Regulatory impact statement

Executive summary

New legislation is needed to disestablish the New Zealand Authors’ Fund and replace it with the New Zealand Public Lending Right. This measure responds to on-going and unresolved issues concerning the effectiveness of the New Zealand Authors’ Fund. Issues have been identified both by authors who are beneficiaries of the Authors’ Fund and Creative New Zealand, which is the Crown entity with statutory responsibility for delivering the Fund. Major issues relate in particular to funding level and the mechanism for determining payments, administration of the Fund and confusion about its primary policy objective and the government’s main interest in providing it. These matters are addressed in the proposed sui generis legislation.

Adequacy statement

The Ministry for Culture and Heritage has reviewed the Regulatory Impact Statement and considers it is adequate according to the adequacy criteria.

Status quo and problem

Twenty-eight public lending right schemes exist internationally. The underlying principle of such schemes is to pay authors for the public benefit derived from the recurrent use of their works through the public library system, in order to meet social, cultural and educational objectives. International practice is to exclude non-book material held in libraries, such as CD Roms, audiotapes, music scores, on-line services or videos.

The New Zealand Authors’ Fund was established by Cabinet minute in July 1973, for the official purpose of “making payments to authors for the library use of their work” (CM73/28/15). A secondary consideration explicitly identified at the time was an interest in providing additional income support for New Zealand writers, given the low level of earnings derived from writing and selling works in a small domestic market.

The Fund was administered by the Department of Internal Affairs until 1991, when it was transferred to the Queen Elizabeth II Arts Council. Responsibility for administering the Fund was subsequently vested in the Arts Council of New Zealand Toi Aotearoa (Creative New Zealand), through the Arts Council of New Zealand Toi Aotearoa Act 1994. Section 31 of the Act states: “there shall be a fund to be called the New Zealand Authors’ Fund to compensate New Zealand authors for the loss of royalty income incurred as a result of their books being made available through New Zealand libraries, to be administered by the Arts Council”.

Since its inception the Authors' Fund has been the subject of on-going negative critique and lobbying by authors and their sector representative organisation, the New Zealand Society of Authors. The Fund has been reviewed a number of times, in particular in 2000, when Creative New Zealand led a major review with substantial stakeholder input.

Funding issues

A primary issue over time has been the level of annual payments delivered to eligible authors from the Fund. Payments are represented by a book-rate, that is the amount paid to authors per copy of eligible titles held in libraries. Relatively static funding and increasing demand, as more books enter the library system and meet the eligibility criteria for the Fund, have resulted in the book-rate fluctuating and often decreasing from year to year.

The Authors’ Fund has been perceived to have been neglected by the Government because it is not direct-line funded. Funding comes from Creative New Zealand's annual budget, with no specific output class or ‘tagged’ provision. Creative New Zealand has discretionary power to determine the Fund’s budgetary allocation against its other priorities for investment, which are primarily in the form of discretionary grants. The arm’s length relationship between the Government and Creative New Zealand, an Autonomous Crown Entity, means that Creative New Zealand is not subject to Ministerial direction on cultural matters, which includes where it targets its funding.

The Authors’ Fund has, therefore, competed for an annual allocation from Creative New Zealand’s budget. No increases in annual funding have been made since 2002, when it was topped up by $0.5 million, as part of a $1 million appropriation to support authors and literature in New Zealand. That additional funding resulted in a book-rate of $2.78. By 2007, however, the book-rate had declined to $2.09.

Call for sui generis legislation

There has been a major on-going lobby for a stand-alone statutory framework giving direction on the scope, eligibility criteria and administration of the Authors’ Fund, and establishing for authors a right to payment for the use of their works in libraries. Unlike public lending right legislation that exists in some jurisdictions, section 31 of Creative New Zealand’s Act does not include an explicit right to payment, rather than expectation of payment. A lack of genre-specific eligibility criteria and a mechanistic basis for calculating payments have created an impression, and an expectation, that such payments are made as of right, rather than as a form of Government grant.

The call for sui generis legislation has been underpinned by a perception among authors that the Fund has a vulnerable legislative base within Creative New Zealand’s Act and could be adversely affected by future legislative changes to the agency.

A lack of clear policy objectives for the Fund has also proved problematic over time. The Fund was set up to compensate writers for the use of their works in libraries, in recognition of their contribution to cultural life and a perceived need to provide additional income support. Over time, some confusion has developed among stakeholders as to where the primary emphasis lies, or should lie - in providing recompense for the public use of intellectual property, or compensating for a loss of income, or as additional income support for authors. As the New Zealand Society of Authors has recently submitted, both the Fund’s name and confusion about its primary purpose have meant it has become too closely identified as a kind of welfare scheme for authors, rather than the provision of fair payment for use of their cultural property (which also has the effect of supplementing other income derived from writing).

Objectives

The objective is to develop sui generis legislation to establish a New Zealand Public Lending Right scheme for New Zealand Authors.

The purpose of the proposed Public Lending Right for New Zealand Authors Act is to:

• repeal section 31 of the Arts Council of New Zealand Toi Aotearoa Act 1994, thereby disestablishing the New Zealand Authors’ Fund; and

• establish a scheme to make payments to New Zealand authors in recognition of their books being available for use in New Zealand libraries. (The definition of authors would include the person or persons responsible for the intellectual or artistic content of the book, therefore would include illustrators.)

The legislation will specify the main administrative function of the proposed scheme, which is to make annual payments to eligible New Zealand authors for the use of their books in New Zealand libraries. The legislation will identify a number of measures that will be required if the scheme is to be effective in meeting its purpose. This includes involvement by the responsible Minister and the establishment of an Advisory Group, both elements which are absent in the current Fund’s management.

Alternative options

An alternative option would be to disestablish the New Zealand Authors’ Fund by repealing section 31 of the Arts Council of New Zealand Toi Aotearoa Act 1994 by Statutes Amendment Bill. A new scheme could then be established to be administered by a responsible department without a statutory framework. This would not address the concerns expressed by authors for a legislated mandate analogous with Public Lending Right schemes in Australia and the UK, for example.

A second alternative would be to maintain the institutional status quo, leaving the scheme within Creative New Zealand but amending (rather than repealing) section 31 of its Act. This would not solve the problems arising from the arm’s length relationship of Creative New Zealand to the Government, particularly with respect to the involvement of the responsible Minister and Creative New Zealand’s power to make discretionary budgetary allocations to the Authors’ Fund.

Preferred option

The proposal to develop sui generis legislation to establish the New Zealand Public Lending Right is preferred. This measure addresses the concern of authors for security of the scheme and provides specific acknowledgement of an obligation on the Government to provide payment for use of book creators’ works in libraries. The administration of this proposed scheme will not affect authors who currently access the Authors’ Fund, as from their point of view the procedures will be the same.

For the department administering the scheme, the costs will be higher than for the current delivery of the Authors’ Fund. The additional costs will be incurred through the requirement to convene, at no less than three yearly intervals, an Advisory Group to provide regular input reviewing the scheme. These costs will mainly be for professional sitting fees and travel and will depend on the nature of the Advisory Group’s role, its size and the frequency of meetings. Funding currently expended on the costs of administering the Authors’ Fund would be transferred from Creative New Zealand to the department responsible for the new scheme.

Implementation and review

Legislation is required to establish the New Zealand Public Lending Right.

It is proposed that the legislation provide for on-going monitoring and review of the scheme, both by the responsible department and the establishment of an independent Advisory Group whose purpose is to:

• review the eligibility criteria for the scheme and recommend any changes to the Chief Executive of the responsible department:

• review the administrative procedures employed to deliver the scheme and recommend any changes; and

• advise the Chief Executive on policy settings, level of funding required and any other matters to maintain the effectiveness of the scheme.

Policy settings and review of eligibility criteria will be the responsibility of the administering department and are not intended to be included in the new legislation.

Consultation

Since the late 1980s there has been continual debate among authors, the New Zealand Society of Authors, libraries and Government agencies, in particular the Ministry for Culture and Heritage and Creative New Zealand, about the effectiveness, administration and governance arrangements of the New Zealand Authors’ Fund. Creative New Zealand’s 2000 review of the Authors’ Fund involved a number of Government and non-government stakeholders. It reported to the Minister for Arts, Culture and Heritage with eight recommendations for reform of the scheme.

In response, in 2002 the Minister established a working party comprising the Ministry for Culture and Heritage and Creative New Zealand, whose terms of reference included considering changes to the Authors’ Fund to deliver a more effective and sustainable scheme. That working party met with a writers’ consultative group, including the New Zealand Society of Authors, which took recommendations back to the Minister which resulted in a higher level of funding for the Fund.

The Ministry subsequently participated in another working party convened by Creative New Zealand to review aspects of the Authors’ Fund recommended in the previous working party - again with sector and other stakeholder representation.

New legislation to establish the New Zealand Public Lending Right would substantially implement recommendations raised in the 2000 review by Creative New Zealand and which continue to be the subject of representations to the Minister for Arts, Culture and Heritage, her officials and Creative New Zealand.

In developing the proposal to establish the New Zealand Public Lending Right the Ministry for Culture and Heritage has sought advice from the Minister and consulted with key government agencies: Creative New Zealand, the Treasury, State Services Commission, Ministries of Justice and Economic Development, Crown Law Office, Parliamentary Counsel Office, National Library and Department of the Prime Minister and Cabinet. Informal consultation has been held with the President of the New Zealand Society of Authors.

The Ministry has also taken account of recently renewed calls for change from the New Zealand Society of Authors, particularly the introduction of a Public Lending Right, to replace the New Zealand Authors’ Fund.