Public Finance (Sustainable Development Indicators) Amendment Bill

I move, That the Public Finance (Sustainable Development Indicators) Amendment Bill be now read a first time. I nominate the Finance and Expenditure Committee to consider the bill. The saying goes that what gets measured gets managed. The purpose of this bill is to complement a traditional measure—gross domestic product—that has become highly synonymous with success with a series of other complementary measures to give ourselves a better picture of the health and wealth of our country. Gross domestic product is, shall we say, a highly problematic measure of success. It captures very little of what we value in life. It is a poor measure of well-being and, as The Economist magazine says, it is not even a reliable gauge of production.

This bill will bring some pretty uncontroversial environmental measures like air and water quality into the Public Finance Act and ensure that they are reported on regularly and are counted alongside more traditional fiscal and economic measures. The bill also requires the Minister of Finance to present the ecological footprint of New Zealand and the Human Development Index to the House of Representatives in relation to each financial year.

Before I expand on my comments in relation to the bill, I would like to acknowledge my colleague Dr Kennedy Graham. This bill was originally drafted by Dr Graham 6 years ago. He consulted widely with a vast network of contacts overseas as well as here in New Zealand, and he rewrote it a number of times based on submissions that he was receiving in the drafting phase. We hope that this can be voted on on a non-partisan basis and improved, in a similar light, through the select committee process.

Dr Graham did choose a set of indicators—as you have to if you are drafting something like this—that was based on an ecological footprint approach run by the World Resources Institute, but I want to acknowledge that there are a number of different systems that we could be using in relation to this. This is why we are asking for the House to send it to select committee, so that we can receive submissions and hear from businesses and academics and non-governmental organisations that are experienced at using sustainable development indicators in their work as to what the final shape of this bill should look like. So we are asking for the House to send it to the Finance and Expenditure Committee because it directly affects the Public Finance Act, and, obviously, the Finance and Expenditure Committee is responsible for that and it affects the nature of the work of the Minister of Finance.

The Minister of Finance will have responsibility for these new indicators, and I would like to lead an open and non-partisan process to take what we are starting here and make it suitable for a cross-party coalition. Yesterday, for example, the OECD presented us with another set of indicators. It has been doing some fantastic work on the effects of pollution and the running down of finite resources on gross domestic product, for example, in a way that we do not yet understand here. Treasury has been working for several years on a Living Standards Framework. That work is well advanced but has stalled, and so on. So we think that there is a decent body of work that we can draw on.

My career started in earnest at PricewaterhouseCoopers (PwC) in London, and my primary role there was to help to start the sustainable business services line. At the core of that was the proposition that we were offering to other businesses, other clients, on how to report on not just the financial health and well-being but a more balanced scorecard of the businesses’ state of affairs. That work was reasonably well advanced in the late 1990s, which is when I came to it. At that time, in the late 1990s, there were only a few large corporates like Shell that were actually using sustainable development indicators in part of their corporate reporting process. Each of the large consulting firms had their own proprietary systems for measuring this, which we felt was an absurd state of affairs, because it is not like each of the large firms had different accounting standards to measure the financial state of the firms. There was, obviously, a generally accepted set of accounting principles in the UK and around the world. So what we did was we got PwC and the other firms together with a series of non-governmental organisations and leading academic institutions into something called the Global Reporting Initiative.

The Global Reporting Initiative is now in about its 20th year. Its set of indicators that it has developed for how large companies are able to report on the impact that they have on the environment and on communities and on their workforce, alongside their financial stocks and flows—that work is now well progressed, and, in fact, very, very mainstream in the corporate reporting world. So in that sense what we are doing here with this bill is taking something that is well advanced in global corporate reporting and simply importing it in principle into how the Government would think about its own finances.

Many of the indicators and the data points that we are suggesting in this bill are already being gathered by the Ministry for the Environment (MFE), by Statistics New Zealand, and by other organisations. So people have asked me—given that MFE, for example, does gather some of this information already—why it should be imported into the Public Finance Act, and why the Minister of Finance should be given specific responsibility for reporting on New Zealand’s ecological stocks and flows alongside our financial stocks and flows. That is actually precisely the point. The Minister of Finance currently presents a fairly narrow sort of set of information that we tend to assume forms a view of the health and well-being of the country as a whole, but actually it is only a partial picture. Importing some of that information into the Public Finance Act and giving specific responsibilities to the Minister does mean that they build up a much more varied and nuanced view of how the country is going.

There are other countries that have shown quite a lot of leadership in questioning the overriding focus on gross domestic product alone as a measure of success. In 2004, China began adjusting gross domestic product for pollution, subtracting the damage that economic growth was doing to its air, its water, and its land, and, in that year alone, environmental damage, had it been accounted for, would have knocked 3 percent off China’s gross domestic product. The OECD found in 2006 that gross domestic product per capita remains critical for any assessment of well-being, but needs to be complemented with other measures to get a comprehensive picture of well-being. In 2008, the United States Government began funding the State of the USA project, designed to create a key national indicator system, following a period of rising GDP but, at the same time, falling personal incomes in the early 2000s.

In 2010, the United Kingdom, under David Cameron’s leadership, began to survey happiness alongside gross domestic product. The President of France, Nicolas Sarkozy, established a commission led by former chief economist of the World Bank Joseph Stiglitz to reconsider the way that prosperity is measured in France. They found that “new political narratives are necessary to identify where our societies should go”, and recommended a dashboard of measures to capture human welfare. Finally, The Economist magazine—that bastion of economic orthodoxy—came out last year saying that gross domestic product is increasingly a poor measure of prosperity, and it is not even a reliable gauge of production, given the major technological changes that have happened to our economy since gross domestic product was invented.

Our singular focus on GDP is distracting us from focusing on what really matters in life, and so I would like to end by quoting Robert F Kennedy, former senator of the United States of America in 1968. He was referring to gross national product, the predecessor of GDP. He said: “Our gross national product, now, is over $800 billion a year, but that gross national product—if we judge the United States of America by that—that gross national product counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwood and the loss of our natural wonder in the chaotic sprawl. It includes napalm and counts nuclear warheads and armoured cars for the police to fight the riots in our cities. … It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile.” And so with that, I commend this bill to the House.

Can I firstly just start by congratulating James Shaw on having this bill pulled from the ballot, and also Dr Graham on his bill. It is a good feeling, and I want to acknowledge the hard work. It is pretty obvious from reading the prefatory notes to the bill and the explanatory note that a lot of work has gone in over a long period of time. I know that it makes reference to the “Sarkozy Commission”, which was a while ago, although he had another tilt recently—it did not work out that well. But I just want to acknowledge the hard work.

Let me start at the outset of this speech, responding with the first speech for the Government, by saying that I agree that GDP is a flawed measurement of a country’s progress. I think that is broadly acknowledged now—

💬 Ron Mark: Stop using it, then.

—and, actually, Mr Shaw made mention of lots of different—Mr Tabuteau, “the Professor”, says: “Well, stop using it, then.” I am about to come to why—

💬 Ron Mark: No, he didn’t. I did.

Oh, sorry, it was that noted economic scholar Ron Mark. I am about to come to why we continue to use it. I think that is broadly acknowledged. Mr Shaw made mention of The Economist magazine and lots of other august international institutions, and, actually, the New Zealand Government itself recognises that. Treasury, for the last few years, has been developing the Living Standards Framework, which the boffins and people involved in that area get very excited about. I think it is sort of Economics 101, for the reasons that Mr Shaw said. You know, if there is an earthquake in a town and you rebuild the town, like what happened in Christchurch, GDP goes up, but have you actually improved the quality of life? Well, obviously not, because you have had a town destroyed and you have to rebuild it. At least, when you look at the numbers, it looks like things are getting better, but obviously you are just replacing lost wealth. You are replacing lost stock and lost GDP.

The reason we keep using GDP is that it is hard to find alternatives that encapsulate as much as GDP does. You can admit that GDP is a flawed mechanism, but you can also accept that it is something that has use and has value, and that is why, as a Government—that is why Governments around the world continue to use GDP.

Let me advance three reasons why I think this bill should fail tonight, and I want to advise the House that the National Party will be voting against it. Firstly, I think it is arguably unnecessary, and Mr Shaw actually made reference to a few reasons in his own speech as to why you could say that the bill is unnecessary. The Government actually already measures a lot of the things that Mr Shaw wants to measure. So if you look at schedule 1, which inserts new schedule 8, “National Sustainable Development Indicators”—there are seven indicators and then, I think, 38 across the seven sub-indicators—a lot of the stuff is already measured. We have been having a debate in the last few weeks about water, and there is a whole section, which is clause 4 of new schedule 8, about water indicators. Actually, the Government is strengthening the regime around water-quality testing and water indicators.

There are air and atmosphere indicators, biodiversity indicators, and energy use indicators, for example, in clause 6 of new schedule 8. The Ministry for Business, Innovation and Employment—the former Ministry of Economic Development and, before that, the Ministry of Energy, which has long departed—has regularly published statistics about the total primary energy supply per capita, energy intensity of the economy, and renewable energy as a proportion of total energy supply. That is well measured and has been for a large number of years. It is published in the New Zealand Energy Quarterly each quarter, and it is published in the annual publication put out by the Ministry of Business, Innovation and Employment.

That is before you even start to talk about the Environmental Reporting Act, which Parliament passed in 2015. It came into force last year. It is a very, very robust form of environmental reporting, with the measurements worked out by the Government Statistician and then audited by the Parliamentary Commissioner for the Environment. Actually, that filled a gap in New Zealand’s statistics regime, because New Zealand was the only country, I think, in the OECD to not have a robust, independent, separate environmental reporting regime. We had a bit of debate in the House around how robust it was and whether the Government Statistician should be involved, and things like that. Some members have different views, but I think, broadly, there was consensus that we came to about the right space on that—that it fills a need and that we have done it. We have got the OECD report card as well, which came out, I think, just a couple of days ago—or certainly this week—which measures a lot of the different things that the Green Party and James Shaw want to advise.

The first point is that a lot of this material is captured already, and it is published. Transparency is important, sunlight is the best disinfectant, and all those clichés. It is published. Mr Shaw made mention—he actually admitted all of this, but he said that we need to import it into the Public Finance Act. I have got to say that his reasons for why we need to import it into the Public Finance Act I found less than convincing. So I guess in one sense it puts it all in one space, and I suppose there are some advantages to having it all in one spot so that you can literally pick up a document and say “Here it all is in one space.”, rather than going from website to website and things like that. But that seems a reasonably flimsy reason to do something, I have got to say. So I think this is unnecessary.

The second reason I want to advance is that I do think some of what is being proposed to be included in the Public Finance Act is inappropriate, and I say that for two reasons. One is that there are too many. There are seven indicators with 38 or 39 sub-indicators, and then there are five or six—sorry, 10 principles. That is new schedule 9, inserted by schedule 2, and these are the “National Principles of Sustainable Development”. That is a lot to report on. I know that might sound like a trivial complaint, but, actually, I think when it comes to things like the framework that our public accounts system relies on, the framework by which the Government reports to the Parliament and seeks the appropriation of public money to run the Government, it is important that you keep those things as simple and as clear as possible, and there is just a lot of material. I think it would result in hopelessly confused reports. So that is the first reason about why it is inappropriate.

The second reason is that, in some ways, some of these indicators are really important, but some are, by comparison, trivial. I am not saying that they are unimportant; they are all important. Greenhouse gas intensity, native land cover, lake water quality—those are important but some are more important than others, but they are all treated the same in the bill and they would all be treated the same in the Act. So, for example, is it really true that packaging waste recycling, which is clause 7 of the sustainable development indicators—

💬 Simon O’Connor: Which clause?

Clause 7(3): “Packaging waste recycling.” So it is measuring on an annual basis the amount of packaging waste that is recycled. It is important, but is it really true to say that it is as important as, for example, lake water quality or groundwater quality? I think you could legitimately have a debate about that, but the point is that the bill proposes that they are, essentially, of the same value. I think that in some ways the bill proposes things that are really important and things that are trivial by comparison, and that is why I say that it is therefore inappropriate to have these things in the Public Finance Act.

The third thing that I would say is that I think it does in some ways undermine the purposes of the Public Finance Act. There are some highly political statements in these principles, particularly in the principles—highly political statements that both sides of the House, I think, would contest. And you only need to look at, for example, principle 4 in schedule 9, which is about precaution. There is this quite strange phrase here. I want to read it out: “Rejection of a lack of full scientific certainty as a reason for postponing measures to prevent the environmental degradation or restoration of ecosystems …” Quite apart from using about three negatives in the one phrase, the concept of the precautionary principle is one that is contested.

What this is actually saying is that we should not be too scared about a lack of scientific certainty as a reason for not doing things. Actually, usually it is the Green Party that advances the precautionary principle as a reason for not doing things. It says that the science is not clear on genetic modification, for example, even though we had an entire royal commission back in 2000 set up by the Clark administration to look into that, and it concluded that it was safe with safeguards. But the Greens say that we cannot do it—we cannot let GE into the environment. It says fracking is not safe, even though we had the Parliamentary Commissioner for the Environment do a full investigation. Steffan Browning has turned up, and we have Steffan, who says that homeopathy is something that we should do as a cure for Ebola, and things like that. So the Greens do not have a great record when it comes to science as a basis for rational public policy.

💬 James Shaw: Oh, yes we do.

I have just named three examples: fracking, genetic modification, and homeopathy. So I think it is highly contested, the idea of precaution, which is in principle 4. For those three reasons, the Government will not be voting for this bill.

I am very pleased to rise and speak in support of the Public Finance (Sustainable Development Indicators) Amendment Bill. In opening my comments I do just want to pay tribute to Mr Shaw and the Green Party for putting this bill forward to the House, because I think it is a bill that focuses us on the future and the kind of country that we want to be. Mr Shaw very aptly made the point that unless we actually identify where we want to go, and unless we start measuring it, we are probably not going to get there, and we are certainly not going to develop the kinds of policies that we need.

Mr Shaw also put forward a quote that I am sure we might hear during other speeches during this debate, but I am going to repeat it. It is one from the great Robert Francis Kennedy: “GDP measures everything except that which makes life worthwhile.” Really, that goes to the core of the purpose of this bill. It is about amending the Public Finance Act, as we have heard, by putting forward sustainable development indicators into it and establishing a set of principles for what sustainable development actually means.

The core of Kennedy’s quote, I think, is very hard to argue against—and I would be surprised if any speaker in this House put forward arguments against it tonight—because what good is GDP if you cannot breathe the air around you? What good is GDP if you cannot swim in the rivers? What good is GDP if you are too scared to set foot outside your house because your community is not safe? What good is GDP if our schools and our hospitals and our community infrastructure are crumbling around us? What good is our GDP if we pass on environmental, social, and other deficits to future generations? What good is GDP if the country that we hand on to our kids and our grandkids is not as clean, is not as sustainable, is not as hopeful, and is not as good, in all of the ways that matter, as the one that we inherited? That is what this bill speaks to. It speaks to it by doing what we do in this House—by looking at legislation, by actually looking at how we make decisions.

I think the key point that Mr Bishop missed in some of his comments—and I want to address a couple of those now—is that what it actually does by putting these indicators into the Public Finance Act is give us a basis for making decisions that are not based just on that crude, simple measure of GDP. Mr Shaw spoke and in all of the notes in support of his bill, there is nothing to say that we should not be measuring GDP, as Mr Bishop suggested at one point; simply to say that that is not a sufficient way of measuring our success as a country. As Mr Shaw said, this is not something that is crazy and wild and out there. This is what the OECD is doing, this is what Canada is doing, and this is what the European Union is doing.

In my old union job—the biggest corporates in New Zealand, the Australian-owned banks, have corporate social responsibility programmes that do exactly what this bill attempts to do. I say that if Aussie-owned banks in New Zealand are up to these kinds of sustainability indicators, then why on earth would we as a country, and why on earth would this Government, not be prepared to measure ourselves against them?

The mechanisms in the bill are pretty simple—a set of sustainable development measures—and they are listed in the bill. Mr Bishop made the point that those could be contestable; they could be arguable. Maybe there are too many. Maybe there are some things in there that are extraneous and other things that would be more important. I thought Mr Bishop’s discussion on that was actually quite apt. It is exactly the kind of discussion that we should be having in the select committee on this bill. If we respect the underlying principles, as Mr Bishop seemed to indicate in the first half of his speech, then let us actually look at it properly and see if we can implement it in a way that works across this House.

I do want to note this document, which Mr Bishop, Mr Foss, and others in this House have explored in depth in the Finance and Expenditure Committee. It is a 2016 statement on long-term fiscal position. This is exactly the kind of stuff that Treasury—the grey men in suits—is saying is important as we plan policy for our future prosperity as a country. Putting these measures in the Public Finance Act, as the bill proposes, is about making them real, about giving them life, and about making this House accountable to those sorts of values, not just that crude and simplistic measure of GDP.

The Labour Party will be supporting this bill, and I challenge the members opposite: if you really are the pragmatic, modern, progressive conservatives that you claim to be, join with us in the select committee in making this bill work. Thank you.

First of all, can I congratulate the member James Shaw on bringing the bill and using his experience in the private sector, and perhaps his experience, I think, in the Young Nats along the way somewhere, to try to apply some business-type, prudent principles to his passions for things environmental. I do admire him for that, and, in fact, the member—I am sure he does know there are many members on this side of the House who are of the centre-right, relatively conservative, who are also environmentalists. It is great to see the Greens finally trying to put up environmental-type proposals, rather than some of the other stuff that actually turns so much of the public off and scares the bejabers out of them, when most of us look to the Greens to come up with ideas in and around things environmental, and to look after our wonderful environment. So well done to that member on that basis.

I am very surprised that Labour is picking up on and supporting this, because, at the end of the day, as discussed in the previous speech, this is not a redefinition of GDP. GDP is simple. It is an economic measure of activity in an economy. What gets the attention is the change in GDP, actually; not GDP itself—quarterly, annually, whatever it might be. It does not actually pretend to be anything else, but it often gets misinterpreted as some kind of other index, noting that there are so many other indices and metrics out there from NGOs, from the OECD, from the World Bank—the Happiness Index, which someone mentioned earlier—as well as all the best places of doing business, etc. So there are plenty of alternatives out there, and even a New Zealand company or activity investing strongly in some environmental, sustainable something or other actually gets picked up by that measure of GDP, which does not pretend to be anything other than a black-and-white interpretation, a binary interpretation, of things that are going in the economy.

And, yes, it has evolved over the years—that is quite true—as a couple of other members have alluded to, but, for example, New Zealand is well down that track of recognising those other important criteria already. For example, when I was in my previous role as Minister of Statistics, we put in the Environmental Reporting Act. That should not be understated as to how important, how independent, and how transparent that is for reporting on the state of the key domains of the New Zealand environment.

I also note—I think it is in the lead-in to the bill there—that in Cabinet paper after Cabinet paper after Cabinet paper, if there are environmental issues or concerns, the Ministry for the Environment and the Minister will make a strong representation about whatever those issues are. It does not actually matter whether it is a fiscally large spending paper or some other type of policy, implementation, or a choice that Cabinet has to make. Running through it, there are Treasury reports, there are Attorney-General reports if necessary, and the Ministry for the Environment is already in there contributing to core legislation, core Cabinet decision-making, and, therefore, picking up things environmental.

One other thing that we must note, actually, is where the Public Finance Act came from. It came from some somewhat dubious activities in the late 1980s and early 1990s—I cannot remember which Budget; was it the 1990 Budget—where the public accounts were, let us say, grossly inflated at the time. The Public Finance Act was amended to give transparency and accountability of this Parliament to the Government of the day, whichever one it was, and it is longstanding.

So I am surprised, particularly at Labour members—I know they have their environmental interests and concerns, and I agree with those—trying to taint the Public Finance Act with other well-intended motivations. New Zealand needs to fund its way in the world as cheaply as possible. The moment the world sees us, well-intended or not, mucking around with the Public Finance Act, which has served this country and its population so very well over so many years—that would have a lot of unintended consequences.

So, as my colleague Mr Bishop noted, we are voting against this. I acknowledge, again, the intent and the work and the expertise of the member who is raising and sponsoring the bill here, but we cannot vote for it at its first reading in its current form. Thank you.

It is my duty tonight to speak to the bill, and I am going to start by congratulating the member. I quite enjoy listening to the member James Shaw’s speeches so often in this House, but it is regretful that I have to tell him that New Zealand First will not be supporting this bill through this reading. I guess people will ask why. I am going to start by saying that we do not disagree with the concerns that other members of the House have in terms of the debate and the discussion as to whether GDP is an accurate measure of the health of the New Zealand economy.

I would do no better, I think, than to take a cue from Mr Bishop, who made quite a sarcastic comment—which is pretty normal, befitting him as his reputation is growing out there in the Hutt as being pretty sarcastic most of the time. But I take the quote from Albert Einstein. One of his greatest insights was that “no matter how, where, when or by whom it is measured, the speed of light in a vacuum is constant. Measurements of light’s price, though, are a different matter: they can tell completely different stories about [how they are made].” There is a lot more that was written from Albert Einstein’s conversation on that matter, in respect of GDP.

I would have to say that we do share the concerns of other parties in this House about the continued use of GDP as the be-all and end-all measuring stick and yardstick as to how the state of the economy sits. We would just point out a couple of things. GDP does not take into account the level of debt that a country has. For example, Japan has the fourth-highest GDP in the world, behind the EU, the US, and China, in that order, and yet it has the highest debt to GDP ratio in the world. Then you could talk about how the GDP also does not take into account the cost the country pays to service its debt. I am looking at the Italian Government, which is paying over 5.5 percent interest on 10-year bonds—eighth by GDP. Canada ranks ninth by GDP and has to pay just over 2 percent to borrow money for 2 years. GDP does not take into account the risk of public policy changing. It does not take into account the level of corruption in a country. We all know that in New Zealand the level of corruption is increasing, and yet this Government pays no mind to that matter at all, and will continue to tell us that everything in the country is rosy.

So although we have some empathy and sympathy for parties that would like to see a different measure and yardstick, we have to simply say that looking at this bill—and looking at clause 6 in particular, which introduces a range of indicators—all of this information is currently available. It is not really a case of changing the law; it is really a case of changing the Government. If this Government was to truly use the information that is before it right now, and if it was to look at the state of the well-being of people who are homeless, the state of the well-being of people who are having to hold down two or three jobs, and the state of the environment, it would be painting a completely different picture and it would give itself an “E” for effort and probably an “F” for failure in that respect.

We do wonder, if you were to introduce this legislation, how much time you would spend debating and discussing the state of the economy, as opposed to getting on and fixing it. Like a lot of things, we can sit here and pass legislation, and we can implement tougher, finer measures and methods through legislation as to how we better manage and control the economy in the interests of the well-being of the nation, but we actually think it is a lot simpler than that. The steps to take going forward are very pragmatic: to look at the number of unemployed, to look at the number of people working two to three jobs, to look at and recognise when you have a housing crisis, and to take active and proactive steps to address those issues.

Probably, if one is to measure the well-being of the economy of the nation, you would look at the well-being of people, and it does not take a brain surgeon or a rocket scientist to see and to know that people are not well in this nation. That is the core of the issue that the Government should be addressing.

It is a pleasure to be talking on this member’s bill. I too must congratulate the member James Shaw on putting this bill forward for discussion tonight. It is an interesting proposal and one that at first glance is very appealing. It has those elements of making sure that fiscal policy aligns clearly with environmental outcomes. At that level I think many people will share the view that this is prima facie something that is worthwhile pursuing. I think everyone in the House shares the same concern for the environment, and for making sure that we are protecting what we do in New Zealand and keeping it in trust for future generations. So at that point there is no discussion and, I believe, no disagreement.

What this bill does do, however, is that it starts to cut across and become almost a conflict between what you are trying to achieve from a financial perspective and what you are trying to achieve in a number of other areas—not only environmental but also social issues, and you can put population into that category, and demographic changes, right through to the whole range of different aspects that New Zealanders hold dear. I think the biggest issue, and the one that troubles me most about the bill, is the inherent conflict that it introduces, but, at the same time, there is almost a doubling up. What I mean by that last point is that when Treasury comes to do the financial forecast—and, obviously, we have all talked tonight about the different processes, and it is a very convoluted process for Government to first present the Budget and then to report back—the inherent assumptions that go to make those projections largely pick up many of the aspects that are included in this proposed bill.

For instance—I am just turning my mind to schedule 8 of the proposed bill—there is a list of aspects that have to be taken into account. Seven indicators, which, again, when you start to think about it—the first one is population indicators. By way of example, it talks about population size and growth, fertility rates, dependency ratios, ethnic diversity, and regional population change. So when the Budget comes to be made, obviously people have to have regard to what is happening with immigration and what is happening with fertility rates. Those assumptions are made, and we heard earlier—in fact, even the Opposition was talking earlier about the fact that Treasury does 40-year forecasts. So many of those factors actually inherently have to be assumed and taken into account when preparing those financial projections.

The other aspect that I just cannot link back to a financial concept is things like the biodiversity indicators. These are things like threatened species, distribution of native species, and area of native land cover, for instance. For me, of course, those are vitally important and, as I said before, we all believe those are vitally important in terms of maintaining them. But the issue is: how do you actually quantify that when you come to do a financial budget? At the end of the day you have got to have financial outcomes.

I think the mismatch with what is being proposed here is, essentially, around what we want to achieve as a nation, and what those high-level outcomes are that we are trying to do. So if you go back to a different form—what are those economic outputs, what are those financials? They all have a relationship. But to try to inject some of these issues into how you prepare a set of accounts—which is basically what a budget is—is a very, very difficult concept, and I think it will inherently lead to conflict.

I think many of these things are covered by a number of other Acts, and I have heard previous speakers talk about it. By way of example, the third category in the bill, “Air and atmosphere indicators”, is actually covered by the Environmental Reporting Act. Trying to make sure that we do not get to a point where we are getting conflicting information to help what we think is going to create a better Budget outcome, I do not believe is the best way to go about doing it. I think it is very important that we are clear about the assumptions, and they are built up looking at all these other aspects that are covered by various Acts to ultimately achieve a good Budget. This is what I think happens, and on that basis I cannot support the bill.

I absolutely support this bill, and I reject the arguments put forward by the last speakers—the two National speakers actually, and New Zealand First. Let me outline the reasons for that. GDP is a very important measure—there is no doubt about that. Gross domestic product: it is the monetary value of all finished goods and services produced within a country’s borders within a specific period of time. It is a measurement of a nation’s overall economic activity. It is important, and no one denies this. I do not think there is any point or any appetite to change this or get rid of it. But, in the 21st century, the question is: is this the only measure we should be using?

In a country like New Zealand, which sells itself globally as clean, green, and “100% Pure”, our brand—our global brand, the thing that gives us a global competitive advantage—is about sustainability of the environment, of the economy, and of our communities. Should we not be trying to benchmark ourselves against others globally? Should this not be part of how we see ourselves and the success of the Government in delivering for all the people of New Zealand?

Sure, there may be measures that should or should not be in this bill—there is no doubt about that. But this is the role of a select committee and that is what we do with these bills. They are imperfect; we all acknowledge that. So we send them to a select committee and we get the experts—and we are not leading the way in this; so there are experts in this field—to submit to our select committee and say that this is what the bill would look like and this is how the law could be applied in a way that is meaningful and really works. This is why this sort of bill should absolutely go to a select committee. That is why I will always support this.

Let me give you a quote—we have heard a number of them tonight—“Sustainable development is the pathway to the future we want for all. It offers a framework to generate economic growth, achieve social justice, exercise environmental stewardship and strengthen governance.” Ban Ki-moon said that. Are these not the measures and aspirations that we all strive for no matter what our political colours may be or which parties we represent?

The only way, actually, to see whether Governments are delivering is to measure. I do not see this as a bill to hold this Government to account; I see this as a bill to hold all Governments to account. If this bill is passed, then the next Labour - Green Government, which is coming in in 6 months, will be held to account in the way that every single Government will be held to account.

The Public Finance Act came in in 1989. I bet that at the same time—and Mr Assistant Speaker Mallard is probably the only one who can clarify this—we were having these sorts of debates, when this bill came in. I bet there were MPs on both sides talking about transparency. Heaven forbid—why would we want transparency in the public accounts! But now the Public Finance Act is seen as an integral part not only of our Government but of democracy.

This bill will have its time; of that I have no doubt. If the Government is not going to support it and New Zealand First is not going to support it, it looks like it probably will not pass its first reading, but it will have its time—of that I have absolutely no doubt. I also believe that in 20 years’ time there will be MPs who will be standing here or who will be reading this or who will be presenting this day, either at Budget time or in parliamentary debates, and we will marvel at the fact that 20 years ago, in 2017, we were actually debating whether we needed these indicators or not. These will be so integral into how a Government measures its success and how the people out there measure a Government’s success that it will just be part of the norm.

I just think it is a shame that, in fact, we are not taking a lead—well, we are not, no; I am not even talking about taking a lead—and that we do not join the rest of the developed world and say: “You know what? These things are now important.” Sure, financial transparency is accountant. But I will support this bill, and I will always support bills like this, because I believe that a greater level of transparency and accountability in Government is vital if we as politicians and we as a Parliament are to win the respect and confidence of the people of New Zealand.

It is sad that this bill is not going to a select committee. It is a real shame, because its time is now, but it will have its time—of that I have no doubt, James. But I support this bill 100 percent. Thank you very much.

Well, I am tempted to call Simon O’Connor; I am not quite sure what I should call him though.

💬 Stuart Nash: Can we suggest something?

Ha, ha! No. That could easily take up my 5 minutes, but it is probably not the indulgent way to take this.

I am opposing the bill tonight, not because of the principles behind it, but I am opposing it because I do not think that this is the right platform—nor in terms of what the last speaker, Stuart Nash, was saying around the use of select committees. I might touch on both those aspects. I do want to—as others have—acknowledge James Shaw for the work that he and, I understand, Kennedy Graham have put into this. I think, actually, what is being proposed here, as a concept, makes a lot of sense. I am sure if our former colleague Dr Cam Calder was here he would be agreeing. I know that at different party conferences he often spoke about the need to look at new indicators well beyond GDP. I do not profess to be an expert in this particular space, but even I can understand there is a lot more that we can measure to better understand how we engage not only with one another but with the environment at large.

I suppose my issue is I do not believe that the Public Finance Act is the place for this to occur. In some ways I think it is sort of a mismatch, which will not actually do any good either to the public finance approaches that this and previous Governments have taken and, I would argue, future Governments will take, and in some ways I do not think it will actually do any good for the environmental side either. The Public Finance Act—we have been given a little bit of history, I think, by Craig Foss a bit earlier on the reason the Act came about. It is fairly simple, in so far as it is around transparency and, importantly, it is around fiscal policy. It is really, in effect, about taxing and spending and debt—that is what it is about, the Act. It uses GDP—a crude model, if you will—to try to explain those things, but it is a crude model that is, I think, very sufficient for its purpose.

Importantly too, I think GDP as it stands, the measures as they stand, and the Act as it stands are well understood both within New Zealand and overseas, and that gives us some surety. I think when we turn, consequently, to schedules 8 and 9—I have them here—we end up with a number of indicators and subclauses. I think there are about 36 subclauses in schedule 8, which really does complicate things. It ultimately takes away from the initial and intention of the Public Finance Act and, if I want to be slightly conspiratorial, I think it would actually harm that transparency, as we all get a bit confused in and around numbers.

We want just some clear indicators from Government, regardless of whether it is the National Government now or the continuing National Government through 2017 to 2020, to know what is happening in that space. Environmentally, I think what the member is suggesting could well sit in its own piece of legislation. I know this Government has made some changes, in I think 2015, around environmental reporting. I think it was a really important step. I think it was the first Government to put such indicators in place. It is only a suggestion off the top of my head. I think what Mr Shaw is suggesting could well play into an Act like that.

💬 Hon David Cunliffe: It’s unravelling.

Ha! Oh, dearie me—the last interjections from that member in the coming weeks. Ha! But use them while you can.

I think there is real positivity in what is being suggested here, to actually go into the Environmental Reporting Act. I think a lot of the elements we see are beneficial. I am conscious of the time though, and I want to add that I think one of the risks we have with these sorts of series of principles is that they can always be added to—some member earlier used the term “progressive”. It will be no surprise to some that I am not a great fan of progressivism as a philosophical concept, and the reason is that it picks winners and losers. I think there is a danger, as we end up with schedules like this, that we end up picking winning and losing concepts that make these de rigueur. I think that is unhelpful, and we have heard some feedback tonight with people critiquing some of these 36 indicators and saying “Well, that’s not in and that shouldn’t be in.”, and I think it ends up being quite wasteful.

That probably takes me to my final point that, As it is currently constructed in this bill, asking that the Minister of Finance be the one responsible to report on these would put him or her in direct conflict with the likes of the Government Statistician and Treasury, so I think there is a bit of a mismatch there.

Finally—which is now my third final point—I will come back to one of the first ones. I do not feel it is the place of select committees to do a lot of that work.

💬 Hon David Cunliffe: Ha, ha!

The ASSISTANT SPEAKER (Hon Trevor Mallard): Order!

Select committees are the place where the ideas are already well articulated and we move from there, and so I would disagree with some colleagues who are saying that here we float an idea and then select committees—

Order! The member’s time has expired. The Hon David Cunliffe—again, I am tempted not to call the member, given those recent noises.

I do apologise for that spontaneous expression of mirth, but it has been quite amusing seeing members opposite—many of whom I certainly like as people—turning themselves inside out to find reasons to vote against motherhood, apple pie, and the environment. This bill is, quite frankly, beyond argument, common sense. Not only is it common sense but it actually represents what National members say they believe in. They say they are liberal conservatives. They say they have the environment at heart. They say they want to bring the environment and the economy closer together. Well, here is a bill that actually does that.

I commend the member who has introduced it—more on that in a second. Here is a bill that uses the Crown accounts, financial analysis, and objective data collection, not to pick winners and not to prescribe policy, but simply to provide a common data set that is fact-based. Who, actually, but Donald Trump could object to such a thing?

Distinguished members opposite have clearly been given very interesting riding instructions: “Please don’t dump too hard on the bill, because the Bluegreens will be upset. Make it sound like you like it, but then refuse to send it even as far as to a select committee, because we wouldn’t want you to actually engage in the substance lest some of it sneaks through.” It was actually Mr Foss—Craig Foss, bless him—who displayed the kind of honesty that has become his hallmark, to his detriment. He came to the punchline: “We do not want to get in the way of financial imperatives. We don’t want environmental indicators going anywhere near the Crown financial accounts.” That is the truth of it. It is the “Labour-lite” approach of giving half a loaf, like they did on paid parental leave, or the head in the sand defence, which is that if you do not measure it, it will not matter—like child poverty. Neither of those work in this case.

In this case we are at the nub of the argument: why would you want environmental indicators sitting alongside GDP? “We won’t do away with GDP; we’ve made that clear.” It is because if you think about GDP it does not tell you the whole story. The single biggest boost to New Zealand’s GDP in the last century was what—can members opposite say? The single biggest boost was not tourism, it was not dairy; it was the Christchurch earthquakes. There was a $30 billion GDP injection, but it is just that hundreds of people lost their lives and our second-biggest city was flattened. It was a disaster, but it was a huge GDP uptick. A war is a great GDP uptick, but it is nonsense to suggest that a war or an earthquake represents what is best in our lives. We need to balance raw GDP, which is simply a measure of turnover, with things that talk about quality and sustainability, and that integrate the long term and the short term.

With a little sense of déjà vu, if I can say to the member, when I was in my first term I negotiated a member’s bill called the Triple Bottom Line Reporting Bill. I was negotiating with the then Minister of Finance—the good member and Assistant Speaker, the Hon Trevor Mallard, was an Associate Minister of Finance—Dr Michael Cullen, who said: “Look, rather than put a complex member’s bill in front of the House, let’s, as a matter of policy, instruct Treasury to start working on these.” It has been pleasing to see a number of those pieces of work flow through to what has been listed in the bill as current products of Treasury and the department of statistics.

How bizarre it was to hear members opposite list amongst their reasons for paying lip-service to the bill—but not even supporting it to select committee—was that they did not think Treasury and the department of statistics were the right places to keep statistics. I beg your pardon? Motherhood, apple pie, and the environment, and members opposite pirouetting on the head of a pin to find reasons that sound nice but actually do harm, which is to vote against the environment and to vote against our children and our grandchildren, who will inherit the mess that members opposite, wittingly or unwittingly, are making worse. They are not using price mechanisms, they are not using objective data, they are not—to use the jargon of economics—internalising the externalities in the Crown accounts, and they are not living up to their own highest ideals of rational economic thought.

Order! The member’s time has expired.

E Te Mana Whakawā Tuarua, tēnā koe. In making my brief contribution on this bill, the Public Finance (Sustainable Development Indicators) Amendment Bill, I want to first begin by congratulating the member James Shaw on bringing this well-intentioned bill before the House. Although I might not necessarily agree with the mechanism the member uses to try to implement the changes that he is wanting to bring about, I will none the less congratulate him on his noble intentions of improving and safeguarding and better reporting on the state of our environment. This is, I think, a positive intention. But a couple of the issues that I have around this bill—

💬 Hon David Cunliffe: Send it to select committee—send it to select committee.

Actually, I would say to the former leader of the Labour Party Mr Cunliffe that it is not a select committee’s job to formulate legislation. Its job, he should know, is to review it, to amend it, and to improve it. When we are starting from a position of legislation that actually has some rather difficult inconsistencies and some unnecessary duplication, I do wonder whether it is beyond—in fact, I would posit that it is certainly beyond the scope and responsibility and domain of a select committee and the New Zealand Parliament to so extensively rewrite the legislation as to make it workable.

The inconsistencies that I want to refer to are around the roles of Ministers in departments. This bill envisages that the Minister of Finance is responsible for tabling indicators that are prepared by departments other than those for which he or she has responsibility—specifically, Statistics New Zealand and the Ministry for the Environment. This would be a rather strange departure from the usual pattern of ministerial accountability that is customary and normal in this House. But it would also require the Minister of Finance to explain how the principles of sustainable development have been incorporated into the economic and fiscal update, even though it is actually Treasury, rather than the Minister, that is responsible for the content of those economic and fiscal updates. So I think that is definitely problematic.

I think we have in this country a fine tradition of improving the fiscal responsibility and transparency of our public finances. This is something I am quite proud of, as a Kiwi and a strong supporter of Transparency International—as a member of our local branch of Transparency International. It is one of the things that allows us to achieve our status—as we have done—as the least corrupt country, certainly in terms of perception of Public Service corruption.

💬 Hon Damien O’Connor: Well, we were.

No, we are the No. 1 least corrupt country in the world, in the latest Transparency International review of these things. I think the member is at least a year out of date in his facts, across the aisle there.

But the issue is that this bill does cut across the environmental reporting measures that this Government has already brought in and put into place. In 2015 we did pass the Environmental Reporting Act, which does back up our reputation—our “clean, green” brand—with authoritative and independent information on the state of our environment in New Zealand. This requires the Government Statistician to provide statistics that meet a very high quality of standards, and this independence is further strengthened by the role of the Parliamentary Commissioner for the Environment.

So I think that the measures the member is proposing, although well-intentioned, are unnecessary because they cut across that environmental reporting that we have already put into place. So although I support the concept of greater clarity and transparency around our environmental reporting in New Zealand, I think the bill is inconsistent in the way it proposes that Ministers would undertake their roles, and it is also unnecessary in light of the legislation that this Government has put forward.

This Government is deeply concerned about the state of our environment and is making many positive steps towards improving the state of the environment. Let us just reflect briefly on the goal to be predator-free by 2050, the creation of many new reserves, and all of these sorts of positive steps. I think this bill is unnecessary, and for these reasons I will oppose it and not commend it to the House.

It has been fascinating, watching a number of members of the National Party speaking against something that the corporate sector has been engaged in for the last 25 years. In particular, people who have actually had some background in the corporate sector, like Andrew Bayly and Chris Bishop, as David Cunliffe said, contort themselves—pirouette—to find reasons for speaking against the bill when, in fact, they are quite well aware that the sector that they purport to represent has been doing this kind of thing for ever.

I am just going to rattle through some of the objections. One that was made is that it is unnecessary because we already measure some of these things. Government does not act in alignment. For example, on the one hand, we sign up to the Paris Agreement and say that we want to reduce our greenhouse gas emissions and, on the other, the Minister for natural resources opens up an enormous block area for oil and gas exploration that, if burned, would massively contribute to global warming. So the Government says one thing on the one hand, and then does precisely the opposite on the other.

One of the reasons why we want to have integrated reporting at the level of the Minister of Finance in the Public Finance Act is to create single-point accountability that joins up Government. The members from the National Party who have spoken against this bill have essentially been arguing against the notion of having a balanced scorecard—the notion that you would have a dashboard of indicators. It is sort of like saying: “I’m going to go driving, but the only indicator on my dashboard is going to be r.p.m.” Well, r.p.m. is not terribly helpful if you want to determine how fast you are driving, how safely you are driving, where the lights are, or anything like that. So they are saying that they want only one measure, and it is essentially what is going on under the hood.

One of the other objections was that there are too many indicators. As I have said, the reason why you have a select committee process at all is so that you can improve the bill. So I do not think it is terribly valid to say: “We think the bill is flawed. Therefore, it shouldn’t go to a select committee.” That is the whole point of having select committees.

I just want to touch briefly on some of the points around gross domestic product, because it does seem that there is actually unanimity across the House on the limitation of gross domestic product. Simon O’Connor did say that it is well understood. Actually, it is not well understood. When I was doing my Master’s programme, there was a guest speaker, Dr Bob Ayres from INSEAD, who is both a nuclear physicist and an economist, and he has looked at what gross domestic product is actually composed of. Actually, we know only about 45 percent of a GDP number in terms of direct causation—right? The remaining 55 percent of GDP is largely correlation. There is some stuff happening over here in the economy and the GDP number is this, and so we think probably there is some form of relationship, but we cannot say why exactly. So even GDP itself is actually poorly understood, let alone a very limited measure of anything.

All this bill does is improve our understanding of capital. So, as Stuart Nash said—I think he gave a really brilliant point—our natural capital is our greatest asset. Here in New Zealand, the country with tourism as its primary source of income—and its second-largest source of income comes from the primary industries, which take place in the environment—our natural capital is our greatest asset. So what we are suggesting is that the Minister of Finance simply understands and has, alongside our appreciation of financial capital, an appreciation of our natural capital. Having some kind of balance between those sorts of sets of indicators makes a lot of sense, especially for a country like New Zealand.

It is disappointing that despite agreement, apparently unanimously across the House, about the principles of this bill and the underlying flaws in the way that we currently measure things, New Zealand First and the National Party are going to vote against this bill—despite the fact that they basically completely agree with everything in it. So it is sad, but this is an idea whose time has come. The private sector has been doing this for decades, and we will get there. Parliament can be a place that considers good ideas.