Speech By Hon Rodney Hide To Otago Chamber Of Commerce Business Luncheon, Dunedin Club, Melville St, Dunedin, Thursday 15 April 2010

Thank you for the invitation to speak today on regulatory and local government reform.

The motivation for my focus on regulatory reform is the government’s strong commitment to lifting the poor productivity growth rate in New Zealand. Regulatory reform is an essential part of that plan.

It is no exaggeration to say that we - and I mean households and businesses - have endured a tidal wave of regulation.

Consider this astonishing statistic. Between 2000 and 2009 over 68,000 pages of regulation was passed. That's significantly up on the previous decade and the decade before that. And that's on top of all the existing regulations.

In light of this, it is hardly a surprise that our productivity growth was a pathetic 0.7 per cent per annum from 2000 to 2006, down from a 2.1 per cent rate in the previous two decades.

The poor productivity growth rate is why we keep slipping further down the international income rankings. It is why many of our best and brightest head to Australia.

So, what are we doing about it?

We have a number of regulatory reviews underway: for example, the second phase of the RMA reforms; reviews of the Building, Food, and Overseas Investment Acts; and of electricity institutional arrangements.

As an example, the Building Amendment Act 2009 which came into force on 1 August 2009 will speed up the building consent process and reduce costs. It also introduces multiple use building approvals. This is a measure that will reduce duplication and fast-track the consent process for group home builders who build homes on sites across the country using the same, or similar, designs.

The Amendment Act also defines a new streamlined process to manage minor variations to building plans after the consent is issued, saving time for applicants and councils, and making project information memorandums voluntary.

Behind the scenes there is an enormous amount of work currently being undertaken by government agencies and departments through an initiative that we call ‘regulatory scanning'. Cabinet has agreed that all agencies must put in place systems for continually and systematically scanning existing regulation to identify possible areas for reform or further review.

I am also committed to introducing an annual Regulatory Reform Bill. This Bill will provide a vehicle to improve regulatory frameworks and reduce the compliance burden on business in more timely fashion than might otherwise be available.

We have also recently agreed to establish a NZ Productivity Commission, which will have a substantial focus on regulatory issues.

But at the most fundamental level, I think we need to change the institutions that drive the behaviour that generates poor regulation. Government's and Ministers come and go, some good, some bad. What we need is to have them operating in a framework which will produce much better results than we get from the current environment.

We have had an excellent taskforce report on a Regulatory Responsibility Bill focused on addressing these issues, and I hope that the National Party will support the Bill.

I see this Bill as akin to, and as important as, the Public Finance Act and the Reserve Bank Act.

Those two Acts have changed the institutional structure around decision-making in the crucial areas of fiscal and monetary policy. Both have fundamentally improved the transparency of decision-making. The Reserve Bank Act is why we now enjoy low and stable inflation.

The Regulatory Responsibility Bill has three distinct elements.

The first is a benchmarking mechanism. This involves a clear statement of the principles that all good regulation should comply with. These principles cover six key areas including the rule of law, protection of individual liberties, protection of property rights, taxes and charges, the role of courts, merits review, and good law making. Together, these rules comprise the benchmarking mechanism.

Second, we need a mechanism to provide transparency in regulation. We need to constrain the ability of Ministers to bully their officials into giving them the answers the Minister wants, or getting what they want with a nod and a wink.

To achieve transparency we need a requirement that Ministers and Chief executives certify as to whether the regulation they are responsible for complies with the principles and, if not, the justification for incompatibility - this is the transparency mechanism.

Third, we need an incentive mechanism that ensures that Ministers and officials comply with these processes. Thus the Bill allows for a process by which individuals may apply to the courts for a declaration that a particular piece of regulation is incompatible with the principles - this is the incentive mechanism.

So that's it. Benchmarks for quality; transparency in decision-making; and an incentive to comply.

A Minister can still advocate for, and a government can pass, legislation which departs from the principles, but they have to acknowledge that upfront and give the reason why - they need to justify that decision.

If they don't acknowledge that upfront, and do pass legislation which departs from the principles, a member of the public may apply to the Courts for a Declaration of Incompatibility. This declaration would state that a particular piece of legislation does not comply with the principles.

In short, if they don't comply with the legislative principles, they will be found out. That's what transparency and accountability in law making is all about. Ultimately it is this transparency that will change the approach and improve the quality of regulation.

We have flowing through Parliament a torrent of regulation, and much of it stinks. You could say it's an environmental problem.

It is not stretching the analogy too far to say that this Bill would allow us not just to slow down the flow, but to improve the quality of it; and in time, it would allow us to address the quality of that substantial body of past regulation that so badly needs treatment.

I want to summarise now how I see the role of local government reform fitting into the broader objectives of this Government.

As I mentioned earlier, the primary objective of the Government's economic policy is to lift the living standards of New Zealanders by lifting the productivity growth rate in New Zealand. The performance of local government is crucial to that effort.

In my role as Minister for Local Government, I am taking action to improve transparency, accountability and financial management in local government, all of which I believe are essential to improving the performance of local government.

I started my work on improving the transparency, accountability and financial management of local government because it very quickly became clear to me, from letters I received and the public meetings I attended, that very many ratepayers are concerned about increasing rates.

Many are struggling to pay these increases. Households and businesses are struggling with complex and costly consent processes.

I decided that the necessary changes are most easily achieved by improving certain aspects of the Local Government Act 2002 (LGA). Cabinet has made decisions to review aspects of the LGA and this work has three underlying principles:

• local government should operate within a defined fiscal envelope;
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• councils should focus on core activities; and
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• council decision-making should be clear, transparent and accountable.
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The proposals will focus on long-term council community plans being simpler and more strategic in focus, financial disclosures will be in plain English, and councils will have more flexibility in choosing effective and efficient delivery methods for water services.

Council reporting will be consistent so that residents and ratepayers will be able to make comparisons between different councils.

I also believe councils' consultation processes are unnecessarily onerous and complex. Worst of all, they are largely meaningless to the average ratepayer.

Essentially these proposals will allow for greater flexibility for councils in responding to community needs and clearer information for the public by integrating community outcomes into strategic planning.

These changes will be provided for in a Bill, which I plan to introduce this year. There will, of course be a chance for public input through the Select Committee process.

Increased transparency does put more pressure on politicians, whether at local or central government. But the ratepayers and the taxpayers deserve to know what is being done in their name, as they are funding it.

I believe that these initiatives will make our local authorities stronger and more robust, by being more accountable to ratepayers.

As you know, in Auckland the Government is working to set up a governance structure that will enhance the productivity and competitiveness of the region.

For region-wide decision-making to be effective, Auckland needs region-wide governance arrangements.

I am confident this structure will overcome the competing interests, parochialism and factionalism that have hampered decision making in Auckland in the past.

How will this work?

The new structure provides for two decision-making groups in the new Council - the governing body, made up of the Mayor and councillors; and the local boards, which have specific decision-making responsibilities in their own right, as well as responsibilities that may be delegated to them by the governing body.

The governing body is responsible for decision-making in respect of the regulatory functions of the Council as a local authority.

The governing body is also responsible for financial management, and ensuring the Council as a whole has the capacity to provide, or ensure the provision of, services and facilities, including local activities, across the region.

To ensure the local voice is heard, the governing body must consider any views and preferences expressed by a local board, if the decision may affect the local board or the well-being of communities within its local board area.

The Council's local boards are responsible for identifying and communicating the interests and preferences of the people in their local board areas in respect of the content of the strategies, policies, plans, and bylaws of the Council. They will also be able to propose, to the governing body, bylaws for their local board areas.

The current Auckland councils'[ combined operating budgets is $2 billion and I am confident that the structure will ensure better value from rates and central government funding, by reducing duplication and delays in previously intractable problems such as transport issues.

Services such as administration, office systems, finance, human resources and information technology will be integrated and streamlined. Each council currently operates its own systems, so there are real savings to be made here.

I have no doubt we will see significant benefits in the first year of the new council. But those of you in business will know that the major gains from this sort of change accrue over time.

Unified decision-making, better transport and infrastructure and more efficient delivery of services will all contribute in the years ahead to a great Auckland region where people will want to live and do business.

One aspect of the new governance structure that has come in for some criticism, was the Auckland Transition Agency proposal for Council Controlled Organisations (CCOs) under the new Auckland Council.

The criticisms have been more in the mould of a political campaign run by the media, than a considered analysis of the issues, most of which have been substantially misrepresented.

This is not a new structure. We have plenty of CCOs in Auckland already in fact, too many. That is why the Auckland Transition Agency (ATA) was asked to review and rationalise these existing wholly owned entities.

There are currently over 300 council-owned or council-funded entities with some form of corporate or business-like structure, spread over the existing eight councils in Auckland.

The Government has already approved three CCOs for Auckland. These are Watercare Services Ltd, Auckland Transport and the Waterfront Development Agency.

To use transport as an example, this means one agency - Auckland Transport - will replace the nine separate existing transport entities across the city. The result will be an agency equipped to provide the focus and continuity in decision-making needed to deliver a transport network that supports Auckland's growth and economic success.

This streamlining and simplification is the whole point behind the unified city - we are working to improve governance, vision, planning and service delivery.

The Auckland Council CCOs are no different to current CCOs in their relationship with the Council, and they are accountable to the community through the Council. As the recent ATA discussion document notes, it is the Council which sets the objectives and accounts to ratepayers for the performance of CCOs. The model includes strong accountability mechanisms between the Council and the CCO. There will be an agreed Statement of Intent with the Auckland Council, and this will be made public.

There will be regular reporting to the Council, audited by the Auditor General; the CCOs will be required to give effect to Auckland Council plans; and they will be monitored by the Auckland Council governance and monitoring unit. The Auckland Council will appoint board members, and have the power to remove them.

In addition to the Council's influence, local boards will influence the activities of CCOs through local board plans, input into Statements of Intent and oversight of agreed service delivery levels.

Auckland's CCOs will be subject to rigorous accountability checks and monitoring. There will undoubtedly be intense media scrutiny of them, as there should be. Aucklanders will know more about the performance its local government and its CCOs than ever before.

While I appreciate there will be uncertainty for some stakeholders through the transition period, the potential benefits of more cohesive and effective local government in Auckland to New Zealand businesses and residents alike are substantial.

To conclude, I will always argue that we need to be bold in dealing to red tape, sloppy law and outdated and wealth sapping legislation; with institutional arrangements that are not serving the public well; and in dealing with long-standing and seemingly intractable problems such as the dysfunction in Auckland local government.

We need to be bold in making New Zealand a better place to live and work.

Thank you

ENDS

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