Annual Rotary Speech 2012
2012 Rotary Address- Nelson West Rotary Club
Hon Dr Nick Smith
25 January 2012
Thank you for the opportunity to give this annual address, now nearly spanning two decades.
This is my first significant speech since the election, and my new Ministerial role. This evening I want to make some observations on the election result, outline my work plans in respect of the environment and climate change, and most importantly set some important direction in respect of my new role as Local Government Minister. I also want to cover off some important Nelson issues.
The election result on November 26th was an extraordinary result for National in both an international, national and local context. The conventional wisdom internationally is that under proportional systems, parties rarely score over 40%. In Germany the home of MMP, neither the Social Democrats nor Christian Democrats have in 60 years achieved such a result. National’s 47% result sets a new benchmark as to what is possible.
I put this success nationally down to three factors.
First, the support for the PM. He is warm, affable, very focused, on top of his game, and relentlessly positive. What makes John Key extraordinary is that he is both respected and liked.
Secondly, National’s moderate programme. People are ‘over’ ideological lurches from governments of the extremes of the left and right. The government’s approach of constraining but not slashing public spending and rebalancing the economy away from debt to saving has broad public support.
Thirdly, Christchurch resented Labour’s attempt to make politics out of the devastating earthquakes. To lose Christchurch Central and Waimakariri as well as National scoring over 50% of the party vote in this traditional Labour city shows just how out of step Labour got with the public mood.
The Nelson Party vote for National of 46%, 19% ahead of Labour, also has to be put into historical context.
Despite the electoral landslides for National in 1960, 1975 and 1990, Nelson still voted Labour in each of these elections.
Since I became the first National MP in the region for decades in the 1990’s, the political commentators have viewed Nelson as essentially a Labour region based on Labour’s strong party vote. They view me as a bit of an anomaly with strong personal support for my electorate work. The 2011 party vote result of 45% to 27% changes that.
The reason for this change is that over the last half century both Nelson and National have changed.
Nelson has become more entrepreneurial and outward looking. We are now the most export orientated region in New Zealand with the growth of our fishing, forestry and horticultural industries.
Nelson is also less of being, ‘just a retirement town.’ The newcomers of the last two decades are younger. They are attracted by our quality of life and the fact Nelson is a great place to raise a family.
National has changed too. Our strongest support base is these young aspiring families. We understand the importance for them of good public services like health and education.
We have become more intone with public opinion issues like the environment and recreation issues. National is a much more diverse party than that of the farmer/ business focus of the 1960’s.
I mention these long term changes because 2011 put to bed the notion that Nelson is at heart a Labour area.
I have historically used this speech to outline my portfolio plans for the year ahead and let me begin with the Environment.
My first environmental priority this year is to pass and implement new laws to provide for the environmental protection of New Zealand’s huge ocean area. This space of 650 million hectares or 20 times our land mass is known technically as the Exclusive Economic Zone and Extended Continental Shelf.
The issue is that the jurisdiction of the RMA ceases at the 12 mile limit of the territorial sea, yet we need to have a robust system for assessing the environmental impacts of activities in the ocean environment.
We need look no further than the Gulf of Mexico disaster in 2010 as to what can go wrong. A key conclusion of the subsequent inquiry was that an independent regulator, separate from the government agency responsible for promoting mineral exploration, needed to robustly check the environment risks. That is just what we are proposing with the Environmental Protection Authority.
Balance is at the core of the Government’s approach to this issue. There are significant economic opportunities for New Zealand from minerals in New Zealand’s EEZ, the 4th largest in the world. This legislation is about taking these opportunities in an environmentally responsible way.
A second environmental priority is improving management of freshwater. Few New Zealanders appreciate how blessed we are in having the second highest per capita water resource in the world, nor how much of our export and energy industries depend on that resource.
In the last term of Government, we established the Land and Water Forum which produced by consensus across 58 groups a way forward for improving how we manage water. This year my priority is making progress on getting clearer rules for farmers on what they need to do to better protect water quality as well as progressing clean-up plans for a number of significant rivers and lakes that had over previous decades become polluted.
I am also proposing a new Environment Reporting Act that will improve the integrity of New Zealand’s green brand.
We are the only OECD country that does not have a statutory system of nationwide environment reporting. This is out of step with the importance of the environment to our national identity, economy and quality of life.
A good practical example of this problem is our water quality. There is no consistent system of measurement. It is very difficult to ascertain if it is getting worse or where it is improving and this just compounds the political difficulties in improving management. My aim is to establish a nationwide five yearly report that ranks New Zealand’s rivers and lakes from the cleanest to the dirtiest and identifies which ones are improving, and which are deteriorating. This will help focus communities on better managing this precious resource. The intended author of the report is the Parliamentary Commissioner for the Environment to ensure its independence and integrity.
Another key work stream is improving the Resource Management Act.
The first phase of reform in 2009 has delivered real benefits in the processing of small non-notified consents.
The number of late consents grew from 18% to 31% between 2002 and 2008. That is 16,000 people in 2008 that had consents that were not processed within the statutory timeframes.
Our 2009 changes have reduced this number to 5% or just 1800.This means 14,200 fewer people facing the frustrations of late consents.
A further major problem we needed to address was the years it took for the RMA to resolve major consents. There are horror stories of major projects like Wellington’s Inner City Bypass taking 15 years to consent because of objections and appeals.
A key innovation is the new national consenting process managed by the Environmental Protection Authority for those large nationally significant projects where a decision is required within 9 months.
The $1 billion Tauhara Geothermal power project near Taupo was the first to be processed, quite successfully, and last year the $2 billion Waterview Motorway project was also approved, with modification, in record time.
These timely decisions are not just important to the economy. Delays in consenting new renewable power stations just means we burn more coal to keep the lights on. Years of delays in transport infrastructure just means years more of highly congested traffic that has far higher pollution and fuel consumption levels.
These reforms also have an important dimension for our own region.
King Salmon has long held ambitions to expand their marine farms in the Marlborough Sounds. It means more jobs, more exports and more wealth in our region. The previous RMA provisions effectively blocked any new marine farms. The EPA is now considering King Salmon’s application under our aquaculture and RMA reforms and a decision will be made this year.
There are three major issues on the agenda in the next phase of RMA reforms.
The first is addressing delays in medium sized projects. The Act is now working better for the small, non-notified consents and for the really big projects, but I still get a lot of criticism about delays for subdivisions, new factories, and new commercial buildings. The next phase of the reforms will set a statutory timeframe of six months for processing medium sized consents.
The second is the strengthening of requirements for councils to consider natural hazards, a deficiency exposed in the wake of the Christchurch earthquakes. The science of liquefaction and the areas that were vulnerable to it were clearly identified by 1990; yet major new subdivisions were approved in the eastern suburbs without any consideration of this risk.
The third key issue is simplifying the planning framework. We’ve got too many different planning documents and the processes for developing and changing them are complex, bureaucratic and expensive. This work is important to improving both the environment and economy and is the most difficult of my challenges ahead.
I wish now to turn to my climate change responsibilities.
One of the more controversial projects during the last term was to implement the Emissions Trading Scheme. National made significant changes to Labour’s original proposal amending the scheme so New Zealand industries would not be excessively disadvantaged. We also moved to halve the cost to consumers and businesses in response to the global recession.
I have been hugely encouraged by the progress that has been made.
Without the scheme, New Zealand was set to significantly breach our emissions target under the Kyoto protocol that runs to the end of this year. This has been achieved by reversing the significant deforestation and the encouragement the scheme gives to planting new forests. During Labour’s last term in Government, New Zealand lost 30,000 hectares of forests. In the last term the area expanded by 11,000 hectares.
Historically, the source of the greatest percentage increase in emissions has been electricity generation, up 120% since 1990. More and more of our power was being produced from burning coal and gas and the previous government even built a new diesel power generator. The ETS in July 2010 put a price penalty on fossil fuel power generation. It is working as intended with a reversal in the declining trend of renewables and with last year seeing the highest proportion of renewable power in a decade of 79%. The most encouraging development has been the consenting in the first year of the ETS of 1340 MW of renewable projects, a five fold increase on the average of last decade. This consists of 2 new geothermal stations, 5 new wind farms, 5 new hydro and a new tidal power generation in the Kaipara harbour
My plans this year include amending the ETS.
We need to take into account the fact that Kyoto expires at the end of 2012 and international negotiators have not been successful to date in concluding a successor agreement. This is disappointing but we need to accept the reality.
We also need to be real about the ongoing financial pressures on businesses and households. We should be cautious of extra impositions of cost from the ETS. That is why National is proposing to slow the scheme and phase in the next stages over three years.
The reforms will also be about changes that align our scheme more closely with Australia. We started 2 years earlier than Australia, but at a softer rate. When they start on the 1st of July, their consumers and businesses will be paying more. Our intention by 2015 is to bring the schemes into alignment. This approach makes common sense given this is a global issue and the extent to which the New Zealand and Australian economies are integrated.
There is a very important underlying principle to the Government’s approach to climate change and the ETS.
New Zealand, as a small country accounts for less than half a percent of global emissions and cannot pretend to solve this global issue alone. We are about doing our fair share and regularly recalibrating our approach taking into account international progress.
The major issue I wish to cover this evening is my new portfolio of Local Government, and as this is my first speech, it is an important opportunity to spell out concerns and priorities.
I’ve spent the summer break studying the briefs from Departmental Officials, from Local Government New Zealand, Business New Zealand and the Society of Local Government Managers, from individual councils and other stakeholders.
I want to stress at the outset Government’s view that an efficient, responsive and well focused local government sector is absolutely vital to New Zealand. Our 78 Councils are responsible for $100 billon worth of public assets, employ 23,000 people, spend $7.5 billion each year of public money and everyday make thousands of regulatory decisions that impact on the lives of all New Zealanders.
If they do these jobs well, they can be a turbocharger for New Zealand Incorporated, but poorly and they become a handbrake on this country’s success. My ambition is to work with Councils to ensure they are a help not a hindrance to New Zealand getting ahead.
My number one concern is about spending and the financial burden of rates on households and businesses.
Over the past decade average rates across the country have grown by 6.8% per annum, or by more than twice the rate of inflation.
It is telling, that of all the inputs into the consumer price index, rates have gone up by more than any other cost. Food price increases since 2002 have on average increased by 3.3%, transport 2.6%, clothing 0.1%, and housing 5%. The 6.8% rates rise figure is just unsustainable.
The 2002 marker a decade ago is significant. That is the year Alliance Minister Sandra Lee, completely overhauled our Local Government legislation covering the sector’s functions, rating powers, consultative and planning requirements.
In the decade prior to these reforms rate rises averaged 3.9%, or within cooee of the rate of inflation.
Let me put the issue more starkly. If average rate rises had increased over the last decade at the same rate of the previous decade, i.e. 3.9% rather 6.9% the average homeowner would be paying $500 less in rates today than they are, or nationally, the rates bill would be a billion dollars a year less.
It is not just rates on the rise that have me concerned. Most New Zealanders would be shocked to learn just how quickly our councils have been racking up debt.
Council debt has roughly quadrupled from $1.8 billion to $ 7 billion over the past decade. Debt is the issue of our time. Since 2008 it has been crippling economies internationally.
There has been a lot of commentary about Government and private sector debt increases over the past decade yet Council debt has grown faster than any other sector. It is now at levels unprecedented in the 140 year history of local government in New Zealand.
Our two councils, Nelson and Tasman are typical. Nelson’s debt has gone from $15 million to $51 million whereas Tasman’s has increased from $29 million to $116 million.
There is increasing concern within the local government sector about its indebtedness. The December issue of “Local Government New Zealand” quotes Larry Mitchell, a local government financial analyst who talks of a Tsunami of debt and of 15 – 20% of our council’s debt hitting the financial wall. He puts the problems down to council prolifigacy, a lack of financial prudence and is highly critical of the unforeseen consequences of the 2002 Local Government legislative changes.
The $8 billion of local government debt might seem low when compared to the $100 billion of council assets. The issue is that very little of these assets are income generating and fewer still could be cashed up. The worry is the capacity to service this increasing debt burden from a relative low income stream of rates. Government has previously put debt limits on councils but these were repealed two decades ago. This may need to be reconsidered.
The underlying issue here is that while central government, households and businesses have responded to the crisis internationally over debt by pulling in spending local government has been slow to respond.
There is evidence of this in the labour cost index. In 2005 to 2008 period pay rises in the state and local government sectors significantly exceeded that of the private sector. National has been successful in pulling back state pay costs to an increase of 3.9% over the last three years, a third of the increase over the previous term. My concern is that local government labour costs over the last three years increased by 7.6% or nearly double the rate of the state sector and still ahead of the private sector.
I am advised by many in the local government sector that there are lots of good reasons why council costs are going up faster than any other sector. I confess to being a tad cynical from my experience as ACC Minister over the last 3 years.
For the period 2002 to 2008, ACC claim costs rose by 12% per year, and by 2008 the Corporation was in a perilous financial position.
When I questioned these cost increases being way in excess of inflation I was given all sorts of reasons by ACC why this was so. The population is aging, I was told, and older people have more accidents and take longer to rehabilitate. I got amorphous answers that it was due to social changes and changed expectations. The reality was far simpler. Costs were just out of control. Over the three years since with a concentrated effort by board, management and staff, we not only stopped the ongoing increases, but were able to generate huge savings. This has enabled on the first of April this year a reduction in levies for workers of 17% amounting to $340 million per year and for businesses of 22% amounting to $250million per year. To give it a Nelson context, that saving is worth $16million a year to Nelson households and $12million per year for Nelson businesses. It shows what is possible.
Local Government is a quite different challenge to ACC. It is run by locally elected representatives rather than a Government appointed board. It is going to be a far more challenging job to get cost control. As with ACC, there needs to be fundamental change in the culture and everyone including Mayors, Councilors, Chief Executives and the 23,000 staff in the sector need to be focused on getting better value for money for the ratepayer.
I am having a fresh look at the changes made in 2002 and how these have increased the cost of local government. My endeavors will be about how government can better support more efficient councils. Inevitably this raises the question over local government reorganization beyond the big changes made in Auckland.
I wish to make it plain however that the Government is not going to embark on a central government led, nationwide programme of forced change as occurred in the 1980’s. Nor do we take the view that bigger is necessarily better.
I believe the new council in Auckland poses a real challenge for the rest of New Zealand. Its single voice, coordinated planning and efficiency gains are going to give it a competitive edge. Other communities need to start thinking about how their area can do better and what future structure of councils will best assist their regions’ prosperity and growth. From the Government’s perspective, we want the rest of the country as well as Auckland to be successful and want to facilitate a sensible dialogue on reform.
It is important that here in Nelson where the Commission is currently considering the merger of Nelson and Tasman that I make it plain that this proposal will be considered under the existing law and process. Their report is due within the next fortnight and it is important as Minister I let the Commission independently make its decisions.
My overriding national goal is to work with local government and communities to ensure councils are in a position to support a growing economy. That means better constraint of costs on households and businesses, reducing unnecessary red tape, providing good quality infrastructure and limiting the accumulation of debt.
I want to conclude on major Nelson issues for 2012.
The first is dealing with the aftermath of December’s floods and landslides. It is the worst disaster to hit Nelson for a generation, although thankfully we had no loss of life or serious injuries. It is going to be a massive job repairing the 600 affected homes, a good number of which will have to be completely replaced and in rebuilding critical infrastructure. A key issue for me will be ensuring Nelson residents get good service from EQC despite the massive demands on this organization from Christchurch’s earthquakes. Tonight that work continues with a public meeting with Councils.
There is another issue on which I intend to give a particular focus – improving services and policy around our most vulnerable children. I am sure your guts wrench like mine every time you see a case of a young child being abused, neglected or killed. It is New Zealand’s most challenging social issue and we need to think locally how we can do better.
Next week I will host a public meeting with Social Services Minister Paula Bennett on the green paper on vulnerable children. This work acknowledges there is no single silver bullet to prevent child abuse. The Government is determined too listen to and work with communities to find durable solutions.
We are not just talking about this issue but also doing more. Government has lifted the resourcing for child protection workers at Child Youth and Family. This means for Nelson three additional care and protection social workers starting work in February
A related issue is my ambition this year to secure government financial support for a dedicated specialist teen parenting unit in Nelson. I commend the voluntary work of Soroptomists and the Impact Church in getting a centre up and running informally last year, but it won’t survive long term without Government support.
The importance of this initiative is accepting the reality that we have about 60 teenage parents each year in Nelson and that all research shows these are amongst our most vulnerable families. The concept is a dedicated education centre proposed on the Auckland Point School site where both mother and child can advance their education and get the wrap around services to support them.
A further initiative is in respect of after hours medical care. I have been working for a number of years with the Nelson Marlborough DHB on establishing a new modern clinic adjacent to the emergency department of Nelson hospital and I want to see this brought to fruition this year. Further gains have been made in extending free under sixes GP care to those after hours services from first July. This is motivated by removing any barrier for young children getting access to medical care as quickly as possible.
There are many other Nelson issues from Cawthron funding, extended broadband access, special needs education and tighter alcohol controls on which I also want to make progress this year.
The broader perspective I want to leave you with is that 2012 is a critical year for the Government progressing the long term substantive reforms that will make for a better country.
2011 was a year of distractions. The tragic earthquakes, the Rugby World Cup and the Election.
This is the year in which we have a real opportunity and a mandate to get on with the reforms that will secure a brighter future for Nelson and New Zealand.
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