Reforming govenance: a totally secretive Reserve Bank

As readers will know, I have for some time been making the case that it is past time to reform the governance of the Reserve Bank.  The Bank’s governance model –  a single unelected decision-maker for a wide range of functions – is out of step with how other countries run these functions, and with how other autonomous New Zealand government agencies are run.  There was some logic to why it was set up that way 25 years ago, which I set out here. But whatever the logic in 1989, it is a model that is not really fit for purpose now, especially given the much wider range of functions the Reserve Bank is now undertaking.

This isn’t a particularly controversial statement.  A couple of years ago, the Treasury recommended to the Minister of Finance that work be undertaken towards changing the governance model.  Many market economists have supported change, and the independent review of monetary policy commissioned by the previous government 15 years ago recommended change.  The Green Party has for several years argued for change, and the Labour Party seems to have toyed with proposing change.

Decisions around legislative governance structures are matters for the Minister of Finance and Parliament.  The Governor has to work within whatever legislative framework is established.  But the Governor himself knows that the existing legislative isn’t ideal.  Shortly after he arrived at the Reserve Bank, I gave him a copy of an earlier paper I had written setting out the background to the current model, and making the case for change.  In response he noted that it had helped inform his thinking on the issues.    In 2013 he gave a speech in which he informed the public that he had decided to make decisions in the forum of a Governing Committee –  himself and his three deputy/assistant governors.  He retained the legal powers and responsibilities, but he envisaged working formally in that committee model.   In his speech, he spoke quite favourably of central banks where decisions are the responsibility of executive committees.  And there was no first principles defence of a single decision-maker model.

So it is pretty clear that the Governor favoured legislative change, and along the lines of an internal executive body (which also happen to be much the same lines as Lars Svensson recommended in that review 15 years ago).  He has also made some rather rash comments to staff about his views on the rather different governance ideas of some particular political parties.

I put in a request for copies of the work that had been done on governance issues over the last two years or so.   This was what I requested

Copies of any papers done by the Reserve Bank on statutory governance issues in the last two years (i.e.: since 1 July 2013).  To be specific, I am requesting:

  • any papers (draft or otherwise) provided to Treasury or the Minister of Finance on these issues;
  • any papers provided to the Governor or the Governing Committee on these issues
  • any internal working or discussion papers on governance issues;
  • any file notes or other records of discussions on these issues between the Governor, and the Secretary to the Treasury and/or the Minister of Finance.

Getting a reply from the Bank took almost two months (the statutory norm is no more than 20 working days), and when it finally came it was surprisingly bald.  Taking almost two months to release almost nothing might be look deliberately obstructive.

They released most of one paper, which is largely about how so-called “macro-prudential” issues are dealt with in other countries.  (Anyone interested can find a copy here)

For the rest, here was the response

The Reserve Bank also holds other information that falls within the scope of your request but which is being withheld from release under the provisions of the Act noted below. 

Reasons that information is being withheld:

  • 9(2)(d) to protect the substantial economic interests of New Zealand.
  • 9(2)(g)(i) to maintain the effective conduct of public affairs through the free and frank expression of opinions by or between or to Ministers of the Crown or members of an organisation or officers and employees of any department or organisation in the course of their duty.
  • 9(2)(f)(iv) – to maintain the constitutional conventions for the time being which protect the confidentiality of advice tendered by Ministers of the Crown and officials.
  • 9(2)(h) – to maintain legal professional privilege.
  • 18(d) – the information is or will soon be publicly available.

At least this now confirms publicly that there has been a work programme underway.   Given that it took two months to reply, it appears to have been something quite substantive, including professional legal advice (and in an earlier holding reply they told me that they had 9786 (no doubt rather coarsely filtered) documents to consider).  And it wasn’t just internal Reserve Bank workings –  it will have got as far the Minister (note the third bullet), and will have involved extensive discussions with Treasury at a variety of levels.

This reply is simply extraordinary.  It is one thing to withhold bits of a particular paper on specific statutory grounds, but I cannot see what grounds they can possibly have for withholding (for example) even the titles of the papers covered by my request.  And the notion that disclosure of  background work on possible governance reform could harm the “substantial economic interests of New Zealand” is just laughable.  Perhaps the Governor is rather exaggerating the importance and impact of the Bank’s governance arrangements?

I was interested in the final item on their list of excuses.  Wanting to be reasonable before highlighting this response, I asked the Bank a couple of days ago when anything would be “soon publicly available”.  Perhaps they do have a speech forthcoming, or a treatment of the issue in the forthcoming Annual Report?  But they have not even replied to my email.

If the Official Information Act really provides protection for every single one of the papers covered by my request, including the titles of those papers, the Act is even more toothless than most had realised.  In fact, I suspect that this is a case of instititutional arrogance and over-reach by the Governor, who doesn’t really seem to regard himself as accountable to the public.  Perhaps the Governor is embarrassed, or frustrated, that the Minister of Finance or Treasury were not convinced by his particular arguments?  Perhaps he had staff simply look at one option, and ruled out of court any serious consideration of the wide range of options used internationally and elsewhere in the New Zealand public sector to govern powerful public agencies?  Whatever the explanation, he doesn’t want us to know.

If the work on statutory governance reforms has been completed, there is no obvious good reason for withholding the material that was done.   The statutory purposes of the Official Information Act are as follows:

The purposes of this Act are, consistently with the principle of the Executive Government’s responsibility to Parliament,—

(a)  to increase progressively the availability of official information to the people of New Zealand in order—

(i) to enable their more effective participation in the making and administration of laws and policies; and

(ii) to promote the accountability of Ministers of the Crown and officials,—

and thereby to enhance respect for the law and to promote the good government of New Zealand:

Reform of the governance of the Reserve Bank is a long-running issue, and not obviously one of those issues that needs to be worked on in total secrecy.  Indeed, any work the Reserve Bank has done could help inform an ongoing discussion about the best possible options for the future.   And all this material has been generated at the expense of the taxpayer.  It is official information, and there is a public interest in its release.  And even if work is still going on, the case for such total secrecy seems very hard to make.

Plenty of free and frank material is released under the Official Information Act.  As an example, not long ago, The Treasury released some pretty critical comments on the Reserve Bank investor finance restrictions. What makes the Reserve Bank different?   The Treasury has also released its 2012 advice on reforming Reserve Bank governance.  What about the Reserve Bank makes it so special that it believes the same law does not apply to it –  that every single piece of paper anyone in the Bank has done on statutory governance reform must be totally withheld?

As I’ve said previously, the Reserve Bank is much less transparent than it likes to make out.  This is just another example.  We’ll see whether the Ombudsman agrees with their interpretation of the Act.  Whether or not she does, this decision by the Governor is not the hallmark of an open and accountable public institution, committed to scrutiny and debate and to improving policy and institutions through the contest of ideas.

One thought on “Reforming govenance: a totally secretive Reserve Bank

  1. [this comment was inadvertently put on the wrong post]
    tuki commented on

    How ironic that that this decision not to release even a literature review on central bank governance and decision making calls into question the current decision making structure so starkly.


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