State Sector and Public Finance Reform Bill

The debate on this part includes schedules 1A to 3A.

I rise to convey Labour’s support for this part of the State Sector and Public Finance Reform Bill. In doing so, I wish to tender an apology to you, Mr Chair, and to the Committee. In my initial remarks on Part 1, I made the misplaced comment that Part 1 was the most major part of the bill. I see on closer examination that Part 2 is equally substantive and important, amending as it does, very significantly, the Public Finance Act.

The bill proposes a number of amendments to the Public Finance Act, and principally the following: firstly, the establishment of a new appropriation type, to be called a multi-category appropriation or MCA. The purpose of this is to allow different types of expenditure to be grouped into a single appropriation where they support a single policy objective or overarching purpose. This is one of the principal innovations in this Act, in the way that the design of the Government’s machinery is carried out. It calls us to reflect on the nature of what we are doing here today. This is not just tinkering legislation; this is framework legislation—and that is why it is good that it is bipartisan across the House—that governs the major rules and regulations by which the organs of the State operate. So that is everything from the rules upon which they are structured, principally delivered through the State Sector Act reforms in Part 1, and, of course, the rules by which their finances are governed, which are dealt with in this part, Part 2, as amendments to the Public Finance Act.

Members of the public will recall—and members opposite will, hopefully, recall—that the Public Finance Act is a very extensive piece of legislation that contains the provisions for fiscal accountability and the ability for Parliament and the public to be able to trace subventions or appropriations from year to year, to be able to track the movement of public funds, and to give effect to that age-old tenet of our inherited constitution that there is no taxation without representation. This is where the rubber, as it were, meets the road, because it is through the legal framework set out in the Public Finance Act, as amended by this bill, that we get the rules about accountability. The main point here is to allow a new form of accountability, multi-category appropriations, which allow policy purposes to be driven simultaneously through several different agencies or votes.

In the past, what has had to happen under the rules of public finance is that a lead agency has been designated and it has borne the financial responsibility, but through that it has also maintained primary control through the Cabinet process. That has not, I think it is fair to say—and both sides of the House that have sat on the Treasury benches over the years would agree—always favoured the highest levels of cooperation between the agencies of the State. So what we are doing here is we are plumbing a whole new beast into the financial reporting rules. It is a beast called a multi-category appropriation, and it is based on the presumption that the behaviour will follow the money. And if the money is in a common pot, where several different agencies have to draw from it, then we are more likely to get truly unified behaviour. The Labour Opposition agrees with the Government that it is a good thing to have that type of provision available, provided that there are sufficient controls around it. I am pleased to say that following the amendments put in place by the Finance and Expenditure Committee, it is now our view that those controls do exist.

As our colleagues have said in relation to Part 1, for the Labour Opposition this is a relatively unusual bill, an unusual process. We quite strongly opposed the bill at its first reading. There were a number of provisions in it, quite a lot of them in Part 1, that we very trenchantly opposed. We are very pleased that through the negotiation process in the select committee there has been an extensive range of amendments and we can now support the bill. The amendments here have been around two principal aspects of multi-category appropriations—firstly, requirements for full and complete traceability down to the sub-output class level. It is a very granular approach so that members of Parliament and the public can trace changes in public expenditure through the years and across categories.

That is particularly important where a multi-category appropriation has the potential to blend appropriations from different departments from prior years. It is too easy to do smoke and mirrors without the amendments made to this Act. It follows that it is made clear in the amendments that other departments as well as the one administering an appropriation can incur expenses against that appropriation. It is a second principle, if you like, that follows from the multi-category appropriation principle. The idea there is that where there is a group of agencies cooperating towards a policy outcome, they can incur expenses against a single appropriation, if that is appropriate. That, again, plumbs into the operations, the machinery of government, cooperative behaviour at every level.

The information required in the estimates and supporting information is being changed to focus more closely on the policy intent of what is being achieved within each organisation. We talked about this in Part 1, the shift from simple output monitoring to outcome monitoring—that is, measuring the work that the State does against the questions of why we are here and what we are trying to achieve; how we are trying to achieve it follows. As we said in Part 1, the risk with that is that if we lose sight of the output measures completely, sometimes outcome reporting can be a bit vague, but a proper combination of the two has been shown to deliver the best balance in terms of strategic thinking and specific behaviour tracking.

The provisions allow annual reports of more than one department to be presented together in one document, where this would more meaningfully convey information. So there is a third significant change. As well as multi-category appropriations and multiple departments drawing upon a single appropriation, now we can have multiple departments reporting through one accountability document that applies to a particular programme. Again, we are designing into the machinery of government the ability to require cooperation of our agencies from the ground up. We are standardising the governance and performance reporting requirements for companies that are listed in schedule 4 of the Public Finance Act—that is, companies where there is a substantial element of Crown ownership. As I look through the bill—and I will be picking this up in my next call—I will go clause by clause through some of these key changes, because there are 60 pages of amendments.

Let me draw the attention of the Committee to one particular matter that I think is pretty important, which is around proposed new clause 59B, amending section 3A of the Public Finance Act, as represented on Supplementary Order Paper 262. That is where proposed new section 3AB(1)(a)(i) states: “Ministers of the Crown hold, on behalf of the Crown, more than 50% of the issued ordinary shares in the capital of the company;”. I do think it is necessary to put on record that this is not a provision that applies to the Government’s harebrained partial privatisation scheme; this is about the development of mixed-ownership entities other than those in the privatisation scheme for the energy companies, which we have heard so much about in the media. The reason for making that clear is that there are a number of strategic disadvantages with the partial privatisation programme that the Government is currently engaged in, which include the loss of strategic control for the portfolio; having to have regard in law to minority shareholders’ rights; the loss of the controls normally contained in the State-Owned Enterprises Act, including the no-surprises policy and the power to direct; and the loss of dividend flows, which means that the programme is often cash value - negative.

I will come on to it in subsequent calls, but there are a large number of schedules—schedule 1A, schedule 2, schedule 3, and schedule 3A—that apply to the Public Finance Act and pertain to amendments in this part, and we will be touching on some of them across the debate on this part. There are a number of Supplementary Order Papers that contain measures on Part 2 that we will want to touch on in this debate. So I think, with your leave, Mr Chair, we will be here for quite a long time going through this. Supplementary Order Paper 168 from Minister Coleman bears upon the Public Finance Act. Supplementary Order Paper 262 from the Minister, which is very extensive, bears upon it. We have disposed already of Supplementary Order Papers 259 and 265. Supplementary Order Paper 261 also has some provisions.

Let me note two things on the Supplementary Order Papers here, as an introductory comment. The first is that it is somewhat disappointing—

As I begin my call I will just request that Mr Cunliffe give me my notes, which are under there. I have prepared some quite extensive notes on this part of the State Sector and Public Finance Reform Bill, Part 2. The bill itself does make some quite significant changes to a very significant Act. The Public Finance Act, of course, is one that, as a former Treasury official, I took quite a lot of interest in.

I am very grateful to have this opportunity to speak in the debate. It is true that the changes to the Public Finance Act will, I hope, have some really positive impacts on the way the public sector is run. The establishment of a new appropriation type, to be called a multi-category appropriation, will allow different types of expenditure to be grouped into a single appropriation if they contribute to an overarching purpose. There are always debates around this kind of change because effectively what happens is that the nature of accountability changes. With the change in the nature of accountability is a commensurate concern for the impact that that will have on the accountability of Ministers through to the taxpayer and the public of New Zealand, who want to see the investment they make through their taxes creating a better society.

These changes, which allow for a wider grouping of expenses, will, hopefully, allow Ministers greater flexibility to achieve the ends they are wishing to achieve through various pieces of legislation or appropriations, which is the money they vote towards specific purposes. But that comes with the risks of being in a bigger pool and of being shifted around without the same kind of attention it has had historically. We find ourselves here in Parliament debating that balance between providing Ministers with flexibility to achieve the outcomes they want to achieve on behalf of the public and, on the other side of that balance, the accountability proper to the taxpayers, who have provided those funds.

We in the Labour Party are supporting this legislation because we believe that roughly the right balance is being struck. It is important that this legislation is enduring, that it survives the various administrations, that the public know what they are looking at when they look at the votes and the appropriations, and that when they look at where departmental spending is going, they can understand what the purposes of that spending are, how the money is being spent, and so on—those members of the public who follow it that closely.

It is, of course, relevant that these changes should be considered here in Parliament, and debated fully, because this is the place where we have the overview of that spending. We had our estimates debate earlier on. We have scrutinised here the Government’s spending and asked questions about moneys that have been moved around between different classes of output category. We have satisfied ourselves, more or less, that the Government has spent that money as it said it was going to spend it.

Whether or not we think it has been spent wisely is a separate debate—that is a separate debate. It is related, and it is often overlaid. Mr Chair, you will have heard—I should not bring you into this debate. Members of the Committee will have heard me express political opinions, views about how money should be spent, whether it is being spent in the right way—and by that I mean on the right things. Here we are talking about whether it is being spent in the way that the Government says it is going to spend it—whether it is true to its word. That kind of accountability is important no matter which administration is in place, because each administration will have its own view as to how money should be properly spent.

This legislation changes the requirements for information about departments’ strategic intentions, including the frequency of its provision. Again, here I think this is about striking that same balance between accountability and how often departments have to outline their strategic intentions. Should they have to do it every year? Is that a good spend? Is it a good use of public moneys to update things, when they may be entirely relevant from the previous year and the intentions may be the same? Just how much public servant time should be spent on judging whether or not the strategic intentions should be updated, as opposed to delivering on the objectives of the Government of the day? This, again, is where a balance is being struck. We believe that in this legislation, by and large, that balance is being struck correctly.

Specifying the financial responsibilities of departmental chief executives to make it clear that they include financial stewardship for the long term is another initiative found in this legislation that we think is good. The proof, again, will be in the pudding in this particular one, we think. Just how we consider the long term—how any Government of the day considers long-term stewardship—is yet to be proven. There will need to be measures put in place to say whether we think that a measure is really in the long-term interests of the country or not. Governments will try to outline those measures. There will be political debate. There will be a political overlay to the particular debate on these matters, and that is natural. It is the job of the elected representatives of the people to try to represent their concerns.

For example, on this side of the Chamber we might be concerned about rising power prices and we might take exception to Mr Key saying that Kiwis are paying about the right amount in power prices. We on this side of the Chamber simply do not think that is true, so that is why we have launched our New Zealand power policy. We think that there should be a different way of organising the electricity market in New Zealand. Our objective will be different from that of the current Government, which seems very satisfied with the rising power prices. Power prices do not bother it. It seems unconcerned that power prices in New Zealand keep going up and up and up, so it will be concerned that the money being spent here is spent preserving the status quo, whereas if the Labour Party was elected into Government it would be concerned that its policy of reducing power prices for ordinary New Zealanders—

The CHAIRPERSON (Lindsay Tisch): Order!

—would be put in place.

That goes precisely to the point here in the legislation in which we are talking about financial stewardship for the longer term. In that particular policy example, Labour thinks that stewardship of that resource in the long-term interests of the country is about delivering lower power prices to businesses so that they can develop and contribute to New Zealand, whereas the Government may take a different view. That is its prerogative. That is the nature of Governments and of parties representing interests in this Parliament. But we will be having the debate, and I think that is the important thing. We will be having the debate about whether the financial stewardship is in the long-term interests or not. I think that is a good thing.

I congratulate the authors of this bill and those who served on the Finance and Expenditure Committee, which managed to work this into the legislation. I join also in congratulating the officials. Although I did not sit on the particular committee for all of the consideration of this bill on its way through, I know, have met, or have dealt with several of the officials before, and regard them as being exceptionally good officials. I heard David Parker recount his experiences and congratulations, and I want to echo those.

This bill will survive administrations. It is a step forward for the public sector. It is a step forward for New Zealand. It is not going to address that fundamental question of whether or not the policies are right. The wrong policies cannot be helped. No amount of fine-tuning how departments deliver what they have been tasked with doing will address the fact that, I think, this Government has terrible policies on some things, but it will fine-tune the Government’s ability to deliver on the policies it says it is going to deliver on. It will fine-tune the accountability measures for the Government so that it can be held to account by members of Parliament and by the general public to say whether or not it is delivering what it has said it is going to deliver. That will become obvious, and then we can have the debate. I can stand up here, as I am wont to do, and say that this Government has the worst economic record of any Government in the last 50 years. It will be a political debate, because Government members can be clear that they have done what they said they were going to do, they have implemented the policies that they said they were going to implement—

💬 Hon David Parker: They didn’t say they were going to raise GST.

—and have spent the money on the things they said they were going to spend it on. My colleague raises the issue of GST, and says the Government never said it was going to raise GST, and then it did. Unfortunately, I do not think this legislation is going to solve that.

💬 Kris Faafoi: They said they wouldn’t.

It said it would not raise it—quite right, Mr Faafoi; you have corrected me. The Government said it would not raise GST, and then it did. Well, that shocked New Zealanders and it was, I think, the wrong thing to do.

The CHAIRPERSON (Lindsay Tisch): Order! That is not part of this debate.

Coming back to this particular debate, this legislation will not, I guess, stop Governments doing the wrong thing, but it will—

It is a pleasure for me to take a call on Part 2 of the State Sector and Public Finance Reform Bill. This is the part, of course, that amends the Public Finance Act and is, therefore, the part of the bill that I think does need a large amount of scrutiny. In amending the Public Finance Act, this is the part where the way the Government’s Budget is structured is being altered. There are often very good reasons why the way in which Budgets are structured can be altered, and I think that some of them are inherent in the changes that this bill brings about.

But we do need to be cautious, because changing the way Budgets are structured is often a way that Governments can actually create a bit of a smokescreen so that it is difficult to compare—

💬 John Hayes: As your Government did for 9 years.

—from year to year what is happening with the expenditure. So it is right and it is proper to give a lot of scrutiny and debate and discussion to this particular part of this bill. I know that Mr Hayes agrees with that, because he obviously shares the concerns that I have raised.

An example of that, which I will give for anyone listening to this debate, is in Vote ACC, in the ACC area. Between 2008 and 2012, if we look at the way Budget documents are currently constructed, we can see in the area of funding for injury prevention in ACC that there has been something in the order of a 42 percent decline over those 4 years. [Interruption] I know, it is shocking. It is actually over a period of time in which workplace deaths have been increasing, a time in which there has been real concern—

The CHAIRPERSON (Lindsay Tisch): Order!

—around what has been happening in that area.

I want to bring it back to the bill by using that as an example of why it is important that there is some consistency between the way the Budget is constructed from year to year. When it is constructed in a similar way, we can actually track that through. We can see that the injury prevention funding has been cut by 42 percent over the course of 4 years. However, when change in the way in which the Budget is constructed occurs, as per the changes being proposed here in this part of the bill, it does sometimes make it difficult to actually compare apples with apples—that is, to say that the way the appropriation was brought down in 2008, for example, is a direct comparison with the way in which it was constructed and brought down in 2012. So, I guess, the question that I would pose to the Minister would be to explain to the Committee how these changes will still be able to allow comparisons between years, in terms of what is happening with those estimates, so that we can be sure of how the money is being moved around.

One of the changes that is being proposed in this part of the bill is a way in which the estimates can change so that it makes it clear that other departments, as well as the one administering a particular appropriation, can incur expenses against that appropriation. Again, the example that I just used is, I think, really relevant to this part of the bill and this particular amendment, because in the instance where there was a rapid decline in the appropriation for injury prevention spending from ACC, there was a corresponding rise in spending on injury prevention in a different department, under the Department of Labour, or what has become known as “MoBIE”—the Ministry of Business, Innovation and Employment. So this particular change would allow some transparency around the shifting of money, which is how I read this particular amendment. It would, therefore, make it clear that even though there had been a huge decrease in funding of around 42 percent in injury prevention in one area and just, I think, about a 15 percent increase in the other area, you would be able to put those together by using this amendment and see that overall there had still none the less been a substantial decrease across those two appropriations of funding in the injury prevention area. I think that this will create better transparency.

I rise to take a call on Part 2 of the State Sector and Public Finance Reform Bill, which involves the amendments to the Public Finance Act. I want to start with the change that is heralded at clause 63 of the bill, which changes the way in which the annual financial statements of the Secretary to the Treasury are published. Currently, annual financial statements have to be published on paper. This legislation, and this is an example of why the Labour Party is supporting this legislation, updates it so as to take advantage of information technologies that are now available to “ensure that the annual financial statements, the audit report, and the statement of responsibility”—of Treasury—“remain available on that Internet site for inspection by members of the public for at least 5 financial years after the financial year to which the annual financial statements relate.” If I read that correctly—and the Minister in the chair, the Minister for Food Safety, can tell me whether I have got that wrong—that effectively means that they are going to be available to the public for 6 years, and people will be able to make comparisons.

Using the example that my colleague Sue Moroney just gave, where they are trying to track a change in expenditure—and I think the example you used was in respect of ACC—if there was a 42 percent decrease in funding over 4 years, you would actually be able to track that year by year through the internet to see what was happening over time. Assuming I am reading this correctly, I presume that that would extend to the likes of the ACC, although it may be that because it is a separate corporation it is dealt with specifically in its separate legislation. Certainly, in respect of Treasury, the Secretary must ensure that those statements remain available on the internet site for inspection by members of the public for at least 5 financial years.

The next issue I would like to briefly address, because I am not sure I quite understand it properly, is clause 75 of the bill, which amends section 80. This amends the ability of Treasury to give instructions to departments. Before doing so, I would note that elsewhere in the Act we make it clear that chief executives of departments are responsible for the financial management of their departments. If we look at new section 35, inserted by clause 85 of the bill, where it says “Responsibilities of chief executives: financial management of non-departmental matters”, it makes it clear that in addition to the other responsibilities of chief executives for the financial management of departmental matters, which are referred to in the prior part of clause 85, which amends section 34—and new section 34 requires that the financial management of departmental matters be the responsibility of the chief executive. That is how it should be. New section 34 says that “The chief executive … is responsible to the responsible Minister for the financial management, financial performance, and financial sustainability of the department; and (b) must comply with any lawful … actions required by the Minister or the responsible Minister.” It is a very, very important provision, which states that the chief executive of a department must comply with any lawful financial actions required by the Minister or the responsible Minister.

At times I have heard it said by some Ministers that they feel that the relationship of power goes the other way, so it is quite good to see that this Parliament is emphasising in this piece of legislation that the chief executive of a department “must comply with any lawful financial actions required by the Minister or the responsible Minister.” I do not think that that is meant to imply that any Ministers are irresponsible, so I am not quite sure what the difference is between “the Minister or the responsible Minister.”, and perhaps the responsible Minister in the chair could take a call to clarify what the difference is in that clause between “the Minister and the responsible Minister.”

What new section 34 says is that the chief executive of a department that administers an appropriation—and they all do—is “responsible to the appropriation Minister for what is achieved with the expenditure under that appropriation;”. So that is making the link through—not only do they have to comply with lawful financial actions required by the Minister but also they are responsible to the Minister for what is achieved with the expenditure under that appropriation. So they have got to comply with those financial directives, and they have got to make sure that they are responsible for what is achieved. Then there are similar obligations in respect of non-departmental matters that I do not have the time to properly address.

That then brings me to clause 75 of the bill, which somewhat confuses me, and the amendment of section 80, which relates to the instructions that Treasury can give to departments or departmental agencies. Clause 75 of the bill says: “Subject to the provisions of this Act and of any regulations made under this Act, the Treasury may—(a) issue instructions to departments”—not chief executives—“or departmental agencies for the purposes specified in section 81(1)(a) …” of the principal Act. Of course, the principal Act is the Public Finance Act 1989, unless I am confused as to which Act this particular clause is amending.

I have got the Public Finance Act 1989 in front of me—[Interruption] Yes, thank you to my colleague Kris Faafoi, who already had it out. Section 81(1)(a) of the Act talks about “requiring information to be supplied to the Treasury by departments and any entities referred to in section 27(3)(a) to (f) to enable the Treasury to properly fulfil the functions imposed on it by the Government or any Act:”. I am not sure what the purposes are of the change to section 80 from the existing Act, which currently provides: “Subject to the provisions of this Act and of any regulations made under this Act, the Treasury may issue instructions to departments for all or any of the purposes specified in section 81(1)(a), (ab), (b), (bc), (bd), or (c) to (e).” So I am not sure what the import is of that change, and I would invite the Minister in the chair to take a call and clarify that important point for me.

The next point I would like the Minister to address, if she is to take a call, is what it is that she envisages in the provision that a “chief executive of a department that administers an appropriation [for which that chief executive] is responsible to the appropriation Minister for what is achieved”. The second part of this provision that I want the Minister to address is what happens, given that clause 85 of the bill requires that chief executive to be “responsible for advising the appropriation Minister on the efficiency and effectiveness of departmental expenses and departmental capital expenditure under that appropriation.” This is getting to the nub of how you hold chief executives and the departments for which they are responsible to account for the objectives of the Government.

For example, when a Government sets as an election promise the fact that it is going to narrow the wage gap with Australia, or eliminate it, I think it was—it was going to eliminate the wage gap with Australia—where is it that we see, in these various accountability documents, that being devolved down to departments in a way that the Government can expect accountability from them and then be held accountable to the population for that promise?

💬 Hon David Cunliffe: What if the gap widens?

Well, Mr Cunliffe, you are quite right. If we have those sorts of accountabilities, I would expect it would be of importance to the electorate to understand that those targets were not being met, but rather that the gap between the incomes of those working in New Zealand and Australia is widening.

It is my pleasure to take my first call that I have on the State Sector and Public Finance Reform Bill in its Committee stage. I am in particular very happy to speak to Part 2 of this legislation, the part of the bill that deals with the amendments to the Public Finance Act 1989, and to look at some of those. As my colleagues have canvassed at great length, Labour has made a decision to support this bill with reservations. My colleague Sue Moroney pointed out that we have talked in some detail about our views on this bill, but there is still plenty more that needs to be canvassed in the course of this debate on this piece of legislation.

Although we opposed this bill at its first reading, the changes that did eventuate at the select committee process, that were worked through with Labour and the State sector unions by and large, have really made this a better piece of legislation that has come back to the House at the Committee stage. We are very happy to be able to say that we can offer it our support, but we do still have some of those lingering reservations. It was heavily amended at the Finance and Expenditure Committee consideration, and I think that that as a process is something that this Committee should applaud. That select committee consideration was allowed to work fully and really fulfil its function in making legislation better.

As I said, in terms of Part 2, “Amendments to Public Finance Act 1989”, which we are talking about, one of the issues that I really want to pick up there is the information requirements for appropriations that come under this part of the legislation. The intent of the bill is that all appropriations should be traceable and accountable from year to year: “Traceability must be explicit where an appropriation or categories within an appropriation have changed, including where a multi-category appropriation is used.” My colleague Sue Moroney has touched on a very current example of where this has been brought into relief. This legislation has meaning for every member in this House. There is no member in this House who has an interest in a portfolio, either on the Government benches or on the Opposition benches, who does not have to deal with the issues that are covered by this bill. For those of us who have been covering appropriations that have been brought under the umbrella of the Ministry of Business, Innovation and Employment, the “Ministry of Everything”, it actually has been a real challenge to follow those appropriations through.

My colleague Sue Moroney talked about trying to follow through ACC budget lines from years before the Department of Labour was absorbed into the Ministry of Business, Innovation and Employment. I myself in the area of research, science, and innovation have been trying to cover through budget lines and trying to track how it is that our funding of things like postdoctoral fellowships has gone from when we had an independent Ministry of Science and Innovation, and how that has gone when it was absorbed into the much larger Ministry of Business, Innovation and Employment. I think that any change to the legislation like we are seeing in this is to be applauded, because I think that the purpose of the House, the purpose of our select committees, and the purpose of members of this House is to make sure that we are scrutinising those appropriations. Members of the public also need to be able to have clear and transparent ways of scrutinising what is happening with public money. That is what we are talking about. We are talking about the use of public money here, and anything we can do to make that more accessible and more transparent is something that we can support.

Other changes that we think are important under this part of the bill include making it clear that other departments, as well as the one administering an appropriation, can incur expenses against that appropriation. Increasingly we are seeing that in the way in which Governments are run. We are having the idea of issues and themes starting to cluster around and appropriations occurring in other departments, and I think it is really important that the legislation that administers the way in which we follow through our public money in our State sector recognises the changes that are happening around governance and the way in which we govern our country. It is in changing the information required in the estimates and supporting information—it is a pleasure to conclude some of my statements around this—that the focus moves more closely on to what is intended to be and what has been achieved with each appropriation. It is increasingly and incredibly important that we do have that. It is important that we can make sure that we know what it is that a Minister sets out to do with a sum of public money, what it is that they want to achieve, and, most important, what has been achieved, so that at the end of each financial year we can go back and we can have a look at whether or not the money that was set aside for something was actually used for what was intended. The bill is changing the requirements for information about departments’ strategic intentions, including the frequency of the provision.

My colleague David Parker touched very briefly on the idea around the departments’ statements of strategic intents. These are incredibly important documents for members of the public, for parliamentarians, and for society at large, really, to know what it is that a public organisation is wanting to achieve. Allowing the annual reports of more than one department to be presented together in one document again speaks to the much more clustered way we are thinking of doing Government, the way in which we need to bring things together. This does provide much more meaningful information about the department’s performance and achievements, and this is what we are all looking to achieve. We are all looking to see that we can have meaningful and real information that can be there to show how it is that a Government department has spent Government money.

So we are very happy to be able to say that we can support the State Sector and Public Finance Reform Bill at this stage because of the incredibly good work that the Finance and Expenditure Committee did, and I would like to congratulate members of the committee from all sides of the Chamber on the work that they have put in. I think that it shows what this Parliament in its committees and in its House can achieve when people put their minds to addressing a piece of legislation, trying to make it the best piece of legislation that it can be, and working with the submitters and listening to the submitters when they come to the committee to see how these changes can be made for the better. Thank you.

Tēnā koe. Kia mahi toa. Let me just draw the Committee’s attention to the considerable size of Supplementary Order Paper 262, which contains a significant number of pages—60-odd pages’ worth—of amendments to this part. It is not ideal practice for us to have a Supplementary Order Paper brought to the Committee that is of this length and complexity, because it has not had the same level of scrutiny—for example, John Hayes’ minute scrutiny—in the Finance and Expenditure Committee that the rest of the bill has benefited from. It has not had the “Hayes effect”. It may still have a haze, with a “z”, but not the “Hayes effect”. It is true that officials have given us their word that these are purely minor, technical, and non-controversial amendments that are consequential upon date changes and other such things, and of course, therefore, there can be no policy intent in them.

I want to turn the Committee’s attention to the substantive amendments to Part 2, which start on page 60 of the Supplementary Order Paper. We have an updated purpose statement and we move through to the substantive provisions starting on page 64. Proposed clause 59B replaces section 3A, “Power to amend Schedule 4”. This allows the Governor-General by Order in Council to add to schedule 4 of the bill the name of any body, office, officer, trust, or organisation; and apply or disapply to any organisation any provision of the Crown Entities Act. The Governor-General can change, add, or subtract the name by Order in Council. Section 3AB, in clause 59B, provides similar amendment proposals for schedule 4A of the bill. If we move through, we see that clause 60A, proposed by the Supplementary Order Paper, inserts new section 7C, which is “Responsibility for, and administration and use of, appropriations”.

On this one I just want to make a couple of general points that are not really drafting points. It is to echo the words of my good colleague David Parker, who I think really emphasised the need to have a clarity of legal appropriation authority from Parliament to the Minister to the chief executive, down through the output classes to the sub-output classes. It is provisions such as the new section 7C on page 66 and their like that make clear that the Minister or the appropriation Minister is responsible for the appropriation. So it is through provisions such as this that we are really underlining that the ethical basis of the expenditure of the taxpayers’ money is through the parliamentary process as vested in the Minister. It clarifies, as David Parker has said, that the chain of command, after advice has been listened to and understood, does go from the Minister to the department, because that is how we account for the use of public money, and that is very, very important.

It makes the further point, in new section 7C(3) that “the Speaker is responsible for any appropriation administered by the Office of the Clerk of the House of Representatives or the Parliamentary Service.” I would be remiss if I did not state publicly that our staff in Parliament have not had a decent pay rise for a good 5 years. So when the Speaker is next considering his or her powers under this innocuous little subsection (3) of section 7C on page 66 of the Supplementary Order Paper, I ask him or her to please have a thought for our hard-working parliamentary staff, whose pay and rations really have not kept up with either the private market or the inflation index. I understand that they may be facing yet another year of severe restraint, and I do not think that any of us think that they should be in that situation.

On page 68 we move to clause 61D. This amends the power of the secretary of the department to receive information, and clause 62 amends the power of the Auditor-General to be the auditor of the Government reporting entity. That is an important power because it means that the Auditor-General has his or her full powers when dealing with a potentially sub-delegated entity, body, Crown entity, or company in which the Crown holds a number of shares or some other organisational form. What this bill is really saying is that that concrete chain of accountability and command can apply—must apply—across a range of organisational forms for which the Crown is responsible. The bill is trying to get, in short, the right balance between clarity of delegation, rigour of accountability, and yet a new flexibility to devolve across a range of organisational forms.

In these post - global financial crisis days of fiscal constraint and fiscal prudence writ large, all of us—but, actually, particularly social democrats—know that we are going to have to do more, if not with less, then with not much more in terms of taxpayers’ funds. Therefore, we need to be absolutely focused on getting the best value for the taxpayers’ dollar that we can. I am reminded of an example early in my time in Parliament where we were considering the cost of delivering social work into one of New Zealand’s remote regions—I think from memory it was the Gisborne - Poverty Bay area. The salary cost for the social workers in those days, quite a while ago, was in the $30,000s a year, but the total cost per social worker was around $120,000, the other $90,000 being departmental overheads. I have never forgotten the example. The actual salary of a social worker was only about a quarter of the total cost; the other three-quarters was overhead. That impressed upon me then that even social democrats have to have an awareness of the best and most cost-effective way of delivering services to our people. Sometimes that might be through an agency that is semi - at arm’s length from the Crown, such as an NGO or a Crown entity. It may be something that is lean and adaptable to those communities.

It is interesting now to come full circle and to see a piece of legislation that, with a lot of good, cross-party cooperation, is trying to achieve a good balance between having the flexibility to deliver those services in a variety of ways as are most appropriate without compromising on the rigour of the accountability back to the taxpayer or the chain of command back to the Minister. That is a sweet spot, if we can achieve it, that will allow modern social democracy to be cost-effective and active and flexible and in tune with our communities, and we are reasonably excited about that possibility.

New section 34, proposed in clause 65B of the Supplementary Order Paper, underlines the responsibilities of chief executives for financial management and for reporting both for departmental and non-departmental matters. In proposed clause 66A on page 71 of the Supplementary Order Paper it dives down. This is quite specific, prescriptive language because Parliament is wanting to leave the departments in no doubt whatsoever as to the nature of their responsibilities and the clarity of their delegations. I think it is well written in that regard. Clause 66A states that departments must prepare annual reports. There is some detail about what must be in them, and it is the same for departmental agencies—obligations to publish, to put the information in the public domain, whether it be in hard copy or on a website. There are time limits of no later than 15 working days after it is presented to Parliament. Again, there is a lot of prescription, a lot of rigour, here to make sure that the public is as well informed.

Earlier this evening I went to a presentation by Transparency International with a number of colleagues. That is an agency that rates the level of corruption in different countries around the world. Guess which is the least corrupt country on the planet? No. 1 on their rankings is New Zealand. We can be really proud of that fact, and we score incredibly well for the integrity of our public sector. So today it might be hard graft. It might not be the sexiest bill in the world. It is rather a large bill, and it contains the kinds of provisions that keep New Zealand safe. It keeps New Zealand safe from either graft or just inefficiency and ineffectiveness because the rules are not clear about how we account for public money. It is in the dense drafting of bills like this that we make good our promise to the taxpayer that we are going to deliver the very best services for them at the very least cost, and we are going to do it in a way that is accountable, rigorous, clear, and efficient. It is this kind of work that underlies the fact that we are the least corrupt, the most transparent Government on the planet, and every New Zealander should be proud of that.

In closing, can I just again start where I began in the last part, and that is to compliment the Government, our high-quality officials, and colleagues across the Chamber for their work on the bill.

I apologise to my colleague David Parker for the confusion, but I think he might have had a crack already and no doubt he can be involved in a sandwich—I can be before and after him, if he wishes.

The first point I would like to make is to compliment the officials who have been involved in the State Sector and Public Finance Reform Bill, and also the Office of the Clerk, on what is for me a new approach, and that is writing the Supplementary Order Papers into the bill in a substantive way. I know that we had some discussions about this process at some stage in the past. What it does do is make a bill much easier to understand for people like me who are interested in the changes that the committee has made, which are not quite as well shown in the version of the bill now. More important, when the Minister of State Services’ Supplementary Order Papers as proposed are incorporated in this way, it makes it much easier to focus—rather than trying to work on two large pieces of paper and trying to integrate them and work out how they interrelate with each other. So I want to thank the officials and I thank the Office of the Clerk and, I think, the Parliamentary Counsel Office too for their suggestions and their work in the area. Having said that, it may be that officials and the Minister regret the fact that it is now easier to understand, because there are more questions that flow from a better understanding of it.

The very first one that I have is on clause 78(3) and the definition of “departmental”. It really is a question of why we need to define “departmental”. Who does not know what departmental expenses are? For a very long time we have had departmental expenses, and we have had departmental capital expenditure. Most of the stuff has been around ever since we divided out the accounts to have a profit and loss account, as far as the Government is concerned, and a balance sheet. That is at the point when operating expenses and capital expenditure were divided. My question is, really, why we need to get to the level of pedantry in having this level of definition. There might be a good reason.

The next point I would like to ask is whether—oh, they do not number the lines the way they used to; this is a bit shocking. Now we are going to have some criticism. What we used to have down the side in well-drafted bills, about every—[Interruption] Have we? Well, I cannot see it.

💬 Hon David Parker: You are looking at the tracked version.

I am looking at the tracked version. What is the point of having a tracked version if you do not have the lines on it? For people like me who want to speak and focus, it makes it a lot easier, rather than having to count down all the lines—you know, using our fingers and toes if we have to go too far—to have the lines numbered every 10 or so. If we want a suggestion for people who are doing tracked versions in the future, put the lines in, the way they are in the report-back version. Clearly they will be at different points, and as long as we know what we are referring to, it would be helpful.

I want to refer to the definition of “lend money”, paragraph (a). It is right below the bit about host department. To make it clear, it is in Part 2, clause 59, “Section 2 amended”, which is the interpretation part. I want to refer to “lend money” in section 2(1), amended by clause 59(3) in the Supplementary Order Paper, and, first of all, to ask whether paragraph (a)(i) could be better referred to as the MediaWorks exemption clause. This is “deferring payment for any goods or services supplied or works constructed for any person, organisation, or government;”. The question is whether this deferred payment arrangement should be known as the “Steven Joyce previously owned companies” clause, or some other approach like that. [Bell rung] Mr Chairman.

The CHAIRPERSON (H V Ross Robertson): The Hon Trevor Mallard.

Is it 5 minutes already? That is hard to believe. I had hardly started, Mr Chairman.

The next question I have is that under “lend money” paragraph (a)(ii) it talks about where the department—or I assume it is the department—is “entering into hire purchase agreements or agreements that are of the same or a substantially similar nature;”. The question I have got is does it not depend on which end of the hire purchase agreement they are in? If they are buying something on hire purchase, surely they are borrowing rather than lending. It is unlikely that a major Government department would enter into a hire purchase agreement. But under subparagraph (iii), which is the next section, where they are entering into finance lease arrangements, again, the normal finance lease arrangements are those where they are in fact borrowing, where they are getting goods and entering into some sort of finance leasing arrangement, done, I think, often by Government departments, and which involves those massive, big printing photocopiers, cars, or some similar arrangements like that—what are effectively lease-type arrangements.

I cannot conceive where it would be appropriate for a department or a Crown entity or a Crown agency to be the lender in such a circumstance. Do we really want the Ministry of Social Development to start getting into the car lease business—you know, the hire purchase finance company for cars? Maybe it is a plan for the Minister in the chair, in her area as Associate Minister of Education, as far as technology is concerned, and maybe it would be valid. It might well be valid if we are going to go into schools and have arrangements whereby there are computers, iPads, or iPhones given to families on some sort of arrangement. I do not want to characterise the Minister in the chair as one of the loan shark type people who enters into the high - interest rate arrangements, because I think that would be unfair. But my question—and she could answer it with some of her other experience—is whether in fact this clause is designed for arrangements such as that. Frankly, I cannot think of arrangements where it is appropriate for the Crown, a Crown agency, or a department to be the loan shark or finance company end of a hire purchase arrangement with the public or in a finance lease arrangement.

I do want to ask questions in relation to “responsible Minister”, as far as it relates to the Speaker and the Officers of Parliament. I do not want to go back over too much of the previous part of the bill, but I want to ask—through you, Mr Chair—the Minister who is currently the Minister in the chair about the interrelationship between the salary setting and the responsible Minister being the Speaker. It is something that I have clearly got some interest in—making sure that the rules are right in this area. I want to ask how this interrelates, for example, with a policy decision to move within this complex towards a living wage over a period of time. Is it a policy decision that the Minister responsible can take under section 2(1) as amended by clause 59(5) in this particular area? Or is it something that can be done by only the chief executive, whom I understand is called the General Manager in the case of the Parliamentary Service, the Clerk in other cases, and in other cases again the Ombudsman, or a number of others? Can the Minister in charge make those policy decisions?

It is a pleasure to take a call on Part 2 of the State Sector and Public Finance Reform Bill. I have listened to several very technical speeches from the Opposition, and I want to also, just briefly, remind us why we are here. It is great to see cross-party agreement in terms of public sector reform. It is also great to see, as well, that members are paying such attention to detail.

I want to touch on a few speeches that have just come before us. Firstly, I was surprised, given David Parker’s extensive legal experience, that he needed me to walk him through some definitions in the bill. He asked what a “responsible Minister” is and what the difference is between that term and “the Minister”, so I am happy to walk him through that. “The Minister” refers to the Minister of Finance, and “the responsible Minister” refers to the Minister responsible for a department. I am very pleased to correct that for Mr Parker.

💬 Hon David Parker: Clarify.

The second clause—the other clarification that Mr Parker asked for was around amendments to section 80, in clause 75, so I am, as well, very pleased to give him some clarification regarding that. That change is specifically to enable Treasury to also be able to issue instructions to new departmental agencies for the purposes of section 81(1)(a), so I am glad that I am able to clarify that, as well. The other thing that Mr Mallard raised was around defining “departmental expenses”, and whether we need to do that. There are a couple—

💬 Hon Trevor Mallard: “Departmental”.

That is right—“departmental expenses”, and the reason that we need to do that. There are a couple of things. We want to be more explicit about chief executive responsibilities for departmental, versus non-departmental, expenses. That is the first reason. The second thing that I wanted to make clear is that “departmental” and “non-departmental” are mutually exclusive. The third point is that the terms are used throughout the bill, and not everybody who is reading that bill will necessarily have the experience that that member has in terms of that difference between “non-departmental” and “departmental”. So I am very, very pleased to be listening so intently to the Opposition speakers. But I want to make this point about why we are here. We are actually here to create greater flexibility in terms of our public sector, so that we can focus on outcomes.

I want to finish with one quote by a member opposite, because I think it was the best quote that we heard tonight. It was a speech by David Cunliffe. It was a great quote. Compared with some of his colleagues who focused on very technical issues, he said “We need to do more with possibly a little bit more, but even less.”, and I felt that that is a seismic shift in New Zealand politics. It is a seismic shift from the Opposition. I am delighted that members opposite have now supported our policy in terms of public sector reform.

Well, I am very glad that the Hon David Cunliffe made the earth move for the Minister. That brings me to capital expenditure incurred in emergencies, some of which will be seismic.

Clause 127 of the State Sector and Public Finance Reform Bill repeals section 23 of the Public Finance Act, then the next clause amends section 24, and then we jump to inserting new section 25A after section 25. On that order, it seems that we are not repealing the existing section 25; we are just inserting a new section 25A after section 25. I thought, well, why are we doing this? I thought that maybe this is arising out of the Canterbury earthquakes, because now new section 25A says: “Capital injections may be made in emergencies … The Minister may approve a capital injection to meet an emergency or disaster described in section 25(1).” So I went and looked up section 25(1). It says: “This section applies if—(a) a state of emergency or state of civil defence emergency is declared under the Civil Defence Act 1983 or the Civil Defence Emergency Management Act 2002; or (b) a situation occurs that affects the public health or safety of New Zealand or any part of New Zealand that the Government declares to be an emergency.” So I thought, yes, I could see where those capital injections that can be made in emergencies could be authorised under new section 25A.

But then I saw that under section 25(2), the Minister can already do something very similar. Under section 25(2) of the existing Public Finance Act, which is not being repealed by this bill, “The Minister may approve expenses or capital expenditure to be incurred to meet the emergency or disaster and, whether or not there is an appropriation by Parliament available for the purpose and despite [some other sections] the … capital expenditure may be incurred accordingly.” Then section 25 goes on to say that if it has not been appropriated in advance, then, under subsection (5), that amount has to be included in the annual financial statements and in an Appropriation Bill for confirmation. So you can do it in the interim, but eventually the appropriation has got to be confirmed by Parliament.

That is already allowed for under section 25, and I would like some clarification. I am sure there is a proper reason as to why we need the new section 25A, inserted by clause 129, in addition, but it seems to me to be very close to the situation that is already covered by section 25, which already allows appropriations for capital expenditure in those emergency situations. So to the Minister in the chair, the Minister for Food Safety, I would ask her to explain why it is that the new section 25A extension to the sorts of capital injections in emergencies is necessary, because it seems to me that it is pretty well covered already by section 25 in the existing Act.

This is just following on the theme that the Hon Trevor Mallard has raised as to why it is that we sometimes overcomplicate legislation. I thought the point that he was making earlier was that if you have already defined “department”, why do you have to define “departmental”, because “departmental” obviously refers to a department. That was the point that he was making. Perhaps the Minister in the chair, the Minister for the Environment, could address that because I am not sure that the previous Minister in the chair, the Minister for Food Safety, quite got the essence of my colleague Trevor Mallard’s point in that regard.

The other point I would like clarification on is in respect of strategic intentions. Sections 38 to 41 of the existing Public Finance Act are being replaced. They are being replaced, in clause 136, with a new section 38, which refers to strategic intentions, whereas previously the departments had to provide information on future operating intentions. I am not sure whether this is because the Government has formed the view that the information that departments have been providing on their future operating intentions has become so detailed or so general as to not be strategic, and whether, either because it is too detailed or it is too superficial, the Government does not think the existing information being provided is strategic enough. But in the new wording the point of difference seems to be that instead of providing information on future operating intentions, the departments have now got to provide information on strategic intentions.

In terms of the timing of that information, the Minister can at any time require the department responsible to that Minister to provide new information on strategic intentions. I can see a number of areas where that would be necessary in the current Government, given its failure to meet election promises that were made to the electorate, which it must be feeling at risk about in terms of future voting intentions.

💬 John Hayes: That’s not true.

“That’s not true.”, says John Hayes. Well, I would like to list a few examples: “Wave Goodbye to Higher Taxes. Not Your Loved Ones.” Remember that one?

💬 David Bennett: Oh, come on.

“Come on.”—you do not like being held to account for your promises, do you? That was one of your election promises. Mr Chairman, sorry. I did not mean to—the member for Hamilton—

💬 David Bennett: Name one.

I will name you more than one, not just the promise to halt the people going to Australia. To halt the reason for them leaving, National said it was going to overcome the wage gap. It was going to deal to the wage gap. What has happened since? It has grown—it has grown. So I would have thought that Ministers who were up to their game would be revising the strategic intentions for their department so that they do a bit better in that regard, because until now it has been an abject failure. I mean, this Government talks about introducing national standards for schools, but maybe instead of strategic intentions being the topic here, it should actually introduce some standards for itself, including being held to account for its election promises.

There was another area of strategic intention that Bill English used to talk about. He came to power saying he was going to rebalance the economy towards exports. Exports as a percentage of GDP are flat. They are flat and, indeed, this year they may go down as a percentage of GDP. Another strategic area of failure—and I can see how it might be more meaningful for members of the public. Instead of requiring more information on strategic intentions for the department, it might be more useful for the public to have some report on whether the strategic objectives of the Government as promised prior to the election were being met by actual outcomes in New Zealand. So I wonder why it is that the Government has moved from information on future operating intentions to strategic intentions.

It is interesting that once these strategic intentions are produced, a department must, as soon as practicable after providing the information to its responsible Minister, publish the information on an internet site maintained by, or on behalf of, the department. That is provided in the new section 39, which is also inserted as part of this clause 136. So clause 136 does not just insert a new section 38; it also inserts a new section 39, which says that these things have to be put up on a website as soon as practicable, except if there is a Budget coming up. Then, if the Government wants to keep it secret during that period, in the 3 months before the Minister delivers a Budget, that department must not publish the information. When I say “information”, that means the strategic intentions that the department is identifying, perhaps after the Minister has asked it to change them.

I was very interested in the Minister for Food Safety’s contribution a short time ago on this part of the State Sector and Public Finance Reform Bill. She did say that she was going to address the questions that had been raised by the Opposition speakers, but she declined to actually answer the fundamental question that I had posed earlier about seeking an absolute assurance from the Minister in the chair, the Minister for the Environment, that we would be able to compare estimates from year to year by comparing apples with apples, even though in this part of the bill we were changing the way that those estimates were going to be brought down. I still would like to hear an assurance from the Minister in the chair about that issue, because I think that is fundamentally important.

It is worrying to me, and of some concern, that we have members in the Chamber from the Government who are here and who sit on the Finance and Expenditure Committee but do not seem interested in taking a call in the debate around how we are amending the Public Finance Act. I really did expect that we would hear them getting up to defend these amendments and these changes, but there has been nothing thus far. Hopefully, that will change quite soon.

The part that I want to address of the amendments in Part 2 of this bill where the Public Finance Act is being amended is the part that refers to the frequency of statements of intent from various departments coming forward. I happen to have here, actually, a copy of a statement of intent so that people can understand what sort of document we are talking about. This one is actually from the Accident Compensation Corporation. I happen to have it with me in the Chamber. I was just perusing it for the vote estimates that we will be looking at, hopefully some time tomorrow, in our select committee. Of course, we are meeting outside the hours of urgency, as is right and proper. They are documents that do actually inform the Government and therefore the public of what the department’s—in this case it is a corporation, the Accident Compensation Corporation—priorities are for the forthcoming year. The amendment that this bill brings forward is actually to move that, where there has been an annual requirement for it, to just a 3-yearly requirement. I note that the select committee was concerned about that, and quite rightly raised issues around moving to just a 3-yearly requirement of statements of intent, and what that means for incoming Governments.

I think we on this side of the Chamber have a particular interest in this because we do intend to be the next incoming Government. If statements of intent were there and were binding for 3 years, then that may actually curtail the ability of an incoming Government and an incoming Minister to implement policy that they have been elected on. It might curtail their ability to actually make a quick amendment to things that they did not approve of that were in, for example, the Accident Compensation Corporation’s statement of intent, or that of any of the other departments. So the select committee quite rightly raised that and did come to an amendment of the amendment, if you like, to give the Minister the right to require a statement of intent to be brought in between that 3-yearly requirement. I think that is right and proper. It might not even be a change in Government; it actually might be a change in Minister, who comes forward from within the same Government. And we have seen that, where Ministers have, you know, maybe slightly different priorities that they want to promote.

Again, I will not take too much of your time, but I will take the opportunity—

The CHAIRPERSON (H V Ross Robertson): I am sure you will take 5 minutes, Mr O’Connor.

No, no. I will take the opportunity to speak on Part 2 of the State Sector and Public Finance Reform Bill. There are couple of issues here that I would like to refer to in particular, and they are the presenting and publishing of departmental annual reports and the issue of responsibility of directors—responsibility for, and administration and the use of, appropriations. I must refer, I guess, to my portfolio area of responsibility of primary industries. I have been studying the reports of the Government in this area for 4 years now. I am assuming that the responsibility here as stated is that these must be accurate. I think it is: “We consider this desirable to allow whole-sector or cross-agency reporting.” The Finance and Expenditure Committee has clearly said that it wants clear and accurate reporting.

If I can take the Ministry of Agriculture and Forestry as an example—and I know that has now been merged into a new superministry—there was one particular issue there on rural proofing, which was a policy introduced by the last Labour Government. It was to ensure that in every area of Government policy there was to be consideration of the effect on rural communities. In fact, a template had been developed, and the Ministry of Agriculture and Forestry and the rural affairs unit, it was kind of assumed, were responsible for ensuring the implementation of that. In fact, the annual report stated that. But it was not happening—it was not happening. And, of course, only through the select committee process—a relatively brief period—did we have the ability to ask the Minister and officials why it was not happening. Indeed, what often happened was that other issues overtook the investigation into this area. So what I am hoping that this bill will demand of Government agencies is not only reporting but accurate reporting. The issue I referred to in the debate on Part 1 is about, I guess, the accountability of the chief executive officer or the Minister, and who should take what responsibility. So I raise that as one of the points.

The second one—in fact, I had referred to two before, but there is one other one—is the authority to lend money. Can I refer to the current situation of the Ministry for Primary Industries, which is that it has a grand scheme called the Primary Growth Partnership. The Minister has indicated that $600 million - plus will be allocated on a basically one-for-one system, where the taxpayer will put up over $300 million and the industry will put up over $300 million. It will get on with projects that have, no doubt—we have been told—been scrutinised. What we have not been told is how they are accountable.

The question I ask is—and there is no authority to lend money in Part 2 here—if the money that was allocated to a project is deemed not to have delivered, is there a requirement to repay, and could that be considered loaned money? It is a technical question, but the bill is technical. If an agency like the Ministry for Primary Industries does not have the authority to lend money, and it allocates money—and we are talking tens, if not hundreds, of millions of dollars—to a project that has a joint-venture arrangement, is that appropriation or allocation deemed a gift, or is it a loan? Is there any requirement for the money to be repaid if there is no delivery on the key performance indicators or the projected outcomes? At this particular point there are a few projects that have been running half their lives, and there is not one substantive narrative report on progress—

💬 Hon Trevor Mallard: “Narrah-tive”.

Narrative—sorry. Thank you for that, Mr Mallard. There is not one substantive narrative report on the progress of the Primary Growth Partnership. So if, indeed, the select committee, Audit New Zealand, or anyone deems these projects to have been a failure, will that money have to be repaid, and will that therefore mean that the lend money, or the requirements and provisions that are in this Part 2 for an authority to lend money, should have taken account of that possible scenario?

The next part I will go on to—and, hopefully, the Minister will answer a few of these questions—is the responsibility of directors. There is a good lesson in here. Although the directors of Crown entities are different from the directors of State-owned enterprises, basically, they have the same moral responsibility—that is, to return to the taxpayers. But I am not quite sure whether these provisions here mirror those of the State-owned enterprises. We have had a classic example in Solid Energy, which is a State-owned enterprise, not a Crown entity, but none the less is owned by the taxpayer and is returning to the taxpayer, hopefully, returns on their investment and efforts and dividends. There was a clear—in my view—failure of the directors of that company to keep it in order.

What we have in the commentary regarding clause 92 is: “The intention of this clause is to allow directors of companies listed in Schedule 4A of the Act to act in certain circumstances in the best interests of shareholders, rather than in the best interests of the company.” I guess a State-owned enterprise would act in the best interests of the company, and this is saying, I assume, that directors should always act in the best interests of the shareholders. It is one and the same if the Crown owns the company, although we appreciate that with the idiotic sell-down of State-owned enterprises by this Government, it is determined to hand 49 percent of State-owned enterprises into the hands of wealthy New Zealanders who can afford to buy a whole lot of shares or, worse still, as we know, into the hands of a whole lot of offshore investors. That is a difference of the State-owned enterprises. There are, however, some Crown entities—and I am not sure, but I am told, that AsureQuality is a State-owned enterprise, and that is one that has done a deal with the Chinese. But I will not carry on, as I know this will be slightly out of the scope of the bill. I will stay within it. So the responsibility here is clearly to the shareholders, as it should be, rather than to the company as an entity. Well, that is the way I read it. Indeed, it is refreshing, and it is something we should perhaps apply to the State-owned enterprises as well. I think that there are some interpretation issues there, and I guess that the select committee has gone through that.

I do not have too much more to say on Part 2 of the bill other than to re-emphasise and repeat the questions that I have raised, of course, around the accuracy of reporting on the departmental annual reports. They are generally glossy. Most people do not read the detail often, but, indeed, it could be said that too often the reports are inaccurate.

The second point, as I said, was the authority to lend money. If money is appropriated or handed over or allocated to projects, then is there a requirement for that money to be repaid? I am suggesting that with the Primary Growth Partnership there is probably not a requirement for it to be repaid. I am hoping that this particular clause, or this part of the bill, does not eliminate the possibility that money could be repaid, as a loan would be, if there are not the outcomes as laid down in the proposal that might have been accepted by officials. It is not terribly complex, just a point about basic accountability. I have to say that with the Primary Growth Partnership there is a lot to be learnt and a lot to be explained, and, indeed, there may be a lot of money to be repaid if, in fact, those projects have not delivered on what they said they would.

I have got lots of dog-eared corners of this State Sector and Public Finance Reform Bill, but there is a particular issue that I would like to start with and that is on page 69 of Supplementary Order Paper 262, about 10 lines from the bottom, at new section 34(1)(b), clause 65B, where it says “by the Minister or the responsible Minister.” The question I have got is whether the words “the Minister or” are, in fact, superfluous. Do we need to have “the Minister or the responsible Minister.”? If one goes back to page 63 of Supplementary Order Paper 262, at subclause 5 of clause 59, “responsible Minister” means in relation to the Office of the Clerk, etc., or the Speaker; in relation to any other department, the Minister for the time being responsible; in relation to a Schedule 4 organisation, the Minister responsible for the financial performance; and in relation to a Schedule 4A organisation, the Minister and the other shareholding Minister. The question I have got is who the Minister could be who is not the responsible Minister, except if one goes further into Supplementary Order Paper 262 to page 127, where you might have a Minister other than the responsible Minister who is responsible for a big report, and this part of the reporting requirements are part of a bigger report, and therefore the Minister who is not the responsible Minister is, in fact, the Minister responsible for the report that this particular segment is part of.

I think that at least the officials know relatively well that Ministers act for other Ministers. That is part of the parliamentary process. Ministers can act for other Ministers and can act for responsible Ministers in fulfilling both their parliamentary and their statutory functions. The question I have is—and it might be a bit pedantic, and there might be a very simple answer for it that is passing me by—going back to that original point: who might be the Minister who is not the responsible Minister who is being referred to in that particular clause? I cannot think of a circumstance, and I have been going back and forth a bit. I have been worrying at it now for about 20 minutes. I cannot work it out. I do not want to call it a non-responsible Minister, because I think having the words “the Minister” indicates that it is, in fact, the Minister who is responsible. But then why do we say “or the responsible Minister.”? Is it belt and braces, or does it have a particular meaning that adds some value to it?

I do want to say to the current Minister in the chair, the Minister for the Environment, that the previous Minister in the chair, Nikki Kaye, was most helpful with some of the explanations that she gave on these technical points.

💬 Hon David Cunliffe: That’s right.

She was quite good at reading out the responses that were given to her by the officials behind her. She did not know the name of the actual bill, but that did not matter that much. I would be interested in a response from the Minister on this. In fact, I would be interested in a response from any Government member. I think we could have a bit of an exemption if Mr Ryall, who used to be responsible for these areas, is across the detail about the difference between “the Minister” and “the responsible Minister”, and the added value. In fact, I would be prepared to wager quite a lot that he would be more across it than the current Minister in charge of the bill or the Minister who is currently sitting in the chair. If anyone knew the difference between “the Minister” and “the responsible Minister” in this particular context, I would say, other than the officials, it is likely to be Mr Ryall.

The next question I would like to ask is whether anything should be read into the last couple of lines on page 117 of Supplementary Order Paper 262, where there appears to be an exclusion for “an intelligence and security department”. The question that goes with that is whether “an intelligence and security department” is defined within this legislation. I have been looking for it, and I cannot find a definition of “an intelligence and security department”. I think the one thing we have learnt in recent weeks is that there has been a bit of bouncing around as to what these different agencies do and how they work and interrelate with each other.

Is, for example, the Ministry of Defence an intelligence or security department for the purposes of this Act? Do we still have a Defence Force as opposed to a Ministry of Defence? Is the Defence Force a security or intelligence department? [Interruption] Is it? Is the Police an intelligence or security department?

💬 John Hayes: It’s in the Act.

It is in the Act? Sorry, I did look for it in the Act. Mr Hayes says it is in the Act. Can you tell me which section of the Act, Mr Hayes? Mr Hayes has grunted that it is in the Act, but he appears not to be able to point out the particular section—

💬 Hon David Cunliffe: Which Act?

Well, I assume it is in the Public Finance Act. That is the Act to which we are currently referring. If it is, that is good; if it is not, or if there is something—just forgive me for being suspicious. I think there are a number of things that used to be above the radar and used to be pretty clearly legal or illegal, and now they are being blurred. What appears to be the case here is that expenditure, which should previously have been transparent, is, in fact, becoming less transparent under the Act.

The next question I would like to ask goes to page 80 of Supplementary Order Paper 262 and the replacement of section 65K of the existing Act. That is the very old one: “The Crown must not lend money except under statute.” I want to say that when I was Minister of Education, one of the things that used to drive me spare was schools that got into trouble for either borrowing or lending when they did not have the authority to do it. It happened all over the place. They were borrowing and lending money. One of the questions I have got, in fact, is whether schools have actually had the legal authority to lend money from their boards of trustees’ operational funds to teachers who have not been paid by Novopay. I am just going to venture a guess, unless there has been a change in the legislation—I think that in the time I was the Minister of Education, they would not have been permitted to lend money in that way.

What I would like to ask is which Acts are being referred to in new section 65K? Is there any intention of doing a list or a cross-reference? It is all very well to say unless “expressly authorised by any Act, the Crown [shall] lend money to a person or an organisation.” Actually, if some lending occurs, it is pretty hard, on a random basis, to work out the authority for that lending if, in fact, there is not the sort of decent listing and cross-referencing that is normally the case.

Something that I do very much support is clause 70AAG, set out on Supplementary Order Paper 262, which is the Auditor-General directing “Ministers to report to House of Representatives in cases involving unlawful expenses, etc”. I have some experience in this area. I had the unfortunate experience, back when I was the member for Hamilton West, of chairing the Māori Affairs Committee when we were doing “the supplementary estimates to the supplementary estimates to the supplement to the supplement to the supplement”—I think we had about seven levels of it. I get a slightly knowing nod from the officials’ bench as to the problems—

This is the first opportunity I have had to take a call on the State Sector and Public Finance Reform Bill. I am happy to make a few observations about these particular clauses in Part 2 of the bill that deal with financial reporting for Government agencies. There are a few points of clarification that I would like to seek on these matters as well, not having been involved in the Finance and Expenditure Committee deliberations on this bill.

It is clear that one of the things that the bill seeks to achieve is a more connected and joined-up Public Service, to break down some of the silo mentality that exists within the Public Service at the moment. I think that is a worthy aim and it is something that we in the Labour Party are very, very supportive of. But one of the tensions with that has always been that, ultimately, under the existing arrangements with public finance, in particular, the chief executive is going to be the person who is responsible for how public agency money, public money, taxpayer money, is spent. Under this legislation that we are debating at the moment, where we are talking about specifying the financial responsibilities of departmental chief executives to make it clear that they include financial stewardship for the long term—so that is what we are doing in one part—we are saying to the chief executives that we want them to take a long-term view of the financial stewardship of their departments. But then in another area we are making it clear that other departments as well as the one administering the appropriation can incur expenses against the appropriation. It sort of highlights the tension that we have.

In order to get a more connected and joined-up Public Service and to get the agencies working more closely together, to some extent we have to erode the autonomy of an individual chief executive over the way their department spends its money, yet we are still going to be holding that chief executive to account. They are still going to be the person who comes along to the financial review process at a select committee to explain how that agency or department has spent its money. There are going to need to be some pretty clear controls in place here, because different chief executives and different agencies may also be getting slightly conflicting priorities or conflicting directives from the Ministers for whom they work. One of the things that I think we risk here—and it is certainly not an insurmountable problem, and I am supportive of what the bill is trying to achieve—is just making sure that we make it clear that where one department incurring expenses against an appropriation of another department is doing that, the accountability is quite clear, the lines of decision making are clear, and we can keep track of what is going on there. That flows right the way back up the system to Ministers as well.

Certainly, most large areas of Government expenditure involve several different departments and agencies. If we take education, for example, I can think of several issues that we would deal with in education that would involve the Tertiary Education Commission, the New Zealand Qualifications Authority, and the Ministry of Education, and they would all be working on the same goal. They would all be working towards the same objective and outcome, yet at the moment they are very much defined separately, although there is, I guess, a coordinating role for the Ministry of Education in overseeing the work of the other agencies. [Interruption] There are other agents, and Megan Woods has just pointed out other agencies involved in transitions—Career Services and various agencies like that. We want those agencies working together towards a collective goal. We want the Government to be able to specify that this is the direction it wants to go in in these areas, and that it wants to make sure that they are connected up and that the public finance requirements do not, effectively, act as a barrier to all the agencies working together. Potentially, it is quite possible—well, I certainly think that it is the intention—that the changes being made in this legislation will provide opportunities for that to happen.

Turning back to the accountability issue and the way that accountability information is presented in annual reports, I point out that it is the annual reports, effectively, that form the starting point for Parliament’s scrutiny of how money is spent. When we get together in our select committees and we go over departmental expenditure and we review departments, we look first at the annual reports and then at a whole lot of supporting information that is supplied, usually in relation to quite extensive questions that members of Parliament will ask through that select committee process.

What the changes in this bill before us allow is for annual reports of more than one department to be presented together in one document, where this will provide more meaningful information about the department’s performance and achievements, and it will allow end-of-year reporting on appropriations that contribute to a common purpose but are administered by different departments to be presented in one document. In education, for example, unless I am incorrect, this could mean that we end up with an annual report for education, rather than an annual report for the New Zealand Qualifications Authority, an annual report for the Tertiary Education Commission, and an annual report for the Ministry of Education—unless I am mistaken; some clarification on that would be quite good.

Then what we do is we get to the point where we start to ask whether, you know, at the other end of the process, some of the documents specifying what we want departments to do should also be common. So rather than the Government specifying a statement of intent for all of the different agencies, the Government can then start specifying “This is our statement of intent for education. This is what we are trying to achieve in education.” Then all of the other things that flow from that contribute to that overall directive, and the annual reporting coming back again contributes to that. That is all positive, in my view. I think that is what we want the Public Service—the public sector and all of the agencies—to be doing. We do not want to have them competing with each other, and we do not want the silo mentality. But within that we have still got to make sure that, ultimately, at the end of the day, someone is responsible and accountable back to the House.

In our estimates we get the opportunity to grill Ministers on what it is they want money that is being spent to contribute towards—what are the outcomes that they are trying to seek. We get to grill them a little bit on their plans and on the decisions that they are making—not always successfully, of course; that relies on them providing the answers. Megan Woods has just raised a very good point. In the scrutiny of all of the votes and all of the departments and agencies that we have through the financial review process, we very much rely on there being timely information to the select committee. For example, we start, as I mentioned, from the annual report. That is the starting point for our scrutiny of where departments are spending their money. But we then ask an extensive range of questions. Normally, there will be around 100 or 150 standard questions that go to all departments and agencies, and that is actually where we get the really useful information. Then, from that, there will probably be more supplementary questions that go backwards and forwards—in a small department, not very many; in a controversial or big-spending area like education, health, or social development, there will be a lot of questions.

By getting that information, we are able to give really good scrutiny to what these departments and agencies are doing. If that is not supplied, because Ministers simply do not require their departments to supply that information, the select committee cannot do its job. And too often in this year’s financial review process, we are seeing that happen. We are seeing agencies not supplying information that is being requested by select committees, and even more so in the most recent round of estimates that we have dealt with. Ministers have been asked for a whole lot of information and it has not been supplied to the select committee at the point where Ministers are showing up in order to answer questions about it. How can the Parliament do its job effectively if we are not actually being given the information before the hearings take place?

One of the things that I am concerned about—and I just, I guess, seek some reassurance from the Government about how it is going to handle this—is that in making the information provision more multidepartmental, and stretching the boundaries of that a little bit more, we have still got to have a mechanism to ensure that there is accountability, to ensure that the follow-up information that is requested is actually supplied and is actually provided. It certainly can be done. There is no reason why it cannot be done. We just need to have an assurance that processes will be put in place to allow that to happen.

I am very concerned that we are departing from some pretty well-established processes—just in practice—around the House and around select committees at the moment, and information is not being provided in the timely manner that select committees should reasonably be able to expect. That is of real concern. It is frustrating for us, of course, but it is actually very concerning for the public, because they rely on us, as members of Parliament, to scrutinise Government decision-making, and to scrutinise in a very robust manner where their money is being spent, and we are not getting the information that we should get to allow us to do that effectively.

At this late hour it is a pleasure to take a call on Part 2 of this particular bill, the State Sector and Public Finance Reform Bill. The bit that I want to talk about—

💬 David Bennett: You are really getting to the bottom of the barrel, Cunliffe.

Will the chattering classes be quiet and listen. You might learn something. The risk exists—[Interruption] Those three members there, just be quiet. It is late now, and I know you are tired. You are making noise for nothing. We know you are tired. We know you are tired. Just concentrate—concentrate. Those members sitting at the back have got no mortgage on financial thinking.

I am particularly interested in the new category, the multi-category appropriation, the MCA, and the notion of a single, overarching purpose, because I think there is something quite fundamentally radical about these proposals, particularly as we apply them in the social development area, as I will attempt to do. It is a commendable idea to bring those two things together. Indeed, other members have spoken about—and the Opposition whip just spoke about—the accountability in this. When David Clark was speaking he raised a fundamental question, and he said that it does change the fundamental nature of accountability—just these particular provisions. I agree with him; it does. I wonder how this will unpack itself as we go on.

One reflection one can make is that over the years, or over decades—and I am going to focus and apply this to the social development area—we have increased expenditure in social development, and in every decade problems in social development have increased. We are talking about children, we are talking about families, and we are talking about that sector of our society that, for some reason, multiple generations get locked into. The interpretation that this Government has made is that that is all about welfare dependency, and I do not agree with them, of course.

But here is an approach that could possibly signal that there is something different that the Government anticipates, and if it does, then certainly we support that. But it does present some major challenges to the Government and to those who are considered to run programmes and deliver services in different ministries and departments that contribute to this single, overarching purpose—in this case, social development or development of children. I wonder how the Government has conceptualised this, because here we are in silos, as others have said, and here is an attempt to link the Public Service together and to join it up a little bit more. We have been trying for probably over a decade now to join the Public Service departments together. But here is something conceptually different.

I wonder—and maybe the Minister in the chair, the Minister for the Environment, might want to give us some ideas as to what the thinking was here—whether it is anticipated that there will be a different type of conceptualisation of the overarching purpose that the Government wants to achieve, and if it has anticipated that, then what that might be. [Interruption] They are still chattering in the back there. Obviously, they are not following the argument. Those three are not following the argument, the chattering classes up the back there.

How would the Government conceptualise this? If we applied that to the welfare of children, for example, as a single, overarching purpose—here the Government has decided that there is a single, overarching purpose to increase the development, if you like, of children, to remove risk, etc. We know from all of the science that is available to us that there are multiple contributions to that development pathway, the trajectory that children have, whether it is in housing or in health or in income adequacy or actually in physical environments in which children live—the communities in which they live and the neighbourhoods in which they live. If there was here a single, overarching purpose to improve the outcomes for those children, then one can anticipate that, indeed, those ministries and those departments—the ones I have mentioned and a number of others—are actually going to be doing something quite different. All of the science that I know actually does reflect the fact that the conceptualisation of what contributes to those problems is at multiple levels, is ecological, and is holistic.

So I wonder whether the Minister can tell us that the officials and others have conceptualised this in such a way that there actually will be a different way of doing business, a different way of addressing the needs of children rather than leaving them in silos. At the moment it is just a rough schema stating that there will be multi-agency appropriations and there will be a single, overarching purpose. But what will make that effective, and this will be fascinating to see, is the conceptualisation behind it: how the area that the single, overarching purpose is designed to address has been thought through, whether all of the ministries and departments that have contributed to it have actually done the work to design, if you like, this schema in which they contribute, and then how those services will be delivered.

This comes back to what I was saying earlier. We have poured money down these silos, and, in the end, social exclusion has actually increased. The problems have not gone away. If this is a different way of doing it, then, clearly, there has to be some fundamental change in our education system, in our housing system, in the child welfare system, in the social development system, and in our environmental design and how we design our environments in which our—

💬 Maggie Barry: His speech is as irrelevant as he is.

Will Maggie Barry please listen for a moment, because I doubt whether Maggie Barry is actually following the argument. We are not planting a shrub now at the moment; we are talking about something quite serious. I doubt whether those three members have actually understood at all what this is about. I know that it is late in the evening. Go back to sleep. You will probably be much better off tomorrow morning.

If that thinking has taken place, then I believe that this is indeed quite a radical change. Other speakers from this side have actually already indicated that there is a huge promise in what this model gives us, but to actually deliver it is something quite different. Of course, the other point, and Chris Hipkins was talking about this earlier, is that when the reports come back to the select committees, and the reporting frameworks that are being used—and that is being changed, as well, under Part 2—then we actually have a whole different way in select committees of interrogating the performance of those Ministers and departments that contribute to the overarching purpose.

So really this is a radical change. If it works and if it is well conceptualised, then it will be effective. But if some of the light-minded people who have been interjecting are responsible for actually designing how these things work, then I doubt very much, Mr Bennett, whether any contribution that that member might make is actually going to have any effect on this. God help us if that member becomes a Minister. Some of the others might. But the Ministers have got to be smart enough to demand the kind of conceptual thinking that this very simple change actually requires.

💬 David Bennett: What’s the name of the bill? Tell me the name of the bill.

I beg your pardon?

💬 David Bennett: What’s the name of the bill?

Oh, come on. Does the member think that I am that stupid? Just take something seriously. Do not be an idiot all your life. I do not think that that member remembers the bill, and if that was all that that member required me to understand about this bill, then I think that member is in cuckoo-land. The fundamental clause I am addressing concerns the multi-category appropriations and the single, overarching purpose. If that member has not understood that, then I do not know whether that member has anything useful to say. I challenge those three members on the other side to take a call and explain their understanding of this particular provision in the bill.

💬 David Bennett: Are you voting for the bill?

Come on, go back to sleep—go back to sleep.

There is something quite serious about these provisions, which we support on this side of the Chamber. I think they could fundamentally change the silo thinking that prevails in many Government departments and agencies. The overarching purpose is a very important way of trying to bring it together. If that is the intent of these provisions, then I think it is a very good bill, and we support it. Thank you.

Kia ora, Mr Chair. Kia ora e te Whare. Kia ora koutou. And special greetings to the noisier members over the back there, who seem to be enjoying the proceedings of the evening. I am sure I am not alone in looking forward to their particular contributions later in the debate.

💬 Andrew Little: You’ll be waiting a long time.

I may be waiting a while, says my colleague. They have been remarkably quiet when it comes to their turn to make a constructive contribution, and are more focused on the interjections. I will not claim any high ground there myself, but I would enjoy any contributions.

To come to the substance of the State Sector and Public Finance Reform Bill, lest I be hoisted on my own petard, Mr Chair—

The CHAIRPERSON (Lindsay Tisch): I am listening.

—I wish to discuss the nature of these departmental agencies and the reporting mechanisms that will apply in future, as we see right up front in Part 2. We come straight to the crux of the matter in clause 58A, which says: “In section 1A(2)(d), after ‘departments,’, insert ‘departmental agencies,’.” Then we have a series of other changes that the bill proposes that will be about ensuring that these departmental agencies are more widely considered in the legislation, that other pieces of legislation fall into line, and that those agencies can incur expenses or capital expenditure under the Imprest Supply Act in the same way that a regular department would.

My question, I guess, for the Minister in the chair, the Minister for the Environment—and I know that this Minister is a capable Minister and will probably not shy away from such questions—is about this creation of a new organisational arrangement, called a departmental agency, as an option for providing public services. We are told that such an agency would sit legally within a host department, which would administer the appropriations used by the departmental agency, but the departmental agency would have its own chief executive directly responsible to a Minister for its specific activities. My question really is around how the lines of accountability would then run. It is interesting that these departmental agencies would, presumably, have a different type of accountability; otherwise, there would be no need to create them. This entity is a new type of entity. Is there a hierarchical arrangement here? Is the departmental agency within the department now in some sense, tacitly at least, responsible to the chief executive of the original department? They report directly to a Minister, so one can imagine that if conflicts occurred over the use of building space or the use of meeting rooms—you know, if we pare it back to the basics of everyday departmental life—then solutions would need to be found.

It is not immediately clear to me how this kind of conflict would be addressed or what the real purpose of introducing these new agencies is, unless it is for some decreased level of scrutiny. This Government does have a track record for favouring a decreased level of scrutiny, and the example that springs to mind immediately is the asset sales legislation—

The CHAIRPERSON (Lindsay Tisch): Order!

This is quite on point—

The CHAIRPERSON (Lindsay Tisch): I am listening very carefully.

—and I will bring it back directly. The public becomes concerned when there is a decreased level of scrutiny on public affairs.

As I have stated earlier, in Part 1, and what is set up in Part 1 is actually brought into practice in Part 2, we are striking a balance here in this Parliament with this legislation between accountability on behalf of the members of the public for the spending of money—and that is particularly relevant in the amendments to the Public Finance Act 1989, which we are discussing in Part 2—and the freedom of Ministers to achieve the goals that they wish to achieve, which they have said they are going to achieve, through the employment of those funds in a way that is flexible, so that they are not bound by unnecessary constraints, by constraints that are artificial in their nature, for a reporting requirement that actually does not serve a public purpose. That is a reporting requirement for its own sake that spells something out in detail because that is the way it has always been spelt out, not because someone has taken a fresh look at it and asked the question: “Is this something we need any more? Are we scrutinising things in a way that is in the public interest, or are we scrutinising things in a way that is actually beyond the public interest and actually inhibits departments and their ability to carry things out without the offsetting public benefit of that wider public scrutiny in a way that is meaningful to the wider public?”. So we are trying to strike that balance here.

That cuts to the issue that I was raising about these departmental agencies. I have not heard a convincing argument from that side of the Chamber as to why these departmental agencies should have this specific piece of legislation that separates them out. I expect Mr Hayes will leap to his feet shortly to articulate—

💬 John Hayes: If you’d come to the committee, you’d have found out.

—exactly why these departmental agencies—Mr Hayes says that if I had come to the committee, I would have found out. Well, I was not privileged to sit on the Finance and Expenditure Committee, where this issue was discussed, so I do invite Mr Hayes to share that, if it is within his ken, if he understood the issues at the time and is willing to share them with the wider members of this Committee. I invite him to take a call and explain why these departmental agencies should be created and what advantages they will create for the taxpayer, because I am certain that at some level this Government will be very, very clear that it does want to make sure that money is well spent for the taxpayer. The public at home may not have that impression from watching this, because what they will observe is that members opposite have not really entered into the spirit of the debate. They seem to be content to sit and listen to many members on this side of the Chamber raise important issues.

That said, I must commend the previous Minister in the chair, the Minister for Food Safety, who did take a call and answered some of the questions that were raised. That is an important part of what we are doing here. We need to convince ourselves that this is weighing that balance—which I raised earlier—right, between proper public scrutiny and not being entirely cumbersome on the Government of the day in a way that ties it up in red tape and makes it unable to achieve the purposes it sets out to achieve. We know that this is the right thing to be achieving, and that is why Labour will be supporting this bill. I must reiterate that the balance that has been struck is one that we think is appropriate and is one that makes this bill one that will survive the test of times.

I think, as I mentioned earlier, that the processes laid down here—the accountability mechanisms—although appropriate, cannot inoculate the Government against bad policy. If the Government wants to implement bad policy, this legislation enables it to do that in a more efficient and effective way. One of the earlier contributors to the debate made the very good point that bad Governments will do that anyway; they will implement bad policy come hell or high water. What this legislation really achieves is that it enables Governments that want to implement good policy and do it through proper process to be able to do that in an efficient way. That cuts to the heart of the matter as to why Labour is choosing to support this bill.

One of the other matters I wish to raise in respect of Part 2 is the standardising of the governance and performance reporting requirements for companies currently listed in schedule 4 of the Public Finance Act and proposed to be moved into the new schedule 4A by schedule 2 of the bill. The standardising of performance reporting requirements must on the surface appear to be a good thing. The standardisation of reporting requirements, making them easier and less burdensome, means that these agencies can continue to do their tasks with Crown entities and get on with the tasks that they exist to carry out.

If we look at some of the earlier legislation that was passed here in this session this week, there was the standardisation of the generally accepted accounting practice procedures so that fewer small to medium sized enterprises are required to undergo those onerous requirements—another good step. That is another good step, and we need more of this kind of thing. We know that recently New Zealand slipped from 15th to 24th in the world business competitiveness stake according to the IMD World Competitiveness Center’s survey. We know that New Zealand business is facing tough times. This Government has skewed the playing field against small business. There is a lot of red tape it has introduced—

The CHAIRPERSON (Lindsay Tisch): Order!

—the child support legislation requirements—

The CHAIRPERSON (Lindsay Tisch): That is not part of the bill.

Mr Chair, the point is that that contrasts, as an example, with this piece of legislation. Those areas in which the Government has put a further burden on small business—those businesses are struggling, they are not being created. There are 2,500 fewer a year than there were under Labour. This piece of legislation contrasts with that. This is an attempt to make sure that business can perform better.

Kia ora. E ngā mana, e ngā reo, rau rangatira mā, tēnā koutou, tēnā koutou, tēnā koutou katoa. Ngā mihi ki ngā kaimahi o te Whare Pāremata, tēnā tātou.

[Thank you. To the authorities, languages, and leaders of a hundredfold, greetings, salutations, and acknowledgments to you all. Greetings to the workers of Parliament House and to us collectively.]

It is my pleasure to take a call on Part 2 of the State Sector and Public Finance Reform Bill. I particularly want to commend the Minister of State Services for trying, I think, to make a better Public Service, which is the whole intention of this bill—trying to make a better Public Service that will achieve some objectives such as increasing participation in early childhood education, increasing immunisation rates, decreasing—

The CHAIRPERSON (Lindsay Tisch): Order!

—rheumatic fever rates—

The CHAIRPERSON (Lindsay Tisch): No. Order! That is not part of Part 2, and I will ask the member to concentrate on Part 2. It is about the Public Finance Act. It is not about these other things.

It is about the Public Finance Act, but it is also about establishing a new appropriation type, which is multi-category appropriation. As a member of the Health Committee, I am particularly thrilled about this multi-category appropriation. The Health Committee has before it an inquiry that is looking at improving child health outcomes—

The CHAIRPERSON (Lindsay Tisch): Order!

—and preventing child abuse—

The CHAIRPERSON (Lindsay Tisch): I will say to the member that we are on the Public Finance Act—

We are on Part 2.

The CHAIRPERSON (Lindsay Tisch): We are on the Public Finance Act, Part 2. I ask the member to concentrate on Part 2.

Thank you, Mr Chair. What this part of the legislation is creating is this new multi-category appropriation, which will allow different types of expenditure to be grouped into a single appropriation if they contribute to a single, overarching purpose. I think that was the point that I was trying to make—that, in fact, there are a number of inquiries and some work that this Parliament is currently engaged in that this particular multi-category appropriation is relevant to. Hopefully, with your discretion, Mr Chair, I am able to elaborate on the relevance of that within the current context.

The whole Better Public Services agenda has been driven because we are wanting to achieve more for less, and so I do want to commend the Government for creating opportunities for Ministers to work together. I mean, that is essentially what this new appropriation type is going to allow. It will, in fact, break down silos. It will, in fact, provide opportunities for Ministers to start working together to address issues such as housing, which is a fundamental driver of rheumatic fever. I have made the connection of the relevance of this piece of legislation with the Better Public Services agenda, and from my perspective that is one of the reasons that the Labour Party is supporting this piece of legislation. We want an efficient and effective Public Service that meets the needs of New Zealanders and that particularly and specifically meets the needs of the most vulnerable New Zealanders. In supporting this particular aspect of this piece of legislation, I think it is fair to also highlight my expectations and the expectations as the member of Parliament for the electorate of Manurewa that this type of appropriation has the possibility to—and is, in fact, going to—improve and transform the lives of my constituents.

I would also like to take the opportunity to highlight within Part 2 of the bill the changing of the requirements for information about departments’ strategic intentions, which includes the frequency of that provision. Essentially, we are talking about statements of intent. Those statements of intent currently are an annual requirement of Crown entities, and the purpose of those statements of intent is, I think, relevant to the Committee to note because they very much set the strategic directions of the ministries. They are set by the Minister and are obviously set by the Government, so within that they are very specific about how the Government, the sector, and the entity will achieve certain outcomes. That is very much about setting the expectations and priorities. I think it is fair that all New Zealanders know what the priorities of Ministers are and what the priorities of chief executives are within that context. So the reason I bring it up, and the relevance of that to this part of the legislation, is that that requirement is going to be discretionary, so Ministers will choose whether they—

It is a pleasure to take my first call—it will not be my last call—in the debate on this bill, because it is of real significance. I am aware that we are on Part 2, and Part 2 is what I wish to direct my comments to, but just before I go to that I do want to note the timeliness of this bill, because, of course, there has been a number of celebrations during the course of this year of 100 years of quality public services. This is the same year that the Public Service Association is celebrating its own existence, and we celebrate with it the delivery of quality public services. So when we come to looking at the State Sector and Public Finance Reform Bill, and at this part, which I am going to detail in a moment, it seems to me to be a significant bill—and obviously a very substantial bill—to bring in this year. I hope that because of the nature of the accommodations that have been reached during the course of the select committee process, this bill will be durable and will contribute to the improved delivery of public services.

To get to Part 2, I too want to follow my colleague Louisa Wall and talk about the multi-category appropriation type, which is a new appropriation type to be provided for and enacted under Part 2 of the bill. I am aware that there are amendments to this part that have been agreed to across the House, which include the full traceability of funds from year to year. I want to state my support for this by using an example where that has not been so apparent in recent times, and I want to refer to the appropriation for Whānau Ora.

The Whānau Ora appropriation was a health initiative—in fact, the words say that. It was a health initiative, and one might have thought it would come under the rubric of the Minister of Health, and so might have been examinable through the estimates and appropriations that come before select committees for consideration. But, no, when the Minister of Health appeared before the Health Committee to justify health appropriations in the last few years, he was unable—or unwilling, really, but had made himself deliberately unable—to offer transparency around the appropriation of Government moneys for the delivery of the Whānau Ora programme. So we were not able to examine the Minister who was best qualified to know whether this health initiative was achieving health outcomes.

My concern is not that the appropriation was handed over by that Minister there, the Minister of Health, to Te Puni Kōkiri and the Minister of Māori Affairs to answer to, but that it was taken away from the transparency that needed to be delivered to the purpose for which that appropriation was established. In the setting up of a new appropriation type, to be called a multi-category appropriation, I hope that this means, together with the agreed amendment that will require full traceability of funds from year to year, that if any appropriation—let us take the example—for health purposes is to be diverted out of the jurisdiction, if you like, the care, or the oversight of the Minister of Health to somebody else, then that is entirely traceable by cross-referencing, by calling it a multi-category appropriation, and by ensuring that the numbers of Ministers who are responsible for that appropriation are able to come before a select committee for examination and that the essential scrutiny can be applied.

What has happened, if I go back to my Whānau Ora appropriation example—which is an example of bad practice, I think, not best practice—is that nobody seems to be able to find what precisely has been done with the money that was appropriated. I would have thought that Mr Ryall, as Minister of Health, could easily come in before a select committee—a man of his ability—and said: “This is what has happened with the Whānau Ora money. We have done it jointly with Te Puni Kōkiri, but it is a health initiative, so it sits under my portfolio.”

If such things are to happen, and a health appropriation is to go somewhere else, let us use this facility that this part of the bill now gives us and call it a multi-category appropriation, so that it may go across departments, across ministries, and across purposes—not at cross purposes, but across purposes—but, at the same time, the appropriation and the accountability for it remain entirely transparent and accountable. That is what a good Public Finance Act ought to deliver. That is the quality that our State servants, despite their battering over the last 5 years, wish to provide for the citizens of this country. If this bill can help us deliver that kind of accountability and transparency across increasingly complex areas of activity by the State, then that is a good thing. But let us make sure that that is what happens to this provision.

I absolutely respect the good intentions of the members opposite, and I respect the fact that members on the Finance and Expenditure Committee have agreed on improvements to this bill. Having been very, very involved—not as a member of Parliament but as a very interested citizen and activist—in the development of the first State Sector Act in 1986, and, in fact, having written the Labour Party’s paper in opposition to it, I have a real interest in how these kinds of services are delivered. The integrity of our Public Service structures are critically important to the quality of our Government, the quality of our accountable apparatus, the quality of the transparency of that apparatus, and our reputation for governance and transparency. We have a very fine reputation for that. It is my hope that this new appropriation type, the multi-category appropriation type, can be used to ensure that this Public Finance Act, now amended for modern times, will deliver exactly the kind of transparency and accountability that a complex piece of legislation like this and the complex operation of the delivery of State services require in a modern society.

I am very supportive of this. I have great optimism for this part of the bill, and I hope that we can proceed with this in a way that in the end can make us all proud of the Public Finance Act and the delivery of State services under its jurisdiction. Thank you.

Tēnā koe, Mr Chair. It is a pleasure to speak at this Committee stage on Part 2 of the State Sector and Public Finance Reform Bill. I would like to start with a verse from a rap from Vincent Price: “Darkness falls across the land. The midnight hour is close at hand.” You might know the rest, Mr Bennett. But maybe not; maybe he was not into Michael Jackson. Maybe he might know another one. But the midnight hour is close at hand. I shall make my contribution on Part 2 because this is a very important piece of legislation.

The Public Finance Act is a key piece of legislation that governs the use of public financial resources. It provides the framework by which Parliament gives its authorisation and scrutiny of Government expenditure. It establishes the lines of responsibility for effective and efficient management of the use of public financial resources, and it does many other things. It is a very core piece of legislation governing the use of public resources.

I want to pick up from my colleague the Hon Maryan Street regarding her comments around multi-category appropriations. They are commendable because anyone who has spent a bit of time or worked within Government departments or agencies knows that they are very much patch protectors. They very much sort of keep to themselves. They very much like to spend their money or try to get the money spent by the end of the financial year, and there are not necessarily those sorts of close relationships with other departments, particularly when there is a common outcome that they should be working towards. So it is commendable that there are now provisions provided for in this bill that there be multi-category appropriations, which are across multiple categories, to allow different types of expenditure to be grouped into a single appropriation. That is a very laudable aim.

The bill also makes it clear that other departments as well as the one administering an appropriation can incur expenses against the appropriation. We see that a lot in the Ministry of Māori Development appropriation. There are a multitude of different agencies and Government entities and all sorts that are involved in Māori affairs, as my colleague touched on with the Whānau Ora situation. We could rattle off a whole host of other organisations that are involved with Te Puni Kōkiri, Māori affairs, or contracts between various agencies or Crown entities to provide outcomes. So there is a whole multitude of different relationships that they have, and it is important that they get better structure and more financial discipline around the way that they conduct their affairs, and that they also report on their outcomes. So those are very commendable aims in Part 2.

The bill is also allowing the annual reports of Government to be presented together.

Debate interrupted.

Sitting suspended from 12 midnight to 9 a.m. (Thursday)