Public Finance (State Sector Management) Bill

, on behalf of the Minister of Finance: I move, That the Public Finance (State Sector Management) Bill be now read a second time. This bill is the culmination of significant work intended to strengthen and improve the accountability, transparency, and effectiveness of the public service and wider State sector.

Sitting suspended from 6 p.m. to 7 p.m.

As I noted ever so briefly before the dinner break, the Public Finance (State Sector Management) Bill is the culmination of significant work intended to strengthen and improve the accountability, transparency, and effectiveness of the public service and the wider State sector. The bill consists of eight parts, covering three important areas of change: first, changes to the Public Finance Act, including integration of the Fiscal Responsibility Act; second, amendments to the State Sector Act; third, the creation of a new Crown Entities Act. At the end of the Committee stage the bill will be divided into its constitute parts, as set out on Supplementary Order Paper 316.

The Finance and Expenditure Committee has considered and addressed a range of issues raised in submissions—in particular, the submission received from the Clerk of the House raised issues from a parliamentary perspective. I thank the committee and officials for working effectively through these to ensure that the primacy of Parliament has been upheld, and to clarify the intent and application of the bill.

The key amendments the committee has recommended to the Public Finance Act, in Part 1 of the bill, relate to the estimates and multiclass output appropriations. The committee has also recommended that the appropriations provisions precede the fiscal responsibility provisions in order to recognise the central importance of the appropriation process. The committee considered that the estimates provide important information, and also wish to allow for future developments. The committee has therefore recommended that clause 8 be amended to provide for the retention of the estimates and to require the Minister of Finance to consult the House on significant changes to the format or content of Budget documents, including the estimates. The Government agrees with these changes.

The bill provides for output classes to be grouped within a single appropriation. Submitters expressed concern that this may reduce the level of information provided to Parliament, thus reducing accountability and parliamentary scrutiny. That is certainly not the intent. Rather it is intended that output classes remain the basis for parliamentary reporting and accountability. The committee has therefore recommended amendments to clause 8: first, to clarify that individual output class information is still required; and, secondly, to safeguard use of multiclass output appropriations by requiring approval from the Minister of Finance. These changes will ensure that accountability to Parliament is maintained, while allowing greater flexibility for Ministers and departments to focus on delivering the best results for New Zealanders.That is always at the heart of this Government’s legislative intent.

Part 2 amends the State Sector Act extending the mandate for the State Services Commissioner to the wider State sector, and establishing the shared responsibility of the commissioner and chief executives for the development of senior leadership and management capability. The committee has recommended only minor changes to this important part of the bill.

The proposed new Crown Entities Act, in Parts 3 to 7 of the bill, sets out a consistent governance and accountability framework for all Crown entities, while recognising that different types of entities have different relationships with the Crown. I think the differentiation and the recognition of it are very important.

The most significant changes recommended by the committee relate to the intent of, and procedural matters around, the proposed whole-of-Government direction of power. To address concerns—in particular, those raised by the Regulations Review Committee—the select committee has recommended that clause 152 be replaced with new provisions that directly authorise the Minister of State Services and the Minister of Finance to issue jointly whole-of-Government directions, rather than by Order in Council. The Government again agrees with these recommendations, which will contribute to alignment across Crown entities.

In addition, the committee has made recommendations that clarify the application of the bill to two categories of Crown entities—namely, school boards of trustees and tertiary education institutions. A number of submissions expressed concern that the bill would result in onerous burdens on school boards of trustees. To address this concern the committee has recommended a positive list approach—that is, the inclusion of a new schedule detailing the provisions that apply to school boards of trustees.

Submissions from tertiary education institutions argued that they should cease to be Crown entities. The committee and the Government consider that the separate category of “Crown entity” is appropriate and recognises their distinctive nature. The committee has recommended that a positive list approach also be applied to tertiary education institutions. I welcome the committee’s practical suggestion.

Two Supplementary Order Papers were released on 7 December. Supplementary Order Paper 316 divides the bill into its constituent parts. Supplementary Order Paper 315 amends the bill as reported back, and covers changes to commencement and transitional clauses, simplifies the application to tertiary education institutions, and contains technical amendments and consequential amendments to other legislation. This includes a correction to the commencement provisions of the Gas Amendment Act 2004.

Finally, I wish to thank the Finance and Expenditure Committee for working constructively and improving the bill. I am pleased, as I know the Minister of Finance is, to note that the committee unanimously recommended all the amendments. The Government supports these amendments. This legislation represents the most significant enhancement of public sector management for over a decade, and will help set a new benchmark for Government transparency and accountability in New Zealand, and, indeed, internationally.

This bill does have some positive changes for public sector management, but the heart of the debate over it is going to be whether this Government can be trusted with this particular tool kit. This is a Government that has overturned most of the conventions and understandings by which the public service has operated. The public service operates at its best when it has clear direction from a Minister and a Government, and is allowed to get on with the job. Part of that job is always going to be dealing with the political pressures that arise around Government decisions, because Government decisions will not always be greeted favourably. That means that public and political pressure will come on those decisions and on the public servants who execute them. What happens then is absolutely vital and is the real test of whether the Government is managing the public sector properly. If the Government changes its position just as a matter of whim, because of political pressure, and if it blames the civil servants for the embarrassment that is caused by their carrying out the Government’s own decisions, then the public service has less capacity to function with independence and integrity.

I will just point out a few examples, which raise questions about the Government’s intent in respect of the civil service, and therefore the effectiveness of this legislation. One would be the fate of the Community Employment Group. They made the mistake of implementing Government policy. That is a bad mistake when Steve Maharey is the Minister in charge of one’s department. He had this idea of the Social Entrepreneur Fund, which turned into a slush fund for all sorts of mad schemes. These were gradually revealed to the public. They were an embarrassment, as they should have been, because it was a stupid policy, and under a Minister who cannot implement anything.

So what did he do? He then turned round and abolished the Community Employment Group altogether. He did not just shut down the Social Entrepreneur Fund; he decided to punish, by sacking, those people who he believed had embarrassed the Government. As it happens the Community Employment Group is one of the more useful social bureaucracies around the place. It has made valuable and long-lasting contributions in my electorate, but it is gone.

What impression does that leave with the civil service? Civil servants believe that the Government is putting in place a bad policy, but carry it out because they are professional civil servants, then find that the Government comes along and punishes them when the inevitable political embarrassment arises. That is one reason why this Government cannot be trusted.

I will give the House another example—the Christchurch Polytechnic Institute of Technology and its saga over Cool IT. That raises a number of questions about public sector administration. The Minister has in recent weeks decided to withhold money from the polytechnic. Is that because he believes that it did something with public money that it should not have? No, it is the result of 12 months of public embarrassment for the Government, in the media.

Everyone who is involved in the sector knows that. The Minister has moved, simply because the political pressure has become sufficient that he feels he has to, or he will lose all credibility. Again, those actions cut across all the conventions and understandings of the way this legislation imagines the public sector would work—where there are clear delineations of responsibilities, where there is transparent accountability for the money, where the Minister has powers but does not use them except in extreme circumstances, and where public servants can operate in an environment of certainty and predictability.

That is why I worry about things like the whole-of-Government direction that is in the bill. It is couched in the usual loose terminology of good intentions, in the same way that local body legislation prescribes that local government is now responsible for the environmental, social, economic, and sustainable good of their communities. It is meaningless garbage in legislation. It could mean anything. It could mean nothing. That is the kind of thinking the Government will bring to bear through mechanisms like the whole-of-Government direction. I hope that, in the Committee stage, some attention will be paid to the kind of approach that is implicit in the bill.

I am particularly concerned about the effect of the bill on the tertiary education sector. I draw the House’s attention to that because that is probably the group that is most opposed to the bill and, in my view, for good reason. The second-most opposed, initially, was the Clerk of the House. I must compliment him on the best example of a senior public service leader standing against the tide. The Government’s initial legislation was a disgrace. It showed its contempt for Parliament and for the accountability that must go on in this place. The Clerk, as at times the Speaker should, stood up for Parliament and put a case. A committee of parliamentarians—rather than Ministers, thank God—heard that submission and changed the bill substantially. I record the Opposition’s gratitude for the role that the Clerk and his office played in holding back the steamroller of the executive.

I return to the tertiary sector, because, as I said, people in that sector were among the strongest opponents of this legislation. The relationship between government and universities, in particular, but also polytechs, is a somewhat delicate one. Their ownership is unclear. The accountabilities are relatively clear, but the role those institutions have to make autonomous decisions of their own is absolutely vital. It is absolutely vital that they do not feel stood over by the Government. It is vital that they can act, as Parliament has charged them to do, as the critics and conscience of society.

Now, I have to say I approached the argument of the tertiary institutions with some scepticism, because in the last 5 or 6 years they have cravenly supported, in just about every respect, the Government’s tertiary policy—up until 6 months ago. That tertiary policy has put together a whole mechanism of control. The Tertiary Education Commission, a $50 million extension of the Minister’s office, is a hopelessly complicated bureaucracy that, for all the wires, pulleys, and computers, actually does almost nothing.

So there should be no surprise that the Government has taken from the tertiary sector the message that it can do pretty much what it likes. All those fine academics who used to denounce past Governments with such vigour have lain supine while the Government rolled over them. Finally they decided to stand up for themselves and oppose the provisions in the bill, and I fully support them on that. It should be absolutely clear that tertiary institutions—universities, in particular—are independent of government, and, particularly, independent of this Government, which believes that it knows better and can do jobs better than the people doing them. It thinks it can run universities better. That is why it is bringing them in under the provisions of this bill. It can run the public service better than the civil servants can, and that is why some new tools have been included in the bill for the Government to use.

This debate is essentially about trust. On its own, in the hands of a Government that respects the civil service, the bill will be useful, constructive, and forward-looking, but in the hands of a Government whose dead political reach goes into every corner of life in New Zealand and whose politicisation of the public service, including the police, is a disgrace, this bill could end up being quite dangerous.

I take a short call in the debate on the second reading on the Public Finance (State Sector Management) Bill. The bill is designed to strengthen the public service, make it more transparent and flexible, allow a more integrated response to complex social problems involving a number of State agencies, and invigorate the culture of the State sector. It stems from the 2001 Review of the Centre and represents the first major change to State sector governance in a decade. There are a number of main points, and I will name just a few of them now for the benefit of members. It integrates the Fiscal Responsibility Act into the Public Finance Act, and it broadens appropriations in order to allow Ministers more flexibility, while retaining levels of reporting and accountability to Parliament. It also enhances departmental reporting, to ensure that a broader range of information about intended and actual performance is disclosed. It also makes the Auditor-General’s controller function become more effective and requires Ministers to report to Parliament on serious breaches.

I hope the House will debate this bill fully as it goes through its stages, and I reiterate my support for it.

In speaking to the second reading of the Public Finance (State Sector Management) Bill, I note that it covers the main legislation that governs public finance and the management of the State sector. I also note that the bill is the culmination of a review of public management. The Review of the Centre suggested there should be initiatives to support better integration, greater flexibility, and an increased focus on results, without losing the system’s current strengths of transparency, accountability, and financial management. The Minister of Finance, Michael Cullen, stated that the bill was “designed to strengthen the public service, make it more transparent and flexible, allow a more integrated response to complex—”

The question was raised by Simon Power that a Minister was not present in the Chamber. The Assistant Speaker declared that a Minister was present.

Before I was interrupted, I was saying that the Minister of Finance said that the bill will “… allow a more integrated response to complex social problems involving a number of state agencies and invigorate the culture of the state sector.”, as the previous speaker said.

But after looking at the bill, and after being on the Finance and Expenditure Committee and hearing the concerns of the submitters as they came to the table, one by one, I say that the bill, sadly, will not achieve those objectives. The New Zealand First members of the select committee, myself and the Rt Hon Winston Peters, wanted to see whether the bill did what Michael Cullen said it would do. We also wanted to hear the submissions, to find out whether submitters believed the bill achieved its goals. After doing that I still feel strongly that it does not, in many ways. In some ways it does, and in other ways it does not.This bill amends the Public Finance Act and the State Sector Act, and creates a new Crown Entities Act. The Government says that it will improve transparency and accountability. Sadly, I really feel, once again, that that will not happen under this legislation in its current shape and form.

I believe that this bill is appropriately named—not because it is good legislation, but because it represents more State control by the Government. This Government is, sadly, all about State control. I believe that it wants to have a stronger grip on anything and everything in our society. It does not want to allow the elderly RSA members, who fought for our rights as a nation, to have a cigarette at the local “Razza”—it does not want them to do that. The Government wants to have more State control over our taxes and our education system, as we can see in this very bill. I will get to that point later on. The Government wants to have more control over our values and what we believe in. I believe we are going down a very scary road.

Representatives from our educational institutions came before the select committee, and they were very, very concerned about this legislation. They, along with the Clerk of the House and others, were concerned about it. The Clerk had a lot of concerns that the Government members on the committee listened to. I, like Bill English, admire the Clerk for standing up against this legislation and honestly saying that it will not work in its current form—that it will not float, as it were. In the same way, I admire the tertiary education sector. The institutions joined forces, came to the select committee, and told us of their fears and concerns about the control that this bill would give to the Government. Some people may say that the intent of the Government is very admirable—or it should be admirable, whatever the Government is. But we cannot be 100 percent sure of that, in view of some of the things that we have seen go through this House in the past few months. I strongly feel that a lot of the issues in this legislation need to be clarified more comprehensively. Speaking of the submitters, it was amazing to see each submitter come into the select committee one by one, and to find that a lot of them had similar concerns. They had a wide range of concerns, but in many ways those concerns all centred around the issue of still wanting to be independent—or the fear that they would lose their independence.

Ultimately, at the end of the day, New Zealand First members had to look—as did all members of the select committee—at this legislation as a whole, and ask whether it would be best for New Zealand in the long run. Sadly, we had to say that no, it would not.

💬 Darren Hughes: Was it a close vote?

It was 13 to nil. New Zealand First opposes this legislation.

I rise to take a call on the second reading of the Public Finance (State Sector Management) Bill. It is a long time since February 2004, when this bill received its first reading. Also, it is now a few months since the Finance and Expenditure Committee, of which I am deputy chair, reported the bill back to the House. At 500 pages, this is a pretty massive bill, and it introduces major changes to the way that the Crown accounts record the public finances of New Zealand. Before I proceed into some of the nitty-gritty provisions of the bill, I would like to mention the use of the word “Crown” in a New Zealand context. When I was growing up, those accounts were known as the “public accounts” or the “Government accounts”. I think the adoption of the Crown terminology is a step backwards.

To most Kiwis—and that includes Māori Kiwis—the Crown terminology conjures up images of the Queen or the Governor-General. But, in truth, the accounts referred to in this bill belong not to the Queen or the Government, but rather to the people of New Zealand. They represent and record, for example, assets purchased with funds taken in the form of taxes from the people of New Zealand, borrowings and other liabilities that are incurred for and on behalf of the people of New Zealand, and expenditure that is funded from taxes, duties, and levies compulsorily imposed on the people of New Zealand. The Government should always remember that no money it spends has not first been collected from the people.

Maybe in the long run we should look at ditching the references to Crown accounts, Crown agencies, and Crown entities, etc. I think it would be good if terminology was eventually adopted that more strongly corresponded to the reality that those entities and agencies, and their accounts, belong to the people, and are there to serve them. Then we may again have—who knows—civil servants, and put more emphasis on the centrality and importance of civil society in New Zealand. However, that debate is for another day. Perhaps it could be taken up by the constitutional inquiry that will be launched by Parliament during this week of urgency.

As a member of the Finance and Expenditure Committee, I acknowledge the centrality of the input we received from the Clerk of the House, Dave McGee QC, and the way that he led us through the various constitutional arrangements that lie at the heart of the public finance accounts and, therefore, of this bill. Without Dave McGee, I am not sure quite where this bill would have ended up. He brought us back to emphasising that in matters relating to public finance, the centrality of Parliament must remain all-important. It is in Parliament that the people of New Zealand place their trust. It is a trust that could be likened, I guess, to trusteeship, and it is also a privilege to make huge decisions, involving literally billions of dollars, for and on behalf of the people of this country—for their welfare. Parliamentarians are the only elected people in New Zealand. We must never surrender the sovereignty that belongs to the elected assembly of New Zealand to unelected and sometimes faceless bureaucrats.

In the first draft of this bill there was definitely a slant in that direction. We needed the advice of the Clerk of the House in order to put the right balance back. I guess that just illustrates how relatively easy it would be for us to kid ourselves—particularly, probably, the executive members of any Government—that somehow we are the people who really constitute the sovereignty of this country, together with our army of civil servants and other paid employees. But we need to continue to clearly express the fact that the people of New Zealand are sovereign in this country, and that we in Parliament are, in a very real sense, here to serve them and their interests.

Another very interesting thing happened in the course of our extensive consideration of this enormous bill. We had, for example, some submissions that put before us a conspiracy theory. That is quite unusual—I think it is the first time since I have been in Parliament that people have come to the select committee, and asked us not to pass a bill because it was really a conspiracy to usher in a one-world Government. From the people who made the submissions to us, we almost got a sense that Armageddon was right behind us—that we would have a one-world Government tomorrow and the end of the world the next day, with the Antichrist somewhere in the distance. They were actually quite well-qualified people, but the bottom line is that their criticism was really alarmist and ill-informed. They could be excused, I guess, for drawing some of those rather fanciful theories together by the sheer complexity of this bill. I have to admit that when one significant piece of legislation is being amended by another, then in relation to technical areas such as public finance and State sector management it really takes something of a wet towel to get one’s mind around some of the amendments and the way they fit into the existing legislation.

However, the central goal of this bill—and I think we have got pretty near to it—is basically to ensure that the public accounts of New Zealand—the various statements made to introduce fiscal policy through the Budget Policy Statement and so forth, and through the Fiscal Responsibility Act—are kept according to standards that represent best international practice. That, I think, has been the driving force behind the bill, and the committee has got us as close to that as possible—certainly within the level of the competence not only of ourselves but also of the many people who worked tirelessly to give us advice in those areas.

I also think that the changes to State sector management in the bill will be positive. I welcome the drive to put in place standardised procedures, including ethical guidelines, that will apply across the board to all State agencies, entities, and whatever other names we choose to give such bodies. We have all those categories of autonomous ones, semi-autonomous ones, independent ones, and so forth. But whatever those agencies are called, I think we need to ensure, in the interests of the people of New Zealand, that they all carry out their functions in accordance with high ethical standards and with the best interests of the people at heart. Really, those are the important things about the bill. We have cleared up a number of grey areas, and a number of situations where the existing legislation was unclear about lines of accountability and responsibility.

In summary, I signal that United Future is reasonably happy with the outcome on this bill and with the work of the select committee. We will therefore support the bill through the Committee stage and its third reading, thereby assisting it to become the law of the country. It will then be up to the same civil servants that I mentioned earlier to put it into practice, and that will be a great challenge to people in Treasury and in the State Services Commission, in particular. I express my own satisfaction with the high quality of the people we have in those organisations.

I rise on behalf of the ACT party, which is voting against this bill. We support the extensive changes that occurred in the select committee, under the guidance and hard work exhibited by the Clerk of the House, but we are still voting against this bill, for two main principles: the first concerns the spending of taxpayers’ money, and the second is the enormous threat this bill poses to the autonomy and academic freedom of universities.

In fact, with regard to the second principle, I find it astonishing that a Government most of the senior Cabinet members of which have been privileged to go through a university education and enjoy the academic freedom that that brings—one of the few areas in life where one can have that kind of protection—is now passing legislation that has outraged the Vice-Chancellors Committee. It has caused the vice-chancellors a huge amount of grief and has forced them to go public with their concerns, after repeatedly lobbying and making submissions on what the legislation will do to the autonomy of universities in bringing them under the control of the Government.

But first of all I would like to talk about the changes that this bill is bringing about to—the watering down of—the Fiscal Responsibility Act. Every single day in New Zealand every taxpayer should go down on his or her knees and thank the Hon Ruth Richardson for bringing in that Act. It places a safeguard—it is a gatekeeper—on the amount of taxpayers’ money that Governments can spend, and where. Politicians love spending taxpayers’ money. They write out cheques for things they would never write out cheques for if it were their own money. What politician, what MP, would write out a cheque for $500,000 to send a port-a-loo that makes a noise like a donkey to an international art exhibition? If there are any politicians or MPs who would do that, I challenge them to get out their chequebooks and do that right now with their own money.

What politician would write out a cheque for thousands of dollars for a hip-hop tour, or for bounty hunters to go around suburbs, mostly in Auckland, in vans, pick up little children, and collect a bounty for enrolling them in an early childhood centre? They are not checking the quality of the education that the children will get in that early childhood centre, or checking to see whether they will stay in that centre, then go on to school and learn to read—all those things that taxpayers’ money should be spent on in terms of adding value to, or improving the lives of, people. No, the money is just for ticking a box. No politician would write out a cheque for his or her own money to do that. If politicians wrote out a cheque for children to go to early childhood centres, they would make damn sure that the children were getting a good education, and that they would come out each day having learnt a little bit more than they knew when they went in.

What politician would write out a cheque for $400,000 to double the salary of a newsreader who was not actually poached by a rival television company? Because negotiations had gone on for so long and were so inept, the newsreader could have walked, so the salary was doubled. No politician would do that, but when it is taxpayers’ money it is another story. Other people’s money is a drug—it is an opiate—and politicians get high on it.

That is why, instead of watering down the Fiscal Responsibility Act, we should be building on that Act. We should be passing legislation that requires value-for-money tests. In fact, we should go so far as to have a taxpayers’ bill of rights that safeguards taxpayers’ money by limiting Government spending to the rates of inflation and population growth. To spend more than that, a referendum would need to be held; if 75 percent or more of the people give their support, politicians could spend more money than that. Instead, this legislation is, as it says, almost a watering down of the Fiscal Responsibility Act.

Trevor Mallard has said that this legislation gives greater financial transparency in ensuring the proper spending of taxpayers’ money. It does nothing of the sort. It still leaves the way open for Governments to succumb to the temptation to spend money to buy votes. With a 3-year term, a Government can save it all up in the first and second years, and spend it in the third year, to ensure that it will get in again at the following election—or promise more. That is what we will see more of, and that is why we cannot support this legislation.

I would like to move on to the issue of universities and academic freedom. Crown entities will include universities as organisations in which the Government has a controlling interest. The ownership of universities is an interesting issue. They are on public land but students have to pay to go there. They also get quite a lot of private funding. More and more universities look to the private sector for sponsorship and funding. That private sponsorship and funding saves the taxpayer millions of dollars. If members have been to Auckland University and seen the Icehouse, which grows entrepreneurs and young business people, they will know that just about all of that has come through private donations and private funding, which the vice-chancellor worked very hard at getting. How will private institutions feel about sponsoring or putting money into universities when they see what happens to universities under this legislation?

There will be a Minister specially designated to control universities. The Minister will have the ability to sack members of the council if the university is not carrying out Government policy. I seriously question how the Government can say this bill is not a threat to academic freedom. If it is not a threat to academic freedom, how come the Vice-Chancellors Committee, hardly the most libertarian organisation in New Zealand, has taken it upon itself to write a public letter seeking support from senior businessmen and senior academics—and many graduates and alumni, as I said, are in this House—to oppose this bill? But the lobbying has fallen on deaf ears.

I will continue on this issue in the Committee stage. I will be urging those in the Government who are concerned about academic freedom to think again before they include universities in this bill, and I will do so again during the third reading. As I said, this bill in its present form is not a bill we can support.

The Green Party will be supporting this bill in the second reading, the Committee stage, and the third reading. I say that with some relief because if substantial changes had not been made to this bill at the Finance and Expenditure Committee, we would definitely have been opposing it in this House.

The process that this bill is now undergoing mirrors, I believe, the bad process that has occurred from the outset. Here we are on Wednesday night—Wednesday night as far as the rest of the world is concerned but Tuesday night as far as the parliamentary timetable is concerned—dealing with a bill that is 500 pages long, under urgency, in a fashion that I think is totally inappropriate. We are having the second reading debate, then we will have the Committee stage—and this bill has something like 18 questions to be debated. The third reading debate will immediately follow the Committee stage. So there will be no opportunity for appropriate consideration of this bill, no opportunity to reflect on its detail during the Committee stage, and no gap between the Committee stage and the third reading in which to consider introducing last-minute changes as a result of the Committee stage debate. I think that is very poor lawmaking.

That, I am afraid, epitomises this bill. When it came to the select committee in the first place, it was a shambles. It was a dog’s breakfast. I have to say that the original bill exposed both the ignorance and the arrogance of the executive. The bill as introduced significantly undermined the status and role of Parliament. I am not asking members to believe me when I make that statement, although members ought to because we are now supporting the bill; I would just recommend that members read the submission of the Clerk of the House, David McGee. His submission was scathing. I have never seen a submission from the Clerk quite like that one. Even his criticism of international treaties was moderate compared with the way he completely demolished the content and structure of this bill. To give members an indication of the depth of his concern, I point out that his submission was 24 pages long. It contained 6 pages of recommended changes, including some most significant ones.

The bill as introduced removed the terms “estimates” and “supplementary estimates” from our legislation. It allowed for the aggregation of votes. It reduced parliamentary consultation. It reduced ministerial accountability to the House. It removed obligations to present and publish departmental annual reports. It restricted the supply of information to Parliament, and it allowed for capital expenditure to occur without appropriation. I will just dwell on that for one moment; Mr McGee’s comment was “Parliament should regard with inherent suspicion any proposal to appropriate permanently.”, and we totally agree with that. Last, but certainly not least, he raised concerns about excessive delegation of power, and the one that we in the Green Party are particularly concerned about is the one that, to quote David McGee, amounted “virtually to an open-ended power to require Crown entities to comply with international treaties to which New Zealand is a party.” I will not go though everything in David McGee’s submission, because it was not the only one that was extremely critical of this bill. Even the usually mild-mannered and reserved Controller and Auditor-General’s submission raised a number of concerns, as did many submissions from members of the public and key organisations such as the Vice-Chancellors Committee.

I am happy to say that the bill has been extensively rewritten, hence its length. It has been rewritten because of those concerns, but I have to ask the Government why it ever brought a bill to this Parliament in the first place without thoroughly consulting key interested stakeholders, such as the Clerk of the House, the Vice-Chancellors Committee, the Public Service Association, and all the other organisations that will be intimately affected by this bill, and such as the Controller and Auditor-General, who is, in conventional terms, Parliament’s man and is there to look after our interests. It is simply bad lawmaking for a select committee to have to spend months wading through report after report to fix up a mess that should not have been created in the first place. But thank goodness that people like McGee did make strong submissions, because in the end he did win the day, and what we have before us is a considerable improvement on what we started with.

It is still far from perfect. A number of people, such as Sue Newberry, believe that we should unwind many of the changes that originally came in in 1989, such as the move from cash to accrual accounting. I know that the vice-chancellors want to remove from this bill any embrace of universities under the Crown entity category, and to have them put completely under the Education Act. I would say to both groups that I understand their concerns, but I think in both cases the bill as reported back addresses many of them. One has only to look at Supplementary Order Paper 315 on the Table to see that the Government has, to a large extent, capitulated to the requests of the universities by removing a number of the requirements under schedule 6B that apply to universities, to keep them onside. Mr Mallard was right when he said in a recent interview that the status quo remains, because the Supplementary Order Paper, for example, removes the application to tertiary educational institutes of sections 174, 175, 199, 210, and 212 of the Act. That goes some way to addressing the vice-chancellors’ concerns.

But there are other improvements that could be made to this bill. I foreshadow a set of amendments, which I will be putting on the Table, that do a number of useful things from our point of view. I will listen with interest to John Key’s comments on whether he supports, particularly, the addition of contingent liabilities to the requirements under section 26J, in clause 8, so that the Government’s long-term objectives with regard to contingent liabilities are set out in a Fiscal Strategy Report. We also want to see an extension of the requirements under section 26P, in clause 8, to cover overseas trade in goods and services, reserves of natural resources, social well-being, and environmental quality, because we want the Government accounts to move to a triple bottom line. We also want to see more transparency with regard to securities, derivative transactions, investment, and guarantees. We want to bring that into section 27, in clause 10. I am sure that many members of the House, particularly Matt Robson, will be keen to see that we want the Security Intelligence Service to have to present its accounts to the House. At the moment it is let off. For all those Labour members who are concerned about workers’ rights, we want to bring in employee representation for Crown entities, and a pay and employment equity programme. Second to last, but not least, we want building societies to be treated on the same basis as banks, as far as their being a place where Crown entities can invest their money.

Ultimately, we are keen to accommodate what the Government Superannuation Fund Authority wants, which is to be treated equally with the Guardians of New Zealand Superannuation, but our solution is to turn the New Zealand Superannuation Fund from an autonomous Crown entity into an independent Crown entity. That should not keep either of those bodies happy, and that is exactly what we are keen to do, because we want them to—

💬 Hon Dr Michael Cullen: I think National will vote against that, too.

I am sure National would. It is the old two-party club situation. Both of them have the same attitude when it comes to many aspects of the economy, which is why this House needs the Green Party here to present an alternative perspective to Tweedledum and Tweedledee.

When the Public Finance (State Sector Management) Bill was introduced to the House in February this year we were told that some of the drivers behind the bill were concerns about Crown entity behaviour and problems with leadership development within the State sector. The bill aims to improve flexibility and retain accountability for public moneys, etc. The National Party played the responsible Opposition party role, and in the interests of demonstrating goodwill towards the reasons that we were given for the bill, we supported the bill to the select committee and raised a lot of reservations.

I am afraid that after the passage of this bill through the select committee we are not convinced, even following the major rewrite of Part 1, that it has answered our major concerns with the philosophy of these changes, and I will proceed to outline them. National will not be supporting the bill in its second reading, unless there are dramatic changes in the Committee stage. I also call on United Future and the Green Party and say that those two parties owe it to the public not to casually give away their consent to support this bill through the Committee stage and third reading.

It was quite disturbing to hear the Green Party co-leader Rod Donald say that this bill is far from perfect and they would accept it. I did not know that the Green Party campaigned to come to the Parliament so it could support anything that is less than ideal or perfect. I think it is a demonstration of how, unfortunately, in this Parliament the United Future party and the Green Party seem to fall over each other to gain favour from the Labour Government. In doing that, they have given away a chance to make sure this important legislation, the Public Finance (State Sector Management) Bill, gets the attention it deserves.

A bombshell was dropped at the Finance and Expenditure Committee when the Clerk of the House brought in a 26-page submission. At this stage I have a question to ask, and I look forward to the Minister of Finance during the Committee stage answering some of the queries that some of us have. Was it intentional for the executive to bring in Part 1, which allows the executive to override the supremacy of the Parliament in making sure that members of Parliament would not be able to request information from various Government departments, unless under some strict conditions, and also limit the ability to examine the accounts? I want to know whether there was a deliberate attempt by the executive to instruct the writers of the legislation to achieve that effect, and indeed they have been caught out by the Clerk of the House.

Equally worrying is whether the executive actually did not intend to do that. But the legislation has ended up in such a shape that a question has to be asked whether the principal advisers, the architects who are responsible for the drafting of this bill, set out to rewrite this bill in this way. The Green Party and United Future say that Part 1, about which the Clerk of the House has raised a lot of concerns, has been substantially rewritten so there is no problem in supporting the bill. But what happened to Part 2, which concerned the State sector management part, and also Part 3, where the universities have expressed a lot of concern about the intrusion of the Government into their academic freedom?

So why should those two parties, the Green Party and United Future, simply accept that Part 1 has been caught out by the Clerk of the House, and simply cave in to support Part 2 and Part 3? No doubt, Mr Speaker, you will allow us time to raise rigorous questions during the Committee stage.

We also raise objection about some of the other issues. The first is that during the last 10 years the Fiscal Responsibility Act has played a significant role in guiding the focus and behaviour of past Governments. It has served the people well. We are opposed to the collapse of this independent legislation, to become part of the Public Finance Act. Of course, the Minister and others have argued that it is no big deal because the substance of the Act has been maintained and the parts strengthened. But the reality is that the form and perception is just as important.

We were told during the select committee stage that when the Fiscal Responsibility Act first collapsed, to become part of the Public Finance Act, it was going to be Part 1 of that Act. At the end, it became Part 2 of the Act. The reason, we were told, was that it was really important to demonstrate accountability, and presentation of the Government accounts was important, so that had to be Part 1, and the Fiscal Responsibility Act had to become Part 2.

This example, in itself, demonstrates that the order of presentation and the collapse of independent legislation to become part of other legislation is just as important to set the tone of the intention of the executive. The executive is sending out a message that the focus on constraining Government spending through a forward-looking document such as this independent legislation, the Fiscal Responsibility Act, is not as important. I point out that, at times, form is just as important as substance. We are not convinced that the Fiscal Responsibility Act, particularly under this “tax and spend” Government, is ready to be collapsed and lose its independent status.

The other point is that the second part is meant to strengthen the public service sector. One of the newly introduced functions in this legislation allows the State Services Commissioner to review the machinery of government across all areas, including allocation of functions to and between departments and other agencies, and the desirability of the creation of a new department. One assumes that this new provision is not intended as a one-off, but as a permanent, ongoing function of the commissioner. What concerns us is that the process was not spelt out as to who can request a review by the State Services Commission, and how often, and what were the criteria for setting up new departments. One has to have a lot of confidence when vesting so much power in a Government department.

The Public Finance (State Sector Management) Bill is a mammoth bill. It is 500 pages and is a rewrite of the 1989 Public Finance Act. It is a bill that the House should take a great deal of interest in and have a great deal of concern about. From a financial perspective it is one the landmark pieces of legislation that this Parliament is based on. Along with the Fiscal Responsibility Act, which becomes entwined within this bill, and the Reserve Bank of New Zealand Act, it is probably the most significant legislation in relation to the way in which the machinery of government is run and the $46 billion of tax revenue is spent by the Government.

The bill came on the back of a Public Finance Act that from its early days until today set significantly high standards of practice for the public sector. In that sense, it came from a strong starting point. This bill was brought about in terms of the review that was undertaken to look at the Government and the way in which the State sector was operating. In some respects, I am forced to say that the review was flawed. It lacked rigorous definition of the problems involved, analysis, and the criteria for assessing the options available to it. As a result of that flaw, the first draft that came out in terms of the public finance legislation was extremely substandard.

We have already heard a bit about the submissions made to the select committee, and I will address some of those individual submissions in a moment. But first I will just take a moment to thank the advisers to the committee, of whom there were quite a number, from a number of departments. They worked tirelessly for a long time to try to knock this legislation into shape.

If we start with the first of the submissions, it was by the Clerk of the House, David McGee. David McGee is well known around Parliament as one of the truly great brains in this area. He has great knowledge. He has written a number of books on constitutional issues here in New Zealand and on the role of Parliament. When someone like David McGee comes to a select committee and says that the bill is “a Trojan horse”, “virus-like”, and “post-modernism gone mad”, one takes a step back and asks whether this is well-drafted legislation.

One needed only to take a look at the face of the select committee chairman, Clayton Cosgrove, when Mr McGee was giving his address to the select committee, to know that the Government was, firstly, going to be found out for what it was trying to push through Parliament, and, secondly, that the Government would buckle at its knees because it could not get the bill through the House in its original form with the support of the Progressives and United Future because neither of those parties would have even thought about voting for the legislation in that form.

Let us be under no illusion as to what the bill was attempting to do before David McGee had the chance to tidy it up. It was the dead hand of government—the creeping hand of this socialist Government—trying to entwine itself in all parts of our State sector and to get control of things like Crown entities that had been deliberately quarantined off by Acts of Parliament. I will come back to that very point in a moment, because I have in my hand—as Chamberlain once said—in this case a letter from the vice-chancellors of the New Zealand universities, and it has been signed by eight of them.

It contains an interesting part that I want to reflect on and, if I may, I will take a moment to read from the letter sent to alumni of the universities: “Universities were given an undertaking by Ministers Mallard and Maharey that in stage one, represented by the bill currently before Parliament, the Government would strictly maintain the status quo.” But the letter goes on to state: “In stage two, which will lead to further legislation in the future, changes to the status quo are being considered. The power to review the functions and activities of universities and to advise on the establishment and abolition of universities is being considered.”

I want to go back to David McGee’s submission for a moment and to talk about what was in the bill before the Clerk of the House got a chance to tidy it up. [Interruption] Mr Hughes has a habit of interrupting, because he does not have time in his busy schedule to go and read very important legislation. I offer Mr Hughes a bit of advice. I could give him about a dozen documents. I realise that he can pick up the bill, that he is now advanced in his adulthood and is able to clutch a group of papers, 500 pages thick, with his vice-like grip, but that does not mean that the member can actually read. Nor has he demonstrated any ability to understand. My advice to Darren Hughes is to pick up the bill, have a read of it, and while he is doing that, to read the commentary and a couple of the submissions, because he will learn a thing or two.

For instance, the member might learn that under the bill in its original form, estimates were about to be removed from this Parliament. That would be a substantial removal of Parliament’s ability to scrutinise anything. Under the Official Information Act, Parliament was going to be limited in its ability to question the executive, because under legal grounds—not political grounds—it would have been quite possible for Government departments to refuse to answer questions or to provide information. That would be, on political grounds, a disgraceful position to find ourselves in.

I also note that it was not just the Clerk of the House who came before the select committee. Others to appear before the select committee were the Commerce Commission, led by Paula Rebstock, the Chief Ombudsman, John Belgrave, and others. They made telling submissions to the select committee and had some impact on changing the bill.

But in particular, I want to make reference to the submissions by Sue Newberry and Alan Robb. I want to say—before the Minister of Finance has a meltdown—that I do not support those submissions. I do not support their position, which was that derivatives should be excluded from the State sector. The State sector—really the Debt Management Office—demonstrated to the committee that it has a very solid grip on its very limited derivatives use. To argue that it is somehow exposing the New Zealand taxpayer to what could be an Armageddon of Enron-type derivatives is an exaggeration.

I want to touch briefly on three major points before my time runs out. The first concerns the embedding of the Fiscal Responsibility Act in this legislation. That Act was an iconic piece of legislation. It was a piece of legislation that stood this Parliament and this country in fine stead. To take away from its significance by burying it within the Public Finance Act is, in my view, a retrograde step. Secondly, I want to talk about the move to aggregate outputs and to define things in the form of outcomes. While that is a noble thought, and while it has some great possibilities if it is administered correctly, I think there are huge risks that outcomes will, in fact, become very woolly thinking from very woolly ministries and will be pretty difficult to understand.

💬 Hon Dr Michael Cullen: It is always a risk.

It is always a risk. I would fully accept that in one sense, looking at the Immigration Service, the outcome we want there is to have immigrants coming to New Zealand, settling here, and making a positive contribution. That is the right outcome—not necessarily the output, which could be that we are processing people through our Immigration Service sufficiently. We actually want the right people processed. I think there is a risk.

Thirdly, I want to mention the Crown entities. As I mentioned earlier in relation to their role in universities, I think this legislation will have some impact on them, and I think that is probably unnecessary. We look forward to the debate at the Committee stage.