Public Finance (State Sector Management) Bill

Those who have taken some time to review the bill will understand that it is quite complex in parts. Part 1 is about amendments to the Public Finance Act, Part 2 alters the State Sector Act, and Parts 3 to 7 affect Crown entities.

Part 2 is very interesting indeed, because it looks to extend the role of the State Services Commissioner in building a strong State sector and showing leadership. It is very interesting, because this bill came to the House at the time when the Amokura Panoho incident broke. The Government did not necessarily like it that someone in her position was involved in the Māori Party. As I understand it, a number of Ministers less than covered themselves in glory. In fact, to put it bluntly, from memory, the Minister in the chair, Mr Mallard, shot his mouth off on public radio and was forced by, amongst others, the Minister of Finance to make a few conciliatory statements and apologies.

Hon David Carter: Cool it.

JOHN KEY: “Cool it.”, I think, was the expression. A lot of “cool it” was going on at that time. It is quite interesting, because this provision will allow the State Services Commissioner to go out and set a code of practice and a code of ethical standards on the way that the State sector should behave.

Hon David Carter: Does he belong to the Labour Party?

JOHN KEY: That could be part of the dictum that comes from the State Services Commissioner’s role.

It is interesting that one of the areas where I think there is likely to be quite intense debate, and it goes back to the Panoho incident, is behaviour during the run-up to an election. The State Services Commissioner is likely to come out and say that here is the code of conduct for the way that State sector employees should act in the run-up to an election. There is nothing wrong with that. In fact, there is a bit of sense in having a code around the way that State sector employees should act and the way they should engage. They could clearly have a conflict of interest, and we would acknowledge that.

However, in the submissions that took place, the Public Health Association made quite an interesting point. The association supported the provision in general, but raised the point that the commissioner has no statutory requirement to consult with relevant parties in developing a code. There is no responsibility at all to consult with anyone, in terms of developing a code. So we could see all sorts of different spin being put on exactly what that code could do. But equally this is all about central government starting to try to dictate more and more in a statement of conduct the way things will happen, extending it to some really interesting parts of the State sector and, potentially, on into Crown entities and the like.

The second element of the code that will be developed by the State Services Commissioner was referred to by the Nurses Organisation, which thought that the code not only was unnecessary but also could be unfair to employees. We have seen some interesting behaviour by one or two Ministers, and by one Minister who is sin-binned at the moment, when they have felt challenged or threatened by members of the State sector and their involvement in potential political parties—

Hon Trevor Mallard: That’s actually the public service. It’s not relevant to this bit. If you are already a public servant, you will not be affected by these changes.

JOHN KEY: The Minister should take a call and clarify the matter, but we accept that point.

The second issue I want to raise is the extension of the State Services Commissioner’s power to issue codes that are more widely intended and could override the existing professional codes in place. While that is not the intention, it is possible that the professional code could cut across existing codes of conduct that are actually in place.

In part, the whole issue around the State sector, its behaviour, the way it interacts, and the way in which it should be able to operate is likely to create some interesting situations, not only as we go into an election but at various other times. At the moment the Judy Bailey incident is quite an interesting example of where the State sector on the one hand is telling—

Part 2 has more of this wishful thinking that the Government tries to write into legislation. The Government seems to believe that if it puts it into law, it will happen, or that somehow it elevates it or makes it more certain, when it is behaviour that anyone should be involved with. Most of the provisions in this part to do with senior leadership and management capability in the public service should simply be the functions of a good employer. There is nothing particularly special about the need to ensure succession and that there is capability coming through the ranks. It does not really matter whether one is running a garage with two apprentices and a boss, or running the public service, the same requirements are there. So the Minister needs to explain just why he is bothered with all of this.

It states here that the State Services Commissioner has to make sure that there are sufficient senior employees able to fill chief executive and other senior management positions. Well, I have never seen a vacant one. I have never seen a department without a chief executive. Sometimes an acting chief executive fills in, and sometimes it can take a wee while to get one, but there is absolutely no reason to believe that legislating the provisions in clause 40 will change any of the processes for finding the right person for the job.

I have a question for the Minister in the chair, the Hon Trevor Mallard. Is this restricted to the New Zealand public service? It has had an injection of Australian capacity—I would like to call it talent, but let us just settle for capacity. It has often had civil servants from the UK, where there is a pretty neat fit between the public service—

Hon Trevor Mallard: Chief executive?

Hon BILL ENGLISH: We have had chief executives come from Australia. How can we tell whether the State Services Commissioner has not fulfilled the objects of the Act? Is it when there are not enough New Zealanders to fill chief executive and other leadership positions, or is the whole world covered by the scope of this object, as long as there is someone somewhere? This provision does not mean anything unless it can be breached, and I want the Minister to tell me that. If this is a law, how do we break it? If this is in legislation, how does the State Services Commissioner fail in his responsibilities? How can an Opposition tell? The trouble with a whole lot of this wishful-thinking legislation is that we cannot tell whether they did it or they did not do it.

It is like the tertiary education legislation. The Tertiary Education Commission was able to show that an information technology course given out to 18,000 people on a disk, when only 600 people completed it, fitted brilliantly with the objectives of the tertiary education strategy, and I would say that it is the same here. Whatever the State Services Commissioner does about anything to do with this public service will fulfil this law. So can the Minister tell us what he has to do to make sure that he has not fulfilled the requirements we are about to vote on?

I am also interested in the provisions to provide advice. The commissioner has to provide advice and training on career development for staff in the public service. What has the commissioner ever done except that? That is the job. The commissioner must provide advice and guidance to employees within the State services at times that affect the integrity and conduct of employees within the State services. Well, we do need that because the current State service is operating in an ethical vacuum. We had the worst example of conflict of interest in a public body that I have seen in 20 years around the public service, down at Christchurch Polytechnic.

Hon Trevor Mallard: It’s not the public service.

Hon BILL ENGLISH: It is covered by this bill.

Hon Trevor Mallard: The member should get his terms right.

Hon BILL ENGLISH: It is covered by the broader bill, and here is how it is connected. Ministry of Education officials could not see the conflict. Even though the details of it were given to them, experienced civil servants like the chief executive of the Ministry of Education could not see the problem, and, from my questioning at the select committee the other day, they still cannot see it.

I want to pick up from where my good colleague the Hon Bill English left off, because this is just junk law. As Bill English told the Committee a moment ago, there is no purpose in having this prescriptive garbage in our law. How on earth do we determine whether someone has breached it? I draw the Minister’s attention to clause 41 in Part 2, and in particular to new section 57 in that clause. New section 57 purports to lay out standards of integrity. In fact, section 57(1) states: “The Commissioner may set minimum standards of integrity and conduct that are to apply in—(a) the Public Service: (b) all or any Crown entities:”—and that is what Bill English was getting at, as Crown entities, of course, include tertiary institutions—“(c) the Parliamentary Counsel Office: (d) the Parliamentary Service.” But then if we go on to new section 57A, it states that if the Minister approves, under section 57A(2)(a), they do not have to have any integrity.

Hon Bill English: And this Minister would be the first.

Dr the Hon LOCKWOOD SMITH: The Minister in the chair, the Hon Trevor Mallard, would be a classic to say: “No, no, you don’t have to worry about that.” Section 57A(2) states: “However, an agency referred to in section 57(1)(b) to (d)”—which is the public service, Crown entities, the Parliamentary Counsel Office, and so on—“may derogate from a particular standard …”. So they can actually be excused from performing with integrity if the Minister says that they can. What on earth does that provision mean? What is the Minister proposing should be allowed there that necessitates that law? I think we deserve an explanation of that. If the Minister proposes to say that a Crown entity can tell lies, he should tell Parliament now. If not, why is that provision there? Why on earth does the Minister require a provision in the law that states that the Minister can give approval for a Crown entity or the public service—

Hon Trevor Mallard: Wasn’t this member in charge of trade? Would the member like to talk about that?

Dr the Hon LOCKWOOD SMITH: The Minister owes it to this Parliament to tell us what that clause means. What was that bit from the Immigration Service about “lying in unison”?So now we can have the public service lying in unison if the Minister gives it derogation to do so. Is that what this clause is about? I think the Minister owes Parliament an explanation. If he expects Parliament to support this junk law—which is what it is—he owes us an explanation. This Parliament should not pass this part without an explanation of why the Minister wants the opportunity to tell the public service it can lie in unison and sing from the same song sheet, because this is about integrity. This clause says the Minister can allow a department not to exercise integrity, to deviate from the standards set out.

What does it mean? I think we are owed an explanation of what it means. If the Minister is not prepared to tell the Committee what it means, does that mean he supports lying in unison? What is it that the Minister seeks with that clause? What kind of lying in unison and singing from the same song sheet is that clause meant to allow the public service? The public service is important to this country. I believe that the public service has integrity. This kind of junk law actually belittles and damages the public sector, the State sector, because it puts in our law a provision for the public service to behave in a lesser manner than the manner expected from the principles of integrity. I think this Chamber deserves to know what on earth this clause means. I am prepared to sit down so that the Minister can take the call and explain to the Committee why he has put this clause into the legislation.

This part suggests that our State Service is in dire straits under this Government. It says we need a special part of legislation simply to say: “Provide for new leaders to come through.” That is what new Part 4 inserted by clause 40 does. I ask the Minister why on earth we need good leadership training and planning to be included in legislation. That is the bit I cannot figure out. Are things so bad that we have to pass a law in Parliament, under urgency, making the State Services Commissioner responsible for “developing and promoting a strategy for the development of senior leaders and managers in the Public Service;”? Is the Minister seriously telling us that that is not happening? Why on earth are we passing a law to make that happen?

Hon Ken Shirley: Not a whisper.

RODNEY HIDE: Not a whisper! Has that not been happening all along? Then we see that a new clause has been put in. We are going to require some general principles, and the chief executive of each department must: “operate a personnel policy that complies with the principle of being a good employer;”. What does this mean compared with the Employment Relations Act? Is this an extra burden upon the chief executive of a Government department? I ask the Minister whether this requirement to be a good employer is something in addition to the Employment Relations Act. What on earth is this about? And what happens under this legislation if a chief executive is not a good employer?

Hon Bill English: Nothing.

RODNEY HIDE: Nothing. So why are we sitting here, under urgency, debating this? Now I come to something else. I have to say that it is a bit rich coming from this Government, particularly with this particular Minister in the chair, that the legislation requires that the State Services Commissioner “may set minimum standards of integrity and conduct”. Trevor Mallard is telling the civil servants: “Hang on, fellas, you’ve got to set some rules for integrity and conduct.” This is from a Government in which the Prime Minister forges paintings—and she is going to make a rule about minimum standards of integrity and conduct! This is from a Prime Minister who then has the evidence destroyed! This is from a Prime Minister who goes steaming through Waimate at 100 miles an hour and does not—

John Key: Like a bat out of hell.

RODNEY HIDE: No, she was going behind on her broomstick; that is how she did not know! She was going through like a bat out of hell—and she says that the Government is going to require minimum standards of integrity and conduct! This is from a Government that has breached contracts. This is from a Government that had a Minister who received $195,000 and paid no tax on it. And this Government is going to set standards of integrity and conduct! Here is the interesting thing—

Jill Pettis: Forty-seven percent in the polls!

RODNEY HIDE: Isn’t Jill Pettis great! Has anyone ever heard Jill Pettis give a speech in this Chamber, or does she just growl on like the Wicked Witch of the West, calling out from her chair, unable to get up and string two sentences together at this time of night? God knows what she has for dinner, but she can never string two sentences together. Then one notices an interesting thing. [Interruption] Is that the woman who has a pint of blood and then hangs upside down in the wardrobe at night for an hour or two?

The CHAIRPERSON (Hon Clem Simich): Order! Come to the bill.

RODNEY HIDE: Clause 41 provides for new section 57, “Commissioner”—wait for this—“may set minimum standards of integrity and conduct”. Is anything stopping the State Services Commissioner now from setting standards of integrity and conduct? I do not think so. Notice that he is not required to do so; the legislation just says he may. [Interruption]

Trevor Mallard is breaking all the rules beside the Chairman. I raise a point of order, Mr Chairperson. I point out that the Minister is in a very privileged position, being beside you. At any stage he can take a call and contribute to this debate, but the idea that a Minister can interject through a member’s speech using your microphone, while you do nothing, is actually an insult to this Chamber. I expect an apology for that.

The CHAIRPERSON (Hon Clem Simich): I think we were proceeding quite nicely. I thought it was helpful to the member, and I intend to leave it at that.

RODNEY HIDE: I raise a point of order, Mr Chairperson.

The CHAIRPERSON (Hon Clem Simich): I have made a ruling on that point. Does the member have a new point of order?

RODNEY HIDE: I raise a point of order, Mr Chairperson. Are you saying that it is OK for a Minister, from his seat beside you, to interject on an MP speaking at the Committee stage?

The CHAIRPERSON (Hon Clem Simich): No, it is not OK, and the Minister will not be doing it again. I did not think he was interjecting. I am doing the judging. I thought the Minister was being helpful to the member. I may have been mistaken. No apology is required.

Quite a few submitters came before the Finance and Expenditure Committee and complained about the provision that the State Services Commissioner “may set minimum standards of integrity and conduct”. The complaints came particularly from the education sector—from the boards of trustees and the principals. They told the select committee that teachers were already subject to two, three, or four sets of codes of conduct, they were not sure how demanding that was, and asked what was meant by the provision that the State Services Commissioner might proceed with another set of standards of integrity and conduct.

I must say that I personally have a lot of concern with the State Services Commissioner setting minimum standards of integrity and conduct. I wonder how far it would have stretched, because the present commissioner is one Mr Mark Prebble, and I know that Mr Mark Prebble has quite a lot to say about the dress codes of public servants, including that they should shop at The Warehouse or at Farmers, not wear earrings, etc. I would like to know how far the public service can expect the State Services Commissioner to intrude into the dress code of employees or into the behaviour of individual departments.

The other power that this provision is supposed to give to the State Services Commissioner is the ability to review the machinery of government across all areas of government, including the allocation of functions to and between departments and other agencies. On the one hand, it could be scary if the State Services Commissioner is to interfere in each individual department’s functions, thereby causing unnecessary undermining of the department’s head, but on the other hand, one has to question what authority is granted to the State Services Commissioner, when he or she can only review. What happens after he or she reviews? Does the commissioner, once again, report to the relevant Minister? What if the State Services Commissioner reviews and recommends changes to Government departments that concern two Ministers, or even three or four Ministers? Would that review yield any tangible result?

We also see this provision giving the State Services Commissioner the desirability or need for the creation of new departments and other agencies. Now, this is quite interesting. I wonder whether the State Services Commissioner can do that based on his or her own opinion, or does the State Services Commissioner have to seek guidance from some higher authorities, such as the Ministers, about the creation of new departments and agencies? How can we ensure that the provision does not become a tool that might be used to undermine Governments and agencies that might be proving too difficult to deal with? Of course, the one thing in a positive light that I can think of is that it could be good for the State Services Commissioner to interfere in the current saga of TVNZ, where the Prime Minister is complaining about it exhibiting a culture of extravagance.

I have to start by saying that I have heard some nonsense in the time that I have been in this Chamber, but this would have to be the worst type of nonsense I have heard thus far.

Craig McNair: Apart from the Civil Union Bill.

BRIAN CONNELL: Apart from the Civil Union Bill, as some member has called out. Why do we need to legislate for this type of fundamental activity that we would see in any business? This is plain, good old-fashioned human resource management. I have to say to the Minister in the chair, Mr Mallard, and to members, that if I came across a chief executive officer who was not doing this as a matter of course, then I would simply fire that person because he or she would not be worthy of having that job title. This is the sort of thing that we expect would come naturally to any senior executive in any organisation across this nation that we would care to name. Putting this type of stuff into legislation will not change that one iota, and that is a great fallacy. That shows the inexperience of the Minister in the chair, and of some of the Ministers in this Government who think that if they put this sort of stuff into legislation, then it will suddenly happen.

Well, let me tell those members that it does not change anything at all. If this is not inherent in one’s make-up as a senior executive, then it will not happen just because it has now been put in writing and is legislated for. What a waste of this Parliament’s time and a waste of taxpayers’ money this is. How many minions are crawling over this part of this bill, putting this sort of stuff in place?

The State Services Commissioner will become a very powerful person if this legislation gets up and running. That is dangerous, because if we read part of what is intended in this bill, he or she can be manipulated by the responsible Minister, and that is a very dangerous principle. The commissioner would surely be intimidated by a member of this current Government, because it is morally corrupt, and we have seen the evidence of that time and time again throughout the course of the last couple of years.

The Government is asking members of this Parliament to accept that it is a Government that will set minimum standards of integrity. I look across to the Government benches and see Jim Sutton. He sat in the back of a speeding car, all the way from Waimate up to Christchurch airport, so that the Prime Minister could go and watch a game of rugby—which she does not like, in the first place—simply so that she could be seen to be there. The Prime Minister’s defence was: “I didn’t know how fast I was going, because I was having a conversation with Jim Sutton.” Well, no one can have a conversation with Jim Sutton for more than 5 minutes, let alone 1½ hours, but we are expected to believe that.

The great nonsense about this bill is that all those requirements are already in legislation, anyway. This is the law. Let us look at some of the requirements, such as employers have to be good employers and adhere to equal opportunity legislation. Is that to be sure, to be sure? Are we legislating to be sure that the legislation that we have already legislated for will be adhered to? It is already in the law. This is good old-fashioned succession planning. We will legislate to make sure that we know how to get succession into chief executive roles in New Zealand corporations or State services. How pathetic is that? It is the law, but here the Government is repeating it again and again.

Let us look at some of the examples. Clause 40A, “General principles”, proposes to substitute section 56(1) of the State Sector Act with a new section 56(1) that will provide: “(1) The chief executive of a Department must—(a) operate a personnel policy that complies with the principle of being a good employer; …”. I ask the Minister what will be different in future from what is already happening in New Zealand in any business that he could care to name? How will that provision change anything? Well, the Minister should get on his feet and take a call, because it is a very fair question. How will that provision change anything?

I move, That the question be now put.

I want to ask the Minister to explain just how clause 41, which substitutes a new section 57 of the State Sector Act, will work. Let us establish first of all that, by way of example, Christchurch Polytechnic is a Crown entity—so I do not want to hear from the Minister that this provision is not relevant to it. It is proposed that the new section 57 will provide that: “(1) The Commissioner may set minimum standards of integrity and conduct that are to apply …”, in this case, to Crown entities. Now, it so happens that, as far as I am aware, the State Services Commissioner has not set standards with regard to Crown entities like the Christchurch Polytechnic, but under this legislation he or she can. I want to know from the Minister whether this legislation will compel the commissioner to set standards that would prevent the kind of conflict of interest that arose at Christchurch Polytechnic. If the Minister is not familiar with those circumstances, I can tell him that a senior employee of the polytechnic was able to make substantial private gain by virtue of the way that employee used her public position. Will the standards be high enough to prevent that?

The next question is: what happens when someone does not comply? I would imagine that any standard that the State Services Commissioner sets for a polytechnic would prevent senior employees from getting themselves in a position where they could make substantial private gains from their public offices. It should go further than just stating they have to declare an interest. The minimum standard should be that there be no conflict of interest, and not just that a conflict of interest is declared. But if senior employees do not comply with a standard set by the commissioner, what will happen? New section 57B inserted by clause 41 states that if there is a breach of the minimum standard, “The Commissioner may advise the responsible Minister if, … a serious breach … has occurred, or is likely to occur.” That is it—the commissioner advises the responsible Minister. I presume that the real powers are there under new section 57C(1), which refers to the powers in sections 7 to 9 of the principal Act that “the Commissioner may exercise in respect of Departments, including the powers in section 25.” Can the Minister just tell us what will happen, apart from the responsible Minister being advised? In the case of Christchurch Polytechnic, senior civil servants, including those in the State Services Commission, knew about the conflict of interest. We know they advised the Minister—because the official papers show this—that an individual holding public office there was a shareholder in a company that had pocketed $6 million of public money, and nothing has happened. Absolutely nothing has happened, either to the individual or to the Crown entity.

So the Minister needs to explain to me why it is that even with paraphernalia like that in place—not exactly what this bill provides for, but like it—when there was a clear breach of not only the formal standards but any general understanding of the role of someone in a Crown entity, nothing has happened. The State Services Commissioner, the chief executive of the Ministry of Education, and the Minister have done nothing about the worst breach of any kind of public service standard that I have seen in 20 years. So the Minister needs to tell us why this wet lettuce leaf will make any difference, at all. None of this law will matter if there is no determination on the part of the Government to enforce the standard. In the absence of that determination, this measure is a total waste of time. It is worse than a wet bus ticket, because it gives people the impression that something may happen. They will think they can go somewhere and something will happen—that they can tell someone, and that at least those responsible will get slapped with the bus ticket. But, in fact, without the will to do so nothing can happen. That is why I say the public service is operating in an ethical vacuum right now.

This measure is all rhetoric. It is meaningless and it is hollow, because in the one chance that the Government has had to enforce it, it did not do anything.

I move, That the question be now put.