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| Dr Eric Crampton | Chief Economist | eric.crampton@nzinitiative.org.nz | ||||||||||||
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Legislation like the Public Finance Act matters for spending. But the budget process sets its own binding constraint. When Cabinet is faced with requests for more spending than Parliament wishes to fund, some budget bids lose out. That fact is hardly antidemocratic. Neither does it thwart Parliament. Regulation does not face anything like the same constraint. The burden of providing the public benefit, through regulation, largely falls outside of government. Regulations do not need to defeat competitors in a budget process. They mainly need to sound appealing. The imbalance means that government can be tempted to use regulation in cases where spending would be more cost-effective. For example, heritage preservation would be far more successful and less contentious if government and council paid for the amenity directly. The Regulatory Standards Bill heightens awareness of an important principle. Those compelled to provide a public benefit through regulation should be compensated – at least when legislation takes or impairs property. If that principle were followed, regulation would be weighed on the same basis as public expenditure. A bid to provide a public benefit through regulation would face the same scrutiny, through the budget bid process, as other spending measures. It would not guarantee that regulatory measures pass cost-benefit assessment any more than the current budget bid process does for spending measures. But we would have greater confidence that the public benefit provided by that regulation merits the cost. Or, at least, that Cabinet viewed the proposed regulation as delivering better value than other measures that did not make the cut. If compensation were warranted, the cost of providing the public benefit would fall on those benefitting, rather than being imposed on owners of the affected properties. The Bill cannot compel that compensation any more than the Public Finance Act can compel fiscal responsibility. It creates no claims at law. But it would strengthen regulatory scrutiny where it is needed most. Measures introduced under urgency can currently evade proper regulatory assessment. The Regulatory Standards Board proposed by the Bill could provide assessment even for measures passed under all-stage urgency, because its remit extends to existing Acts. It does not fix everything. But it is an improvement. |
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| Nick Clark | Senior Fellow | nick.clark@nzinitiative.org.nz | ||||||||||||
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The proposals for new national directions for infrastructure, the primary sector, and freshwater raise a critical question: are they preparing the ground for a property-rights-based resource management system or merely tinkering at the edges? Overall, they show a welcome shift towards enabling development and reducing regulatory burdens. Streamlining infrastructure consenting, reducing barriers to housing intensification, easing regulatory burdens on the primary sector, and providing greater flexibility in freshwater management are all moves in the right direction. Yet the real test lies not in their individual merits, but in their consistency with the government's broader commitment to replace the RMA with a system based on property rights. Property rights form the bedrock of a prosperous society. They provide security and certainty that encourages investment, innovation, and responsible stewardship of resources. When regulations arbitrarily constrain how landowners can use their property – particularly without compensation – they can undermine these fundamental principles and create perverse incentives. The RMA has long operated on the premise that regulation can solve complex environmental and planning challenges through ever-more detailed rules and restrictions. This approach has delivered neither environmental excellence nor economic prosperity. Instead, it has created a system characterised by uncertainty, delay, and mounting costs. It satisfies no one. The proposed national directions offer a chance to break this cycle. Temporary patches on the existing flawed system are better than no change at all. But they should be stepping stones towards a genuinely different approach. This means new national standards should enhance rather than erode property rights, enable better approaches to sustainably managing resources – including pricing and trading instruments – and recognise economic activity as beneficial rather than merely tolerated. Mostly they do, but not all of them. Take the National Policy Statement (NPS) for Highly Productive Land, which seeks to protect agricultural and horticultural land from urban encroachment. It will continue with some tweaks. Putting aside its negative impacts on housing growth, it is hard to understand how continuing with this NPS is consistent with a regime where property rights will be a central feature. The government has an opportunity to demonstrate it is serious about a resource management system that respects property rights. This requires not just removing the worst excesses of current regulation but actively designing national directions that coherently foreshadow the future system. Getting these right matters for ensuring stepping stones do not become stumbling blocks. |
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| Dr Benno Blaschke | Research Fellow | benno.blaschke@nzinitiative.org.nz | ||||||||||||
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In 1988, New Zealand boasted 453 special purpose governance entities. These obscure bodies – Harbour Boards, Electric Power Boards, Land Drainage Boards, among others – committed the unforgivable sin of actually delivering infrastructure. People could vote to tax themselves for specific projects, use that revenue to pay off debt taken on for the project, and build what they needed. Naturally, this had to stop. The Officials Coordinating Committee sprang into action. Treasury and Department of Internal Affairs officials diagnosed the problem with surgical precision: communities were “formally organising collective action” without proper permission. Worse still, people “kept using” these entities because they were “relatively easy to establish” and “effective.” The horror. Officials acknowledged that these governance vehicles were “critical to infrastructure supply” and “key to the historical supply of New Zealand’s infrastructure.” Armed with this damning evidence of success, they reached the only logical conclusion: abolish everything. The committee’s reasoning was flawless. They saw “no coherent pattern” among diverse local solutions and worried about “confusion in the public mind about accountability.” Heaven forbid that communities should solve problems differently. Much better to have one confused system than hundreds of effective ones. The 1989 local government reforms delivered spectacular results. We traded 453 working special purpose entities for dysfunction. Infrastructure delivery slowed, along with permission to build housing. Housing affordability collapsed. Citizens lost their ‘right to organise’ and communities their capacity to act. Today’s housing crisis flows from this masterstroke. Without special purpose entities to deliver infrastructure, development capacity remains artificially constrained. Councils face impossible trade-offs between growth and ratepayer resistance. The ‘threat of entry’ into land markets disappeared, to the benefit of owners whose zoned land became artificially scarce. Minister Bishop’s housing reforms signal potential for new targeted finance mechanisms while recognising councils need better incentives – though it appears nobody has whispered that communities who actually benefit might be the answer. Will government officials connect the dots? Or will we get another decade of head scratching wondering why councils lack enthusiasm for projects that financially burden incumbents who do not directly benefit? Perhaps some intrepid policy advisor will eventually stumble across New Zealand’s pre-1989 history in a dusty Treasury basement. “Minister,” they’ll breathlessly announce, “we’ve discovered this revolutionary concept called ‘letting people solve their own problems.’ Apparently, it worked for over a century before we banned it.” |
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