West Foyer
Beehive
Today I want to talk you about that topic we all love to hate – red tape. In particular I'll talk about some of the changes that business and government agencies are going to see as a result of the government’s Quality Regulation Review. In her statement to Parliament last year the Prime Minister said:

"We will also be taking a fresh look at regulatory frameworks. Feedback from business suggests that higher quality regulation would lead to more growth and investment – and we want to engage with business on how to achieve that."

That is precisely what the Quality Regulation Review has been about and I want to thank the more than 200 businesses and their organisations that made it possible by contributing their time, their energy and most importantly their ideas. As I have said on several occasions now, this type of review has been not been undertaken before, and it’s success is driven off the fact that it is addressing issues that businesses have raised themselves.

There will be some who will say, that some of the fixes are small fixes, and they are right – but that’s because it is often the small things that do count. They are the irritants that stand in the way of getting on with business.

Over the past few years I have seen New Zealand’s debate about regulation grow increasingly sophisticated.

There’s general acceptance that regulation helps deliver effective and fair markets, it fosters investor and consumer confidence and ensures that environmental considerations are not overlooked. As Gary Banks said in the Australian Regulation Taskforce Report, while accepting there was a need to address the burden of regulation:

“[that] does not mean that [we] should engage in a ‘race to the bottom’ and abandon worthwhile regulations. There are important economic, social and environmental goals that warrant regulation, and should not be traded off simply to improve business competitiveness."

And within government there is a much greater understanding that the way we regulate, including the way we enforce regulation, and the combined effect of different regulations coming one on top of the other, can have significant – and often unintended – impacts on business.

The pivotal word in this review has been "quality" and that means quality at every stage of the process - in design, in implementation, in monitoring and enforcement. If government gets just one of those ingredients wrong… Well, it doesn’t really matter how perfectly conceived and crafted the original policy proposal was, it just won’t work in practice – or at least not without a whole lot of unnecessary complexity and confusion.

So does New Zealand stack up against the rest of the world in terms of our regulatory environment? Yesterday our number three status in the Fraser Institute’s World Economic Freedom report was confirmed again and we rank number two in the World Bank Doing Business Survey. My ambition is to see us at back at number one on the World Bank Survey, something the Quality Regulation Review has, put us on track to do.

So what have we learned and what have we achieved?

First – we now understand the significance of the difference between the big and small ends of town. For SMEs the biggest issue is the combined effect of regulation. The message was clear: don’t look at this from the perspective of the individual regulatory framework or from a departmental perspective. Instead look at the cumulative effect of the many regulatory frameworks we deal with and the many agencies we have to work with – give us precise, consistent, easy-to-follow information that enables us to know what you want, when, how and why.

I’ll give you just two examples. Businesses told us there were problems with the way the new Building Act interacted with the Resource Management Act. The Department of Building and Housing, Department of Internal Affairs, the Ministry for the Environment and Local Government New Zealand have got their heads together to come up with a large number of initiatives to address the main concerns highlighted during the review.

Health and safety was another big one that needed a whole-of-government approach. Businesses - especially in horticulture – told us that trying to work with the Health and Safety in Employment Act, the Hazardous Substances and New Organisms Act and ACC legislation was a challenge. So Cabinet has instructed the Department of Labour, the Environmental Risk Management Authority and the Accident Compensation Commission to sort out the interaction of those three regulatory frameworks.

And we’re getting results. Already ERMA and Labour have developed a package of information and tools to make complying with HSNO requirements in farming and horticulture a lot more straightforward. They’re looking at options for delivering co-ordinated health and safety advice and information through established business mentoring and coaching programmes. ERMA is working on user-friendly guidance on HSNO requirements, particularly for small businesses, and has set up a toll free service for compliance questions.

The second thing is that from the government's perspective, we see the Companies Office, the IRD, ACC, MFE, OSH or the Departments of Labour and Statistics.

But business just sees "the government" and quite reasonably asks, "why do I have to give 'the government' the same information over and over again?” Early on in the review I asked why couldn’t these many arms of government extend a single hand to business?

We have started down that track with the announcement a few weeks ago of the IRD/ Companies Office initiative whereby companies incorporating online can now also register for their company tax number with the Inland Revenue Department at the same time. With that number e-mailed back about an hour after registration, (instead of the 10 days it previously took), New Zealand should make number one in the company registration index of the Doing Business survey, which should help towards my goal next year.

This seemingly small change required a lot of negotiation and effort between the agencies involved, but it has been entirely worthwhile in that will help businesses hit the ground running. And it didn’t require a law change; it took a mindset change, coupled with an investment in innovation and some thought about what dealing with government is like for a new business.

I want to give you another example, which is not fixed yet. I have been visiting my Small Business Advisory Group members at their businesses and a few weeks ago was at Bernie Graham’s place in Dunedin. She told me of a staff member, injured over the weekend; the fax comes from ACC on Monday asking her to set out how much her staff member has earned over recent weeks. Why, says Bernie, can’t they get that information from IRD? Good question, I say. So it’s a conversation with the Minister for ACC and she’s thinking instantly of ways it could be fixed – a privacy waiver on the claim form and amendment to the Act – the officials are now looking for a solution.

And that’s what has been amazing about this review and that is the process. Listening to business to find out what those barriers are – the annoying things that make you wonder why you got out of bed in the morning. What’s been great for me has been how easy some of these things have been to fix, but on other occasions I will admit to some frustration with how slow the wheels of government can turn.

But sometimes that is because we now have better processes in place to ensure that we are properly consulting on regulatory matters and that takes time. We are putting in place a regulatory framework for Financial Products and Providers – and it has been a thorough process; for good reason. Innovation can be stifled if the balance is not right and businesses stop taking calculated risks, which is the essence of entrepreneurship.

And that is the next element of what has been delivered by the review and that is a strengthened Regulatory Impact Analysis process that allows for much better input into the policy development process and the design stage of the regulatory process. Although it hasn’t been released yet, you will see the practical effect of having a draft Regulatory Impact Statement in the Discussion document that is being prepared by the Ministry of Justice and the Department of Labour on the impact of three regulatory frameworks, each designed for different purposes, when they coincide on Easter weekend. This came up during the review as a glaring example of what happens when changes to different frameworks are not addressed at the same time – and it has the added complication of the conscience vote in Parliament, which means Parties don’t take positions.

The Shop Trading Hours legislation governs opening hours on Easter Friday and Sunday and contains area exemptions; the Sale of Liquor Act governs the ability of certain establishments to sell liquor on Easter Friday and Sunday, but there is no connection to the Shop Trading Hours exemptions and the statutory holidays, for which staff get extra pay, are Easter Friday and Monday. The Discussion Document is a way to get all the options on the table and settle this issue once and for all.

Another outcome of the review is the agreement by Cabinet to introduce an omnibus Regulatory Improvement Bill planning to fast-track those changes to the Fisheries Act, the Ministry of Fisheries Restructuring Act, the Conservation Act, the HSNO Act and the Designs Act that have emerged from the review. These may sound like small changes – but it is the cumulative effect of small changes, seen from the point of view of business, that will make the difference. And the idea of a relatively easy mechanism for bringing about improvements in one Bill is one that I have championed throughout the review. Some changes aren’t made because departments know that they won’t get such a small matter onto a busy legislative agenda.

So how does a government get this way of thinking to stick? How do we make this a permanent change in attitude? As I have already said we have strengthened the Regulatory Impact Analysis requirements for government agencies and given the RIAU real teeth so that they can send papers back if they are not adequate or the stakeholder engagement has not been sufficient.

We’re putting a lot more effort into training officials to think outside the regulatory square: to think about alternatives to regulation; to look at existing frameworks; to think about compliance issues right from the beginning, when the first policy questions are being asked.

Next year we start a two year trial of a Business Cost Calculator. This is a tool originally developed for Dutch policy makers to quantify the compliance costs for business of any proposed regulation. The Australians have modified the Dutch model to their specific needs and the Ministry of Economic Development is now working with the Australian Office of Best Practice Regulation to get the calculator’s software ready for piloting in New Zealand by March next year.

Quality regulation has to keep up with a changing world – with economic, social and technological change. Vigilance is critical - good regulation isn’t only determined at the design stage, but can be influenced throughout its life span. As the world around us changes, regulations can become obsolete, compliance information can become outdated, and duplication, overlap and inconsistencies can occur.

The QRR has enabled us to identify ten unused, unnecessary or outdated regulations affecting the health sector. I don’t know why they were still on the statute books but they were - the regulatory equivalent of not taking the garbage out – so it's a single trip to the dump for them.

You can see why it is very important to ensure that the focus on quality doesn’t disappear once government has decided that it will regulate and how. That means government – working with business - must be committed to a culture of constant vigilance and continuous quality improvement.

The review has also shown us there are many ways of fixing these issues. It’s by no means a one-size fits all approach. There are a number of things that can be done to build a better environment for business if government agencies are prepared to be innovative, and take an open-minded approach to working with business.

Finding a solution doesn’t always require considering legislative amendment, and other solutions adopted as part of the review included changes to departmental administrative processes and procedures, communication and information dissemination and the inclusion of issues in existing departmental reviews or work programmes.

And so is where to from here? The review paid particular attention to the cumulative impact of regulation on four important sectors of the economy - hospitality, retail, horticulture and the wine industry.
Regulatory frameworks often intersect within industries and at the individual business level. In the past we’ve often looked at how one regulation works across the economy but seldom at the cumulative impact of all regulation on one sector or industry.

Interviewing over 130 businesses about how they're affected and their ideas for solutions, has given us a richer perspective of the impacts on business and a better understanding of how we can best resolve any concerns.

I’m keen to repeat that process with other sectors of the economy, to work with industries in detail on their issues with regulation. MED has been charged with developing a programme for that engagement. The aim is to work with one or two sectors a year and to keep clearing away that clutter.

A longer-term issue is reducing the duplication of information requests from government agencies. It’s back to my question why the many arms of government cannot extend a single hand to business? I have said on several occasions that the solution will be an e-solution. Standard Business Reporting is part of that. It’s in use in the Netherlands already, and Australia is now exploring its potential. Businesses can submit financial data to several government agencies in just one transaction. I’ve asked officials to look at options for introducing those sorts of systems to New Zealand. I know from the comments businesses made during the review that they would go a long way to reducing paperwork.

So in a way, although the QRR has come to an end, the process it has put in train will continue and that has got to be good for business. My thanks go to all the business people who took time out of their busy lives to send an e-mail to the business consultation website or sit down with officials or me and share with us your concerns and ideas. I have been very proud of what has been achieved but it couldn’t have happened without you.

Thank you.