Standards Amendment Bill, Testing Laboratory Registration Amendment Bill

on behalf of the Minister of Commerce: I move, That the Standards Amendment Bill and the Testing Laboratory Registration Amendment Bill be now read a third time. I thank the members of the Commerce Committee for their consideration of these bills, and also thank all those people who made submissions to the select committee. Standards and conformance are critically important in both the New Zealand and international contexts. Consumers are demanding safer products of a higher quality and this has resulted in higher minimum standards. Increased technological change requires a more rapid development, and amendment, of standards. Also, an increase in social and environmental concerns has led to standards applying in areas of the economy not previously covered. At the same time, providing independent confirmation that a product or service complies with the relevant standard has become increasingly important for business success. That is why these bills are so important.

Although New Zealand’s standards and conformance infrastructure is well respected internationally, maintaining the confidence of our trading partners in it is essential. The key purpose of these bills is to ensure that our infrastructure remains up to date with international best practice. Therefore, most of the amendments are largely technical in nature. The bills clarify the roles of the standards and testing laboratory registration councils and improve their efficiency and effectiveness.

The Standards Amendment Bill will clarify and expand the scope of the Standards Council functions to include the preparation of codes of practice, handbooks, specifications, and other material currently produced by international standards development bodies. The bill extends the development of standards to include minimising environmental risks and promoting social responsibility, in a manner consistent with our international obligations. It also includes improving the process for nominating organisations to make appointments to the council.

The Testing Laboratory Registration Amendment Bill will delineate the roles of the Testing Laboratory Registration Council and the Joint Accreditation System of Australia and New Zealand. This is the one urgent amendment. The bill clarifies that the council does not have the ability to accredit certification bodies, and confirms that it does have the ability to accredit inspection bodies. It also makes the council’s provision of certification services discretionary rather than mandatory.

When the Minister, Lianne Dalziel, introduced these amendments to the House, she indicated that a major review of standards and conformance was to be undertaken. This has been progressing, and has indicated that our infrastructure is generally sound. But there is always room for improvement. The Minister has now released a discussion document that identifies a set of issues for further consideration and provides options for addressing those. The provisions of these bills are, however, an important first step in ensuring that New Zealand’s standards and conformance infrastructure continues its excellent international reputation into the future. I commend the bills to the House.

National opposes these bills on three grounds. Firstly, we do not believe that subjective standards should be introduced that raise expectations but are not able to deliver. I will expand on that later. The second reason we oppose these bills is that the Minister of Commerce, Lianne Dalziel, and the officials have not addressed the unacceptable position whereby companies that now seek accreditation from the new agency will have a tenfold fee increase, without receiving any additional benefit from it. The third issue is the failure—or the officials’ acceptance that it is not possible—to quantify compliance costs. It is totally unprofessional for Government departments to say that, as it is too difficult to quantify costs, they will assume that additional compliance costs will not be incurred. That approach is simply not acceptable. Let me expand further on those three grounds.

The Standards Amendment Bill expands the Standards Council’s objective to develop standards by including two additional objectives. One is to minimise environmental risk, and the other is to promote social responsibility. Both of those terms are very subjective. I have a vision of our officials going overseas and continuing a very long discussion with other international delegates on how to achieve those objectives, and then, on coming back, probably developing all sorts of standards—I cannot say “standards”, because I do not believe that we can develop standards—to achieve them. We would end up with a whole lot of processes. Companies would be told that they had to have another folder sitting in their offices to demonstrate that they had gone through the process of adhering to those standards, and that once the process was finished—that is, when they had finished ticking all the boxes—somehow the environmental risk would have been minimised and the companies would have done their work.

We were not able to get satisfactory answers about this matter from the officials during the select committee process. They admitted that it was a matter of “suck it and see”, but I do not think that New Zealand businesses and consumers should be led to these false expectations, and they should not be burdened with additional costs when there is no tangible of way of achieving those high expectations.

The second point is more serious. It is about the unacceptable fee increases. The Commerce Committee heard a submission from Health and Disability Auditing New Zealand. That organisation is already in existence. It is approved by the Director-General of Health to audit all the service areas under the Health and Disability Services (Safety) Act 2001. It is already accredited under the current organisation, International Accreditation New Zealand. One can assume that as the Auditor-General approved this agency to carry out the work, we should be able to rely on the fact that the Auditor-General and the department have confidence in the competence of this organisation.

In its submission to the Commerce Committee, this organisation pointed out that the fee for certification by International Accreditation New Zealand for a 3-year period was $18,915. But, as soon as it has to get certification under the agency called the Joint Accreditation System of Australia and New Zealand, the certification fee will jump 10 times to $155,823. That is the question. What can be achieved by a fee increase of that amount? What value could the new agency add to the organisation that would warrant a fee increase of $130,000?

💬 Sandra Goudie: They’ll go offshore.

Yes, absolutely; it will force people to go overseas. When Health and Disability Auditing New Zealand raised this problem with the Ministry of Economic Development, the ministry asked the Joint Accreditation System of Australia and New Zealand to review its fees. Well, there is some good news, which is that the fee suddenly came down by $20,000. That actually makes one worried, does it not? One complaint and the fee drops by $20,000. But even then the organisation is still faced with an overnight increase in the fee alone of $110,000. And we can guess where that increase in fees will be recovered from. No doubt the organisation will charge all the health service providers additional fees for carrying out their audits. Also, we can guess where the service providers will recover their additional costs from—and I do not see any additional benefit coming with it. I think it will be from the Government’s Budget.

This afternoon we were told there had been a leaked email. We are told that if district health boards do not cut a fixed number of patients from the waiting lists, they incur penalties of millions of dollars. So I can imagine that the $100,000 would be recovered in the same way—by cutting the number of people waiting for operations from the waiting lists. But this organisation, like others, is facing not just this quantifiable fee increase; it is also facing compliance costs.

I got really worried, because the Minister of Commerce, who is the Minister sponsoring these bills, on the one hand said that she is carrying out a vertical, horizontal, dynamic review of compliance costs with the aim of cutting them and making life easier for small business, and on the other hand said in the business compliance statement that came as part of the Standards and Conformance Bill that that is the best her officials can do. The officials say that people will adjust to rising compliance costs.

But the worrying thing is what they went on to say, which was that there may also be some confusion in the market. They said that as a result of these changes, particularly for the clients who have been certified by the affected certification body, it is not possible to quantify the size of these compliance costs. Well, it is easy for officials to say it is not possible to quantify the size of these compliance costs; service providers—real people out there—actually have to live with the increases in compliance costs.

The worst thing is the solution of the Ministry of Economic Development staff, who reckon that these compliance costs will be mitigated by the officials writing to the clients who have been certified by the affected certification body, to explain that. So somehow a letter from the Ministry of Economic Development to those business clients will mean that the compliance costs will disappear. I actually suggest that the Minister of Commerce should just instruct the officials in the Ministry of Economic Development to write a letter to all people who are in business in New Zealand, because that seems to me to be their solution to cut compliance costs.

The National Party is totally dismayed and disappointed with the Standards Amendment Bill. It protests on behalf of business, particularly small businesses, against this subjective piece of legislation that will increase costs without giving any benefit to them at all.

In speaking to the third reading of the bills arising from the Standards and Conformance Bill, I want to acknowledge the fine work done by my most excellent colleagues, particularly Pansy Wong, in what is, essentially, a summing-up exercise of our concerns. I want to reiterate some of the many points already raised.

Firstly, what is the reason for the change? The explanatory note of the Standards and Conformance Bill states: “This Bill is an omnibus Bill that amends the Standards Act 1988 and the Testing Laboratory Registration Act 1972 to align … with international standards and conformance norms and practices.” So what are the international standards and conformance norms and practices that require parliamentary time and use of taxpayers’ money? What is this most serious and objectionable transgression being perpetrated by the current system? Here in New Zealand we have the most awful practice of having two entities with the function of registering certification bodies. Is that not just awful? Well, that is the reason for this change. So I ask members to please take a moment to appreciate the ludicrousness of that.

The only thing in this legislation that gives a reason for the changes appears to be the fact that international practice is to have only one body in any country with the function of registering certification bodies. There is no rule. There is no set requirement. It is just the fact that other countries only have one, so we could not possibly have two. We now have to just go along with what everybody else is doing and have one. I have seen nothing that suggests there is any sort of problem with having two entities.

In fact, I would suggest the contrary applies. I can see a bigger problem arising out of a change to having only one entity, and that is, of course, the increased compliance costs—costs that submitters took great pains to set out for the Minister, the Hon Lianne Dalziel, but that have largely been ignored. We can just ask Telarc, whose accreditation costs are equal to 50 percent of its 2004-05 annual profits. The impact of this legislation will see those costs rise 30 percent extra. That is a huge cost to Telarc and will be a consequence of this legislation. As my learned colleague Pansy Wong has said, we have just to ask Health and Disability Auditing New Zealand, whose costs under this legislation go from $18,000 to $155,000. So much for this Government trying to claim the high ground about reducing compliance costs! It has done the absolute opposite. The only answer that this Government has to anything, in terms of compliance costs, is to increase them.

This legislation, on the pretext of meeting not a standard or a requirement but some bureaucrat’s bright idea, is now creating a monopolistic situation where costs can be loaded, because people wanting accreditation will have nowhere else to go. The Joint Accreditation System of Australia and New Zealand, the new sole entity, identifies itself as a non-profit entity and has a membership of 10. Six of those are appointed by the Australian Government, three of those are appointed by the New Zealand Government, and one is the chairperson—and who knows where that person will be appointed from? The principal aim of the Joint Accreditation System of Australia and New Zealand is to facilitate international trade. I might add here that the administration of the Joint Accreditation System of Australia and New Zealand is in Australia, so I presume that all the profits that are accrued, after costs, go to Australia and not to New Zealand, apart from the fees that may be paid to the three representatives from New Zealand who are on the board.

Perhaps a Minister might like to take a call and explain what happened to the level of standards and accreditation that applied to the importation of Australian rock melon. My learned colleague Shane Ardern has highlighted to the New Zealand public an example of a biosecurity breakdown with the discovery of fruit fly eggs in Australian rock melon released for sale in our supermarkets. That is just another example of the breakdown in our biosecurity systems, and came from our National biosecurity spokesperson, Shane Ardern. So where were the standards around the importation of that, given that the primary role of the Joint Accreditation System of Australia and New Zealand is accreditation and standards for international trade? Australian rock melon coming into our country is international trade, so where are the rules around that?

Biosecurity New Zealand assured bee-keepers that the import health standards on Australian honey were robust enough to allay fears about European foul brood. Yet Australian rock melons containing potentially disastrous fruit fly material passed through those same import health standards. Despite criticism from the Auditor-General about import standards and container checks, nothing has changed. The fact that insects were discovered should have meant that the fruit was not released into New Zealand’s environment. Jim Anderton should be calling for an immediate investigation into how that occurred.

It is ironic that Australia has refused to import New Zealand apples on the scientifically spurious grounds that they might have fire blight, yet Australia’s imports are posing a major threat to this country that could cost us millions of dollars, and here we are setting up, in this legislation, a single entity that has predominantly Australian membership and only three representatives from New Zealand. With the fruit fly discovery, we have seen a breakdown in our biosecurity. Where is the real confidence that the Joint Accreditation System of Australia and New Zealand will look after New Zealand’s interests, when we have only three members on its board? So I have major concerns.

I am really pleased that National is opposing this legislation because, I think, in time to come we will see it go against us. It will cost our exporters dearly through accreditation costs. Those costs have already been outlined to the Minister, and neither she nor this Government is fronting up to the costs that this legislation will incur. Telarc put through some very good recommendations. It recommended that competition should be maintained by allowing International Accreditation New Zealand to offer management systems accreditation, and that has been ignored. Failing that, Telarc recommended that a mechanism is included within the Act either to regulate the Joint Accreditation System of Australia and New Zealand’s fees for accreditation of certification bodies, or to provide an independent fee dispute arbitration process. There must be some form of control of what that body can charge. Along with its predominantly Australian membership, as I have already outlined, that is a major concern, and one that the Minister should have addressed, but has failed to do so.

The other major concern is around the new additions to our standards: minimising environmental risk and promoting social responsibility. I highlighted this concern in talking about cars. It is now coming to public attention that small cars, although they may be seen as environmentally friendly because of their reduced fuel consumption, are more dangerous than larger cars because occupants are less protected by the structure of the vehicle.

💬 Nandor Tanczos: Why is that?

The structure of the smaller vehicles puts the occupants more physically at risk if they have an accident with another vehicle. So on the one hand there may be an environmental benefit, but on the other hand people are significantly put at risk. So what is going to weigh in the balance here in terms of the environmental risk against social responsibility and protecting people and their lives? That will be something that I think this Government will certainly struggle with.

The legislation seems like a lot of do-good nonsense. I am concerned about it because the standards are meant to be set with all of the participants having an input and agreeing to them. The Minister has already said that 80 percent are required to participate in the decision, or otherwise the board makes it. I have some concerns about that. I do not think the standards are getting the full input from the general public or interested parties that they should get. I do not think the public have continuing confidence in this Government to put the right measures and controls in place. I think the water quality standards are a fine example of that lack of public confidence in the Government’s ability to set those standards. Communities want to make those decisions for themselves. The Government wants to try to control everything and it is going to do that through standards. The Minister has greater powers under this legislation, and I think that will be to the detriment of New Zealand in the future, in the way in which we set our standards.

I rise on behalf of New Zealand First to take a call in this debate. New Zealand First supports the third reading of this legislation. It is important to all of those who are involved in industry—the export industry and New Zealand’s domestic industry—so that they can manufacture goods and products, and provide services, to an internationally recognised standard. It is absolutely essential in today’s world to be able to ensure that customers can have complete confidence in the product they are purchasing. That confidence can be achieved by ensuring the product has been manufactured according to the specified audited standards of an international certification body. It is always an external auditing body that ensures those standards are being met, by inspecting the documentation, the procedures, and the processes that are an integral part of the product.

The standards and conformance infrastructure that exists supports New Zealand’s trade, health and safety, and environmental objectives. It is absolutely essential to ensure that international and domestic confidence are maintained in the infrastructure that exists in New Zealand, by aligning the functions of the Standards Council and the Testing Laboratory Registration Council with international norms and practices. This legislation reflects that New Zealand will have a joint accreditation system with Australia—the Joint Accreditation System of Australia and New Zealand—to register the certification bodies. International practice requires that there is only one registering certification body. We must ensure that certification is consistent.

We have to emphasise here that product registration is definitely not compulsory for products that are exported. It is a business cost that a person or a business picks up and decides to do. It is not mandatory. Rather, certification shows a business’s customers that it is very serious about product or service quality, consistency, and manufacturing practices. It shows that the business has the practices and the procedures in place to produce a consistently good-quality product every time. It enables the manufacturer to trace the product, from the initial raw ingredients right through to the consumer—from the farm gate to the plate. When a business is able to carry out this type of analysis, it is very evident that very detailed systems have to be in place. Of course, we have to have the required manuals to follow, in this instance.

We know that costs are a very necessary part of this regime and they are usually built into the product cost. Costs themselves depend on the size of the business, because auditing in itself takes time. It is a very laborious job, and one that definitely needs a lot of patience and takes time. We believe that this procedure has rapidly become absolutely essential in today’s world. Overseas customers, in particular, expect that accreditation and the processes to be in place. We must remind the previous speaker, Sandra Goudie, that doing business overseas has definitely changed over the last few decades. The old adage of “Near enough is good enough” does not stack up any more. Internationally recognised and accredited products are a part of the new way of operating. New Zealand has to keep pace with the rest of the world if we want to compete on a level footing for export markets. This legislation brings us up to speed.

There is one issue of concern to New Zealand First, and that is the point that was expressed in National’s minority report, which is attached to the legislation. New Zealand First has always resisted provisions and objectives to promote items that are not directly quantifiable. That type of provision is difficult, if not impossible, to implement and then audit against.

New Zealand First supports this legislation. It is a very good first step. We need to continue working in this very important area, into the future. Our overseas customers increasingly require that. New Zealand First supports the legislation.

I rise to speak against the Standards Amendment Bill and the Testing Laboratory Registration Amendment Bill. The bills are not supported by National, largely because they fall short of the mark, like so many of the Labour-led Government’s supposed initiatives. When will the Government ever get it right? Where and why does the Government not get it right? The answer to those questions will be a topic of increasing public interest, I have no doubt, over the next 3-week adjournment and beyond.

In the meantime, in this the third reading we can reflect on the passage of this legislation, which was formerly the Standards and Conformance Bill. I note the kind comments from those on the other side of the House about the work the Commerce Committee did on this legislation, and I appreciate those, because the legislation indeed required a lot of attention. It has been examined by the committee. I note the adverse minority report and the comments therein, and I will be addressing those during the next few minutes.

The legislation seeks to develop systems that will be of assistance in developing and ensuring the integrity of New Zealand’s setting and maintaining of standards—a very important aspect of our commercial life. But it goes not quite far enough. A number of issues raised by submitters to the committee highlighted that, and we have heard a number of speakers in this House address aspects of the legislation. We heard in detail from my colleague and friend the Hon Dr Nick Smith, who spoke on the vacillations of certain players in the timber industry, where truth itself seems to have been compromised and when anyone who purports to present it afresh is put under incredible pressure not to speak up.

💬 Hon Member: They were sacked.

They were sacked. One of the advantages of entering Parliament following a fair stretch of a career in business and commerce is that one does not have too many illusions over the need for authoritative standards to be set for public protection. Again, this legislation falls short of the mark in achieving those. If one also has experience in dealing with the standards—or lack of them—in jurisdictions overseas, then one can see the experienced level of protection that is required to protect the innocent, the unassuming, and the trusting. This legislation falls short of the mark in providing that.

I never expected to hear in this House revelations of such an appalling lack of standards in the building industry as were detailed by Dr Nick Smith during a speech on this legislation. The reality is that ordinary people without an in-depth knowledge of building materials and that which constitutes an effective remedy for rot need protecting—and I include myself in that category of people who do not have the capacity, time, inclination, or knowledge to look beyond the claims made for a product on the manufacturer’s label.

It is clear that we are now living in a new era—an era when things have been changed and socially structured to meet the ideological requirements of the present Labour Government. Instead of being able to depend on things as we used to, terms such as “buyer beware” have suddenly taken on a whole new meaning. We should now beware not only of faulty products but also of not being able to depend on the standards that have been set. The legislation falls short of the mark in correcting that.

We heard of the leaky homes disaster, which affected 15,000 homes. We heard that it is a calamity of a scale equal to the Napier earthquake. Standards New Zealand was created as a consequence of that earthquake. Surely, the adjustments in this legislation before us now should seek to do more than just tinker and modify the standards. Again, the efforts have fallen short of the mark.

The legislation’s key provisions will clarify the situation regarding the accreditation of testing and calibration laboratories and certification services. The requirement to have those services is a very important element in ensuring New Zealand’s competitive edge in an international environment. Our products and services have to be of a standard that will reflect a quality that can be depended on. The availability of a sound and efficient standards and conformity assessment infrastructure is a key element for ensuring success in not only export matters. We have to have the means of ensuring that local people and local users can develop confidence in domestic products, so that those products are not unfairly displaced by imported substitutes. Our standards have to be rigorous and recognised internationally, and we have to use testing procedures that withstand international assessment and critical analysis.

Again, there is a haunting echo to these words, as one gives consideration to recent events emanating from this House. Those events are repeatedly being reported in the media as showing a lack of standards in the New Zealand political arena—

💬 Shane Jones: Oh rubbish!

—it is not rubbish—be they associated with Mr Phillip Field or with the questions addressing the use of public funds in election campaigns.

💬 Shane Jones: Exaggeration!

It is a sort of stain, I say to Shane Jones, on the floor of the House. It is a stain that is at risk of spreading outside and, indeed, is at risk of staining our reputation overseas. How such an ethical lapse supports the sort of legislation we are looking at at present is a bit hard to imagine.

But, to return to the legislation, I say that there are continuing concerns from this side of the House over the addition of the terms “minimising environmental risks” and “promoting social responsibility” to the legislation. I sit on the Commerce Committee, and I have not heard members opposite make anything like a satisfactory explanation of what the implications of adding those terms will be. How are the concepts of “minimising environmental risks” and “promoting social responsibility” to be applied to the establishment of standards and laboratory testing? How will those references be applied in a scientific sense to determine the criteria to be used in relation to testing and certifying products, processes, and services? It seems a very subjective measurement to me.

Let us see what the Minister of Commerce, the Hon Lianne Dalziel, said about it. In introducing the legislation, she said that the technical amendments in it will amend two Acts: the Standards Act 1988 and the Testing Laboratory Registration Act 1972. Dealing with the amendments to the Standards Act, Ms Dalziel said that they are designed to ensure that international and domestic confidence in New Zealand’s standards and conformance infrastructure are maintained. She said: “the Standards Council, through its operational arm, Standards New Zealand, develops and publishes standards that are agreed specifications for products, processes, performances, or services.” She said that the amendment would: “clarify and expand the scope of the council’s functions to include the preparation or recommendation of codes of practice, handbooks, specifications, and other material produced by international standards bodies.” And then—here we go; here is the kicker—she stated: “The bill will also extend the development of standards in a manner consistent with New Zealand’s international trade obligations to include minimising environmental risks and promoting social responsibility.” I find that to be a fictitious suggestion.

We have heard in detail from my colleague Pansy Wong about the cost and cost recovery aspects of this legislation, which are a concern not just to the Opposition but to those who anticipate having to meet the legislation. I really share her concerns. Let us take the example of a submission made to the committee by Health and Disability Auditing New Zealand. Under the International Accreditation New Zealand system, that organisation’s total costs for 3 years would be $18,915. Under the Joint Accreditation System of Australia and New Zealand—

💬 Pansy Wong: How much?

Does the member really want to know how much it will cost under the Joint Accreditation System of Australia and New Zealand? Members should remember that the first figure I gave was $18,915; the new figure, under the Joint Accreditation System of Australia and New Zealand, is $155,823—10 times as much.

To conclude, I say that this legislation falls short of what is required—it will not do. A far more substantive reform is required. Such a reform needs to be able to address the matters that were raised by the Hon Dr Nick Smith. It needs to reflect the sorts of standards brought into being, initially, in 1932, following the Napier earthquake. It needs to be leading legislation that governs the standards in those areas that it is specifically designed to deal with. It needs to reach beyond where it is at the moment. Thank you, Mr Deputy Speaker.