As leader of the second-largest party in the Government, David Seymour could have had his pick of the great departments of state. Instead, he chose to be minister of a tiny new ministry, Regulation. His decision will result in a constitutional change in the way we are governed.
Sir Geoffrey Palmer famously observed, “we have the fastest law in the west”. At any time, governments can issue arbitrary regulations covering virtually every aspect of our lives. The Cabinet Manual requires that before passing regulations, a department must produce a regulatory impact statement. But often, those statements are slipshod, do not justify the regulation, or the requirement is ignored.
Act campaigned to remedy this with a Ministry of Regulation and a Regulatory Standards Act. The new law will require that before any regulation can be promulgated, the promoting department must set out the problem to be solved; show that the benefits exceed the costs; that the costs fall fairly; the regulation is not in conflict with existing regulations; it is workable; and it is the minimum regulation required.
Governments will no longer be able to ignore the requirement because the courts will be empowered to strike down any regulation that does not meet the new tests.
Many of today’s regulations would fail these proposed tests. Red tape is the reason Auckland is the city of cones. Auckland Mayor Wayne Brown’s office has estimated that temporary traffic management costs ratepayers $145 million a year. A traffic management plan can cost more than the work itself. But as the Health and Safety at Work Act requires all work to be carried out safely, the regulations were never needed.
Red tape is a reason why it is so expensive to build a house in this country.
In 2016, the International Labour Organisation estimated that red tape costs New Zealand 2.8 per cent of GDP. That study was based on 2012 regulations. Since then, we have had a Labour Government that never saw an activity it did not want to regulate. Sixty thousand New Zealanders are now unbanked because they cannot produce a utility bill, or meet one of the other requirements to open an account.
Twenty years ago, a Business NZ-KPMG survey found compliance costs for a small business amounted to $2750 a year per employee. This year’s Deloitte election survey found 93 per cent of businesses said government had increased their compliance costs. Farmers have been subjected to an avalanche of regulations.
Today, I believe regulatory compliance costs would be closer to 5 per cent of GDP or around $20 billion a year. As the ILO says, the cost of compliance in Finland, hardly the wild west, is just 1 per cent of GDP, so there is huge scope for significant savings.
We are all affected. Red tape bans the over-the-counter purchase of an effective and safe cold remedy. Red tape requires pre-schools to get a daily signed approval from parents in order to give any medicine, including over-the-counter remedies.
The new law will enable the minister to review existing regulations.
The legislation will take at least a year to be passed and perhaps another year for the first review of existing regulations. But the Government must not wait for the new law before repealing regulations: ministers need to repeal the most damaging rules before Christmas.
As power and privilege are never surrendered voluntarily, the bureaucracy and interest groups will fight to retain regulations. While the civil service goes on holiday, in January ministers should take the opportunity to make another list of damaging regulations and repeal them. Repealing red tape must be a top priority.
The new Government has inherited a mess. The economy is close to recession. Inflation is still raging. There are huge deficits in health, education and infrastructure. Too many able-bodied adults are on welfare. All those problems are easier to solve in a growing economy.
Cutting red tape is the only low-cost, immediate way to liberate the New Zealand economy’s entrepreneurial spirit.
It works. Donald Trump, despite facing 91 indictments, leads President Biden in the polls. Voters tell pollsters they were better off under Trump. While Trump was making wild statements, his Cabinet was repealing Federal regulations. Freed from red tape, the US economy rebounded more quickly than any economist predicted.
Repealing red tape will unleash the New Zealand economy. We will be better off with less red tape.
There is another more important reason why we need a regulatory standards law: unaccountable bureaucrats passing arbitrary regulations make the citizen powerless while transferring privileges to the few. It is corrupting of society.
The power to make regulations has been abused to pander to populist calls that “there ought to be a law” and to grant favours to vested interests.
A Regulatory Standards Act will curb the state’s unbridled power.
The vast expansion of the administrative state is undermining liberty in all Western democracies. The Regulatory Standards Act will be New Zealand’s most significant contribution to democratic government since women’s suffrage.
Richard Prebble is a former leader of the Act Party and a former member of the Labour Party.