ACT's attempt at regulatory reform in NZ has failed 3 times already – what's different now?

As part of its coalition deal with National, the ACT Party is preparing to resurrect its “regulatory responsibility” legislation for the fourth time. This is despite the idea having been consistently rejected since 2007.

As ACT’s coalition partners decide whether to allow its Regulatory Standards Bill to succeed this time, they need to reflect on that historical context.

ACT’s definition of “regulation” goes beyond parliamentary laws to include all forms of regulation at all levels of government. Its bill requires new (and eventually all) such regulation to adhere to principles and processes, also defined by ACT. It would also allow the courts to issue declarations of non-compliance.

The proposal is an extension of the neoliberal rhetoric of “best practice regulation”, including regulatory impact assessments and statements, which has become embedded in government practice since the 1990s. It has been endorsed by both National-led and Labour-led governments.

The 1999-2008 Labour government embraced the notion of “risk-tolerant regulation”. Essentially a market-based approach, it spanned a spectrum from no regulation or self-regulation to co-regulation with government. Hands-on regulation was a last resort.

This minimalist approach assumed businesses would honestly and rigorously monitor themselves, and report on their compliance based on those loosely framed principles. Government agencies, meanwhile, would limit regulation based on risk assessments and cost-benefit analyses.

The risk side has carried a high price over the past 30 years. Light-handed regulation or self-regulation helped deliver the leaky buildings crisis, the Pike River mine tragedy, workplace deaths in forestry and on farms, finance company collapses, unsafe aged care and dangerous adventure tourism, among other failures.

A brief history of ‘meta-regulation’

The origins of ACT’s latest push for regulatory reform lie as far back as the 1980s and 1990s, when the Labour finance minister, Roger Douglas, and his National Party successor, Ruth Richardson, ushered in core pieces of legislation: the Reserve Bank Act 1989, State Sector Act 1988, Public Finance Act 1989 and Fiscal Responsibility Act 1994.

A Regulatory Responsibility Act was the missing piece. In my 2015 book The FIRE Economy, I explained its significance as “meta-regulation”. In effect, it was designed to regulate the way governments regulate. It institutionalised a pro-corporate approach of self-regulation, light-handed regulation, or no regulation at all.

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The neoliberal Business Roundtable think tank (now the New Zealand Initiative) began pushing the idea of an “economic constitution” in the early 1990s. A 2001 report for the Roundtable by former Treasury director Bryce Wilkinson, titled Constraining Government Regulation, contained a draft Regulatory Responsibility Bill.

This required all future laws and regulations to comply with a selective list of libertarian principles. These encompassed aspects of the rule of law, protection of individual liberties and property rights, and restrictions on the imposition of taxes and charges.

It also sought to embed “good law-making processes”, including cost-benefit analyses and prioritising non-regulatory options. Public entities would have to review their relevant laws for compatibility with the principles.

Significantly, it also empowered the courts to review legislation. Individuals could ask the courts to declare that new laws breached these regulatory standards, and after ten years could seek a judicial declaration on pre-existing laws.

The bill that wouldn’t die

ACT adopted the Roundtable’s draft bill, which was drawn from the ballot in the name of party leader Roger Douglas after the 2006 election. (Douglas had by then left the Labour Party to co-found ACT in 1993.)

Labour blocked the bill at the select committee stage. But the committee’s report created a platform in 2009 for new ACT leader Rodney Hide, then in government as minister for regulatory reform, to set up a Regulatory Responsibility Taskforce to advance the bill.

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A renamed Regulatory Standards Bill was introduced in 2011. Constitutional experts attacked its selective principles, and objected that judicial declarations of non-compliance with those principles would potentially involve judges in making political decisions.

The bill was also silent on Te Tiriti o Waitangi/the Treaty of Waitangi. The Legislative Advisory Committee opposed it. And the Treasury used the same regulatory impact process ACT’s bill championed to oppose it.

Arguing the bill lacked necessary broad-based support, and that compliance costs would exceed benefits, Treasury favoured the alternative of strengthening the parliamentary review process.

The third attempt to introduce the bill, by ACT leader David Seymour in 2021, fell at the first reading, although National (by then in opposition) supported it.

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Time to draw a line

Considering this history, it is likely the same grounds for opposing ACT’s regulatory responsibility campaign will be rehearsed in select committee once again.

The potentially significant budgetary impacts of a proposed ministry of regulation, reviews and repeals of existing regulation and revisions of the current regulatory toolkit are also uncosted (despite ACT’s insistence on “fiscal responsibility”).

There is some irony, too, in ACT’s election promise to rein in “knee-jerk, populist laws”. The coalition government is implementing its 100-day plan with little pretence of “good regulatory” process, or even select committee hearings.

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Already, the dual Reserve Bank objectives, fair pay agreements, smoke-free and employment laws – which all originally went through the regulatory impact assessment and statement process – have been repealed under urgency.

The government has also refused to release a draft regulatory impact statement for its bill to repeal the Clean Car Discount Act (which has implications for New Zealand’s ability to achieve its climate goals) until after parliament votes.

ACT’s Regulatory Standards Bill may yet meet trenchant and terminal opposition again. But perhaps its introduction will lead to a broader revisiting of the neoliberal model of “meta-regulation”, and how it has served Aotearoa New Zealand over the past 40 years.