Establishment and Development of the Ministry of Consumer Affairs

Background Paper to Creating Confident Consumers

May 2003

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Institutional Arrangements for the New Ministry

It was envisaged that the Ministry would be:

• small and compact
• well resourced
• regionally based
• accessible to consumers.

Structurally, the Ministry was to be located within DTI, but would report directly to the Minister of Consumer Affairs. The policy and administrative relationship between the Ministry and DTI was to be set out in a memorandum of understanding among officials and endorsed by the Ministers of Consumer Affairs and Trade and Industry (Office of the Minister of Consumer Affairs, 1986). This endorsement was to be by way of an information report, so there was no actual requirement that the memorandum be signed by Ministers.

At the time, the Ministry's proposed structure was considered to be contentious. The institutional arrangements were widely described as "unusual", and there were concerns with the Ministry's ability to provide independent policy advice within DTI, and that this did not conflict with broader economic policy. For example:

• Care needed to be taken that there was no conflict between the obligations of the Secretary of DTI to ensure administrative and organisational efficiency, and the policy independence of the Head of the Ministry (State Services Commission, 1986).
• The Ministry needed to be "... seen to be scrupulously independent". While a clear statutory statement might achieve this, [3] there were doubts that a memorandum of understanding would achieve this in the "public's mind" (Department of Justice, 1985 p2).
• Consumer policy should not cut across broader economic policy. Locating the Ministry within DTI, which focused on broad economic objectives, was seen to mitigate this risk (Treasury, 1985).
• An internal report to the Secretary of DTI noted that establishing the Ministry within DTI "... would allow any potential conflict between `consumer' and `business' interests to be internalised and hopefully resolved" (Department of Trade and Industry, 1985 p3). Conversely, the report noted that if the Minister of Consumer Affairs wanted to pursue policy lines to which DTI might object on the basis of competition or cost effectiveness, then DTI would have to espouse both sides of the argument and subordinate either the consumer or business side. A memorandum of understanding was not seen to provide a suitable resolution to this issue.

It is worth noting that Cabinet's decision on the Ministry's establishment was made without an expected report from The Treasury on the relationship between the Ministry and the DTI. The need for such a report was overridden on political grounds (Department of Trade and Industry, 1986).

It was also proposed that the Ministry's relationship to the Commerce Commission be set out in a memorandum of understanding between the Chair of the Commerce Commission and the Minister of Consumer Affairs (Consumer Affairs Unit, 1985).

[3] While noting precedents for the establishments of smaller Ministries within large Departments, such as the Ministry of Civil Defence, Justice noted that these had been established by statute.

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