Free Press

ACT’s regular bulletin

Biddy the Cheesemaker

Biddy is a world famous cheesemaker who has won international prizes for her cheeses produced in Eketahuna. She has also become a pin up victim of regulatory excess, with her business crippled by regulatory fees taking 40 per cent of her revenue. In this weekend’s Sunday-Star tete-a-tete against Labour’s Jacinda Ardern, David Seymour highlights how excessive regulation achieves little for food safety but cripples successful small businesses.

More Regulatory Challenge
In the House this week David Seymour questioned Commerce Minister Paul Goldsmith on why peer-to-peer lenders are facing so much regulatory headwind in New Zealand, with one facing large and unnecessary court costs to defend innovative business practice. The Ministers answers (in this story) show that part of the problem is the Minister responsible receives conflicting advice on the law from the Commerce Commission, Ministry for Business Innovation and Employment, and Financial Markets Authority, and feels unable to act when one of them takes a business to court in spite of the others.

Peer-to-Peer Lending
Peer to peer lending is big business in the U.S. and U.K. with businesses such as Ratesetter in the UK and Lending Club in the US facilitating billions of pounds and dollars worth of peer-to-peer lending. The simple concept is that online platforms cut out the middle man, allowing investors to furnish loans to borrowers online. In New Zealand, Harmoney, Squirrel Money, Pledge Me, and Lending Crowd have been approved by the Financial Markets Authority as peer-to-peer lenders, but they are facing severe and unnecessary regulatory challenge.

The Technical Problem and its Solution
In an effort to protect vulnerable borrowers, lenders are not allowed to charge fees to borrowers beyond the reasonable costs of arranging a loan. Online peer-to-peer lenders aim to get fees down to zero, so they can reasonably charge nothing for their services, but the costs of building such a website are large, with 45 engineers working to build Harmoney. Elsewhere the fee charged by the website is not a lending fee, as the site itself is not a lender, and borrowers are shown an all-in Annual Percentage Rate (APR) that builds set-up fees into the total cost of borrowing. A small legislative amendment that peer-to-peer platforms are not lenders but must give an APR would solve the problem.

Why it Matters
At one level financial market regulation for new players is all a bit esoteric, but it goes to the heart of making New Zealand a competitive place for new and innovative businesses to thrive. A small and isolated country cannot compete on scale, we need to be nimbler and better regulated than our competitors or we risk becoming the world’s branch office rather than an innovation engine. The world of tech start up moves fast, and government regulation can’t let our competitors around the world pass us by.

Regulatory Reform
ACT invented regulatory reform and David Seymour carries on the tradition as Under-Secretary to the Minister for Regulatory Reform, working to improve the quality of Regulatory Impact Statements which have been panned as woeful by the business community and official assessments of their quality. The holy grail for ACT in this area remains the Regulatory Responsibility Bill, which would allow citizens to challenge the government of the day in court for failing to adhere to sound regulatory practices.

Sound Regulatory Practice
Too often, regulation is seen as a way of one set of people imposing their views on another (for example, some think we should all live close together in apartments, so expansion of the city is banned with disastrous results). Good regulation should be about identifying genuine market failures such as in fishing where there would be a race to the bottom and no fish left without quotas. The government can tax you, own things, and regulate the use of any property you have left – poor quality regulation should be the Government’s biggest priority for reform.

She’s Right
Judith Collins got all the usual suspects properly riled up for pointing out what should be non-controversial. Poverty is often not only about a lack of money, but a poverty of responsibility and caring. ACT has argued that the 12,000 people per year who have children while on a benefit should receive their benefit in kind, i.e. have rent and power paid directly, receive food-only purchase cards, so that children receive the necessaries of life.

Three Strikes Burglary
The Dominion Post has revealed that most burglary convictions do not result in imprisonment. ACT has long argued that, due to pitiful reporting and resolution of burglary, anyone who is caught has probably committed a number of burglaries, and if they’ve been convicted three times they should get three years’ jail. Sadly ACT’s Three Strikes burglary bill was rejected by National as part of the two parties’ confidence and supply agreement, and then rejected by all parties for debate in parliament earlier this year. We won’t let this go.

ends

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