Fran O'Sullivan: Government needs to sort own house too

Labour's Nanny State is loosening her apron strings as far as business goes.

Or so we are being asked to believe.

Commerce Minister Lianne Dalziel - "energised" to the max - has heralded a competition law shakeup and wants to put her stamp on a new officials taskforce to reduce compliance costs for business.

That the overall programme is riddled with contradictions seems to have so far escaped the gutsy Dalziel, who unveiled her "Getting on with Business" moves at the first of Vector's Winter 2006 lecture series - one of those cosy Wellington cocktail parties which could have benefited from an injection of more hardcore business people to ask the questions the civil servants, regulators and SOE personnel do not find it in their interests to pursue publicly.

Let's state first up that after six years it is about time the Government did finally respond to the commercial sector's repetitive bleats for it "to get out of business's way".

But the overall programme is riddled with contradictions.

Business organisations - ranging from Chambers of Commerce through to Business New Zealand and the Business Roundtable - need to be on guard as the "whole of Government" taskforce led by Ministry of Economic Development official Peter Mumford starts redefining what is working and what isn't.

Here are a few pointers:

* Reminder 1: It was the Clark Labour Government, after all, that upped the regulatory burden in the first place.

Anyone wanting a pointer to the philosophical thinking underlining Dalziel's programme need look no further than her original desire to brand the regulatory review "taking care of business".

This was hardly a surprise to some of her senior colleagues who see her as a terminally "huggy" type intent on an "all roads lead to Rome" (aka the Government) approach to solving regulatory issues.

But when officials dug deep they found Telecom had got there first - trademarking the slogan for remote business products.

"Telecon" - as many people now label the telco - is hardly flavour of the month in the Beehive. So Dalziel's officials came up with the alternative, "Getting on with Business" which, the minister explains, shows that the Government is engaging with business to get feedback on what's working, what's not and how that can be fixed.

The Government is keen for business to get on with business.

"Getting on with Business is about relationships and Getting on with Business is about getting on with the job," Dalziel said.

"The goal for me is that the Government gets out of the way of business as much as we can, but we keep the rules up to date and well-communicated; we keep an eye on progress, offering signposts or roadmaps along the way, and we let people know if they are signalling a wrong turn, and if they turn off anyway we pull them up and get them on the right track again."

You get the slightly flowery drift.

The problem with the current construct is that it puts the Government very much back in the centre - brokering regulatory deals - but not examining whether its policies such as the Resource Management Act (which it has yet to formally review) or the Employment Relations Act and related changes are appropriate in the first place. Dalziel says the Government's not for changing on this score as it was elected on its policies.

This is very limited thinking as it was clearly not elected on a platform to eliminate Telecom's effective broadband monopoly either but has decided this is necessary to spur New Zealand's overall national interest. There needs to be some consistency here.

* Reminder 2: Small-business voters - who wanted National's tax cuts and promised war on red tape - nearly tipped Labour out at the last election.

Helen Clark wants Dalziel to cater to the needs of these businesses to help spark New Zealand's economic transformation. With 96 per cent of NZ firms classified as SMEs (small to medium-sized enterprises) with fewer than 20 employees, they are a critical catchment - both economically and electorally for a calculating PM wanting to shore up her chances of a fourth parliamentary term.

This presents a fortunate alignment of interests if business organisations play tough. Their memberships must not allow them to settle for a "snow job" this time round.

* Reminder 3: Debate over light-handed versus heavy-handed regulatory regimes should not be made to disappear simply because Dalziel wants to banish the terms in favour of others like "high-quality" and "balanced" regulation, using Blairite-type semantics.

Next week Gary Banks, chairman of the Australian Productivity Commission, will be in Wellington as a Roundtable guest.

The commission recently produced a report, Rethinking Regulation, which looks destined to be implemented by John Howard's Government. Dalziel is now promoting an expansion of the commission's work to cover New Zealand - not just its home patch. She acknowledges on certain fronts New Zealand's frameworks would be a much better starting place for reform in Australia than the other way round.

Already the commission has examined the impact of transtasman competition rules in the context of single economic market discussions, and the Ministry of Economic Development is informally mooting the appointment of two New Zealanders as commissioners.

If this does happen it is important that the Roundtable uses its opportunity to impress on Banks the clear fact that NZ business does not want "high-quality and balanced" regulation if that is simply cover for the reintroduction of a heavy-handed regime. It's a moot point that quality regulation has spurred the recent growth on the NZ sharemarket - as Dalziel claims.

* Reminder 4: The claim that Fonterra is some sort of best-in-class example of the virtues of creating local monopolies to compete internationally should be examined rigorously before the Government gives a green light to more monopolies.

Air NZ has been lobbying for a review of the Commerce Act, arguing that it would have been able to form a strategic alliance with an overseas airline and build critical mass to compete internationally if it received similar advantages to Fonterra.

Dalziel appears to have taken this on board: "Fonterra represents a good example of a NZ-based, globally competitive company that would not have passed the initial test without Government support. They abide by the rules now, but the Government lifted them over the threshold. To me, that is smart government," she told the Vector function.

But even as the Government signals it is prepared to look at allowing greater industry concentration to overcome difficulties posed by NZ's geography, population and relative isolation it is taking punitive action against the very legislatively created monopoly - Telecom - its Labour predecessors ticked off.

And if Telecom, why not NZ Post? The state-owned enterprise continues to monopolise postal services at the expense of its competitors.

Telecom's copper wire loop had to be opened to competitors but the Government needs to be consistent. It can't slap the telco's private shareholders yet not apply the same principles to the monopolies it owns directly and expect business to view it as acting in a principled fashion.

Dalziel argues many of today's challenges were caused by a privatisation programme that did not distinguish the public interest in infrastructure from the private interest in the business.

Telecommunications, energy, rail and ports (air and sea) are in her sights.

The upshot is that once the review process is complete there will be a move to much greater centralisation of regulatory power. Balanced, not heavy-handed.

But regulation all the same.