Smith Nick; Robertson GrantPart 7 Amendments to Public Finance Act 1989Hon Dr NICK SMITH (National—Nelson): National has concerns that with respect to Part 7—the core issue for us is ensuring effective and wise spending of public money and we should be in no question of the importance of this part. The Government spends $80 billion $90 billion now heading towards $100 billion a year of public money and National would want included—there's all sorts of nice values in this bill about the Public Service being neutral and we support that and those things. But equally in the Public Finance Act we think there should just be a very explicit overriding obligation on the Public Service to spend public money wisely and effectively and I'd be interested in the Minister's view of amendments that would require that obligation on every Public Service agency whether it be department Ministry or the like.Hon GRANT ROBERTSON (Minister of Finance): By happy coincidence I find myself in the chair at the moment that the member asks that question. The first thing that I would point out is that Part 7 itself is a relatively technical part in terms of the changes in the sense that what it does is facilitate—through the Public Finance Act—what is happening in the rest of this bill as opposed to I think what the member is suggesting which is a wider sweep of reform of the Public Finance Act. We are in fact as the member will be aware going through a Public Finance Act modernisation process the first element of which this House has already passed which is the wellbeing amendment bill that went through a few weeks back. We're now looking at what further modernisation is required and just to draw him back to this part of the bill what it is doing is allowing for the more flexible arrangements created by the rest of the bill to be able to be reflected in the obligations on Public Service agencies through the Public Finance Act. I think that is both an important technical thing to do and very supportive of these arrangements. By way of explanation of Part 7 I would point to one of the things which is mentioned here which is the concept of a joint venture. We have one of those in operation at the moment around domestic and sexual violence and it's a fantastic piece of work bringing together—I think—between eight and 10 different Government and State sector agencies all under one heading and working towards one set of accountabilities one set of outcomes in terms of eliminating the scourge of domestic and sexual violence from New Zealand. It's been a very successful programme and we've funded it significantly but if you go looking for it in the Government's accounts you won't find it and the reason for that is that each of the eight agencies have a small portion of it reflected under their appropriation. So actually this will help make what all parties I think in Parliament want to have happen: the breaking down of silos within Government more clear and obvious in a public finance sense. You'll actually be able to see all of that in one place rather than having to go through and find eight different versions of it.So that's what Part 7 is about. I understand the points that the member's making about the importance of the efficiency and the effectiveness of spending. I think that's better dealt with through a direct Public Finance Act amendment rather than Part 7 of the bill.Hon Dr NICK SMITH (National—Nelson): Minister I understand totally what Part 7 is all about. National members were very disappointed when we set out in the earlier debate that the principles of the Public Service should include spending money wisely and effectively and so the purpose of my question was having not put it into the Public Service Legislation let's at least put it into the Public Finance Act and I'd like the Minister to respond to that question.The more detailed second question I have for the Minister is that our whole system of Government is around parliamentary accountability for public money and a very important—and if you walk through into the Parliament the signing of the New Zealand Bill of Rights Act was that the Government was not allowed to spend money without the authority of Parliament and we have a whole set of trying to codify that in the Public Finance Act that we're amending with this bill. The really important part of the accountability in the Public Finance Act is that for every Vote there's a Minister. That Minister needs to account for that expenditure and that accountability process is really important. Now I want to make absolutely plain—the Minister has made the point about the Government's response to family and sexual violence and National is strongly supportive of the provisions in the wider bill and in this part that get our Government agencies out of their silos and working across sectors to try and get better outcomes. A number of those initiatives were taken during our period of Government and your Government has also taken initiatives in that area and no problem. The bit that we need to sort in the Public Finance Act is in ensuring where you have multiple agencies multiple Ministers and multiple chief executives and you have the appropriation of money that you—in achieving a very proper public objective: getting better cooperation and coordination—don't lose that fundamental responsibility of someone's responsible for the money. So my question—particularly where there are 36 changes in this part to the bill that went before the select committee. The fundamental question that I want the Minister to answer is which Minister when Parliament goes through its annual appropriations—and let's say you take an example whether it be in the health whether it be in the justice or other sectors where you establish a cross-interdepartmental executive board and agency. Who's responsible to the Parliament? How is that link maintained?Hon GRANT ROBERTSON (Minister of Finance): Yeah I thank the member for his question and I think this does cut to the heart of how we get the balance right between making sure that we are having Government function in the way that the outside world functions and still meeting those requirements that the member has alluded to. So at a very practical level there will always be a specified agency and there will always be somebody who has to account and report. Actually what Part 7 does is make sure that someone still is doing that—that's the point. So by changing around the requirements or the contents of an annual report as we do here and the various other reporting and strategic documents that is about making sure that there is a specified agency who does that.What I do want to put on the record and actually agree with the member on is that this has to be watched and monitored closely and I think he's right about that because what we don't want is no one to be responsible. So I believe that the bill actually fulfils that. What we will see as these evolve over time I suspect are further changes down the track particularly around appropriations because we're already doing that. The member himself was part of a Cabinet where they moved more towards multi-category appropriations and multi-year appropriations both of which are very useful tools of flexibility in the system. We have managed as those have been implemented to continue proper parliamentary scrutiny. So actually what this part of the bill is doing is the very thing that the member wants it to do. It would be fair to say that as these practices evolve we may choose to see the Public Finance Act (PFA) evolve alongside them and you know it is certainly my intention if I have the privilege of being in the position of administering the PFA again to continue to work on how we can both make it flexible but also maintain those accountabilities. But that is actually the very thing that Part 7 does.Hon Dr NICK SMITH (National—Nelson): I want to specifically ask the Minister about the Supplementary Order Paper (SOP) that has been tabled SOP 549. I want to say to the Minister in the chair that we've only had these 200 pages of amendments for 24 hours and so I make no apologies for wanting to scrutinise it. But what surprised me is the amendment that says that the agency that is administering the appropriation can in fact be different to the Vote. Can he explain that?Hon GRANT ROBERTSON (Minister of Finance): I'm just going to get some advice for the member on the first part of that but yes that is because—it's the very point I'm making. So let's take the current joint venture that we have in operation now. So that is effectively managed through the Ministry of Justice—that's effectively how it's managed and it would be continue to be the lead agency. Now as it happens a number of other agencies are contributing to that. There is actually no great value for the Parliament in digging into for example Oranga Tamariki and their role within that because it actually is an incoherent way of assessing whether or not the Government's expenditure is effective in that area because what you're then doing is saying well yes that money has come through Oranga Tamariki but actually their responsibility is part of the wider joint venture—you lose the impact of what they're doing. A very specific example within that is a partnership between the police and Oranga Tamariki as part of the domestic and sexual violence joint venture. Being able to disentangle whether or not who's got which dollars within it and are they being used you will still be able to do but under this process you'll actually see it as part of its coherent whole.Hon Dr NICK SMITH (National—Nelson): Madam Chair I know you're cautious of me getting into detail but sometimes actually a practical example is a way to interrogate the amendments that are being made to the way in which this Parliament deals with Estimates. What concerns me with the provision in clause 116 is Parliament's going to be faced with the situation where it's dealing with Estimates at a select committee and the person and agency responsible for the Vote is different to that which is administering the Vote. That's specifically what is provided for in the SOP. So my question for me: how do we expect this to practically work?So let's say you've got the Ministry of Justice appearing before the Justice Committee and it's on an issue where it's responsible for the Vote but the administration is going on in some other Government agency. A member of the select committee says Hey look you've made a mess of spending that 2 million bucks." And they say "Oh nothing to do with us. That's administered by someone different." Are you confident and how can it be that in the SOP clause 116A inserting section 14(1)(ca) where it specifically says that the agency that's been authorised with the Vote from Parliament can be different to the agency that's actually administering the fund—aren't we really breaking up the parliamentary accountability?Hon GRANT ROBERTSON (Minister of Finance): No. Yeah no we're not and the point that I want to make very clear to the member and I think this is how this will need to evolve—my personal view is that where there is a clear—and it will be—specified agency they will have to front up and they will have to be accountable to Parliament. What I think we need to evolve to though as we have more of these cross-departmental entities is providing for that cross-departmental entity which will have as the joint venture does somebody who leads it a chief executive—that they can be brought in front of a select committee. But the member is arguing here that just because there is an administering agency and a specified agency somehow or other that means he won't be able to question them. He will. The specified agency simply needs to be prepared to be able to answer questions for things to which they are responsible to Parliament for.Hon Dr NICK SMITH (National—Nelson): To further that discussion Minister is that currently we do not have the situation where the Vote is different to who administers the Vote and what the Minister's SOP does is actually say that for the first time in Parliament the Vote could actually be administered by another agency. But I also want to ask the Minister the question about his amendment in respect of assets and liabilities because in the Supplementary Order Paper—which I again say is being rushed through and we've only had 24 hours to look at—the Government is amending the way in which those assets and liabilities are going to be managed. So what my question is is: what is the practical impact of the amendments—how those assets and liabilities will be dealt with in the Public Finance Act?Hon GRANT ROBERTSON (Minister of Finance): Just to clarify with the member he's not referring to changes in Part 7 with respect of assets and liabilities?Hon Dr NICK SMITH (National—Nelson): Yes I am. Part 7 clause 124(4) specifically says in the amendment "Subsection (1)(a) applies to a specified agency only to the extent that the specified agency manages assets or liabilities." So what I want an explanation of is what—this is the first we've seen it. We've only seen it for 24 hours. It's reasonable for me to ask: what does that change in dealing with assets and liabilities under the Public Finance Act? What's the practical effect of clause 124 and the changes in the Minister's Supplementary Order Paper?Hon GRANT ROBERTSON (Minister of Finance): On that specific section it is around the responsibilities as the member will be aware of chief executives. So this is making sure that we are clear in the Public Finance Act what a chief executive is responsible for. It refers back as pretty much everything in Part 7 does to earlier changes that have been made. So it's simply about making sure the Public Finance Act reflects the changes here.To come back to the member's earlier point yes we are moving into different territory here—that's the whole point of doing a bill is to actually create an environment where we're not sitting here to just reinforce the status quo. We are trying to facilitate the very thing that he has acknowledged both his own party and the current Government have done. It will mean that things feel different from time to time in a committee but the whole point of changing the law and changing the Public Finance Act through Part 7 is chief executives in this case remain responsible. So it's actually making sure that we keep the integrity of the Public Finance Act while we amend or create new legislation for the public sector.Hon Dr NICK SMITH (National—Nelson): Well let me be very specific because these issues are big. The Public Finance Act was introduced—when I first came into Parliament a huge issue was that there were massive liabilities that had been hidden by a previous Government and we came into Government and suddenly we had huge liabilities. So part of the Public Finance Act was making sure there was transparency about liabilities—that Government can't hide nasty big legal action or other liabilities on the books.Now the question I'm asking is around how we deal with both assets and liabilities for these new agencies. I've indicated to the Minister and we're in agreement—we want to have the capacity for these interdepartmental agencies that are able to do things. But the question is this: at the moment in the Public Finance Act if you're the Secretary for Justice and you've got a big liability on your books because you've screwed something up and you're being sued or you've incurred some large debt the Secretary for Justice is in the gun as the chief executive of that agency for that.My question is that what we're saying here in the law is that the specified agency is only responsible to a limited extent. So where I want to know there's accountability is if there is a liability incurred by one of these new agencies we've created and they don't declare a significant liability or they don't declare a substantial amount or legal action or debt who's in the gun?"