Dialogue: Regulation signals mired in overload

Early in my appropriately short stage career, when I was 5 or 6, the focal point of a play I starred in was whether the cheese someone had been sent to buy was milder than strong or stronger than mild. The regulation debate has taken on some of that flavour.

Is the Government moving us into a heavy, light-handed regulatory regime or a light, heavy-handed one? Much hangs on this.

First, note that some chief executives oppose any regulatory tightening as a sin against globalised economics and/or as making already marginal profits out here on the periphery even more marginal. For them, any tightening is heavy.

Then there are chief executives who expected Labour's moves to be lighter than they have turned out to be. They either did not listen before the election or misheard what Labour was saying, and are now surprised and negative. Auckland, in particular, is grim.

So on Friday, as Telecom's share price dropped in step with world telecommunication companies and also after the telecommunications inquiry's report recommending a commission to sort out access and pricing if the industry can't, Michael Cullen made an extraordinary intervention.

"[Commerce Minister Paul] Swain has always been sceptical about the value of industry-specific regulation, preferring ... the Commerce Commission as a vehicle for any regulatory changes," Dr Cullen said. "The Government does not adopt unnecessarily heavy-handed regulatory approaches and it is very unlikely we would do so with respect to telecommunications."

While Mr Swain has in the past expressed a preference for generic regulation, he has also not ruled out specific regulation. He carefully made no response to the report. Dr Cullen, by contrast, seemed to kibosh its central recommendation.

Dr Cullen's problem is a sudden rash of regulatory announcements which it is all too easy to see as in the same vein as the Employment Relations Act and ACC renationalisation: electricity one day, telecommunications the next, a takeovers code this week, the deadline for submissions on insider trading this Friday, all amid reminders that the Commerce Act rewrite returns to Parliament on December 1.

And there were confusing signals.

Ministers claimed the electricity regime was still the lightest in the OECD but Energy Minister Pete Hodgson has threatened a mailed fist for lines companies which don't self-regulate to his satisfaction.

While Clear praised the telecommunications report's light-handedness in OECD terms, Telecom, which stands to lose heavily, called it heavy-handed.

While Brian Gaynor in the Weekend Herald called the insider trading proposals "bland," Mr Swain told journalists he favours criminalisation, which sounds heavy-handed.

The takeovers code likewise is welcomed by some investors and condemned as draconian by others.

The Commerce Act changes align us with Australian law, which has caused angst in bigger business circles there.

So what does the Government think it is doing? Helping business by ensuring state-of-the-art and cheap telecommunications, cutting electricity costs, encouraging more investors into a "wild west" stock market, facilitating new entrants into currently dominated markets. In some cases, this is the main purpose, in others a spinoff from cutting consumers' costs.

The Government thinks it is maintaining a light-handed regime by OECD standards. That might be interpreted as heavy, light-handed. The weight of evidence supports its claim.

But its critics fear regulatory creep, that plugging loopholes in the new laws will lead to heavier regulation. That view might be interpreted as light, heavy-handed, with heavier to come. (That is distinct from the separate prospect of more regulation as the Government sets out to cut greenhouse gas emissions.)

Critics also note that, except for a favoured few in each case, almost any increase in regulation reduces profitability.

Moreover, many OECD countries are lightening regulations. Each such decrease diminishes any advantage for firms operating here.

The Government's gamble is that chief executives will in time see that the cheese is merely stronger than mild and restart investing and expanding. But it has a lot of work to do yet to convince them the cheese is not just milder than strong.

* ColinJames@synapsis.co.nz