Devolution and the New Zealand Resource Management Act

Kerr, Suzi; Claridge, Megan; Milicich, Dominic Working Paper Devolution and the New Zealand Resource Management Act New Zealand Treasury Working Paper, No. 98/07 Provided in Cooperation with: The Treasury, New Zealand Government Suggested Citation: Kerr, Suzi; Claridge, Megan; Milicich, Dominic (1998) : Devolution and the New Zealand Resource Management Act, New Zealand Treasury Working Paper, No. 98/07, New Zealand Government, The Treasury, Wellington This Version is available at: https://hdl.handle.net/10419/205401 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. 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The Treasury takes no responsibility for any errors or omissions in, or for the correctness of, the information contained in these working papers. TREASURY WORKING PAPER 98/7a A Case Study in Devolution: The Problem of Preserving Kiwi Habitat in the Far North Megan Claridge & Suzi Kerr* (Contract to New Zealand Treasury, managed by Benedikte Jensen) ABSTRACT Many past and potential New Zealand reforms involve significant devolution, i.e. the transfer of authority to make decisions on behalf of society from a higher to a lower level of government. In particular the Resource Management Act (RMA), the health and education reforms, and decisions about the institutions for addressing Maori issues have led to significant devolution of authority. Employment policy and social welfare are areas where devolution is an important policy option. The role and function of local government also is inherently an issue of the appropriate level of devolution. Many of these reforms have now been in place for a number of years, so it is appropriate to review our experience of devolution, identify the successes, and attempt to address the problems that have arisen. Two papers address issues of when and how we should devolve authority from central to local government. The first paper (Treasury Working Paper 98/7) looks at devolution both from a general theoretical standpoint and from the perspective of the New Zealand Resource Management Act 1991 (RMA), with residential land use as an illustration. Although the RMA is discussed throughout both papers, the framework developed applies to any area of policy for which devolution decisions are being considered. This paper applies the framework to the optimal pattern of devolution for policies relating to kiwi protection. *Megan Claridge – NZ Treasury, Suzi Kerr – University of Maryland at College Park. INTRODUCTION Kiwis are rare and unique to New Zealand: our national symbol, our nickname. Yet some species are endangered. How can we most effectively protect this critical part of our heritage and identity and do our part to preserve biodiversity? Is the current Resource Management Act the best structure for formulating social objectives about kiwi protection and providing appropriate habitat? The previous paper (WP 98/7) pulls together theoretical literature relating to devolution to local government and develops a framework to apply this theory in solving practical problems.1 This article builds on that theoretical work by providing a Resource Management Act (RMA) case study to illustrate how the framework can be applied to a real situation. It looks at the issues that have arisen when applying the RMA’s provision on the preservation of significant natural areas (SNAs) in the Far North. The case study follows through the implications of the model for an ideal structure for regulating kiwi preservation. We then contrast that with the actual structure, drawing on the framework to identify likely problems and showing how these problems manifest themselves in the case of kiwis in the Far North. The framework allows us both to diagnose what has gone wrong and to offer remedies. WHY REGULATE? Kiwis (and therefore kiwi habitat) are a public good. It is not feasible to restrict their use; living in a country with a rare, unique and endangered species that we identify as our national symbol is a non-excludable benefit - we can’t stop people consuming this good. It is also not desirable to restrict their use: the marginal cost of supplying kiwis to an extra New Zealander is zero. The non-excludable nature of public goods means that there will be a free rider problem. Individuals benefit from kiwis regardless of whether or not they contribute to providing 1 Devolution is defined as the transfer of authority to a lower level of government. In practice devolution cannot be considered in isolation from issues of decentralisation, defined as the use of a lower level of government as an implementing agent for central government policy. 2 habitat. Therefore they have no incentive to contribute voluntarily, but rather will attempt to rely on the efforts of others. The combined effect of many individuals free riding is an under-supply of kiwi habitat. With a large population affected, and potentially able to protect kiwis, almost no kiwi habitat will be produced. It’s reasonably accepted that we regulate kiwi preservation. The question we are interested in is: at what level of government should regulation occur? Is preservation of kiwi habitat appropriately dealt with by devolution to local level? Let’s apply the model introduced in the previous paper (WP 98/7) to analyse the actual situation in the Far North. AT WHAT LEVEL SHOULD REGULATION OF KIWI HABITAT OCCUR? Our devolution model has three ‘locations of choice’; three decisions that have to be made: • Political Decision: what level of government should decide how much kiwi habitat to preserve?2 • Cost Bearing: what level of government should bear the costs of providing habitat? • Implementation: what level of government should decide exactly how to go about preserving kiwi habitat? One option is for central government to control every aspect of the process. Another is to devolve some or all of these functions to some level of local government. The RMA, as it stands, devolves quite substantially. Implementation, funding and, to a large extent, political control rests with local authorities3. To find the ideal locations for decision2 The political decision is merely about the ‘optimal level of production’; it is not about exactly which kiwis or which areas of habitat to protect. 3 There is provision in the Act for more national involvement, through National Policy Statements, but this has not been utilised. 3 making and cost bearing we’ll use the diagram developed in the previous paper (WP 98/7). Political Decision Making and Cost Bearing Arguments to do with what level of government should make the political decision and what level of government should bear the costs are related, so it is useful to consider them together. Informed decision making requires that all preferences are reflected and that both subjective and objective information is included. Balanced decision making requires that both costs and benefits be taken into account. There will also be distributional considerations regarding cost bearing. Informed decision making When considering who should make the political decision about preserving kiwi habitat, one would take into account the location of all relevant objective and subjective information. Some objective information is material. How many kiwis are there? How many kiwis are required to maintain viable populations? What is the cost of saving them? What is the cost of not saving them, in terms of habitat destruction and loss of biodiversity? This information is located nationally. However, the most important information here is subjective. How many kiwis we want is mainly a matter of preference. How much do we care?4 The subjective information is tied, by its nature, to the benefits. People who have preferences about an issue are the people who are affected by it. Getting access to subjective information is a problem for governments at any level. How do we access 4 Some would argue that kiwis have intrinsic value, over and above whether or not humans value them. This paper takes an anthropocentric approach and rejects the idea of intrinsic value. The notion of ‘value’ isn’t independent of a subject. A thing must be valued by someone. We may ascribe other things having values but that is, in the end, a value judgement we make. This need not be a problem for the environmental movement: one of our values is that other beings have value. This stance isn’t unique to economics; other disciplines and ethical theories take the same view. 4 peoples’ private preferences about how much they value kiwis? All social choice mechanisms are imperfect. The best approximation we can get about tastes is to see how they are revealed through participation in political processes. To get the best information the decision-making jurisdiction should be at least as large as the area of effects. This will ensure that all preferences are represented. The benefits of kiwis are biodiversity and national identity. These benefits are located across all of New Zealand.5 Kiwis are a national public good: people in Invercargill value them as well as people in Northland. Subjective information is therefore also located nationally: people all over New Zealand have preferences about kiwis. Decision making at a national level will better reflect these subjective preferences.6 Balanced decision making Even when the political decision making jurisdiction matches the area of benefits we may still have problems, if costs and benefits are not borne by the same people. Matching the jurisdictions of benefits and costs will lead to balanced decision-making; mismatches will generate interjurisdictional externalities.7 If decision-making and cost bearing were devolved to local level, the Far North would under-protect kiwi habitat since they will ignore the positive externalities generated by kiwis for the rest of the country. In contrast, if cost bearing is devolved to local level but decision making is retained centrally then kiwis will tend to be overproduced. The rest of New Zealand has incentives to overstate their preferences and demand more kiwis be saved since they bear none of the costs of their decisions. The best solution is for decisions and costs to be located centrally. In this way costs and benefits are borne by the same people – all New Zealanders. 5 And arguably internationally, in the case of biodiversity. 6 People in areas where kiwi are found may also have preferences about the types of policies used to protect kiwis. 7 Problems of inequity and over-provision can also occur within jurisdictions. Even inside the Far North costs are not shared equally. Landowners bear all costs; they are not shared across the jurisdiction. 5 Figure 1 of WP 98/7, with all the box and bubble items located centrally, summarises balanced and informed decision making about kiwi habitat. Informed political decision making requires that all preferences are reflected. Since the benefits of kiwis are felt all over New Zealand subjective preferences about kiwis are located across the whole country. Decision making at national level will best reflect these preferences. Balanced decision making requires that both costs and benefits are taken into account. Because benefits are felt nationally, costs and decisions should also be located nationally. Implementation We have discussed political decision-making and cost bearing. Implementation is the third function about which location decisions must be made. Whether local or central government will be the most efficient at providing a public good will vary case by case. The efficient location of implementation will depend on where the relevant information, expertise and capability are located. Efficient implementation Successful implementation will need to incorporate both objective technical information and information about physical on-the-ground effects. Information about physical effects includes information about detailed geography (where exactly are the SNAs?) and monitoring (are farmers complying with regulations?). It tends to be intrinsically local: it is often only farmers themselves who hold this kind of detail. Local government is better placed to access this knowledge. Farmers are more closely linked to local government than central and this allows better monitoring and accountability, better access to local information and possibly greater trust. Objective information and skills include information about kiwi science (what is the life cycle of the kiwi? How much habitat is required to support a given kiwi population?), co-ordination with other areas of kiwi habitat and overall conservation priorities. It could be held centrally or locally but in this case is mainly central. 6 Scientific knowledge is primarily a function of resources. Central government has an advantage in this through economies of scale. It is better resourced to employ specialists. Decentralising implementation totally to the local level raises issues of competence: local councils just don’t have the resources to employ the same level of expertise. Being able to prioritise and coordinate is a function of perspective. Again, central government has an advantage in this; its broader environmental perspective will enable it to set priorities and undertake informed trade-offs. Kiwis exist in many areas and only central government can coordinate kiwi preservation in the Far North with preservation of kiwi habitat across the rest of New Zealand. Similarly, central government will have the information to coordinate preservation of kiwis with that of other protected species. It can learn from wide experience and avoid duplication by developing one set of rules for non-varying situations. Deciding which areas are SNAs is likely in most cases to require skills and perspective that go beyond a local level. Information aside, there are issues of capability. Successful protection of kiwi requires more than merely refraining from destructive activities in areas of kiwi habitat. Active measures on the part of the landowner also play a part: stock may need to be fenced out, weeds eradicated, pests, particularly possums and stoats, trapped and farm dogs kept under control.8 Whichever level of government is responsible for implementation, they will need to work with landowners and elicit their goodwill and cooperation. Local government may be at an advantage here. It has the ability to be more ‘personal’ and may be able to form more effective ongoing relationships with farmers and other affected local people. Relevant information about implementation is held both centrally and locally. Local government has some advantages in capability. Efficient implementation will therefore require a mix of central and local input. Implementation could be primarily local with central government input and expertise. Central guidance is vital because local councils 8 Salmon (1998) 7 just don’t have (and can’t get) all the information they require. Alternatively implementation could be primarily central with local assistance. Local assistance will be crucial to secure positive relationships with landowners. Which of these options is most efficient will vary case by case and depend on how easily the information can be communicated and who has sufficient resources. In this case it could go either way; it’s not clear who the most efficient implementer will be. What is important, however, is that someone is ultimately responsible. The mix of central and local cooperation is difficult to achieve and often results in conflict and lack of clarity over who should be doing what. One body needs to take ultimate responsibility. Difficulties with Separating Decision-making and Implementation We have established that ideally the decision about how much kiwi habitat to preserve should be made nationally and the costs also borne nationally. Implementation could be carried out either centrally or locally. There are arguments for implementation and decision making being carried out by the same body. Although it is theoretically possible to have centralised political control and local implementation it’s not clear that they always come apart easily. If implementation is non-discretionary and you can define your objectives well in advance an arms-length contract can be written. Implementation is simply following orders. However, if discretion and judgement are required then contract specification becomes more difficult and implementation blurs into political decision making. In the case of kiwis this problem of separating responsibilities tips implementation towards central government. The RMA requires substantial interpretation. Non-trivial discretionary political decisions get made in the implementation. According to our framework the optimal location of all three functions is the national level. 14 be problematic and that special attention would need to be paid to accessing that objective information. This difficulty is seen in the actual situation and has resulted in the implementation problems described above. Both in the Far North and throughout the country there have been complaints of a lack of information and assistance from central government.20 This has been blamed on under-resourcing of DOC and the fact that no agency is clearly funded to act in an advisory role on SNAs and the RMA.21 DOC, whose statutory functions include the oversight of off-estate areas, has not been given the funding it needs to carry out that role. Lack of central guidance is not necessarily a devolution problem. Implementers will face difficulties accessing all the relevant information no matter what level of government has responsibility for implementation. The problem arises because of the large number of people and bodies that are usually involved in policy implementation and the difficulties agencies face working together. It is these processes that need to be addressed. What the devolution framework does is alert us to where the problems are likely to be in any given case. This is particularly useful if employed when designing new regulations. In this case it would have highlighted a need to supplement the RMA legislation with structures to allow transfer of centrally held information. A particular central agency would have been given responsibility for assisting local implementers. It remains useful now, in remedying these oversights. 20 The Local Government/DOC protocol, signed in 1996, states that DOC should make information it holds available on request to local councils when they prepare their plans. However it is the responsibility of the Councils to determine and elicit the information they need and they are, in some cases, charged for it. 21 The Ministry for the Environment did receive some resources for monitoring of the RMA in the 1997 budget and is developing case studies and guidelines to share with local councils. 15 CONCLUSION We could address the problems that have been identified in several ways. Although this case study has identified an ‘ideal’ this would involve quite a radical change to current legislation. We may wish to make more limited improvements by directly addressing the problems created by mismatches among jurisdictions. One compromise solution could be national decision making, national cost bearing and local implementation. Without fundamentally changing the Act, this devolution structure could be created and the current situation could be improved with the following measures: • Clarify what is intended in section 6c through the publication of a National Policy Statement on SNAs. As well as providing a definition and criteria for the term “significant” it would establish what central government required and what was discretionary for local government. • Allocate some national resources to buy some additional kiwi habitat as conservation estates and/or partially compensate farmers to address the problems of unfunded mandates and over-provision. • Allocate resources to the Ministry for the Environment or DOC (or other agency) to provide specifically for advice and dissemination to local authorities of scientific knowledge and expertise regarding implementation. The current regulatory framework for kiwi protection is poorly designed. This can be addressed within current legislation. Although the flightless nocturnal kiwi views the world in a local, limited way, a national vision and effort is necessary to protect it. 16 BIBLIOGRAPHY Coase, R. (1960) “The Problem of Social Cost” Journal of Law and Economics pp:1-44 Epstein, Richard A. 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