We should all be talking about Minister English's financial veto


Last week, Minister of Finance Bill English exercised a 'financial veto' in respect of Sue Moroney's Bill to extend paid parental leave to 26 weeks. That's a big deal, and it's something I think we should all be talking about.

First, let me start by saying that I support Moroney's Bill. I believe extending paid parental leave to 26 weeks is good policy. But what I have to say in this post would apply even if I disagreed with Moroney's Bill. The underlying issues are the same.

The Standing Orders of the House of Representatives provide that the Government may veto proposed legislation if the Government considers that the Bill "would have more than a minor impact on the Government’s fiscal aggregates if it became law". There is an obvious rationale for this type of power. It helps ensure fiscally responsible government by providing those elected members who hold the Treasury benches for the time being with a lever to manage expenditure that might otherwise be beyond their control because it is necessitated by Parliament.

I think it is a nice compromise. It balances the theory of a sovereign (all powerful) Parliament with the reality of running a government and managing the country's books. Parliament's sovereignty is maintained because the process of passing a bill builds in a veto power.

Not everyone agrees. Supporters of Moroney's Bill and some public law experts made comments to the effect that the financial veto should be removed (or perhaps not exercised in this instance). That would change the balance between government and Parliament, and that means constitutionally significant change.

Let's review the arguments. It's a basic principle of New Zealand's constitution that Parliament can do what it likes. That principle is usually justified on the basis of popular, democratic representation. Parliament (or more accurately, the House of Representatives) is made up of people whom we have all elected. Further, that group of people is more or less representative of our nation as a whole. What the majority of the House of Representatives wants, we should take seriously. That's how democracy works.

From this view, the financial veto is a constitutional anomaly. It frustrates Parliament's will in favour of the government of the day, who (because of the quirks of MMP) may not actually represent a majority of the electorate. That's one way of understanding what has happened between Moroney and English.

Another way of understanding this interaction is by recognising that part of the function of a constitution is to provide effective government. Effective government and democratic government aren't always consistent, and sometimes being effective is more important. This is at least part of the reason why we don't have a popular vote on every decision the government of the day is required to make. There is a degree of democratic legitimacy because the Government has been elected, but at some point we stop pursuing democracy and let the Government just get on with governing well.

On that narrative, the financial veto has a stronger justification. Some democratic legitimacy in the form of Parliamentary authority is given up for the sake of effective and responsible government. Abolishing the financial veto would therefore result in a re-balancing of the relationship between Parliament and Government, and I'm perosnally not sure that there are clear reasons that any change along these lines would be for the better. Especially with the modern tendency for coalition government, having constitutional tools to maintain effective and responsible government can be vital.

Of course, we need to take democratic legitimacy seriously, and there is always a risk that a power like the financial veto can be abused. But I think our current constitutional arrangements actually address these points quite well. By exercising the financial veto, the Government is saying very clearly that they know they are going against the wishes of the majority of New Zealanders. That costs political capital, and so should come at a significant cost to the Government.

If we think that cost is too light, then that's really on us. When the Government chooses to exercise its veto power, we should all be talking about it and should definitely be asking questions. Is every item of government expenditure really more important than 26 weeks parental leave? Are we convinced by the reasons given by the Government for using the veto? Could the government have done more to work with opposition parties to reach a compromise? These are challenging questions, and it takes a lot to be satisfied with the answers. And we should absolutely be demanding answers to them from Minister English and his government.

So we should all be talking about English's use of the financial veto. It's fine that he has this power, but we need to make sure it's exercise always comes with political consequences. Here's what I propose to make these costs tangible. Treasury estimates the cost of Moroney's Bill would be $278 million over four years. When the National Party campaigns next year for your vote, see what they propose to spend that sort of money on if re-elected. If that doesn't really impress you, let them know in the strongest possible way. That's a great way of reconciling the veto power with a meaningful commitment to democracy.


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