The ‘ideological trojan horse’ of the Regulatory Standards Bill

Monday, 3 February 2025

Dr Bryce Edwards is the director of the Integrity Institute, a charitable body set up to highlight unethical practices by wealthy interests.

OPINION: The coalition Government has agreed to pass a Regulatory Standards Bill, proposed by the ACT Party, which will further tilt the political playing field to advantage vested interests.

Despite sounding rather dull, this legislation is potentially the most radical reform the coalition will make this year, progressing an agenda to create a more pro-business environment in New Zealand.

Few people have heard of the proposed Regulatory Standards Bill. Partly this is because the Government put the proposal out for consultation over the summer holiday period. But it’s also because the Opposition, media and public scrutiny have been almost solely focused on the Treaty Principles Bill.

Unlike the always-doomed Treaty Principles Bill, National and NZ First have already committed to support ACT’s Regulatory Standards Bill into law – even though the bill hasn’t been drafted yet.

We do know what it’s about, though. It’s essentially the framework to underpin the work of David Seymour’s new Ministry of Regulation – an agency that should have been named the Ministry of Deregulation, as its focus, according to Seymour, is on “cutting red tape” and reducing rules for business.

The Regulatory Standards Bill sets up a process to scrutinise each piece of new legislation through a lens of concern to ensure that “property rights” aren’t unfairly impacted. Prioritising “property rights” over public interest means stacking the deck in favour of business owners and the wealthy.

Its proponents claim that it will simply set up a mechanism, a Regulatory Standards Board (RSB), appointed by the Minister of Regulation (currently David Seymour), with significant powers to assess and recommend changes to existing laws. This, they say, will help reform laws that are impeding economic productivity and growth.

In their view, it adds to transparency and fairness because corporations will have a formal and streamlined process to get an official assessment from the new Regulatory Standards Board as to whether a particular regulation unfairly disadvantages their profits or property rights. This is constitutional change on a large scale.

In contrast, critics say it’s a thinly veiled effort to constrain the ability of governments to enact public-interest legislation.

For example, the Council for Civil Liberties has warned that such provisions will lead to regulatory paralysis and make it prohibitively expensive for governments to legislate in the public good.

The Environmental Defence Society warn that this could lead to poor-quality law-making that prioritises powerful corporations' interests over ordinary New Zealanders' rights.

Perhaps the biggest problem in the bill – the one that will really rig the legislative game in favour of wealthy vested interests – is its proposal of “compensation” for owners of property rights affected by regulations.

The ACT Party says that whenever new regulations inhibit companies' profits, the property owners should be liable to receive fair financial recompense. For reasons like this, the lobby group BusinessNZ has come out in strong support of the legislation.

Conversely, opponents say that the compensation focus of the Regulatory Standards Bill will mean that profits are protected over public interest considerations. If, for example, in public health, a government decides to introduce further restrictions on alcohol, tobacco, or fast food, the logical implications of the Regulatory Standards Bill would be that the state should financially compensate the companies that sell those products. Likewise, for prohibitions on pollution or emissions impacting climate change.

One critic, Professor Jonathan Boston of Victoria University of Wellington, says this would be akin to giving slave owners compensation when slavery was outlawed, instead of compensating the former slaves.

Unlike the Treaty Principles Bill, this new legislation hasn’t seemingly come out of nowhere but relates to a long-standing determination on the neoliberal right of New Zealand politics to see more significant deregulation for business. Such deregulation first occurred under the Fourth Labour Government, pushed by Roger Douglas, and continued under the next National Government, primarily influenced by Ruth Richardson.

New Zealand quickly became one of the least-regulated economies in the world. However, letting businesses self-regulate themselves had many predictable outcomes, mainly in making the rich richer and the poor poorer. There were also all sorts of tragic case studies of market failure in areas like the building industry with leaky houses, the mining sector with the Pike River disaster, and the financial investment sector with finance company bailouts.

Increasingly New Zealand has learnt from such mistakes, seeing the value of quality regulation of business. However, on the neo-liberal political right, there is ongoing frustration that the deregulation agenda has stalled.

The ACT Party-adjacent Business Roundtable (which later joined the New Zealand Institute to form the New Zealand Initiative) started to advocate for further deregulation in 2001, commissioning Bryce Wilkinson to write his report, “Constraining Government Regulation”, which advocated rules to constrain what new laws could do in terms of regulating business. Wilkinson’s report included a draft of what he proposed as “the Regulatory Responsibility Act”.

A Regulatory Responsibility Bill was introduced to Parliament by ACT MP Rodney Hide as a private member’s bill in 2006, but it was not passed; and when he became Minister of Regulatory Reform in the National-ACT government in 2008, he again championed a bill of that name, but it did not proceed.

In 2021 David Seymour tried again, and it failed for a third time.

This “zombie bill” now looks to be revived, but with even bigger teeth, as a gift to corporate interests. When enacted, it will help entrench economic libertarian values in the policy-making process.

Although its supporters emphasise that it won’t be a straitjacket on future governments, as politicians will be able to override it, there should be no doubt that the Regulatory Standards Bill will indeed tilt politics more in favour of wealthy interests.

Policy making will be even more one-sided, with the influence of corporate lobbyists further enabled.

In this regard, it’s worth noting the submission on the proposal from the Parliamentary Commissioner for the Environment, Simon Upton. He’s rather scathing about the bill, suggesting it’s unlikely to achieve its stated goal of improved productivity, but instead it will produce poor social and environmental outcomes.

He has also highlighted that in the absence of “adequate rules to manage lobbying” – made worse, he says, by the 2024 Fast-track Approvals Act – vested interests will dominate decision-making even more.

Other critics allege that this bill, with its additional layer of bureaucracy, and its dangerous concentration of power in the hands of unelected officials (and a new regulatory body stacked with political appointees), will open the door to more political interference and favouritism. The dice will be further loaded against the democratic will of the public.

This is a huge problem. As New Zealand grapples with issues like climate change, economic inequality and ethnic inequity, the last thing the country needs is legislation that ties the hands of its government and prioritises profit over people.

The Regulatory Standards Bill should be rejected in its entirety, and efforts should focus instead on strengthening existing mechanisms for good governance and regulatory stewardship. The stakes are too high to allow this ideological trojan horse to pass unnoticed.

For a contrasting perspective on the Regulatory Standards Bill, read Bryce Wilkinson’s view.

(CORRECTION: This opinion piece has been updated to clarify the history of efforts to introduce a regulatory standards law, including the role of the Business Roundtable in that.)