Friday 8 December 2023

A belated look at the coalition agreements

Things got a bit busy after the National-ACT and National-NZ First Coalition Agreements were released. 

A fair few things showed up in those agreements that we've been working on at the Initiative for rather some time, whether through reports, submissions, columns, panels and whatnot.

So that's been a bit busy, and I've been trying to clear through a few other bits before heading back to Canada and the US for a few weeks over the school holidays. So posting has been unduly light.

But I've been particularly pleased that these showed up in the agreements. 
A Rule of Two for Drug Certification

The government will require Medsafe to approve new pharmaceuticals within 30 days of them being approved by at least two overseas regulatory agencies recognised by New Zealand.

Loyal readers may recall series of tweets, blog posts, and columns from me on this one. I worked with a couple student teams at Canterbury to get a report up on the likely effects of a Rule of Two. 

It is in both coalition agreements and will be legislated. No "will investigate" or "will consider". It will happen. 

I am rather pleased about this one. 
Incentives for Growth

Weak incentives for councils to encourage housing development hasn't been the only problem blocking housing growth, but getting more housing despite current incentives requires heroes. And policy can't reliably depend on there being heroes around. The coalition agreements will introduce financial incentives for councils to enable more housing.

This has been core for the Initiative since before I got here. And now it will happen.

Easing Foreign Investment

The Overseas Investment Act will limit ministerial decision-making to national security concerns and make such decision-making more timely.

NZ has one of the OECD's most restrictive FDI regimes. Other places try to attract foreign investment; NZ does the opposite. 

Easing restrictions on FDI have been core for the Initiative since before I got here. Fingers crossed that the legislation interprets this as broadly as is implied by the text of the coalition agreements. 

Market Studies

Commerce Commission market studies will focus on reducing regulatory barriers to new entrants to drive competition. 

So far, ComCom has produced about one giant study per year. But the first-order problem is going to be in areas where ComCom has hitherto been precluded against poking around: matters falling under statutory exception. If a matter is authorised by Parliament, it doesn't get cartel investigation even if it is definitely behaving as a cartel. 

Instead of doing one giant study per year, ComCom would do a larger number of short studies focused simply on checking whether it is actually possible for a new entrant to get through NZ's regulatory and land use hurdles to provide potential competition. 

So here I disagree with my friend Donal Curtin. He worries about instances where the issue isn't regulatory barriers. Maybe I'll agree with Donal after the revised regime has run for a few years. But the low-hanging fruit simply is not going to be in places where ComCom has been able to use other tools. It will be in the place where they've been unable to shorten the way.

This shift in approach is something I've argued for in columns, submissions, at a CLIPNZ session, and in various conversations around town. 

Ben Hamlin and I have been, I think, the only ones really worried about the statutory exceptions. Ben's piece on it in the latest Law Review is very good; his gratuitous citing of my columns is inframarginal to that assessment. 

Monetary Policy

The Remit will be narrowed to focus only on price stability.

This too is excellent. In a normal environment, a dual mandate shouldn't matter. The long-run Philips curve is vertical. Maintaining price stability is the best way the bank has to ensure maximum sustainable long-term employment. 

We have worried about the broad Remit, which includes a preamble that encourages the Bank to give regard to basically the entirety of the government's policy agenda, for some time. 


The government will consider setting an income threshold above which a personal grievance could not be pursued.

Our Chair, Roger Partridge, has been writing on this for some time. The measure would make it far simpler for firms to dismiss underperforming high-paid managers who really aren't the people that employment law protections should focus on anyway. 


The government will allow the sale of cold medicine containing pseudoephedrine.

This is another one that loyal readers may recognise. I think me and Twitter's @BoxcarJoey have been the only ones making the case for this obviously sensible move. And now it will happen. 

There's a lot of other stuff in the agreements, mostly good, some less good. 

As another bit of fun, the Dom Post put out its latest 'Wellington Power' list. I think it needs an accompanying 'Wellington Mystery' list so we can figure out whose power is exceeded only by their mystery, or vice-versa, or both, somehow, simultaneously. 

But in any case, I made the cut for inclusion this time. But only barely. And possibly only because I also write a column for them. 
45. Eric Crampton

The stocks of think tank New Zealand Initiative’s chief economist have soared, with the ascendancy of ACT into Government. The Canadian is a prolific report-writer and commentator, with a free market bent, and incoming ministers are sure to be paying attention to his sharp, original (and often witty) thinking.

Friday 17 November 2023

Volcano powered

I love that GNS is looking at supercritical geothermal generation.

They've commissioned Castalia to look at timelines and economic feasibility. It's looking good, from 2037, if we can get fast-track consenting - and if there aren't other substantial hiccups. 

NZ will need a whole lot more generation as carbon prices rise and folks shift away from carbon-intensive energy sources.

Great thing about geothermal is that it just runs. It doesn't care if the wind blows or the sun shines.

Waste heat can be used for other processes - like milk powder drying, or making wood pellets.

As reminder, here's Eli Dourado's piece from a couple years ago on the big-picture on this stuff.

Thursday 16 November 2023

Afternoon roundup

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Advice to an incoming government from Dominic Cummings

Or, at least, some very sharp observations on how the system works. It won't be much different in New Zealand. 

Here's Cummings on Dwarkesh Patel's podcast, and some snippets from the transcript. Superb throughout. If an incoming National government wanted to know what they're getting into, listening to this would be a decent start. 

Dominic Cummings 00:04:08

A fundamental problem with how the British state works is this question of prioritization and the Prime Minister’s time. So you have all of these normal parts of the system that essentially can’t really do anything quickly at all, even in a crisis. So the Prime Minister’s time and the Prime Minister’s prioritization is the most important asset. But also it’s something which is constantly pulled hither and thither by all of this craziness.

One of the things that obviously we wanted to do was fundamentally reorient Number 10, away from what it’s been since Thatcher, which is a kind of press entertainment service. Where the whole building is just built to respond to what the media says and instead say, “What do we actually think is important?” And what is the management system you’re going to build that actually can maintain focus on those things whilst the inevitable chaos goes on?


Again, one of the funny conversations I had with Boris was, you know, we should say to the ministers that here’s your actual priorities as defined by us. Whether or not you get promoted and whether or not your career goes well is going to be defined by how well your department actually fulfills these goals. We don’t care about all of your interviews. We don’t care if you are on TV or never on TV. That’s not how we’re going to judge. Because they’ve all grown up in a culture where they think whether or not they’re going to be promoted really depends on: Are they seen as a good media performer? Or do they botch things on the media? Well, that’s just a fundamentally bad criteria, not least because their definitions of what’s good on the media are themselves terrible. By approaching government like that, you’re incentivizing them to think that their goal is making friends with the media. So then they get good interviews. That also incentivizes them to leak everything. So again, the culture and the incentives are self reinforcing in a very negative way.


I’ll tell you a story about it that kind of summarizes it. At the peak of COVID craziness in March 2020, on the day itself that the PM tested positive for CoVID, a bunch of people come into Number 10 sit around the table and we have a meeting and it’s about supplies of PPE to the NHS.

They say, “None of this ppe that we’ve ordered is going to be here until the summer.”

“But the peak demand is over the next three to four weeks.”

“Sorry, Dominic, but it’s not going to be here.”

“Why not?”

“Well, because that’s how long it takes to ship from China.”

“Why are you shipping from China?”

“Well, because that’s what we always do. We ship it from China.”

But A, we need it now and B, all of the airlines are grounded. No one’s flying anything.

“So call up the airlines, tell them that we’re taking their planes, we’re flying all the planes to China, we’re picking up all our shit, we’re bringing it back here. Do that now. Do that today. Send the planes today.”

We did that. But only the Prime Minister could actually cut through all the bureaucracy and say, Ignore these EU rules on Blah. Ignore treasury guidance on Blah. Ignore this. Ignore that. “I am personally saying do this and I will accept full legal responsibility for everything.”

You multiply that kind of problem by hundreds and thousands of problems, you get a sense of partly why COVID was so crazy. This is normal government. But in a crisis, when no part of the system can actually move fast, all of these bottlenecks end up very dramatically escalating to the PM’s office. And if you read Jared Kushner’s book, Memoir about the White House, there are very, very similar tales there. That a lot of things that obviously should have been solved elsewhere couldn’t be solved at any other part of the system. They all end up cascading upwards in these centralized bureaucracies, because ultimately only the president or only the Prime Minister can give certain kinds of orders.


And in fact, In 2020, for example, when we did some things very differently, it was extremely disruptive and extremely unwelcome to the large part of the system. Hence why a lot of what we did was closed down.

Did they say, “Okay, the vaccine task force and operation warp speed and the state have been great successes. We should massively reinforce them. We should build the next generation of vaccines. We should spread the lessons of how the task force operated.”?

No, they basically closed the task force. Sewage monitoring closed. Rapid testing, basically closed and forgot to order enough tests the following year.

So if you look back at 2020, most of the people who were most wrong were given awards and honors by the system and promoted to new jobs. The people who were most obviously repeatedly right have almost all left.

What incentive is there for people to speak out about how these things work? No one expects anything to change. Even after something as big as COVID, when you see what the reaction is, everyone can now see the truth. You can have a once century pandemic. It can kill tens of thousands of people unnecessarily. It can be a complete carnage for the economy, and everyone will just basically go back to normal. MPs will ignore it and nothing much will change.

So if you’re a standard official inside the system, all the signals to you are very clear. In fact, in 2021, it was even more powerful than that. There were a whole load of legal actions brought to say that the real problem with 2020 was that we went too fast and we did things too quickly. People actually brought legal actions against the vaccine task force. They brought legal actions against rapid testing. They brought legal actions against all sorts of activities.

The system didn’t say “This is completely insane. Actually, the bureaucracy and the sloth killed thousands of voters.” It said “Yes, we’re going to investigate all of this.” Every signal propagated through the system was essentially back to normal. You will be promoted for being the most insane process, and you will be demoted and blacklisted if you say this process is insane and try to do better.


Dominic Cummings 00:24:16

Manhattan Project is much in the news with the Oppenheimer movie. If you look at the very last bit of General Grove’s book on Manhattan Project, he talks about what are the most fundamental principles about why it succeeded? And one of those principles is relevant to government. Actually, they’re all relevant to government.

One of the principles is that the quality of the people is fundamental. Another one is that responsibility and authority are always delegated together. The entire British constitutional system and management structure is based on the fundamentally opposite principle. Responsibility and authority are not delegated together. So if you’re asking about something like the vaccine task force, in the normal system, nobody really is in charge of anything. Lots of people can criticize, lots of people can complain, lots of people can argue about things. Lots of people can veto. Almost nobody ever has the authority just to build something or just to do something.

Why did we create the vaccine task force the way we did? Well, because we were trying to actually embody principles like responsibility and authority pulled together. We brought one person in, we said “You are responsible.” But once we’d gone, then what happens to that entity? It’s sitting there amid Whitehall while all the normal parts of Whitehall just start going back to being normal. So what happens? They say, well, they are exempt from all of these rules on HR that the Cabinet Office imposes on every part of Government. This should change because it’s going back to normal. They have to do the following things properly. We gave them special dispensations because of the extraordinary circumstances of summer 2020, but these now come to an end.

So those sorts of things come in. The treasury says, “The spending rules and how the people in the vaccine task force make decisions, that was an emergency thing. Now the normal rules apply again.” So before you know it, all the different parts of the system have basically said, the thing that you created outside of the normal system now has to obey all of the things that it was specifically created to avoid.

Now, the system will just do that automatically unless there is a very powerful counterforce. Fundamentally, again, only the PM can say,”No, we’re not having that. In fact, I want to strengthen the vaccine task force. We want to move on to the next generation of vaccines. etc.” If they don’t do that, and if the people in charge of it can’t call on the PM’s authority, the system will just devour the new entity very, very quickly and force it to conform with all of the normal system.

I’ll give you another example of this on rapid testing. One of the things that we did to get the rapid testing to work was we got a guy who formerly was commanding officer of the SAS, British Special Forces, and this guy got a bunch of his friends from Special Forces also to work on rapid testing. When we first got this pushing from Number 10, I got the critical people from procurement, commercial HR, etc, into the Cabinet room with the Cabinet Secretary, the single most important official in the whole country, and the two of us said, “The PM wants rapid testing dealt with as if this is a wartime crisis.” We’re going to have a second wave. There’s going to be thousands more people getting CoViD, there’s NHS. People are dying, etc. We can’t have any of the normal civil service HR. We can’t have any of the normal civil service bullshit on procurement. Exactly the same as with the vaccine task force. Everyone sits around the cabinet table, they all nod their heads.

A week later, I call this guy, a former SAS boss and say, “So, how’s it going? Are you getting who you want and is everything working great?”

He says, “No, it’s all the same shit show.”

So I have to get all the people back in the same room with the country’s most senior official and say, who the fuck have we got to fire around here to make clear that these people doing testing don’t have to do all of your bullshit HR?

That’s how extreme things have to be. It was only by doing that a second time and making clear that I would get the PM to actually just start firing senior people in the Cabinet office. It’s only then that the system will kind of part and go, “Okay, this element is allowed to.” But you imagine as soon as that countervailing force is removed, all the normal sea floods back.


Dominic Cummings 00:31:25

Sorry to interrupt, but imagine as well what the promotion system is like and who ends up getting to the top of these systems. A lot of people say, “Oh, you’re so negative about the civil service. You’re all saying that everyone there is rubbish, and it’s not fair.” That’s not my view. In fact, if you look at the civil service, you actually see a lot of very able people, but most of them are young. What happens is the young, excellent people get weeded out by self-selection, largely because they go in idealistic, they’re there for a few years, but then they look at what the process is to be promoted, and they look at their bosses, and the best of them look at it and go, “I don’t want to be like that.” I don’t want to have to make those decisions. I don’t want to have to make those compromises. I don’t want the job like that, where it’s almost all bullshit. We can’t actually build anything.

The most entrepreneurial, the kind of people who actually want to get on and do stuff now, leave and the most HR compliant, disastrous people to be in charge of supposedly fast moving agencies are the ones who are promoted to take over. And then that culture itself becomes highly self reinforcing. Once you get a whole cadre of leadership at the top that’s like that, it’s extremely difficult to break out of.

I'll stop clipping there or I'll wind up just having the whole darned thing. 

Monday 13 November 2023

Afternoon roundup

The tabs!

Preparing for the new government

Tova O'Brien at Stuff reports on leaked emails at MBIE that point to preparations for downsizings.

In a statement, MBIE said the cuts were in response to the savings targets imposed by the outgoing Labour government and being mindful of the cost of living crisis.

“This work to date has been based on the targets and expectations set by the current Government. We will have conversations with the new Government when it is formed on how we have worked to date to achieve the fiscal savings target,” Tremain told Stuff.

In late August, just ahead of the election campaign, Labour’s Finance Minister Grant Robertson announced $4b in public service savings including cutting back on contractors and consultants and trimming agencies’ baselines by 1 and 2% of which MBIE faced the largest cut at $110.8m

But further changes being considered may be in anticipation of the new government making good on its “cut the waste” campaign rhetoric; in the email, Tremain says “we are preparing for change” and that “this is inevitable as we get ready to support a new government and new Ministers”.

I was curious where some of this might be going and had put in an OIA a while back. 

Treasury had started a pre-election information exercise to help them prep for Budget 2024. I figured that whatever they got back from the Ministries would be a heck of a lot more informative than what's served up in Briefings to the Incoming Ministers. 

Because it would be a lot more informative, Treasury withheld all of it. And fair enough. 

But they did give me the questions they'd asked. I'll copy it all here. 

It's relevant to today's story from O'Brien because a lot of this process started before the election, and there was a Baseline Savings Proposal that was underway. 

But Treasury was also asking for substantive changes to stop or scale down current services or activities - as it ought to be. 

Also interesting - Treasury was asking what projects hadn't yet been started, presumably so they could be cut if needed. I wonder if any agencies started scrambling to start spending on projects to lock them in.

I wonder what all showed up as savings options in Section Two.

Friday 10 November 2023

Afternoon roundup

The end-of-week closing of the browser tabs