Next Steps for the Land Transport Sector

Planning and Funding


92 The proposed planning and funding system outlined below aims to address the issues identified in this Review by establishing a new strategic framework for the land transport sector:

  • providing clear direction on the Government's funding priorities over a three year period - this substantive guidance to Land Transport NZ and Approved Organisations will guide decision-making, and contribute to the achievement of the longer-term goals of the NZTS;
  • enabling national and regional interests and priorities to be managed and integrated within a coherent framework;
  • clarifying and improving accountability for decision-making at all levels;
  • improving the linkage between those who pay and those who benefit from and cause the expenditure; and
  • reducing the fiscal risk to government.

93 The proposal includes some immediate measures to be taken to improve land transport decision-making and funding. It builds on the current system and previous reviews. The proposal is also largely consistent with and builds on measures that the Government has already put in place (such as the funding update process).

94 These measures are envisaged as part of an on-going process of refining and improving how the land transport planning and funding system works. In addition to this Review's core proposals, some topics for further work are suggested.

95 The key changes that are proposed to the current system are:

  • more explicit guidance on the Government's funding priorities for land transport over the medium and longer term. This guidance will be provided through two documents:
  • "Implementation of New Zealand's Transport Strategy" (INZTS) currently being developed by the Ministry; and
  • a Government Policy Statement (GPS) with a six year outlook and a three-yearly update process;
  • the NLTP will be developed on a three-yearly, rather than an annual basis;
  • all land transport funding proposals (from councils and the State highway agency) must first be prioritised at the regional level (through RLTCs or similar bodies) and included in a Regional Land Transport Programme (RLTP), in order to be considered for funding;
  • consultation will no longer be required on the State Highway Forecast: this will be incorporated into the consultation process undertaken on RLTPs;
  • the Ministry's role will be enhanced to include advice to the Minister on the Land Transport Agency's (see later) evaluation process and monitoring of specific activities;
  • FED and RUC will be fully hypothecated to the NLTF ; and
  • because the NLTF will only include revenue from user charges (FED and RUC), any Crown funding used to fund land transport activities, will require a separate process to provide clear accountability to Ministers for the use of this funding.


Government policy statement

96 As noted in both the EXG and MAG reviews, greater guidance is needed for the decision makers in the land transport system on the NZTS and how the high-level objectives contained in the NZTS can be achieved. The INZTS, which is being prepared by the Ministry, will provide greater guidance to the sector with a medium-long term focus. In addition, it is proposed that there be a new statutory document to establish the Government's short term funding priorities, funding levels, and FED and RUC levels. This would be in the form of a Government Policy Statement (GPS) revised every three years.

Three-yearly review

97 As part of the process for developing the GPS, every three years land transport funding would be reviewed to:

  • determine whether funding and the balance between activity classes and short-term priorities are sufficient to achieve the objectives outlined in the NZTS and INZTS; and
  • provide an opportunity for the Government to highlight any particular land transport priorities it wishes to focus on for the next few years.

98 This three-yearly review would build on the process developed for updating the NLTP revenue guarantee and State Highway Plan cost guarantee. The key difference is that the three-yearly review would result in a formal GPS which would provide concrete guidance to the sector.

99 An Issues, Trends, and Options Report would be developed by the Ministry in consultation with the Land Transport Agency for Cabinet consideration.

100 Following Cabinet's consideration of the Issues, Trends, and Options Report, the Ministry would develop the GPS for Cabinet sign-off. The GPS would outline:

  • Government's funding priorities;
  • the proposed range within which each activity class would set; and
  • FED/RUC levels for the next three years.

101 It is proposed that the document be statutory and published. Central Government land transport agencies would be required to give effect to the GPS, and regional councils and TAs to act consistent with it. Further work is required on the precise legislative nature of the GPS.

102 The GPS would cover a period of up to six years and would be reviewed every three years, or at the Government's discretion.

National Land Transport Programme

103 It is proposed that the NLTP be retained. The NLTP would outline the activities that will be funded within expected funding levels and that are considered to best contribute towards achievement of the desired outcomes. It is proposed that the Government remain separate from any decision-making on individual activities. Therefore, the NLTP would continue to be developed at arms-length from core Government.

104 Further, it is proposed that the NLTP be produced every three years rather than annually and be required to outline how the proposed set of activities will help achieve the priorities in the GPS. This will help provide certainty on what activities are likely to be funded over the next three years and reduce the constant churn of consultation and document development that currently exists.


105 New Zealand's land transport funding system was established as predominately a road user funded system. The recent Crown injections have weakened the link between those who benefit from and cause the expenditure and those who pay. The mixed funding sources have also caused accountability difficulties. It is proposed that the funding of land transport activities return to being more tightly linked to road use. This proposal would be consistent with an eventual move towards more sophisticated road user charges should the Government decided to move in this direction.

106 Whether rail funding should be part of this system requires further consideration. Rail passenger transport, as with road passenger transport, is currently part of the system as it is considered to benefit road users. Other aspects of rail funding, such as infrastructure investment, are currently under review.

Full hypothecation of Fuel Excise Duty

107 In order to reinforce the linkages between those who cause or benefit from the expenditure and those who pay, it is proposed all FED be spent on land transport.

108 Further work is required on how this change would be implemented. Officials propose to report back on:

  • fiscal implications;
  • grand-parenting the existing Crown appropriations to the NLTF;
  • the retention of 2007/08 - 2008/09 funding levels; and
  • implications for the relativities between FED and RUC.
FED/RUC levels

109 As outlined above, Cabinet agreement would be sought to the proposed FED and RUC levels for each of the next three years. These levels would then be established in legislation (most likely Budget legislation).

110 There may need to be slight adjustments to these levels if the assumptions (expected cost movement and economic growth) on which forecasts were based proved to be inaccurate. There will need to be a mechanism to make such adjustments.

111 Further work is required on exactly how changes to setting FED and RUC levels would be implemented. For example, this work would consider what legislative change would be needed, the constitutional implications of any changes, and how to achieve consistency between the mechanisms for setting FED and RUC.

112 This proposal for adjusting FED and RUC, along with the development of a GPS, is designed to provide certainty on overall funding levels and activity class levels for the next three years. We consider that there would no longer be a need for the Government to provide a revenue guarantee for the NLTF and a funding guarantee for State highway construction projects. These changes will also remove Crown fiscal risk associated with the current guarantees.

National Land Transport Fund

113 It is proposed that the NLTF include only revenue raised from road users. That is FED, RUC and MVR. This proposal does not stop the Government from appropriating funding for priority activities that might not be appropriately funded from FED and RUC. However, decisions and accountability for these appropriations would be separate from the NLTF and would not necessarily go through the NLTP process. Arms-length distance would be retained for activities funded by FED and RUC, but Ministers would have direct control over the funding that they appropriate for specific purposes.

114 The NLTF would be allowed to go into deficit/surplus in any one year if unforecast changes in revenue or costs occurred, but not over time. The ability to find out expenditure over time should also be considered for other purposes, such as speeding up activities and building up surpluses to pay for "lumpy" capital activities.

Approval of evaluation policy

115 Evaluation policy determines how projects are assessed in terms of their contribution towards the achievement of the desired outcomes (relative to their costs), and is an important element in achieving these outcomes. It is proposed that the Minister of Transport approve the evaluation policy (i.e. the funding methodologies) prepared and applied by the Land Transport Agency. The Ministry would play a greater role by providing advice to the Minister on whether the evaluation policy should be approved.

116 It is also proposed that officials provide advice on whether, and if so how, the Land Transport Management Act be amended to give greater emphasis to cost-effectiveness.

Use of design standards

117 The way that higher level design standards (for example intersection spacing, design speed) are applied to State highways can have a major effect on the operation of the transport network, on the communities the highways pass through and on important considerations such as urban form.  They can also be one of the factors that significantly affect costs. While the default position is that the road controlling authority (Transit NZ and councils) will set such standards, the Minister should have reserve powers to direct the application of certain standards, on the advice of the Ministry, to ensure the preferred balance between the factors.

Regional planning and prioritisation

118 As well as providing better guidance at central Government level, there is also a need to achieve better integration of national with regional and local processes.

119 It is proposed that regional councils working through RLTCs (or similar bodies) be responsible for prioritising all regional and local land transport funding proposals through new Regional Land Transport Programmes (RLTPs) prepared on a three yearly basis. The RLTPs would also outline how the proposed activities contribute towards the national objectives and any particular regional objectives. The RLTPs could be part of the Regional Land Transport Strategies (RLTSs) or a separate document. With the RLTP on a three-yearly cycle, it may be appropriate for RLTSs to move to six yearly-cycles, and with a horizon extended beyond the current 10 years to align with the INZTS and to reflect their more strategic role.

120 The RLTP would include all State highway activities. This would mean that there would be no separate consultation on proposed State highway activities. Some strategic State highway improvements would be identified in the INZTS, and/or the GPS, and would ensure that national priorities would proceed.

121 Only activities prioritised in RLTPs would be eligible for funding from the NLTF. The Land Transport Agency would still make the final decision on what activities to include in the NLTP and in what priority category.

122 Further work is required on the proposed regional prioritisation process. Officials propose to report back on:

  • alignment of timeframes between the GPS, NLTP, RLTS and RLTPs;
  • the regional structures for developing the RLTPs;
  • whether activities because of their nature should be excluded from the regional prioritisation process;
  • whether the introduction of the proposed system should be phased in; and
  • implications for the Auckland region.

123 Officials consider that this new system would lead to a closer partnership between central, regional and local government in developing solutions to regional and national transport problems.


124 It is proposed that the key consultation process for land transport projects would be through the development of the RLTP. This will streamline existing consultation processes. The NLTP would, as currently, not be consulted on.

125 There is an issue about whether NZ Police road safety enforcement activities (under the Authorities Land Transport Programme) should be consulted on as part of the regional prioritisation process. These are currently approved by the Minister of Transport. Officials propose to report back on the precise mechanisms for consulting on and approving this activity class along with whether the Minister should also approve the operational funding of the Land Transport Agency. There will also be a need to consider if there are other activities that need to be exempted from the regional consultation process e.g. emergency works.

Impact on the State Highway Forecast

126 These proposals mean that there would no longer be a need for, or consultation on, a national State highway programme (known as the State Highway Forecast). The proposed approach to planning would also mean that a guaranteed State Highway Construction Plan would not be necessary although the Government may require a plan for accountability reasons.

127 The GPS would set the activity class ranges for the next three to six years. This would provide some surety to the industry on how much funding would be available in the roading construction area (and not simply in the State highway construction area). Likely State highway construction activities for the next three years would be documented in both the RLTP and the NLTP and the medium term outlook of likely corridors for upgrading in the INZTS and RLTSs.

Implication for Rail

128 Ultimately it is envisaged that rail policy and funding would be more integrated with the rest of the land transport system than it is currently. The Ministry has historically been responsible for rail policy and funding, but the waters have been muddied recently with the Treasury's involvement on funding. This has caused confusion over relative roles and responsibilities.

129 It is proposed that the Ministry be mandated to be the lead agency on rail policy. The Ministry should eventually take the lead on rail funding issues. However, as the current commercial negotiations with Toll NZ Ltd are being progressed, it is proposed that Treasury's current rail funding functions (in terms of commercial negotiations) remain with the Treasury until they are completed. Following the completion of these rail funding decisions, consideration of how rail funding would be best integrated into the overall land transport planning and funding system should be undertaken.

Review and Monitoring

130 An important element of any system is the review and monitoring of how the system overall is performing and how the various agencies within the system are performing. It is proposed that the Ministry develop a more effective performance monitoring system. As part of this monitoring role, the Ministry, on behalf of the Minister, would be given the power to monitor and review a selection of activities funded under the NLTP at any stage pre, post and during an activity's life cycle, and the processes undertaken by the Land Transport Agency.

Further work

131 The following issues need to be considered in more detail and any changes made to legislation, structures or systems to enable these issues to be discussed and resolved:

  • how the proposed funding and planning arrangements may be further improved to address the lack of incentive for TAs and local communities to consider cost-effectiveness for State highway proposals in their areas;
  • how to move towards more sophisticated road user charges;
  • the incentives/measures (over and above what is currently proposed) required to achieve better integration between planning and funding; and
  • how to achieve better integration between modes in key areas such as Auckland, Wellington and Christchurch.

See diagram (PDF file)

Roles, Functions and Institutions Arrangements

132 The planning and funding changes recommended above would have a substantial impact on the roles and functions of the Ministry, Land Transport NZ, and Transit NZ.

Ministry of Transport

133 As a consequence of the changes recommended above, the Ministry would be endorsed as:

  • the Government's principal adviser on all transport modes and matters;
  • the leader of strategic developments within the land transport sector, including priorities and targets and providing guidance on how to meet strategic objectives;
  • the Minister's agent in:
    • assisting land transport Crown entities to carry out their roles, and monitoring and evaluating their performance;
    • monitoring and evaluating land transport performance at activity class level; and
    • monitoring and reviewing selected land transport activities.

134 Depending on which structural option is chosen (see below) for the possible placement of the current Crown entities' roles and functions, the impact of change for the Ministry could be significant for the monitoring and review functions. The Ministry would be charged with monitoring and reviewing:

  • selected activities funded through the NLTP;
  • all activities funded by the Crown;
  • land transport Crown entities, as part of the 'standard/regular' Crown entity monitoring that Ministry conducts as the Minister's agent; and
  • particular aspects of Crown entity performance, such as the processes for approving and funding land transport activities.

135 To perform these roles, the Ministry must develop and maintain a capacity and capability to:

  • set strategic directions and provide advice and guidance to central and local government institutions, and others, on how to interpret and implement the sector's strategic documents. Primary in this is the preparation of the INZTS and GPS;
  • advise Government on each transport mode and inter-modal matters, including endorsing the Ministry as the lead adviser for rail policy;
  • advise on appropriations for activities to be funded by the Crown;
  • monitor and review activity class performance, some specific activities, and Crown entity performance This includes:
    • advising the Minister on the methodologies used for approving activity level funding;
    • determining the performance information required;
    • quality assuring and monitoring major projects;
    • conducting pre, post and during evaluations of selected activities;
    • gathering and analysing performance information (above activity level) for the sector;
    • monitoring any activities funded by the Crown;
    • advising the Minister on the application of certain roading design standards;
    • managing the sector's capital assets (according to guidelines being developed by the Treasury); and
    • monitoring the Crown entities, including advising on and negotiating their accountability documents.

The Treasury

136 It is not proposed to alter the Treasury's role as the lead agency for the current commercial negotiations on the Rail Network Access Agreement. This role should be confirmed alongside the clarification that the Ministry is the lead agency on rail policy.

137 The proposals in this paper do not impact on the Treasury's responsibilities for the administration of Vote Finance, including funding for ONTRACK and certain other sector infrastructure investments, or for providing second-opinion advice on any proposals for Crown funding.


138 As noted above, ONTRACK would change from a State-owned enterprise to a Crown entity if the Rail Network Bill is enacted as reported back to the House by the Government Administration Committee in June 2006.

139 While ONTRACK is outside the scope of the proposals of this Review pending passage of the Bill and the conclusion of related commercial negotiations, Ministers may wish to consider how the Next Steps proposals might extend to ONTRACK in the future.

Land Transport NZ

140 The changes to the planning and funding system would focus Land Transport NZ's role on activity-level functions and provide the linkage between the national and regional levels. The primary function of developing the NLTP would continue, with a heightened emphasis on linking individual funding allocation decisions to the directions set out in the GPS. Associated functions include:

  • assisting the Ministry with the preparation of the three-yearly issues trends and options report for Cabinet consideration;
  • providing advice on the high level mix of activities most likely to achieve Government's objectives;
  • developing an annual budget within the three-year levels approved by Ministers, and recommending any changes that might be required to FED and RUC levels in the interim years;
  • assisting regional and local bodies in the development of RLTSs and plans that link demonstrably to Government's objectives;
  • assessing three-year funding requests;
  • approving activity funding;
  • auditing the use of NLTF funds by Approved Organisations; and
  • reporting against the NLTP, including activity level performance information.

141 It is not proposed to alter arrangements in the sector for the licensing activities and regulatory implementation and enforcement, primarily because:

  • these functions are low risk and do not require direct Ministerial oversight or control;
  • decision making about particular persons or activities is maintained at arms-length from Ministerial influence; and
  • a governance board can add value to land transport licensing and regulatory implementation and enforcement regimes.

142 The Motor Vehicle Registry and Revenue Management output class is subject currently to a separate review under the responsibility of the Chief Executive of the Ministry of Transport.

143 The lack of clarity with respect to roles, and the absence of guidance from the Ministry, has created a number of instances of duplication of effort e.g. advice on travel demand management coming from the Ministry, Land Transport NZ, and Transit NZ. The nature and scope of activities needs to be much more tightly defined and aligned e.g. through Statement of Intents and/or letters of expectation from Ministers.

Transit NZ

144 Subject to decisions on subsequent structural change, Transit NZ would continue to be responsible for building, maintaining and operating the national State highway network, but the proposed changes would impact significantly on its role with regard to planning in the sector. That role would change both with respect to planning the development of the State highway system and with respect to input into land use planning.

145 Regional bodies would be responsible for prioritising the State highway activities alongside other proposals for their region. Transit NZ would assist by providing technical advice on potential State highway activities. This regime would replace the current preparation and consultation on an annual State highway programme.

Further Possible Institutional Arrangements

146 The Terms of Reference requested that the Review consider structural issues. Noting that the changes described above should address most of the issuesof concern the Review turned its attention to structural questions. Specifically, the Review considered what structures would best support the proposed planning and funding processes.

147 The following potential options for the structure of central Government agencies in the sector were identified and assessed as to whether they would materially add to the benefits offered by the proposed changes outlined above.

Departmental Options

148 Three options were considered for using departmental form:

  • merging Land Transport NZ and Transit NZ as a single department, with the Ministry remaining separate;
  • merging the Ministry, Land Transport NZ and Transit NZ as one large department; and
  • subject to the completion of commercial negotiations and ONTRACK becoming a Crown agent, including ONTRACK in either merger above.

149 All three options were rejected on the basis that current arrangements are based on the Minister of Transport being at arms-length from decision making to approve and fund individual land transport activities. Instead, the board of Land Transport NZ is responsible for this as a statutorily independent function. The Minister may issue a policy direction to the board, but such directions may not be given in relation to a statutorily independent function, or to bring about a result in respect of a particular person or persons.

150 This arrangement protects the Minister of Transport from lobbying to show favour or disfavour for any particular land transport activity, and from accusations of interference or influence for political gain or other benefit.

151 While it is possible to 'ring fence' decision making functions in a department (as a statutorily independent function, or as the responsibility of a statutory officer within the department), the appearance of Ministerial separation from decision making is as important as the reality. The Minister has extensive powers of direction and influence over a department's activities and there is a high risk that the appearance of separation from Ministerial influence would disappear.

152 Second-order reasons for not supporting any of the departmental options include the:

  • risks to the arms-length separation from Ministerial influence over regulatory decisions (e.g. a decision to revoke a transport operator's licence);
  • loss of board member knowledge, skills and experience in land transport licensing and regulations, infrastructure maintenance and management; and
  • risks of bias towards land transport activities prepared in-house, and a loss of transparency over related funding decisions.
  • options were identified but not advanced because they were out of scope of the Terms of Reference.
Preferred options

153 It is proposed that Ministers consider two main options for the placement and scope of functions (depicted in the table on page 34):

  • enhancing the Ministry and retaining two Crown entities but altering the allocation of functions, with sub-options (Options A and B) concerning the scope of functions currently carried out by Transit NZ; and
  • enhancing the Ministry and merging the remainder of Land Transport NZ and Transit NZ (Option C).

154 Options are viable. They both have advantages and disadvantages in relation to each other. The preferred option represents a balance of judgment, as discussed in the following paragraphs.

Option A

155 Under option A, the existing agencies in the sector would continue to operate as stand alone agencies, separate from each other.

  • There would be no major structural changes i.e. disestablishments, mergers or the establishment of any new agency:

- the Ministry and the Treasury would continue as Public Service departments; and

  • Land Transport NZ and Transit NZ (but renamed "Land Transport Agency" and "State Highways NZ" to better reflect their focus and the change from the current situation) continue as stand alone statutory Crown entities, specifically as Crown agents i.e. they must give effect to Government policy when directed by the responsible Minister.
  • The emphasis would be on clarifying and reinforcing the existing agencies' roles and responsibilities, and enhancing capability where needed:

- The Treasury would be endorsed as the lead agency for the current commercial negotiations on the Rail Network Access Agreement, while it would be clarified that rail policy is part of the Ministry's role;

- the Ministry would have a substantially increased role in monitoring and reviewing, as discussed above, in addition to its high level funding and other strategic functions;

- the Land Transport Agency's planning and funding role would be focused on activity level functions. It would prepare the NLTP and approve activities for funding, but some high level planning and funding functions would transfer to the Ministry. The Land Transport Agency would become the primary point of discussion for councils with regard to the development and prioritisation of State highway activities;

- State Highways NZ would build, maintain and operate the national State highway network. There would be a substantial reduction in planning functions from Transit NZ. It would provide technical advice to councils for the purposes of their development and prioritisation of State highway activities.

  • There would be continued reliance on the effective use of the levers of Ministerial influence to address any remaining issues not resolved through the changes to planning and funding, and through enhanced capability.
Option B

156 Option B is a variation of Option A and would further narrow State Highways NZ's functions. It would focus specifically on the procurement of value for money, State highway building, maintenance and operations. Its planning role would be further reduced, with the Land Transport Agency in conjunction with regions being actively involved in State highway activity planning.

Option C

157 Under this option:

  • the Ministry would have the enhanced role and responsibilities as described above, supported by improved capability. Its capability to review specific activities would be greater than in Option A;
  • Land Transport NZ and Transit NZ would merge into a single Crown entity (called here the Land Transport Agency, combining the reduced planning and funding functions described above for the separate entities. The Land Transport Agency would be a Crown agent, required to give effect to Government policy in accordance with the Crown Entities Act;
  • Land Transport NZ's statutorily independent functions would be vested in the Land Transport Agency under the authority of the board;
  • the separate statutorily independent functions currently held by the Director of Land Transport could be vested in the board of the Land Transport Agency (recommended) or continue to be vested in a statutory officer in the Land Transport Agency. The board would normally have authority over all the entity's functions and powers, and ensure they are carried out under appropriate delegations;
  • the Land Transport Agency could be structured as either:

- a 'standard' Crown agent with several business units accountable to a chief executive appointed by, and accountable to, the board; or

- a 'special purpose' entity that contains a statutory unit responsible specifically for State highway maintenance and management. Under this arrangement the chief executive would be responsible for the statutory State highway unit, and would appoint a general manager to oversee day to day activities. Alternatively, the statutory State highway unit could be headed by a general manager appointed by the board (similar to the Aviation Security Service).

Comparative factors

158 The table in Appendix D provides some details on the considerations underpinning the recommendations in this report. Those considerations do not lead to a clear-cut preference between Options A, B, and C.

159 The recommendations present a judgment around multiple and overlapping factors, including:

  • the effectiveness of solutions to date, including the changes that followed the 2004 Government Transport Sector Review and the availability of the levers of Ministerial influence over the central Government agencies;
  • the likely impact of the proposed changes to the planning and funding regime in terms of better achieving value for money in the sector as well as the other objectives of this next steps exercise;
  • the costs of change involved in each option, in relation both to the other options and to the overall gains in better achieving value for money in the sector;
  • the benefits and risks in each option, including:

- Options A and B both have risks that the Crown entities would redevelop their functions over time;

- Option B could have the benefit of a board with commercial expertise, focused on value for money procurement; a risk is that the board could lose focus both on being a Crown agent, directly accountable to the Minister of Transport, and on the inter-modal and sector wide objectives and the Government's sustainability objectives; and

- Option C could have the risk that a multiple-function entity requires a multiple-focus board that could be detrimental to achieving value for money; alternatively, such a board could be well placed to make inter-modal decisions and trade-offs, especially in the context of the broader objectives around sustainability.

160 On balance, this report recommends Option C based on the following considerations.

  • the department's (Ministry's) and the entity's (Land Transport Agency's) respective roles would be clarified, duplication of functions would be minimised, and councils would have a single point of contact with central Government for regional planning;
  • a single Crown entity, governed by a single board, would be responsible to the Minister of Transport. The State highway entity (currently Transit NZ) would no longer have to provide similar information to separate agencies (the Ministry and Land Transport NZ) for similar purposes;
  • the Land Transport Agency would be positioned to make the inter-modal decisions required to meet the range of Government's transport and sustainability objectives;
  • the risk of a multi-focused board not focusing sufficiently on value for money would be substantially mitigated by the range of the Land Transport Agency's various functions, and if:
    • the need for activities to be cost effective is reinforced; and
    • the board appoints one or more committees to advise on the various aspects of the Land Transport Agency's business. In accordance with clause 14 in schedule 5 of the Crown Entities Act 2004:
    • such committees could advise the board on any matters relating to the entity's functions and powers that are referred to the committee by the board; or
    • the board could appoint such committees to perform or exercise any of the entity's functions and powers that are delegated to the committee (as long as the committee includes at least one member of the board and any other person(s) that the board thinks fit);
  • the Ministry's capability would be boosted, and the Land Transport Agency's expertise would cover all aspects of land transport activity planning and delivery, to produce a sector capable of being responsive to Government and implementing policy.
  • while full implementation of the planning and funding changes would take several years (4-6) to be realised, more rapid and endurable gains would be achieved in a shorter timeframe, e.g. the capacity to provide joined-up communications and advice to the Minister; the need to operate, and to be seen to operate, as an instrument of central Government.

161 The success of Option C would rely on having effective governance arrangements, including a high quality board. Officials propose to report back on how to reinforce the necessary maintaining of focus on value for money, including board membership and board composition, and the possible use of board committees.

Board role

162 The role of boards in providing governance over Crown entities is one of the key planks in New Zealand's public management system. Section 25 of the Crown Entities Act defines the board's role in the following terms:

(1) The board is the governing body of a statutory entity, with the authority, in the entity's name, to exercise the powers and perform the functions of the entity.

(2) All decisions relating to the operation of a statutory entity must be made by, or under the authority of, the board in accordance with this Act and the entity's Act.

163 A Crown entity board must have a good understanding of the delegations through which it can carry out its responsibilities. The Crown Entities Act sets out the board's powers to delegate and the effects of delegating (including that the board remains responsible for the actions of any delegate acting under delegation).

164 In addition to the role of the board, the collective duties of the board as well as the individual duties of members are described in the relevant provisions in the Crown Entities Act 2004. Key elements of the board's role include:

  • setting strategic policy and direction consistent with the statutory and policy frameworks within which the entity operates;
  • appointing a chief executive;
  • monitoring the performance of the entity and its chief executive;
  • ensuring compliance with the law and with key accountability documents applying to the entity;
  • reinforcing expectations of the behaviour of the chief executive and entity that are appropriate to a public body;
  • maintaining relationships with the Minister, Parliament and the public; and
  • complying with good employer requirements.
Board membership

165 The requirement that all decisions relating to the operation of a statutory Crown entity must be made by, or under the authority of, the board goes to the heart of the board's importance 1 . This requirement is the reason why:

  • a corporation sole is appropriate in a small number of specific instances; and
  • a multi-member board is preferable in the vast majority of cases.

166 High quality decision making relies on the appropriate knowledge, skills and experience to assist the entity to achieve its objectives and perform its functions. The range of knowledge, skills and experience should cover:

  • the nature of the entity as a central Government agency and the implications, including a clear understanding of the role of the Minister and monitoring department;
  • the entity that the board governs, including a clear understanding of relevant legislation and the entity's role, functions and powers; and
  • the strategic and operating context (e.g. commercial context; range of stakeholders; impacts of decision making).

167 Section 29 of the Act adds a fourth quality to the composition of the board of a statutory Crown entity. Ministers are charged with appointing persons who have the appropriate knowledge, skills and experience, and - subject to that requirement - they must also take into account the desirability of promoting diversity in the membership of Crown entities.

Statutorily independent functions

168 The requirement that all decisions relating to the operation of a statutory Crown entity must be made by, or under the authority of, the board explains why an entity's functions and powers are vested in the board as the governing body. It would be incongruous for an entity to have functions and powers that do not come under the authority of the board.

169 It is recommended that the statutorily independent functions carried out by Land Transport NZ should continue to be statutorily independent functions of the Land Transport Agency. Under s.69(2) of the Land Transport Management Act 2003:

"The Authority's statutorily independent functions are-

  • to determine whether particular activities should be included in a national land transport programme; and
  • approving activities; and
  • approving procurement procedures."

170 Under s.197(4) of the same Act, the Director of Land Transport currently has some statutorily independent functions that are exercised under statutory authority independently from the Minister of Transport and the board (these are in addition to Land Transport NZ's statutorily independent functions, listed immediately above):

"In performing or exercising any functions or powers in relation to-

(a) The issue, endorsement, alteration, replacement, renewal, suspension, or revocation of any land transport document or other authorisation under any enactment; or

(b) The granting of exemptions under any enactment; or

(c) The enforcement of the provisions of any enactment conferring functions or duties on the Director,-

in respect of a particular case, the Director must act independently and is not responsible to the Minister or the Authority for the performance or exercise of such functions and powers."

171 It is recommended that the functions cited in the previous paragraph become statutorily independent functions of the Land Transport Agency. This would place them under the authority of the Agency's board, to be exercised in accordance with any delegations determined by the board.

172 This change would place land transport in a different situation to maritime and air transport, where the Directors of the respective Crown entities have statutorily independent functions. However, this Review provides an opportunity to place land transport on a consistent basis with the rest of the Crown entity sector.

1 It is possible for statutory officers within entities to have statutorily independent decision making functions, for which they are not answerable to the board. The Director of Land Transport currently has several such functions.

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