Cullen Michael: Public Finance (State Sector Management) Bill — Second Reading Instruction to Committee In Committee 
Text is incorporated into the Bound Volume 
Cullen Michael: Public Finance (State Sector Management) Bill — Second Reading Instruction to Committee In Committee 
[Sitting date: 14 December 2004. Volume:622;Page:17854. Text is incorporated into the Bound Volume.] 
Hon Dr MICHAEL CULLEN (Minister of Finance) 
: 
 I recall that a long time ago as a stage 1 English student I learnt about stream of consciousness novels. We have just had a kind of stream of consciousness speech. I am still trying to work out what Mr Key was trying to say in that speech. As I recall it he actually said that the National Party really supports this bill but is desperate to find some reason to oppose it. Apparently the reason to oppose it—if I have it right—is that output appropriations may comprise more than one class of outputs. I ask the member whether that is correct. That is the provision in the bill? 
John Key 
: Yes that’s right—that’s one of them. 
Hon Dr MICHAEL CULLEN 
: That is right. That provision is designed to give a little more flexibility in what is occasionally a very rigid system within the Public Finance Act in that respect. 
This is an important part of the bill because it is the part where the Clerk of the House raised some very important issues. Contrary to what Mrs Wong seems to think the Clerk is happy with the bill as reported back. He believes that the amendments in the bill take care of the objections that he had to the bill. [ 
Interruption 
] Well I have no problem with the Clerk raising issues. I would be worried if the Finance and Expenditure Committee had not listened carefully to the Clerk and dealt with those issues but it has. So I say to Mrs Wong that she should celebrate success. She should stop living in the miserable little world of defeat that she inhabits at the present time. She should come out—come out if I may say so and as I would say to a number of members of the National Party—and celebrate success along with the Government at the present time. 
I also want to deal with very few other matters. What has happened in the bill is that the fiscal responsibility part which was Part 1 has now become Part 2 so Part 1 is now the appropriations part. Part 1 is important in a very crucial constitutional sense. It is about the fact that the Government has to go to Parliament to seek approval for appropriations. That is the whole function of Parliament around the issue of confidence and supply and the fact that the Government can survive if it can command a majority in those matters. But it is also about the issue of how we present those accounts and how they are seen to be properly presented. I think that the member was right if I can allude to a previous statement to say that outcomes can be very fuzzy. I do not think there is any way of solving that. There will always be attempts to try to define outcomes more closely and there was always a tendency for the Government to drift back towards focusing on outputs rather than outcomes because they are easier to measure and easier to show results with. Nevertheless I think that the legislation is right as the 1989 Public Finance Act was right in terms of the focus on outcomes. 
There have been some strange things going on in terms of some of the criticism of the bill from outside. The select committee has quite properly dealt with some of those criticisms and some of them were just basically tipped straight out of the window—as they should have been; they were really rather peculiar. One of the most peculiar of those criticisms was the notion that Parliament or the Government—it was never quite clear which—should set the accounting standards by which the Public Finance Act operated and under which the Government operated. Now I have been in politics long enough to remember the time when the Government used to set its own accounting standards. I think it is fair to say that when it did so the standards tended to be rather low and somewhat elastic and it was very difficult to work out what was actually going on within the Government accounts. The Government can no longer engage in that kind of behaviour. It is very clear within the public accounts if the Government tries to engage in accounting fiddles. 
The second part of that was the notion—which it is probably more appropriate to discuss later although we can deal with it in this part—that somehow or other under accruals accounting it is easier to sell assets. I have to say to the people who have that strange view that the public’s objection to selling assets has nothing to do with the accounting treatment thereof within the Public Finance Act. There is a quite simple political issue around Government ownership and public ownership of assets. That is the political test that the Government will always have to face on that issue. Accruals accounting gives a much more accurate measure of the fiscal consequences of the sale of assets as long as those assets are properly valued and that is one of the difficulties on occasion with the valuation of some State assets. 
I think that this is a good bill. There will always be some arguments around the fringes of this bill. I make no apologies for bringing the Fiscal Responsibility Act within the bill. That was the original intention; it is what Treasury supported in 1993-94. I think that Treasury was right at the time because everything within the Fiscal Responsibility Act is appropriate to put within the Public Finance Act. The final point I would make in response to the member is that it is not for him to preach to me about fiscal responsibility. It is the National Party that wants a looser fiscal policy not Labour.