Address to Regulator’s Forum Core Board Meeting

Thank you all for having me here today. It’s a pleasure to discuss regulatory reform, a topic I’ve always considered to be an important part of my role in parliament. 

I look forward to hearing the presentations from Land Information NZ and International Accreditation NZ’s representatives, but before I begin, I’d like to say a few words about the Government’s aspirations for the regulatory system, and what progress we are making against these objectives.

As you know, regulatory quality is incredibly important to this Government.  A better regulatory environment for business is one of the six drivers of the Government’s economic strategy. 

We know all too well that poor regulation stifles initiative, strangles innovation and suffocates growth.  The 2025 Taskforce concluded last year that up to a third of the income gap with Australia could be closed if New Zealand moved to world best practice across all the major areas of regulation.

We knew, when we came into Government, that there was a lot of cleaning up to do.  A 2008 evaluation by the New Zealand Institute of Economic Research (NZIER) of public sector regulatory impact analyses found serious shortcomings: 

• weak problem definitions, 

• poor descriptions of the scale of the issues; inadequate analysis of costs and benefits; and

• insufficient risk assessments 

New Zealand is losing ground in terms of the competitiveness of its regulatory environment.  Our OECD ranking for product market regulatory quality fell from 4th in 1998 to 12th in 2007.

Quite simply, regulation is costing New Zealand business money, particularly smaller firms.  The 2008 KPMG-Business NZ survey found that for small businesses, compliance with regulation costs over $3000 per full-time employee.

This Government is determined to turn it around.  We are determined to stop this rot.

The Government’s commitment to the objective of a better regulatory environment can be seen in the Statement on Regulation we issued last year. In that statement, we said publicly that we would only bring in new regulation when we were satisfied that it was reasonable, required and robust.  This sets a clear standard against by which all regulation can be measured.

This Government’s commitment is also demonstrated by my appointment as Minister for Regulatory Reform.  This is the first New Zealand Government to have a portfolio and Minister dedicated to culling unnecessary legislation, and boosting its quality.

The longer I’ve been in my role as Minister for Regulatory Reform, the more I’ve come to value spending time with both the regulators and the regulated.  There is no better test of the quality of a regulatory system than seeing how it works at the coalface.

One of the things I’ve come to appreciate is that having a good regulatory system is not just a question of good policy analysis – although that certainly helps - good regulatory systems require:

• a willingness to look at non-regulatory options first, and to thoroughly test the need for coercive methods;

• a commitment to implement any regulation in the most efficient and most effective way, and to think carefully about the impacts on the regulated; and

• openness to new approaches to review, and a focus on continued improvement.

The Government has recently raised the bar on new regulatory policy proposals, to ensure that all possible options – whether its self-regulation or the preservation of the status quo – are considered thoroughly.  

The Government has also been taking a good hard look over the past two years at some of the major regulations affecting the economy – for example, the Building Act, the Resource Management Act, the rules governing the electricity market, and other pieces of legislation.  Many of you here today have been involved in this work.  The aim here is to clear away the barriers, shred red tape and other constraints, strip out the necessary costs, and ensure that our key regulatory frameworks are fit-for-purpose.  

Alongside this, I’ve been running through the statute books for laws and regulations that are no longer needed and can be repealed.  The team at MED will be reporting to me shortly with a ‘hit list’ of redundant laws Parliament can delete.

And as you heard from Peter Mumford earlier today, the Government has recently agreed to establish a Productivity Commission.  The Commission will be an independent Crown entity, which will provide advice to the Government on key issues affecting the welfare of New Zealanders, and our overall productivity performance.  One of the key functions of the Commission will be to review the effectiveness and efficiency of regulatory agencies and regimes.  This will bring an extra layer of expert scrutiny to regulation and its operation.

The aim of these tougher standards and new review mechanisms is to encourage greater care in developing regulation, more transparency to the public and other Cabinet colleagues, and – ultimately – better decision-making.

But as you the practitioners know, the effectiveness of any policy ultimately depends on the people running it.  Incentives on policy makers to do their job better and to introduce better checks and balances are important; but it is only part of the picture.

We need to have people both at Cabinet level and at the implementation level with the characteristics I spoke of before – healthy scepticism, a focus on efficiency and customers, and openness to innovation, review and improvement.  We need a culture change, from the top to the bottom of government.

I think we are making progress on this front.  I am beginning to see some really good quality Regulatory Impact Statements at Cabinet Committees.  I’ve been talking to department chief executives over the past few months, and I’ve been pleased to hear them say that they welcome the new regulatory standards.  

They tell me that they like being challenged to give their best advice; to speak freely and frankly.  They tell me that they are taking responsibility for the quality of their analysis and advice.  And they tell me they are committed to doing better in future.

It’s clear from the work programmes that you are sharing with me here today that you are also picking up the gauntlet that the Government has thrown down.  

I’d encourage you all to stay the course.  Unfortunately, regulatory quality is ongoing campaign, which requires commitment and vigilance.  There is no silver bullet; no one size fits all, quick fix. 

It requires a willingness to take risks – especially by politicians - and it requires people like you sharing your expertise and experience with each other, so that improvements in one area can be repeated elsewhere.

It requires people like you challenging me and my Cabinet colleagues.  You need to tell us where there are problems, when something is not going to work, what needs to be fixed, and how we might go about making things better.  

We had a good discussion last time I was here about some of the problems that you as regulators face on the ground, and the approaches you are taking to resolve them.  I found that information incredibly useful, and I’m looking forward to getting that same kind of feedback here in today’s session.