Cunliffe David: State Sector and Public Finance Reform Bill — In CommitteeText is incorporated into the Bound VolumeCunliffe David: State Sector and Public Finance Reform Bill — In Committee[Sitting date: 02 July 2013. Volume:691;Page:11633. Text is incorporated into the Bound Volume.]Hon DAVID CUNLIFFE (Labour—New Lynn):I rise to convey Labour’s support for this part of the State Sector and Public Finance Reform Bill. In doing so I wish to tender an apology to you Mr Chair and to the Committee. In my initial remarks on Part 1 I made the misplaced comment that Part 1 was the most major part of the bill. I see on closer examination that Part 2 is equally substantive and important amending as it does very significantly the Public Finance Act.The bill proposes a number of amendments to the Public Finance Act and principally the following: firstly the establishment of a new appropriation type to be called a multi-category appropriation or MCA. The purpose of this is to allow different types of expenditure to be grouped into a single appropriation where they support a single policy objective or overarching purpose. This is one of the principal innovations in this Act in the way that the design of the Government’s machinery is carried out. It calls us to reflect on the nature of what we are doing here today. This is not just tinkering legislation; this is framework legislation—and that is why it is good that it is bipartisan across the House—that governs the major rules and regulations by which the organs of the State operate. So that is everything from the rules upon which they are structured principally delivered through the State Sector Act reforms in Part 1 and of course the rules by which their finances are governed which are dealt with in this part Part 2 as amendments to the Public Finance Act.Members of the public will recall—and members opposite will hopefully recall—that the Public Finance Act is a very extensive piece of legislation that contains the provisions for fiscal accountability and the ability for Parliament and the public to be able to trace subventions or appropriations from year to year to be able to track the movement of public funds and to give effect to that age-old tenet of our inherited constitution that there is no taxation without representation. This is where the rubber as it were meets the road because it is through the legal framework set out in the Public Finance Act as amended by this bill that we get the rules about accountability. The main point here is to allow a new form of accountability multi-category appropriations which allow policy purposes to be driven simultaneously through several different agencies or votes.In the past what has had to happen under the rules of public finance is that a lead agency has been designated and it has borne the financial responsibility but through that it has also maintained primary control through the Cabinet process. That has not I think it is fair to say—and both sides of the House that have sat on the Treasury benches over the years would agree—always favoured the highest levels of cooperation between the agencies of the State. So what we are doing here is we are plumbing a whole new beast into the financial reporting rules. It is a beast called a multi-category appropriation and it is based on the presumption that the behaviour will follow the money. And if the money is in a common pot where several different agencies have to draw from it then we are more likely to get truly unified behaviour. The Labour Opposition agrees with the Government that it is a good thing to have that type of provision available provided that there are sufficient controls around it. I am pleased to say that following the amendments put in place by the Finance and Expenditure Committee it is now our view that those controls do exist.As our colleagues have said in relation to Part 1 for the Labour Opposition this is a relatively unusual bill an unusual process. We quite strongly opposed the bill at its first reading. There were a number of provisions in it quite a lot of them in Part 1 that we very trenchantly opposed. We are very pleased that through the negotiation process inthe select committee there has been an extensive range of amendments and we can now support the bill. The amendments here have been around two principal aspects of multi-category appropriations—firstly requirements for full and complete traceability down to the sub-output class level. It is a very granular approach so that members of Parliament and the public can trace changes in public expenditure through the years and across categories.That is particularly important where a multi-category appropriation has the potential to blend appropriations from different departments from prior years. It is too easy to do smoke and mirrors without the amendments made to this Act. It follows that it is made clear in the amendments that other departments as well as the one administering an appropriation can incur expenses against that appropriation. It is a second principle if you like that follows from the multi-category appropriation principle. The idea there is that where there is a group of agencies cooperating towards a policy outcome they can incur expenses against a single appropriation if that is appropriate. That again plumbs into the operations the machinery of government cooperative behaviour at every level.The information required in the estimates and supporting information is being changed to focus more closely on the policy intent of what is being achieved within each organisation. We talked about this in Part 1 the shift from simple output monitoring to outcome monitoring—that is measuring the work that the State does against the questions of why we are here and what we are trying to achieve; how we are trying to achieve it follows. As we said in Part 1 the risk with that is that if we lose sight of the output measures completely sometimes outcome reporting can be a bit vague but a proper combination of the two has been shown to deliver the best balance in terms of strategic thinking and specific behaviour tracking.The provisions allow annual reports of more than one department to be presented together in one document where this would more meaningfully convey information. So there is a third significant change. As well as multi-category appropriations and multiple departments drawing upon a single appropriation now we can have multiple departments reporting through one accountability document that applies to a particular programme. Again we are designing into the machinery of government the ability to require cooperation of our agencies from the ground up. We are standardising the governance and performance reporting requirements for companies that are listed in schedule 4 of the Public Finance Act—that is companies where there is a substantial element of Crown ownership. As I look through the bill—and I will be picking this up in my next call—I will go clause by clause through some of these key changes because there are 60 pages of amendments.Let me draw the attention of the Committee to one particular matter that I think is pretty important which is around proposed new clause 59B amending section 3A of the Public Finance Act as represented on Supplementary Order Paper 262. That is where proposed new section 3AB(1)(a)(i) states: “Ministers of the Crown hold on behalf of the Crown more than 50% of the issued ordinary shares in the capital of the company;”. I do think it is necessary to put on record that this is not a provision that applies to the Government’s harebrained partial privatisation scheme; this is about the development of mixed-ownership entities other than those in the privatisation scheme for the energy companies which we have heard so much about in the media. The reason for making that clear is that there are a number of strategic disadvantages with the partial privatisation programme that the Government is currently engaged in which include the loss of strategic control for the portfolio; having to have regard in law to minority shareholders’ rights; the loss of the controls normally contained in the State-Owned Enterprises Act including the no-surprises policy and the power to direct; and the loss of dividend flows which means that the programme is often cash value - negative.I will come on to it in subsequent calls but there are a large number of schedules—schedule 1A schedule 2 schedule 3 and schedule 3A—that apply to the Public Finance Act and pertain to amendments in this part and we will be touching on some of them across the debate on this part. There are a number of Supplementary Order Papers that contain measures on Part 2 that we will want to touch on in this debate. So I think with your leave Mr Chair we will be here for quite a long time going through this. Supplementary Order Paper 168 from Minister Coleman bears upon the Public Finance Act. Supplementary Order Paper 262 from the Minister which is very extensive bears upon it. We have disposed already of Supplementary Order Papers 259 and 265. Supplementary Order Paper 261 also has some provisions.Let me note two things on the Supplementary Order Papers here as an introductory comment. The first is that it is somewhat disappointing—