Future options for NZFSA

70 There are a number of options that can be considered for the future location of, and arrangements surrounding, NZFSA. At a broad level, the choice comes down to whether NZFSA continues to be part of MAF or whether it is separated into a stand-alone agency of some description. For the sake of convenience and reflecting the nature of the discussions with stakeholders, consideration is given first to the options of establishing NZFSA as a stand-alone organisation (ie separated from MAF) and leaving NZFSA within MAF as a SAB. Beyond these two broad options, several variations are also considered.

71 In the context of the stand-alone options, there are choices in terms of:

  • the scope of functions undertaken by the stand-alone NZFSA. In particular, the options of a Ministry of Food and Biosecurity and a Ministry of Food (with no trade-related responsibilities) are evaluated, and
  • the organisational form for the stand-alone entity (ie some form of Crown entity or a department).

72 In relation to the SAB option, consideration is also given to removing NZFSA's status as a SAB and, instead, operating it as a division within MAF (along the same lines as Biosecurity NZ).

Description of the two main options

73 The two main options are briefly described below. For the purposes of comparing these, it is assumed that the stand-alone entity would take the form of a department. The reasons for this are discussed further below but they essentially reflect the need for decision making to be kept reasonably close to Ministers (rather than at arm's-length as would be implied by some form of Crown entity) and the requirements of international trading partners who seek assurances from Government (and not Government agents).

Option

Description

Retain NZFSA as a SAB attached to MAF

This is a status quo option. Under this option, NZFSA would continue to have an independent line of advice to the Minister for Food Safety.

The NZFSA brand would be retained.

The Executive Director would be responsible for the day-to-day operation of NZFSA under delegated authority from the Director-General. The Executive Director would also have delegated powers relating to recruitment. NZFSA would continue to access corporate/support services from MAF.

The Director-General would continue to have ultimate responsibility for all parts of MAF including NZFSA.

The principles and obligations described in the existing relationship agreement between the Director-General and the Executive Director would continue.

Separate NZFSA from MAF and establish it as a stand-alone department

NZFSA would be reconstituted as a department. The Minister for Food Safety would become both the Vote Minister and the Responsible Minister.

The department would be headed by a Chief Executive appointed by the State Services Commissioner in the normal manner.

The scope of functions currently undertaken by NZFDA would continue under the new organisation. As a department, NZFSA would assume added reporting and accountability responsibilities.

The NZFSA brand would be retained.

Initially, at least, the new NZFSA department would procure corporate support services from MAF (i.e. IT, finance, HR, legal etc). Over time, the new department could decide to make other arrangements if these were more cost effective.

The existing relationship document between NZFSA and MAF would need to be modified to reflect NZFSA's new status as a department separate from MAF. Much of the existing content of the document would no longer be relevant. A new relationship protocol would need to focus more on defining areas of common interest, ensuring clarity of respective roles and responsibilities, defining the principles governing the relationship and documenting the nature and form of information sharing and communications between the two parties.

Retention of NZFSA as SAB attached to MAF

Considerations in favour of attachment to MAF

74 The review has identified five main reasons in favour of continuing to attach NZFSA to MAF. These are:

  • ensuring an effective regulatory regime
  • enabling effective decision making
  • achieving Government outcomes
  • minimising risk to NZ's trade interests, and
  • minimising cost.

Effective Regulatory Regime

75 Traditional barriers to trade (quotas and tariffs) are being replaced by regulatory barriers based around biosecurity, food safety, environmental and animal welfare issues. Maintaining an effective food and biosecurity regulatory regime is, therefore, critical to NZ's trade prospects. NZFSA plays a key role in maintaining NZ's access to export markets. While much of its work is technical in nature, there is also a heavy policy and strategic advisory aspect to NZFSA's contribution reflecting the direct involvement by NZFSA in negotiations over trade access including the conditions under which NZ product can enter markets.

76 The success of NZFSA in these roles, and the maintenance of an effective regulatory regime, requires that close and strong links be maintained with other parts of MAF including, in particular, Biosecurity NZ and MAF Policy. The links exist across several dimensions:

  • In the context of providing regulatory assurances to trading partners, there are and need to be very strong links between NZFSA and Biosecurity NZ. A considerable part of NZFSA's work involves providing assurances to trading partners about the safety and suitability of NZ food exports. NZFSA's main focus for export certification is animal products but in order to do this, NZFSA relies upon assurances from Biosecurity NZ regarding the health status of NZ's livestock.
  • In a wider context, both NZFSA and Biosecurity NZ are involved in the management of biological risk across borders. Biosecurity NZ's principal focus is on inbound biological risk but NZFSA also has keen interest in health risks surrounding imported food. NZFSA is focused more on outbound food and related products, but Biosecurity NZ has responsibility for export certificates issued in respect of plant products and live animals.
  • There is a strong link that exists by virtue of the need for NZFSA and Biosecurity NZ to operate from the same principled approach to regulation that is built on science and risk-based standards. NZ's ability, through NZFSA and MFAT, to successfully negotiate against unnecessary regulatory-based barriers to trade would be seriously undermined if Biosecurity NZ did not adopt a principled approach to regulation of imports.
  • There are also links in terms of the competencies and backgrounds of NZFSA and Biosecurity NZ personnel reflecting the technical and scientific underpinnings of the standards that are part of the regulatory regime governing food safety and cross-border trade.
  • Reflecting the complementary competencies and overlapping areas of focus, NZFSA, Biosecurity NZ and MAF Policy are jointly involved on an ongoing basis on a wide range of trade issues and regulatory issues such as animal identification and traceability, NZ's BSE status, the future of the TB eradication programme and standards relating to animal feed.

77 The examples above illustrate the close links that exist between NZFSA and MAF and which are needed to ensure achievement of a consistent approach to the regulatory environment. If NZFSA was to be separated from MAF, there is a risk that these links would become strained and, eventually, fail. To the extent that any of the links are weakened, or broken, there is the potential for inconsistencies to develop in the design or, more likely, application of the regulatory framework. If this occurs, NZ's trading interests are threatened.

78 These points are essentially no different to those made at the time that the establishment of NZFSA was being considered. They remain valid. At the time, it was argued that linking NZFSA to MAF would:

  • allow seamless management of food safety risks from "farm to fork"
  • maintain MAF's existing strengths in managing links to biosecurity, agriculture and trade, and
  • provide consistent representation of NZ's interests internationally.

79 The principled, science and risk-based regulatory regime is critical both to NZ's trading success and the cost-effective protection of domestic food consumers. However, good regulation requires a blend of technical capability and analysis coupled with consideration for wider policy issues. The design of food and biosecurity-related regulations requires wider economic, social, cultural and environmental factors to be taken into account. It is not just a matter of undertaking science and risk-based analysis. It is for this reason that a strong case can be made for the policy perspectives of MAF to be closely linked to the more technical orientation of Biosecurity and NZFSA as well the case for close integration of NZFSA with Biosecurity. The issue then becomes one of whether the effectiveness of decision making is better achieved through having NZFSA as part of, or separate to, MAF.

Effectiveness of Decision Making

80 The need to maintain effective links between NZFSA and MAF is not questioned. The issue is whether these links are better maintained by having NZFSA as part of MAF as opposed to being separated. Clearly, NZFSA has links with a number of Government agencies (MFAT, Ministry of Health, ERMA, etc) but it is not attached to any of these agencies.

81 There are several reasons for believing that integrating NZFSA with MAF will better contribute to maintenance of the links and, in turn, lead to better decision making.

  • Foremost, the synergies and common interests that exist between NZFSA and MAF are much more significant and overlapping than is true of the links between NZFSA and any other Government agency.
    • NZFSA makes a direct contribution to three out of four MAF outcomes. The same cannot be said in terms of its contribution to the outcomes of other Government agencies.
    • The frameworks that underpin the work of NZFSA and MAF are the same (and need to be).
    • The nature of the work of Biosecurity NZ and NZFSA share many similar characteristics (ie regulatory, trade-focused, science-based).
    • Most of the functions undertaken by NZFSA have their origins in MAF prior to the establishment of NZFSA.
  • Much of the work of NZFSA and Biosecurity NZ (and MAF) is technical in nature but, as discussed above, needs to be balanced by wider policy perspectives. It makes better sense for the technical and policy advice to come together within one entity rather than have two separate strands of advice presented to Ministers. From time to time, there will be differences of view between NZFSA on the one hand and either Biosecurity NZ and/or MAF Policy on the other hand. Generally, effective decision making is better served if the agencies try to address the differences and identify the trade-offs for themselves rather than escalating the issue up to Ministers to sort out (although major and strategic issues will nonetheless require consideration by Ministers).
  • In a somewhat wider context, there have been, and continue to be, concerns that the relatively fragmented nature of NZ's public sector is not conducive to effective decision making. Much effort is going into horizontal integration and collaboration across agencies so as to improve analysis and decision making and, in turn, improve performance and contribution to Government outcomes. Retaining NZFSA as part of MAF is consistent with this.

82 At the time that the establishment of NZFSA was being considered, concerns were raised that the effectiveness of decision making would be compromised if NZFSA was part of MAF because of the risk of producer capture. At most this is purely perception and has no basis in fact. MAF and Biosecurity NZ have no incentive to compromise domestic food safety in the interests of producers since to do so would prejudice the integrity of NZ's regulatory framework and, in turn, NZ's trading interests. On the contrary, it could be argued that Biosecurity has a more risk-averse attitude than does NZFSA because the consequences from biosecurity risks are, in general, much greater than those associated with food risks. External stakeholders interviewed as part of the review did not consider the producer capture issue to have any relevance whatsoever and, moreover, did not see the trade aspects of MAF's work undermining effective decision making with respect to food safety issues.

Achievement of government outcomes

83 The Government outcomes relevant to MAF and NZFSA are articulated in MAF's Statement of Intent. There are four main outcomes three of which depend heavily on co-ordinated contributions from MAF, Biosecurity NZ and NZFSA. 10 Achievement of the three outcomes is potentially compromised if the links between MAF (including Biosecurity NZ) and NZFSA are compromised. The three outcomes and the contribution of the agencies is summarised below.

Outcome

MAF

Biosecurity NZ

NZFSA

NZ's economic growth and prosperity are enhanced through high performing and innovative sectors

Overarching responsibility to ensure effective and efficient regulatory regimes

Responsibility for Import Health Standards

Responsibility for export certification and food standards

Safe and Freer Rules-based Trade

Support cross-government approaches to enhance trade liberalisation and market access

Advocate for safe and freer rules-based trade

Promote rules-base trade, sound science and risk-based standards

Input to CIE and IPPC

Ensure credible export assurances

Enhance NZ's position as a trusted exporter of food and related products

Promote rules-based trade, sound science and risk-based standards

Overall responsibility for the CODEX relationship

Ensure credible export assurances

Healthy New Zealanders

Policy co-ordination and support

Improve early detection and identification of serious pests and diseases

Improve response preparedness

Enhance compliance with biosecurity requirements

Development, maintenance and review of food standards

Ensure consistent compliance

84 The synergies that exist between NZFSA and MAF, and which contribute to Government outcomes, also have a parallel with one of the Government's state-owned enterprises. Agriquality NZ provides services that, in part, support the regulatory regime for food and biosecurity. It markets itself under the banner of "food safety and biosecurity" reflecting the close links that the Company sees between its food safety and biosecurity-related functions.

Minimising risk

85 Retaining NZFSA with MAF helps to ensure consistent application of protocols for imported and exported animal and plant products and, hence, helps to minimise the risk of inconsistent application undermining NZ's access to international markets. The same point can be made with respect to domestic food standards vis a vis traded food standards.

86 The SAB option poses, however, higher than normal risks in terms of conflicting or unclear accountabilities and, hence, some risk to the achievement of Government objectives.

Costs

87 Retaining NZFSA as a SAB attached to MAF is, in effect, the status quo. As such, there is no structural change and/or reallocation of roles, responsibilities and resources involved. In this sense, there should be no transitional costs involved. Because this is the status quo option, it might also be expected that there would be no additional ongoing costs. As discussed further in the section titled Making the SAB model work below, the assumption of no additional ongoing cost is unlikely to be appropriate. The SAB model involves accountability arrangements that are more complex than normal. Accordingly, there is a higher than normal onus on the entities involved to take steps to ensure that the model is workable in practice and delivers effective accountability. In the section entitled 'Making the SAB model work', some measures for strengthening the functioning of the model, and underlying relationships, are suggested. There would be a small amount of cost to implement and maintain these measures. That said, however, the costs associated with these are orders of magnitude less than those that would be incurred under the stand-alone option.

Considerations against retaining NZFSA as SAB attached to MAF

88 Notwithstanding the advantages of retaining the existing SAB arrangement for NZFSA, there are some disadvantages when assessed against the criteria outlined in the section titled Evaluation criteria above. In particular, it can be argued that the SAB arrangement does not score well in terms of the need for clear accountabilities.

89 In particular, the SAB model involves accountability relationships that are more complex than is normal for departments. As noted in the section entitled 'Concerns and risks with the SAB model', the added complexity gives rise to some risks in terms of:

  • Ministers/Cabinet expecting a greater degree of separation and independence under the SAB model than is actually achievable under the State Sector and Public Finance Acts
  • blurring the accountability of the Director-General and the Executive Director
  • creating a situation where the Executive Director perceives that he has two masters (although this should not be any more problematic than the relatively common situation where departmental Chief Executives have output agreements with multiple Vote Ministers), and
  • potentially compromising the responsibility of the Director-General if he is not party to the advice being provided to the Minister for Food Safety.

90 Notwithstanding the risks in terms of unclear accountabilities, the SAB model can, and does, work in several contexts. However, because of the inherent tensions associated with the model in an accountability sense, the parties involved need to be committed to making it work. To this end, there is a higher than normal need to ensure that there are clear and shared understanding of roles, responsibilities and accountabilities. In the section entitled 'Making the SAB model work', some suggestions are made as to how the NZFSA/MAF SAB arrangement could be made to work better.

Stand-alone Department

Considerations in Favour of a Stand-alone Department

Clear Accountabilities

91 There is no doubt that viewed against the criterion of promoting clear accountability, the option of the stand-alone department rates ahead of the SAB model. The option of a stand-alone department would conform with all of the formal accountability requirements embodied in the State Sector and Public Finance Acts. Arguably, accountability would be further streamlined by making the Vote and Responsible Minister one and the same portfolio and position (although the situation of one or more Vote Ministers in addition to the Responsible Minister is common to many departments).

Clear Roles and Responsibilities

92 Under existing arrangements, there are comprehensive delegations in place from the Director-General to the Executive Director and these sit alongside a Relationship Agreement that seeks to define further roles and responsibilities. These arrangements would need to change if NZFSA was established as a stand-alone department.

93 Clearly there would be no ongoing need for the delegations from the Director-General to the Executive Director and the Director-General would no longer be a signatory to the output agreement between the Minister for Food Safety and NZFSA. In practical terms, the roles and functions of NZFSA in an output sense would remain the same, but clearly would be performed with direct responsibility rather than under delegated authority from the Director-General.

94 Roles and responsibilities would change in an ownership sense. Clearly, as a stand-alone department, NZFSA would take on responsibility for its own key accountability documentation (Statement of Intent, Output Agreement and, monthly, quarterly and annual reporting) and the Chief Executive of the new department would have full responsibility for financial management and performance. Further, in relation to the provision of corporate services, the relationship between MAF and NZFSA would become more akin to that of provider/customer.

95 There would be a need to revisit the Relationship Agreement that currently exists between NZFSA and MAF if NZFSA was to be reconstituted as a stand-alone department.

  • More emphasis would need to be given to the services that MAF provides to NZFSA in order to enable NZFSA to carry out its functions and, more generally, the links between the two entities and the common outcomes to which they contribute. This includes, for example, work undertaken by Biosecurity NZ that enables NZFSA to issue export assurances and certification. Similarly, it would need to make more explicit the terms under which MAF provided, at least in the short to medium term, corporate support services. The revised relationship protocol would also need to be more explicit about the communication protocols and information flows between the two entities.
  • Less emphasis would need to be given to:
    • the personal responsibilities of the Director-General and Executive Director to one another
    • roles in relation to planning, budgeting and performance reporting
    • the section dealing with managing people, and
    • the sections dealing with the establishment of NZFSA as a SAB.

96 Relationship protocols between departments are commonplace and are capable of being designed in a way that promotes clarity of roles and responsibilities. In short, the stand-alone department option presents a clearer picture of roles and responsibilities and, ultimately, accountabilities, than does the SAB model.

97 From an external stakeholder perspective, it might also be argued that the stand-alone option helps to distinguish NZFSA's roles from those of MAF and, in so doing reduce any perception that advice on food safety matters is tarnished by trade considerations. In reality, such arguments are of doubtful validity. Based on discussions with external stakeholders undertaken as part of this review, there do not appear to be indications that the roles of NZFSA and MAF are misunderstood. There are signs that external stakeholders do not appreciate that NZFSA is a SAB, but equally, this appears to carry no implications from their perspectives. The suggestion that separating NZFSA might reduce the perception that it is tarnished by association with trade is not borne out in practice. External stakeholders interviewed as part of the review do not perceive producer capture to be an issue in reality. In any event, even if NZFSA was to become stand-alone, the majority of its activities would continue to have a strong association with trade and market access issues.

Considerations Against a Stand-alone Department

Effective Decision Making and Achievement of Government Outcomes

98 The links between NZFSA and MAF are critical to the achievement of Government's objectives in relation to food safety, agriculture and access to markets. These links need to be maintained irrespective of whether NZFSA is stand-alone or part of MAF. The issue is whether the effectiveness of the links, and hence of decision making is impeded in any way if NZFSA is separated from MAF. There is potential for impediment for several reasons:

  • at a general level, greater fragmentation of the machinery means a need for more points of connection and, almost by definition, greater risk that one of the links in the chain will break
  • it is simply harder to achieve integration and collaboration on issues if agencies are at arm's-length from one another than if they are part of one organisation, and
  • the extensive array of synergies that exist between NZFSA and Biosecurity NZ (as described in paragraphs 76, 81 and 99) will be harder to realise if the agencies are separated.

99 These considerations raise concerns that separating NZFSA into a stand-alone department could undermine the maintenance of an effective regulatory environment and emergency response management capability.

  • MAF Policy, NZFSA and Biosecurity NZ all contribute to the protection of NZ's export markets. They are the official guarantors that NZ has a competent, transparent food and animal regulatory system. Part of their credibility rests on the close co-ordination that occurs across the three arms of MAF and on speaking with one voice. Separating any one of the agencies from the other two would risk undermining the credibility that has been established.
  • There are risks from separating MAF Policy from the more technically-focused work of NZFSA. Good regulatory design depends on having technical and wider policy perspectives. By distancing NZFSA from MAF, there is a risk that the design and application of the regulatory framework under NZFSA will begin to diverge from that under Biosecurity NZ. Policy and regulatory coherence is a necessary part of NZ's success in the international trade arena.
  • Where differences of perspective arise between MAF and NZFSA on policy, regulatory and other issues, it is more likely that the issues will need to escalate up to Ministers more so than they do now (because under existing arrangements, such issues get resolved within MAF/NZFSA). This is not necessarily an optimal use of Ministers' time. Many of the issues that are being dealt with are technical in nature and are better addressed as far as possible at officials' level.
  • The recent FMD hoax on Waiheke Island demonstrated the need in a crisis for close co-ordination between MAF Policy, Biosecurity NZ and NZFSA. Achieving the high degree of co-ordination that is required could be more difficult in circumstances where co-ordination was through negotiation and agreement between separate entities rather than through cooperation and clear lines of authority as currently exists.
  • NZFSA and Biosecurity NZ have their discrete areas of operation, but jointly provide assurances on food safety and animal health for NZ exports. From the viewpoint of exporters and overseas jurisdictions, there are advantages in having one assurance authority.

Risks

100 The area of risk with greatest consequence, arising under the stand-alone option is that of allowing inconsistencies in the design and application of the regulatory framework to emerge. There is no reason for doubting that even if stand-alone, NZFSA would continue to apply a principled science and risk based approach to the regulatory regime for food and the standards that exist within the regime. However, under the stand-alone option there are risks that:

  • New Zealand will not always speak with one voice in international/trade fora, and
  • the application of the regulatory framework managed by NZFSA will begin to diverge in subtle ways from that managed by Biosecurity NZ. Reciprocity with trading partners requires absolutely consistency of approach. Two agencies, rather than one agency, create greater risk that the requirement for consistency will be breached.

Costs

101 MAF has undertaken further work to refresh the estimates of costs of the stand-alone option that were prepared prior to the establishment of NZFSA (paragraph 29 above refers).

Impact on NZFSA

102 Based on 2006/07 budget numbers, NZFSA's share of MAF corporate overhead costs is $7.4 million. MAF has estimated that if NZFSA was to replicate these services on a stand-alone basis, the cost would escalate to approximately $10.3 million dollars per annum (an increase of about $2.9 million per annum). Further, it estimates that there would be one-off costs of a further $6.1 million. The ongoing costs assume that NZFSA would seek to replicate corporate support functions rather than continue to look to MAF for some, or all, services under and outsourcing arrangement. Approximately two thirds of NZFSA's costs are funded by cost recovery (mainly industry levies). By implication, the level of cost recovery to fund NZFSA would need to increase by around $2 million per annum. This is likely to be strongly resisted by industry.

Impact on MAF

103 If NZFSA is established on a stand-alone basis, and assuming that it chooses to arrange its own corporate support services rather than relying on MAF, MAF would not longer receive the $7.4 million contribution to corporate support costs currently paid for by NZFSA. MAF's requirements for corporate services would reduce in light of the reduced size of the organisation. However, some of its corporate support costs are fixed in nature. This constrains MAF's ability to shed cost. MAF have estimated that it would be able to reduce corporate support costs by around $5 million per annum. However, it would lose the $7.4 million from NZFSA. In net terms, MAF's costs would increase by about $2.4 million per annum.

Overall impact

104 In total, as a result of separating NZFSA, some economies would be lost. NZFSA costs could increase under the stand-alone option by around $2.9 million. MAF's could increase (in net terms) by around $2.4 million. Total operating costs could increase, therefore, by around $5.3 million per annum.

105 In addition, capital costs of around $6 million may need to be incurred as a result of having to build new IT and related systems for NZFSA.

106 It should be noted that these cost estimates are heavily dependent on the assumptions used and do not include provision for establishment-related costs and transitional costs (e.g. redundancy and recruitment costs, costs of terminating existing supply contracts etc).

107 The single largest corporate support cost is IT (NZFSA's current share of MAF IT costs is around $4.2 million). In recent times, MAF has been investing heavily in the replacement and upgrade of its IT systems. This work has proceeded on the basis that NZFSA is part of MAF. A significant part of the overall IT cost is driven by the need to provide systems and support to the regional network of NZFSA offices. If NZFSA was not part of MAF, MAF would not need to have the same scale of regional network. At some point, MAF would seek to scale back its IT network. NZFSA would then be faced with the prospect of having to build its own IT system. 11 On a stand-alone basis, MAF estimate that this would cost NZFSA $7.2 million per annum in ongoing costs compared to the existing $4.2 million share of MAF's IT costs attributed to NZFSA. The one-off capital costs have not been estimated with any degree of rigour, but could be at least $5 million.

Stand-alone entity: other options

108 If NZFSA were to be separated from MAF into a stand-alone entity, there are other options to consider. The first of these is to establish NZFSA as some form of stand-alone Crown entity rather than, as has been assumed above, a department. Further, there are some other options around the scope of functions that would be undertaken by the stand-alone NZFSA.

Crown entity or ministry?

109 If NZFSA was to be established as a stand-alone entity, an issue arises as to the choice of organisational form. The choice is between a department or a Crown Entity (and if, Crown entity, there would be a further choice as to the type of Crown entity).

110 There are several Crown entities that undertake regulatory responsibilities (in a wide sense of the term) the majority of which are Independent Crown Entities (ICEs) and examples are provided in the table below.

Independent Crown Entities

Autonomous Crown Entities

Crown Agents

· Broadcasting Standards Authority

· Commerce Commission

· Human Rights Commission

· Law Commission

· NZ Sports Drug Agency

· Office of Film and Literature

· Police Complaints Authority

· Privacy Commission

· Securities Commission

· Takeovers Panel

· ERMA

· Standards Council

· Civil Aviation Authority

· Electricity Commission

· Land Transport New Zealand

· Maritime New Zealand

· NZ Qualifications Authority

· Pharmac

· Social Workers Registration Board

111 One of the main reasons why most of the regulatory entities in the table above are ICES is because it is not appropriate for Ministers to have any involvement in the exercising of what are quasi-judicial determinations. The nature of NZFSA's regulatory functions is more akin to those undertaken by Crown agents than they are ICEs.

112 For two main reasons, the Crown entity option is not recommended if NZFSA is to be separate from MAF into a stand-alone organisation. First, while NZFSA's activities have a strong regulatory element, they also have a very important bearing on trade issues. The nature of these issues requires a closer relationship to Ministers than that implied by some form of Crown entity. Moreover, a significant part of NZFSA's role is to provide policy advice on food and food safety and suitability where suitability refers to those requirements, either legislated or stemming from market access reasons, which do not relate to safety. Advice generally, and particularly in relation to market access is something that requires a close, rather than arm's-length relationship with the Minister. In general, the nature of activities undertaken by NZFSA is such that it is appropriate to keep responsibility for them reasonably close to Ministers.

113 The second reason for favouring a Ministry form is that a key part of NZFSA's work is providing official assurances. From the perspective of our trading partners, they want those assurances to come from Government. While Crown entities are part of Government, they operate at one arm's-length from Government, with more formal and structured channels for Ministerial oversight and influence. This arrangement does not sit comfortably with many trading partners. Anecdotally, there is a view that the trading partners struggle to understand the concept of a Crown entity. They want to deal with departments that are under the direct control of a Minister.

Scope of functions

114 While most of the focus of the review has been on the future location for NZFSA given this current mix of roles and responsibilities, consideration has also been given to two other options:

  • a Ministry of Food and Biosecurity, and
  • a Ministry for Food Safety excluding any export assurance activities.

Ministry of Food and Biosecurity

115 Under this option, the Ministry would be responsible for administering the Food, Animal Products, Agricultural Compounds and Veterinary Medicines, Dairy Industry Animal Welfare and Biosecurity Acts. It would combine the functions currently undertaken by NZFSA and Biosecurity NZ. It is further assumed that the Ministry would also assume the functions undertaken by MAF Quarantine Services (MQS) recognising the close links that exist between the services and Biosecurity NZ (there would be little synergy in retaining MQS with MAF Policy).

116 This option was considered at the time the establishment of NZFSA was being addressed. At that time it was noted that this option would:

  • maintain the links between food safety and biosecurity that, as argued above, are better managed if joined together in one entity, and
  • in so doing, contribute to the maintenance of a single and cohesive regulatory regime.

117 At the time, it was also noted, however, that this option would raise significant issues in terms of the future for MAF's policy functions (and several smaller service delivery functions). It was noted that such a change would have a substantial impact on MAF's roles and functions and, accordingly, would need to be considered in much more detail if the Ministers wanted to explore the option further.

118 This conclusion is still valid. A Ministry of Food and Biosecurity would raise many issues.

Ministry of Food

119 This option would involve separating NZFSA's roles in relation to domestic food safety into a stand-alone department. Export certification and other trade-related functions would remain with MAF. None of the stakeholders interviewed as part of this review has advocated this option, but it is raised simply for the sake of completeness.

120 This option is not recommended on several grounds.

  • It would create a dual regulatory regime - one for food that is produced for the local market and one for food that is traded internationally (both imported and exported). This option has the potential, therefore, to directly contradict the need for a single and consistent regulatory framework that is vital to the ability to trade.
  • It would increase compliance costs for producers who are selling into both domestic and foreign markets because they would have to deal with two agencies.
  • It would involve establishing what would be quite a small Ministry (as noted earlier, MAF estimates that roughly 80% of NZFSA's direct activities are related to trade). As such, the Ministry would almost certainly lack critical mass to function efficiently and effectively. In turn, this would probably lead to a desire to attach it to another agency - and go full circle in the process.

121 There are no obvious benefits from this option and it is not supported.

Attachment to MAF: SAB or Division?

122 If the decision is taken to retain NZFSA as part of MAF, there is a further choice to be made in terms of whether it continues as a SAB or becomes a division of MAF in the same manner as Biosecurity NZ.

123 The advantages of retaining NZFSA as a SAB are that it:

  • helps to signal a degree of separateness, if that is what Ministers want
  • signals an identity that is related to, but separate from, MAF. The independent branding of NZFSA achieves much the same end, however
  • can be seen as better complementing other arrangements including having a separate Vote and Vote Minister
  • helps to create focus on NZFSA's roles and responsibilities and allows NZFSA to foster its own culture and values. These are important dimensions of organisational performance, but care is needed to ensure that these dimensions do not conflict with those of MAF, and
  • involves no structural change from existing arrangements. Accordingly, there is no disruption from an internal and external stakeholder perspective although there are issues to address in terms of making the relationships under the SAB model work better (and these are discussed in the section entitled 'Making the SAB model work').

124 The disadvantages of the SAB option are the inherent accountability tensions and the premium this therefore places on the parties involved to make the SAB model work and the risks that arise if the SAB model does not work well.

125 Re-establishing NZFSA as a division of MAF would clearly address the potential conflict with the accountability principles underpinning the State Sector Act and PFA. Moreover, being a division would serve to reinforce the close links that already exist between NZFSA, Biosecurity NZ and MAF Policy and which are a key part of ensuring:

  • consistency in the design and application of regulatory frameworks both for domestic food safety and international trade reasons
  • that NZ speaks with one voice in international trade fora, and
  • effective response management in the event of an emergency.

126 Operationally, the switch from SAB to division should not have any major impact at a day-to-day level. The roles and functions of MAF and NZFSA are already clear and understood. The switch to a division does not change this.

127 There would be a need to review, and probably terminate, the Relationship Agreement that currently exists between MAF and NZFSA. It would be very unusual for a Chief Executive to have such a document with a division of his or her department. A performance agreement is much more usual.

128 The key disadvantage of the divisional option is that does not signal the degree of separateness that is implicit in the SAB model. As discussed earlier, the concerns regarding producer capture and trade bias that were raised at the time NZFSA was being established do not have any basis in reality and, based on stakeholder interviews, do not even appear to be a perception. In short, it is not obvious that there are any compelling advantages in continuing with the SAB model, but equally, provided that the parties involved with the SAB are prepared to make it work, there is not an overwhelming case to change the existing arrangement.

10 NZFSA does not have direct links to the fourth outcome which relates to the management of natural resources.

11 More generally, given that NZFSA is utilising technology as a major part of its business strategy (e.g. e-cert), it seems very unlikely that NZFSA would want to rely on MAF, if stand-alone, since it would not be able to influence MAF's IT strategy. NZFSA would want to own its own IT strategy and the means for achieving that strategy.

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