Wilson Margaret: Public Finance (State Sector Management) Bill — First Reading 
Wilson Margaret: Public Finance (State Sector Management) Bill — First Reading 
[Volume:614;Page:10752] 
Hon MARGARET WILSON (Attorney-General) 
 on behalf of the 
 Minister of Finance 
: I move  
That the Public Finance (State Sector Management) Bill be now read a first time. 
 I intend that the bill be referred to the Finance and Expenditure Committee for consideration. I am pleased to move the first reading of this bill because it is the most significant reform of State sector financial management for over a decade. It helps set out the new benchmark for public sector management in New Zealand and internationally. 
This bill contains eight parts and covers three important areas of change: first the changes to the Public Finance Act including integration of the Fiscal Responsibility Act; second amendments to the State Sector Act; and third the creation of a new Crown Entities Act. All of these amendments will work together to provide greater transparency and accountability in the use of public finances improve flexibility for departments and ministers reduce fragmentation effect positive cultural change in the State sector and provide a consistent governance and accountability framework for Crown entities. 
In 2001 the Government commissioned a ministerial advisory group to review and report on practices and performance issues in the State sector. This report now known as the Review of the Centre aimed to find ways to maintain and strengthen the public sector and the wider State sector. The review found that although the foundations of public management systems were sound there were some changes that could be implemented to make them respond better to the needs of the future. The legislative backing required for some of these changes is contained in this bill. 
 The major focus of the bill is that it improves transparency and accountability around the management of public finances and in the governance structures for Crown entities. The Crown entities spend half of the State sector budget outside benefit payments and debt servicing and they employ over two-thirds of all State sector staff. As such it is very important that they operate in a transparent and accountable manner. The changes contained in this bill aim to set out consistent and cohesive governance and accountability requirements. 
The bill builds on the basis for strategic engagement between Ministers and Crown entity boards to establish performance expectations and reporting of performance. It tailors the governance and accountability framework to capture major differences between Crown entities while still reflecting their different relationships with the Crown. It also clarifies the relationship between Ministers and individual Crown entities. In addition the changes set out rules on significant matters such as the appointment and dismissal of board members board duties conflicts of interest and financial powers. Existing legislation relating to particular Crown entities will be amended by this bill to bring it into line with this framework. 
The bill also amends the Public Finance Act and integrates into the Public Finance Act the provisions of the Fiscal Responsibility Act. I need to emphasise that these changes are solely to provide enhancements of these already fundamentally sound pieces of legislation. The Public Finance Act amendments confirm the model of public sector financial management whereby agencies provide services that contribute to the results or outcomes sought by the Government while maintaining the capability to continue to deliver. The amendments also affirm the primacy of outcomes in the context of managing outcomes. The Fiscal Responsibility Act is being integrated because it contains key provisions for reporting on how the Government manages its finances and it makes sense for it to be in the same stable as other provisions relating to the Government’s financial management. 
There will be changes to the focus of the Budget Policy Statement and the Fiscal Strategy Report. The Budget Policy Statement will now focus on the upcoming Budget strategy. The Fiscal Strategy Report tabled with the Budget will focus on the short-term and long-term fiscal strategy. To further extend the benchmark for fiscal transparency Treasury will be required to carry out a review of the long-term fiscal issues every 4 years that looks at risks over a 40-year horizon. 
The bill will improve transparency and accountability by strengthening the reporting to Parliament by departments Offices of Parliament and Crown entities on their intended and actual performance particularly in the area of non-financial information. For example departments will be required to provide information on Budget day on their future operating intentions for the next 3 financial years. 
The second main thing that this bill does is to provide an opportunity for Ministers and departments to manage public finances more flexibly and in a way that reduces fragmentation. Increased flexibility will allow departments to have a greater focus on achieving results and to find synergies across various votes and departments. For example the changes will allow more than one Minister to be responsible for different appropriations within a vote. Changes also allow for more than one output class to be covered by a single appropriation. In allowing increased flexibility I have also been clear that accountability must be retained so although we have increased flexibility by allowing Ministers to authorise fiscally neutral adjustments between outputs within the same appropriation without further reference to Parliament accountability is retained because reporting is still at the individual output class level. This will allow departments and Ministers to focus their energies on delivering improved outcomes in New Zealand. 
Reducing fragmentation is a particular focus for the Crown entity changes which in addition to improving accountability and transparency will also strengthen the whole-of-Government approach that this Government is committed to promoting within the State sector. I think the House will be interested to note that this bill will introduce a framework for board fees that both requires disclosure of fees paid and precludes compensation for loss of office. 
The third main thing this bill does is to introduce changes designed to strengthen the State sector through amendments to the State Sector Act. The two main aspects of the State sector changes are extending the State Services Commissioner’s mandate for the sector and encouraging senior leadership and management development. The commissioner’s mandate will be extended to ensure that people working in Government organisations are clear that they are required to adhere to high ethical standards. The commissioner’s mandate will also be extended to provide leadership to the State sector on other matters—for example advice on management systems structures and organisations in the Crown entity sector. This bill aims to facilitate building a group of talented senior managers to meet the future needs of the public service. 
Finally the Government has taken steps to consult with other parties represented in the House during the development of this bill. The pre-introduction parliamentary briefing released in August provides an overview of the bill and its main points. I am pleased that all but one party took the opportunity to engage in this consultation. We seek to build broad support for this bill due to the fundamental and enduring nature of the legislation. I believe that this bill will serve the future of public sector management in New Zealand well and set a new benchmark internationally. It is therefore with much pleasure that I commend this bill to the House.