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Speech To Federated Farmers Plenary Day, Auckland

Posted on 01 Jul 2009

Speech To Federated Farmers Plenary Day, Auckland

Good morning. I’m very pleased to have the opportunity to join you here today.

Your business - agriculture - is one of the few areas where New Zealand leads the world. We are the 12th largest agricultural exporter by value. The success of New Zealand agriculture is reflected in its value to our economy, making up around 12 per cent of GDP and over 12 per cent of employment.

A badly performing economy impacts on us all, regardless of whether we are employers, employees, superannuitants, or self-employed. That’s why growing the economy is one of the Government’s three priority areas.

To grow the economy we need to create the right environment, which means reducing bureaucracy, and reducing regulatory and compliance demands.

The work I have underway, both as Minister of Regulatory Reform and Minister of Local Government, aims to make an important contribution to creating the right environment to foster growth.

I’ve had a lot of valuable input from farmers, both in meetings I’ve attended and correspondence I’ve received. The messages have been very clear - farmers are paying too much in rates and this is impacting on the economic viability of your farms.
Many of you also feel that council expenditure has got out of hand. And you’re certainly not alone in thinking that.

I’m very clear about what needs to be done. Firstly, we need to focus on reducing local government costs. Containing councils’ costs will benefit all ratepayers, including the rural sector, through reduced rates demands. Just as central government has had to cut its spending in the current economic climate, local government needs to consider how it can contain costs and limit rates increases.

Councils should be looking at each and every item of expenditure. They need to be assessing if every service they provide and every project they plan is necessary, and listening carefully to what their ratepayers think. Councils need to do better in some areas. They should be streamlining procedures and processes to ensure their services are as efficient as possible.

Some councils’ procedures for processing resource consents are good examples of how not to run a service. Consent applicants are paying a high price for these bad processes, through significant delays and costs. The delays don’t just affect applicants; they can also impact on regions’ economies by delaying or discouraging economic growth.

As farmers, and significant contributors to the national economy, you will understand that we cannot afford these sorts of unwarranted and avoidable hindrances to improving our economic performance. This is particularly so in the current economic climate, which is unlikely to significantly improve for some time yet.

The Government wants ratepayers to have greater confidence in, and control over, their councils. This means that councils’ decision-making must be clear, transparent and accountable to ratepayers in a meaningful way.

We are taking a number of actions to try to achieve a more streamlined, efficient, and responsive local government sector. One of the most important areas of work in my local government portfolio is enhancing local accountability, and reducing the process burden that central government imposes on local government. The work aims to ensure that ratepayers and citizens have more control over council costs, rates and activities.

Some commentators have portrayed the proposals as a threat to local democracy, but that is not correct. The review is not about stopping councils from doing things. It’s about giving ratepayers and citizens more tools to have a greater say in what is done on their behalf and with their money. It is about simplifying processes, and ensuring that ratepayers and citizens have the right information to make informed decisions about what they want for their communities.

The review is guided by the following principles:

- local government should operate within a defined fiscal envelope
- councils should focus on core activities, and
- council decision-making should be clear, transparent and accountable.

It has three related workstreams:

- long-term planning and financial management
- management of service performance, and
- accountability and decision-making.

The first workstream aims to reduce the complexity and cost of long-term planning processes.
It will also consider how councils’ financial reporting could be improved to provide better and more easily understood information.

Planning documents such as long-term council community plans play an important role in councils’ accountability to their communities. But the size and complexity of these plans often make them difficult to understand and can deter citizens from participating in decision-making processes. Much of the financial information provided by councils is incomprehensible to the layperson.

Having access to useful information that can be readily understood is crucial if communities are to hold their councils accountable. Information needs to be in ‘plain English’ and ratepayers need to know what activities their money is being spent on.

Officials will examine the merits of councils preparing financial strategies to set limits on rates, debt and expenditure, and to prioritise expenditure. Under this approach councils then set priorities within those limits, rather than collating a wish list and taxing ratepayers to pay for it.

They will also consider pre-election financial updates, which would ensure that councils give a proper account of activities over the previous three years, and identify proposed items of expenditure over the next three years.

This would give electors a chance to put hard questions to candidates about past and proposed expenditure, and encourage debate about spending priorities.

The second workstream will look at whether changes are needed to the current requirements around identifying and monitoring community outcomes. It is debatable whether this is a good use of council resources. Officials will be examining options for a more focused and less costly service performance reporting system.

The third workstream is about enhancing councils’ accountability to their ratepayers and citizens. There are two issues. The first is the total cost of councils. The second is council priorities.

The councils that control the budgets set a clear fiscal strategy. That stands to reason.
A fiscal strategy clearly has to be set. The question is ‘who sets it?’ It seems to me that it should be ratepayers. After all, it’s their money being spent.

Accordingly, officials are examining options for allowing voters at election time to tick a box and thereby control council spending to, say, the rate of inflation.

Total cost is an issue. So is prioritising.

Many ratepayers have written to me concerned about rate rises. Many too have written because they are worried and angry at having to pay for facilities they don’t want - like the Otago Stadium, the Timaru aquatic complex, and the Nelson Performing Arts Centre.

The problem with current mechanisms, such as complaints to the Ombudsmen or voting out councils, is that they are retrospective. By the time elections come round, the council may have started the project, so it’s too late to pull out.

We’re looking at putting the horse before the cart, by giving ratepayers greater control over council decisions to invest in large and controversial projects, and especially projects beyond what we think of as core local government functions.

Officials have now scoped the review and are consulting with stakeholders, including the Local Government Forum. As a member of the Forum, Federated Farmers will have input into the process.

I believe that the measures being considered in the review would go a considerable way towards achieving my objective of an efficient, cost-effective and responsive local government sector.

I am aware that Federated Farmers is advocating for wider reform of local government funding, such as a move away from property-based rates to a greater focus on matching costs to benefits. At this stage my priorities are to get Auckland’s governance issues sorted out, and then to get local government expenditure under control. Once I’ve dealt with these matters, I will welcome discussion on future priorities for local government reform.

There has been quite a lot of attention lately on what constitutes the ‘core’ business of local government. Officials are considering this, as it is linked to their work on transparency, accountability, and financial management.

There is currently no formal definition of local authority core services. We need one. But I’m not suggesting that the Government stop councils from undertaking activities.

What I’m proposing is that councils focus on core services and seek a citizen mandate (probably through a referendum mechanism) for activities that are clearly not core services.

I am also concerned about mandatory functions and associated costs being imposed on local government by central government. In the past, too many obligations and costs have been passed on to local government by central government.

The Government is committed to reducing the costs that central government has imposed on the sector. I intend to examine whether central government has processes for making policy decisions that take full account of the costs and benefits.

My local government reform programme ties in with my work as Minister for Regulatory Reform.
The Minister of Finance and I have oversight of review of 11 major areas of regulation. These include review of the Building Act and Resource Management Act. Significant progress has been made on both reviews.

At the moment the Resource Management Act is causing unnecessary delays and high compliance costs that slow down our economic growth and infrastructure development. We currently have a Bill before the House which seeks to streamline and simplify RMA processes. This Bill makes a lot of small improvements to the Act, including removing frivolous, vexatious and anti-competitive objections, improving plan development and plan change processes, and reducing the compliance cost of consents.

We think this will make a big difference for farmers and other businesses.

The current Bill is only the first step in improving the RMA. We are starting to look at a host of more complex issues. For farmers, perhaps the most important will be water. Getting water right is critical to the long term future of the primary sector, tourism and Brand New Zealand. It will require input from all water users, and a concerted effort from both local and national government. And it won’t happen overnight. But we’re confident that in conjunction with work already underway on managing water quality, abstraction and allocation, we can continue to improve the way water is managed and ensure we get the most value from it.

In my role as Minister for Regulatory Reform I see one of my jobs as changing the culture of government. I want regulators to give more thought to how regulation impacts on local government, businesses, and private citizens. Regulators should be thinking 'how much is this going to cost the taxpayer or ratepayer' and 'is regulation really the right approach or are there more savvy ways of achieving the same result?' The quality of new regulation is important.

Officials are working on a set of quality assurance measures that can be established within government. This includes a Government Policy Statement on regulation.

We also need to have a systematic approach to continually reviewing existing regulations, to make sure that they are still relevant and implemented in the most efficient way. Again, officials are working on proposals for us to consider.

Additionally, we are establishing a 2025 Productivity Taskforce to investigate a number of important matters, including:
- the reasons for the recent decline in New Zealand's productivity performance
- identifying superior institutions and policies in Australia and other more successful countries, and
- making credible recommendations on the steps needed to close the income gap with Australia by 2025.

We will also explore the concept of a New Zealand Productivity Commission associated with Australia's Productivity Commission, in order to support the goals of higher productivity growth and improvements in the quality of regulation.

So you can see that much work is underway to help get our economy growing. New Zealand is not going down the path some other countries are currently following in pursuing heavy regulation and even heavier subsidies. That leads to a farming sector which is over-regulated, inefficient, and drifts further and further behind what is internationally competitive.

We want New Zealand farmers to continue to be innovative, sustainable and profitable, and the role of Government is to focus on getting the regulatory settings right to enable you to do so.

Thank you again for the opportunity to speak to you today. I’m very happy to take your questions or hear your comments.

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