Kicking the tyres of regulation

Farmers need better support from their agencies.

'New Zealand's regulatory system isn't broken but it could be working more effectively.'

So said the Productivity Commission last month when it released a draft report for its inquiry into regulatory institutions and practices.

Federated Farmers agrees. For many years we have advocated for better-quality regulation and a lower burden of compliance.

In any modern society a level of regulation is necessary, but we have long been concerned that poor regulatory quality has added significant costs to the productive sector and impeded its productivity, with serious implications for our members' businesses and for the wider economy.

We have also been particularly concerned about insufficient recognition, let alone protection of private property rights.

The Commission has in its own words 'kicked the tyres' of our regulatory system, which it describes as 'enormous'. There are hundreds of regulatory regimes and thousands of government officials and inspectors who work in regulatory roles.

Yet nobody is thinking of regulation as a system, and there is little or no collection of information of what regulation is achieving, or checking whether it is working as well as it could. Inconsistent approaches make designing, running, and reviewing regulation harder than it should be.

This imposes costs on business. Farmers consistently tell us that one of their biggest concerns is the burden of regulation and associated compliance costs.

Even officials concede that there are many examples of legislation that has not met its intended objective, has had significant unintended consequences, or clearly lacks some of the key attributes of good legislation.

Despite its great importance, we know far less about regulation than we do about government taxation and spending.

Therefore, the Commission is calling for the system as a whole needs leadership from a senior minister to set strategic objectives for regulation and monitor progress against them.

This in turn would require better support from agencies like the Treasury and the State Services Commission.

The Commission wants better monitoring of regulators and for staff to have the capability to be effective, not just as regulators, but so they also identify risk better and prioritise effort where it is really needed.

This is all good but what is clear to Federated Farmers is that New Zealand's problems with regulation are worsened by public, media, and political 'angst' over real and imagined risks, accidents and misdeeds.

This angst has encouraged in both central and local government a culture of excessive risk aversion and a 'government knows best' mentality. Sadly, if this culture doesn't change it will be hard for any system improvements to work.

To Federated Farmers it is no coincidence that we know much more about government taxation and spending than we do about regulation. This is because the Public Finance Act has embedded a strong framework for accountability and transparency in fiscal policy.

The same can be said for the conduct of monetary policy under the Reserve Bank Act. The regulatory system needs equivalent legislation, which is why we have been such a strong proponent of a Regulatory Standards Bill.

The Commission's draft report runs to 480 pages, makes 130 findings, 43 recommendations, and asks a further 19 questions for feedback. It comes after considering 53 submissions on an earlier issues paper, 92 meetings with stakeholders, and a major survey of businesses. Submissions close next month and it will make a final report to Government in late June.

Federated Farmers will continue engaging with the Commission as it works on its final report. In particular, we will continue to press for passage of a Regulatory Standards Bill.

For more information on the inquiry see the Productivity Commission's website (www.productivity.govt.nz).