Rodney Hide

Good afternoon and thank you for the opportunity to address you today.

Today I will outline my view of the current regulatory environment and explain how I think the Regulatory Responsibility Bill will impact on that environment. But first some context.

This conference exists because most people's confidence in the market is qualified.

We can all agree that exchange between two people who have different but compatible wants is generally a good thing. Both people benefit and so does society by 'society', I mean some aggregate of individual well-being.

Voluntary exchange based on enlightened self-interest is unobjectionable, except where it hurts others.

Debates in competition law and regulation and other kinds of market intervention are about the exceptions, they're about when people get hurt unnecessarily or excessively. So we identify a range of activities that occur in markets that we think lead to so-called 'market failure', and when these things appear to happen, we bring in our legislation, our regulatory agencies and our courts to take a closer look.

The intention is better regulation, but more commonly and all too often it results in more legislation or regulation, not better regulation. With every new regulation we create, we add compliance requirements to some part of the economy.

Before we know it the trickle has become a torrent.

That's why I am proposing the Regulatory Responsibility Bill. To clean up red tape and to provide better law making.

Regardless of politics and ethics there is a lot at stake when governments intervene in markets and introduce new regulations. Government action changes the value of private acts and private property.

The ability to coerce people in their businesses, in their homes, at their jobs is an awesome power responsibility. But it's scary how often and how easily lawmakers take this responsibility for granted. They shouldn't take it for granted, and with the passage of the Regulatory Responsibility Bill, they won't be able to.

If competition law and regulation is a security against market failure, the Regulatory Responsibility Bill is a security against government failure.

That is government failure which loads compliance costs on New Zealanders in many facets of their daily lives, affecting business opportunity and sapping the energy of some of our best and brightest.

The New Zealand Government runs a policy network more pervasive than the physical networks of Transpower, Telecom and KiwiRail combined, but it's subject only to a quality path reset once every three years. Well, not anymore.

I introduced a private member's Regulatory Responsibility Bill in 2007. The Bill is built around three major areas. The Bill:

contains a set of regulatory principles that all legislation and regulations should comply with;

provides that departures from these principles should be temporary and justified; and

contains a regime whereby the agencies responsible for legislation must maintain, for each piece of legislation, a statement setting out the impact of the legislation and justifying its continuing existence.

First, the principles were a statement of ambition about what regulation should and should not be about.

Secondly, we must recognise that, pragmatically, we cannot always and in every respect live up to our ambitions, so we also said that there could be some exceptions.

But they had to be reasoned exceptions that do not compromise the general rule of principle.

The third area was about making regulations subject to the principles over time. It is not enough to think about impacts in the time leading up to Cabinet decisions. We must consider impacts retrospectively. Continual imposition on people's behaviour demands continual justification.

The Bill itself was referred to Parliament's Commerce Committee. The Committee saw the potential value of it, but had some questions about the statement of regulatory principles and the proposed role of courts.

So, in line with the National-ACT supply agreement, the Regulatory Responsibility Taskforce was asked to reconsider the Regulatory Responsibility Bill.

The Taskforce's recommended Bill is in many ways similar to the model I introduced, but it provides more specifics about how Ministers and regulators can depart from principles and about the role of courts. The Bill is primarily a transparency measure.

It blends the two existing approaches into a single set of principles and requires those responsible for promoting regulations or administering them to certify as to their compliance or non-compliance.

One of the most exciting parts of the Taskforce's proposal is the idea that people can hold a government to account should the government mislead the public over whether proposed legislation complies with the principles of good law making.

Any member of the public may apply to the Courts for a Declaration of Incompatibility, which states that a particular piece of legislation does not comply with the principles. This Declaration has no effect on the validity of the legislation, but will nevertheless send a powerful message to the government that sloppy legislative practices will be exposed.

Ministers will need to state where the legislation departs from the principles and the reasons why.

If they don't they will be found out. That's what transparency and accountability in law making is all about.

So changing the mindset across all areas of government is an important objective alongside removing the "misguided" legislation that we endure in our daily lives.

The Taskforce also proposed various supporting measures to give the Bill more bite. For example, they suggested that a special select committee, possibly the Regulations Review Committee, could be assigned the task of reviewing bills for consistency with the principles of responsible regulation.

The Taskforce's Bill is a challenge to Parliament, but it is a challenge that Parliament asked for.

The Taskforce is saying, "Here is a set of tools and disciplinary measures that we expect to improve the way you regulate." And the rest is up to us.

There is no close international precedent to the Regulatory Responsibility Act I am proposing. That of course means some people will be nervous about its impact.

I will always argue that we need to be bold in dealing to red tape, sloppy law and outdated and wealth sapping legislation. And we need to be bold in making New Zealand a better place to live and work.

Nothing in this Bill asks Parliament not to respond to public concerns; rather, it asks ministers to explain how and why its actions satisfy those concerns and regulatory actions.

Regulatory Responsibility legislation will run parallel to the Public Finance Act.

The Public Finance Act imposes on government spenders certain responsibilities. It says if you are spending public money, justify it, and be accountable for it.

The Public Finance Act has created a cultural shift in the way that money is spent in New Zealand and the whole mindset around public expenditure.

The Regulatory Responsibility Bill will do the same for the way we make law and regulate.

Of course, we are not relying on the Bill alone to guard against government failure.

We have already introduced the "Better Regulation, Less Regulation" policy statement, which sets the agenda for improvements to regulation under this Government.

We have strengthened the Regulatory Impact Analysis regime, demanding better, more independent analysis from officials, and more responsibility for that analysis.

We have asked for regulatory scans and plans so that we can get a picture of how much we are planning to impose further regulations on people, and how much we are imposing already. And we have targeted some of the most important regulations for in-depth review, to see what we need to keep and what we need to fix.

The aim of well-designed and properly administered competition law and regulation is to make markets work better for the benefits of consumers. Its aim should be to encourage enterprise to generate value, not to unnecessarily hinder it. Its aim is to encourage the creative powers of competition and innovation.

We also want to get people thinking about the cost of regulating.

I don't mean the financial costs to government (which are easy to think about), or even the compliance costs to business, but also the dynamic opportunity costs. We need to think about the lost opportunity from bad and burdensome regulation.

Regulations that cost little to enforce and impose no direct costs on business can still be burdensome if they prevent firms and individuals from taking advantage of opportunities or from taking on our competitors.

Regulations that stop businesses and others from doing valuable things need particular, systematic scrutiny.

The Regulatory Responsibility Bill, and the other measures I have discussed, have the exact same objective.

We want all regulations to make markets work better for consumers.

Regulation is a cost of doing business. If the cost is excessive, not only do businesses suffer, but so do consumers. Regulation aims to achieve legitimate social goals, be they equity, environmental, safety, health, cultural, or whatever.

We can and will argue forever about what these goals should be, but if we want markets to work, we should not argue that achieving a social goal should be done at a high cost when, with a bit of self-discipline and a culture of constraint, we can achieve them at a lower cost. To ensure that we don't take the higher cost option, we need to guard against government failure.

It is for these reasons that I am working on convincing my ministerial colleagues that passing the Regulatory Responsibility Bill is the way to go.

In closing I would just like to say where I see this proposed legislation in the New Zealand of the future.

The law when passed will not just be a pact between the 2008 Act Party and the people, nor yet the National-Act Government, until things change at some future election.

This is meant to be a contract between the people and all Parliaments and Governments.

The aims of regulation are subject to cyclical policy, but how we achieve these aims can be subject to proper disciplines and principles. That is the promise of the Bill, and that is the focus of my energies.

Thank you again for the opportunity to address you today. I wish you well for the remainder of your conference.