Unleashing Enterprise Through Regulatory Reform

Thank you for the opportunity to join you here today to talk about one of my great passions - unleashing enterprise through regulatory reform.

I'm not a doctor - I have no medical training at all - but I have managed to diagnose an acute condition that is very common among people in my profession.

Let's call it the regulatory reflex.

We all know about the Patellar reflex - when we get a tap just below our kneecap, our leg involuntarily kicks out. This kick was called the "knee-jerk" in 1877 by physiologist Michael Foster, and it's a sign that things are working as they should.

Well legislators are prone to knee-jerks too, but in their case it's definitely not a sign of good health.

What happens is this: politicians perceive a problem (maybe because of a high profile incident, maybe at the insistence of vested interests), and they instinctively kick out with new rules, new restrictions.

Some governments are more prone than others to these spasms, but no government is completely immune from them.

We are fortunate to live in a relatively stable democracy - one in which there seems little chance of losing our freedoms to war or revolution.

I think we can thank the strength of our institutions for that, particularly:

• a good parliamentary system;
• the rule of law, including common law;
• well-functioning markets;
• respect for private property; and
• the family unit.

But even in a stable democracy, freedom is never entirely secure.

In our case, freedom might not disappear in a coup, but it can erode. Just as the flow of water can wear away rock, the unchecked passage of rules and restrictions can cut a channel through our bedrock institutions.

Regulation, by definition, restricts our choices and actions and options - the things that matter to us as individuals, as families, and as a society.

So what is the freedom that is threatened by regulation?

Well, to borrow from the nineteenth century writer John Stuart Mill, "the only freedom which deserves the name, is that of pursuing our own good in our own way, so long as we do not attempt to deprive others of theirs, or impede their efforts to obtain it."

"Pursuing our own good in our own way" - that's about living the way we want to, as best we can.

That's enterprise, and it's something we want to carefully foster, not carelessly hinder.

Enterprise - the freedom to discover and pursue opportunities - is what will give us the best chance of making tomorrow better than today.

We should use law to suppress this exercise of freedom only with the greatest reluctance.

It is this philosophy that underpins the government's statement on regulation that the Minister of Finance and I released in August.

The Better Regulation, Less Regulation statement makes two promises to New Zealanders:

• Firstly, that we will introduce new regulation only when we are satisfied that it is required, reasonable, and robust; and
• Secondly, that we will review existing regulation in order to identify and remove requirements that are unnecessary, ineffective or excessively costly.

These promises mean little without action.  So what are we doing to relieve the burden of regulation?

Essentially, the government is getting better and less regulation by regulating ourselves.

We are making ministers and officials accountable for the rules they propose and administer.

We are using regulatory reform and regulatory restraint to change the culture of the public sector.

So much regulation is passed with too little thinking about whether the benefits of regulating exceed the costs, and whether there are better ways of solving the problem.

From this month, departments and Ministers are required to back up their regulatory proposals with evidence and analysis that proves the need for intervention, rather than just assuming it.

Ministers need to certify that their proposals are consistent with the principles set out in the statement on regulation.

Departments have to report annually to Ministers on all known and expected regulatory changes for which they are responsible.

We have also directed departments to report on all their existing regulations, with a view to identifying opportunities for improvements or elimination.

And we're taking a particularly hard look at pervasive regulations, such as the Resource Management Act and the Building Act.

Obviously not all regulations are all bad. We get benefits from a lot of them. Who doesn't like things to be cheaper, cleaner and safer?

But there's no such thing as a free lunch - particularly when it's made by people who have to comply with a smorgasbord of rules about food safety, biosecurity, labelling, and so on.

Our strategy now is to pause to consider these costs, weigh them against the benefits, and ask if there might be a better way to get what we want.

There will be more thought given to the problem that the regulation is designed to solve, and we will ask if it is actually a problem at all.

If there is a problem to solve, if there are benefits to be gained, then we'll find the least cost way to do it, not the most politically expedient.

Any regulation that would impose business costs, impair property rights or undermine common law will be subject to particular scrutiny.

This is where you come in. We need the New Zealand public, and especially business people like yourselves, to hold us to account.

Unless the public participates with us in the pursuit of better and less regulation, politicians will lose their energy and restraint, and you will see the reflex re-emerge, once again unchecked.

If certain regulations aren't working, we want to know.  If they aren't needed, tell us that too.

If the impact on your businesses or households is too large and unfair, then we need to know about it.

As Minister of Regulatory Reform, I am keen to hear from all New Zealanders - especially those some distance away from parliament -on what we can and should reform.

I want other ministers to hear the message loud and clear. And I want all MPs to hear the message loud and clear, so that we become a parliament of regulatory reformers whose main concern is letting people pursue their own good in their own way.

This is what lies at the heart of my Regulatory Responsibility Bill.  It seeks to unclog the arteries of freedom, and tie the tubes of political convenience by ensuring that those who wish to force feed us regulatory lard are held to account.

I recently released the Regulatory Responsibility Taskforce's report on my bill.  And I have to say that Dr Graham Scott and his team have given it a thorough medical, performed a few nips and tucks, and generally got it into admirable shape.

But, as we all know, beauty is in the eye of the beholder.  Some will see my bill, and the accountability and transparency that it will introduce, as an inconvenient bridle on their gallop towards political expediency. 

I say to these people, and particularly those who take this view around the Cabinet table, that there comes a time in Government that you must do what is right, rather than what is easiest. 

I also ask them to consider what our parliamentary legacy will be. 

Those who take the path of least resistance tend to be those who are quickly forgotten, while those who take tough and principled decisions tend to be those who are remembered over time.  I look no further than my colleague Sir Roger Douglas as evidence of this truism. 

Organisations like yours have a critical part to play in ensuring that politicians do the right thing. 

I encourage you to be mindful of Edmund Burke's poignant observation: "All that is necessary for the triumph of evil is that good men do nothing". 

You know what matters to business, you know what stifles enterprise, and you know what impact decisions taken in Wellington have on the rest of the country.

No doubt there will be knee-jerk decisions from this and future parliaments. But now we're asking you to kick back.

The economy isn't in the best shape, and I'm not just talking about the recession. There are structural problems that we need to solve unless we are happy to see ourselves fall further behind other advanced economies.

These challenges are bigger than regulatory reform, but regulatory reform is an important part of the solution.

Thank you for the opportunity to speak to you today - I look forward to hearing your comments and questions.