Smith NickSTATE SECTOR AND CROWN ENTITIES REFORM BILLIn CommitteePart 1 Amendments to Crown Entities Act 2004Hon Dr NICK SMITH (National—Nelson): I'm pleased to take a call on Part 1 of the amendments proposed by the Minister in respect of the Crown Entities Act 2004. It matters because the performance of Government in so many of our Crown entities depends on the strong leadership and the skills of the chief executives that are appointed. Now for a large number of those Crown entities Government is responsible for the appointment of the board and the board is then responsible for the appointment of the chief executive their terms of employment and ensuring their performance.The question for Parliament this afternoon in Part 1 of this bill is how far the Government through the Minister of State Services and particularly the State Services Commissioner is able to further interfere in the processes of that Crown entity. The question that I have for the Minister in the chair Chris Hipkins is how far he expects the provisions that are provided in this bill to go. The reason it matters is that there can easily be a culture of envy that gets in the way of getting the best performance for New Zealand out of its Crown entities.I had the unfortunate ministerial experience of being appointed the Minister for ACC when it had lost over $4 billion in the preceding year. That entity is now in good shape and has a net balance sheet of over $20 billion. Every member of Parliament and every New Zealander has a huge interest in seeing that a Crown entity like ACC is well managed.The question that I've got for the Minister in the chair with the new provisions that are provided in clause 4 is how far does he expect the State Services Commissioner to go? In my view while we might save maybe $100000 a year on the salaries or performance payments that might be made to a chief executive of an organisation—like the super fund or ACC or one of our other very large entities like Housing New Zealand—with the billions of dollars of assets that those organisations run you would only need a 100th of a percent change in their performance for it to actually end up as a negative net balance of Government outcome. So I think it would be very helpful with the new powers being provided to the chief executive for the Minister in the chair to give the Parliament a greater degree of direction about how far we intend the State Services Commissioner to go.I'm pleased and I compliment my colleague Brett Hudson the chair of the Governance and Administration Committee that took on board some of the concerns about the State Services Commission's powers and provided some restraint on interference in that process by requiring a set of conditions to be set down in new section 117(2AA) about the sorts of factors that the chief executive would need to take into account—things like the legal the commercial and the operational context of the entity; what sort of information the board had; what commercial rates of pay would be appropriate; what the Government's expectations are; and what the market information is about.So while I think the select committee has taken a step forward it's not gone as far as National would prefer. We would actually want a statutory criterion that is judicially reviewable so that the State Services Commission is not driven by some sort of political motive of a drive to the bottom but really is interested in the best appointment.I would in closing just make reference to the Ministry of Business Innovation and Employment (MBIE): one of New Zealand's largest entities in the State department. We as Government tried to secure a private sector person for that role and there was actually little interest with the rates. So if we are to get first-class people to be able to lead these major sector organisations we do need to ensure that we are offering terms and conditions of employment that will deliver the quality of the public sector that we want.So our own Government's experience around the appointment of the chief executive of MBIE was actually quite telling. We thought that by having a very large economic development ministry that covers a very large range of electricity immigration labour laws and building laws we would be able to attract a candidate from the private sector who may be interested and apply some of that expertise to a major Government agency of that sort. Our experience was actually only receiving applicants from the public sector. I want to express full confidence in the appointment of the chief executive that was made for that agency but it's a reminder of the risks of what we're doing in Part 1 of this bill in undermining our capacity to be able to get the very best person possible.The further part that I would want to question the Minister in the chair on is that National members do have some concerns about some of the recent changes that have been made to chief executives' employment. That is there was an at-risk component of chief executives' pay that this Government has decided to automatically provide for them. So there is no longer an at-risk component for chief executives who lead organisations that are clearly failing and the removal of any sort of performance payment for those chief executives and simultaneously providing every chief executive with a week's holiday.Those issues are not specific to Part 1 of this bill but I'd be very interested in getting an indication from the Minister in the chair—if you've got a board or an organisation like the super fund or you've got a board of an organisation like ACC that wants to include quite specific requirements in the performance of the chief executive maybe for an organisation like ACC it's about rehabilitation rates a really important factor for that organisation or whether the board of the super fund quite specifically provides performance requirements for the head of that super fund managing nearly $30 billion of public money—whether the provisions that are being provided to the State Services Commissioner cut across the capacity for those significant Crown entities to be able to provide the very best of incentives for those organisations to perform?The last point I would want to make in respect of Part 1 of this bill is to get some clarity from the Minister as to how different the practice is intended to be following the passage of this bill which National is supporting around those new Crown entities that have come under these powers. In other words there are Government State departments and others right now of which the State Services Commissioner effectively has a veto over the terms and conditions of their employment. So what I'd be really keen to get an indication from the Minister on is with the passage of this part of this bill is the intention to simply extend the practice that currently exists over a range of Government agencies and Crown entities? Is the intention to simply extend that to all Crown entities or are these provisions in fact going to be used to up the ante and for the State Services Commissioner to have their fingers deeper into the operational elements of these sorts of Crown organisations that Parliament and Government entrust to those boards? Those matters are important.I want to stress to the House that across these Crown entities we are talking about north of $100 billion worth of Government assets. We're talking about Crown entities that manage over $15 billion a year in public funds. The way in which we structure those organisations and the degree to which they are autonomous and the degree to which they are constrained by these extra powers of the State Services Commissioner deeply matter to New Zealand how we do as a country and how well our public services do. National is of a view that we want a connected Public Service but we also want an accountable Public Service. That is we don't want to go back to the gliding-on days—so well illustrated with the sort of Yes Minister approach to Government—where we have an amorphous massive Public Service where nobody is accountable for anything. So while we're happy to have some extension of these State services powers it's absolutely critical that chief executives are accountable.