Public & Administrative Law Conference

Hon Rodney Hide speech to the Public and Administrative Law Conference; Te Papa, Wellington; Friday, February 19 2010

Thank you for the opportunity to talk to you today about the Regulatory Responsibility Bill - a subject close to my heart. I know also that many New Zealanders are looking to the changes that I am proposing to contribute to making New Zealand a better place to live in and do business in.

This Bill is new.  Kiwis are drowning in red tape. Compliance costs and investment uncertainty are killing business. 

The Regulatory Responsibility Bill is designed to clean it up. The Bill is a new institution, one that demands proper and deliberate reflection on new and existing regulation.

New Zealand has to move to deal with this issue. Our starting points are the existing regulatory impact statement requirement and the Legislation Advisory Committee guidelines.

The first is an economic approach centred on using cost-benefit analysis to test the worth of a regulation.  The second approach uses legal and constitutional principles as tests. 

There is much in them that is good.  But in the last decade and more, they have largely been ignored.  This is despite them being Cabinet Manual requirements. 

This must stop.  Good regulatory practice requires that as a general rule regulations should conform to sound principles.  Departures from these principles should be acknowledged.  Reasons for those departures should be clearly stated.  Responsibility for the opinion that departures are justifiable and in the public interest should be assigned.

And some disciplines need to be put around all this.  Otherwise, the all too familiar empty and contemptuous assertions of compliance that we have seen in the past will re-emerge and make a farce of what we are attempting to achieve. 

The Regulatory Responsibility Bill that I introduced to the House in the last term of Parliament imposed such commonsense requirements. 

The Bill itself was referred to Parliament's Commerce Committee. The Committee saw the potential value of it, but had some questions about the statement of regulatory principles and the proposed role of courts.

The Committee recommended that a taskforce review the proposal.

So, in line with the National-ACT confidence agreement, the Regulatory Responsibility Taskforce was asked to examine the Regulatory Responsibility Bill and make recommendations.

The Taskforce's recommended Bill is in many ways similar to the model I introduced, but it provides more specifics about how Ministers and regulators can depart from principles and about the role of courts. The Bill is primarily a transparency measure. 

It blends the two existing approaches into a single set of principles and requires those responsible for promoting regulations or administering them to certify as to their compliance or non-compliance

One of the most exciting parts of the Taskforce's proposal is the idea that people can hold a government to account should the government mislead the public over whether proposed legislation complies with the principles of good law making.

Any member of the public may apply to the Courts for a Declaration of Incompatibility, which states that a particular piece of legislation does not comply with the principles. This Declaration has no effect on the validity of the legislation, but will nevertheless send a powerful message to the government that sloppy legislative practices will be exposed.

Ministers will need to state where the legislation departs from the principles and the reasons why.

If they don't they will be found out. That's what transparency and accountability in law making is all about. So changing the mindset across all areas of government is an important objective alongside removing the "dopey" legislation that we endure in our daily lives.

The Taskforce also proposed various supporting measures to give the Bill more bite. For example, they suggested that a Special Select Committee be assigned the task of reviewing bills for consistency with the principles of responsible regulation.

The Taskforce's Bill is a challenge to Parliament, but it is a challenge that Parliament asked for.

The taskforce is saying: "Here is a set of tools and disciplinary measures that we expect to improve the way you regulate." And the rest is up to us.
There is no close international precedent to the Regulatory Responsibility Act I am proposing. That of course means some people will be nervous about its impact.

I will always argue that we need to be bold in dealing to red tape, sloppy law and outdated and wealth sapping legislation. And we need to be bold in making New Zealand a better place to live and work.

Nothing in this Bill asks Parliament not to respond to public concerns; rather, it asks ministers to explain how and why its actions satisfy those concerns and regulatory actions.

Regulatory Responsibility legislation will run parallel to the Public Finance Act.

The Public Finance Act imposes on government spenders certain responsibilities. It says if you are spending public money, justify it, and be accountable for it.

The Public Finance Act has created a cultural shift in the way that money is spent in New Zealand and the whole mindset around public expenditure.

The Regulatory Responsibility Bill will do the same for the way we make law and regulate.

Of course, we are not relying on the Bill alone to guard against government failure. We have already introduced the "Better Regulation, Less Regulation" policy statement, which sets the agenda for improvements to regulation under this Government.

We have strengthened the Regulatory Impact Analysis regime, demanding better, more independent analysis from officials, and more responsibility for that analysis.

We have asked for regulatory scans and plans so that we can get a picture of how much regulation we will impose on people, and how much we are imposing already. And we have targeted some of the most important regulations for review, to see what we need to keep and what we need to fix.

The point of all these measures is to get people thinking about the costs of regulating. I don't mean the financial costs to government (which are easy to think about), or even the compliance costs to business, but also the dynamic, opportunity costs.

Those costs are the least easy to observe, but often the most important.

Regulations that cost little to enforce and impose no direct costs on business can still be burdensome if they prevent firms and individuals from taking advantage of opportunities or from taking on our competitors. Regulations that stop businesses and others from doing valuable things need particular, systematic scrutiny.

As I've mentioned, Ministers have all sorts of incentives, some immediate, some medium-term and some long-term, but not are not necessarily aligned at any time with the long-term interests of the public.

Systematic disciplines, such as the Regulatory Impact Analysis regime and the Regulatory Responsibility Bill, offer a way of constraining the short-term dynamics of policy formation so that it better aligns with the long-term interests of the public.

Let me give you an example. No-one dislikes energy efficiency except perhaps those who sell energy.

One regulatory response might be to achieve better energy efficiency, through, for example pursuing a pollution tax. Another regulatory response might be to identify technologies that are currently in use, determining which are more energy expensive and which are less efficient.

This alternative response might ban less efficient technologies or impose differential taxes on them.

The second approach will be more expensive for every joule, every unit of energy saved. Why?
 
Because when the inefficient technologies are determined by civil servants and by ministers, their values will almost certainly not match the value of the same amount of energy saving by the market.

Expensive as it might be, banning a technology is an easier and more effective way to reduce energy use, but not more efficient.
 

If you say that certain light bulbs or car engines or vacuum cleaners are illegal, then they are, and people will need to find an alternative or stop consuming.

If, on the other hand, you charge people for the extra cost of energy, then they will stick with what they have (if it is worth it to them), or else substitute a lower cost alternative.

We have too often seen the first approach on people's actual goals and values and too seldom the second. The first approach has the political advantage that it is immediate and definitive. The second is less obvious, and relies on people's actual values to get objectives met.

I am not committing the Government to taking the second approach rather than the first; rather, I am asking, what are the consequences of doing so? Present those consequences to the public when taking a decision and be accountable for them.

I am working on convincing my ministerial colleagues that passing the Regulatory Responsibility Bill is the way to go.
 
We need to abolish dopey regulations like having to register anti-dandruff shampoo as a medicine, or those that prevent an entrepreneurial Northland woman from making preserves for a local hospice.

These are the sorts of things that not only impose costs but strangle the spirit out of people and strip us of jobs, income and the ability to be innovative.
Every day I hear heartbreaking stories of lost opportunity and the frustrations caused by poor law.

Over the years many new regulations have come into effect.

Between 2000 and 2008 over 63,000 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.

Every new regulation represents more compliance for some part of the economy and before we know it the trickle has become a torrent.
That's why I am proposing this Bill. To clean up the red tape and to provide better law making.

There is no doubt in my mind that the Regulatory Responsibility Bill can probably do more than tax cuts to improve productivity and make the economy more competitive than any other measure the government could take.

And just think if we channel all that resource - not just financial resource, but the ideas, endeavour and energy that we currently devote to unnecessary and wasteful compliance - what we could achieve as a nation. It pains me to see great New Zealanders giving up on great ideas, or worse moving offshore, because they are tired and worn down by the plethora of silly regulations.

In closing I would just like to say where I see this proposed legislation in the New Zealand of the future.

The law when passed will not just be a pact between the 2008 Act Party and the people, nor yet the National-Act Government, until things change at some future election.

This is meant to be a contract between the people and all Parliaments and all Governments.

The aims of regulation are subject to cyclical policy, but how we achieve these aims can be subject to proper disciplines and principles. That is the promise of the Bill, and that is the focus of my energies.

Thank you.