Magna Carta, the regulatory state, and the Reserve Bank

In the very early days of this blog, one commenter observed that he was looking forward to posts based on my (rather large) collection of books more than fifty years old.  This is one of them.

Today is the 800th anniversary of the Magna Carta.  The charter is dated 15 June 1215, although apparently it was probably signed a few days later.    In anticipation, I pulled down from the bookcase last week an excellent 1961 biography (by W L Warren) of King John, the monarch who provoked the demands that the charter responded to.    One clause of the Magna Carta is (according to an article in the  Herald the other day) part of current New Zealand law (in fact, here it is), but in a sense the charter is more important for what it came to represent in the stories we tell ourselves about Anglo-American freedoms, limited government etc than for the specifics of the 1215 document (which was annulled only a few months later, only to be later reissued).   The specifics are worth reading –  but probably, for anyone other than scholars of medieval law, only once.

There is plenty of material around on Magna Carta, John, and the history of the times.  I particularly liked this piece by Daniel Hannan.  But I’m writing this post mostly because of a single point that struck me as I read.

Part of what provoked the demands that led to Magna Carta was the king’s increasingly need for money.  John had been fighting to defend his extensive French territories, and wars don’t come cheap.  Unable to raise more money by conventional measures, which even then required the consent of the barons, John’s government chose to resort to ratcheting-up discretionary impositions.

One example was amercements.  As Warren notes:

“It was easy to get on the wrong side of the authorities, to be adjudged in misericordiam – at the king’s mercy –  and to escape only by paying an “amercement”.  Amercements were not imposed for crimes (upon which death, mutilation or outlawry were visited) but for misdemeanours, such as neglect of public duties, failing to bring a criminal to justice, or for mistaken or stumbling pleading in a case before the court.  “You were almost bound to come out of the court poorer than you went in”, it has been said, “whether you were there as plaintiff or defendant, pledge or juryman.”…. The charges imposed by the justices were not often large, but they rarely fell below half a mark (6s 8d) and this was a serious vurden for many men at a time when a wage labourer could not expect to make more than thrity shillings a year, and the goods and chattels of an ordinary peasant were worth little more than ten shillings.  Most men, it seems, could expected to be amerced at least once a year in the normal course, so it was intolerable when, as in 1210, special justices came round the courts in addition to the normal circuit judges who seemed to have no object beyond the collection of money for the king’s coffers.  Though the barons were not usually amerced themselves, they were deeply concerned that their peasants and villagers should not be ruined by hard-hearted royal judges.

John had his own ways of getting extra revenue out of the barons, including levying extremely heavy (much more than conventional) charges on heirs taking up a title and estate.   Technically such levies were within the law, and John pushed them to such an extreme as to provoke Magna Carta

Both abuses were addressed in clauses of the Magna Carta.  Clause 2 limited succession duties to £100 for a baron, and 100 shillings for a knight, and clause 20 provided that

A freeman shall not be amerced for a slight offence except in accordance with the degree of the offence, and for a grave offence he shall be amerced in accordance with its gravity, yet saving his way of living; and a merchant in the same way, saving his stock-in-trade; and a villain shall be amerced in the same way, saving his means of livelihood –  if they have fallen into our mercy: and none of the aforesaid amercements shall be imposed except by the oath of upright men of the neighbourhood.

It perhaps won’t surprise you that in reading this, I had the regulatory actions of the Reserve Bank in mind.  But it isn’t only the Reserve Bank (and it isn’t only a New Zealand issue).  In the last couple of months I’ve read very nice pieces concerned about the growth of the regulatory state, one from the right by Chris Berg (who the NZ Initiative have visiting later this month) in Quadrant and one from the left by David Graeber in Harpers.

As Berg notes:

We often imagine that our modern concerns are distinct from those of the past.  But how much legislative power the executive could exercise without parliamentary approval was one of the great contests in the lead-up to the English Civil War.  The seventeenth century English historian Roger Twysden declared that “the basis or ground of all the liberty and franchise of the subject” was “this maxim, that the king cannot alone alter the law”.  Yet through executive pronouncements and delegation governments have vested vast legislative power in what scholars call “non-majoritarian” regulatory and bureaucratic agencies.”

As a New Zealand First MP put in Parliament recently  “Although my party has issues with this Government’s economic policies, it is elected, whereas Messrs Wheeler and Spencer most definitely are not”

How consistent is it with the sorts of freedoms and limited government that our ancestors fought for that a single unelected official can determine  who private businesses can, and cannot, deal with, and on what terms?  The Governor, for example,  asserts the right to allow banking businesses to be subject one set of constraints in Auckland, and a different set in Dunedin –  although we live in a unitary state.   He plans to impose severe limits on one type of property owners (but not others), in some regions (but not others) to use otherwise identical collateral to support their spending or investment plans.  And he proposes to impose such restrictions through a process that lacks transparency:

  • He commissions policy proposals and the background work in support of them, and then makes final policy decisions himself (there is none of the customary separation between, say,  ministers and officials, or even between an individual minister and the Executive Council)
  • He takes submissions on his proposals, but the public has no automatic or timely access to those submissions before final decisions are made (and no guarantee of seeing them even afterwards)
  • Unlike debates in Parliament on new primary legislation, the Governor’s own internal deliberations are not public.  Minutes of key internal meetings are not published and since, ultimately, the decisions are those of a single person, the mental musings that lead to new law are not even effectively OIA-able).
  • He uses provisions of 25 years old law which were never intended to be used for such intrusive and restrictive purposes.
  • He seeks to compel banks to comply with his new law before he has even gone through the required legal processes to make it law.
  • And, if the previous LVRs restrictions are any guide, he will no doubt seek to require, on pain of potentially severe penalties, banks to comply with the “spirit of the restriction”.  What happened, one might wonder, to law being written in ways that citizens could consciously comply with, not being dependent on the whim of an official as to whether he judged one’s actions to be compliant with the “spirit of the law”?

I’m not suggesting that what the Reserve Bank Governor has been doing is against the law.  But neither, generally, were the sorts of initiatives King John took.  But what is lawful is not necessarily legitimate or right.

Of course, there are more protections for citizens now than there were in the 13th century (judicial review –  which banks seem strangely reluctant to use –  the rather weak reed of the Official Information Act, and ultimately the capacity of Parliament to change the enabling legislation), but it is not the sort of style of government that made Anglo countries some of the most prosperous, and freest, societies on earth.

No doubt there are other examples, in other areas of New Zealand public life, of this sort of discretionary regulatory overreach.   And the regulation-making power of even elected ministers should be a concern (thank goodness for the, not extensively used, powers of the Regulations Review Committee established in the 1980s), but such extensive powers exercised by a single official seem particularly egregious, and disconcerting, in a month when we remember, with gratitude to our forebears, our inheritance of law and politics, of freedom and of limited government.

2 thoughts on “Magna Carta, the regulatory state, and the Reserve Bank

  1. Michael,

    The Productivity Commission’s report on “Regulatory Institutions and Practice” noted that the Regs Review Committee has been seriously degraded in recent years – numbers appointed to it have shrunk, it is served by only 1 policy analyst and meets for just 1 hour per week when the House is in session. Likewise, the Law Commission’s group that once spent time conducting substantive reviews on new legislation has essentially abandoned that task due to funding constraints.

    MAS

    Like

  2. Thanks Murray. I think Geoffrey Palmer in his memoirs notes that in 25 years only one set of regulations had been disallowed. I must read your report.

    I certainly wasn’t trying to be optimistic about the regulatory state, just not wanting to come across as a crazed nutter who thought 2015 was 1215 over again….

    MIchael

    Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s