Smith Lockwood: Public Finance (State Sector Management) Bill — First Reading 
Smith Lockwood: Public Finance (State Sector Management) Bill — First Reading 
[Volume:614;Page:10753] 
Dr the Hon LOCKWOOD SMITH (National—Rodney) 
: 
 The Hon Margaret Wilson who has just resumed her seat claimed that this legislation is important to the Government yet a few minutes ago there seemed to be no Government Minister who was much interested in reading this bill for the first time in this Parliament. No one stood to take the call and quite clearly the Minister herself did not know a lot about it. She just read someone else’s speech. 
National will support this bill to the select committee but I must make it clear that we do so with some serious reservations. This bill will see the repeal of the Fiscal Responsibility Act which is icon legislation in this country. The Fiscal Responsibility Act is pivotal to maintaining investor confidence in New Zealand. It was that legislation that gave confidence to financial markets in this country. It was that legislation that prevented Ministers of Finance from priming the pump in election years and from concealing the true facts of the state of our accounts—as Labour did when it went out of office in 1990 claiming this country had a $89 million surplus when in reality it had a multibillion-dollar deficit all of it hidden from the public. The Fiscal Responsibility Act stopped that ever happening again. It is pivotal to maintaining investor confidence in New Zealand. 
Although I accept that many of the provisions of the Fiscal Responsibility Act are incorporated into this bill the very fact that the old Act is being repealed means that we must be vigilant to make sure that none of the vitally important elements of that Act are lost in the transition to this bill. The last thing we want for New Zealand is investors—especially off-shore investors—to be given the impression that the Parliament of New Zealand has repealed that critically important legislation the Fiscal Responsibility Act. 
I have to confess that in my time in this place—since 1994—Dr Cullen has never been a great enthusiast for some parts of the Fiscal Responsibility Act. I suspect he has always felt it has constrained him a bit because even though he is running what appear to be huge surpluses at the moment he has been a very enthusiastic spender. If we look at the increases in Government spending over the years that Michael Cullen has been Treasurer we will see that they have grown exponentially. His quite significant surpluses have resulted from his very effectiveness in increasing taxes. 
He claimed that he would only put the top tax rate up from 33c to 39c to affect 5 percent of our workforce. Counting the latest export levy there have been 18 new taxes and levies but worst of all Dr Cullen and this Labour-led Government have not altered at all the thresholds for income tax. That means that New Zealand has seen massive bracket creep or fiscal drag—whatever one likes to call it—and since Dr Cullen has been Treasurer the average worker in New Zealand has suffered the second highest increase in income tax in the OECD. That is why Dr Cullen has such big fiscal surpluses—18 new increases in taxes and levies plus the greatest increase in personal income tax on average workers in New Zealand compared with the rest of the OECD. So Dr Cullen has actually been quite a big spender and the Fiscal Responsibility Act has always been a bit of an irritant for him. 
I want to come back to the details of that Act in a moment because as the select committee explores this bill two other issues need examination. The first is new clause 26B which provides for appropriations to cover more than one class of output. I can understand why the Government is seeking to do that. I think its argument would be that it should give Ministers more flexibility to spend the appropriations of Parliament more effectively. But the desire of Ministers to have more influence over how they spend this Parliament’s appropriations has to be balanced against accountability back to Parliament. With this change the select committee must examine whether Parliament will be able to identify—the way it is identified in supplementary estimates at the moment—where Ministers have changed spending and deviated from the appropriations of Parliament. 
There is nothing wrong with Ministers having to change certain amounts of spending. I was a Minister for 9 years and accept that there is nothing wrong with that but the disciplines of the current legislation require those Ministers to come back to Parliament so that it can rubber-stamp anything beyond a certain percentage. It means that changes in spending are at least drawn to the attention of this Parliament. I want the select committee to make sure that if this bill is to provide for greater flexibility so that the appropriations can cover more than one class of output then there must be a mechanism for drawing Parliament’s attention to instances where expenditures differ significantly from what it was told was the intention of the Government in the first place. 
That is the first issue that National wants to make sure the select committee scrutinises closely. The second is that the State Services Commission as we heard the Minister say has been given an extended mandate to provide leadership on ethics values and standards. I guess that sounds all fine in theory but listen to this: the amendments to the State Sector Act also provide for the Prime Minister to direct the commissioner. I want to make sure that the select committee explores that provision very closely because we know all about our current Prime Minister’s ethics and standards. She is prepared to forge her signature on paintings. If she is now able to direct the State Services Commissioner under these amendments to the State Sector Act we want to make sure that there is a fair bit of constraint on how she can direct the commissioner. I highlight those issues as additional ones that we want to make sure the select committee examines. 
Let me come back to the Fiscal Responsibility Act because one of the major issues is the changes that this legislation makes in respect of the Budget Policy Statement. That statement is hugely important for New Zealand. At present it is where the Government lays out the long-term objectives for fiscal policy and how the Government’s current or shorter-term strategy for the Budget fits into that longer-term fiscal framework. What this legislation changes is that that long-term fiscal view will come out of the Budget Policy Statement because it seems that Dr Cullen is arguing that there is duplication between that long-term fiscal view in the Budget Policy Statement and the Fiscal Strategy Report that is tabled at the same time as the Budget. 
The issue is that the Budget Policy Statement comes out before the Budget and for maximum value to be obtained from the Budget Policy Statement we must see how it fits into the Government’s longer-term fiscal objectives. But we will not know that because the Fiscal Strategy Report does not come out until the Budget itself. There are issues of timing around that that I hope the select committee will examine in some detail because we must not undermine the value of the Budget Policy Statement. 
The various reports required by the Fiscal Responsibility Act are hugely important and in repealing that icon legislation and incorporating it into this legislation we must make sure that the powerful accountability mechanisms of the Act leading from the executive back to this Parliament are not weakened in any way. If they are investment in the New Zealand economy in the future will suffer and ultimately New Zealanders will be the worse off for that. 
I repeat—we will support this legislation to the select committee but there are a number of issues that require greater examination by the committee and our final position will depend of course on that analysis.