Norman Russel: Public Finance (Fiscal Responsibility) Amendment Bill — First Reading 
Text is incorporated into the Bound Volume 
Norman Russel: Public Finance (Fiscal Responsibility) Amendment Bill — First Reading 
[Sitting date: 04 December 2012. Volume:686;Page:7054. Text is incorporated into the Bound Volume.] 
Dr RUSSEL NORMAN (Co-Leader—Green) 
: 
 I rise to speak on behalf of the Green Party on the Public Finance (Fiscal Responsibility) Amendment Bill. It is with great pleasure that I speak to this bill which I think is an excellent bill. I think the Minister of Finance should be congratulated on putting the bill together. It was great that we got rid of the spending caps which were a silly ACT Party intervention into the debate but now that sense has been seen and we have got rid of that one actually we have ended up with a good bill. There are a lot of good things about this bill. 
The first part is about being explicit about how fiscal policy settings will interact with monetary policy. Of course this is something that has always been implicit but putting it explicitly into the Public Finance Act seems to me a very responsible and sensible thing to do. I would argue in fact that those of us who are supportive of a capital gains tax excluding the family home would have quite a bit to say about the way a capital gains tax could influence monetary policy and actually take some of the pressure off monetary policy in terms of trying to control housing asset bubbles in the future. I would be very interested to see Treasury’s analysis given that it has for a long time been supportive of a capital gains tax of using this bill and the new requirements in this bill to look at the effect of a capital gains tax on the interaction between fiscal policy and monetary policy. We believe as Treasury does that a capital gains tax has a very positive effect on that interaction. 
Another part of this bill is that the Government must state how the Government’s fiscal policy will impact on present and future generations and it is expected to take a 40-year perspective. I think this is a very healthy development for our democracy. From the Green Party’s point of view we try to take a long-term intergenerational approach to policy—for example around climate change which is a classic if you like environmental issue but of course is a highly economic issue and social issue as well. Having the Government required to take a 40-year view to take a long-term intergenerational view seems to me a very positive development. I want to come back to that shortly with regard to public-private partnerships. 
Obviously the Government has included the principle that tax revenue needs to be raised “efficiently and fairly”. The Minister of Finance made a point in his speech that clearly this is a subjective thing—what is efficient and what is fair. But I think he rightly made the point that the Government will be required to explain what it thinks is efficient and what it thinks is fair in terms of raising revenue. Getting that on the record and getting it transparent is I think a positive thing. 
The next part of this bill is the retrospective or looking-back element. I think this is a very healthy development. Often we find when we read the Government statements that they cover the present and they have these projections and the projections are always wonderful and about how everything is going to get better. So I think it is quite good that there is an element of looking back that will be required in the reporting elements around the Budget. Having that backwards-looking element is I think a very positive development. It requires the Government and Treasury to look at what the Government said it would do then what it actually did and hopefully to make some kind of assessment about how things worked—whether they worked well or whether they did not. 
The other part of it is about instituting or formalising the Government’s Investment Statement. This was a great innovation by the current Government and Minister of Finance—to put out the Investment Statement. Obviously it was linked in part to the Government’s asset sales programme—which we do not agree with—but the Investment Statement itself is I think a positive development in terms of reporting. 
Taken together I think these provisions are really good and this is a really good bill. Obviously we still have a lot of criticism of some of the Government’s strategy and we would argue that it is not meeting if you like some of the good principles that are actually in this new bill. None the less in terms of a reporting requirement it seems to me quite sensible. 
I want to talk a little bit about PPPs and debt and how they might be covered by this reporting requirement because I think it is important. PPPs are public-private partnerships. There are many variants but we could look at motorways. The Government has got a problem with motorways at the moment. It has this extraordinarily large motorway building ambition but the revenue source for that motorway building ambition is drying off because State highway volumes have remained flat now for over 5 years. So the Government’s problem is how it funds it. Traditionally in the past it would have done it through debt and there is a very clear way to record debt on the books so we would have had a clear view of that. The Government is now exploring using public-private partnerships. So essentially if we were to look at a project—one of the motorway projects—the Government would get a private corporation to build the project and then the Government would pay it a certain amount every year to run that highway for any number of years into the future. Essentially it becomes the Government paying this private corporation this payment every year for many years. 
The Government’s and Steven Joyce’s aim in this is to sign up contracts so that future Governments cannot stop these major motorway projects. That is the political ambition of the Government. The Government wants to lock any future Government into large motorway projects whether it supports them or not. That is why the Government is going down the public-private partnership route from the point of view of a political reason. From the point of view of a financial reason and related to this bill it is to try to hide the cost. If the Government had to go out and borrow a whole bunch of money to build these motorways we could all point to the debt and say “Hey you’ve taken on this debt. There’s a certain cost of servicing that debt.” So what the Government wants to do is sign a contract with a private provider which then builds the motorway and the Government pays it an income stream over 10 or 15 years further down the track. 
The question I have is how the Government books will treat these things because it seems to me that if you borrow money and then you pay it off over a certain period you are effectively committing yourself to pay a certain amount of money every year for 15 or 20 years—however long it takes. If that is a debt trap to pay for the motorway projects compare that with a public-private partnership. Effectively it is the same thing—that is the Government is committed to paying a certain amount of money every year for a certain number of years. So it seems to me that if the Government is going to be straightforward and honest in its reporting of these kinds of public-private partnership instruments it should report them as a liability essentially on the Government because the Government has to pay these payments in a public-private partnership well into the future as if they were debt. So I would be very interested to explore in the Finance and Expenditure Committee how the Government proposes to account for public-private partnerships on the Government books. I am not sure how this bill will affect that. I hope it will have a positive effect in the Government being transparent that actually public-private partnerships are effectively the same as taking on giant wads of debt. 
The other part of it that I think is kind of interesting—it is a very interesting bill this one—is that it is like Treasury’s redux against Labour about student loans and Working for Families payments in a way. What Treasury liked about the last Labour Government was that it paid down debt and it did it in a big way. It was hard to criticise it. National was totally wrong in all its criticisms of the last Government in terms of it paying down debt. The one great thing the positive thing that the current Government inherited from the last Government was the fiscal position which gave it a lot of leeway. But what Treasury really hated was the Working for Families payments and the interest-free student loans. The reason it hated them was they did not appear on the books as debt but effectively had kind of long-term fiscal impacts on the Government books. So what they are trying to do with this bill is to lock in some kind of accountability—from its point of view accountability—for what are the long-term fiscal impacts of making decisions like interest-free student loans or Working for Families and trying to make the Government of the day account for those out-years the very significant long-term effects of making decisions like interest-free student loans or Working for Families. 
Bill English kind of hinted at this in his speech. He did not want to say it explicitly but there is an inherent criticism from Treasury in that on the one hand it liked the last Labour Government because it was responsible on debt but on the other hand it made these commitments which from Treasury’s point of view locked in future Governments and the fiscal position going forward and Treasury wants the accounts to reflect that. I think that is reasonable. Although I am a supporter of these policies I think it is reasonable that we need to factor in the long-term fiscal impact when we make decisions like that because I do believe that you know responsible Governments need to look at the impact of their decisions on future generations. I wish that the current Government would take this to heart in a lot of its decisions. For example if we were to look at the current Government’s decisions on the emissions trading scheme we see that they have very long-term and very very significant fiscal impacts on the Government. It is very hard to account for them properly and Treasury has kind of struggled to do that but even the last round of changes according to Treasury’s own Cabinet paper cost $300 million. So the decisions that the Government makes around climate change not only have very significant environmental and social effects in terms of the broader or the real world; they also have very significant fiscal effects going forward. It will be very important to us to make sure that this bill and the existing arrangements properly account for the true fiscal impacts of decisions like the Government’s decision around climate change because that has such enormously significant impacts. 
I am also interested in the concern of Treasury about pro-cyclical fiscal policy. I am also very interested to see what the matching side will be in terms of monetary policy. What are the macro-prudential tools we will introduce to prevent pro-cyclical monetary policy from the Reserve Bank side if we are going to be keeping a close eye on pro-cyclical fiscal policy? Because those two things do need to be aligned and matched together. 
But anyway it is a good bill and I look forward to the select committee hearings.