The Regulatory Standards Bill is working its way through government processes despite having failed in three previous iterations.

It proposes far-reaching neoliberal reform in line with ACT Party ideology.

From consultation documents released on the latest proposal, it’s clear there’s been little formal engagement on its contents, while key chunks of official advice have been redacted.

The coalition agreement promises the bill will pass.

Here, Emeritus Professor Jane Kelsey outlines her concerns with the proposal.

 

The objective of the Regulatory Standards Bill is to bind governments forever to the neoliberal logic of economic freedom. It does this by setting overarching rules and principles within which all future political decisions must be made.

The bill advocates a raft of measures tailored to avoid “political slippage” and address a “commitment problem” where future governments may seek to deviate from the neoliberal agenda that it proposes.

This ideological project for an “economic constitution” was first promoted in Aotearoa in the 1980s and early ‘90s by the Business Roundtable, a precursor of the New Zealand Initiave.

It was put into action incrementally during the Fourth Labour Government under Roger Douglas (who later founded and led the ACT Party), and then by a National government through Ruth Richardson in 1990–1994.

Four core pieces of legislation set the neoliberal norms and disciplines to guide the project: the State Sector Act 1988, the Reserve Bank Act 1989, the Public Finance Act 1989, and the Fiscal Responsibility Act 1994. These were complemented by binding and enforceable international trade and investment agreements that expanded to diverse areas of policy.

The missing piece in this economic constitution was a Regulatory Responsibility Act.

Such an act would guarantee the primacy of private property and impose a regime of “meta regulation” to permanently constrain the ways that any government can regulate. It would institutionalise presumptions of self-regulation, light-handed regulation, or no regulation at all.

Requiring future and existing laws and regulations to comply with a selection of libertarian-slanted principles, including an abridged notion of the rule of law and the protection of individual liberties and private property rights, would embed neoliberal ideology at the core of governance. It would subordinate and potentially exclude other principles that reflect different values.

This is precisely what the current Regulatory Standards Bill now aims to do.

Three strikes but not out

The ACT Party has tried to pass this legislation three times and has failed. As a fervent supporter of a “three strikes” approach when dealing with sentencing, it should apply the same principle to this bill.

This version is essentially a re-run of bills that parliament has already examined three times — twice in depth — and rejected each time.

In 2001, Dr Bryce Wilkinson wrote a report for the Business Roundtable entitled “Constraining Government Regulation”, which annexed a draft Regulatory Responsibility Bill. This was the basis for a member’s bill that had its first reading in July 2007.

The bill was referred to the Commerce Select Committee, where it was strongly criticised by a wide range of submitters, the legal profession, and academic commentaries. The commerce committee recommended the bill not be passed.

In 2008, under the coalition agreement between National and ACT, then ACT leader Rodney Hide was appointed Minister for Regulatory Reform, and a taskforce was set up to carry forward work on the Regulatory Responsibility Bill.

The taskforce was chaired by former Treasury Secretary and ACT candidate Graham Scott, a leading advocate of the bill, and included Bryce Wilkinson. Predictably, the taskforce’s report in 2009 endorsed the bill and provided a revised draft.

The re-named Regulatory Standards Bill was the subject of a public consultation process in 2010. The bill was introduced in 2011 and sent to the commerce committee. It faced strong criticism again, including from the Legislation Design and Advisory Committee. The number of concerns raised led the commerce committee to hold an interim inquiry. Its final report again recommended the bill not be passed.

Significantly, the Treasury’s Regulatory Impact Statement (RIS) in 2011 rejected both the original bill and the taskforce’s bill:

We do not support the Taskforce’s proposed Bill. We doubt the chosen principles can attract the broad-based support necessary to induce enduring behavioural changes, and compliance costs could exceed benefits. The interpretive direction presents a particular risk of unintended outcomes.

The bill lapsed in 2017 when it was not reinstated by the incoming parliament.

ACT’s third attempt to introduce the legislation as a member’s bill in David Seymour’s name was voted down at its first reading in August 2021 by 77 votes to 43.

The coalition’s double standards

This fourth attempt by ACT to pass its bill is the result of horse-trading in coalition talks with the National Party.

The coalition agreement between ACT and National commits to legislating, not just introducing, a Regulatory Standards Bill.

During the Waitangi Tribunal urgency hearings on the Treaty principles bill, it became apparent that officials had been instructed by a cabinet circular, dated March 25, 2024, to “implement” the coalition agreements.

This means that coalition commitments take precedence over the best practice regulatory processes now in place.

In effect, a minor political party that attracted just 8.6 percent of the total vote in the general election is being permitted to bypass the democratic process that has three times rejected the proposed bill — in two cases through rigorous parliamentary processes.

This is the antithesis of best practice regulatory standards, parliamentary democracy and the rule of law, let alone rangatiratanga.

Principles-based decision-making that lacks principles

There is a saying that “principles-based regulation does not work if those implementing it have no principles.”

That is patently true of the ACT-National coalition agreement, which promises that the coalition government will make decisions that are based on sound public policy and are people-focused, evidence-based, fiscally responsible and adhere to pro-democracy principles, among other ideals.

Yet, formal quality-assurance checks were not required for any of the projects in the coalition’s 100-day plan.

A study conducted by Newsroom analysed 84 Regulatory Impact Statements and other reports on the coalition’s new policies. In over half of the policies, the study found that officials reported either a lack of data to support the policy, or that data existed but did not support the policy.

Some ministers had instructed officials not to consider alternatives to their politically pre-determined plans. In three-quarters of the policies, officials said there was insufficient time for proper analysis.

The Regulatory Impact Statement for this bill followed the same pattern. The interim RIS was constrained by direction from the Minister for Regulation, David Seymour, who instructed that the previous bill (which was not supported past the first reading) must be the starting point for officials’ assessment.

These constraints led the Quality Assurance Panel to assess the interim RIS as “partially meeting” the quality assurance criteria. While a final RIS will reflect the consultation which closed on January 13, the current constraints will presumably still apply.

The minister’s double standards

The Minister for Regulation in charge of this bill, David Seymour, is also the Associate Minister of Justice responsible for the Principles of the Treaty of Waitangi Bill, whose introduction was also a commitment under the coalition agreement.

During the Waitangi Tribunal’s urgent inquiry into the Treaty principles bill, it became clear from the cabinet circular that government officials were not free to offer frank and informed advice that the measure not proceed.

They were required, instead, to ensure the introduction of the bill and its referral to the select committee. They had to do so even if those actions overrode the Crown’s legislative criteria and processes and breached the Crown’s own guidelines on Tiriti compliance and its constitutional obligations under Te Tiriti o Waitangi.

In addition, Minister Seymour overrode officials’ advice on engagement and reversed approaches that were previously agreed, such as the release of an exposure draft for public or targeted comment.

Clearly, the minister and ACT leader is willing to breach principles and processes he claims are foundational to democracy when it suits his party’s political or ideological purposes.

He is also brazenly prepared to totally repudiate Te Tiriti o Waitangi.

This abrogation of democratic responsibility, and the selective and self-serving approach to “best practice” principles, would become entrenched should his Regulatory Standards Bill be passed.

The minister and his successors would be able to expand on the legislation by issuing guidelines for the assessment of existing and new legislation to “provide further information in relation to the way the principles should be interpreted and applied.”

The minister could also specify which classes of regulation are required to comply with consistency requirements, which would presumably enable the exclusion, for example, of coalition agreements.

Te Tiriti o Waitangi

Te Tiriti o Waitangi, He Whakaputanga o te Rangatiratanga o Nu Tireni, and the UN Declaration on the Rights of Indigenous Peoples (UNDRIP) are all absent from the proposed bill. .

This means Te Tiriti would be removed from the list of considerations that inform regulation, including legislation (aside from Treaty settlements.)

Even if ACT’s Treaty principles bill doesn’t become law, this legislation would de facto have the same effect.

In other words, a significant part of ACT’s Treaty principles bill would come into effect, and constitute new breaches of Tiriti principles that the Waitangi Tribunal has identified.

David Seymour’s contempt for Te Tiriti o Waitangi as the nation’s founding document is incompatible with any legitimate notion of “best practice regulation”.

Contrary to the proposal’s own principle of “transparency”, one-third of the Tiriti o Waitangi assessment of the bill was blacked out on the basis of maintaining legal professional privilege. Also redacted is half of the only cabinet paper recommendation that refers to iwi/Māori.

Presumably, the redacted legal advice relates to breaches of the Crown’s Tiriti obligations, the potential for Waitangi Tribunal inquiries, and risks related to the judicial application of regulatory principles that exclude Te Tiriti.

The preliminary analysis does identify fundamental failings in the proposal relating to the principles of kāwanatanga, tino rangatiratanga, and equity. While I would interpret these principles differently, they at least recognise the constitutional relationship agreed in Te Tiriti.

In addition, the assessment refers to Crown-derived principles of partnership, active protection and redress. The redaction of the paper’s assessment of the proposal in relation to these measures warrants the assumption that most, if not all, the proposed principles were considered to be in breach.

The minister also continues to ignore Crown responsibilities under Te Tiriti and the UN Declaration on the Rights of Indigenous Peoples to engage with Māori on matters that affect their rights and duties.

David Seymour indicates that he intends only to hold some targeted engagement with specific Māori stakeholders within a general engagement strategy, rather than undertaking a broad Māori engagement strategy.

Transparency

A further example of David Seymour’s “do as we say, not as we do” approach involves the principle of transparency.

The cabinet paper cites as a justification for the bill “a lack of transparency about whether new regulation meets accepted standards and, where it does not meet those standards, why it has still been proceeded with.”

Yet the cabinet paper and consultation documents fail to provide any such justification for the bill itself, aside from the coalition deal.

Furthermore, key advice provided to the minister has been redacted from the publicly released documents citing legal professional privilege.

Given the quasi-constitutional nature of this proposed bill, the legal risks must not be kept secret. These include risks arising from the introduction of novel legal liabilities, such as regulatory-taking rules, new breaches of the Crown’s Tiriti obligations, and distortions of fundamental legal principles, such as the rule of law.

Part of the assessment of financial implications is also redacted and the fiscal costs of implementing this regime are not disclosed.

Given the Regulatory Impact Statement does not believe there will be cost savings from the regime, this vanity project of ACT is likely to be a significant additional drain on the budgets of a range of ministries.

There is also very real potential for massive damages claims and awards under the regulatory takings provision. Recent experiences with leaky buildings, finance company collapses, and the Pike River tragedy illustrate the significant additional remedial costs arising from regulatory failures that need to be factored in.

Disclosure of this, and other redacted advice, is all the more critical given the cumulative history of analyses that rejected similar bills. Such lack of transparency should be sufficient justification to stop this process now.

ACT’s self-serving principles

The flaws in ACT’s “principles” that underpin this bill have been addressed extensively in previous inquiries on previous iterations of the bill.

David Seymour himself concedes in his cabinet paper that “some of these principles describe concepts differently to, or are broader than, the comparable wording in the Legislation Guidelines or in other legislation.”

It is extraordinary that this minister is asserting the power to redefine core constitutional principles to govern future polities, just as he did with the “principles of the Treaty”. This creates neither a Tiriti-based nation nor a democracy.

Perhaps the proposed principle which concerns me more than any other is the one referring to the taking of property.

It reads:

Legislation should not take or impair, or authorise the taking or impairing, of property without the consent of the owner unless:

• there is a good justification for the taking or impairment
• fair compensation for the taking or impairment is provided to the owner
• compensation is provided to the extent practicable, by or on behalf of persons who obtain the benefit of the taking or impairment.

The cabinet paper and consultation document have scant details on this proposed rule. The scope of “property” is not defined. It potentially includes shares, companies, real property, intangible intellectual property, foreign exchange, carbon credits, fisheries quotas, goodwill in a business, cryptocurrencies, social media platforms, mining permits and other licenses.

Impairment of property rights would include measures that affect its value or profitability. This could effectively rule out any government being able to take such actions as:

• Issuing compulsory licenses to ensure access to vaccines in a pandemic, even if permitted under the WTO.
• Setting new restrictions on tobacco or alcohol sales and marketing, as occurred with the expropriation claims made by tobacco companies in relation to plain packaging tobacco products.
• Introducing capital gains or wealth taxes.
• Designating buildings as historic, or land as having outstanding landscape character.
• Recognising rights of mana whenua over whenua, wai or other taonga to redress Tiriti breaches, including requirements for free, prior and informed consent.
• Climate change measures that affect profits or the value of carbon credits under the ETS.
• Tightening rules on individual transferable fisheries quotas, or significantly restricting catch volumes in certain areas.
• Not renewing mining permits for environmental or climate reasons.
• Breaking up supermarket chains or electricity providers that dominate the market.
• Tightening regulations on construction following a recurrence of leaky buildings caused by the proposed weakening of regulations.
• And much more.

Regulation bad, profit good

Overall, the proposed bill treats regulation as a cost, and hence bad, and its criteria for deciding what regulations are “unnecessary” and “poor” are ideologically skewed.

Regulation serves multiple positive purposes that seek to balance competing objectives that are essential in a Tiriti-based democracy. Yet there is no pretence here of balancing libertarian principles with those of a social democracy, let alone a nation based on Te Tiriti o Waitangi.

The proposed principles prioritise non-regulatory options, rely on risk-based assessments, or favour a minimalist approach of self-regulation, disclosure, or co-regulation.

The absence of regulation leaves those who are affected by the conduct of another vulnerable to the power and information deficits that are intrinsic to commercial and market relationships.

This minimalist approach assumes businesses will honestly and rigorously monitor themselves, and report accurately on their compliance.

Yet light-handed regulation or self-regulation helped deliver the leaky building crisis, the Pike River mine tragedy, workplace deaths in forestry and on farms, finance company collapses, unsafe aged care, and dangerous adventure tourism, among other failures over the last 30 years.

Steps to address such crises are at risk of being swept away under this bill, especially if affected industries have more powers to object to regulations and demand more profit-friendly regimes.

Unaccountable executive power

David Seymour intends that two entities will give effect to this regime. The new Ministry for Regulation would conduct regulatory reviews to ensure they achieve ACT’s objectives and “do not impose unnecessary compliance costs or unnecessarily inhibit investment, competition and innovation”. There is not even a pretence of balanced public policy considerations.

This ministry has already been established without legislation or scrutiny of its rationale and fiscal implications at a time of budgetary austerity. Ironically, it does not support this bill.

The second entity is a proposed Regulatory Standards Board whose functions would include considering complaints and conducting reviews under the libertarian principles. It’s inevitable that well-resourced, powerful private interests and corporations will use this as a lobbying and pressure point to challenge regulations they dislike and seek to deregulate activities impeding their profitability.

The biased “principles” contained in the proposed bill would automatically override many of the concerns that others may wish to raise about regulations that adversely affect them, even if they had the resources to raise them.

The board will be hand-picked by the Minister for Regulatory Responsibility. I could almost name those people now. This has the potential to be our ideologically driven version of the Trump administration.

The process from here

To date, the only targeted engagement on the bill outside of government has been with the previous members of ACT’s Regulatory Taskforce.

The cabinet paper proposes targeted engagement with business groups, councils and legal experts. But the paragraph which might provide further information on this process has been redacted.

There is no basis for trust here. Based on the constraints in the cabinet paper and consultation document, and the previous behaviour of David Seymour, I’d expect those targeted for engagement will predominantly be champions of his legislation.

It is the constitutional responsibility of public servants who are conducting this consultation to break out of the minister’s constraints and provide free, frank and critical advice that reflects Te Tiriti o Waitangi and core democratic principles.

Likewise, National and New Zealand First need to take responsibility for allowing this travesty of democratic governance to reach even this far. They must act now to stop it before it even reaches the select committee.

 

Jane Kelsey is a retired law professor from the University of Auckland.

E-Tangata, 2024