted to just 10 percent of GDP. In other words, the total amount of government spending could have been financed by a simple flat 10 percent income tax with no GST.

Today government consumes a third of GDP. Taxation and regulation have grown in tandem with each other.

I don’t know why we put up with it. New Zealanders who produce and work get taxed to destruction to pay for over-zealous bureaucrats whose only job it is to hassle them. And when you ring the police because you are getting robbed they’re too busy to help.

There’s a simple message for how government can help: get out of our pockets and off our backs. Cut out the crap and provide the basics like the police and roads.
The way to protect the environment and drive up workers’ wages is to protect private property rights and the freedom to contract. Not by having a bunch of government busy-bodies going around hassling people engaged in productive endeavours.

We need to deal to the problem fast. The best first step is not to make the problem any worse.

To do this, ACT would impose the equivalent of the Fiscal Responsibility Act for regulations – a Regulatory Responsibility Act. This would require government ministers to abide by a prescriptive set of standards before signing any new regulation into force.

The Regulatory Responsibility Act would demand that a government answer a few basic questions before running off with the legislator’s pen. Questions like does the proposed regulation pinch property rights, is compensation being paid, is it necessary? Most regulations would fail to meet these tests and the country would be a better place for not having them.

ACT would move to gut those laws that impose the greatest level of compliance costs on business currently. You can guess what these are.

The Resource Management Act, the Employment Relations Act, the Health and Safety in Employment Act and the Holidays Act.

The principles that should underscore any re-write are simple enough. Private property rights should be protected, so too should be the freedom to contract. Applying these two principles would devastate these existing laws and make New Zealand a freer and more prosperous place.

Such reforms have the potential to boost New Zealand’s economic growth significantly.
The medium term outlook is for GDP growth of just under three percent. The Treasury has said that if ACT’s tax policy of a maximum 25 percent rate of tax was adopted, the rate of economic growth would be boosted by one percent to four percent per annum.

ACT believes that removing unjustified compliance cost constraints on New Zealand business could have a similar impact on growth – adding another one percent. If we can do that then means economic growth of 5 percent is easily achievable.

Lower taxes and lower compliance costs are the keys to unlocking higher growth rates and a higher standard of living for all New Zealanders.
ACT is the party that understands this best.

It is not the government’s job to unjustly burden business with regulation and tax.

Rather, it is government’s job to get the environment right to enable business to do what they do best. This involves having a minimum of regulations, clear and easy to understand, and a low tax environment.

So it is not clear what the regulatory environment facing your industry in 2020 will be.
If current trends continue, we know the amount of regulation will be double what it is today. The costs on your business, in compliance costs, lost opportunities and taxation, will be higher than today.

And the risks to your business of government bureaucrats deeming you to be in breech of regulations will be greater.

The odds of you being satisfied with the return you’re making in relation to all the risks you’re taking will be lower.

We are at a crossroads today. The future of compliance costs is not set in stone. We have shown that by forcing a rethink on the fart tax.

ACT will be doing everything it can to chart a different course by promoting a tougher line on regulations and reviewing badly drafted laws.

This way, government will free up more of your time to do what you do best – running your business.

ACT is the only party that is unashamedly pro-business, pro-development, and pro-growth. We are pro-free enterprise and pro-freedom. We are against big government, red tape, high taxes and political correctness.

You have two votes this election. We are asking for just one of them. Your party vote for ACT. That’s a vote for our future. That’s a vote for prosperity.

ENDS

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