Freedom to Do

ACT’s plan for a Regulatory Constitution

ACT will:

  • Require Parliament and government departments to follow principles of good lawmaking
  • Empower citizens to challenge bad laws in court with recourse to a Regulatory Constitution

Red tape is a complaint in every industry and a massive handbrake on the economy. It often takes longer to get permission to do things than to actually do them. It’s estimated that the annual compliance cost associated with red tape is $5 billion.

As problems arise, new regulation is almost invariably proposed as the solution. Parliament has passed 60,000 pages of red tape over the past two decades. Politicians are addicted to regulating our lives. Lawmakers face few consequences for making poor-quality regulation, but New Zealanders bear the cost.

The Cabinet Manual currently requires the Government to follow principles of good lawmaking when it passes laws through Parliament and regulates New Zealanders. This is important because, beside the power to tax and spend, government’s greatest power is the ability to regulate the use of private property. The quality of regulation is a major contributor to our overall wellbeing. Poorly-made regulation is not only costly because of the direct costs it imposes, but all of the things that don’t happen due to red tape and regulation.

Good lawmaking requires the Government and Parliament to properly define the problem they are seeking to solve. It must show that, were it not to act and everybody simply pursued their self-interest, harm would be done. It must then show that the benefits of the proposed law would outweigh the costs, and identify who would receive those benefits and suffer those costs. Unfortunately, government frequently ignores these requirements, and introduces laws that do more harm than good.

A recent example is the ban on oil and gas exploration. The problem was not properly defined. If the aim of the ban is to reduce emissions, then it is likely to have the opposite effect as coal is a likely substitute when gas runs out and no more has been found. Under proper principles of good lawmaking, this law would not have been made.

A longer term example is the Resource Management Act. Since the Act was passed, the median Auckland section has increased by 900 per cent, compared with general inflation of only 60 per cent. This law has allowed councils to restrict the growth of cities, pushing up the price of land that can be developed and causing social, economic, and fiscal problems. Had this law been subject to the principles of good lawmaking, it would not have been passed.

In nearly every sector the story is the same. In the financial sector, people who need advice miss out because of the restrictions on giving it. In the construction sector, costs are multiplied by compliance and the related delays it brings. Even in education, educators complain of the rules and regulations that make their job harder.

In order to lift our productivity and overall wellbeing, we need to improve the quality of regulation.

A Regulatory Constitution for New Zealand

Despite having principles of good lawmaking in the Cabinet Manual, the Government frequently ignores them. After the current Government was elected, it simply stated that it needn’t follow regulatory impact analysis in its first 100 days. Frequently, Treasury deems attempts at regulatory impact analysis to have not met expected standards.

There needs to be another way that citizens can hold the Government to account for bad lawmaking. In countries such as Australia and Canada, citizens can go to court and challenge poorly-made laws.

ACT proposes that, for new laws and regulations, citizens be given a similar right with recourse to a Regulatory Constitution. The Regulatory Constitution has three elements.

The first is a clear statement of the principles of good lawmaking. For example, the Government must properly define the problem it is seeking to solve. It must show that, were it not to act, harm would be done. It must then show that the benefits of the proposed law would outweigh the costs, and identify who the winners and losers would be. Furthermore, the government shouldn’t take your property without good reason or without paying compensation, and rights should not be changed retrospectively. Principles like these are designed to uphold the rule of law, protect individual liberties and property rights. They are already scattered throughout legislation and in the common law.

The second element of a Regulatory Constitution requires Ministers or chief executives of government departments to publicly state that the regulation they are making complies with the principles of good lawmaking. If it doesn’t, they will need to explain to the public why that is the case. This will improve transparency of lawmaking.

The third element encourages politicians to comply with the Regulatory Constitution. Citizens will have the right to challenge the law in court. If the courts find that a law hasn’t been made in accordance with the basic principles of good lawmaking, the law can be declared invalid.

A Regulatory Constitution will change the incentives faced by politicians. It will require governments to publicly confront the costs of the red tape they are imposing on the rest of us. It’s when these costs are ignored that we get poor social and economic outcomes. There are always winners and losers in policymaking. A Regulatory Constitution will require politicians to publicly acknowledge who loses and by how much. This will enable more informed public debate about legislation, and the costs and benefits of various options, before it is passed.

A Regulatory Constitution will improve the accountability of Parliament and the transparency and quality of lawmaking. If New Zealand is to overcome the disadvantages of its small size and isolation – and attract people, ideas and investment – we need to do better. If we want an aspirational society we must get red tape under control.