Third Readings

I move, That the Public Finance Amendment Bill, the State Sector Amendment Bill (No 4), the Crown Entities Bill, and the State-Owned Enterprises Amendment Bill be now read a third time. The provisions contained in what was formerly the Public Finance (State Sector Management) Bill represent the most significant enhancement in public sector management in New Zealand for over a decade. I thank members of the House for their cooperation in progressing this important legislation through the House. This is the Government’s legislative response to the early work done by the Hon Simon Upton, enhanced by the recommendations from the 2001 Review of the Centre. That review concluded that the New Zealand public sector management system was fundamentally sound, but identified three areas for improvement: first, achieving better integrated and people-focused service delivery; second, addressing fragmentation and improving alignment; and, third, enhancing the people and the culture of the State sector. This legislation benefits New Zealanders.

The Public Finance Amendment Bill reinforces the existing principles and objectives of the Public Finance Act and the Fiscal Responsibility Act, strengthens accountability to Parliament, and improves flexibility. It will ensure that Parliament gets a wider range of information about what is intended and about the actual performance of departments. Similar requirements around statements of intent will also apply to non - public service departments, the Reserve Bank, and Crown entities, ensuring a consistent approach to reporting across the State sector. Greater consistency in reporting is one key feature of the bill that will contribute to reducing fragmentation and improving alignment across government. Multi-class output appropriations will increase flexibility for Ministers and departments, and enable Parliament to focus its scrutiny on significant policy changes. Requiring the approval of the Minister of Finance for those appropriations will provide a safeguard.

Integration of the Fiscal Responsibility Act has been one of the more debated aspects of the Public Finance Amendment Bill. The Government firmly believes that consolidating the legislation regarding public finances will ensure that the current level of transparency is maintained by future Governments, and that New Zealand continues to demonstrate international best practice in fiscal reporting. New Zealanders rightly expect that people working in any Government organisation will adhere to high ethical standards. This bill will broaden the State Services Commissioner’s mandate, covering departments outside the public service, Crown entities, and the Reserve Bank. The commissioner will be able to provide advice and guidance on matters that concern the integrity and conduct of people working in the State services, and may issue appropriately customised codes of conduct. I might say that during the Committee stage, I have never heard so much nonsense spoken as I heard spoken on that area.

The commissioner’s mandate will also be extended to provide leadership across the development of organisational leaders and senior management across the State services—outside the public service, of course, the commissioner does not have responsibility.

Good governance and effective accountability arrangements are the key to ensuring that Government organisations perform well and deliver results. The new Crown Entities Bill replaces a patchwork of provisions applying inconsistently across statutes governing different Crown entities, with a coherent framework for governance, accountability, and performance. In the area of board fees, for example, disclosure of fees will be required, and any compensation for a loss of office will be precluded.

I think the essence of this part of the legislation probably goes back to the work of the Hon Murray McCully and his relationship with the Tourism Board, his gross interference in that area, and his causing of the paying out—on an illegal basis—large amounts of money to get rid of a board. This legislation makes it clear that that sort of ministerial interference cannot occur again.

There is currently some uncertainty among Crown entity chairs, boards, and staff around exactly how Crown entities fit into the Government and what is expected of Crown entities regarding Government policy and processes. This bill will clarify the roles and responsibilities of Parliament, Ministers, Crown entity chairs, and boards, ensuring that governance standards are comprehensive, transparent, and consistent. Through judicial use of the whole-of-Government direction power, Governments will have a greater scope to set expectations across the State sector. I do not think it will be used often, but when it is used it will be used transparently. Again, this is something that is particularly important. This will contribute to reducing fragmentation, and, as a Minister who has some responsibility for e-government, I think it can be particularly useful in reducing overlap and fragmentation in that area.

The Government is mindful, however—and this is a point that comes through from the work of the Hon Simon Upton—of the significant differences in the types of Crown entities, and this legislation does not attempt to impose a one-size-fits-all approach. It is crucial, for example, that the independence of entities such as the Commerce Commission be both protected and be seen to be protected. Amendments to the legislation proposed by the Finance and Expenditure Committee have further strengthened the legislation in this regard—for example, by explicitly defining “just cause” in relation to grounds for removal. The Government also recognises that the very different business needs of Crown entities depend on what they do. For example, we have some tiny rural schools with as few as four or five pupils that are Crown entities, running right through to entities such as the Accident Compensation Corporation and district health boards that are responsible for budgets in the hundreds of millions of dollars.

So the umbrella framework of the legislation has been carefully designed to include mechanisms for tailoring provisions to the varying business needs of entities, while ensuring that the fundamental principles and standards for accountability and governance are met.

In summary, this legislation forms the foundation for a new level of excellence and cohesion in public sector management in New Zealand, while retaining and strengthening the fundamentals of the current system. I would like to thank all those people who were involved in developing the legislation. While being aware of the Standing Orders, I would like to acknowledge a group of officials who are currently in the gallery, for the years of work they have done. This legislation goes back well before the time I became Minister of State Services. People have been working on the principles, and there have been various draft bills around now for pretty close to 5 years. I want to thank those people for their concerted efforts on that.

I welcome the enactment of the Public Finance Amendment Bill, the State Sector Amendment Bill (No 4), the Crown Entities Bill, and the State-Owned Enterprises Amendment Bill, and I look forward to the resulting improvements in transparency, accountability, and effectiveness.

In speaking to the third readings of these bills, I must say that this is important legislation. The public finance issues, and the size of the State sector itself, make this hugely important legislation. In my view, the State sector in this country is too big—it is huge whichever way we look at it—and therefore its management is vastly important. During the 1980s and 1990s New Zealand led the world in reform of our State sector and public financial management. I know from my work internationally at the OECD that New Zealand was recognised as having implemented world-leading reforms, and I remember one day in Washington a Deputy Secretary of the Treasury saying to me that New Zealand was an international public good in the way we had led the world in State sector reforms and reforms of public finances.

There is no question that even with the very good reforms that New Zealand implemented in the 1980s and 1990s—reforms like the Fiscal Responsibility Act brought in by the National Government in the early 1990s, and like the State-Owned Enterprises Act of the previous Labour Government in the late 1980s, which at the time were excellent legislation—we accept there will always be room for improvement. The State sector is so huge in New Zealand we could almost qualify as a communist country, not a market economy. It is so huge that ongoing reform of it is important. Of course, it started under the last National Government, as the Minister has mentioned. He pointed out to the House that the Hon Simon Upton started this work.

But the tragedy is that the good work on improving the public financial management in this country and the management of the State sector has been hijacked by this left-wing Labour Government. The Public Finance (State Sector Management) Bill caused such concern when it was introduced into this Parliament that the Clerk of the House made an unprecedented submission to the Finance and Expenditure Committee, and the result of that was such that major portions of the bill were struck out and replaced. That shows the extent to which this Labour Government ran it off the rails—it ran this vitally important improvement of the management of our State sector right off the rails and forced the Clerk of this Parliament to intervene and make a submission to the select committee.

The problems that have emerged with this legislation—the original 500-page Public Finance (State Sector Management) Bill—are because we have a Government that wants to meddle more. There is nothing wrong with the way this legislation provides for better coordination. We do not object to some of that material in this legislation. The objectionable parts are the way this legislation, in quite an insidious way—in clauses spread right throughout it—enables this Labour Government to meddle much more in the State sector.

Let me give this House examples of what I mean about this power to meddle more, and the increased control that is given to this Government. I guess this is led by the control freak, the Prime Minister—that is what the public call her. It diffuses right down through this Government, and we see it in this legislation.

The first example is the ability that this legislation gives the Minister to direct the affairs of Crown entities. There is nothing wrong, obviously, with Ministers being involved with the board of directors in determining the statement of intent for Crown entities. Obviously Crown entities’ statements of intent should reflect the objectives of the Government. That makes good sense. There is no objection to the parts of the legislation that facilitate that. But the bits that enable the Minister to direct a Crown entity right down to employee level is objectionable.

We know what this Government does to employees. We saw what this Government did to Kit Richards. When he did not agree with what Helen Clark wanted, she drove him out of his position. This legislation gives the Minister the power to meddle far down into the organisations. It gives the Minister the power, not just to be involved in setting the broad objectives and the statement of intent for Crown entities, but to get involved in how they will deliver them. Again, that is unprecedented meddling in the management of these entities. So that is our first concern—the increased control that this legislation gives the Minister over Crown entities, when the whole idea of the reforms of the late 1980s and the early 1990s was to enable those Crown entities to be less influenced by politics and to get on with doing the job they were meant to be doing.

The second problem that emerges and flows on from that ability for the Minister to direct is that this legislation gets right down into the employment arrangements of some Crown entities. This legislation, for example, incorporates blatantly racist provisions that I would argue are demeaning to Māori. I am referring specifically to clause 156 in this legislation. The clause requires certain Crown entities to specifically look at the employment aspirations of Māori. I am unaware of any other legislation that does that. It is racist. The legislation does not require the Crown entity to examine those aspirations for any other group of New Zealanders. That is racist whatever way one looks at it, and it is objectionable to have it in legislation that is being passed in this House under urgency in 2004.

What is also bad about this legislation is the prescriptive claptrap in it. Maybe if I can engage your interest in this area, Mr Speaker, as someone—and I know I should not bring you into the debate, but just in passing—who I know has a particular interest in the English language, and the structure and grammar of it. I invite you, Mr Speaker, to look at some clauses in this legislation that provide for Crown entities to “do an act”.

This bill uses that phrase. It provides for Crown entities to “do an act”. I invite any member of this House to tell me what part of the English language the phrase “to do an act” comes from. Are we so legislatively hopeless today, is our knowledge of English so appalling, that we are reduced to putting into the laws of this land such a phrase. Clause 59, “Acts must be for purpose of functions”, states: “A statutory entity may do an act under section 57 …”. I believe that one can perform an action in the English language. However, I would be interested when one last heard of someone doing an act. It is jargon and should not be put into our legislation.

Finally, I shall focus on a hugely important part and that is the removal from our legislation of the Fiscal Responsibility Act. That Act has been hugely important to the economic well-being of this country. When I became a Minister in 1990, prior to the passing of the Fiscal Responsibility Act, the first thing the financial controller of the Ministry of Education told me in my office on the first day was that there were things I needed to know about how the Government—this was the previous Labour Government—had been spending money illegally.

The Hon Phil Goff was the Minister I replaced. His financial controller in the ministry wanted me to know on the first day about the Mickey Mouse stuff that he believed was illegal that he had been forced to do by the Minister the Hon Phil Goff when he was the Minister of Education. The Fiscal Responsibility Act made that kind of thing impossible. It was iconic legislation that has led this country to a period of fiscal surpluses and sound financial management. One would ask what the motives are, for that iconic legislation to be wrapped up into this legislation in this way. I believe that it has a lot to do with this Government actually wanting less transparency. We know how this Government likes to hand out money to all and sundry. It is not helpful for the future prosperity of New Zealand.

If anybody was doing an act, frankly, it was the last speaker. At this time of Christmas, pantomimes, and things of that ilk, I refuse to believe that a member of his standing in this House could be so perpetually angry. It is Christmas, after all.

💬 Darren Hughes: He used to be good.

Yes, he used to be good once. He was on the Finance and Expenditure Committee when I was chairing that committee. I say to that member that his acting ability is well known. He sits there with a Pepsodent grin, knowing very well that he does not believe a word he says. There is only one thing that is making that member perpetually angry about this matter, as with all pieces of legislation, even with legislation that he agrees with. He gets perpetually angry about it. I do not know whether he thinks it sounds better, but the reason he is so grumpy is that the only plank of the economic change of this country that the National Party can put up its hand and take credit for is the Fiscal Responsibility Act.

There is a saying for people who are perpetually angry and acting up in ways like that, and that is “Build a bridge and get over it.” It has been said in this debate, and I agree with the honourable Minister in his speech, this legislation is not repealing the Fiscal Responsibility Act at all. It integrates several pieces of legislation into one piece of legislation. I agree with the Minister that officials who have worked on this, and Ministers who have worked on this, including Simon Upton, did a remarkably good job in putting into place legislation that will stand the test of time.

We in this House should not say that this legislation removes fiscal responsibility. That is irresponsible in the extreme. I know that John Key will not use those words. I listened to John Key and the way he has been performing lately. He is the only one on that side of the House who has any financial understanding at all and is making any headway in terms of the way in which he is running his portfolio. I know that he will not say that. I know that they are grumpy that Ruth Richardson’s legislation is now being integrated into the Public Finance Act, but that is just the way it is. Legislation does not stand still, and neither should it.

I say to members of the National Party that it is Christmas. For crying out loud, stop the act, stop the pantomime, recognise that we have some very strong financial and fiscal legislation in this country that ensures very clear transparency, and let us celebrate that. We actually lead the world in that respect. I do agree with Lockwood Smith about one thing. When we travel overseas we get great kudos for the financial reform that we have introduced in this country. So let us not badmouth it, let us celebrate it, and let us all have a good Christmas.

By the looks of it, the Government has the numbers stitched up with the United Future party in this third reading debate, and this legislation looks as though it will be enacted. As we all know by now, these bills are supposed to cover the main legislation that governs public finance and the management of the State sector. The legislation is the culmination of a review of public sector management, and has been questioned from time to time in the second reading debate, the Committee stage, and in this third reading debate. The Review of the Centre suggested 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. Like all members on the Finance and Expenditure Committee, I had to ask whether this legislation would achieve the transparency, the accountability, and the better financial management that this Government said it would. At the end of the select committee process, after looking through the legislation tirelessly, after looking through the submissions, and after the submitters had talked to us and we had also asked them questions, the answer I came up with was a big, fat, resounding no.

I found that to be quite sad. New Zealand First always wants to support good legislation. We will always oppose bad legislation. Unfortunately, the make-up of this legislation was too far from what we would call good. The New Zealand First members wanted to see whether the legislation did what Michael Cullen said, in a press release quite a few months ago now, that it would do. We also wanted to hear submissions on whether the legislation would achieve its goal. Sadly, as I have just said, I do not believe that it does achieve its goal in any way, shape, or form. The legislation amends the Public Finance Act and the State Sector Act and creates a new Crown Entities Act, as we all know. It is said that that Act will improve all the transparency and accountability around that legislation by bringing in the Public Finance Act, the Fiscal Responsibility Act, and so on. Unfortunately, given the way that the legislation has been drafted and so on, I believe it still needs to have a lot of work done on it.

This legislation represents more State control. If one asks what the legislation stands for and represents, at the end of the day one learns that it represents more State control from this Government. That is clear and simple; there are no two ways about it. In respect of clause 212 in Part 6 of the original 500-page bill, I shall read out something that concerned me greatly. Clause 212(1) stated: “The Governor-General may, by Order in Council, make regulations for all or any of the following purposes:”—members should listen to this—“(a) requiring Crown entities to include information in a statement of intent or annual report that is additional to the information required by this Act:”

That clause states that after the Crown entity has fulfilled all its requirements, after it has fulfilled everything it has been asked to do, and after it has dotted all the i’s and crossed the t’s a million times, the Government still wants to be able to delve into its life and get additional information from it, no matter what, and no matter what the Crown entity thinks. That is what clause 212 stands for—that is what it means. There are no two ways about it, there is no way through it, and there is no way over it. The fact is that the statement “requiring Crown entities to include information in a statement of intent or annual report that is additional to the information required by this Act:” means that the Government wants to be given additional information—it wants to have extra information. The entity may have done everything required of it and everything set out under the law, but the Government wants more than that.

That is what this Government stands for in this legislation. That is what the legislation does, and it is one of the many reasons why I am fundamentally opposed to it. The Government wants to have a stronger grip on anything and everything in our society, and that is what it is slowly doing, little by little, in legislation such as this. It wants to have more State control over our taxes, our education system, and our other organisations. There is one issue that I want to speak to the United Future members about, which is the whole area of academic freedom. I say that United Future’s supporters and voters would want their party to stand up for what they believe in and for what they voted it into Parliament to represent them on. We all know how scary it can be if academic freedoms are not upheld, and I believe that this legislation opens the door to the stifling of those freedoms. Representatives of our educational institutions came to the select committee, and they were very concerned about this legislation in terms of academic freedom. They were very uneasy about Part 3 of the original bill. I admired the way the tertiary sector stood up against the bill. Overall, the Government has changed a few things in this legislation, but the legislation has ultimately kept the same shape that it had at its first reading. That is why New Zealand First will have to vote against this legislation.

The ACT party is still voting against this legislation in the third reading. It is legislation that cannot be fixed by a few amendments here and there. It repeals the Fiscal Responsibility Act, without any good argument being advanced as to why we should repeal it. The Fiscal Responsibility Act should remain a stand-alone Act. New Zealand has led the way, in terms of showing the world how we can have legislation that restricts the power of politicians to spend money. Politicians, whether from central government or local government, love to spend other people’s money. It is very, very easy to spend other people’s money. We should be passing legislation to further restrict that spending, instead of passing legislation to make it much easier for politicians to spend money. The Hon Ruth Richardson’s intentions when the fiscal responsibility legislation was drafted have remained valid. They were that the Act would be a discipline on Government expenditure, as well as providing information to Parliament and to the people represented by Parliament about where and how taxpayers’ money is being spent. We should build on the principles of the Fiscal Responsibility Act, not weaken them. The legislation before us does weaken that important check on politicians’ temptation to spend public money recklessly.

Fortunately, the legislation as it is being passed now is somewhat better than the bill that went to the Finance and Expenditure Committee. We still have the situation whereby taxpayers’ money can be spent only with the authority of Parliament. The changes made to the legislation by that bipartisan select committee were driven largely by Dave McGee QC, who put in strong submissions to the committee. The executive is restricted, but Parliament still has unfettered power to spend other people’s money. As I said, we should be building on the principles of the Fiscal Responsibility Act rather than, as the situation is at the moment, passing legislation whereby Parliament votes to spend money on generalised and basically unprincipled spending, such as that in the areas of education, social entrepreneurship, regional development, or arts and culture. The discretion on how money should be spent in those areas is passed on to unelected public servants.

What do we get as a result of that? Under the education spending, we get degrees, courses, and certificates in nonsense topics, like Twilight Golf and singalong Māori lessons on the radio. Under social entrepreneurship, we get spending on hip-hop tours of the United States—

💬 Craig McNair: Hawaii.

Yes, the United States. Under Māori development and Māori culture, we get the spending of millions of dollars on kapahaka competitions that skip a year and do not happen because the budget has blown out. Under regional development, we get Jim Anderton’s “jobs machine”, where his officials spray money around like confetti so that he can try to get votes and photo opportunities. We get spending on places like the Warehouse, and millions of dollars go to Hollywood moguls who come here to make movies, as a reward. In retrospect the money is spent, but where is the regional development in that?

Under Vote Arts, Culture and Heritage, half a million dollars of taxpayers’ money is spent on so-called art—assemblages such as a port-a-loo that makes a noise like a donkey. In fact, we still have not seen the artist who is to represent New Zealand at the international exhibition that the art will go to. We still do not know what we are sending there. The Minister herself does not know that.

💬 Jim Peters: Et al.

Et al. Under the broadcasting vote, money is spent on NZ Idol, which is a copy of an overseas programme—one of the most commercially successful television programmes, in terms of generating revenue both from audience participation and advertising. We spent taxpayers’ money on that, under the heading of broadcasting. It is about picking winners. It does not work, and it rewards rent-seeking behaviour. That is why I believe we should debate and pass legislation that places much greater scrutiny on the spending of taxpayers’ money. We should be looking at the value for money—what we get out of what we are spending. Why do we not look at that before we decide where we spend it, instead of just passing it under generalised, unprincipled headings and sending it off to the huge State service sector to spend?

We should have an independent commission that would undertake systematic reviews of taxpayers’ money, to see whether we had value for money. We can imagine how it would be if we had a taxpayers’ bill of rights that restricted Government spending even further, so that it did not exceed the rate of inflation or population growth. I liked the United Future member’s suggestion about the state of Colorado, where, when it has a fiscal surplus—if it takes too much tax from the taxpayers—it has to give that back. It cannot just save that money and store it up for an election year, and then spend it on constituencies where it wants to get the vote. This is not our money. People seem to forget that. There are too many members in this House, especially on the Government side, who have never run their own businesses or worked in the private sector, and who do not know what it is like to generate wealth—to make and spend one’s own money. If they did, they would think very carefully about where they spent taxpayers’ money.

I will finish by briefly touching on what this legislation does to the academic freedom and autonomy of tertiary institutions. I commend the Vice-Chancellors Committee for the fight it has put up against the Government, which has been totally dismissed. The Government will argue until it is blue in the face that the status quo has been preserved. It has not been preserved. The legislation increases the State’s control of Crown entities, and does not exclude universities from those entities. The spirit of the Education Act of 1989 has been breached. The academic freedom protected in that Act has now gone. The State Services Commissioner can have a say in collective agreements negotiated by any Crown entity, including the universities. In conclusion, I believe that the repeal of the Fiscal Responsibility Act is a serious error.

This legislation is better than when it started, but it is not as good as it should be. I thank in particular the Clerk of the House, David McGee, and the staff from the office of the Auditor-General for their strenuous efforts at the Finance and Expenditure Committee to improve the legislation. It was really because of their hard work that we have the legislation before us in its current form. I will not repeat what I said during the Committee stage debate about how, particularly, David McGee made a big difference to the original bill, but I think it is worth reflecting on a couple of the very strong statements that he made in his early submission. It is unusual language for the Clerk of the House to describe clauses of a bill as “virus-like” and as a “Trojan horse”, yet he did, and I think he needed to use that sort of language in order to shake the select committee out of its lethargy. Up until then the officials had done a very good job of convincing us that everything was largely technical in nature, and did not involve substantive changes to existing legislation.

It is appalling parliamentary process for legislation of such size, and that has an all-pervasive impact on the public sector, to be forced through under urgency in this way. I think the Government will look back on that and regret the way it has treated the public sector in Parliament in relation to this legislation. It will be interesting to see how long it takes the Government to look back, because one needs only to remember that within 19 days of the foreshore and seabed legislation being passed under urgency—thanks to New Zealand First supporting the Government—the first amendment to it was before the House. I remind United Future of its complicity in this urgency motion. It is because of the United Future members that we are doing the same to this legislation as we did to the foreshore and seabed legislation.

Notwithstanding those criticisms, the Greens will support the passage of this legislation, although lingering doubts remain about its intent and application. We endeavoured to improve it by a series of amendments, and I acknowledge the Labour Party and the Progressive party for their support for our amendments to allow Crown entities and tertiary education institutions to bank with their local building societies. That is a first but significant step towards countering the bank-preference clauses that discriminate against building societies in New Zealand. Our building society amendments will enable the community partnership that already exists between, for example, the Southern Institute of Technology and the Southland Building Society, to extend to banking—something that I know Mr Peck, the local MP, is very pleased to see. I found it extraordinary that the National, ACT, New Zealand First, and United Future parties opposed building societies. I could not believe it when they voted against that amendment. I do not know what they have against mutual organisations that have 150,000 members and that simply want to be able to provide tertiary institutions and Crown entities with a safe, secure place to deposit their money, in the full knowledge that the profits will remain in New Zealand instead of being siphoned off by foreign-owned banks.

Unfortunately, the Labour Party and the Progressive party joined the other parties in opposing our other amendments. I am very sad about that, because I think we put up some very constructive amendments. One of the most significant amendments that we put up was a change to the good-employer clause, which would have required Crown entities to have a pay and employment equity programme. It is very disappointing that, for all the fine rhetoric from the Government, and despite the fact that it set up a task force in 2003 and now has a unit beavering away in the Department of Labour, it wants to continue the talkfest, rather than to implement actual legislative change in order to address pay equity. That is a shame, because the Government should be taking a lead on pay equity. Instead, there is a greater gender pay gap in the public sector than in the private sector. Members need only to look at the classic example of nurses, whereby a nurse gets approximately $10,000 less than a police officer when starting out but, at the top of the scale, gets $20,000 less than a bobby on the beat. Pay equity is not just a gender issue, of course; there are inequities along ethnic lines, as well. For example, the average hourly rate for a Pākehā man is $19.88. That compares with $13.79 for a Pacific woman, and everyone else sits in between those two figures. That is an amendment that I would have thought a Labour-Progressive Government would support, especially given the number of former trade union officials in those parties.

Other amendments we put up would have created a belt and braces approach in relation to contingent liabilities, derivative transactions, securities, investments, and guarantees—something I would have thought that John Key would support, given his background in the area. We also sought an addition to various reporting functions, particularly the economic forecast. We wanted that to include the balance of overseas trade in goods and services, reserves of natural resources, our social well-being, and our environmental quality. Again, that amendment and others relating to triple bottom lines were rejected by the Government. That is not just unfortunate but is also hypocritical, because the Government has had a lot to say in recent years—at the Rio conference, in Johannesburg, at the Redesigning Resources conferences in New Zealand, and at its own press conferences where, from the Prime Minister through to the Minister for the Environment, it has waxed lyrical—about the benefits of triple bottom lines. But when it came to the opportunity to incorporate triple bottom lines in the Crown financial statements, the Government refused to do so. I think that is an indictment of the Government, and it is something we will continue to raise with the Government, because it is long overdue that those changes take place.

Although the Green Party supports this legislation, we have lingering concerns about it. Some of those concerns were expressed by a group of submitters. I have already traversed the views of the universities. I am not sure that their concerns are entirely justified. Given that the universities are protected under the Education Act and given the amendments made to schedule 6B of the original bill, I think that the universities have had some significant concessions.

I finish my speech with a small tribute to June Pellow, who was one of the critics of this legislation. She died in November as a result of cancer, but right to the end she continued to contribute to the debate on this legislation. She said in her closing article on it: “Contrary to the statement made by the Minister of Finance in tabling the bill, we conclude that overlooking the political implications is a risk, especially if New Zealand is to ‘set the world benchmark for public management’, and that politicians need to be educated in accounting matters and their significance for the democratic process. A wolf (risks to taxpayer funds) appears to be entering the New Zealand Government using innocuous sheep’s clothing (technical accounting matters).”

I hope that June Pellow’s conclusions are wrong, but I acknowledge and honour the contributions she has made to the public policy debate in New Zealand. I hope that we will be vigilant in terms of the concerns she has raised.

I rise to speak to the third reading of the public finance legislation, which we have now been debating in the House for more than 24 hours. I begin with a comment about the universities. As the previous speaker, Rod Donald, mentioned, we had some submissions from the universities. Their argument—which I think was, in the end, fallacious—was that they did not want their assets and liabilities consolidated into the Crown accounts, on the basis that that would somehow threaten their academic freedom. As I said in a previous speech, I think we need to decouple those two things, because realities are realities.

I suggest to the universities that if they want the totality of academic freedom in the way that, for example, Harvard University exercises it in the United States, then their only option really would be to become private. That is not completely out of the question. I understand that Oxford University either has, or is in the process of, or is certainly looking at the possibility of becoming a private university. Private status confers upon a university the opportunity to have complete academic freedom, and also complete freedom to challenge the Government or any other part of society from time to time. I think the only answer I can give to the vice-chancellors who came to see us is to tell them to look at the Oxford example and consider whether it is possible for some universities in this country to become private. Maybe that is a way out.

This bill accomplishes some important things in the interests of the clearer presentation of the public accounts and the absorption of the Fiscal Responsibility Act into the overall public finance framework. It is important to appreciate that this bill does not bring the Fiscal Responsibility Act to an end. On the contrary, it affirms and embeds that world-leading legislation into New Zealand law for the long term. The bad old days when a Government could keep the public in the dark about the state of the nation’s books, particularly in an election year, are now a thing of the past—and a somewhat shameful past it was at that. We can thank Ruth Richardson for that Act, although some of her other innovations are not fondly remembered. However, credit where credit is due. The targeting and control of Government expenditure is also at the heart of this bill, and it is in that regard that I think the nation still has some way to go. In my view, the focus of the estimates on outcomes is conceptually correct, but they do not yet, in general, really measure the worth, or otherwise, of expenditure with sufficient precision.

The big question is whether taxpayers get bangs for their buck in the delivery of services by Government agencies and their departments. Let me mention a couple of examples. What really is it that the Department of Child, Youth and Family Services is trying to do? I must say that when I put that question into my speech, I did not realise that the Hon Ruth Dyson would be in the Chamber to hear me. I assure the Minister that I am not picking on the Department of Child, Youth and Family Services; I simply want to use it as an example. I put that question at the Finance and Expenditure Committee to Dr Graham Scott, former secretary of the Treasury and, therefore, someone with a fair bit of experience in the whole concept of outcome-oriented expenditure controls. His reply was that the core function of the Department of Child, Youth and Family Services should be preventive. I do not know for sure that that answer is correct, but if it is, then obviously the Department of Child, Youth and Family Services is a failure, because sadly, as is well known, the department’s list of clients—children at risk—grows ever longer. In other words, if the goal is preventive, it is not working.

Parliament and the Government need to know that, because if it is not working, then we need to do something about it. It needs to be reformed, and we then need to reallocate the necessary resources into something that does work. What difference, for example, might result from a much smaller sum of money being put into the financing of vouchers to subsidise all New Zealand parents into parental training courses, run not by the nanny State but by charities and other non-governmental organisations? There are many fine organisations already in New Zealand that offer parenting programmes, but they are often scratching pub charities to try to find the money to keep those programmes going, as well as charging fees to parents to participate in them. I believe that the Government could remove some of those barriers and have, as a policy goal, to ensure that all parents in New Zealand become educated on how to become great parents. If that were done, I think it would result in less children being at risk. Then, truly, the outcome-goal of preventing children from becoming at risk in the first place would certainly be better delivered than it is under the present system.

It is fundamentally important that our departments and agencies do the right thing in terms of outcomes for our society. I remember a speech that Bill Clinton gave at the APEC conference in Auckland a few years back. He made that very point. He said that if we are not doing the right thing—if the idea we have in the first instance is not the right idea—then we can work away and pour a lot of money into the wrong thing for a very long time. If we are doing that, then our system, which is outcome-based, should pick that up. We then need to stop that, start again, and do things differently.

The mechanisms provided in this bill are merely tools. We still have to do the job. At least when it comes to children at risk, we clearly are not doing the right thing. We will not be doing the right thing until we see the statistics about the abuse and neglect of children, and about other situations that put children at risk, coming down. Indeed, we should see a decrease in the involvement of young people in the criminal justice system—that situation should begin turning round. In other words, the ideas around outcomes-focused reporting are: why are we spending the money, what are we getting for it, and how do we measure that? Otherwise, Government initiatives merely become like a giant super-tanker that moves forward under its own momentum, absorbing megabucks compulsorily extracted from taxpayers but doing little that truly makes a positive difference to our society and its families. The bill provides a methodology and a system, but it will deliver real benefit for New Zealanders only if we skilfully use it to deliver measurable outcomes that are designed to enrich the life and welfare of the people of this country.

I could perhaps give a further example to emphasise the point and the importance of outcomes-related expenditure controls—something, I know, that the Secretary to the Treasury is continuing to work on. As I have said of this legislation, we have provided a good framework, a mechanism, whereby the estimates in particular that come to this House are outcome-driven. But again, we have only to look, for example, at an area like the money dispensed through Sport and Recreation New Zealand and say: “OK, we are putting all this money out, but are we actually getting something back for our buck?”. Is it actually making a difference? What is the goal? Is it, through physical exercise, to improve the health of New Zealanders? If so, has it done that and are we measuring it? If, on the other hand, we use anecdotal evidence—for example, evidence of a rugby league club that decides to have a Saturday night booze-up for the members of the club and their spouses—then quite obviously the money is being misspent against an outcome that is negative, not positive, in terms of improving the health of people through sport.

I believe there are some very real questions that need to be continually worked on by Treasury and by the Government in that area. However, having expressed those sentiments, let me say that, overall, United Future is content that this legislation is a good step in the right direction. It will put in place some very robust rules around public sector finance and the State Services Commission in terms of management. Accordingly, we are happy to signal that we will vote for the legislation on its third and final reading.

I rise to speak in favour of the third reading of the public finance and State sector legislation. First, I will refer briefly to the National Party’s concern that the fiscal responsibility provisions that used to be in a separate Act now appear in this legislation. I read from the Finance and Expenditure Committee’s report back: “it is true the Fiscal Responsibility Act will be incorporated in the body of the new Public Finance Act, ”. The matter is that simple; the report I read from is in fact the National Party’s minority report in the commentary on the bill, and whether the fiscal responsibility provision appears in Part 1 or Part 2, it does not change its effectiveness at all. National’s protestations to the contrary are just plain incorrect.

The next point I will deal with is the suggestion that the Government is trying to take away academic freedom from universities. The Government is required—and all parties agree that the requirement is appropriate—to comply with international accounting standards. Those accounting standards require that the Government include in its books all the assets that fall within the ambit of financial reporting rules. University assets and liabilities fall within the ambit of those rules, therefore the Government has an obligation to include them in the Crown’s finances. If the Government does not, it is criticised and gets tagged accounts, as happened during the last year when universities’ accounts were not consolidated into the Crown’s financial statements. That is the reason—the only reason—why it is that universities are now required to have their financial situations consolidated in the Crown accounts. That does not at all undermine the academic freedom of universities, which this Government supports and will protect in the future. I commend this legislation to the House.

We are here today to debate the third readings of the public finance and State sector legislation, legislation that National will be opposing. Before I begin, I acknowledge the work of the officials who worked on this legislation for a very long time. It is very significant legislation. It replaces the Public Finance Act, an Act of Parliament that has served New Zealand extremely well indeed. I know that the officials worked extremely hard, and the criticism I am about to make of the legislation is no reflection on their work but, rather, on the misguided musings of two Ministers who have a political agenda—namely, Dr Cullen and the Minister of State Services, Trevor Mallard. That agenda is intertwined in this legislation, which will be remembered, if for nothing else, for the fact that the original bill was 500 pages long and contained an incredible amount of drivel. It also contradicted itself on numerous occasions. Other than that, the fact that the legislation is so prescriptive means it is likely to lead to lawsuits all over the show involving Crown entities, and we are left wondering why we are rushing it through under urgency today.

I want to make note of the select committee process. In the 2½ years I have been in Parliament I have seen a great many submissions before various select committees. I think it is fair to say that in my limited time in Parliament I have never seen a submission accepted almost in totality in the way that the submission from the Clerk of the House, David McGee, was accepted. That in part reflects the very widely held, cross-party view of the work that David McGee does and the contribution he makes to Parliament. I think the New Zealand public, many of whom will not know David McGee, have a lot to thank him for for the work he undertook on this legislation, because he certainly transformed it.

I want to draw attention to two of the major issues that he highlighted in his submission, and that have been corrected in the soon-to-be-passed legislation. The first of those was around the elimination of the estimates. It is easy to sit back and say there is so much information that removing the estimates would really not have too much impact, but we forget that one of Parliament’s most significant jobs is to allocate the spending undertaken by the State sector, and to scrutinise and review that spending as it takes place. The estimates process is a very important and detailed process, a process under which parliamentarians on both sides of the House—but very often it is left to Opposition members—can drill down into the spending, and make sure that taxpayer dollars are being appropriately assigned to where it was indicated they would be, so that true reflection can take place. To remove the estimates would have had quite a significant impact on transparency and on the ability of members, particularly those in the Opposition, to scrutinise spending.

I also want to highlight a second and very important part of the submission that Mr McGee made. It was around the ability under the Official Information Act potentially to block requests—often from Opposition parliamentarians but also from the media—on the basis of political grounds. At the moment, most of those who work with the Official Information Act will know that information can be requested across all matters, and can be and often is withheld by the Government on commercial grounds, but cannot be withheld on political grounds. Mr McGee pointed out, quite effectively I think, that there was a great chance that that could take place under this legislation. One has to ask why it was left to David McGee to work that out. I think the answer, and the conclusion one draws, is that it was not left to Mr McGee; he was smart enough to see it, but, in fact, it was part of the process that the Government was wanting to entwine in the original bill and to bury so deep in that 500-page document that it never saw the light of day.

I will now reflect on some comments in relation to the Fiscal Responsibility Act, and the entwinement of that Act in the new Public Finance Act. I say that that action is an absolute disgrace. Maybe this House needs a small history lesson on where and how the Fiscal Responsibility Act came about. It came about because a National Government came to office and had to look at, and work with, a set of accounts that were fundamentally wrong. They fundamentally did not tell the truth about the New Zealand economy. To say that the 1984-90 Labour Government cooked the books is not incorrect, but to say that New Zealand should never be faced with that situation again is absolutely the right picture. When Ruth Richardson became Minister of Finance in 1990, she worked tirelessly to get the Fiscal Responsibility Act, an iconic piece of legislation, into our Parliament. She did a magnificent job of it.

New Zealand has a lot to thank her for, because under that Act we get not only some clarity but also some transparency. Most of us will know that just this week we have gained some more transparency under the Budget Policy Statement, as a result of the Fiscal Responsibility Act, in relation to just how the Government will spend money. And, my word, it is going to spend money—$23 billion in the next 4 years.

💬 Clayton Cosgrove: How much does your tax policy cost?

Well, our tax policies are costed, thank you, I tell the member. The Fiscal Responsibility Act plays an incredibly important part, and it is a disgrace that it is being buried in the Public Finance Act. I think that will not be lost on the people of New Zealand when they reflect on that matter.

I want to talk about another important move within this legislation. One of the reasons I have concerns is the way that the State sector will endeavour to define the way that it should be judged, effectively—to put it in layman’s terms. The Public Finance Act in 1989 essentially defined the way that the State sector should be measured—on the basis of outputs. It was relatively easy to go and look at those outputs and to determine and decipher whether the Government department in question had actually reached its goal in terms of outputs. The Public Finance Act makes some movement towards a goal of measuring by outcomes. I think that in one sense that is quite a noble cause and not without merit. I say that because if we take a very simple example like, say, the Immigration Service, and ask ourselves what the outcome is, I think most New Zealanders would agree that the Immigration Service’s No. 1 outcome is to allow people to come to New Zealand, make New Zealand their home, integrate into our society, and make the best contribution they possibly can. Therefore the outcome we want from the Immigration Service is that it does that job and allows people to come here and make a significant contribution to our country. That can be different from the output, which can be processing the number of people going through the Immigration Service, with no regard at all to the kinds of people who come out the other end.

So in one sense I understand the dilemma, but I think it leaves open a very woolly interpretation by Ministers, who will all of a sudden find it quite difficult, I think, to judge whether their departments have actually achieved their outcomes. One can imagine that with biosecurity the argument will be put forward that the outcome—something very dear to our rural background and something that could have a significant impact on our economy—is no incursions, but in reality it is likely that any incursion could well be blamed on many others areas over time. I have concerns about that. I have concerns about multiple aggregation of outputs, where definition will become less clear, and it will become harder for the Opposition to interrogate and decipher the information.

A lot has been said about the Crown entities. There is not enough time in my address to discuss that, unless, Mr Speaker, you are prepared to give another 10 minutes—and even though this is the Christmas season I doubt that that is the case. So on that note I will leave that, and say that National will be opposing this legislation.

Mr Speaker, in case I do not have another opportunity to do so, I wish you the very best for Christmas.

💬 Mr SPEAKER: Thank you very much.

I am pleased to support the legislation.

That was a stunning speech from the Minister of Fisheries—a few little words! As I have said before, during the first reading debate on the Public Finance (State Sector Management) Bill, National has tried very hard on it. We understand that the officials spent a lot of time drafting the legislation, and we learnt during the Committee stage that the concept for the bill came from the Hon Simon Upton. But, unfortunately, as was pointed out by my colleague John Key, the incoming Minister of Finance, it has been politicised, interfered with, and tinkered with by the Minister of Finance—the current one—and the Minister of State Services.

When the original bill was introduced to the House, at some stage in February, it was said that it was meant to fix problems with Crown entities’ behaviour and governance, to provide leadership and development among the State sector, to improve flexibility, and to retain accountability for public money. But how much real impact that 500-page bill will have in terms of changing behaviour and culture remains to be seen. It is important to bear in mind that behavioural and cultural change come about by having leaders with clear vision who can articulate expectations and put in place transparent and appropriate measurement systems. The mere fact that everything is written into a 500-page bill will do little to motivate individuals to behave in a way that is conducive to producing the desirable outcome. Rules, regulations, and legislation alone will not achieve that. The fact is that the minority Labour Government for far too long—5 years—has shown a lack of independence and objectivity in enforcing a policy that will enable New Zealand to move forward in a way that benefits all New Zealanders. I would certainly not expect the public sector to behave any differently because of this legislation.

I also want to make a sad observation on the behaviour of two political parties, United Future and the Greens, during the debate on this legislation. Both those parties campaigned on the promise that they would come to Parliament to hold the Government to account. They told their supporters that they stood for integrity and excellence. We have heard Rod Donald time and time again say that this legislation is not as good as it could be but it will have to do. We have heard from United Future that this legislation is a step in the right direction, but that United Future members are looking forward to it returning to the House for further amendment. The New Zealand Parliament is not a place where mediocrity should be respected or accepted. Members of Parliament come to this House to do their best. It is a place where political parties are supposed to be accountable to their supporters and to all New Zealanders.

Let us examine why the National Party eventually decided, after much deliberation, that we cannot support this legislation. In the debate on Part 1, I continued to point out that the Finance and Expenditure Committee acknowledges and is grateful to the Clerk of the House for standing up to defend the supremacy of Parliament over the executive’s attempts, in the way that Part 1 was drafted, to undermine that supremacy. It would have made MPs’ lives difficult in seeking answers and also digesting aggregated financial information from Government departments. The acknowledgment of that fact still has not removed the lingering doubt in our minds as to why it happened in the first place. If that drafting was the result of deliberate political instruction, that is very worrying. If it was due to a lack of understanding on the part of the officials that it would undermine parliamentary supremacy, that certainly makes me very worried as to the capability of the officials involved. I would like to think it was unintentional, but certainly the doubt is there.

It was very much of concern to us on this side of the House whenever we saw a statement about the whole-of-Government approach in terms of Part 2 and Part 3, which concern the management of the State sector and Crown entities and State-owned enterprises. The very famous line about the Immigration Service of “lying in unison” gives me more reason to doubt whether the executive would allow Government departments to remain independent. If the Minister of Finance and the Minister of State Services can jointly instruct that there be a so-called whole-of-Government approach, I doubt whether Parliament would ever get to the bottom of answers to any questions we want to pose about Government departments in terms of outcomes, outputs, and accountability for their performance.

I think the universities have raised a valid point, not so much about the drafting of this legislation but in pointing out that in the last 4 years the Labour Government has chipped away the autonomy of the tertiary education sector. That is why they are concerned about this legislation. As I say, sometimes it is not so much what one puts in the legislation; rather, in this case it was the consistent chipping away of academic autonomy that had the university sector making very strong representations to the select committee.

Mr Speaker, I would like to utilise my last few seconds to wish you a very merry Christmas and a very well-earned break. After all, we are going to miss you because this will be your last Christmas in your long and, shall I say—

💬 Darren Hughes: Distinguished.

—distinguished—that is a good word—career as Speaker of the New Zealand Parliament, which is one of the oldest democracies. I say bon voyage to wherever you may be going, and have a very good break.

💬 Mr SPEAKER: Thank you very much, and I am sure all the other members of your party join you in expressing those wishes.

I rise to support the third readings of the legislation. I would like to echo the last member’s words and wish you a very happy Christmas, after a very productive and interesting year in the House where, as Speaker, you have at all times behaved in the most professional and fair manner.

💬 Mr SPEAKER: Thank you, but that still does not mean the member can break any Standing Orders.