Financial Review Debate — State Services Commission

Given the events of the last few weeks in the Department of Corrections and the events of the last few months in the Department of Labour, a look at this report from the Government Administration Committee on the States Services Commission in 2005-06 paints a very bleak picture of the activities of the State Service and, in particular, the office of the State Services Commissioner.

Today in the House we heard a stout defence of Mr Barry Matthews, who is the Chief Executive of the Department of Corrections and a gentleman who is directly employed by the State Services Commissioner. Although his report is to the Minister of Corrections, it is also to the State Services Commissioner. It is interesting to note that in this report, long before the debacle over the parole of Graeme Burton and the subsequent tragedies that occurred at his hands when the Department of Corrections should have ensured that he was incarcerated, the State Services Commission had had to justify some very considerable blowouts in the budget for the development and building of prisons.

Here we have a State Services Commissioner who has to acknowledge in the financial review of his department that there are problems around contracting that go right to the capability of management in his department, and he does nothing. He simply goes out and produces a report that says even though the Department of Corrections engaged in the activity of building prisons without a fixed price, and simply accepted the bills willy-nilly as they came in from the builder, it was not the department’s fault. There was nothing wrong with that—every cost was justifiable, etc. But this was not a small blowout. This was a whopper—well over $100 million. That amount, I might add, is similar to the blowout in the INCIS computer program that caused so much flak among the Labour Party members about 7 or 8 years ago.

Interestingly, Mr Barry Matthews was right at the heart of that problem, as well. But today we heard a stout defence of him by the Prime Minister. No doubt she would make a similarly stout defence of the commissioner, Dr Prebble. One has to ask why these people who have a track record of bumbling remain in prominent public positions. It is because the current Government has politicised the State Service and the office of the State Services Commissioner. The State Services Commissioner has allowed that to happen; in fact, he has encouraged it, in my view.

Recently, one of our members wrote to the State Services Commissioner expressing concern about the Department of Corrections, and 22 hours later that member released that letter publicly so that we could be seen to be doing the job politically that we are elected to do. The State Services Commissioner decided to reply to that particular member of Parliament that he not only was whitewashing the particular issues raised but also was immediately releasing this correspondence to the media because that appeared to be where the member wanted to conduct the business. That is completely unacceptable.

I note that in the year under review the State Services Commissioner undertook to develop a code of conduct for employees in State services and in State entities, and, I would presume, for anybody covered under the State Sector Act 1988. I wonder how he would measure himself against his code of conduct. I would think that Dr Prebble, as a man who is well interested in codes of conduct, would fall well short of the mark. I do not see how we could have a year when so much could go wrong. Remember the Television New Zealand (TVNZ) debacle. Effectively, the chief executive of TVNZ came along to Parliament and lied to the select committee. Dr Prebble excused that by saying it is very difficult for these guys because they have to represent the position of their Minister. Represent, not misrepresent—that is what a code of conduct would suggest should be done.

The question for Dr Prebble is how good his code of conduct is now, when he has the TVNZ issue, the Department of Corrections issue, and the Department of Labour issue. The Department of Labour issue is very interesting. Dr Prebble has recently sacked the chief executive; he has given him his marching orders. Yet the sacking is dressed up as some sort of voluntary exit. Over the next short while in the Committee some of the reasons for that action will be made clear. It is not a pretty picture, at all. I think everybody in this House should be very concerned that the State Service, an organisation that has a large number of people in it who are very dedicated and capable State servants, unfortunately is led by a State Services Commissioner who is happy to see his role politicised. I do not think there is any defence he can mount, in any case that relates to his activities where a question has been legitimately raised by the Opposition, that he can truly justify according to his code of conduct.

When we look back at the last year we see that the whole concept of misleading Parliament developed quite strongly. Remember Immigration New Zealand—“If we lie in unison, we will get away with it.”? That was in the same year. So we have layer upon layer of bureaucrats deciding that they will mislead Parliament, bureaucrats deciding that they will engage in the building of State-owned buildings without contracts, simply with a sign-off, and all because they know they have a State Services Commissioner who, no matter what they do, will leap in to defend them.

That is what interests us most about the predicament of Dr James Buwalda. He has been sacked, and no one has been told the full reasons why. But, of course, over the next couple of days those members over there who want to question the veracity of this will find out. The Minister Annette King knows, and the Minister will be required to answer questions in this House. We will see how well the Minister is served by her civil servants in that regard.

I come back to Barry Matthews. It perplexes us that no action at all appears to have been taken against Mr Matthews for appearing at a press conference and making that most insensitive claim that there is no blood on his hands. That is going a heck of a lot further than simply saying: “I can’t be held responsible for someone who breaks out of prison, when I’ve done all I can to keep him there.” It almost implies that it was expected that this particular prisoner would engage in the sort of activity that resulted in the tragedies we learnt of in late January. That is unacceptable from this particular department. I think it is high time that Dr Prebble enacted his code of conduct and asked Mr Matthews to reconsider his future. We know that he will not do that, because it would appear that Mr Matthews is a good friend of the Prime Minister and a good friend of the Labour-led Government. These days, being political in one’s work as a State servant brings rewards, rather than the sort of condemnation that it should bring.

As I said earlier, this criticism is very narrowly confined, because we have some excellent State servants, and I am sure there is every chance that under a new Government the State Service will return to the sort of standard we expect of it.

One of the oddities in this particular session of Parliament is that the Minister of State Services is responsible for the development of a proposed new agency called the Australia New Zealand Therapeutic Products Authority. This agency is all about regulating health issues—medicines, medical devices, and dietary supplements—so it should fall within the health portfolio, as it did for the previous 6 years. But presumably Annette King, the previous Minister of Health, felt that, having put so much effort into this authority, she wanted to bring it to a successful fruition herself, so she got that part of the health portfolio taken with her into the State Services portfolio. So within this Budget we had $1 million spent last year on setting up this new authority—altogether about $6 million of taxpayers’ money has been spent. A whole army of officials went backwards and forwards between Australia and New Zealand with endless little meetings setting up this agency and getting quite carried away about it.

Now, of course, we find that all these years and years of negotiation and all this expenditure and taxpayers’ money could be for nothing, because it is rather looking as though the one thing Annette King forgot to do was ensure she had the numbers to pass the legislation. It is increasingly looking as if the Government could suffer an embarrassing defeat over the Therapeutic Products and Medicines Bill, with the announcement by Phillip Field that he will not be supporting it. It looks as if it is dead in the water. But while the bill is still before the House I think there are a few things we need to examine about this odd agency that the Minister of State Services has spent so much of her time negotiating.

First of all, the authority is being called an offshore entity, but it is set up under Australian legislation—Australian corporate law—and is going to be headquartered in Australia. The Minister has refused me 6 years’ worth of Official Information Act requests. I have asked for the minutes of the ministerial council about the decisions it has been making these 6 long years, and the Minister has refused all those Official Information Act requests. So much for democracy. But she did inadvertently give me one paper that stated there would be about 550 staff in the authority, 93 percent of whom would be Australian and 7 percent New Zealanders. I think that sums up what this authority is all about. It is 93 percent Australian, with a little clip-on of 7 percent New Zealand at the end.

In this offshore authority there will be an unelected and unaccountable managing director who will have completely unprecedented and virtually unconstrained powers to issue orders that would have the effect of law in New Zealand without ever having to come before our Parliament. When the select committee examined the treaty that sets up this agency we pointed out that these powers were completely unprecedented. We examined the treaty and said: “Look, what is this odd provision? It says that the managing director shall not be responsible to the board for decisions made by the managing director in the performance of the agency’s regulatory functions.” So this managing director will be able to issue orders about a huge range of subjects. He or she will have the statutory delegated decision-making powers of the Minister of Health or of the Minister of State Services, but will not be responsible to the board for any of its decisions.

So who will this managing director of this offshore entity set up under Australian law be responsible to? There are all sorts of alarming provisions in the bill that sets up the agency, including a provision that will give the new authority powers—again, unprecedented powers—of search and seizure so that an agency official of this offshore entity would be able to come to New Zealand, enter and search a business in New Zealand without a warrant, and impose penalties of up to $5 million without having to go through a normal judicial process. This is an extraordinarily odd provision.

Some of these issues really need to be examined because they have constitutional and wide-ranging implications. A very heavy-handed regulatory regime is proposed, which inevitably will increase the cost of dietary supplements and traditional remedies, and also the public’s access to them. The problem is that if, for example, somebody wanted to use a traditional remedy—shall we say, a herb called kawakawa—and put it into a dietary supplement, but it was not on an approved list, that particular traditional remedy, and literally hundreds of traditional Chinese herbal remedies, would become illegal if they were not on the approved list once the agency was in place. They would not be able to be sold in New Zealand even if they had been safely used for centuries and approved by an overseas regulatory authority such as the American Federal Food and Drug Administration.

So this raises very serious issues. Why should New Zealanders have their access to traditional Chinese remedies, for example, taken away from them because we sign up to some offshore entity that is based in Australia, with these managing director’s unlimited powers? I am not being hypothetical here. A Chinese herbalist out in Mana has 250 Chinese herbs that she administers. All of them have been approved by the American Food and Drug Administration and have been safely used for centuries. None of these are on an approved list in Australia, nor will they be approved in New Zealand, because they contain many ingredients and it would be far too expensive to licence these remedies. So they will become illegal in New Zealand.

I think the Government and all those officials with their endless little meetings backwards and forwards across the Tasman forgot to ask the people of New Zealand, and the people of New Zealand have become increasingly concerned about this treaty that the Government has signed and about this agency. They have said: “Hang on a minute.” Basically, what this Parliament would be doing is transferring control over all these dietary supplements and traditional remedies to an offshore agency, and Parliament would completely lose control over these matters into the future. More and more New Zealanders have become concerned about the constitutional implications of this authority. There are no Treaty of Waitangi provisions, and, once it has been put into place, it will basically be beyond the reach of MPs in this Parliament.

Another odd quirk is that the legislation that will set up this authority has been introduced into the New Zealand Parliament—it is currently before the Government Administration Committee—but it has not even been introduced into the Australian Parliament. So, presumably, the Australians could change the legislation after we have passed it here. No explanation has been given for that. We are also, effectively, almost signing a blank cheque with this particular agency, because all of the details of how it will operate are contained in rules and orders, and we do not know what those rules and orders are. So it is like signing a blank cheque. We have no idea, really, of the detail of how it will operate because, even though it is before the select committee, none of this has been consulted on.

The other issue, of course, is that Australians themselves are saying that the agency, as it operates in Australia, is draconian and heavy-handed. Many of them believe that it has been a disaster in Australia. They are not able to access many of the dietary supplements and traditional remedies that we have here, because, effectively, the agency, which is a pharmaceutical-type agency, regulates their dietary supplements according to a pharmaceutical paradigm. It has not approved many, many remedies and basic vitamins that are on sale here in New Zealand.

I wish to follow on from the previous speaker, Sue Kedgley, who was talking about the establishment of this trans-Tasman therapeutic agency, and about how incorrect and fallacious some information tabled in the House can be. That member is no longer on the Government Administration Committee, which is now looking at an entirely new agency. I chaired the Health Committee that first considered the inquiry into a proposed trans-Tasman regulatory agency, and the matter was of genuine concern to the New Zealand public. We produced a report and made recommendations to the Government, and those recommendations were taken into account. Then we looked at the agency itself, which was to be established under a treaty. Several of the issues raised about the treaty we considered, which were concerns of the Health Committee, have been taken into account in respect of the subordinate legislation that the Government Administration Committee is now considering. How strange it is that the previous speaker and I, who have both been on the select committee, see the world through entirely different glasses.

Proposals in respect of this agency were initiated by the previous National Government, when Bill English was the Minister of Health. I wonder what sort of discussion Mr English and Mr Key are having now as co-leaders of the National Party. I wonder what sort of discussion John Howard, who came to New Zealand, had with Mr Key about listening to Mr English, who first proposed the trans-Tasman agency. How divided the Opposition is, and what a lack of foresight its members are showing in Opposition.

The Opposition has an intransigent view in respect of this entirely new proposed trans-Tasman agency. It will not be Food Standards Australia New Zealand, as the member Sue Kedgley seems to believe. It will not be the Therapeutic Goods Administration that we know now. It will be a new agency set up—quite correctly—by law in Australia, but with subordinate law in New Zealand. The so-called bureaucrats that that member runs down have been working on the very issues that the Health Committee raised in terms of our concerns about issues of sovereignty, issues about the not unfettered powers of the managing director, and issues about the relationship with the new board that is yet to be established. All of those issues are now considered in the legislation before this committee.

That member went with me to Australia, where we looked at the Therapeutic Goods Administration. Every member of the Health Committee at the time agreed that we did need a new regulatory regime, and that in no way did Medsafe have the capacity to measure the harm, the risks, and the public safety issues that were before us with the ever-growing market of complementary health-care products in New Zealand. We all agree that it is a great market. It is a great opportunity for New Zealand. We are leaders in the development of many of these remedies, but it is absolutely critical, where there are health claims about any remedies, that there is a regulator to check out whether those health claims are scientifically robust. No one argues about that.

The other issue here is the one I heard in the House today. Taito Phillip Field is quite concerned—and, obviously, someone from the Opposition has already got that member on his own—about the role of rongoā, Pacific Island natural therapies, and new players that may want to come into the market, and he asked about whether we would be constraining the market. All of us are very concerned about issues of rongoā, and they will be excluded from this new agency. So it is important that we brief those members in their confusion—

💬 Gerry Brownlee: Why?

Because they do not make health claims. It is an old custom and practice of Māori to go out and collect—

💬 Gerry Brownlee: Rubbish! Of course they do.

No, they do not. They do not market those products commercially. That member of the Opposition is clearly confused.

I turn to some of the other claims we are hearing about the cost for new product registration. For goodness’ sake, if we have a joint regulator now, it will be the envy of the European Union. Its representatives have been over to look at this proposed new agency. They are impressed that new market entrants can come in from Singapore and Asia. This will be an ASEAN issue that will really strengthen us as a regulator internationally. I am confident that that legislation will be passed by this House.

Report noted.

Ministry of Health