‘At arm’s length’
The category of ‘Crown entity’ was originally created in the Public Finance Act 1989 to help bring some order to the different categories of government organisation and how they were accountable to ministers and Parliament. Although the term is relatively new, public organisations created by their own legislation at arm’s length from ministers have existed in New Zealand since the 1860s. Early examples were local marine boards created in the 1860s for the maintenance of lighthouses, the Government Life Insurance Office (1869) and the Public Trust Office (1872).
‘At arm’s length’ means sufficiently separate so that ministers cannot make everyday decisions on their operations. A major reason for establishment of semi-autonomous government agencies was to prevent undue political influence and interference. Examples from the 1940s include the State Advances Corporation, responsible for lending to farmers and homeowners, and the New Zealand Broadcasting Service, in charge of public radio at the time. By 1958 there were over 1,000 of these organisations in national- and local-government levels.
'A New Zealand authority on public administration, Leicenster Webb, observed in 1940 that ‘government by statutory authorities not identified with the Crown is resorted to when it is desired to remove a service or a group of services from the direct control of the central government in order either to give autonomy to a local community or to enable the management of a public utility to be insulated from the effects of the party system on the quality of administration.’1
Other reasons for establishment
Since the 1980s there have been more varied arguments for splitting off government functions into special-purpose bodies. For example, greater efficiency was expected from concentration on a single mission when New Zealand Trade and Enterprise was established in 2003. It merged Trade New Zealand (the government’s trade-promotion agency) and Industry New Zealand (the government’s economic development agency).
Clearer identification of a group with special requirements was the motive for establishing the Special Education Service in 1989. In 2000 the Labour-led government wanted a higher profile for what it saw as an important objective so it set up the Energy Efficiency Conservation Authority. In contrast the Families Commission (later called Superu) was established in 2004 as part of a United Future and Labour deal following the 2002 election.
Another motivation has been the freedom to decide individual cases without ministerial influence. Examples are regulatory bodies such as the Commerce Commission or the Financial Markets Authority, or funding bodies such as Creative New Zealand. Other reasons for creating Crown entities from the 1980s were to give greater control to local communities (school boards of trustees) or to separate policy from operations (Housing New Zealand, established in 1992).
The significant restructuring of the central government sector in the 1980s and 1990s led to the creation of many new special-purpose organisations. For example in its heyday as a super-ministry in the 1970s the Ministry of Transport employed some 4,500 staff. In the 1990s it was restructured into a small policy ministry, a state-owned enterprise (the MetService) and several Crown entities responsible for regulation of land, sea and air transport.
Similarly, the research divisions of the old Department of Scientific and Industrial Research became separate government-owned companies known as Crown research institutes, in 1992. A major driver at this time was a new approach to organising government which separated out the ‘policy’ and ‘purchase’ functions of organisations from ‘provider’ functions. A prime example was the Ministry for Research, Science and Technology (1990–2011), which for its two decades of existence was a policy-only ministry. It funded ‘purchasers’ such as the Foundation for Research, Science and Technology – which did not do any science itself, but rather funded ‘providers’ who were mostly Crown entities (Crown research institutes, universities and other research organisations). In 2011 the Ministry for Research, Science and Technology and the Foundation for Research, Science and Technology were combined to form the Ministry of Science and Innovation. Research organisations continued to bid for funding.
Recombining or reabsorbing functions into government departments is usually done on the grounds of better coordination of policy or operations. Other examples were the Labour-led administration’s merger of the Special Education Service back into the Ministry of Education in 2000, and bringing the former Health Funding Authority back into the Ministry of Health in 2001. The National-led government elected in 2008 sought to streamline government operations by merging organisations with similar functions. A major reason for this was to save money during a recession.