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Crown entities

by Rob Laking

Crown entities were invented to keep politicians out of the day-to-day running of affairs. Bids to streamline government processes have caused such entities to proliferate.


What are Crown entities?

Crown entities

Crown entities are central-government organisations defined by the Crown Entities Act 2004, mostly created by specific acts of Parliament and with their own governing bodies. Crown entities are responsible for a wide range of public services and regulatory functions. They include school boards, tertiary education institutions and district health boards, and many other public bodies.

A grab-all

In 2002 a branch manager of the State Services Commission, Derek Gill, attempted to describe the diversity of Crown entities: ‘There is tremendous variation in what they do – everything from quasi-judicial functions to commercial functions; in their legal form – companies, trusts, corporations sole, statutory corporations, other statutory bodies; in their scope and size – anything from Auckland hospital, which has 5,000+ employees – through to entities with no employees (for example the Road Safety Trust); and in their relationship with the responsible minister – this varies from total independence to a reasonably close degree of control.’1

They are by far the most numerous type of government organisation. In 2010 there were 2,606 Crown entities, 41 government departments, 19 state-owned enterprises and two special bodies (the New Zealand Superannuation Fund and the Reserve Bank of New Zealand) reporting through ministers to Parliament, together with three officers directly responsible to Parliament.

How much do they spend?

The total spending of Crown entities in 2009/10 was $32 billion. Crown entities hold nearly 40% of the Crown’s assets on their balance sheets. Over 200,000 staff work in them – about two-thirds of total state-sector employees. Schools and district health boards account for most staff.

Once were quangos

From the 1970s, what are now referred to as Crown entities were often called quangos (quasi-non-governmental organisations). The ‘non-government’ reference merely means they were not part of the public service (government departments and ministries).

Sources of income

Crown entities are funded from a variety of sources. In 2009/10, 70% of their total income came from general government revenues. Some have significant other sources of income. For example the Accident Compensation Corporation is part-funded by levies on employers and workers, and the Earthquake Commission’s main source of income is levies on house insurance.

Footnotes
  1. Derek Gill, ‘New Zealand.’ In Distributed public governance: agencies, authorities and other government bodies. Paris: Organisation for Economic Co-operation and Development, 2002, p.135. Back

Why were Crown entities created?

‘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.

Greater autonomy

'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).

Separating functions

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.

Integrating functions

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.

Footnotes
    • Leicester Webb, Government in New Zealand. Wellington: Department of Internal Affairs, 1940, p. 95. Back

How are Crown entities governed?

Acts of Parliament

Most Crown entities have been created by specific acts of Parliament. Some, such as the Crown research institutes, Radio New Zealand, Television New Zealand and the New Zealand Venture Investment Fund, are similar to state-owned enterprises. They are registered under the Companies Act 1993 as limited-liability companies, with shares held by the responsible minister and the minister of finance.

The Crown Entities Act 2004 established some general rules for governance of the non-education Crown entities (of which there were 94 in 2010). The act covers the appointment, powers and responsibilities of members of the governing body, its accountability to Parliament, and financial rules. The relationship between the Crown and the2,512 (as at 2010) educational Crown entities is largely set out in the Education Act 1989.

Crown agents

Each Crown entity has a responsible minister, whose powers vary according to the Crown entity’s classification. Some entities termed ‘Crown agents’ must, like any government department, obey government policy directives. These include some of the biggest service-delivery organisations such as the Accident Compensation Corporation, district health boards, the Fire Service, Housing New Zealand, the New Zealand Transport Agency and the Tertiary Education Commission.

Autonomous Crown entities

A second category of organisations, called ‘autonomous Crown entities’, must only have regard to policy directives. These include the Arts Council, the Museum of New Zealand Te Papa Tongarewa, the New Zealand Symphony Orchestra and Te Māngai Pāhō (Māori Broadcasting Funding Agency).

Independent Crown entities

Organisations in a third category, called ‘independent Crown entities’, are generally fully independent of government policy and include some important regulatory and quasi-judicial bodies like the Commerce Commission, Electoral Commission, Independent Police Conduct Authority and the Financial Markets Authority.

Governing bodies

Most Crown entities are governed by boards or councils. In a few cases, the governance is in the hands of a single person, for example the Independent Police Conduct Authority and the Children’s Commissioner. With some exceptions (some elected members of school boards, tertiary education institutes and district health boards), appointments are made by the government of the day.

There are around 650 government appointments. Ministers are free to appoint or nominate who they wish but are supposed to take into account appropriate knowledge, skills and experience and the desirability of promoting diversity in membership. Anybody can apply to be considered for appointment. Appointments are generally for three years, except for independent Crown entities, where the term is five years. Members receive fees, mostly on a scale decided by the government but, in the case of independent Crown entities, according to decisions by an independent remuneration authority.

The general powers and responsibilities of governing bodies are set out in the Crown Entities Act. The Companies Act governs the duties of directors of Crown companies (such as Television New Zealand), but the general provisions for board decision-making, managing conflicts of interest and reporting are similar to those for other Crown entities. Members are generally protected from civil liability for any decision or action by the Crown entity for which they are responsible.

An odd fish

New Zealand’s 12 fish and game councils are also Crown entities. Although they receive no direct government funding – almost all of their revenue comes from licence sales – they still report annually to the minister of conservation.

The formal relationship between the government and Crown entities is conducted between the responsible minister and the governing body (usually a board). In practice many Crown entities have direct contact with ministers through senior management, particularly when there are significant issues of public policy involved in their operations. Ministers very rarely make use of their formal powers to direct Crown entities, and almost always work less formally with board members and senior management.

Accountability

Crown entities have documents called statements of intent that set out their goals and funding. These are agreed with the minister at the start of each financial year. Each Crown entity reports on the achievement of these goals in its annual report to Parliament and its financial statements are audited by the controller and auditor-general. Each year parliamentary select committees scrutinise the estimates and review the statements of intent and annual reports of Crown entities. The ombudsman can consider complaints about the administration of Crown entities under the Ombudsman Act 1975 and (under the Official Information Act 1982) about decisions by these organisations to withhold information.


External links and sources

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How to cite this page: Rob Laking, 'Crown entities', Te Ara - the Encyclopedia of New Zealand, http://www.TeAra.govt.nz/en/crown-entities/print (accessed 23 September 2019)

Story by Rob Laking, published 20 Jun 2012, updated 30 Jun 2015