O'Connor Damien: State Sector and Public Finance Reform Bill — In CommitteeText is incorporated into the Bound VolumeO'Connor Damien: State Sector and Public Finance Reform Bill — In Committee[Sitting date: 02 July 2013. Volume:691;Page:11649. Text is incorporated into the Bound Volume.]Hon DAMIEN O’CONNOR (Labour—West Coast - Tasman):Again I will not take too much of your time but I will take the opportunity—The CHAIRPERSON (H V Ross Robertson): I am sure you will take 5 minutes Mr O’Connor.Hon DAMIEN O’CONNOR: No no. I will take the opportunity to speak on Part 2 of the State Sector and Public Finance Reform Bill. There are couple of issues here that I would like to refer to in particular and they are the presenting and publishing of departmental annual reports and the issue of responsibility of directors—responsibility for and administration and the use of appropriations. I must refer I guess to my portfolio area of responsibility of primary industries. I have been studying the reports of the Government in this area for 4 years now. I am assuming that the responsibility here as stated is that these must be accurate. I think it is: “We consider this desirable to allowwhole-sector or cross-agency reporting.” The Finance and Expenditure Committee has clearly said that it wants clear and accurate reporting.If I can take the Ministry of Agriculture and Forestry as an example—and I know that has now been merged into a new superministry—there was one particular issue there on rural proofing which was a policy introduced by the last Labour Government. It was to ensure that in every area of Government policy there was to be consideration of the effect on rural communities. In fact a template had been developed and the Ministry of Agriculture and Forestry and the rural affairs unit it was kind of assumed were responsible for ensuring the implementation of that. In fact the annual report stated that. But it was not happening—it was not happening. And of course only through the select committee process—a relatively brief period—did we have the ability to ask the Minister and officials why it was not happening. Indeed what often happened was that other issues overtook the investigation into this area. So what I am hoping that this bill will demand of Government agencies is not only reporting but accurate reporting. The issue I referred to in the debate on Part 1 is about I guess the accountability of the chief executive officer or the Minister and who should take what responsibility. So I raise that as one of the points.The second one—in fact I had referred to two before but there is one other one—is the authority to lend money. Can I refer to the current situation of the Ministry for Primary Industries which is that it has a grand scheme called the Primary Growth Partnership. The Minister has indicated that $600 million - plus will be allocated on a basically one-for-one system where the taxpayer will put up over $300 million and the industry will put up over $300 million. It will get on with projects that have no doubt—we have been told—been scrutinised. What we have not been told is how they are accountable.The question I ask is—and there is no authority to lend money in Part 2 here—if the money that was allocated to a project is deemed not to have delivered is there a requirement to repay and could that be considered loaned money? It is a technical question but the bill is technical. If an agency like the Ministry for Primary Industries does not have the authority to lend money and it allocates money—and we are talking tens if not hundreds of millions of dollars—to a project that has a joint-venture arrangement is that appropriation or allocation deemed a gift or is it a loan? Is there any requirement for the money to be repaid if there is no delivery on the key performance indicators or the projected outcomes? At this particular point there are a few projects that have been running half their lives and there is not one substantive narrative report on progress—Hon Trevor Mallard: “Narrah-tive”.Hon DAMIEN O’CONNOR: Narrative—sorry. Thank you for that Mr Mallard. There is not one substantive narrative report on the progress of the Primary Growth Partnership. So if indeed the select committee Audit New Zealand or anyone deems these projects to have been a failure will that money have to be repaid and will that therefore mean that the lend money or the requirements and provisions that are in this Part 2 for an authority to lend money should have taken account of that possible scenario?The next part I will go on to—and hopefully the Minister will answer a few of these questions—is the responsibility of directors. There is a good lesson in here. Although the directors of Crown entities are different from the directors of State-owned enterprises basically they have the same moral responsibility—that is to return to the taxpayers. But I am not quite sure whether these provisions here mirror those of the State-owned enterprises. We have had a classic example in Solid Energy which is a State-owned enterprise not a Crown entity but none the less is owned by the taxpayerand is returning to the taxpayer hopefully returns on their investment and efforts and dividends. There was a clear—in my view—failure of the directors of that company to keep it in order.What we have in the commentary regarding clause 92 is: “The intention of this clause is to allow directors of companies listed in Schedule 4A of the Act to act in certain circumstances in the best interests of shareholders rather than in the best interests of the company.” I guess a State-owned enterprise would act in the best interests of the company and this is saying I assume that directors should always act in the best interests of the shareholders. It is one and the same if the Crown owns the company although we appreciate that with the idiotic sell-down of State-owned enterprises by this Government it is determined to hand 49 percent of State-owned enterprises into the hands of wealthy New Zealanders who can afford to buy a whole lot of shares or worse still as we know into the hands of a whole lot of offshore investors. That is a difference of the State-owned enterprises. There are however some Crown entities—and I am not sure but I am told that AsureQuality is a State-owned enterprise and that is one that has done a deal with the Chinese. But I will not carry on as I know this will be slightly out of the scope of the bill. I will stay within it. So the responsibility here is clearly to the shareholders as it should be rather than to the company as an entity. Well that is the way I read it. Indeed it is refreshing and it is something we should perhaps apply to the State-owned enterprises as well. I think that there are some interpretation issues there and I guess that the select committee has gone through that.I do not have too much more to say on Part 2 of the bill other than to re-emphasise and repeat the questions that I have raised of course around the accuracy of reporting on the departmental annual reports. They are generally glossy. Most people do not read the detail often but indeed it could be said that too often the reports are inaccurate.The second point as I said was the authority to lend money. If money is appropriated or handed over or allocated to projects then is there a requirement for that money to be repaid? I am suggesting that with the Primary Growth Partnership there is probably not a requirement for it to be repaid. I am hoping that this particular clause or this part of the bill does not eliminate the possibility that money could be repaid as a loan would be if there are not the outcomes as laid down in the proposal that might have been accepted by officials. It is not terribly complex just a point about basic accountability. I have to say that with the Primary Growth Partnership there is a lot to be learnt and a lot to be explained and indeed there may be a lot of money to be repaid if in fact those projects have not delivered on what they said they would.