Misunderstanding the policy process

Policy development happens through a complex interplay of politicians' directives, civil servants' work, and civil society input. 

Bryce Edwards is director at The Integrity Institute, which has been pretty critical about anyone's involvement in policy processes other than the bureaucracy and anyone considered to not have a financial stake in an outcome. 

Last week, BusinessDesk found the Institute's trust deed. Or, rather, decided it was worth checking over at the Company's Office to see what it says. And the whole document is really weird. Things that ought to be operational decisions for the Director are instead hard-coded into the deed. The rest is a combination of direction to do the obvious and specific targets they want investigated, like going after Transparency International. 

I'd threaded the thing; you can't link directly to a Companies Office filing. 

There's been a fair bit of tu quoque over this. But the best take I think thus far is from Deb Te Kawa. A snip:

Sometimes, those who claim to defend democracy are the ones who misunderstand it most. The Integrity Institute’s recent campaign, ostensibly about exposing undue influence over policy, has revealed something more troubling: a fundamental confusion about how policy advice, participation, and legitimacy actually work in democratic systems.

The policy advisory literature has long since moved past the myth of the neutral bureaucracy. As Craft and Howlett (2012) argue, modern advisory systems are pluralised and layered. Policy advice no longer flows solely from within the state. It emerges through dynamic interaction between political actors, ministerial advisers, public servants, and external stakeholders: including iwi, hapū, academics, commentators, lobbyists, consultants, contractors, industry and community interest groups, and civil society. This is not a breakdown in integrity. It is a shift in how democratic knowledge is produced and contested; a shift that has been underway since 1996, when we began correcting for the distortions of the 1980s’ new public management reforms.

Rather than engage with this shift, the Integrity Institute appears to reject its premise. In targeting Federated Farmers, the Institute frames visible, declared advocacy as inherently suspect. Yet publishing policy platforms, meeting with ministers, or advocating for sector interests is entirely within the bounds of democratic practice. As Craft and Halligan (2020) remind us, robust advisory systems must accommodate both internal and external sources of advice. To treat advocacy as corruption is to misread the core architecture of modern policy-making.

This conflation is not just technically inaccurate. It is democratically dangerous. Legitimacy in policy does not come from insulation. As I have been exploring in the Waitangi Tribunal Thursdays series, and arguing in The Practical State, it comes from contestability, transparency, and deliberative engagement.

Whether it’s iwi asserting rangatiratanga, unions calling for fairer conditions, or academics and researchers offering empirical insight, the presence of diverse voices is a safeguard, and not a threat. As the policy advisory literature insists, multiple advisory channels are vital for balanced decision-making in complex societies.

The real question, then, is not whether influence exists. It always does. The question is: what kind of influence, under what conditions, and with what visibility? The distinction between transparent, procedural engagement and opaque, privileged access is not semantic. It is constitutional. Effective oversight requires more than tracing contacts. It demands a grounded understanding of procedural fairness, institutional independence, and the layered nature of advisory input.

With that particular critique in mind, let's have a look at a different campaign. 

One that Guyon Espiner has been running, on the public dime, at Radio New Zealand, and at RNZ-Newsroom co-production The Detail. 

In his telling, shadowy alcohol industry influence stymied admirable public health efforts to adopt new and stricter Canadian low-risk drinking guidelines.

He's had a lot of airplay on this. If you're reading this in New Zealand, you've been forced to pay for it. 

So what is that shadowy influence?

David Farrar has the correspondence. 

The Brewers Association wrote to Ministry of Health asking for details on a review of the low-risk drinking guidelines. And there was also correspondence on the use of the alcohol levy - a small levy imposed on every bit of alcohol sold, used to fund various harm-reduction efforts. Producer levy schemes tend to have producer involvement. 

The Brewers also pointed out what looked like an error on the Health NZ website (recall that Health NZ is the operational arm, Ministry is policy). They thought that some proposed Canadian guidelines had actually been implemented. 

Health Canada had commissioned a third party to produce revised alcohol guidelines. That was a couple of years ago. Those proposed guidelines have not been adopted or ratified by Health Canada. And two different Ministers of Mental Health and Addictions, in late 2024 and early 2025, have confirmed that the 2011 guidelines remain the ones in place. 

Health NZ thought that Canada had tightened its guidelines and was taking this as basis for tightening ours. 

The Brewers pointed out an error. The Ministry of Health saw that error corrected. And Guyon Espiner deemed the whole thing an example of influence that needs to be stopped. Of course, on his podcast interview with The Detail, he hedges a bit - saying he's only raising questions and noting how interesting it is that a framework convention bars industry discussion with government in the case of tobacco but not for alcohol. Not that he's campaigning to get the framework convention extended to alcohol. 

Let's go back to Deb's piece. 

As Craft and Howlett (2012) argue, modern advisory systems are pluralised and layered. Policy advice no longer flows solely from within the state. It emerges through dynamic interaction between political actors, ministerial advisers, public servants, and external stakeholders: including iwi, hapū, academics, commentators, lobbyists, consultants, contractors, industry and community interest groups, and civil society. This is not a breakdown in integrity. It is a shift in how democratic knowledge is produced and contested;

The Brewers found an error. Min Health made the same mistake Espiner did, potentially based in motivated reasoning - wishing that the Canadians had given NZ an excuse to tighten guidelines here. 

That error was corrected, because we don't stick bureaucrats in towers and ask them to hand down advice from on-high. There is interaction. It is helpful. It makes things suck less. 

Some campaigners, like Edwards, and like Espiner, seem not to like it when that interaction results in policies that they like less. They seem to view it as inherently corrupt. At least Edwards isn't doing it on public funding. 

David Farrar's post with the correspondence went up on the 25th. 

The day before that, I submitted a column to Newsroom on the topic, because I'd first caught this on their site - they co-produce The Detail. I sent it through on Wednesday of last week for my usual slot on Tuesday - earlier than usual, because it was critiquing some of their work and I wanted to give them time with it. 

After asking that I add a lot more detail on the evidence around moderate drinking, they decided not to run it. There was an in-house view that Espiner had sufficiently couched what he'd said on The Detail. Perhaps there was a background worry that publishing a critique would make a likely press council / BSA complaint about The Detail piece more viable; I wouldn't know. 

I brought the piece back to 800 words; it was in Monday's Post as a full-page print piece (and presumably Press etc). An ungated version is here. I confirmed bits of the correspondence with the Brewers Association in the interval. 

The full piece I'd sent to Newsroom is below; it's a lot longer than the version at the Post, in part because they asked me to add a fair bit of content. 

I only saw Deb's piece after all this. But it's been rolling around in my head since then. The policy process really isn't what some of these campaigners seem to wish it were. 

Anyway - the piece that Newsroom declined. I declined to write a substitute piece for them for this week. 

The price of butter

When global dairy prices rise, so does the price of butter. Farmers sell milk to whoever will provide the best price. Producers will ship products to wherever returns are best. When people start seeing butter as a health food compared to stuff made of oils, demand for butter goes up - and New Zealand produces a lot of the world's trade product. 

Ministers of Finance should not be involved. 

It will whet populist demand for more of the same whenever prices rise for other things. 

The meeting this week with the head of Fonterra was set earlier, but turned into a media circus framed around the Minister holding Fonterra accountable for butter prices. It then turned into a supermarket beat-up over what the Minister thought might be ten or twenty cents on a block of butter. 

I am a very big fan of enabling more supermarket competition by easing regulatory barriers. If there are super-profits to be had in NZ grocery retail, someone can then enter to chase them down. 

I just can't see it doing much on the price of butter though. For a pretty specific reason. 

In the 2000s, there was a similar beat-up over milk prices. At the time, Al & Sons was selling much cheaper milk at corner stores (dairies) in Christchurch. I'd regularly buy two 2-litre bottles for the price of one normal-brand bottle at the supermarket. 

Some prices are particularly salient. Butter. Milk. They're the kind of thing that dairies can stick placards up at the door about. And that's how I'd go and find Al & Sons. A dairy on my drive home through Woolston had the placard up advertising cheap milk, so I'd pop in and buy some and maybe a couple other things. 

Butter is at least as salient as milk, given the current fooferah.

So. 

Let's think it through. 

Imagine you believe the problem is Fonterra. If it is, that's an obvious opportunity for anyone who might want to undercut Fonterra by selling cheaper butter. There are lots of producers out there. And there could be more. NZ regulations require Fonterra to sell milk to competitors at a regulated price. If you want to start up your own butter company, you don't have to buy a pile of trucks to go start collecting milk. You can just get it on tap. 

So it isn't gonna be a Fonterra thing.

Maybe you figure it's really a dastardly supermarket thing. They've rigged the whole game and told every butter producer that they'll never buy another block of butter from them if they sell to anyone who'd sell it at a lower price. I don't buy any of that. But suppose you believed that were the true state of the world. 

Now remember Al & Sons. They didn't bother with the supermarkets. They just sold through the dairies. If you want to set up a butter plant selling only to dairies, that's perfectly fine. Nobody will stop you - but you will have to comply with the health regs. Al & Sons folded, I think, after the combination of the Christchurch earthquakes and a tightening of health standards made everything too hard. 

But there are lots of other operators. Any one of them could decide to flip to a dairies-only strategy if the supermarkets were creaming things too much. Whatever excess margin they figure the supermarkets are taking, they could split between themselves as producers, the dairies as retailers, and customers through lower prices. Dairies could set up the placards outside. Cheap butter would attract punters in. 

I expect that the government has to understand this, otherwise they wouldn't have referred to about ten to twenty cents in potential savings on a block of butter costing in the $8-$10 range. That may not be a margin large enough to encourage anyone to flip to a dairies-only distribution strategy. Which seems prima facie obvious given that nobody is putting up 'cheap butter here' placards outside of dairies. 

And surely this isn't the reason to oppose poking holes in GST. It must be the journalist not quite getting it right, right?

Both Australia and the UK do not apply GST (or its equivalent) to basic goods including milk and butter. For example, an $8 block of butter in New Zealand would cost about $6.96 if GST were removed. However, Willis has ruled that out, arguing it would effectively act as a subsidy for supermarkets, with no guarantee savings would be passed on to consumers.

Taking GST off butter would be a terrible idea regardless of incidence. 

Meanwhile, our grocery commissioner considered that Woolworths was being sneaky in pointing to GST as something that needed to be accounted for when making international price comparisons.

"Just as an aside on that pricing; It's a bit sort of sneaky, to say if you take GST out, and if you do this, and if you do that, and do a few fancy arithmetics, we are cheaper than others are."

The Commissioner is just bad and wrong here. If the object of the comparison is to tell whether prices in one market are roughly competitive with prices in another market, you have to adjust for differences in tax. 

Greater supermarket competition could well reduce prices to consumers across a large shopping cart full of goods. But it's not likely to do as much on any individual product - and particularly not one like butter where prices are particularly salient. It's more typically the kind of thing where a retailer might run thin margins to get punters in the door - and potentially risk being damned for an anticompetitive 'aggressive loss-leading' practice. And taking a international spike in butter prices as reason for raking companies over the coals is a bad idea. It whets demand for populist responses to other price changes. 

Bring on the price control boards, because that's where this path leads. Some days, I wish National and ACT were in opposition, simply so that there would be push-back in Parliament on this sort of thing. 

I drew the third slot in our Insights newsletter this week; it's meant to be a satirical take. 

I wrote this. It has been such a stupid week. 

Buttering up a slippery slope

You might not remember 2025, even though it’s only two decades ago. AI was only just getting started. Looking back, it is easy to tell where the path back to price setting boards started. 

This was before synthetic fermentation, when New Zealand still exported a lot of butter and global markets set the price. Whenever butter prices dropped, consumers barely noticed. Whenever they rose, people screamed. 

The orthodox economics still practiced elsewhere, and back then, sometimes even in New Zealand, offered an obvious solution. When global dairy prices rise, farmers make more money and pay more tax. Government collects taxes and gives money to poorer people, with payments adjusted for inflation. People then decide what to buy. 

Unfortunately, some prices draw a lot of attention. The spike in fuel prices during the 2020-2022 pandemic saw the government subsidise road users. People started to think that the government should step in whenever prices increase.  

That populist turn solidified under the 2023-2026 National government.  

A July 2025 meeting between the Finance Minister and the head of a large milk company caused a media frenzy about butter prices, followed by condemnation of supermarkets. Both drew popular applause. 

Things slid from there. People came to expect public excoriation of businesses whenever prices increased unexpectedly.  

In short order, the Minister was having to devote two or three days every week to these circuses. It was seriously impeding other government business.  

So, the Minister delegated the job to a new Board established to supervise prices and to bring a more formal bureaucratic process to the inquisitions.  

The new Labour-led government in 2026 kept the Board but broadened its role. It was more convenient for everyone involved.  

Previously, anyone reducing prices risked prosecution for predatory pricing. Anyone increasing prices had to be gouging. And keeping prices the same was obviously collusion. It was a risky time. 

In the new order, the Board and the businesses it supervised agreed on prices for the next year. Officials viewed government-enforced price coordination as obviously beneficial.  

The real cost of everything rose considerably. Shortages of some things and surpluses of others abounded.  

Government had first call on short supplies of butter and often used it for industrial purposes. It is a fine lubricant, useful for making slopes more slippery. Most of the rest was exported. 

But at least the prices listed on the empty supermarket dairy shelves were low.  

Compensation for regulatory takings - reader mailbag

I've had a couple of recent columns explaining the in-principle case for compensation for regulatory takings. 

Such compensation is recommended in the Regulatory Standards Bill, and is likely to be part of proposed Resource Management reform. 

The shorter version of the argument was in our Insights newsletter; the longer one in The Post, ungated here. A snip:

The Regulatory Standards Bill sets a principle that legislation should not take or impair property without fair compensation. And, where practicable, that compensation should be provided by those benefitting. Parliament remains free to ignore that principle.

In some cases, the beneficiaries are the broader public and compensation should be provided by the government. In other cases, a smaller group would benefit. Where practicable, that benefitting group should be the one to provide compensation.

Done sensibly, none of this would prevent beneficial regulation. Instead, it would help solve an imbalance and inequity in how things are currently done.

Governments can be tempted to use regulation in cases where a spending measure would be more effective for achieving some desired purpose, simply because government can ignore the cost that regulation imposes on others. Compensation would bring a more level assessment.

And requiring that the beneficiaries compensate those harmed from loss of legal rights accords with many reasonable views of equity. Where the gains to the winners exceed the losses to the losers, those gaining can compensate those losing and everyone is better off.

The excellent Brent Layton emails with a fun Wellington Council regulatory takings case. He writes (I've bolded one bit):

Dear Eric

I “enjoyed” reading your recent article on the logic behind the Regulatory Standards Bill containing provisions pointing decision makers towards consideration of compensation to those subject to a regulatory taking. I also “enjoyed” watching on a streaming service you and Bryce interact with two Labour MPs and a TPM MP at a Select Committee hearing on the Bill. If any group in the country should be supporting compensation for regulatory takings it should be the TPM, but she clearly did not get this. The Labour MP’s seem to not realise that principled regulation will be in the interests of everyone, but particularly those without wealth to exploit regulatory loopholes and inefficiencies.

Earlier this month my partner and I were among a smallish group of landowners in Wellington subjected to a significant regulatory taking over collectively a large area of land. The Wellington City Council adopted its new District Plan. Under it approximately 20 hectares of our backyard in Karori is designated an SNA. The Wellington CC SNA restricts the rights of landowners to use and develop the land subject to it very materially. 

For us, the impact is not as great as for most other owners for three reasons. Most of our land subjected to the SNA is already subject to a QEII Trust covenant that constrains its use and development anyway. In addition, I made submissions on the Council’s initial proposal and got most of our non-QEII Trust land out of the SNA designated area. Most of my neighbours did not make submissions, some, at least, because they mistakenly thought the change of government had put an end to councils imposing SNAs. The proportion of their land now covered by an SNA  designation is in many cases very high. We had also done quite a bit of development in the area affected by way of putting in tracks, drainage of tracks, building reinforcement to stop the stream eroding areas, etc. knowing that Wellington CC was determined to effectively “take” the land. Maintenance rights are better than development rights under the SNA.

Our experience illustrates a point you made very clearly; that the absence from a need to consider compensation to those adversely affected impacts adversely the area taken. The initial Wellington CC proposal relating to our place contained a lot of land that was covered in gorse, blackberry, Darwin’s barberry, and buddleia. The extent to which there was natural vegetation it was limited to immature mahoe pushing their way up through the pest plants. There was also an area containing a cluster of very mature macrocarpa. The land had been farmed with goats until the 1990’s. 

The council had arrived at its proposed SNA’s through looking at articles, some very old, on where a botanist thought there was significant natural coverage or something else worth protecting and from looking at aerial photographs. Anything that looked like bush from a few thousand feet, was included. I think that no compensation would be paid meant the “planners” were able to take a wide view of what should be an SNA and wait for the landowners to complain and provide evidence that the area did not contain significant natural features.

In my submission I argued that, if there was a net benefit to the community, those adversely affected should be compensated. This would ensure the land designated is properly scrutinised. I also included photos showing that a lot of the areas on our land the planners wanted to include were not areas of natural vegetation. The Chair of the Hearings Panel organised for an independent botanist to come out and view the land in detail. The panel itself also paid us a visit but did not do a detailed inspection of the site. They looked along the valley from a good vantage point where you could see that the vegetation in the areas I had identified in the photos was not natural.

The upshot was that after receiving the botanist's report 3 of the 4 areas I had pointed out did not contain significant natural vegetation were excluded from the area designated as an SNA. The fourth area was still included in the SNA, this included an old but still used farm track flanked by gorse and the cluster of macrocarpas. I wrote to the Chair of the Hearings Panel and pointed out the inclusion of this area in an SNA was clearly a mistake. He replied there was no appeal until after the Wellington CC had adopted the plan. However, when I checked the plan released with the adoption I found the land containing the macrocarpas and the gorse flanked track are outside the legally imposed SNA. Possibly I misread the earlier map. I wish I had of taken a screenshot.

We have decided we will not appeal because the costs would be high and we think we may be net beneficiaries of Wellington’s regulatory taking, or, alternatively, we think it possible the SNA will become redundant by legislation as the impact on land and house prices gets wider recognition. We own in total a block of  approximately 65 hectares in Karori. The area - approximately 30 hectares - that could in future be developed for residential subdivision is outside the SNA. The effect of Wellington’s SNA designations is to severely restrict the supply of alternative land that could be developed. If the SNA designations remain, our developable land will be a scarcer asset and probably significantly more valuable. If the SNA designations get over-ridden by legislation, then it would have been pointless to have spent the money to appeal. 

From society's perspective, I think the SNAs should be over-ridden by legislation and a regime be introduced by which Councils that want to protect areas have to negotiate and reach agreement with landowners, including over payment of lump sum or annual compensation. From a personal point of view, we suspect we have been winners from the actions of the Wellington Council. To hell with those wanting and needing affordable housing; we are boomers and deserve to fly business class. 

Keep up the good work.

That last line of the penultimate paragraph is very clearly tongue-in-cheek - Council has restricted the supply of land that might compete with Brent's when developers want to build more greenfield housing in Karori. Which likely makes him better off all-up, but he'd clearly prefer that the SNAs hadn't happened. 

If council wants more land in parks in the green belt, it should buy land and add it to the green belt. Stealing it via SNA isn't right.

The map of the SNAs, at least as of the draft district plan, is here.