Hon LIANNE DALZIEL (Minister of Commerce) : I move, That the Business Law Reform Bill be now read a second time. This is the third Business Law Reform Bill to come before the House. It is part of a programme of regular incremental reforms to improve our business laws. Most of the changes in the bill are not dramatic but improve the law in small ways. When those changes are taken together, the bill will make a significant contribution to keeping our business laws efficient, effective, and up to date, and will reduce unnecessary costs for business.

The Business Law Reform Bill contains 60 clauses, amending five business law statutes. It includes amendments to the Financial Reporting Act 1993, the Companies Act 1993, the Friendly Societies and Credit Unions Act 1982, the Insurance Companies’ Deposits Act 1953, and two technical changes to the Dumping and Countervailing Duties Act 1988.

As the explanatory note of the bill states, most of the amendments are based upon suggestions from business law practitioners, enforcements agencies, and the business community itself. It was these practitioners and members of the business community, as well as industry associations, who took the time to make submissions on the bill to the Commerce Committee. I acknowledge their experience and thank them for their advice in getting the bill to this stage.

Some of the changes the bill makes are purely technical, and I do not want to discuss those. Instead, I want to talk briefly about areas of the bill where significant changes to our business laws are being made. The first relates to financial reporting. The proposed changes to the Financial Reporting Act 1993 are aimed at generally improving the workability of the financial reporting system and reducing business compliance costs. In particular, the bill will remove excessive compliance requirements on many small companies and overseas companies. Exempt company provisions are expanded to now include a two-out-of-three test: total assets of no more than $1 million, and/or turnover of under $2 million, and/or five or fewer fulltime-equivalent employees. I note from the select committee’s report that there has been some debate about clause 28, which allows for these thresholds to be amended by the Governor-General by Order in Council. I appreciate the select committee’s report. Basically, as the specialist committee, it has determined that the risk of proceeding with this provision would be minimal, so I thank it for considering that matter and reporting back in that regard.

The bill also includes a new exemption-making power that will empower the Accounting Standards Review Board to make exemptions from approved financial reporting standards. This is intended to be a safety-valve provision. The purpose of it is to recognise that on rare occasions international financial reporting standards may not always be fully applicable to New Zealand circumstances. This exemption power has been designed to be used very rarely, if ever. Divergence between standards in different sectors can lead to lower levels of accountability and transparency, and applicants will need to make very strong cases in order to obtain an exemption. The select committee in its report has drawn attention to the submissions that opposed the granting of the exemption-making power, and I know that the Accounting Standards Review Board was one of those. I appreciate the detail with which the select committee has both considered and responded to the concerns that were raised by the Accounting Standards Review Board and others. I accept its reasoning in rejecting those submissions and pursuing what is indeed intended to be a transparent process.

One of the key aims of the bill is to reduce compliance costs resulting from administrative procedures. In this regard the bill also proposes to exempt some overseas companies from some of the reporting requirements imposed on those companies registered under the Companies Act. Changes are also proposed that are aimed at reducing the cost of distributing reports to shareholders. Companies will inform shareholders that the annual report can be obtained in hard copy or electronically.

I think, though, that the most important change in this legislation—one that I believe will help shareholders have a clear understanding of what it is that is being reported to them—is the ability for companies to offer shareholders concise annual reports more suited to the needs of ordinary investors and not requiring legal or accounting advice to interpret what in many instances are much more complex statements.

Currently, inactive companies are required to file financial statements with the Registrar of Companies that contain little or no new information. The bill removes these filing requirements for inactive companies. It will also improve enforcement by introducing an infringement notice system for company directors who fail to file their company’s financial statements with the Registrar of Companies by the due date. This will have a significant deterrent effect, in my view, and ensure that financial statements are indeed filed on time.

Proposed changes to the Companies Act 1993 further improve enforcement by extending the management and director banning provisions to persons who have been banned in certain overseas jurisdictions. Together with the exemptions of some overseas companies from some of the filing requirements imposed on overseas companies registered under the Companies Act, these changes will improve the trans-Tasman business environment and promote single economic market agenda objectives between New Zealand and Australia.

The bill also proposes to prohibit entities incorporated or established in New Zealand from using the word “insurance” or other similar terms in their names, or from holding out overseas that they are New Zealand insurers when they are not, in fact, carrying on insurance business in New Zealand. There are now automatic exemptions to this proposed ban for insurance workers and industry associations; both groups submitted on the bill and actually fall outside the objective we had intended to meet with this legislation. This change to the Insurance Companies’ Deposits Act is to prevent entities from representing that they are supervised under New Zealand’s insurance regulatory regime when they are not, and is necessary to prevent potential damage to New Zealand’s reputation internationally through companies behaving in that way.

The changes to the Friendly Societies and Credit Unions Act 1982 provide some of changes that have been long awaited. However, substantive reform still awaits the review of financial products and providers that is currently in the market for consultation.

In conclusion, although the bill deals with a range of amendments, the amendments are united by the aim of keeping our business laws up to date, clear, efficient, and effective. The changes will help business by removing unnecessary compliance costs. I thank the members of the Commerce Committee for their work in considering this bill—I actually believe they were quite outstanding—and again acknowledge the contributions of those who provided submissions on the bill. I commend the bill to the House.

PANSY WONG (National) : That passionate delivery by the Minister of Commerce just shows the excitement and big dreams she has for the business community. Actually, the Minister’s delivery reflected very fairly the way she treated the recommendations that came from the Small Business Advisory Group. It asked for courageous, bold steps such as relief for small business from the terrible employment situation where employers are too scared to employ inexperienced workers and give them a chance. It asked for a 3-month trial period for new employees, but what did this Minister deliver? Nothing. Instead she announced in the bill today just small, incremental steps to improve the business environment. Even though the Commerce Committee is a hard-working committee, I must admit that its members felt a bit underwhelmed by this legislation. None the less, any improvement for the business environment will be welcomed by National, and we fully support this bill.

I want to touch on two subjects that are quite interesting. The first subject is in regard to the provision that allows the Accounting Standards Review Board to make an exemption for certain entities not to comply with a financial reporting standard. Some of the submitters, particularly chartered accounting firms, put up objections to that. I was not surprised, because the accounting profession has a high degree of integrity. It is very nervous about making exemptions; it wants one standard for all.

Our recent champion with a high profile was the Auditor-General, Mr Kevin Brady, who believed absolutely that there should be one standard. He should be “Sir Kevin Brady”, and we should bring back the honours system for him, for insisting on one high standard for Labour. No political party should use parliamentary funding for electioneering purposes.

Arguments about the same type of standard were put to the Commerce Committee by submitters from chartered accounting firms. They were very nervous and said they did not believe that exemptions should be granted, in that case. The Commerce Committee took their concerns to heart. We debated long and hard, and ultimately accepted that the risk was really small, so we went along with the provision. But I want to acknowledge the high integrity of the chartered accountants, who in their submissions said that a standard should be set at a high level, and that compliance should be enforced at all times.

The second subject is in regard to the relaxation of the rules governing credit unions. This is another interesting story. The Minister was right; these amendments are long overdue. In fact, relaxation of the rules governing credit unions was promised by one Hon Jim Anderton, before Kiwibank was established. The credit unions met with the Hon Jim Anderton and he actually hinted that the rules would be relaxed for them, and that they could in fact take on banking functions. The credit unions were promised, but it did not happen. They were very disappointed when they brought their concerns to me, which was about 2 years ago. So we are happy to see these amendments at long last, but I am afraid to inform the Hon Jim Anderton that that is another broken promise. He raised the expectation of the credit unions many years ago that there would be a relaxation in their operation, but it was not delivered. The whole package has not been delivered even today. Labour Ministers do not aim for a huge improvement, so National has now learnt that it is obliged to support any small concession that Labour is prepared to make towards improvements for the business community.

BRIAN CONNELL (National—Rakaia) : I will start by saying that anything that reduces compliance costs for my constituents has my support, albeit what has been suggested in this legislation is rather superficial. The Minister, in her introductory remarks, told us that the Business Law Reform Bill is an omnibus bill that makes a number of changes to commercial legislation as suggested by Government officials and lawyers. That is an oxymoron if ever I have heard one.

Government officials and lawyers are the sorts of people who in my experience perpetuate compliance and have a vested interest in making sure that it is not reduced. If the Minister wants to rely on that quality of advice I say to her that it is no wonder she has problems intellectualising what needs to be done to reduce compliance costs across New Zealand. The Minister went on to outline a number of amended Acts, and she pointed out that the Companies Act 1993, the Dumping and Countervailing Duties Act, the Financial Reporting Act 1993, the Friendly Societies and Credit Unions Act, and the Insurance Companies’ Deposits Act 1953 had been amended. I have to say that they are all worthy changes, albeit relatively minor in the scale of things. The two that are most noteworthy are, firstly, the Companies Act, where directors banned overseas will be banned in New Zealand, and that makes sense. The bill goes on to say that it will remove filing requirements for foreign companies if information is supplied to the home regulator and provides an option of electronic accounts for shareholders. They are sensible amendments and, of course, we support those. Secondly, the Financial Reporting Act 1993 is amended to provide for the removal of unnecessary reporting requirements and to increase the eligibility for small businesses to have minimal filing responsibilities.

I am pleased to say that the Minister has taken heed of two things that were concerning business people across the country, and they are probably the two items that business people advised the Minister of, as opposed to Government officials and lawyers. Let us have a look at some of the more substantive issues not addressed in this bill. The first thing that comes to mind is the correlation between lawyers and the Resource Management Act. Am I the only one who has noticed in the last 10 years the huge explosion of legal practices that have developed based solely on the Resource Management Act? The Minister said in the House that she has taken advice from lawyers who have been telling her how compliance costs could be reduced. Lawyers who have practices substantially based on the Resource Management Act have a vested interest in making sure that the Resource Management Act continues unabridged in its most complex form. It is rather naive of the Minister to think that she can rely on their advice.

This Government has increased 40 different taxes, fees, and levies since taking office and a further four are proposed. And the Minister says that she is serious about reducing compliance costs! The Business New Zealand latest publication, Regulation Perspectives, calculates that over 2,000 new regulations have been introduced since 1999. I know that the member from New Zealand First will probably take a call after me. He has a habit of quoting things I have said, so I hope he gets it right. Two thousand new regulations have been introduced since 1999. Many of these regulations affect businesses, and the average cost to each firm was $53,000 in 2005, which is an increase of nearly 17 percent, up from $43,200 in 2003.

The issues addressed in the Al Dunn report in 1999-2000 are the critical issues that the Minister should have addressed in this bill but did not. The Al Dunn report highlighted 162 compliance issues that were of such importance the Government needed to take heed of them.

Pansy Wong: And this is for only minor issues!

BRIAN CONNELL: Pansy Wong points out that this bill is for only minor issues. I am sorry; I got the wrong end of the stick. I thought it was a bill that would reduce the costs of compliance per se.

Of the 162 items that the Al Dunn report highlighted, 143 of those said tax, the Resource Management Act, Occupational Safety and Health, and industrial relations are the four critical issues that the Government has to come to terms with. So I read the bill carefully, I looked for the components that were going to deal with tax, the Resource Management Act, Occupational Safety and Health, and industrial relations, and I am sad to have to report to the House that they have not been addressed. That explains, I say to Pansy Wong, why the Minister, when she took her call, did so in a very dispirited way. She mumbled and murmured into her microphone because she knew that the acid test of this bill would be in the detail, and that when the business people, whom she did not consult, sat down and read this bill they would be terribly, terribly disappointed.

I leave the House with just one quick example of why compliance costs and red tape in this country have got out of control. I suggest to the New Zealand First member that if he is ever down in Hinds, there is good little hotel there, called the Hinds Pub, surprisingly enough. I was in there speaking to constituents and a drink was forced on me. I was having a conversation with a chap who said: “Five years ago, I relied on the dole to maintain my livelihood, but that was leading me nowhere. So I started a business cutting firewood and have been doing that job for 5 years, Mr Connell.” He was one of the respectful constituents I have. “But today, I am extremely annoyed, because when I got home this evening, before I came down to the pub, I got a letter form OSH saying that in order to pursue my chosen career I had to get a certificate that demonstrated that I knew how to use the chainsaw that I have been using for the last 5 years.” That certificate was going to cost him 250 bucks. And do members know what he said? He said: “I feel like throwing it all away.” Actually, that is the polite way of saying it. What he actually said was: “I feel like taking my chainsaw to Wellington and dealing with the bureaucrats and your colleagues up there who think that this type of legislation is sensible.”

Nowhere in this legislation do I see anything that has come to grips with those concerns that drive hard-working business people across this country to distraction. With that contribution, I conclude.

R DOUG WOOLERTON (NZ First) : New Zealand First will support the Business Law Reform Bill. In doing so, I have to say that New Zealand First has never been in favour of increasing compliance costs, taxation, or any of those sorts of things. The two big parties in New Zealand have increased taxes and done all of those things perfectly well for many, many years without our assistance. New Zealand First has a record of voting for tax reductions and we will continue to do so into the future. I will talk a little bit about reducing compliance costs and a little bit about the Dumping and Countervailing Duties Act for just a short period—in general terms, I might add—then I am happy to leave it to other speakers.

Before I do that, for those who preach doom and gloom, whether it is in New Zealand or anywhere else in the Western economies, people like Brian Connell and others who are well versed in these things and whose business expertise I respect, will tell them that around the Western World and in New Zealand, businesses across the board—not small businesses, I might tell members—are getting bigger and better and wealthier day by day. That is not always for producing the same things—the right things—or for exporting, which New Zealand First favours. Often they are importing companies and financial companies. New Zealand First certainly believes in incentivising the tax system for companies—we have said that consistently—and businesses in the racing industry are some that come to mind.

I will talk about compliance costs. We in New Zealand First believe that compliance costs should be reduced. We are certainly not in favour of extra regulation, and the sorts of occupational safety and health things that Mr Connell talked about, but those things are coming in. However, we are in favour of reducing compliance costs where we can.

I will talk just for a minute about dumping and countervailing duties. In this country, unfortunately, we have come into the situation where we are importing just about everything we use, mainly from Asian countries such as China and India. Those countries have excessively low wages and excessively high inputs from their Governments—in the case of China, it is a communist Government at that—yet those countries can still get their products into New Zealand. We talk about anti-dumping legislation and countervailing duty legislation that we do not use, but we should be using these sorts of mechanisms to ensure that, at least to some degree, our manufacturers and exporters have more of an opportunity.

I was in Australia just a little while ago—

Craig Foss: How were the apples?

R DOUG WOOLERTON: I will not talk about apples, but Australians are pretty good at keeping our apples out of their country and at protecting theirs. But more interesting was a place called—now I have forgotten the name of it—

Craig Foss: “Appleville”.

R DOUG WOOLERTON: No, it was where the tornadoes went through and wrecked the banana plantations, down on the Queensland coast. The Prime Minister of Australia, no less, promised the banana growers that the Australian Government would not import bananas from other countries because it would hold the faith with the banana growers of Australia. It would hold faith, let the prices rise, and would not import bananas from Fiji, South America, or anywhere else. The price of bananas when I was over there was $14 a kilogram—huge!

Brian Connell: That was the last week’s special.

R DOUG WOOLERTON: I know that it is last week’s special and I know that it is last week’s news. But if we are going to talk about business, business costs, and countervailing duties, then we need to talk about what the Australians do compared with what we do here in New Zealand. In Australia—as New Zealand First would advocate—the Government looks after its businesses. My goodness gracious me, does it look after its businesses or what!

In New Zealand, if we had sectors of our manufacturing areas or our farming areas wiped out, the stuff would come flooding in from any country in the world at the cheapest price possible, and to heck with the local producers. But not in Australia. John Howard himself got up and promised the banana farmers that, as they had had a reversal of circumstances and an act of God had come through and destroyed their crops, the Government would hold the faith with them and would not import bananas in competition with theirs. The price would rise so that, for the few bananas the growers had, they could receive a high dollar, which in some way would compensate for the losses they had had.

We in New Zealand First believe that that is a sensible way, and it is indeed a way of looking after industries in one’s own country. New Zealand First is happy to support this bill. It goes some way towards attending to the problems that we have in our industries, but not nearly far enough, as far as we are concerned.

CRAIG FOSS (National—Tukituki) : There will be no bananas or any other fruit, cakes, or anything like that in my speech, which will take a quick few moments. Yes, National is supporting the second reading of the Business Law Reform Bill. I thank the Minister and the Commerce Committee as well, because I think they did listen to some amendments. But I want to pick up on one point that my colleague Pansy Wong alluded to.

• Debate interrupted.