Creating Confident Consumers

Review of the Ministry of Consumer Affairs

|Index|Phase One: Report : Background Papers|Phase Two: Final Report|

2. Background to the Review and Outline of This Report

The Review was initiated late in 2002 at the request of the then Acting Minister of Consumer Affairs, Hon Jim Anderton. A full review of the Ministry's role and functions has not been undertaken since its establishment in 1986, although there have been a number of changes to the Ministry's roles and functions during that time.

The Ministry's parent agency, the Ministry of Economic Development (MED), has developed a vision for the year 2012 that includes "knowing what matters for consumers" and being "the key link between the government, the business community, and consumers". The Review is intended to allow the Ministry to focus on how it should respond to these challenges, and to consider further the role of consumers and consumer policy in achieving MED's objective of sustainable per capita income growth for all New Zealanders.

The Task

The Review has been divided into two phases. This first phase is intended to provide an assessment of the Ministry's strategic direction - "what" the Ministry does and "why". The second phase will provide an assessment of the organisational implications raised by the recommendations from Phase One - "how" the Ministry should be organised and what it needs to do its work most effectively.

Phase One will focus on the strategic direction of consumer policy over the next 5-10 years, within the context of the government's overall strategic direction and goals, and what this means for the role, purpose and scope of the Ministry of Consumer Affairs. This will include an assessment of:

The output of this phase of the review will be a report analysing and making recommendations on the implications of these factors for the role of the Ministry of Consumer Affairs and, should this prove necessary, the policy and institutional framework within which it operates.

The Terms of Reference made it clear that the Review Team was not to include a strategic review of energy safety policy or the Energy Safety Service that resides within the Ministry. Considerable strategic planning is continuing in the area of energy safety.

The Review Team understood from the Terms of Reference that it was being asked to develop a high-level strategic direction for the Ministry that would allow the Ministry to position itself effectively into the future. In responding to this task, the Review Team considered that there were three questions that it needed to answer:

The answers to these questions would provide the necessary information and conceptual materials for putting together the Ministry's strategic direction, and so this Report is structured along these lines.

Structure of the Report

What Is the Ministry Trying to Achieve?

For the Ministry to remain effective, it needs to have a clear sense of what impact it is seeking to have on society through its activities. This is the fundamental starting point for determining its strategic direction, because the Ministry's desired impacts (or outcomes) on society provide a clear focal point for the Ministry's activities. It is very difficult for an organisation to determine what it will do unless it first understands what it is trying to achieve.

Section 3 of the Report considers, at a general level, the role of consumer policy in a dynamic modern economy. Section 4 then translates this into a hierarchy of specific outcomes that are intended to function as the high-level structure for organising the Ministry's activities.

What Does the Ministry Need to Do to Achieve Its Outcomes?

Once the Ministry's outcomes are clearly defined, the next phase of strategy development is to determine what activities (or outputs) the Ministry should undertake in pursuit of those outcomes. Sections 5, 6, and 7 examine and develop in some detail the key issues and strategic approaches the Ministry needs to consider in deciding what consumer issues it should take up as priorities.

The general principle supported by the Review Team is that the Ministry needs to focus on those things that enable it to best achieve its outcomes. This implies a concentrated focus on the consumer problems and issues that are most likely to have a significant effect on these outcomes - that is, in what areas of consumer policy can the Ministry make the most impact?

This Report does not propose specific activities that should be undertaken by the Ministry, recognising that the Review's purpose is not to undertake detailed strategic and business planning. This is a task for the Ministry as part of its annual planning processes in which it will develop its outputs for the year. The Team did consider, however, that its role did extend to providing the general strategic direction and framework for thinking that would guide the more detailed planning effort.

Firstly, the Report identifies and broadly considers the possible implications of key strategic or emerging issues that are likely to have an impact on the Ministry's stated outcomes. The intention is to draw these high-level issues to the attention of those in the Ministry who will be developing work programmes each year, to ensure that the implications of these issues are considered fully and integrated into the Ministry's activities.

The Team acknowledges that it is identifying issues and implications at a particular point in time. The reality is that the external environment continues to evolve, new issues do arise and implications are clarified as knowledge develops. To be effective, the Ministry needs to commit itself to an ongoing process of identifying important consumer issues and their implications on a continuing basis. It then needs to respond by adjusting its strategy, if necessary.

The second purpose is to offer specific guidance to help the Ministry think about what issues it does or doesn't get involved in. "Guidelines for involvement" are suggested - criteria that can be applied by Ministry staff when confronted by an issue that the Ministry might potentially take on. The aim of the guidelines is to help staff determine whether the issue is appropriately one for the Ministry, and the relative priority of the work that might result from dealing with it. The guidelines draw upon basic elements of the standard policy-development process, and link back to the outcomes as the focal point for the Ministry's activity.

The third purpose is to reach conclusions on the high-level role of the Ministry in getting involved in consumer issues, and to explain the different facets of those functions the Ministry might perform in carrying out its role.

What Capability Does the Ministry Need?

Section 8 of the Report considers the capability issues that the Ministry will need to address if it is to achieve its outcomes in an effective way. The theme of this section is that the Ministry will need to be able to do certain things on an ongoing basis to maximise its outcomes - including the ability to identify and make judgements about which issues are the most important, and to measure the impact of its activities.

Recommendations

Section 11 is a set of recommendations that point towards areas and activities where the Ministry needs to take action, if it is to achieve its aims.

Methodology and Overall Approach

To undertake the review, the General Manager of the Ministry established a Project Steering Group and appointed a Review Team. The Review Team comprised Ministry policy and operational staff, and a representative each from MED's Medium Term Strategy Group and its Regulatory and Competition Policy Branch. A Staff Reference Group and a Key Stakeholders Group were also established to be consulted during the Review. Appendix A lists the stakeholders interviewed. Appendix B names the Review Team and the Project Steering Group.

Comments from the Staff Reference Group and MCA staff not incorporated into this report are included in Appendix D for the information of the General Manager.

The Review Team worked with an external consultant at two points during the review to help shape the review process and clarify the issues to be examined.

The Team undertook background research on the issues identified in the Terms of Reference, and developed five background papers to inform their thinking. All of these papers are available on the Ministry's website or from the Ministry in printed form. It should be noted that the Review Team did not undertake a detailed analysis of the mix of consumer policy tools used by consumer agencies in other countries. An analysis of that kind involves significant resources, and is unlikely to be of great value without detailed discussions with regulators about why particular approaches have been taken.

The Literature Review on Analytical Frameworks, written by Nick McBride, is the first of the background papers and it reviews the major theoretical approaches to consumer policy. Writers in this area note that consumer policy lacks a robust theory or clearly defined set of goals, but the McBride paper nevertheless identifies an information-based framework as an appropriate one for consumer policy in New Zealand.

This framework provides that the goal of consumer policy should be to remove barriers and also shape expectations "so that, with respect to any particular transaction, consumers receive what they intended and expected. This goal is derived from an efficiency framework but is broader in that it gives consumer policy a role in shaping consumer expectations and the process of preference formation while stopping short of making choices for consumers or judgements about what consumers should want." [1] The Review Team has based its proposed outcomes framework for consumer policy on the information-based approach discussed in this paper.

Consumer Policy Tools (Sarah Kerkin and Karen Chant) describes the broad range of tools available to policymakers in dealing with problems of consumer protection. The assumptions inherent in any framework - including the information-based framework proposed by the Review Team - will tend to favour different combinations of policy tools. This paper identifies some of the considerations that policymakers need to take into account when selecting tools for particular issues, and discusses the trade-offs that need to be considered in designing and choosing policy tools. This paper informed the Review Team of the options available within consumer policy for making an information-based framework an effective form of consumer protection.

Key Trends in Consumer Policy and the Role of MCA (Jeanette Harris) identifies key issues that will most affect the Ministry's effectiveness and outcomes over the next ten years. The changing face of New Zealanders and their characteristics as consumers will influence where and how the Ministry provides information. Changes in the market will raise new issues for policy and information delivery. The paper discusses how the voice of New Zealand consumers might be heard in the future, and how the flow of information between government and people might be radically different from what it is today. The issues this paper raises highlight how important it will be for the Ministry to keep pace with developments in an organised way. It also emphasises the need to strengthen its relationships with other agencies in order to identify the right strategies for delivering information and to recognise market failures quickly.

The Establishment and Development of the Ministry of Consumer Affairs (John Barker and Jamie Kerr) reviews how and why the Ministry was established. A significant reason for its establishment was the uncoordinated approach to consumer law that existed at the time. This paper also describes changes that have occurred in the Ministry and why they came about - one feature of the Ministry's history has been the ad hoc addition of new functions over time. Until now the Ministry has never undertaken a review to define the desired outcomes for consumer policy and the Ministry's own role.

The fifth paper, Perspectives of the Ministry of Consumer Affairs Stakeholders (Lesley Harwood) summarises the perspectives of the stakeholders of the Ministry who were interviewed during the review. Their expectations of the Ministry were varied, which highlighted the need for the Ministry to be very clear about its boundaries. Some expectations were that the Ministry would provide the consumer perspective on issues; conduct research on consumer behaviour, problems and the impact of consumer policy on consumers; develop policy and legislation; provide information; be an advocate for consumers; target specific consumers (which is seen as a legitimate role for government); and support self-regulation schemes. The issues seen as being relevant to the Ministry in the future were generally consistent with those the Review Team identified in its research or with those that the Ministry is already working on. This paper was an essential tool in assessing whether stakeholders' expectations and the outcomes framework would be in accord.

Through these background papers, the Review Team was able to propose a set of outcomes for consumer policy in New Zealand that adopted an information-based approach to consumer policy and which drew on the expectations of stakeholders and the analysis of the key trends that face the Ministry in the future. To do this, the Team used strategic planning tools adopted by MED. The outcomes framework encompasses what the Review Team sees as key objectives for consumer policy. The advantage with developing a framework of this sort is that linkages can be identified with MED's outcomes in its annual Statement of Intent. This helps to clarify the Ministry's role and functions within MED and also the role that consumer policy plays in economic development generally.

|Index|Phase One: Report : Background Papers|Phase Two: Final Report|

Review of the Ministry of Consumer Affairs