Key John: Public Finance (State Sector Management) Bill — Second Reading Instruction to Committee In Committee 
Text is incorporated into the Bound Volume 
Key John: Public Finance (State Sector Management) Bill — Second Reading Instruction to Committee In Committee 
[Sitting date: 14 December 2004. Volume:622;Page:17850. Text is incorporated into the Bound Volume.] 
JOHN KEY (National—Helensville) 
: 
 The Public Finance (State Sector Management) Bill is a mammoth bill. It is 500 pages and is a rewrite of the 1989 Public Finance Act. It is a bill that the House should take a great deal of interest in and have a great deal of concern about. From a financial perspective it is one the landmark pieces of legislation that this Parliament is based on. Along with the Fiscal Responsibility Act which becomes entwined within this bill and the Reserve Bank of New Zealand Act it is probably the most significant legislation in relation to the way in which the machinery of government is run and the $46 billion of tax revenue is spent by the Government. 
The bill came on the back of a Public Finance Act that from its early days until today set significantly high standards of practice for the public sector. In that sense it came from a strong starting point. This bill was brought about in terms of the review that was undertaken to look at the Government and the way in which the State sector was operating. In some respects I am forced to say that the review was flawed. It lacked rigorous definition of the problems involved analysis and the criteria for assessing the options available to it. As a result of that flaw the first draft that came out in terms of the public finance legislation was extremely substandard. 
We have already heard a bit about the submissions made to the select committee and I will address some of those individual submissions in a moment. But first I will just take a moment to thank the advisers to the committee of whom there were quite a number from a number of departments. They worked tirelessly for a long time to try to knock this legislation into shape. 
If we start with the first of the submissions it was by the Clerk of the House David McGee. David McGee is well known around Parliament as one of the truly great brains in this area. He has great knowledge. He has written a number of books on constitutional issues here in New Zealand and on the role of Parliament. When someone like David McGee comes to a select committee and says that the bill is “a Trojan horse” “virus-like” and “post-modernism gone mad” one takes a step back and asks whether this is well-drafted legislation. 
One needed only to take a look at the face of the select committee chairman Clayton Cosgrove when Mr McGee was giving his address to the select committee to know that the Government was firstly going to be found out for what it was trying to push through Parliament and secondly that the Government would buckle at its knees because it could not get the bill through the House in its original form with the support of the Progressives and United Future because neither of those parties would have even thought about voting for the legislation in that form. 
Let us be under no illusion as to what the bill was attempting to do before David McGee had the chance to tidy it up. It was the dead hand of government—the creeping hand of this socialist Government—trying to entwine itself in all parts of our State sector and to get control of things like Crown entities that had been deliberately quarantined off by Acts of Parliament. I will come back to that very point in a moment because I have in my hand—as Chamberlain once said—in this case a letter from the vice-chancellors of the New Zealand universities and it has been signed by eight of them. 
It contains an interesting part that I want to reflect on and if I may I will take a moment to read from the letter sent to alumni of the universities: “Universities were given an undertaking by Ministers Mallard and Maharey that in stage one represented by the bill currently before Parliament the Government would strictly maintain the status quo.” But the letter goes on to state: “In stage two which will lead to further legislation in the future changes to the status quo are being considered. The power to review the functions and activities of universities and to advise on the establishment and abolition of universities is being considered.” 
I want to go back to David McGee’s submission for a moment and to talk about what was in the bill before the Clerk of the House got a chance to tidy it up. [ 
Interruption 
] Mr Hughes has a habit of interrupting because he does not have time in his busy schedule to go and read very important legislation. I offer Mr Hughes a bit of advice. I could give him about a dozen documents. I realise that he can pick up the bill that he is now advanced in his adulthood and is able to clutch a group of papers 500 pages thick with his vice-like grip but that does not mean that the member can actually read. Nor has he demonstrated any ability to understand. My advice to Darren Hughes is to pick up the bill have a read of it and while he is doing that to read the commentary and a couple of the submissions because he will learn a thing or two. 
For instance the member might learn that under the bill in its original form estimates were about to be removed from this Parliament. That would be a substantial removal of Parliament’s ability to scrutinise anything. Under the Official Information Act Parliament was going to be limited in its ability to question the executive because under legal grounds—not political grounds—it would have been quite possible for Government departments to refuse to answer questions or to provide information. That would be on political grounds a disgraceful position to find ourselves in. 
I also note that it was not just the Clerk of the House who came before the select committee. Others to appear before the select committee were the Commerce Commission led by Paula Rebstock the Chief Ombudsman John Belgrave and others. They made telling submissions to the select committee and had some impact on changing the bill. 
But in particular I want to make reference to the submissions by Sue Newberry and Alan Robb. I want to say—before the Minister of Finance has a meltdown—that I do not support those submissions. I do not support their position which was that derivatives should be excluded from the State sector. The State sector—really the Debt Management Office—demonstrated to the committee that it has a very solid grip on its very limited derivatives use. To argue that it is somehow exposing the New Zealand taxpayer to what could be an Armageddon of Enron-type derivatives is an exaggeration. 
I want to touch briefly on three major points before my time runs out. The first concerns the embedding of the Fiscal Responsibility Act in this legislation. That Act was an iconic piece of legislation. It was a piece of legislation that stood this Parliament and this country in fine stead. To take away from its significance by burying it within the Public Finance Act is in my view a retrograde step. Secondly I want to talk about the move to aggregate outputs and to define things in the form of outcomes. While that is a noble thought and while it has some great possibilities if it is administered correctly I think there are huge risks that outcomes will in fact become very woolly thinking from very woolly ministries and will be pretty difficult to understand. 
Hon Dr Michael Cullen 
: It is always a risk. 
JOHN KEY 
: It is always a risk. I would fully accept that in one sense looking at the Immigration Service the outcome we want there is to have immigrants coming to New Zealand settling here and making a positive contribution. That is the right outcome—not necessarily the output which could be that we are processing people through our Immigration Service sufficiently. We actually want the right people processed. I think there is a risk. 
Thirdly I want to mention the Crown entities. As I mentioned earlier in relation to their role in universities I think this legislation will have some impact on them and I think that is probably unnecessary. We look forward to the debate at the Committee stage.