John Key has made it a badge of honour to announce his policy intentions well in advance and, where they are controversial, to signal a mandate from the electorate before proceeding.
Consistent with this, National went into the election campaign having already laid the foundations for much of its second term agenda. In some cases – securities law reform and KiwiSaver – legislation has been introduced. In others – the ETS, benefit reform, ACC – much of the policy work has already been done.
This Brief Counsel looks at the likely shape of the new Government's policy programme for the first half of the new term.
Continuity a key theme
We expect the continuities to outweigh the differences between the Key Government's first and second terms.
National holds 60 seats in a 121-seat House. This may drop to 59 if the Greens pick up another seat at National's expense on specials. But National would still be able to look to either Act and United Future or to the Maori Party to get a majority. It will not need all three parties on every issue.
A potential vulnerability for National is if Tariana Turia or Pita Sharples retire mid-term as there is a risk that their seats could go to Labour in a by-election.
The Prime Minister has indicated that he will be reshuffling his cabinet. But he has also said that there will be no change in three key portfolios: Finance will stay with Bill English, Foreign Affairs with Murray McCully and Trade with Tim Groser.
The fiscal settings will also be much the same as National is promising to maintain a close hold on the purse strings by:
- limiting new operating spending to $800 million in its first two budgets and to $1.2 billion in its third (2014-15) budget
- deferring any new capital allowances until Budget 2017, and instead
- funding new capital spending from the $5 billion to $7 billion Future Investment Fund which the Government will create from the asset sales process.
And the downsizing and search for efficiencies in the public sector will continue. National will apply what is effectively a sinking lid policy. The number of FTE core government administration positions (as opposed to front line jobs) will be capped at current levels over the next three years.
The mixed ownership and welfare reform programmes will soak up a lot of the Government's time, energy and political capital – especially if the Maori Party demands a special deal for iwi as the price of its support. Key has ruled out preferential access, but expect some form of iwi accommodation for the Maori Party's vote.
|Mixed ownership model||Sell up to 49% of Mighty River Power, Genesis, Meridian and Solid Energy. Reduce the government's stake in Air New Zealand.|
|Comment||If the world slumps into recession, National will be under pressure to defer this programme until the market picks up. Bill English has already flagged this possibility. But National will be extremely reluctant to put the sales on hold as it needs the revenue if it is to have any chance of bringing the budget back into balance by the target 2014-2015 date.|
|ACC||Open the workplace account to private insurance. Expand the Accredited Employers Programme. "Explore" opening the Motor Vehicles and Earners' Accounts to competition.|
|Comment||National will announce the detail of its ACC decisions in February but is expected to forge ahead with the reforms outlined in the Department of Labour discussion document, released on 1 June 2011.|
|Resource management||Three tranches of reforms are planned.
They are, in order of sequencing:
|KiwiSaver||Enactment of legislation to increase the minimum contribution rate from 2% to 3% from 1 April 2013. Auto-enrolment is pencilled in for 2014 but will be implemented only when the budget is back in surplus.|
|Innovation||Invest $60 million in "national science challenges" to find solutions to some of the issues New Zealand faces – e.g. how to intensify primary production in an environmentally sustainable way. Transform Industrial Research Ltd (a CRI) into an advanced technology institute to work in the high tech manufacturing and services sector.|
|ETS||Key amendments to the ETS legislation
A review will be held in 2014 into whether agriculture should enter the scheme in 2015 as currently legislated. This review will recommend that entry be deferred until the technologies are available to allow farmers to reduce their emissions or our trading partners are also exposed to a similar carbon cost.
Further labour market deregulation through:
|Comment||Will raise a number of difficult issues for the Maori Party.|
Benefits to be framed according to the level of workforce participation expected rather than – as now – according to the circumstance which created the dependency.
Job Seeker Support: includes unemployment and sickness beneficiaries and widows' and DPB recipients whose youngest child is older than 14. Expected to look for full-time work.
Sole Parent Support: people will be required to undergo work testing when their youngest child turns one and to undertake at least part-time work when that child is five.
Supported Living Payment: basically the invalid's benefit.
|Comment||This is "brand National" but will require delicate handling (and a funding boost for whanau ora) to get the Maori Party on board.|
Financial Markets Conduct Bill
Key provisions will:
- focus definitions on the economic substance of the financial product not just its legal form
- replace the requirement for issuers to prepare a prospectus and investment statement with a requirement to issue a single product disclosure statement (PDS) targeted to retail investors
- require all collective investment schemes to have an external supervisor
- establish additional licensing regimes for fund managers, independent trustees of workplace superannuation schemes, derivatives dealers and peer-to-peer lenders, and
- reorient the liability regime to civil remedies (including civil penalties) for most breaches, reserving criminal sanctions for egregious conduct and for "knowing" and "reckless" behaviour.
Commerce (Cartels and Other Matters) Bill
- The Bill introduces criminal sanctions for intentional hard core cartel conduct.
- Lesser or unintentional offending will attract a civil penalty.
- Exemptions are provided for joint ventures and other "collaborative" activities provided they are not entered into for the dominant purpose of lessening competition.
Legislation to target loan sharks
The major changes proposed are to strengthen the Consumer Contracts and Consumer Finance Act by adding new responsible lending criteria including that:
- the borrower must be reasonably expected to repay the loan without substantial hardship, and
- the lender must be honest and transparent in dealing with the borrower.
As has become the practice in the capital markets area, a draft exposure bill will be released for consultation prior to the legislation being introduced to the House.
Companies and Limited Partnerships Amendment Bill
- strengthens the company registration provisions to prevent shell companies being registered in New Zealand for criminal purposes, and
- creates criminal penalties for serious breaches of directors' duties.
The information in this article is for informative purposes only and should not be relied on as legal advice. Please contact Chapman Tripp for advice tailored to your situation.