9 December 2011

The election result, and resultant confidence and supply agreement between ACT and National, has breathed new life into the Regulatory Standards Bill (Bill), which began as the Regulatory Responsibility Bill. However, it will be an alternative life form.

The Bill has had a long history, starting life as Rodney Hide's Member's Bill in 2006, being reviewed by a Taskforce in 2009, and introduced to Parliament in 2011 with National's support to send it to the Commerce Select Committee for further analysis. However, the Bill languished before the Committee as it became apparent that Ministers, officials (especially Treasury) and submitters all had divergent views on the form the Bill should take. Ultimately, the Committee released an interim report inviting submissions on criticisms made by the Regulations Review Committee.

The new confidence and supply agreement provides that the Bill will be reinstated (all Bills before the previous Parliament lapse and must be reinstated by the new Parliament). It also provides that John Banks MP, in his role as Minister of Regulatory Reform, will work on the Bill with the Minister of Finance "... to achieve a mutually agreed outcome, based on the Treasury's preferred option (option 5), for enacting within the next 12 months." Accordingly, provided that there is an outcome that can be "mutually agreed" between National and ACT, we can expect a modified Bill to be enacted before the end of 2012.

The modified Bill is said to be "based on" Treasury's option 5, which comes from the Regulatory Impact Statement (RIS) that was published when the current Bill was introduced into Parliament in March 2011. Obviously this provides some latitude for negotiation. However, some guidance can be obtained from Treasury's analysis of the current Bill. Treasury's RIS contains a comprehensive attempt to define what bad quality legislation is, explore the causes of such legislation and consider what solutions may addresses those causes. The RIS brought greater rigour into the debate about regulatory quality and has provided the preliminary analysis for the proposal that will now progress.

Treasury's option 5 focuses on strengthening Parliament's review of proposed legislation, and does not give any role to the courts. Ministers would have to draw attention to any bad features contained in proposed legislation, based on a list of matters drawn from existing Legislation Advisory Committee guidelines. This option is modelled on Queensland’s Legislative Standards Act, which requires proposed legislation to be accompanied by explanatory notes containing certain details, including an assessment of consistency with listed "fundamental legislative principles".

This alternative option can be contrasted with the current Bill as follows:

The current Bill	Treasury's option 5
Principles The Bill contains principles of responsible regulation. The scope of these principles encompasses the rule of law, protection of individual liberties, protection of property rights, the imposition of taxes and charges, the role of the courts, review of administrative decisions, and good law-making processes.	Matters There would be a list of matters that legislation should only provide for after careful scrutiny. The list could be based on existing Legislation Advisory Committee guidelines. The matters could be: adversely affecting rights or imposing obligations retrospectively; taking or impairing private property without compensation; allowing public entities to set charges that exceed cost recovery; seeking to oust or restrict access to judicial review; authorising decisions affecting rights and interests without providing rights of appeal; conferring criminal or civil immunity on any person; and authorising the making of delegated legislation that would amend an Act (a 'Henry VIII clause'), or grant exemptions from an Act or regulation.
Certificates The Bill requires decision-makers (Ministers, department chief executives and MPs) to certify whether Bills or regulations they are proposing are compatible with the principles. In the case of Bills, the certificate must be presented to the House of Representatives. Any incompatibility with the principles is justified to the extent that it is reasonable and can be demonstrably justified in a free and democratic society (the same test that applies under the New Zealand Bill of Rights Act 1990). If a decision maker relies on that test, then he or she must provide reasons in the certificate.	Explanatory notes If a Bill, SOP or regulation provides for any of the listed matters, then the responsible Minister would have to present an "explanatory note" to the House disclosing the matters and explaining why they are justified. The list of matters may be different in the case of regulations.
Role for courts The Bill empowers the courts to make declarations of incompatibility where they conclude that legislation breaches a sub-set of the principles. The declaration would not amend or strike out that legislation. The courts are also directed to first try to interpret legislation to be compatible with the principles, where possible.	No role for courts The courts have no role.
Regular review of legislation Public entities must regularly review all legislation that they administer to check for incompatibility with the principles.	Periodic review of legislative processes The Attorney-General would commission a 5-yearly report on the performance of processes for developing legislation.

 

Treasury notes that its proposals could be given effect without legislation but by instead amending the Standing Orders and Cabinet guidelines. However, the new ACT-National confidence and supply agreement contemplates that a Bill will be enacted.

Treasury also suggests that its option 5 be supported by other measures:

• Greater release of exposure drafts of legislation for consultation. This is something that should be encouraged.
• A new legislative quality select committee, or requiring subject select committees to report on legislative quality criteria.
• A new Officer of Parliament to consider legislative quality and support select committees (which would require legislation), or other new resources to support select committees.
• A reinvented Cabinet Legislation Committee (LEG) that subjects proposed legislation to greater scrutiny before it is progressed by Cabinet.

The RIS also emphasises the need for any new measures to have buy-in from Ministers, the public service and MPs in order to be successful. The full RIS can be read here.

The new Government remains free to modify and depart from the option proposed by Treasury as it develops a new proposal to enact as law. Given the likely changes from the Bill currently before Parliament, we would hope (and anticipate) that there will be another chance for submissions on the new proposal.

It is hoped that the Bill will introduce greater care and discipline to Government decisions on making new legislation, just as the Fiscal Responsibility Act (now part of the Public Finance Act) has brought greater discipline to Government decisions on fiscal policy. If the Bill, or any non-legislative measures that result from this reform process, are a success then the quality of regulation in New Zealand can be expected to improve over time. It is therefore important that business and other interested stakeholders participate actively in the development of the new Bill over the next year, to ensure that the Bill is a success.

The ACT-National agreement provides greater certainty that the Bill will be progressed in a new form, and the choice to adopt the more moderate option recommended by Treasury increases the likelihood that the reforms will be politically enduring. The question that only time will answer is whether the enhanced acceptability has been bought at the expense of the effectiveness that the original architects were seeking to achieve.

Contributed by Tim Clarke, Craig Shrive and Henry Clayton.

This publication is included in Russell McVeagh's website : www.russellmcveagh.com

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