NEWS ON POLICY AND POLITICS
5 April, 2007

Watching Brief is a regular publication from Russell McVeagh on developments in public law and policy of interest to New Zealand business.

www.russellmcveagh.com

IN POLITICS

The Horns of a Dilemma?
Having urged peace and goodwill in places as various as the Horn of Africa and Iraq, the peripatetic Winston Peters has a no less difficult task of reconciling the warring factions of his own Party. more...

Acid Test for Government Policy Looms
Whilst Labour strategists nervously preoccupy themselves with the outpourings of focus groups on smacking, bigger and significantly more material issues loom in the government's management of New Zealand's post Kyoto economy. more...

IN OTHER NEWS

Dame Margaret Delivers Indictment
Veteran public servant, Dame Margaret Bazley, has delivered a damning indictment of Police culture. more...

Terms of Reference for Housing Affordability Inquiry
Parliament's Commerce Select Committee is inviting public submissions on the inquiry into housing affordability in New Zealand. more...

Regulatory Impact Analysis Beefed Up
From April 1st 2007, government's regulatory impact analysis regime will be strengthened. more...

IN PARLIAMENT

Bills Introduced more...

State-Owned Enterprises (AgriQuality Limited and Asure New Zealand Limited) Bill

Bills before select committee more...

Open for submissions
Closed

Bills Reported Back more...
Supplementary Order Papers more...
Bills Passed more...

HEARINGS more...

IN THE WINGS

Definition of "Associated Person" more...
KiwiSaver more...
Venture Capital Rules more...

IN CONSULTATION more...

The Horns of a Dilemma?

Having urged peace and goodwill in places as various as the Horn of Africa and Iraq, the peripatetic Winston Peters faces the no less difficult task of reconciling the warring factions of his own Party. Riven by disputes about the now infamous smacking bill, New Zealand First has much to lose with an electorate overwhelmingly opposed to this latest in supposed social engineering.

What Peters does will be significant for his party's fortunes and could also be an indicator of his own ambitions for 2008. Absent a convenient deal with National or Labour for an electorate seat, Peters must rely for his prospects on dragging his Party over the 5% threshold.

With polling at around 1.2%, those prospects are not good. Nor are they improved by being seen to take an entirely unpopular legislative measure across the line.

If Peters persuades his caucus that the party's interests rest on withholding support from the Bradford Bill, the result may be a sign to doubters that he is in for the slightly longer haul. Certainly, the outcome will be unpalatable to the Prime Minister, who has staked Labour's reputation on seeing the Bill through the legislative process. Her patronage may well be critical to some of the career alternatives Peters may have in his sights and without it he is left with the status quo and a challenging job of political risk assessment.

Falling back on 'conscience' and ignoring the harping from his party administration would normally be the path of least resistance. But as Labour's eleventh hour attempt to put some distance between it and ownership of the Bradford Bill has shown, public perception is real and likely, at this stage anyway, to be unforgiving.

Acid Test for Government Policy Looms

Whilst Labour strategists nervously preoccupy themselves with the outpourings of focus groups on smacking, bigger and significantly more material issues loom in the government's management of New Zealand's post Kyoto economy.

Last week, the deadline for submissions on the government's proposals on climate change and rural management came and went with no-one really the wiser about the detail of what they were making submissions on. Whilst much has been said about the downside costs of deforestation and carbon sinks that are too shallow, limited if any thought seems to have been given to the upside of making use of the right land for the right purposes.

Flexibility of decision making and the highest and best use of land are important principles and should be holy writ for a country dependent upon exports for its livelihood. Government's role in all that should be the relatively modest one of ensuring that the right regulatory and policy conditions are in place, or at the very least keeping out of the way.

However, positive policy options such as offset mechanisms for forestry have not been conspicuous in government's thinking to date (although it has, perversely, featured in options for agriculture). Instead, foresters and dairy converters have been treated to the hardy annual of 'behave or be regulated', with no apparent appreciation that with the current market for pinus radiata, you might just as well have said "start up those chainsaws, fellas!"

This conservatism can, in part, be attributed to the view that any scheme that doesn't deal with New Zealand's conservatively estimated $500 million exposure during the first Kyoto commitment period is simply not a runner. However, that simple preoccupation is in danger of encouraging government to embrace a set of policy options that will leave us all significantly worse off long after the first commitment period and, indeed, Kyoto have come and gone. The fact that offsets are more likely to encourage new forests (and, even better, the right sort of forests) hasn’t seemed to carry much weight. Presumably, it has the credibility of an option that might work in practice, but not in theory.

But $500 million is $500 million afterall. That's true, but it's also $100 million a year for the first commitment period. And measured against the cost of … say the government's appeal to tertiary students in the run-up to the last election, it's chump change. It certainly shouldn't be allowed to panic us into targeting narrow sectors of the economy and adopting wider policy settings with economic consequences that are as foreseeable as they may be unintended.

Having got its sums wrong in the first place and then signing us up to a deal that discounted our best assets, government must not get its response wrong too. So far, the signs are not encouraging and the risk we face is that government will penalise the very sector of the economy it needs most to help deepen our carbon sink, at the same time as freezing land use in a bureaucratic aspic, which will be felt in the economy for years and potentially decades to come.

Dame Margaret Delivers Indictment

Veteran public servant, Dame Margaret Bazley, has delivered a damning indictment of Police culture. In her report on the Inquiry into Police Conduct, she has highlighted significant flaws not only in the character of some Police officers, but in the management and accountability systems of the Service itself.

Although expected, the Inquiry's findings cap off what has been a couple of disastrous years for the Police. Perceptions of political bias, criminality and, at the very least, doubtful conduct have done immeasurable damage to public confidence in the Police, as well as Service morale. It has also served those whose apparent purpose in life is to calumniate the Police and everything about it.

That the Police have, to a major degree, been the authors of their own misfortune should not be shied away from. Whilst unacceptable behaviour has been the preserve of just a small minority of officers, it has also been the defensive culture of the Service that has allowed that behaviour to flourish. It would be wrong to describe that culture as complicit in wrong-doing, but it is fairly observed that the tendency to close ranks against attack from outsiders and the apparent weakness of accountability mechanisms has protected the bad as well as the good.

It is, of course, easy for politicians, lawyers and other assorted seat-shiners to hold forth from the comfort of their salons about how awful it all is. How many have any real understanding of the realities of life for the average rozzer is moot. A defensive, closed-ranks, culture is a understandable corollary of the sharp end of policing and is one which, perversely, is only reinforced by current criticism.

The Police will, as a body, need to rise above that reflexive response to recognise that while some will always choose to attack and undermine, there is a reservoir of public goodwill and understanding that only wants to see the Police Service succeed. Openness and a willingness to deal firmly and publicly with less than acceptable behaviour will be critical to that.

Terms of Reference for Housing Affordability Inquiry

Parliament's Commerce Select Committee is inviting public submissions on the inquiry into housing affordability in New Zealand.

The terms of reference are:

io ensure that as many New Zealand families as possible will be able to achieve the traditional Kiwi goal of home ownership at a fair and reasonable price.

identify and quantify all components of the cost of housing for first home buyers in New Zealand and examine significant shifts over time. Particular interest is to be taken in:

1. the effect on land supply, and therefore the price for land, of both
   a) restraints on land supply for new housing, and
   b) land 'wastage' through 'large section only' subdivisions.
   
   
2. household ability to service debt, meet costs of ownership and the changing relationship between income, property prices and mortgage interest rates;
   
   
3. impact of increasing demand for residential properties by investors;
   
   
4. local authority planning and approval processes;
   
   
5. charges and levies imposed at all stages of the housing supply chain;
   
   
6. building material and building labour costs as compared with those in other similar economies and countries;
   
   
7. access to finance for house building on multiply owned land;
   
   
8. impact of changing preferences for home ownership;
   
   
9. range of financing products available for first home owners.

identify which components of the cost of housing can and should be brought under control, or freed from restrictive controls, with a view to increasing the affordability of housing.

identify intervention programs that may improve the ability of individuals and families to purchase a home, their success and operation. Consideration will be given to:

schemes such as 'shared equity' and 'rent to buy", the capitalisation of benefits and a sell and build strategy for some state housing stock;

how proven third sector housing organisations currently help individuals and families reach their home ownership goals.

The closing date for submissions is 15 June 2007.

Regulatory Impact Analysis Beefed Up

From April 1st 2007, government's regulatory impact analysis regime will be strengthened "to improve the quality of new rules and to give business more input into determining the costs and benefits," according to Commerce Minister Lianne Dalziel.

Currently, all developed policy proposals must be accompanied by a regulatory impact statement (RIS) to ensure that the regulations proposed are justified, cost-effective and do what they're supposed to. Henceforward the RIS will need to be more explicit in outlining the range of options and reasons why some are preferred over others.

Discussion documents will be required to include a draft regulatory impact statement, including questions about the likely effects of proposed regulation. This is intended to allow those affected to inform policy design at the earliest point.

Intended to remedy some of the very deficiencies in government agencies' problem definition and cost-benefit, and options analyses, the new RIS regime is expected to better inform decisions about whether a regulation is necessary or desirable.

The regime will be managed by a stand-alone unit within the Ministry of Economic Development's 'Effective Markets' branch. The unit will focus on policies that impact on economic growth and will be able step into agencies' policy processes to ensure all the options are canvassed, the right questions asked and the right people consulted.

"From April 1 the RIAU will also be able to send regulatory impact statements back to the relevant department for more work if they aren't up to scratch. The changes will ensure that Ministers will have the best information in front of them when making decisions. It will enhance confidence in the government's analysis of proposed laws and rules and, will ensure the debate and investigation around the possible impacts of new regulations is wide, transparent and open to scrutiny," Lianne Dalziel has said.

Bills Introduced

State-Owned Enterprises (AgriQuality Limited and Asure New Zealand Limited) Bill
Member in charge: Hon Trevor Mallard
Type of Bill: Government
This Bill aims to prevent competition between two State Enterprises, AgriQuality Limited and Asure New Zealand Limited, which are currently the only entities able to provide red meat export quality assessment services. This competition would result in net cost to the Crown as the owner of both entities. The Bill also aims to enable a potential future merger of the two SOEs.

Bills Before Select Committee

The Aviation Security Legislation Bill was referred to the Transport and Industrial Relations committee. Submissions close on 27 April, and the report is due on 16 July.

The Criminal Proceeds (Recovery) Bill was referred to the Law and Order committee. A closing date is yet to be advised for submissions, and the report is due on 27 September.

The Palmerston North Reserves Empowering Amendment Bill was referred to the Local Government and Environment committee. A closing date is yet to be advised for submissions, and the report is due on 27 September.

The Terrorism Suppression Amendment Bill was referred to the Foreign Affairs, Defence and Trade committee. Submissions close on 18 May, and the report is due on 28 September.

Open for submissions

Submissions Closed

Bills Reported Back

Social Security (Entitlement Cards) Amendment Bill

Supplementary Order Papers

SOP 095: Crimes (Substituted Section 59) Amendment Bill
Other Member: Judy Turner
Type: Substantive amendment
The SOP sets out amendments to the clause 2 commencement provision of the Crimes (Substituted Section 59) Amendment Bill. The effect of the amendments is that only section 1 and 2 (the Title and Commencement sections) of the Act will come into force on the day after the date on which it receives the Royal assent.

SOP 102: Crimes (Substituted Section 59) Amendment Bill
Other Member: Hon David Benson-Pope
Type: Substantive amendment
The amendment adds a new clause 6 to the Bill. The new clause 6 will require the chief executive of the department administering the Children, Young Persons, and Their Families Act 1989 to monitor the effects of this Act and advise the Minister responsible for administering the Children, Young Persons, and Their Families Act 1989 on those effects, including the extent to which this Act is achieving the purpose stated in clause 3 of the Bill, and of any additional impacts.

SOP 096: Disabled Persons Employment Promotion (Repeal and Related Matters) Bill
Member in charge: Hon Ruth Dyson
Type Substantive amendment
This SOP replaces SOP No 93, by making additional amendments to clauses 4, 7, and 8. The effect of these amendments is to change the expiry date of the transitional period set out in the Bill from 30 June 2007 to 30 November 2007.

SOP 097: Criminal Procedure Bill
Member in charge: Hon Mark Burton
Type: Substantive amendment

SOP 098: Criminal Procedure Bill
Member in charge: Hon Mark Burton
Type: Motion to divide Bill
This SOP divides the Criminal Procedure Bill into 6 Bills: Crimes Amendment Bill; Criminal Disclosure Bill; District Courts Amendment Bill; Juries Amendment Bill; Summary Proceedings Amendment Bill; and Victims' Rights Amendment Bill.

SOP 099: Criminal Justice Reform Bill
Member in charge: Hon Mark Burton
Type: Substantive amendment

SOP 100: Justices of the Peace Amendment Bill
Member in Charge: Hon Clayton Cosgrove
Type: Substantive amendment
The amendments correct cross-references in new section 3A(1)(c) and clarify the application of new sections 5B(1A) and 8.

SOP 104: Immigration Advisors Licensing Bill
Member in Charge: Hon David Cunliffe
Type: Substantive amendment
The SOP proposed amendments to the Immigration Advisers Licensing Bill to ensure that the costs of the licensing regime, including the costs of the Tribunal, may be recovered from licensed immigration advisers. There is a need to provide for a levy as well as fees, since not all advisers will benefit directly from the functions of the Authority, or be a party to proceedings in the Tribunal.

Bills Passed

Appropriation (2005/06 Financial Review) Act 2007
Disabled Persons Employment Promotion Repeal Act 2007
Minimum Wage Amendment Act 2007
Student Loan Scheme Amendment Act 2007

The Commerce committee continued its consideration of the Copyright (New Technologies and Performers' Rights) Amendment Bill. It also set the terms of reference for the inquiry into valuation methodology of State-owned enterprises.

The Finance and Expenditure committee heard evidence from the New Zealand Law Society on the Income Tax Bill.

The Government Administration committee continued its consideration of the Therapeutic Products and Medicines Bill.

The Health Committee heard further evidence on the two human tissue Bills. It also considered further the Health (Drinking Water) Amendment Bill, as well as continuing its inquiry into obesity and type two diabetes.

The Local Government and Environment committee continued to hear evidence with respect to the Waste Minimisation (Solids) Bill.

Definition of "Associated Person"

The IRD is currently consulting on proposed changes to the definition of "associated person" in the Income Tax Act 2004. The changes will address identified loopholes (specifically with respect to land sales).

KiwiSaver

Legislation is proposed to allow investors in unit-linked life insurance products to have access to some of the benefits of the new portfolio investment entity (PIE) rules associated with KiwiSaver when it comes into effect in July. This will address some technical difficulties faced by funds managers.

Venture Capital Rules

The Government is proposing some major changes to the legislative framework relating to the formation of venture capital.

The Ministry of Economic Development is currently working on possible changes to Part II of the Partnership Act 1908 (which controls special partnerships), and is due to report back on the issue in early 2008.

In addition, legislation is also proposed to be introduced later this year in order to modernise the law on limited partnerships (which is the preferred business structure internationally for investing in venture capital). A discussion paper on the taxation of limited partnerships is due out later this year.

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