Spending Cap (People’s Veto) Bill - First Reading
I move that the Spending Cap (People’s Veto) Bill be now read a first time. At the appropriate time I intend to move that the Bill be referred to the Finance and Expenditure Committee.
The Bill is a timely response to New Zealand’s challenging economic circumstances. It will provide more certainty around the growth in government spending, greater spending restraint, and will improve the transparency of spending decisions.
The Bill will lead to government objectives being delivered through a state sector that takes up a smaller share of the economy. A smaller, more efficient state sector will allow a lower tax burden over time, supporting higher economic growth and higher living standards.
The Bill also responds to weaknesses in our current legislative framework. The fiscal responsibility provisions of the Public Finance Act focus on achieving and maintaining a prudent level of government debt and on the operating balance required to achieve that. The Public Finance Act has served us well in that regard, and helped New Zealand bring its net core Crown debt down from 56% of GDP in 1992 to 5.6% in 2008.
But the Public Finance Act has not prevented core Crown expenses from rising as a share of gross domestic product. We have seen government expenses soar from 28.8% of GDP in 2004 to a forecast 36% in 2011. It has been easier for governments to increase spending, than to reprioritise and drive greater efficiency within the existing base of spending. This Bill is designed to place greater disciplines on governments, deliver greater value for the taxpayers’ money, and protect New Zealand’s growth prospects.
The Bill has two main elements. The first is a spending cap that limits the annual increase in core Crown expenses to the rate of population growth multiplied by the rate of inflation. The second is a requirement that any proposed spending increase above that cap be subject to a binding referendum on whether the cap is to be raised to allow for that increase.
The spending cap for a financial year beginning 1 July is based on the product of the annual percentage change in the resident population and the consumer price index. This “rate of increase” is based on data for the twelve months ending 30 September in the year prior to the financial year for which the cap is being set. That rate is then applied to core Crown expenses from the previous financial year.
The spending cap provides for a small number of sensible exclusions.
For example, the cap is designed to allow fiscal policy to continue to play a stabilising role in response to the economic cycle and shocks. Unemployment benefit expenses are therefore excluded from the cap so that they can continue to expand and contract through the economic cycle in a counter-cyclical way.
Borrowing expenses are excluded from the cap as these are effectively limited by the Government debt objective, required under the Public Finance Act 1989.
Similarly, capital expenditure is excluded from the cap because it is constrained by the debt objective and the fact that the operating expenses associated with capital expenditure would need to be met from within the cap
The Bill provides for national emergencies, such as natural disasters, where it is appropriate to exclude expenses incurred in responding to an emergency.
Impairment losses on assets (such as student loans), which are recorded as an expense, are also excluded from cap. These tend to be volatile from year to year and hard to forecast, and therefore difficult to manage within the cap.
The Bill fits with the annual budget cycle by requiring that the spending cap for a coming fiscal year be publicly announced in the Budget Policy Statement ahead of the Budget. Indicative caps for the following two financial years must also be disclosed.
The Minister of Finance would be subsequently required to state, when presenting the annual financial statements of the government to Parliament, whether expenses were within the cap for that year. If not, the Minister must explain why expenses were incurred in excess of the cap, and what measures will be taken to ensure compliance in future.
The Government may, at any time, initiate a binding referendum on a proposal to increase the spending cap for a specified financial year. The Bill requires any referenda to be held under the provisions of the Referenda (Postal Voting) Act 2000.
The question put to electors requires a simple “yes” or “no” response and is specified in the Bill. If a majority of votes cast in a referendum favour the proposal to increase the spending cap, then the cap is raised by the specified amount.
A referendum may be held on a proposal to increase the spending cap for the financial year ahead, or to increase the indicative spending cap for a subsequent year. It is envisaged that a referendum on the latter proposal would fit better with the budget cycle. In such case, a referendum could be held twelve months before the start of that subsequent financial year, allowing time for the result to be reflected in the Budget strategy and process relating to that financial year.
The Spending Cap (People’s Veto) Bill has its origins in the Taxpayer Rights Bill, which I had drafted as a private member’s bill during the previous term of Parliament.
The National-ACT confidence and supply agreement provides for the Taxpayer Rights Bill to be referred to the Finance and Expenditure Committee as a government bill.
That Bill has been refined so that it focuses solely on limiting the growth in expenses, thereby allowing for future taxation to be lower. It has also been renamed the Spending Cap (People's Veto) Bill to better reflect its intent – capping the annual growth in spending and allowing people a direct say over any higher increase.
New Zealand is grappling with the hangover of too much spending and too much debt. Putting New Zealand back on to the right path will require restraint and a determination to never again allow excessive public spending to drive up interest and exchange rates, and to drive out growth. The Spending Cap Bill will help provide that restraint, and will support that determination.
I commend the Spending Cap (People’s Veto) Bill to the House.
Spending Cap Bill gives people power over big spending
Minister for Regulatory Reform Rodney Hide today introduced into Parliament the Spending Cap (People’s Veto) Bill. The Bill will help prevent governments from going on spending sprees and leaving future taxpayers to pay the costs.
The Bill would limit public spending from increasing faster than inflation and population growth.
Any Government that wished to increase public spending at a higher rate would need to seek the public’s approval, through a binding referendum.
“It’s far too easy for governments to spend, and leave our grandchildren to pick up the bill. And based on previous experience, it’s proven too hard for governments to show restraint when times are good. This can’t go on,” Mr Hide said.
“New Zealanders have learned from the recent recession that we all need to live within our means. Spending more than we can afford over the long term is a recipe for disaster. It’s important that governments learn the same lesson.
“The Spending Cap Bill does not ban future governments from spending more, if they wish to. However, any increases in spending would need the explicit approval of the public. After all, it’s their money,” Mr Hide said.
The Spending Cap Bill (formerly known as the Taxpayers Rights Bill) is a product of the ACT-National Confidence and Supply Agreement.
ENDS
Speech To The SPELD NZ Annual General Meeting
Associate Minister of Education Hon Rodney Hide
Saturday, July 30 2011 Mercy Centre, Guildford Terrace, Wellington.
Good afternoon everyone and thank you for inviting me to speak today.
It is a tremendous privilege to be the Associate Education Minister. I’ve learned so much about the large and complex area of special education in such a short time.
I have had the opportunity to see the dedication of teachers and staff when working with children who have many learning challenges. I’ve also seen the determination of students and the joy and excitement on their faces when they are learning and making progress. And I’ve witnessed how classrooms can be inclusive places for all children.
The work SPELD does in supporting and helping children with dyslexia and other learning disabilities is highly regarded and appreciated by parents and many others. I want to make sure students with learning needs can access the resources and services that best meet their needs.
This means providing more choices for parents. And I know that SPELD has been doing a lot of work to position itself as provider of choice for students who have specific learning disabilities.
I strongly share your belief that having a learning disability is not, and should not be regarded as, a barrier to learning. Having learning needs should not stop anyone from reaching their potential. However, certain attitudes, expectations or the lack of knowledge from other people can be a barrier. This was one of the themes when developing the special education action plan for the next three years: Success for All – Every School, Every Child.
Last year more than 2,000 people told us what is working and what isn’t working well for young people with special education needs. While many parents were happy with the level of support they received, they lacked confidence in the system. So the system isn’t broken – but we need to make it more flexible, more responsive and more accessible.
I was pleased to launch Success for All – Every School, Every Child in October – which has a vision to create a fully inclusive education system in which every child can learn and succeed in every school. This has a greater emphasis on mainstream schools doing more for students who have learning needs.
An Education Review Office report last year found that half of all schools in New Zealand do a good job of including students with special education needs. This is not acceptable. I want all schools to be successfully including students with learning needs. This will give parents more choice, and it will give these students more opportunities to learn and to succeed. Many parents of children with disabilities simply don’t have the same choices as others. Some schools do not welcome their child.
I've had the privilege of spending time with people who have experiences that have been difficult to overcome. While visiting Christchurch in May I had the pleasure to meet one of Marion’s students, Nathan. Nathan described the challenges that he is working to overcome at school. I understand what it is like to not fit in at school, but I had never encountered the type of experience that Nathan shared with me – where his learning differences were the focus for the wrong sort of attention from other children. I don't want any other child to have to go through that type of painful experience at school.
I believe that ordinary schools can be extraordinary places for learning for all children. It must be automatic that every child, whatever their learning needs, is included and gets the support they need – without having to fight for it.
Last month I was fortunate to visit Anne Marie Biggs and her staff at Glendowie School, who are working to make their school ‘dyslexia friendly’. I observed teachers working in new and innovative ways to support children’s learning. I believe that the key to building confident schools is the willingness of the school to find solutions. It's not about having all the answers. A positive attitude is crucial, and that positive attitude is alive and well at Glendowie School.
I have set a target for schools to improve their performance as inclusive environments for students with special education needs. By the end of 2014 I expect 80 percent of schools to be doing a good job of welcoming and including students with special education needs – with the rest well on their way.
I take this target very seriously. I want every child to be able to learn and to succeed in every school. The Ministry of Education will be asking schools to report on how they are using their resources to support students with special education needs. And ERO will be measuring the progress schools are making. I expect the first results in August this year.
Last year my colleague Education Minister Hon Anne Tolley, announced changes to the Resource Teachers Learning and Behaviour Service. It will be transformed to ensure there is a consistent and cohesive service across the country that provides an effective supportive network of RTLB provision for schools.
Government’s investment in the RTLB Service is not insignificant at $70 million, and we have to be confident that it is delivering the support required. The proposed changes will see the new service better aligned with other special education services, and better able to work effectively with a range of providers to achieve good outcomes for students. We want to lift the professionalism of this service, provide career paths to leadership, and develop better capability to support students. We are also keeping the service school-based.
We’re improving teacher education so that all teachers are confident and competent to teach students with different learning needs. This includes:
A new postgraduate qualification for specialist teachers, which started in February this year. This qualification will provide a sound theoretical base for teachers to enable them to support children with diverse learning needs.
Updated Teachers Council guidelines so all initial teacher education programmes ensure graduating teachers have the knowledge, attitude and skills to support students with special education needs.
The Education Minister has also asked the Teachers Council to review the standards for entry to the profession to ensure teachers are competent to teach students with diverse needs.
I also want it to be quicker and easier for young people with the highest special education needs and their families to get extra help. I’ve changed the Ongoing Resourcing Schemes (ORS) so they have less unnecessary assessment of students, particularly when it is clear to all that a student meets the criteria. New funding will enable 1100 more young people with severe difficulties to get the support and services they need through ORS.
We have directed $25.6 million over four years to support an additional 1,000 children in their first three years in school as part of the Communication Service.
I’m changing the support for vision and hearing impaired students. Services are uneven across the country, and many schools don’t have teachers with the specialist skills these students need. We’re reallocating the existing resources to specialist centres – the two deaf education centres and the Blind and Low Vision Education Network. A specialised workforce can then provide intensive teaching support to vision and hearing impaired students in regular schools.
I’m finding better ways to bring together the support families receive from different agencies. There needs to be more coordination and less fragmentation. I want to relieve stress on parents and students by providing more support from the education system when times get tough. I’ve asked for advice on a new mediation and disputes resolution service, so issues are addressed faster and more satisfactorily.
I will eagerly monitor the progress of Success for All – Every School, Every Child – I expect to see the following things happening in three years:
Schools to be welcoming and including every student
All young people learning and succeeding, and getting extra help when they need it
Parents being able to see that their child belongs, has friends and is learning and succeeding
Parents receiving good information – without being knocked back.
I know it can be done as there are schools out there that are already doing it. I will spend every day until November working hard to turn this plan into a reality. You can be rest assured if schools don’t meet the targets I have set, I’ll make my views known.
Before I finish I want to touch briefly on how SPELD can contribute to the success of National Standards. There are students who will be identified as not meeting, or are unlikely to meet, the National Standard in reading or writing. The Ministry is supporting schools to tailor their own solutions for these students.
A nationwide Literacy Intervention pilot project is underway. Schools have been invited to participate in one or more of four pilot projects, which are all about accelerating progress for these students. The pilot projects are based around reading for Year 1 and Year 2 students; accelerating writing progress for Years 4 to 8 students; and reading and writing for English Language Learners.
Schools are being encouraged to look to the expertise they already have available in literacy and teaching to guide their work. They may choose to involve SPELD teachers in this work and in developing their approach to accelerating the progress of targeted students. I know many SPELD tutors have firm connections with schools and the expertise they bring to teaching approaches is valued.
So there is a lot happening in special education at the moment. We are strongly focused on choice, on better information and on inclusive learning environments. We want to ensure all students are given opportunities to learn and succeed, and to reach their potential. Thank you for the part you play already in making this happen.
Thank you.
Toothpaste Controls Given A Root Canal
New medical regulations which will come into force on Monday 1 August 2011 will lead to greater choice of sanitary products for consumers, and cut unnecessary costs for businesses, says Regulatory Reform Minister Rodney Hide.
“Under the Medicines Regulations, everyday products like fluoride toothpastes, anti-dandruff shampoo, barrier creams for nappy rash and acne creams will no longer be subject to the same burdensome controls applied to prescription medicines. Because of the costs and slowness of these controls, many sanitary products freely sold in other countries have not been available in New Zealand in the past.
“Other regulatory changes will allow 'general sale' medicines like cough and cold remedies and travel sickness products to be sold through vending machines.
"This is a great example of what 'better regulation and less regulation' means. More options for New Zealanders, lower costs, and less unnecessary hassle for business. Everyone wins.
"Health regulation obviously needs to control risky substances. But the old controls were ridiculous. New Zealand treated toothpaste like medicines’. Clearly, this had to change," Mr Hide said.
Speech To The Rotary Club Of Newmarket
Speech to the Rotary Club of Newmarket
Chairman's Lounge, Ellerslie Events Centre, Ellerslie Racecourse.
President Roger, ladies and gentlemen - good afternoon. Thank you for inviting me to your meeting today.
My talk today is about Auckland, its future and the recent amalgamation of eight councils to create one single organisation – the new Auckland Council. I would also like to touch on what we need to reverse the ever-increasing burden of red tape that is bedevilling New Zealand.
For 50 years, Auckland’s ability to develop and to prosper was stymied by competing leadership, complex and fragmented governance, factionalism and weak accountability.
I decided even before the last election that it would be a good job for me to fix it. That’s why I sought the job to be Minister of Local Government.
It was a big job. And I was lucky to have a tremendous team get behind the project.
I sat down at the start with the Mayors and Chief Executives. I said we were doing this for Auckland. I explained I would listen to all complaints and to all suggestions. But there would be just one criterion of consideration: what’s best for Auckland? I wasn’t interested in what was good for the old council structures, interest groups, or particular careers, or the past. I wanted what was best for Auckland’s future.
I also issued a challenge: let’s show the rest of New Zealand Auckland at its best.
And we did.
Everyone got on board. We completed the largest restructuring public or private ever attempted in Australasia. We did so at speed, on time under budget with a minimum of fuss. Council officers worked hard for long hours for Auckland’s future even though for many of them there was no job at the end. They worked themselves out of a job. The professionalism shown was outstanding and commitment shown to Auckland and our future was extraordinary.
I am very proud of what has been achieved.
We have created a legislative framework that is already delivering integrated decision-making and greater community involvement.
Previously, eight long-term plans had to be prepared; five water and wastewater companies operated; and seven district plans existed. Now, under a unified Auckland governance structure, we have just one of each.
In delivering a more efficient organisational structure, Auckland ratepayers have benefited through lowered rates.
As projected by the Auckland Transition Agency, the new Auckland Council recently announced a below-inflation rates increase of 3.9 per cent.
To put that into context, under the old eight council structure rates across Auckland were to rise by an average of 9.3 per cent, with one council projecting a rise of up to 11.9 per cent! The reduction in rates equates to a saving of $84 million to Auckland ratepayers.
In addition to the rates savings, on July 1 the price of reticulated drinking water across metropolitan Auckland dropped by an average of 20 per cent. That's a saving of $30 million.
The reform has more than paid for itself in savings in its first year.
But the benefits don’t stop there. The new council structure has also created other efficiencies.
Under the old councils there were 60 different categories of dog licence. This has been halved and fees have been standardised at the lowest level.
Auckland’s libraries have been amalgamated creating the largest library group in Australasia and giving Aucklanders access to around 3.5 million items.
Aucklanders can now use their library cards at any of the 55 libraries and four mobile libraries in the region.
The savings are considerable. And they are good to have. But they were not the point of the reform. The purpose of the reform was to substantially improve the governance of our largest city. That's where the big gains are to be had.
We now have one Mayor and one council.
That's a big improvement over eight competing, confused and confusing councils.
The Mayor and the new council now have both the mandate and the legislative ability to deliver their vision for Auckland.
Likewise, the people of Auckland now have one Mayor and one council to hold to democratic account. The endless buck-passing that bedevilled Auckland for decades has gone. There’s one Mayor, one council, Auckland governance is in their hands.
It means too that central government can now talk to the political leadership of Auckland, make decisions, and critically have them stick.
That has never before been possible in Auckland. Fragmented and competing leadership simply made that impossible.
A big challenge for Auckland is transport. We now have just one entity, the CCO Auckland Transport, instead of the previous nine local transport entities that existed in the region. We have for the first time a coherent, region-wide approach to solving Auckland’s transport issues.
Auckland now has a strengthened and integrated governance structure.
There will be no more costly duplication of functions with eight rating authorities and a multitude of differing bylaws.
With the new governance structure in place, Aucklanders can now look forward to their city becoming a united, prosperous and dynamic region that all New Zealanders can be proud of.
The project now possible and underway and critical to New Zealand's future success is the Auckland Spatial Plan.
The spatial plan is a first for New Zealand. It provides, if you like, a helicopter view of how Auckland will develop over the next 20 years.
The plan belongs to the Auckland Council but the Government is closely engaged with the council on the plan.
We have been working with the council and have a dedicated Cabinet Committee that I chair, so central and local government decisions for Auckland can be closely aligned.
The process is working very well and the plan will be completed in early 2012.
Those with an interest in Auckland should put in a submission during the public consultation process.
We now have one Mayor, one council, with the mandate and the ability to deliver the future Aucklanders desperately yearn for and need. I am very proud of the achievement.
Before I finish today, I would like to switch hats and, as Minister for Regulatory Reform, discuss my Regulatory Standards Bill which has had its first reading in Parliament.
Every year, Parliament passes hundreds of laws, and the Government introduces hundreds of regulations.
Many of these laws and rules protect our environment, support a competitive and efficient economy, and ensure that we get treated fairly.
But too many laws unnecessarily limit our freedoms, and restrict our ability to live life as we would like.
For example, until 2009, Aucklanders had to apply for resource consent to trim a tree on their own property!
Ordinarily, we rely on our representatives in Parliament, and on the ability of citizens to make their case before Select Committees, to stop dodgy rules.
But that depends on MPs and citizens being able to keep up with all the proposed laws and rules. This is increasingly difficult.
Last year, Parliament passed 3,020 pages of laws and the Government introduced 3,953 pages of regulation. In 2008, the last year of the previous Labour Government, 5,411 pages of regulations were brought in – that’s over 15 regulations a day!
Many of these rules and laws are very technical, and their implications are hard to discern, even for professionals and Members of Parliament whose job it is to scrutinise our laws.
My Regulatory Standards Bill provides better information to New Zealanders about how new laws and rules will affect them, through three key steps.
First, the Bill sets clear standards that new rules and regulations will be measured against. These standards spell out what good laws look like and should do.
For example, laws and regulations should treat everyone equally. They should be accessible and easy to understand. They shouldn’t take away your property without good reason or without compensation. And, they shouldn’t take away your right to appeal to the Courts, when you believe you’ve been wronged.
Second, the Bill would require anyone proposing new laws or regulations to certify that their proposals meet these standards.
If their laws don’t meet the standards, the person proposing the law – for example, a Minister or MP – would need to explain to Parliament and to the New Zealand public why the law doesn’t comply and why this is in the public interest.
Finally, if someone believes that a new law doesn’t meet the standards and it has not been disclosed, they will be able to ask the Courts to decide whether or not the law complies.
The Courts would not have the power to overturn a law or award any damages or other remedy.
Even if they decided it violated the standards the law would still be binding. But a negative judgement from the Courts could embarrass politicians, and discourage them from making the same mistake twice.
That’s the whole point.
That, in a nutshell, is what the Regulatory Standards Bill does.
It simply makes our law making more open and transparent.
To me that openness in respect of clear principles is critical if we are to achieve more accountable law-making and better law.
And better law is crucial to lifting New Zealand’s performance.
So if you want to better understand how laws and regulations could affect you, and what Parliament is doing on your behalf, have a read of my Regulatory Standards Bill. Even better, make a submission on the Bill to the Commerce Select Committee.
To sum up today, I am hugely excited for the future of Auckland. Auckland ratepayers are already benefiting from the reforms and it is my expectation that Auckland will continue to grow in stature and efficiency to become a truly international city.
The spatial plan process has the new Auckland Council and Central Government working closely together on the development of Auckland.
I believe too that with my Regulatory Standards Bill passed into law we can start to get on top of the red tape that is throttling New Zealand.
And won’t that be a relief.
Thank you.
Why a capital gains tax is a very, very bad idea
All taxes are economically damaging but the capital gains tax is easily the worst of the lot.
Taxes on capital gains doubly tax savings and investment, they are brutally unfair, they are complicated and costly to administer, they are easy to avoid, they raise very little money, they choke the economy and harshly penalise entrepreneurship and innovation.
Capital gains taxes double-tax income
The value of say a business is simply the net present value of its expected income stream. The income stream is taxed and so the capital value of the business is after tax. This is a key point.
Cut the tax rate and the business will be worth more. That shows that the capital value of productive assets is always after-tax. Let’s show a simple case.
A business generates $100 a year. The going discount rate is 10 percent. The value of the business is $1,000. That’s if there’s no tax.
Introduce a tax of, say, 30 percent, and the business now yields only $70 a year. The business is worth only $700. The tax liability is capitalised into the value of the business.
Now let’s say I buy the business and fix it up. I double its income to $200. In the absence of any tax the business is now worth $2,000 and I can sell the business and pocket a $1,000 capital gain. However, if there’s an income tax of 30 percent the increase in the business’s value is from $700 to $1,400. My capital gain is now only $700.
My gain is not tax free even though I appear to pay no tax on my gain.
That’s because the capital value reflects the extra tax the extra income the business generates.
A capital gains tax of 30 percent reduces my gain from $700 to $490. I am doubly taxed.
Capital gains aren’t tax free and a capital gains tax doubly tax savings and investment.
Capital gains tax is brutally unfair
There are plenty of ways a capital gains tax is unfair. Imagine a young widow with children whose husband poured his heart and soul into his business. Following his death the young widow has no choice but to sell the business. She has no income and no other assets.
The business was a start up. It generates $200 a year. After tax, that’s $140. The business sells for $1,400 upon which capital gains tax has to be paid at say 30 percent.
She nets $980. In the absence of any tax she would net $2,000.
The widow is taxed at 51 percent. That’s brutal.
Capital gains tax complicated and costly
Capital gains taxes for practical and political reasons are invariably riddled with exemptions and exceptions making them devilishly complicated to administer and to comply with.
We see that with Phil Goff’s proposal with exemption and exceptions already and having to be sent off to an 'expert panel' to be worked out.
The big complication is determining the true capital gain net of inflation after netting out the purchase price and the cost of maintenance and investment in the asset over the years. It’s hard to do financially let alone in terms of writing and then administering tax law.
It will be a great tax for tax lawyers, tax accountants, tax consultants and tax bureaucrats. But bad for everyone else.
Interestingly, but not surprisingly, Phil Goff’s proposal is not to net out inflation. That makes the tax somewhat simpler, but means New Zealanders will be taxed on their nominal gains.
The government-induced inflation rate over which you have no control will determine your tax liability. It’s not a trivial amount.
BERL who provide Phil Goff with his analysis estimate the return on New Zealand shares at 2.6% with inflation at 2%. The bulk of the tax to be raised is on nominal gains, not real gains.
Capital gains tax easy to avoid
The decision to pay a capital gains tax is entirely up to the taxpayer.
It’s the easiest tax to avoid because you just don’t sell your asset.
Besides high-priced consultants will always outwit the complex and complicated law that will always have to be amended and reviewed in the vain attempt to keep up with perfectly legal tax minimisation.
Capital gains tax raises little money
Capital gains taxes don’t raise much money. BERL assume no change in behaviour as a result of a 15 percent tax on the nominal gains in many trades.That’s a heroic assumption.
But even accepting that, they estimate that by 2028 Phil Goff’s capital gains tax will raise $3.7 billion. That’s a lot of money.
In its first year, it only raises $17.5 million – leaving Phil Goff a big hole in his budget.
But Treasury’s Long-Term Fiscal Model estimates the total tax in 2028 as $120 billion.
Phil Goff’s capital gains tax fully matured raises a measly extra 3 percent in tax assuming no change in the number of trades and with the tax taxing nominal gains not real gains.
Capital gains tax chokes the economy
The heart of a vibrant, prospering society is wealth-creating trades that shift productive resources to ever higher valued uses.
A capital gains tax chokes those trades and bungs up the economy. That’s the big problem with a capital gains tax.
Imagine you can an increase the value of a productive asset by ten percent. That’s a big gain that the economy can ill-afford to miss out on.
In the absence of a capital gains tax you would easily make an offer to the present owner in which both of you are better off through the trade and the economy gets a ten percent gain.
That gain won’t happen with a capital gains tax.
The tax at 15 per cent proposed by Labour more than wipes out the gains from trade and the wealth-creating trade does not proceed.
Multiply that result a million times over and the incredible wealth-sapping effect of a capital-gains tax is obvious.
Phil Goff’s capital gains tax will lock up New Zealand resources in low-valued uses. It’s an incredibly damaging tax.
Capital gains tax harshly penalise entrepreneurship and innovation. Entrepreneurship and innovation are key to a dynamic and prosperous economy.
The incentive to entrepreneurship and innovation are capital gains. The capital gains tax is a double tax on entrepreneurship and innovation.
Politicians like Phil Goff talk up the need for entrepreneurship and innovation but their policies invariably hobble and hinder them, and there’s no greater disincentive than a capital gains tax.
But what about economists backing a capital gains tax?
Back in the day economic text books used to back a capital gains tax because it was argued capital gains are income and that the absence of a capital gains tax is itself distortionary. The latter point is the important point. It derives from a note Nobel Prize winning economist Paul Samuelson wrote in the 1960s.
It showed that a true capital gains tax was neutral alongside a comprehensive income tax. The trick is in the assumptions.
The model assumes perfect information, no entrepreneurship or innovation, a closed economy so that critically the income tax drops the cost of capital rather than grosses it up, and that the capital gains tax is an accruals tax payable every year on gains with all losses netted out.
I wrote to Prof Paul Samuelson about his conclusion and he readily accepted it didn’t apply to an open economy like New Zealand in which the income tax rate here grosses up the cost of capital.
I suspect the New Zealand Treasury now accept that point.
There is a section of the New Zealand population that are always up for taxing the rich and the successful. That’s who Phil Goff is targeting.
It’s certainly not about improving the economy.
The promise of a capital gains tax also allows Phil Goff to bluff and bluster through how he is going to pay for his spending promises which is where he hopes to win his votes.
The great thing about political promises is that the numbers don’t have to add up.
That’s because as H. L. Mencken observed an election is an advance auction in stolen goods.
This was first published 15 July 2011 on interest.co.nz.
Address to Local Government New Zealand 2011 Annual Conference
President of LGNZ Lawrence Yule, Chief Executive Eugene Bowen, other members of the LGNZ National Council, ladies and gentlemen – thank you for the opportunity to speak to you this afternoon. I would like to thank Local Government New Zealand for organising this event and bringing us all together.
This looks to be my last Local Government New Zealand National Conference. There’s been regime change in my own Party and my time in politics appears over.
I set my goal to be Minister of Local Government well before the last election. I figured Auckland Governance was broken. And that it would be a good job for me to fix it.
I also realised that local government has a big impact on people's lives and our nation’s prosperity. It seemed to me too that, for years, central government hadn’t taken local government seriously. I believed I could do something very positive for New Zealand in the role.
It has been a tremendous privilege being Minister of Local Government. I have especially enjoyed getting to know and working closely with Lawrence and Eugene. They do a tremendous job on your behalf and I have been very fortunate as Minister to have had their help, their friendship and their counsel.
I would like to thank all of you too for making me welcome in your districts and explaining for me your issues and challenges. You made me aware of the diversity that is local government and just how far away your communities are from Wellington and the bureaucratic BS that too often can consume us.
I had a great weekend with Mayor John Forbes and his council. Walking around with him, I realised that everyone in Opotiki knows John. But what’s more, John knows everyone in Opotiki. That’s the local in local government. We must never lose that.
John’s council built an aquatic centre. Not bad for Opotiki. And it didn't cost the council a cent.
One of John’s councillors has heavy machinery. He dug a mud slide down a hill and diverted a creek for a great ride at a dollar a pop for local charity. The kids – and adults – had the best fun – as much as in any $20 million facility I have seen. There was a great community feel. And the local charity did well too.
We must never lose sight of the Opotikis, the Kaikouras, and the Buller Districts when thinking about local government. Too often we do. They are our heart and soul and local government at its very best.
I did get to fix Auckland. It was a big job.
I sat down at the start with the Mayors and Chief Executives. I said we were doing this for Auckland. I explained I would listen to all complaints and to all suggestions. But there would be just one criterion of consideration: what’s best for Auckland?
I wasn’t interested in what was good for the old council structures, interest groups, or particular careers, or the past. I wanted what was best for Auckland’s future.
I also issued a challenge: let’s show the rest of New Zealand Auckland at its best.
And we did.
Everyone got on board. We completed the largest restructuring public or private ever attempted in Australasia. We did so at speed, on time under budget with a minimum of fuss. Council officers worked hard for long hours for Auckland’s future even though for many of them there was no job at the end. They worked themselves out of a job. They did it for Auckland. The professionalism shown was outstanding and local government should be very proud of their work. I know I am.
Looking ahead, I do not see great mileage in further amalgamation. For me Auckland was unique.
We needed a Mayor and a council with the mandate and the power to provide the political leadership and vision that Auckland lacked. That was never possible under the old fragmented structure. We now have it.
The reform was never about savings. It was about good governance for Auckland. We achieved significant savings but they were hard work and I don’t believe amalgamation guarantees lower costs. We were lucky with Mark Ford and his team at the Auckland Transition Authority who kept a very clear vision and a determined focus.
Amalgamation is risky. It’s too easy to end up with councils even more remote and more bureaucratic – losing the local in local decision making.
So looking ahead I see benefits in shared services and councils working together on both projects and plans for the wider regions of which their communities are a part. I believe in that way we can enjoy the benefits of amalgamation while keeping the local in local government and avoiding the risks of amalgamation.
It may well be that other cities will copy Auckland in becoming a unitary authority. There is logic to that. For example, Christchurch may be best served with a unitary authority with the Regional Council ECan concentrating on the rest of the region. I believe we might improve both the governance of our cities and our natural resources with such a structure.
But let’s see how Auckland goes. We have an opportunity now to learn something about what governance structures may or may not best serve our own communities.
Looking forward we must in the future align better local and central government decision making. That’s the key to unlocking our true potential. It seems wrong to me that central government requires local government to make 10 and 30 year plans but then itself does not come to the party. Yet the dominant player in those plans is central government itself.
We have a unique process now for Auckland as it prepares the first spatial plan in New Zealand. The Government has provided the new Council with background papers on its views on Auckland’s development, officials have been authorised to work closely with council officers on the plan, and we have a dedicated Cabinet Committee to ensure close collaboration between Ministers, central government agencies and the Auckland Council.
The project is proceeding better than I could ever have hoped thanks to the Mayor, his council and council officers. Central government agencies are taking full advantage of the opportunity of at long last being able to work closely with the political leadership of Auckland in their own areas of responsibility.
We now have a unified Auckland leadership but also we have an Auckland working closely with officials and Ministers on its future development. That’s a huge improvement over where we were.
I believe the process may offer benefits for other regions in New Zealand. I can foresee councils of a region working together in developing their own joint plans. And likewise having the opportunity to align central and local government decision making for their region. I believe such alignment is critical if we are to unlock our full potential.
As Minister, I have always been keen to get costs down for ratepayers and to provide democratically elected councils greater autonomy from Wellington. We are not rich enough to be able to waste precious resources on unnecessary process and needless bureaucracy. The result was the changes to the Local Government Act. These were positive. But to me they still don’t go far enough.
I still consider the Act too prescriptive. Mayors and councillors are elected by their communities to make decisions for their community. The Local Government Act needs to enable them to do that. Its purpose should be to ensure that decision making is transparent for communities to hold Mayors and councillors to account. But it shouldn’t disempower them by setting them on railway tracks of process where it’s the process that rules, not the people themselves. That’s wrong. We don’t do that for central government. We shouldn’t do that for local government.
But the challenge of the Local Government Act being too prescriptive pales in comparison to the tidal wave of legislation passed by government and the multitude of policies pursued which further burdens local government operations. Time and time again principles of good governance are sacrificed for the particular policy objectives being pursued by Ministers and central government agencies
Let me give you a controversial example.
The Government naturally and rightly wants to settle historical Treaty grievances. In these cash-strapped times it’s getting harder. And the claims are getting tougher.
So now local governance is up for grabs as part of the settlement process. Treaty negotiators have been discussing co-governance and seats at the council table in lieu of cash and property. Their purpose is not good local government but treaty settlements.
Of course, if the objective is a Treaty Settlement, then it’s unlikely good local governance will be the result. These are two different objectives. The drive for a Treaty settlement is quite different to a drive for sound local governance.
The same mixing of objectives occurs in every portfolio and every policy objective of central government. The same problem arises for Aquaculture, Building Regulation, Transport policy, and so on.
Lawrence, Eugene and I found ourselves always on the wrong side of the Treaty Settlement process, not because we were against the settlements as such but because we were for good local governance.
And, of course, in the past local government and local communities weren’t involved in the process until the deal was done because rightly Treaty Settlements are the responsibility of central government, not local government.
We found it impossible to debate every proposed settlement on the basis of the principles of good governance. So we engaged cabinet in a generic debate about what principles for local government should guide the Treaty Settlement process. That was a whole lot easier. Having established the principles at Cabinet, we now have a good basis for a proper discussion of Treaty Settlements as they affect local government.
To me the big challenge for local government now and for the future is establishing its proper place in the constitution of New Zealand. To me it’s very clear. Local government is our second tier of government, properly constituted and democratically elected. But successive central governments have not treated it as such.
It’s now become a mish-mash between central and local government of confused roles, overlapping decision-making, blurred accountability, and too often dual funding.
We need to establish some clear principles to guide local government and central government decision making.
That’s why the ‘Smarter Government, Stronger Communities’ project is so important. It picks up on the many concerns and issues you have raised with me as I have visited and met with you. And it provides a mechanism and a process for your issues and challenges to be properly considered, debated, evaluated and acted upon.
It’s a big project for local government and for the country. I intend getting enough momentum behind it in my remaining months to propel it through the next three years to a conclusion.
I don’t have any preconceptions about what the project will conclude. But I do have one thought to share.
It’s hard in our parliamentary structure to provide proper constitutional protection for local government. Parliament is after all sovereign.
But I do believe that the Government should sign up to a statement of principle to govern its relationship with local government after each and every election. And it should be required to adhere to these principles unless it has good reason not to. Because otherwise, to be frank, councils will continue getting pushed around every which way. The sort of principles I would like to see recognised are:
1. That there will be a clear assessment of what level of government is most competent to make a particular decision.
2. When central government makes decisions that constrain local decision-making, it will only do so in the national interest.
3. The cost of any central government intervention in local government should be fully costed.
4. If an intervention is considered in the national interest, it should be recognised when developing funding options.
I believe that central government should keep these principles in mind at all times before it makes any decisions relating to local government.
Once we get the principles established decision making becomes a whole lot easier. What we have achieved for the Treaty Settlement process by way of good principle we should likewise do for all policy.
Once again thank you for inviting me to speak.
Thank you for your great support and hospitality you have shown me. It has been a tremendous privilege to be Minister of Local Government in this great country of ours.
And let me assure you I am continuing to make every day count. There's much to be done before November, and I am working to achieve a good momentum to ensure the work we have underway continues and is completed in the years ahead.
Thank you.
Speech to Cranes Association 2011 Annual Conference
Speech to Crane Association Annual Conference 2011
Minister of Local Government Hon Rodney Hide
Rydges Lakeland Resort, Queenstown; Thursday, July 7 2011
Crane Association President Grant Moffat, Chief Executive Ian Grooby, ladies and gentlemen - good morning to you all.
It’s a pleasure to be here with you once again to talk to you as Minister of Local Government.
Let me begin by acknowledging your contribution to our nation’s critical infrastructure. And in particular, your support of crane operators and your campaign for increased training and safety standards.
As result of your efforts to raise industry safety standards, the New Zealand crane industry is now an international benchmark.
Good on you for being recognised as a world leader.
Today I would like to talk to you about the Auckland governance reforms eight months on, what the reforms have delivered and the impact they will have on the future of local government in New Zealand. I will also touch briefly on some of my other work as Minister for Regulatory Reform. I will be happy to answer any questions at the end.
Increasingly its cities that compete, not countries.
We think not about locating to Australia or New Zealand but say Sydney versus Auckland or Queenstown verses Taupo.
Cities must attract business, investment, and people to prosper.
For 50 years, Auckland’s ability to develop and to prosper has been stymied by competing leadership, complex and fragmented governance, factionalism and weak accountability. That’s what the Auckland reforms set out to fix.
Eight months on I am very proud of what has been achieved. We delivered – on time, under budget.
We have created a legislative framework that is already delivering integrated decision-making and greater community involvement.
Previously, eight long-term plans had to be prepared; five water and wastewater companies operated; and seven district plans existed. Now, under a unified Auckland governance structure, we have just one of each.
In delivering a more efficient organisational structure, Auckland ratepayers have benefited through lowered rates.
As projected by the Auckland Transition Agency, the new Auckland Council recently announced a below-inflation rates increase of 3.9 per cent.
To put that into context, under the old eight council structure rates across Auckland were to rise by an average of 9.3 per cent, with one council projecting a rise of up to 11.9 per cent! The reduction in rates equates to a saving of $84 million to Auckland ratepayers.
In addition to the rates savings, on July 1 the price of reticulated drinking water across metropolitan Auckland dropped by an average of 20 per cent. That's a saving of $30 million.
The reform has more than paid for itself in savings.
But the benefits don’t stop there. The new council structure has also created other efficiencies.
Under the old councils there were 60 different categories of dog licence. This has been halved and fees have been standardised at the lowest level.
Auckland’s libraries have been amalgamated creating the largest library group in Australasia and giving Aucklanders access to around 3.5 million items. Aucklanders can now use their library cards at any of the 55 libraries and four mobile libraries in the region.
The savings are considerable. And they are good to have. But they were not the point of the reform. The purpose of the reform was to substantially improve the governance of our largest city. That's where the big gains are to be had.
We now have one Mayor and one council. That's a big improvement over eight competing, confused and confusing councils.
The Mayor and the new council now have both the mandate and the legislative ability to deliver their vision for Auckland.
Likewise, the people of Auckland now have one Mayor and one council to hold to democratic account. The endless buck-passing that bedevilled Auckland for decades has gone.
There’s one Mayor, one council, Auckland governance is in their hands.
It means too that central government can now talk to the political leadership of Auckland, make decisions, and critically have them stick. That has never before been possible in Auckland. Fragmented and competing leadership simply made that impossible.
A big challenge for Auckland is transport. We now have just one entity, the CCO Auckland Transport, instead of the previous nine local transport entities that existed in the region. We have for the first time a coherent, region-wide approach to solving Auckland’s transport issues.
The rules for operating in the Auckland road corridor are now standardised across the region.
For example, fees for overweight permits across the region have been harmonised, something which I know was a real issue for you. I also understand that Auckland Transport is looking to soon end the requirement that operators get a separate permit for different regions within Auckland.
The Crane Association now has only one local authority to deal with in Auckland. And I am sure you are already seeing the benefits. I was pleased to hear that the Crane Association just recently met with Auckland Transport. I hope that you continue to collaborate with one another and strengthen your relationship.
These are just some of many examples of how one Auckland has delivered more for you.
Less bureaucracy will save your businesses time and money which can instead be invested in the development of new business opportunities.
Auckland now has a strengthened and integrated governance structure. No more endless disagreements about the location and funding of regional amenities, and the provision of necessary infrastructure. There will be no more costly duplication of functions with eight rating authorities and a multitude of differing bylaws.
With the new governance structure in place, Aucklanders can now look forward to their city becoming a united, prosperous and dynamic region that all New Zealanders can be proud of.
Now that I have covered what the reforms have achieved, let's look forward.
Local Government faces considerable challenges in the years ahead. We need to identify these challenges and come up with solutions to resolve them.
That's why I have started the ‘Smarter Government, Stronger Communities’ project to look specifically at councils’ structures, functions, funding, and relationship with central government. I think we can do better at both central and local government, and this project is designed to identify how we can do better.
As a first step in the review, the Department of Internal Affairs has been facilitating a series of informal roundtable discussions. These discussions have brought together a range of individuals from a variety of backgrounds, including public commentators, academics and other people with knowledge of the sector.
The Department is focussed on scoping the review this year, and the discussion and debate from these meetings will help the Government identify key issues and further focus the review. Broader stakeholder engagement will take place later in the process.
The information we receive will help us identify the key issues and challenges for local government and further focus the review.
I have no preconceptions about the outcomes of the project.
And we’re not going to rush it. Decisions will not be made until well into 2014.
There are big issues. They need proper consideration.
The other project critical to New Zealand's future success is the Auckland Spatial Plan.
It's critical to Auckland and I believe the model that we are following will provide the basis for other regions in New Zealand to engage fully with central Government for the development of their regions and communities.
The spatial plan is a first for New Zealand. It provides, if you like, a helicopter view of how Auckland will develop over the next 20 years.
The plan belongs to the Auckland Council but the Government is closely engaged with the council on the plan.
We have been working with the council and have a dedicated Cabinet Committee, so central and local government decisions for Auckland can be closely aligned.
The process is working very well and the plan will be completed in December.
Those with an interest in Auckland should put in a submission during the public consultation process.
This Government has also set out its vision for New Zealand’s infrastructure by 2030 in the second version of the National Infrastructure Plan.
The overall purpose of the National Infrastructure Plan is to improve investment certainty for businesses in relation to current and future infrastructure provision.
The plan seeks to provide common direction for how we plan, fund, build and use all economic and social infrastructure. This plan focuses on enabling New Zealand businesses to increase their productivity and grow the economy.
We are developing more integrated decision-making for infrastructure and a longer view in decision making, reflecting better the life of the projects involved.
Before I finish today, I would like to switch hats and, as Minister of Regulatory Reform, discuss my Regulatory Standards Bill which had its first reading in Parliament this week.
Every year, Parliament passes hundreds of laws, and the Government introduces hundreds of regulations. Many of these laws and rules protect our environment, support a competitive and efficient economy, and ensure that we get treated fairly. But too many of laws unnecessarily limit our freedoms, and restrict our ability to live life as we would like.
For example, until 2009, Aucklanders had to apply for a resource consent to trim a tree on their own property!
Ordinarily, we rely on our representatives in Parliament, and on the ability of citizens to make their case before Select Committees, to stop dodgy rules.
But that depends on MPs and citizens being able to keep up with all the proposed laws and rules. This is increasingly difficult.
Last year, Parliament passed 3,020 pages of laws and the Government introduced 3,953 pages of regulation. In 2008, the last year of the previous Labour Government, 5,411 pages of regulations were brought in – that’s over 15 regulations a day!
Many of these rules and laws are very technical, and their implications are hard to discern, even for professionals and Members of Parliament whose job it is to scrutinise our laws.
My Regulatory Standards Bill provides better information to New Zealanders about how new laws and rules will affect them, through three key steps.
First, the Bill sets clear standards that new rules and regulations will be measured against. These standards spell out what good laws look like and should do.
For example, laws and regulations should treat everyone equally. They should be accessible and easy to understand. They shouldn’t take away your property without good reason or without compensation. And, they shouldn’t take away your right to appeal to the Courts, when you believe you’ve been wronged.
Second, the Bill would require anyone proposing new laws or regulations to certify that their proposals meet these standards. If their laws don’t meet the standards, the person proposing the law – for example, a Minister or MP – would need to explain to Parliament and to the New Zealand public why the law doesn’t comply and why this is in the public interest.
Finally, if someone believes that a new law doesn’t meet the standards and it has not been disclosed, they will be able to ask the Courts to decide whether or not the law complies.
The Courts would not have the power to overturn a law or award any damages or other remedy. Even if they decided it violated the standards the law would still be binding. But a negative judgement from the Courts could embarrass politicians, and discourage them from making the same mistake twice. That’s the whole point.
That, in a nutshell, is what the Regulatory Standards Bill does. It simply makes our law making more open and transparent.
To me that openness in respect of clear principles is critical if we are to achieve more accountable law-making and better law. And better law is crucial to lifting New Zealand’s performance.
So if you want to better understand how laws and regulations could affect you, and what Parliament is doing on your behalf, have a read of my Regulatory Standards Bill. Even better, make a submission on the Bill to the Commerce Select Committee.
To sum up today, I am hugely excited for the future of Auckland.
Auckland ratepayers are already benefiting from the reforms and it is my expectation that Auckland will continue to grow in stature and efficiency to become a truly international city.
I am also hugely excited about the future of local government as a whole.
The ‘Smarter Government, Stronger Communities’ review is an opportunity for councils and ratepayers around the country to have a say in the future of local government in New Zealand. When the opportunity arises I encourage the Crane Association to make a submission on the review.
There are some really exciting opportunities ahead and I look forward to seeing what we make of them.
Thank you.
Regulatory Standards Bill - First Reading
I move, that the Regulatory Standards Bill be now read a first time. At the appropriate time I intend to move that the Bill be referred to the Commerce Committee for their consideration.
The Regulatory Standards Bill aims to improve the quality of regulation in New Zealand.
As a Government, we use our power to regulate to ensure that people live safe lives, get treated fairly, protect the environment, maintain a competitive and efficient economy, and much more.
But regulation also imposes costs.
Excessive regulation can impose unnecessary compliance costs on businesses and individuals, deter investment, and limit innovation and competition.
Decade by decade, the quantity of regulation made in New Zealand has increased. Between 2000 and 2009, over 68,000 pages of legislation were passed. This equates to creating or amending around 105 Acts and 405 regulations, every year.
Many of the countries we compete with have focused on improving the quality of their regulation, with more success than New Zealand.
New Zealand’s ranking in the OECD Product Market Regulation Indicator has fallen from 4th in 1998 to 14th in 2008.
As a small, isolated country, we need to do better, if we want to be competitive in the global economy.
Regulatory quality has been a strong focus for this Government, as set out in its Statement on Regulation of August 2009.
We have introduced a number of administrative measures designed to improve regulation as it is made, and the stock of existing regulation.
These measures include strengthened regulatory impact analysis requirements, a programme of regulatory reviews, and a government-wide scan of the regulation on our books.
These measures have led to improvements in the quality of regulatory policy advice provided to Ministers.
The fact is, however, that administrative measures alone will never be enough to deliver the level of improvement that New Zealand needs.
Only the Regulatory Standards Bill’s more stringent requirements can bring about a change in the way governments think about regulation.
The Regulatory Standards Bill has its origins in the Regulatory Responsibility Bill, which I introduced as a Private Member’s Bill in 2006.
The Regulatory Responsibility Bill was examined and substantially revised by an expert Regulatory Responsibility Taskforce established by the Government in 2009.
The Regulatory Standards Bill is the result of the work of that Taskforce.
I would like to thank Dr Bryce Wilkinson who first put forward the case for a Regulatory Responsibility Bill in his 2001 publication "Constraining Government Regulation". I would also like to acknowledge Roger Kerr, Executive Director of the New Zealand Business Roundtable for his tireless work in gaining support for this Bill over the past 10 years.
The Regulatory Standards Bill aims to increase the transparency of lawmaking and the accountability of law-makers. The Bill has three key components:
- It provides a benchmark through a set of regulatory principles that all regulation should comply with.
- It provides transparency by requiring those proposing and creating regulation to certify whether the regulation is compatible with the principles.
- And it provides monitoring of the certification process through a new declaratory role for the courts.
The Bill identifies a set of principles of responsible regulation, which all regulation should be consistent with.
“Regulation” is defined to include Acts of Parliament, statutory regulations, and tertiary legislation, but excludes regulation made by local government.
The principles are distilled from sources such as the Legislative Advisory Committee Guidelines, the common law, and Parliament’s Regulations Review Committee.
The principles cover seven key areas including: the rule of law, protection of individual liberties, protection of property rights, taxes and charges, the role of the courts, review of administrative decisions, and good law making.
These principles are guides, not binding rules. From time to time, breaches of the principles will be necessary.
The Bill provides for this, allowing Parliament to pass any legislation regardless of whether it complies with the principles. All that the Bill requires is that departures from the principles are “reasonable and demonstrably justified in a free and democratic society”.
In order to encourage transparency about whether regulatory practices are consistent with the principles of responsible regulation, the Bill imposes certification requirements on those who make regulation.
Under the Bill, Chief Executives and Ministers responsible for proposed regulation must certify whether that regulation is consistent with the principles.
Where regulation does not comply with one or more principles, the Minister responsible must explain why that non-compliance is demonstrably justifiable in a free and democratic society.
If there is no Minister responsible, as is the case with some tertiary legislation, the responsibility falls to the Chief Executive.
Certification allows others to understand the impacts of proposed regulation and the trade-offs that we have had to make.
We can, and do, have significant impacts on New Zealand businesses and individuals when we use our regulatory powers. It is only right that we should be open about the impacts that our proposed regulation will have.
The Regulatory Standards Bill provides monitoring of the certification process by allowing the courts to provide declarations of incompatibility where they believe that the principles have been breached. This power is declaratory only. The courts will not have the power to strike down legislation, to issue injunctions against Parliament or the Crown, or to award damages to those adversely affected by regulation that is incompatible with the principles.
The purpose of the declaratory function is to provide an independent, informed opinion on whether regulation complies with the principles. This function encourages Ministers and Chief Executives to certify diligently and in good faith, as their certifications are liable to be tested in court.
Initially, the courts would only be able to make declarations in relation to regulation made after the commencement of the Bill. After 10 years, the declaratory power would be extended to all regulation.
In addition to its three key components of principles, certification, and monitoring by the courts, the Regulatory Standards Bill requires the courts to prefer legislative interpretations that are consistent with the Bill’s principles.
This provision initially applies only to new regulation, but after 10 years applies to the existing stock of regulation.
The Bill also requires every public entity to use its best endeavours to regularly review all regulation that it administers for compatibility with the principles. The steps entities have undertaken to review their regulation, and the outcomes from this process, must be included in the entities’ annual reports.
This Bill provides us with better disciplines for creating and managing our regulation.
It provides transparency in a similar way to the Public Finance Act. That Act imposes certain responsibilities on government spenders. It says, if you are spending public money, justify it, and be accountable for it.
The Act has created a cultural shift in the way that money is spent in New Zealand and the whole mindset around public expenditure.
The Regulatory Standards Bill places similar responsibilities on government regulators. It says, if you are using the Government’s regulatory powers, justify it and be accountable for it.
This transparency will result in higher quality regulation that has fewer unintended consequences, reduced compliance costs and that better achieves policy objectives.
I commend the Regulatory Standards Bill to the House.
Speech to the Association of Integrated Schools Conference - Hon Rodney Hide
Speech to the Association of Integrated Schools Conference
Associate Minister of Education Hon Rodney Hide
Wednesday, June 22 2011
Good morning and thank you for inviting me to speak at your conference today - it’s great to be here.
I believe the best education systems are those where parents have a genuine choice of schools. And a diverse range to choose from.
High quality integrated schools make an important contribution to this diversity.
Parents value the range of educational programmes on offer at your schools – particularly the religious or philosophical values and aspirations that underpin them.
Your schools’ special character allows students to have their needs met. And to be taught in an environment that suits them best.
Today, I would like to talk to you about a subject that I’m very passionate about - public private partnerships - or PPPs.
Since becoming Associate Minister of Education, I have had the chance to visit many schools around the country. And on these visits nearly every school has the same complaint. Property - and the amount of time principals and boards are forced to spend sorting out property issues.
This problem is largely because there are few incentives under our current property procurement processes to think about how a building’s design and construction will impact on its ongoing maintenance and running costs.
This Government has made it clear we are open to greater use of private sector expertise where it makes sense.
Currently underway is a project to commission two new schools at Hobsonville Point in Auckland. These schools will be financed, designed, built and maintained under a public private partnership.
A single establishment board of trustees is overseeing and assisting in setting up the new schools.
The benefits of a PPP is that it ties a school’s design and construction together with its maintenance for 25 years, forcing people to think about what makes sense in the long run.
The land and school will still be owned by the Government, while the board of trustees will remain wholly in charge of the governance and day to day running of the school.
The private partner provides services such as building and grounds maintenance, cleaning, waste management, security, and furniture and equipment.
Penalties will be charged if these services aren’t carried out to an agreed standard or within a specified timeframe.
In addition, the private partner will carry the risk around time-consuming and expensive problems like leaky buildings, and will be required to sort them out quickly or face financial penalties.
So it’s like having a 25 year guarantee on the building.
The private partner will have greater flexibility as to how to deliver a solution. For instance the PPP contract might specify that the buildings don’t leak, but the choice of roofing material is up to the private partner.
All of this means the board of trustees and school leadership can get on with student learning and achievement – and not have to worry about property.
Principals of PPP schools in Australia report having up to fifty per cent more time to devote to improving teaching and learning.
Other benefits of a PPP include:
• more accurate and transparent assessment of whole-of-life costs.
• more motivation for private partners to find the most efficient ways to deliver the facilities we are after.
• potential for better value for money.
So as you can see, a PPP is about a three-way partnership between the Government, a private partner and a board of trustees when it comes to property.
A contract sets out the relationship between the Government and private partner, with sub-agreements and property occupancy documents setting out the school’s relationship with the other parties.
A private provider can only make money through a charge specified at the start of the contract.
Your schools, on the other hand, have entered into an educational partnership with the Crown.
You receive the same government funding for each student as other state schools. But your proprietors retain ownership of land and buildings – and have more say over the school’s operations. Charging attendance dues is one example of this.
This strong relationship achieves our Government’s aims and preserves your schools’ special character.
Looking to the future, PPPs will only be used again when they stack up against traditional procurement methods.
The Ministry of Education’s investigations revealed that PPPs would not be suitable for all new school projects due to the higher procurement costs.
Future PPPs will most likely continue to be for small groups of new schools like Hobsonville Point rather than individual schools.
Lessons learnt from Hobsonville Point will be applied to the future use of PPPs.
Before I finish I want to touch briefly on the changes the Government is making to special education, so every single child gets a fair go.
As you know, last year I launched ‘Success for All – Every School, Every Child’ – an action plan for the next three years that will lead to greater emphasis on mainstream schools doing more for special education students.
An Education Review Office report last year found that only half of all schools in New Zealand do a good job of including students with special education needs.
This is unacceptable, so I set a target for schools to improve their performance.
By the end of 2014 I expect 80 percent of schools to be doing a good job of welcoming and including students with special education needs – with the rest well on their way.
I take this target very seriously as I want every child to learn and succeed in every school.
ERO will be measuring the progress schools are making to meet it – with the first results available later this year.
I want it be quicker and easier for young people with the highest special education needs and their families to get extra help.
Children with high and obvious needs can now enter the Ongoing Resourcing Schemes (ORS) with less assessment and no unnecessary reassessment.
Eleven hundred more young people will get ORS support by 2014, and a further thousand will be able to get specialist support in their first three years at school.
I want to make better use of the special school teaching expertise. Special schools are being encouraged to provide outreach specialist teaching – making their skills and support available to more students in mainstream classes.
In four years time I expect to see:
• Schools welcoming and including every student
• All young people learning and succeeding, and getting extra help when they need it
• Parents who can see that their child belongs, has friends and is learning and succeeding
• Parents receiving good information – without being knocked back.
In conclusion, I believe that innovation is the key to transforming our education system, so it delivers for every single young New Zealander.
We need to look at new ways of doing things, and we need new attitudes and new expectations.
That’s why I’m excited about the potential of PPPs to introduce innovation that will be beneficial across the wider schooling network.
Thank you – and I wish you all the best for the remainder of your conference.
