Govt will help us find forgotten money – it will also enable the RBNZ to hire more staff to (hopefully) protect our finances

Latest from the Beehive –

Our immediate reaction was to be grateful on learning from a Beehive press statement headline that  the government is Protecting Kiwis with stronger financial supervision

Our second reaction was to wonder exactly how it intends strengthening this supervision.

The answer is that a new five-year funding agreement with the Reserve Bank will provide it with an annual average budget of $115 million, up $35 million from this financial year.

The bank expects staff levels to rise 58% to 468 during that period.  To do what?

Not only does the government intend protecting our financial wellbeing, however.  It also aims to boost the finances of some people by introducing a law change to make it easier for forgotten funds in institutional accounts to be returned to their rightful owners.

Revenue Minister Stuart Nash has introduced an amendment to the Unclaimed Money Act 1971. It will update the rules controlling forgotten sums of money held by banks or other financial institutions and professional bodies.

The long list of institutions which hold money on behalf of clients includes banks and building societies, lawyers’ trust accounts, sharebrokers, real estate agents, auctioneers, insurance companies, motor vehicle dealers and company liquidators.

In November 2019, an estimated $199 million of unclaimed money sat in the Crown’s accounts. In the year to November 2019, Inland Revenue returned about $2.4 million of unclaimed money to rightful owners.

Financial institutions have a number of accounts that have been inactive for a long time, Nash said.

If they are unable to trace the owner, the bank incurs the cost of maintaining these accounts, including a physical register, until they can be transferred to the IRD to manage. In some cases this process takes 25 years.

“The proposed changes will ease compliance costs for banks and make it easier for Inland Revenue to track down the owner of the money by actively using its systems and data collection records to link unclaimed money accounts to taxpayers,” said Mr Nash.

At first glimpse, everybody should benefit from Finance Minister Grant Robertson’s announcement of a new five-year funding agreement with the Reserve Bank enabling it to “boost its work to protect New Zealanders’ finances”.

Robertson hastens to assure us New Zealand has a strong and stable financial system.

“Financial stability is an area that we are not prepared to cut corners for, particularly during the global recession created by the COVID-19 pandemic,” Grant Robertson said.

“This Government is committed to continued investment so New Zealanders can maintain confidence in their banks and financial institutions, through increased supervision and greater enforcement capability to deter and deal with bad behaviour.”

Then he explained that the Reserve Bank funds itself with revenue from its own operations.  This means the funding agreement does not require money from the Government’s Budget.

Its five-yearly budget requires agreement between the Finance Minister and the Reserve Bank Governor. The new agreement has been signed by both the Minister and Governor, and will be ratified by Parliament on 30 June.

The new agreement provides the Bank with an annual average of $115 million a year for its operations over the next five years, with a further average of $13 million a year for the issuance of currency. The 2019/20 budget total was $80 million.

Robertson said the increase recognises that

  • The number of full time employees at the Bank is expected to increase from 296 in 2018/19 to 468 by 2024/25, and
  • That investment in new technology is required as it takes on new work to keep New Zealanders’ finances safe.

The new funding will support greater supervision of banks and other financial institutions following the Government’s work to review and modernise the Reserve Bank Act, Robertson said.

The International Monetary Fund’s 2017 Financial Sector Assessment Programme Review also recommended that the bank substantially increase its financial supervisory capability.

The bank typically pays a dividend to the Government each year when revenues are greater than its expenses.

“While the new funding agreement will mean the Bank retains more of its revenue before paying a dividend to the Government, this is critical to make sure the Bank can keep New Zealand’s financial system strong and secure,” Grant Robertson said.

Explanatory notes accompanying the press statement advise us that…

The Reserve Bank is funded through revenues from returns on the Bank’s investments, the issuing of currency, deposits (held by banks and the Crown) and equity (held by Government).

The Reserve Bank does not receive appropriations through the central government budgetary process to cover operating expenses. Instead, the Minister of Finance and the Governor enter into a five-year funding agreement to specify the amount of the Bank’s revenue that is retained to meet net operating expenses each financial year. The Bank’s revenues typically exceed its expenses, with any excess revenue paid back to the Crown through an annual dividend, after allowing for the Bank’s capital requirements.

Governor Adrian Orr said the bulk of the increased spending

“ … will focus on expanding and enhancing the Bank’s core activities, particularly investing in financial supervisory and enforcement capability, as recommended by the International Monetary Fund’s 2017 Financial Sector Assessment Programme Review”.  

 This certainly suggests more staff will be hired – but to what effect?

Michael Reddell, on Croaking Cassandra, delved into a Stuff report headed “Reserve Bank restructures digital services team, cuts five roles”.

He found the Bank isn’t shrinking at all, but is growing (quite substantially).  But it is increasing staff numbers “in what are clearly non-core areas”.

Reddell also shared his thoughts on what he described as the Reserve Bank’s “very odd funding structure”.

Formally, there are no binding constraints on the Bank’s ability to spend whatever it likes.  If seignorage revenue is not what it was with interest rates so low, it is still more than ample, and in any case the Bank does not even need positive capital to keep operating.

But 30 years ago when the 1989 Act was passed a strange and inadequate partial reform was put in place, whereby the Governor and Minister could (but did not formally need to) agree a five-year Funding Agreement.  If such a Funding Agreement was signed it was subject to ratification by Parliament.  There has been a succession of Funding Agreements in place since which, almost always, the Bank underspent.  It was very much a half-measures reform –  better at the time than what had gone before (no constraints at all) but well out of step with modern expectations for transparency and accountability.

The current Funding Agreement in effect expires next week, which explains why Robertson is announcing the new deal.

Reddell’s post includes some observations he made when the current Funding Agreement was adopted

He notes that – for one of the most powerful government agencies in New Zealand – the current agreement contains almost none of the information people might reasonably need, whether as MPs or citizens, to know whether $49.6 million is the right amount.

“The entire document runs to just over two pages, but the meat of it is simply five lines

“That is the same level of detail we get in the Estimates about the spending of the SIS – and at least Parliament (a) has to vote for the SIS’s spending, or the spending can’t happen, and (b) has to vote each and every year.”

Robertson’s statement was among several which emerged from the Beehive yesterday

The Beehive home page included a statement from the PM which simply carried a headline,  Queenstown infrastructure package to bolster local economy, and another from Health Minister David Clark headed Government delivers on mental health commitment

Click on the PM’s statement heading, and you will learn that a central government partnership with Queenstown “will help unlock around $300 million of projects in the township and create about 320 direct jobs…”

Clark was braying about legislation passing its third and final reading in Parliament to enable the establishment of an independent Mental Health and Wellbeing Commission.

The statement further told us he still has a job as Minister of Health.

Release

26 JUNE 2020

Scott Watson’s convictions to be referred to Court of Appeal

The Governor-General has referred Scott Watson’s convictions for murder back to the Court of Appeal, Justice Minister Andrew Little announced today.

Hon Andrew Little

Justice

Release

26 JUNE 2020

Protecting Kiwis with stronger financial supervision

A new five-year funding agreement for the Reserve Bank will mean it can boost its work to protect New Zealanders’ finances, Finance Minister Grant Robertson says.

Hon Grant Robertson

Finance

Release

26 JUNE 2020

Forgotten funds and missing money

A law change has been introduced to make it easier for forgotten funds in institutional accounts to be returned more easily to their rightful owners.

Hon Stuart Nash

Revenue

Release

26 JUNE 2020

Government delivers on mental health commitment

Hon Dr David Clark

Health

Release

26 JUNE 2020

New Zealand privacy law modernised

A Bill to replace New Zealand’s Privacy Act passed its third reading in Parliament today, Justice Minister Andrew Little has announced.

Hon Andrew Little

Justice

Release

26 JUNE 2020

Queenstown infrastructure package to bolster local economy

Rt Hon Jacinda Ardern

Prime Minister

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26 JUNE 2020

Tourism operators provided extra support

Extra support is being provided to tourism businesses operating on public conservation land announced Tourism Minister Kelvin Davis and Conservation Minister Eugenie Sage today.

Hon Kelvin Davis Hon Eugenie Sage

Conservation

Tourism

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26 JUNE 2020

Key appointments to ensure high quality healthcare for New Zealanders

Health Minister Dr David Clark welcomes the appointment of Morag McDowell to the role of Health and Disability Commissioner and the appointment of the inaugural Paramedic Council.

Hon Dr David Clark

Health

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26 JUNE 2020

Whakatāne Māori food producers receive $2.1m PGF boost

The Provincial Growth Fund is investing $2.1 million in a blueberry orchard initiative, Deputy Prime Minister Winston Peters and Under-Secretary for Regional Economic Development Fletcher Tabuteau announced today.

Fletcher Tabuteau

Regional Economic Development

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26 JUNE 2020

PGF investment in Rewa’s Village

A well-known Māori tourism in Northland will receive $1.25 million from the Provincial Growth Fund for much-needed redevelopment, Regional Economic Development Minister Shane Jones says.

Hon Shane Jones

Regional Economic Development

Release

26 JUNE 2020

$2.5m PGF funding to speed up economic recovery in Whakatāne

The Provincial Growth Fund (PGF) is investing $2.5 million to accelerate three infrastructure projects in Whakatāne.

Fletcher Tabuteau

Regional Economic Development

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26 JUNE 2020

Government partners with Ngāti Rēhia to create kauri sanctuary

The Government and Northland iwi Ngāti Rēhia have today announced up to $6.25 million in One Billion Trees funding for a new kauri sanctuary.

Hon Shane Jones

Forestry

 

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