Local government confusion
For the last year or more the government has been berating councils for being poor fiscal managers, insisting they need to refocus on core services and cut out wasteful spending.
As well, there has been unhelpful and unfocused speculation about the future role of regional councils.
To add to the messy mix, last week the government announced a confusing set of restrictions on councils' planning programmes to stop them doing work which will not align with the forthcoming laws replacing the existing Resource Management Act.
Plan reviews and changes will be stopped through an Amendment Paper to the Resource Management (Consenting and Other System Changes) Amendment Bill, expected to become law next month.
There will be mixed views about whether councils are irresponsible big spenders on vanity projects or whether the majority of rates rises are the result of them finally trying to catch up with years of underspending on infrastructure.
What people believe is the truth may depend on the size of their rates increase and whether they take issue with some aspect of council spending they think is unnecessary.
It is convenient for the government to point the finger at local government for the impact rates rises are having on the cost of living. It diverts attention from other living cost pressures, among them continuing food price rises. Despite its big talk about reining in the dominant supermarkets, nothing changes.
The Regulatory Impact Statement on the Local Government (System Improvements) Amendment Bill which passed its first reading in Parliament late last week made the point cost pressures on councils were being driven by capital and operating cost escalation, flowing from supply chain upheaval and a tight labour market during the pandemic and "accelerated headline inflation since".
"Infrastructure costs have long been a major cause of rate increases, with councils needing to upgrade infrastructure, especially for water and wastewater treatment plants, and invest in more infrastructure to meet growth demands.
"Around two-thirds of capital expenditure for councils is applied to core infrastructure, not including libraries and other community facilities, or parks and reserves."
What the government considers is OK for council spending and what is not has not always been clear, but the Bill attempts to shed some light on that.
It defines the core services of a local authority as network infrastructure, public transport services, waste management, civil defence emergency management, libraries, museums, reserves and other recreational facilities.
It has also tinkered with the definition of the purpose of local government to include supporting local economic growth and development.
But the purpose also states it is to enable democratic local decision-making and action by and on behalf of communities.
Councillors and wannabe councillors around the country might wonder what that means when it appears the central government is wanting much greater influence.
Many will be feeling betrayed by the failure of the National Party to live up to its promises of devolution and localism.
Local Government NZ president Sam Broughton summed up that feeling at the organisation's conference last week, saying it felt like "every party in opposition is a localist and then as soon as they're in power, they become a creature that draws all the more power to themselves."
Local government minister Simon Watts is still talking up plans for a rates cap, saying the government is working at pace on a model for it, despite National not seeming to have the backing of its coalition partners.
NZ First leader Winston Peters was scathing about it, quoted as saying "every other party is interfering in local government" and his party had never done this.
He suggested central government could not preach to local government when it did not have its own spending under control.
Whatever happens next, it is clear there is much to do to improve the relationship and trust between central and local government and to ensure the word local is not becoming a synonym for national. Further preaching and scolding will not achieve that.
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Government Direction On Plan Changes
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How And Why Artificial Intelligence Is Being Used To Process Your Submissions To Politicians
Explainer - The public likes to have their say. Tens of thousands of public submissions come in every year to bills before Parliament and to local government entities. With large-scale campaigns and website submission forms, the ability to speak out is easier than ever - but that's causing a problem on the other end of the system, where planners and politicians can struggle to keep up. Artificial intelligence has increasingly been drafted to go over public submissions. Some have applauded the technology's ability to process data quicker than humans, while others fear the human touch may be getting lost in the shuffle. What exactly does AI processing of public submissions mean, how does it work, and are everyone's views getting a fair shake in the process? Here's a breakdown of it all. First, how do public submissions work? It's a chance for people to get their voice heard in local and national government. People can make submissions to both their local councils and to Parliament. Submissions can be made to local councils on things like planning and urban development, while the public can make submissions to Parliament select committees on upcoming bills. Submissions have been sky-high in recent months, where the Treaty Principles Bill received more than 300,000 submissions, while the Regulatory Standards Bill which is now before Parliament also has had huge interest. Final submission numbers on that have not been released, but even the early discussion on the proposed bill at the end of last year received about 23,000 submissions. Dr David Wilson, Clerk of the House of Representatives who oversees the business of Parliament's rules and procedures, said public input is at a high. "The Treaty Principles Bill had more submissions than the last two parliaments combined," he said. At one point submission numbers were so large the website suffered technical difficulties. Wilson said the number of submissions does put a strain on resources in Parliament. "If that is the sorts of volumes we're going to see on more and more bills, the days of human beings being able to deal with them in a sort of reasonable time will be past." When submissions come to Parliament, staff of the Office of the Clerk first process them to make sure they are relevant to the bill and not defamatory or insulting before they go on to select committees. Select committees then process and consider feedback before making possible changes to a bill ahead of a final vote on it. "It's great that the public want to engage with Parliament and see the value in making their thoughts known even in such volumes," Wilson said. "I think people understand that no individual MP could read 300,000 submissions. We can't create more time for MPs to read them." Eddie Clark, a senior lecturer in public law at Victoria University of Wellington who is critical of AI use in public submissions, noted that large numbers of submissions have been processed before AI became widely available, such as the Conversion Practices Prohibition Legislation Bill in 2021 which received more than 100,000 entries. "So it is possible for very large numbers of submissions to be actually read and processed by actual human staff. What was required was time and resource, and in my opinion the denial of both is a reason the huge number of submissions has become such a problem several times over the last couple of years." Enter artificial intelligence This is where artificial intelligence is starting to come in - both in local and national government, where it's being used to help process, sort and analyse public input. The Office of the Clerk does not use AI in processing submissions, but it's up to the individual committee overseeing the bill to decide whether to do so when the bills come to their end, Wilson said. For instance, it's been used along the way for the Regulatory Standards Bill. "Committees make their own individual decisions; they don't have any central guidelines around it at the moment." Wilson said the Office of the Clerk is looking at how it might use AI in the future, but is being cautious and "not rushing into it". "I still think ultimately we need to have human decision makers but AI has capacity to do things more quickly than people can - such as flagging submissions that are irrelevant or defamatory. Most submissions are absolutely fine." AI processing has been taken up by local councils, too. In Nelson, the city council worked with local firm the AI Factory to process submissions to their long term plan, Group Manager for Strategy and Communications Nicky McDonald said. "We used the tool to analyse views on issues, including numbers for/against, and to provide us with a summary of views which we then used when writing the first draft of our deliberations report to council. "This report went through multiple iterations as we edited it, but AI was able to give us a starting point which we then developed into a final draft." Xinyu Fu, a senior lecturer in environmental planning at the University of Waikato, organised a pilot project with Hamilton City Council analysing thousands of public submissions on planning proposals. "A lot of them are facing stresses on analysing public submissions," he said of local planners. "Planners spend a lot of time going through those public submissions and those are very laborious work." What exactly are they using AI to do? Prompts - instructions, questions and information put into generative AI - are used to direct it. In Hamilton, Fu's research paper explained that "we tasked ChatGPT with extracting five key elements from public feedback: 1) political stance (support, opposition, or unspecified), 2) reasons from submitters, 3) decisions sought by submitters, 4) sentiment of the submission (positive, negative, or neutral), and 5) relevant planning topics." "AI models are sensitive to prompt phrasing so a slight change in prompt may result in changes in its responses," Fu said. With the Regulatory Standards Bill, public feedback on the discussion document last year drew 22,821 submissions. (The feedback to the select committee on the bill itself is still being processed and is confidential until the Finance and Select Committee releases that information.) In a summary of submissions, the Ministry for Regulation said that all submissions on the then-proposed bill were analysed using a Large Language Model (LLM) AI, and it worked with the independent research organisation Public Voice. "All emails and Citizen Space submissions (a digital tool that submits an online form) were assigned a preliminary classification by Public Voice using a LLM that followed a logic model created by the Ministry, analysing it and classifying it as supporting, partially supporting, opposing the bill or unclear on its stance." The majority of submissions on the proposed bill were analysed by AI. However, the summary also said that in a qualitative analysis sample, 939 of those 22,821 submissions were examined by Ministry for Regulation staff to "analyse the themes raised in submissions and feedback on specific policy proposals." That process "involved several staff across the Ministry manually reviewing the sample of submissions (both email and Citizen space submissions) and applying thematic tags." Another 605 submissions were also looked at separately. Submissions made in te reo Māori were translated. "Our approach was carefully designed to reflect all submissions in the final analysis, noting there were many similar points made across most of the submissions," the ministry's deputy chief executive Andrew Royle told Newsroom. How much human scrutiny is applied to the process? Can the AI avoid a bias? "As a rule of thumb, having humans in the loop will be the best practice - humans in charge and AI as a co-pilot," Fu said. "The risk is very high if we completely rely on AI to do the work. To put simply, such biases are generally embedded in our institutions as well as the information humans generated, and these biases are then input into the model to train. Then they become inherent to the model. Because AI systems are black boxes, it is uncertain and unclear about the nature and degree of these biases." Nelson Council's McDonald said they were transparent about how they were using AI. "Every submission form included a statement saying we'd be trialling AI to help speed up submission processing and reduce the resource burden on staff. "We intentionally ensured there was always a (sceptical!) human in the loop sense checking the tool's outputs. Staff (and elected members) read every submission and we had processes to check AI responses." Fu said there are differences in how AI approaches looking at thousands of public submissions. "AI is really good at consistency (if instructed properly) whereas humans are likely to miss things due to fatigue, boredom, or bias towards particular viewpoints (humans are biased too). "AI can do things much faster than humans, and AI's work can be more transparent if designed well because you can ask AI to document its processes and responses for later review and replication. On the downside, humans excel in knowing about the contexts, while AI knows little about the local contexts and backgrounds." Is there a risk that people's voices aren't being heard? "I absolutely think that a regular practice of AI analysis of submissions risks undermining people's confidence in the democratic process and thus the legitimacy of government," Victoria University's Clark said. He said there was a need for more options for people to consult on legislation. He noted in the case of the Regulatory Standards Bill, the pre-legislative consultation was conducted mostly over the holiday period from mid-November to mid-January. This "leads to people seeing the Select Committee stage as their only real chance to comment, incentivising mass submissions expressing simple opposition or support", Clark said. "Giving people a chance to be heard throughout the process, not just at Select Committee, could help deal with the problem. There is a reason the legislative process is generally slow and deliberate, and derailing that good, democratic process has consequences. In my opinion the glut of submissions at the Select Committee stage is one of them." Labour MP Duncan Webb spoke out about the government's use of AI on the Regulatory Standards Bill submissions, writing on social media site BlueSky that it "turns out democracy under this government is real people making submissions and computers reading them". When contacted by RNZ, Webb said he is not opposed to the use of AI, but concerned about how it is used in the democratic process. "New Zealanders who take the time to share their views deserve more than a computer reading their submission. "AI can help with sorting large volumes of submissions, but it can't replace the value of reading someone's views, like the handwritten letter from an 85-year-old or a bundle of colourful drawings from school kids. These submissions often reflect deeply held experiences and emotions, and politicians need to read them." However, Fu said that in local government planning the use of AI in analysis could give staff more time to work with local and underrepresented communities. "Planning has become very reactive," he said. "If we can use AI planners then planners can actually do better work because otherwise they're overwhelmed." A lot of the submissions made on local planning tend to be by developers, Fu said. He said planners could use the time to reach out to communities whose voices aren't heard as often in public submissions, including Māori. What about privacy? When it comes to privacy, public submissions are already just that - public. All submissions sent to select committees become public and are posted on Parliament's website and become part of the permanent parliamentary record - they can only be removed in exceptional circumstances by the Clerk of the House. "They know their submission will become public," Wilson said of submissions. "Our staff are going to read it, officials will read it." "The main privacy concern is about people's contact details - they are always separated from submissions now." Contact information is removed from public submissions before they are posted publicly but Wilson said privacy is one reason to be cautious of the use of AI in analysing them. "We want to make sure we've got a key set of principles and some business rules in place," Wilson said. The government unveiled its first national AI strategy earlier this month mostly aimed at economic growth, "unlocking innovation, productivity, and smarter decision-making across New Zealand" and responsible AI guidance for businesses "to overcome concerns about ethics and complexity." In Nelson, McDonald said they also considered privacy issues. "The submissions, numbering 1505, were redacted of all personal data before they were processed to ensure there were no privacy issues - this is something we would do anyway, before all submissions are uploaded to the Council website for public view." Where should AI not be used? Most agree AI should never be making decisions on policy, however. "What I don't think I can do - and I wouldn't trust it to do anyway - is make judgements," Wilson said. "Nobody's going to predict what's going to happen next month in the AI space because it's evolving so rapidly," Fu said, noting that hyperbole over AI is everywhere at the moment. "We're still in that hype space ... I think we need to start thinking about the responsible use." And for some, there's still a question as to whether the technological advances of AI might be leaving something behind. "In short, democracy takes money and time," Clark said. "Trying to avoid the necessary costs of democratic infrastructure has consequences, and while I understand why the hard-working people in our underfunded and rushed systems might see AI as helpful in these circumstances, in my opinion it will not solve the underlying issue and could unintentionally undermine people's faith in a democracy that cares about their voices."
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What You Need To Know About A 150,000-Customer Banking Class Action
ASB and ANZ have rejected an offer to settle a class action suit against them, for about $300 million. Instead, the legal drama continues - and now the country's lawmakers are involved, too. So what is the class action suit actually about, and what's happening now? What does the class action claim? The class action is for breaches of the Credit Contracts and Consumer Finance Act (CCCFA). Between 2015 and 2019, the law said that a lender that was in breach of its disclosure requirements had to repay borrowers all the interest and fees they were charged during the time when they were not compliant with the rules. The class action claims that between 30 May, 2015 and 28 May, 2016, a coding error in one of ANZ's systems failed to take into account interest that had been accrued and not yet charged. As a result, loan variation letters contained incorrect information. ANZ said it meant customers were undercharged. The class action also claims that between 6 June, 2015 and 18 June, 2019, ASB did not ensure customers received variation disclosure when they requested changes to repayment amounts, dates or frequency, over the phone or in branch. They also say ASB did not provide customers with compliant variation disclosure when requesting other kinds of changes. It has been estimated that, if banks were to lose in court, more than 150,000 customers could be reimbursed a combined total of hundreds of millions of dollars. Customers have been added to the class action on an "opt out basis". All ASB and ANZ customers the court determines to be affected will be represented unless they choose not to be. The action has been in progress for about four years and University of Auckland senior law lecturer Nikki Chamberlain said it was the biggest consumer class action she was aware of in New Zealand history. Haven't the banks already made amends? The banks have already compensated affected customers after reporting the breaches to the Commerce Commission. ANZ first paid customers about $6 million. The Commerce Commission investigated and the bank admitted a breach of its responsible lending obligations and agreed to pay customers another $29.4m. ASB agreed to pay just over $8m. What is the law change? The Credit Contracts and Consumer Finance Amendment (CCCFA) Bill, which is before select committee, includes a retrospective fix that would mean instead of a blanket penalty applying for disclosure breaches between 2015 and 2019, a court would be allowed to decide what compensation was "just and equitable". In 2019, the law was amended to apply to breaches from that point, but this change would apply to breaches before that time, too, if they had not been dealt with by a court already. What's the criticism? "Changing the law creates a dangerous precedent for everyone and exposes the plaintiffs to more cost and delay, as well as introducing uncertainty to their established claim," said Scott Russell, the lawyer leading the banking class action. Chamberlain said many consumer protection laws were punitive rather than compensatory. "The reason we have punitive remedial provisions in these consumer-based legislations is to incentivise big players like the banks to invest in their compliance systems. Otherwise what would be the motivation for the bank to invest in their systems? Their money is better spent in growing their lending portfolio… so there's this idea that we want to incentivise banks to self-regulate to some extent. "We want them to be having good practises and disclosing what they need to be disclosing in their lending documents to customers and we need to have punishment that's severe enough they take notice." She said the change could make it uneconomical to pursue the case, and could put litigation funders off from taking action in future in other scenarios. "If you change the remedial provision retrospectively, you are going to increase the cost of evidence that is required and the legal fees required because you're going to have to go through every single breach for every single customer, and go through the factors and that's going to blow the cost out which might make the litigation uneconomical and unviable. "Litigation funders have been funding it. Litigation funders are a good thing. Yes, they do take a percentage on a no win, no fee basis. But what litigation funders do with class actions is they make claims which would ordinarily be uneconomic to pursue economically viable." She said the defendants could use the fact there was a power disparity between them and plaintiffs to their advantage, but litigation funders helped to offset that. "One of my bigger concerns is about the rule of law, retrospective legislation in general is something that is not well looked upon. "In fact, it should not be enacted unless there are extraordinary circumstances. Why is that? Because we need certainty in the law. If people can't rely on the rights and remedies provided by the law at the time of breach, then there's uncertainty in the law and it will absolutely impinge on the integrity of the legal system. And eventually, democracy itself, because it goes to us being able to rely on what our rights are… why would a funder enter the market if there's a concern that big powerful organisations who are defendants in active litigation can lobby the government and they just change the law midway through the proceeding, in their favour?" It would be possible to put a long stop limitation provision in the law to prohibit any future litigation under the old rules, she said, if the concern was about the future liability of other lenders. What do banks say? But Roger Beaumont, chief executive of the New Zealand Banking Association, said the change was needed. "Between 2015 and 2019 any lender who even made a small mistake in the information provided to borrowers, like getting their phone number wrong, could be subject to a draconian provision in the law that, on one interpretation, would make them repay all the interest and fees paid until the error was corrected. That consequence would be totally out of proportion with the technical legal breach, especially if there was no harm to the consumer who was happily enjoying their new home or car thanks to a bank loan. "Modelling from the Reserve Bank shows a potential risk to the financial system of $12.9 billion. The Reserve Bank considered more extreme variations that 'were much more severe' but didn't publish them as they were too 'speculative'. A financial system risk much worse than $13 billion should be concerning to everyone." He said the change would also benefit smaller lenders who could not absorb the cost of legal action. Banking expert Claire Matthews, from Massey University, said if the claim were successful, there was a risk that litigation funders might see it as a way to make money. "They could be exploring other opportunities to see if there is something else that somebody had done." She said the law as it stood "significantly advantaged customers" and "almost encourages them to find a mistake. If you can find that somebody's made a mistake, and let's face it, people do make mistakes from time to time, you could have a very small mistake which is what was the case here and suddenly you don't have to pay any interest for the whole time of the loan? That to me just seems a bit unusual". The Commerce Commission had the ability to apply punitive damages if it had considered it appropriate, she said. Retrospective legislation was not uncommon. "It's kind of two different arguments. Maybe it's bad, but it's happened often enough that suggests that in certain circumstances, it's not unreasonable to do in this case." What settlement offers have been made? Claimants in the class action last week offered to settle for more than $300 million. But both banks rejected it. The offer included a cap on liability that was the lesser of either 68 percent of what customers paid in borrowing costs during the breach period, or a small percentage of bank profits. For ANZ the percentage was 3.5 percent of profits from FY16 through FY19. While ASB's offer was 5 percent of profits during the same period. ANZ described the offer as a stunt. Matthews said if the law change went ahead it would have a big impact on the case. "I'm not sure that it would completely kill the case but it would have a substantial impact. I think there would be potential for the case to still progress but the associated penalties and the impact of a decision in favour of the applicants would have less benefits for them and therefore the litigation funders might decide it was no longer worth their while to purse it because the costs would be too great."
