Red-tape bill risks cost blow-outs, climate backsliding, officials warn

Saturday, 28 June 2025

Treasury has issued a blistering warning over the Government's controversial red-tape bill, slamming it as costly, risky and unlikely to improve regulation.

And the Ministry for the Environment (MfE) says key provisions could fundamentally undermine environmental legislation, reverse the “polluter pays” principle, and severely impact crucial climate adaptation efforts such as managed retreat.

The proposed Regulatory Standards Bill would require ministers and government agencies to assess legislation and regulations against a series of principles: rule of law; liberties; taking of property; taxes, fees and levies; and the role of the courts.

A politically appointed board would also assess new regulations against the principles in the bill.

But Treasury advice, released under the Official Information Act, warns it could cost taxpayers tens of millions each year, choke off vital public services, and trigger legal headaches for future national infrastructure projects.

Officials said the bill could have a “chilling effect” on useful regulation, with upfront costs originally forecast as high as $60 million a year.

Even a pared-back estimate of $18m annually was conservative, with officials warning ongoing costs to review thousands of existing laws remain unaccounted for.

“The proposed design of the bill reduces the likelihood it will meet its intended goal of improving overall regulatory quality, could impose costs on agencies exceeding the potential economic and societal benefit, and may also have a chilling effect on the development and retention of beneficial regulation,” the advice says.

The documents note agencies are expected to fund these extra costs from existing budgets, which could mean cuts to frontline work or higher fees for the public.

The new Regulatory Standards Board would cost up to $1.17m a year. Treasury questions the value for money noting that the minister already has power to trigger reviews.

“The proposed design of the bill… could impose costs on agencies exceeding the potential economic and societal benefit,” Treasury mandarins warned.

The bill also introduces mandatory 10-year law reviews. Treasury says these soak up resources and may blindside regulators to wider system failures.

The scrutiny “would be less supportive of your Going for Growth agenda than more targeted reviews,” officials wrote.

Pointing to a seven-year saga over the City Rail Link (CRL), which saw YMCA and Auckland Council battle in the courts, Treasury warns new compensation rules for “regulatory takings” could bog down infrastructure projects in costly legal fights.

Principles relating to regulatory takings and related compensation “go further than conventional policy in this area and could adversely impact the cost and speed of government infrastructure projects and public works in the future.”

Officials urged Cabinet to hit pause, warning the bill’s design is flawed and recommended an assessment that considers “likely durability, cost effectiveness and alignment with the Government’s broader economic and social objectives”.

Undermining the foundational principles upon which the bill is built, Treasury found: “Not all of the principles proposed in the legislation are broadly accepted as good regulatory practice.”

MfE officials were equally scathing.

They warned the bill’s proposed principles — especially around individual liberties and “taking of property”— clash with environmental laws that prioritise long-term, collective wellbeing.

It could undermine managed retreat, weaken emissions controls, and reverse the “polluter pays” principle, potentially forcing taxpayers to foot the bill for pollution and resource overuse.

“These principles could make it harder for councils and government to enforce land use controls or limit development — even where it’s vital for climate adaptation or public health,” officials wrote.

MfE was also alarmed by the potential for retrospective compensation claims, which could saddle local councils with massive liabilities for past planning decisions — transferring risk from property owners to ratepayers and handcuffing future climate response efforts.

It said the draft bill shifts costs away from property owners onto the public and ratepayers, undermining market principles.

“It] places the onus of costs and the expectation of development approval back on councils and ratepayers,” officials wrote.

“This removes the onus on property owners to accept the limitations of their property or their investment, which is the actual intent of a free market, rather than transferring costs onto the public (including future generations) to bear.”

The liberties principle does not include a public interest qualification, and has direct implications for climate adaptation and the potential for mandatory compensation.

“This principle then creates an obligation on the Government and/or local government to pay compensation for restrictions on land use necessary to reduce exposure to natural hazards arising from climate change.”

The departmental comments were provided to the Ministry for Regulation in mid-March.

Officials made some recommendations for change but reiterated “the potential undermining and undercutting of the intent of much of our legislation (current and proposed over the coming year) should the proposed bill and principles proceed in their current form”.

ACT leader and Minister for Regulation David Seymour has been a staunch defender of the bill, dismissing critics as misinformed and accusing some of scaremongering.

He’s also had to defend his “Victim of the Day” and “Regulatory Standards Derangement Syndrome” social media posts, targeting opponents of the legislation, such as academics, MPs and some of the 75,000 select committee submitters. Seymour said he was just being playful.

In a statement to The Post on Friday, Seymour said: “I would be very happy to sit down with the MfE and address their concerns, because it appears to me that they have not properly understood the bill before criticising it.

“The key requirement the Regulatory Standards Bill places on anyone is for lawmakers to issue a consistency accountability statement.

“The statements will explain what problem a lawmaker is trying to solve, and what effect it will have on different people. If the statement shows the law is inconsistent with the principles of the bill, the law can still be made but the public will judge whether the inconsistency is justified.”

He re-iterated that the advice misunderstands how the bill would work.

“For example, a restriction on pollution could easily be justified under the bill. The bill says that a person’s liberties may be constrained in order to secure the same liberty for others.

“That is how you would justify a restriction on polluting the air or water that other people breathe or swim, you benefit just as they do. On the other hand, if people feel their proposals will not withstand scrutiny, the answer is not to oppose scrutiny but come up with better proposals.”

A number of other agencies and governmental bodies have raised concerns with the bill, including the Legislative Design and Advisory Committee, Justice Ministry, Te Puni Kōkiri, Waitangi Tribunal and Ministry of Disabled People, Whaikaha.

“We’re aware the public service doesn’t like this law,” Seymour said.

“Yes, it makes more work for them, justifying laws that interfere in people’s lives.”

He estimates the cost of policy work arising from the bill is just over 2% of the overall work engaged by Government.

“In fact, good regulation pays for itself.” he said. “The Ministry of Regulation has already saved hundreds of millions by eliminating bad laws. The Regulatory Standards Bill will make this activity normal.

“Here’s the thing: If the public service think being required to justify their laws is a faff, imagine what it’s like for the public they have to serve who are obliged to follow them.”

The documents were released to Greenpeace Aotearoa’s Gen Toop, who has been a vocal critic of the legislation.

She believes the official advice reveals the legislation’s real intent “which is to tie the hands of future Governments and impose the ACT party’s far-right neo-liberal principles on our democracy.”

Seymour has consistently rejected this claim and argues the bill is a transparency and accountability tool, not a way to lock values into law. He maintains it won’t prevent future governments from passing any legislation but will require them to publicly justify why they're doing so.

Toop says the concerns raised by officials echo many of those made in an open letter to Prime Minister Christopher Luxon from environmental groups including Forest & Bird, the Environmental Defence Society and WWF-New Zealand.

“It is the role of Government to govern for the collective wellbeing of the people it serves, and that includes protecting the environment and the climate on which we all depend,” Toop said.

“This Bill flips that around and tries to make our Government serve corporate interests instead. But clean drinking water, safe food and a liveable climate should never be made subservient to the so-called property rights of corporations.”

She said the bill represents “an unprecedented threat” to the environment and the Government’s ability to respond to the climate crisis.

“This bill has been rejected three times for good reason. This is the fourth attempt by ACT to get this dangerous bill across the line and this time they are advancing it in plainly undemocratic ways, including through a coalition agreement that was negotiated behind closed doors.”

ACT has been pushing versions of this idea for over a decade, with legislation drafted in 2006 and in 2012, and through an expert taskforce established in 2009. Seymour has embraced this, saying earlier this week that it is “probably the most consulted-on bill this century.”

Toop said it was “a direct attack” on democracy and called on National to withdraw support.