Hon Dr NICK SMITH (Minister for Climate Change Issues) : I move, That the Climate Change Response (Moderated Emissions Trading) Amendment Bill be now read a first time. At the appropriate time I intend to move that the bill be referred to the Finance and Expenditure Committee, with an instruction that the committee report finally to the House on or before 16 November 2009, and that the committee have authority to meet at any time while the House is sitting except during oral questions, and during any evening of a day on which there has been a sitting of the House, or on a Friday in a week in which there has been a sitting of the House, and to meet outside the Wellington region during a sitting of the House, despite Standing Orders 187, 189, and 190(1)(b) and (c).

This bill is about implementing for New Zealand a workable and affordable emissions trading scheme. It takes a responsible approach to the climate change problem caused by greenhouse gas emissions while being realistic about how much a small country like New Zealand can contribute. The bill is also about the John Key - led Government delivering on its promises. We said we would legislate for and implement a carefully balanced, “all sectors, all gases” emissions trading scheme. We said we would take an emissions intensity approach. We said we would align our emissions trading scheme more closely with Australia’s. We said we would not pocket billions of dollars by nationalising our emissions allowance. We said we would not discriminate against small and medium-sized enterprises, and we said we would align the phase-out of industry support with that of our trade competitors. This bill does all these things. The bill is also consistent with the recommendations of the Emissions Trading Scheme Review Committee, which was ably led by the United Future leader, Peter Dunne.

Let me briefly outline the specific changes in the bill. The industrial, energy, and transport sectors will enter the emissions trading scheme on 1 July next year and agriculture in 2015. There will be a transition phase for the next 3 years, with a half-obligation and a fixed-price option of $25 a tonne. These changes will halve the cost increase for electricity and fuel for consumers and businesses.

Support for trade-exposed emissions-intensive industry is changed in four ways. First, the arbitrary threshold of 50,000 tonnes, which penalises small and medium-sized enterprises, is replaced by a high and a medium-intensity threshold. This expands the number of eligible companies from an estimated 21 to 65 companies. Secondly, the allocations will be based on an industry-average basis and not an arbitrary 2005 level. This will ensure we do not reward those with higher emissions and punish those who invested early to improve their efficiency. Thirdly, the allocations will be production based. If companies cut their production, their allocations will drop. If they grow, their allocation will increase. This is about addressing leakage. This Government is not about exporting jobs offshore; we are about incentivising more efficient production here in New Zealand. The fourth change is about slowing the phase-out of support to industry.

The bill also makes 34 technical changes to fix faults in the current law and to make the scheme more workable. A good example is removing the liabilities created by the clearing of wilding pines. Another is removing the liability associated with nitrogen curing of cabling, which could have cost New Zealand export manufacturing jobs. This bill recalibrates New Zealand’s position to a more pragmatic approach. The existing Act was a branding statement by a dying Government wanting to make gestures about saving the planet, with little regard to whether they would work or their impact on consumers, on jobs, and on investment.

Extravagant claims have been made by some that this revised scheme will mean taxpayers subsiding major emitters. This is untrue. There is a cost in reducing the immediate impact on fuel and electricity prices relative to the current scheme, but there are also savings as a consequence of reducing allocations earlier. Officials, backed up by Treasury, estimate that over the first decade of the scheme these changes will actually provide a small saving for the taxpayer. The latest claims over costs relate to the period beyond 2018, when, frankly, any cost estimates are little more than guesses. The issue beyond 2018 is that, under Labour’s scheme, industry support is phased out at 8 percent per year compared with Australia’s 1.3 percent and the EU’s 1.7 percent. We are not absolutely married to the 1.3 percent phase-out as far as that into the future, and note that the law provides for it to be reviewed every 5 years, starting in 2011. We are, however, committed to moving in line with our major trading partners, and we worry that Labour’s phase-out rate, which is five times faster than that of any other country, will encourage jobs and investment to be exported offshore. Other claims are that the environmental integrity of the scheme is weakened, with the Green Party’s Jeanette Fitzsimons so incensed that she says that at Copenhagen she will wear a large sign around her neck saying she is ashamed to be a New Zealander. I ask that members get reconnected with planet Earth.

This emissions trading scheme will be the first of any country outside Europe, and on 1 July 2010 will be the most comprehensive by including transport, industrial, and energy emissions. New Zealand is the first country in the world to include forestry, and under these amendments will be the first country in the world to include agriculture. Accusations have been made about New Zealand providing a soft ride for Rio Tinto’s aluminium smelter. Our Bluff smelter will be the very first of 168 in the world to face a carbon price for its industrial emissions. There has also been strident criticism of our production-based approach to industry allocations, an approach that was recommended by both the New Zealand Institute of Economic Research and Infometrics at the select committee review. Australia is taking this approach and so, too, is Europe in the third phase of its emissions trading scheme. This is about incentivising efficiency rather than just exporting emissions-intensive industries to other countries.

I want to acknowledge the constructive role the Māori Party has played in helping move this debate forward for New Zealand. Had it not stepped up to the mark, we would most likely have been forced to defer again introducing a price on carbon, and we would go to Copenhagen with our climate change policy unsettled. The Māori Party brings a balanced perspective to this debate, with both a strong commitment to Papatūānuku but also a real concern about jobs and about the impacts on low-income households, and an understanding of the importance of primary industry to New Zealand. The changes agreed with the Māori Party have halved the cost to households, will see thousands more low-income homes insulated, will see the Government working with iwi on afforestation schemes, will see better support for our fishing industry, and will see ongoing Māori involvement as we progress forward on climate change policy. Despite the politicking over that agreement, most in this House know that these changes are good for Māori and good for New Zealand.

I am disappointed that Labour has taken such umbrage at the agreement and has pulled out of talks with the Government. It is equally disappointing that Labour has thrown its toys out of the cot and today has blocked this bill going to the special select committee that has spent the last 9 months working very hard on this issue. It has been my long-held view that climate change policy is bigger than any political party, and that there would be real benefits for New Zealand from a wider and broader consensus. That is why, as an Opposition member, I wrote in 2005 seeking an engagement with the then Government. I never received a reply. I have engaged for months in good-faith talks with Labour. There is little difference in this bill from what was agreed in those talks. My hope is that, through the select committee process, we can get back round the table to resolve the few remaining issues.

I make this point in conclusion. New Zealand has had a 15-year-long debate about how to put a price on carbon. We have flip-flopped, under both National and Labour administrations, between a carbon tax and an emissions trading scheme. We need to move forward. This bill will, on 1 July next year, enable us to make that start. I urge all members of this House to put aside party politicking, to recognise the importance of the issue of climate change, and to back the balanced way forward in this bill, which is a response to this huge challenge and one that is balanced in respect of the economy. I commend this bill to the House.

CHARLES CHAUVEL (Labour) : The Climate Change Response (Moderated Emissions Trading) Amendment Bill, to amend the emissions trading scheme—a move for the New Zealand economy that is described by the member who has just resumed his seat as being as significant as the introduction of GST—has been in the hands of members for some 10 to 15 minutes. We have not seen the content of this legislation until now. To make matters worse, the Government will not even release the Cabinet papers and the officials’ advice concerning the costs of this revised scheme. We asked for that information to be provided on an urgent basis under the Official Information Act, but the Minister has made it clear that it will not be made available until well into the select committee process, and no doubt there will be many redactions from the material that we will have to go to the Ombudsman about. This material should not be hidden from the people; it should not be hidden from the Opposition; it should not be hidden from the Parliament.

It is shocking that this behaviour comes from a Government that parades what it calls its fiscal rectitude. It is introducing changes to the New Zealand economy that it says are equivalent in magnitude to the introduction of GST, yet it is denying people the right to see the basic costings and the official advice behind the legislation and the changes, and it has tabled the bill just when the first reading speeches have to be made.

We have seen the problem with that in question time this week, because we have a Minister with responsibility for the passage of the legislation who uses figures to suit himself. Papers were tabled in the House on Tuesday that purported to detail to the people the cost of this legislation. We now see, on page 33 of the explanatory note of the bill, the true table without the omissions that the Minister made when he tabled the document in the House. That is why the people need to see the official costings, the analysis, and the Cabinet papers. As Labour has learnt to its peril over the last couple of weeks, the Minister is not one who can be trusted on the assertions he makes, unless the material behind those assertions can be seen and tested.

The Minister mentioned that there was a desire to send this legislation to the special Emissions Trading Scheme Review Committee, but that Labour had declined to cooperate in that, and I say we certainly have. The Emissions Trading Scheme Review Committee was a complete waste of time and money. That is demonstrated by the fact that although its specialist advisers ate up the entire Office of the Clerk’s budget for advice to select committees in 1 year, at the same time the committee could produce only four minority reports as well as what the Government came up with as a result of that exercise. It is appropriate that this legislation should simply go to the Finance and Expenditure Committee. This is not a measure that will have anything to do with the environment. It will certainly not help to protect the environment; it is simply a measure that is designed to extend subsidies to emitters. As such, it is appropriate that the expertise brought to bear on the legislation should be that of the Finance and Expenditure Committee.

As I said, we are considering a measure that has an impact on the economy equivalent to that of GST, and we are considering it under urgency. Members ran out of work yesterday at 6 o’clock and went home, but the Government has us back here today, sitting under urgency on a major initiative.

The existing emissions trading scheme puts a price on the emission of greenhouse gases, which New Zealand has to account for under the Kyoto Protocol. In order to emit such gases on a continuing basis, different sectors of the economy, on a phased-in basis, would, under the existing scheme, receive a defined level of free credits in order to continue to pollute for a defined period of time. If emitters needed or wanted to pollute over that level, then they could basically buy a limited number of credits in order to do so. When they bought those credits the Government, from the revenue it gained from that purchase, would fund a series of complementary measures designed to help our economy to transition to the lower carbon using economy that we all know we need to have. It would fund home insulation, the transition to electric vehicles, and so on.

Under the amendments contained in the legislation that the Minister has just introduced, a very different scheme emerges. Under that scheme, emitters will get a much longer transitional subsidy to allow them to continue to pollute. Those emitters are allocated ongoing rights to pollute, on a so-called intensity basis, but without a cap—unlike the proposed Australian scheme. It means that emitters are incentivised to continue to increase their pollution, rather than to decrease it. It is the complete opposite of the intention of an emissions trading scheme. There is no cap in this so-called “cap and trade” scheme—no cap. The emitters have the dates on which they will enter the scheme pushed out by up to 2 years.

In the short term, the analysis in the explanatory note of the bill indicates that there will be, to 2013, an extra cost to taxpayers of about half a billion dollars as a result of those changes. Then, for the 4 years between 2013 and 2017, the costs will go down slightly, but that seems largely to be because motorists are to be brought into the scheme up to a year earlier than they would be under the existing scheme. So there will be revenues for the Government that otherwise would not have been available. But if we look at the out-years, which the Minister has blithely dismissed by saying we cannot make reliable estimates as to what will occur then, and if we look at the full table—it ought to have been tabled in the House on Tuesday—that appears on page 33 of the explanatory note of the bill, we see that the missing two columns for 2020 and 2030, which the Minister did not table earlier in the week, show a very hefty additional cost to taxpayers. By 2030 that is estimated to be an additional $2 billion a year. That is serious money. Even discounting it back in today’s money—

Hon Trevor Mallard: $2 billion a year?

CHARLES CHAUVEL: No, $2 billion in total, and after 2030 it is half a billion dollars a year, in every year thereafter. We are talking about the cost of the accident compensation scheme or the prison system, about one-third of the education budget, or the entire cost of the police service being given away each year to polluters, and we will be paying for it as taxpayers.

This is neither environmentally nor fiscally sustainable, and it will have to be rolled back. Polluters like Methanex and Rio Tinto will be laughing all the way to the bank. To use the example of Methanex, it will get a billion dollars over 10 years to increase its emissions by 5 percent. That is basically the effect of the amendments that have been tabled today. This is just madness; it is utter madness.

There are another couple of matters that I want to turn to. If we look at the explanatory note of the bill, we see Treasury says the alignment with Australia, which this legislation attempts to make, is very bad public policy. Treasury points out that Australia does not even have a scheme.

Hon Dr Nick Smith: It does not say that.

CHARLES CHAUVEL: The Minister is shouting out. If he looks at page 12 of the explanatory note of the bill that he has just put on the Table of the House, he will see that Treasury asks, in essence, why on earth somebody would try to harmonise with a country that does not even have a scheme and might not even have a scheme if the legislation there does not get up in the Senate in November, and that it asks why on earth public policy would proceed on that basis.

We were also told by the Minister last night, in the briefing he offered to us, that a Treaty clause is to be inserted in the final version of the legislation. But this amendment will not be introduced by the Māori Party until the Committee of the whole House stage, which therefore means that the Finance and Expenditure Committee will not consider it and the public will have no opportunity to submit on it. The other alleged concessions to the Māori Party that we have heard about will not be included in the bill, but will be done by way of variations to Government policy later on.

Labour will have no option but to roll back these amendments when next in office. National could have had a deal with Labour, if it had negotiated in good faith, that would have endured and would have given ongoing certainty over climate change policy. Instead, we are seeing fiscally irresponsible legislation that will harm, not help, the environment. This is a day of shame: shame for the National Government, shame for the Māori Party, and a shame for New Zealand.

CRAIG FOSS (National—Tukituki) : I am proud to stand up and speak in the debate on the first reading of the Climate Change Response (Moderated Emissions Trading) Amendment Bill. I congratulate the Minister for Climate Change Issues, the Hon Dr Nick Smith, on bringing together an emissions trading bill for the shape and structure of the New Zealand economy in the current times. It matches our profile and our ambitions to be an environmentally and socially aware and conscious nation, balanced out with the economic challenges that are facing the structure of our economy.

First I will acknowledge members of the Emissions Trading Scheme Review Committee, especially the chairman, the Hon Peter Dunne, who did a great job. I am not sure whether he regrets that this bill, if it passes its first reading, will be going to the Finance and Expenditure Committee as opposed to another committee with which I am sure he would have been involved. I will be interested to find out his view on that. I also thank the member who spoke previously, Charles Chauvel, for his endorsement and vote of confidence in the abilities of the Finance and Expenditure Committee to rapidly process this bill through the various stages that it needs to traverse. I acknowledge, and I am very interested in, the fact that he carved out entirely all the environmental considerations around what is contained in this bill, noting that we have had two very large select committees considering this particular issue. They were totally focused on the economic matters in and around this bill and on the impact, or otherwise, that this changed bill will bring to our economy.

I am sure that once members go through the numbers, look at the potential job losses under the previous scheme, and examine the improvements that this new bill will bring to the existing scheme, they will be pleased to see them, particularly in these hard and recessionary times. It surprises me somewhat, even discounting some of the rhetoric from members opposite, that the word “jobs” has not appeared once in any of their speeches on this matter. This improved bill is entirely about preserving New Zealand jobs. It is as simple as that. The term “leakage” is used often, and for the benefit of those who are listening, that refers to the leakage of jobs—that is, this Government is all about trying to keep New Zealand jobs in New Zealand and to improve and grow the industries that contain them.

If we take some of the comments made by other members to the logical extreme, we realise that the easy route is to allocate New Zealand units based on 90 percent of the 2005 level of emissions, as in the previous scheme, to some of the large emitters. The price of carbon would go up, those businesses would close down and jobs would go, the emitters would get a free windfall gain of absolute billions, and New Zealand would be left where? Unemployment would rocket and our current account would absolutely deteriorate. There is a lot of highbrow economics around this stuff, but the bottom line is that New Zealand families and jobs are now in a better place because of the improved emissions trading scheme bill that Dr Nick Smith has put before us today. I look forward to working through this bill with the members on the Finance and Expenditure Committee. I will be quite intrigued about the various power plays as to which members will appear, because I am sure that the Hon David Cunliffe will want to have part of this action, as a senior Labour member on that committee.

A point that seems to be constantly lost on other members, particularly the member who spoke previously, is that the policy intent of the National Government in the improved emissions trading scheme was put before the electorate last year. Last year the public of New Zealand voted against the scheme as described by the previous speaker. They voted for an amended scheme that balanced out our economic future, our opportunities, and our concerns about climate change and the environment. The word “balance” is the absolute key. The election-result deniers who are in speaking on this matter perhaps need to remember that they put all of their arguments, which we are now hearing again today, before the electorate last year, and the electorate rejected them. The five or six key principles that this new, improved, amended bill is based upon were before the electorate. Nothing here is new.

With regard to the point that the previous speaker made about his having only just received this bill, I note from memory that when Labour was in Government, its bill came in under urgency. At the time the National Opposition had maybe half a day’s notice, if that, but the difference is that we put aside the politics and voted for it.

This bill is all about minimising the risk to the New Zealand economy and balancing out our objectives in order to be part of a global concern. As an exporting nation, it is very, very important that we get this right economically with regard to the perception of the customers for our export products around the world. I will reiterate for Hansard that I am a very, very proud New Zealander, and I would wear a “Proud to be a New Zealander” T-shirt anywhere in the world, with or without this bill. My pride in New Zealand goes beyond that.

There was a very good article in the New Zealand Herald this morning by Brian Fallow. There is a lot of politics around this stuff, but I think that what is missing out there is the point that so much of this emissions trading scheme has actually been agreed to across much of the House. In fact, I am surprised that there has not been more celebration of the fact that at least the majority of members in the House have come to the point where, yes, they are arguing over some key detail. We can focus on that positive aspect, for the sake of our economy and our environment. I will pick out the point that Mr Fallow noted. It is very important, because it shows how close the two proposals—this improved scheme and the existing scheme—are around the 90 percent emission levels in 2005. I will quote the article just quickly: “If a large emitter’s emissions per unit of output in 2005 was bang on the average for its industry in this part of the world, its allocation of free units would be the same under both models.”—that is, it would be exactly the same—“If it is below par it would be worse off, if it is above-average, it would be better off.”

Therein lies the starting point. Labour members now seem to be suddenly rejecting the benefits of the market-based price mechanism, which the previous Government brought in, because this amended bill, the new bill, applies it across the economy. We are an open-market, trading economy at the whim of the international markets, so the moment that someone tries to fix something for the long term or to decide which industries should be in New Zealand—and because industries are foreign owned, apparently, they are bad and ugly, so I say that Labour members should front up to employees and their families and tell them that they work for a bad and ugly international employer. They should just see what those people say.

I look forward to this bill going to the Finance and Expenditure Committee. I look forward to good, solid progress and cooperation as we consider the bill in the committee. I enjoy that committee. I am the chair of that committee, and I look forward to hearing contributions on very tight and specific points about this new bill, noting that so much of this information has been reviewed, the arguments have been litigated in two select committees and many times in the House, so I am quite sure that it will be a very quick, seamless, and focused process. Thank you.

Hon DAVID PARKER (Labour) : This debate, on the Climate Change Response (Moderated Emissions Trading) Amendment Bill, is an argument about good economic management and fundamental economic principles of economic management. I know that there are parties in this House that do not think that climate change is a problem, and that we should therefore not be in the Kyoto Protocol and should not price emissions. That is not the argument we are having today. The argument is about how an emissions trading scheme should be designed.

I will not respond to the Hon Dr Nick Smith’s accusations about process. Suffice it to say that the paper trail in respect of process is on the web. If people go to the Red Alert website they can look at it. The comments that Dr Smith made are not correct.

There were four outstanding issues of significance between Labour and National. We have offered to compromise on all of them, but not to go the whole extent on the fourth issue. The first one was the date for entry of sectors. Because the Government has delayed so long, in practice we cannot bring in stationary energy on 1 January next year.

Hon Dr Nick Smith: You never could!

Hon DAVID PARKER: I disagree. So we agreed—

Hon Dr Nick Smith: Officials say you never could.

Hon DAVID PARKER: The member has had his turn. We agreed to extend that date to the middle of June, and we also agreed to the Government bringing transport forward to that same date, noting that it brings forward the date of costs for consumers of transport, contrary to some of the claims made by National. We do not understand the reason behind delaying agriculture any further. Already New Zealand faces the cost of increasing greenhouse gas emissions in agriculture. We have to count them under the Kyoto Protocol, so why is the Government not sending an economic signal that reflects that reality? None the less we said, even on that issue, that it is politically important to the Government. It won the election, so we would compromise on that issue too. So there was not an unsolvable problem there.

In respect of price caps, if we are to trust the markets, then we should not have price caps. If we are to trust the markets and we want the emissions trading scheme to work, we should not have price caps. Again, we said that the longer the price cap is and the lower the price cap is, the bigger the problem is; if it is not too long and it is not too low, we could probably go there too. I do not think that would be the best outcome, but we could compromise on that. I am not convinced that the so-called halving of electricity cost works, because, of course, we do not change the price of electricity in the long run. It is driven by the marginal costs of new supply, which are unaffected by the discount given to electricity wholesalers. None the less we said that we could live with that.

We were then left with the biggest issue, which was free allocations. This is where the analysis by the Government has been so poor. The Government has not yet justified its transitional measures. It says it is trying to have a transition that moves to the full pricing of emissions over time, yet during that period it will let people increase the amount of free emissions.

Hon Dr Nick Smith: What did the New Zealand Institute of Economic Research say?

Hon DAVID PARKER: The New Zealand Institute of Economic Research had a report that was flawed in a number of areas. For a start, as it said in its own report, it had not properly factored into its report the effect of increasing dairy land prices and other marginal land prices on forestry. It said that in the end it was a line call on the basis of its analysis. We asked Treasury officials about this. We asked them whether they relied upon a general equilibrium model that produces a line call to overturn settled economic theory. Of course, the answer is that they do not.

The reality here is that New Zealand faces the cost of increases in emissions. During a period when other countries are not pricing emissions there is a very real risk that industries that are exposed to competition from those countries will not be able to compete, and during that transitional period New Zealand would therefore lose businesses that in the long term should be sustained here. That is why there should be a generous free allocation to major emitting industries that face competition like that. It does not mean that it is in New Zealand’s economic interests to let that cost grow. It does not follow that one should do that.

There are some similarities between this policy and tariff reduction policy. Arguments are still had to this day in New Zealand about when Sir Roger Douglas and others deregulated the New Zealand economy and exposed the New Zealand economy to competition from other countries. We phased out tariffs. I actually agree with that move; we should have phased out tariffs. The question is whether we should have done it a wee bit slower than we did. I actually think that is a fair question. We clearly should have done it, but no one thinks—whether or not it should have been slightly slower than the pace that we did it at—that we should have increased protection during the phase-out of tariffs. That is what this bill does. It increases the protection of the agricultural sector to allow it to increase its emissions above its current levels of emissions, and taxpayers have to pay for it. That leads to the misallocation of economic resources—

Hon Dr Nick Smith: Not true!

Hon DAVID PARKER: I tell Dr Smith that it is. If it were not true, he would be able to agree to a cap on the free allocation in the agricultural sector. He has said—at least in the short term—that the cap on the allocation in the industrial sector would have been able to be agreed to by his Government because his new allocation methodology in industry would not reach that cap, anyway. I accept him at his word. We will go through the numbers on that. But in respect of agriculture, we know that the Government and the industry already say they are at the world’s best practice. Therefore, farmers will not have to do anything more than increase their output in order to get more free allocation. That makes New Zealand poorer, not wealthier. It sends the wrong economic signal. We will not have a change in land use away from higher emissions behaviour towards lower emissions behaviour.

The agricultural sector accounts for one-half of our emissions. This is economic mismanagement by the current Government. You know, it was a National Government that previously visited supplementary minimum prices on New Zealand. That was poor policy from a prior National Government, and it actually took a Labour Government—with the help of Sir Roger Douglas, David Lange, and others—to remove what were improper supplementary minimum prices. This measure is actually smaller; it is not nearly as significant as supplementary minimum prices were.

Hon Dr Nick Smith: That is ridiculous.

Hon DAVID PARKER: But it is. It is a subsidy for increased emissions in the agricultural sector. It is exactly the same in principle; there is no difference. That is why we cannot agree that we should have an uncapped free allocation in agriculture.

I want to move to a couple of other issues.

Hon Dr Nick Smith: But you can for industry.

Hon DAVID PARKER: No, we cannot. We should not have an uncapped free allocation for industry, either. The reality is, as the Minister says, that so long as the rate of allocation under an intensity basis in industry is reasonably strict, we do not actually reach the cap. It becomes a semantic argument. But it is not a semantic argument in agriculture and, as a consequence, we will not see the hectares of land that we need planted out in trees to absorb carbon because it is a low-cost way of reducing our emissions, and we will not see the reductions in agriculture emissions that we should see by encouraging emitters towards lower emissions behaviour. Quite apart from the environmental outcome, we will get poorer as a country as a consequence of this change to the allocation methodology, rather then richer. That is bad policy.

It is not about jobs, as the Minister says it is. We all agree that there should be generous free allocations so that we do not cause enterprises to leave. But the means of production in agriculture are fixed. It is land. It is processing equipment. It is livestock. No one will pick them up and take them away. The question is whether we want to see that sector expanding in a way that does not internalise the cost of its emissions. It will still expand in areas where it is profitable to do so if it is facing marginal costs of emissions, but it will not expand where it is not profitable to expand when the marginal costs of emissions are included. That is what an emissions trading scheme is meant to do. The current scheme, which the Government seems determined to push through, will actually make New Zealand poorer, not richer. Quite apart from the environmental consequences, we will become poorer, not richer.

Hon Dr Nick Smith: You are far too pure!

Hon DAVID PARKER: I am not being pure. I am saying we can have intensity-based allocation. I am just saying that during the transitional phase, if we want emissions to come down, we should not pay for them to go up—beyond a cap. We can allocate on an intensity basis up to that cap. It is not as good as our historical base in terms of the marginal pricing signal it sends to the emitter, but it can be done.

Lastly, this Government is breaching another very important point of principle. Treaty settlements are full and final. Treaty settlement assets become assets that are subject to the laws of this land. The National Government deal with the Māori Party says that that is no longer the case, and that it will do a special deal for Ngāi Tahu in respect of assets it received. The Government of the day did nothing wrong. It did not misrepresent the position.

Hon Dr Nick Smith: Not true!

Hon DAVID PARKER: Yet a specific line says National will address the issues on the value of pre-1990 forests that went to Māori under Treaty settlements.

JEANETTE FITZSIMONS (Green) : The emissions trading scheme proposed in the Climate Change Response (Moderated Emissions Trading) Amendment Bill is the sort of emissions trading scheme one has when one still thinks that climate change is a hoax. Nothing in the bill is about reducing carbon emissions in order to protect the climate. Nothing in the bill is about protecting the climate. The existing law puts a price on carbon emissions, although quite lightly and quite late; this bill weakens that price considerably.

The key goal of emissions trading must be to put New Zealand on a path towards a low-carbon economy where growth and prosperity happen in those areas with low emissions. That is where we need to be in the future in order to be a prosperous country. That is not what this emissions trading scheme will do. The bill is virtually a carbon copy of the Australian bill, which has been rejected twice by the Australian Senate and which may never pass into law there but is apparently good enough for us. By aligning with the non-Australian scheme we are prevented from aligning with the EU, which rules out aligning with countries with intensity allocations—

Hon Dr Nick Smith: They’re changing to intensity.

JEANETTE FITZSIMONS: —with a cap—and it prevents us from aligning with where the US and Japan are going. But, apparently, it is only the little South Sea bubble of climate deniers in the world that we want to be part of. We need to think carefully about whether a scheme that is designed for an economy where farming is a minor source of emissions, forestry is not a big player, and the issue is mainly coal, steel, and heavy industry is the best for our economy, which is very different from that.

In “cap and trade” schemes, whether for pollution or for fish quotas, the “cap” protects the resource or the environment, and the “trade” allocates rights efficiently. The proposed emissions trading scheme is not a “cap and trade” scheme, because there is no cap. Therefore, there is no protection of the climate. Emissions are allowed to—actually, they are encouraged to—go on climbing forever. The existing scheme says to polluters that it will help them stay in business, competing with firms and countries with no price on carbon, but if they want to grow their emissions beyond where they are now, then they must factor in the full price of carbon. The proposed moderated scheme says to polluters that if they want to grow their emissions, then the taxpayer will pick up 90 percent of the cost of those new emissions for them, and the subsidy will reduce only very slowly over three generations.

The most extreme example of how that will work is Methanex, which turns our limited and precious natural gas resource into methanol in two plants in Taranaki. Methanex substantially downsized its operations in 2004-05 as the Māui gasfield was running out and new gas was expensive. Shortly after it became known that the Government would allocate free credits on the basis of total production, Methanex announced that it would expand production to the maximum possible in both its plants—2.33 million tonnes of methanol, which is six times what it was in 2005 and two and a half times what it is now. If the bill becomes law, the taxpayer will pick up the cost of 90 percent of those emissions, as well as the cost of its existing operation. Assuming that the carbon price is as the Minister for Climate Change Issues expects—$25 a tonne until 2012 and $50 thereafter—the taxpayer subsidy to just that one company will be around $1 billion over 10 years.

There is an interesting question here of whether this industry growth, along with the new carbon-intensive start-ups that will happen, will grow New Zealand’s emissions beyond the number of credits we have been allocated by the initial Kyoto Protocol. Given that agriculture is part of the scheme, we may well find ourselves with a deficit.

The Minister claims that he is putting in place transitional measures to help ease emitters into having to pay for their emissions. I say to the Minister that the transition does not start now; it began in 1992. That was when New Zealand first committed, in an international treaty, to reducing our emissions and protecting our forest sinks. If no one noticed that in 1992, they should at least have noticed it in 1997, when we negotiated a reduction target at Kyoto, in 2001 when we ratified that reduction, in 2002 when the Government of the day announced a carbon charge, or in 2007 when legislation was introduced for our existing emissions trading scheme. How much notice do businesses need that a carbon price must be factored in to their investment decision-making?

Some businesses have already factored it in. Contact Energy has put aside its consented gas-fired plant at Ōtāhuhu and turned to geothermal and wind energy. Many people have bought more efficient cars and appliances and have started to take account of their carbon footprint. But the proposed emissions trading scheme is designed to favour those who have done nothing.

We have had 17 years of transition. How many more years do we need? The Kyoto Protocol set up a transitional period for the world; it was to run from 1997 to 2008, when countries would first be accountable for their commitments to reducing emissions. That was almost a decade of transition, and, as of nearly 2 years ago, the internationally agreed transition period ended, and New Zealand has been accountable for all its emissions over 1990 levels.

There is a real, actual dollar cost to the economy. It is much larger than it needs to be, because virtually nothing has been done to reduce emissions cost-effectively over that decade. The question, as it has always been, is who pays the cost—the polluter or the taxpayer? The table in the explanatory note of the bill sets out the costs. In 2030 it is about $2 billion a year, and from thereon it phases out very slowly for a couple more generations. It is true, as the Minister said, that 2030 is a long way away, but he is also fond of telling us that climate change is a long-term issue and that we should not worry if no progress is made on reducing emissions for a long time. He cannot have it both ways.

Under the bill the taxpayer will give Methanex around $1 billion over 10 years. What about the other players? Well, the total cost to the taxpayer of exempting agriculture for the first 5 years of the first Kyoto period at $25 a tonne is around $700 million. A further 2 years at $50 a tonne is $281 million. So adding them together, by the time agriculture enters the scheme, farmers will already have received a taxpayer subsidy of close to $1 billion. After that the subsidy accumulates to $1.2 billion to $1.3 billion, depending on how fast agriculture grows.

When the previous emissions trading scheme legislation was reported back to the House, there was a note in the select committee’s commentary from Nick Smith that National wanted to explore bringing in nitrous oxide earlier than 2013 in order to encourage better farming practices. The Government has not done that; instead, it has delayed bringing in nitrous oxide and methane by a further 2 years. Subsidising farming in that way will raise land prices. That is where the value gets capitalised, making it harder for foresters to purchase land in order to plant trees. It is a slap in the face for every New Zealander who has bought a smaller car, moved closer to work so they can cycle or catch the bus, put in a solar water heater, or bought an efficient wood stove. They expected a return on that investment, and it has just been halved. They got a higher tax bill, as well.

Every business that has taken carbon prices into account in its investments decisions, replaced its coal-fired boiler with wood waste or a smart boiler with lower power use, or done a complete lighting retrofit across its offices will find that its return on investment has just been halved. Every forester with trees planted since 1990 has just seen its local market collapse and the price it can get capped at $25. Local polluters now need to buy only half the units they thought they were going to need, and they can get them from the Government at $25. Professor Euan Mason of the School of Forestry has said that this will dampen any enthusiasm for planting more forest in the next few years, so New Zealand’s emissions will rise further.

I cannot see what the Māori Party gets out of this deal. There is absolutely nothing in the legislation. The 90 percent fishing subsidy was already National policy. The forestry conditions have not changed. There will be a Treaty clause, which we have not seen. The nicest thing I can say is that the Māori Party has been conned. It has been promised a commitment to be inside some talks and to sit around the table. Well, we went down that road once or twice in the past few years, and it was not worthwhile.

In conclusion, the one good thing we can say about the bill is that the legislation will not last. It will not endure. New Zealand cannot bankrupt itself in supporting transnational corporations.

Hon Sir ROGER DOUGLAS (ACT) : Normally, our leader, Rodney Hide, would take a call on this subject, but I will make one or two points. My first point is that ACT will not be voting for the Climate Change Response (Moderated Emissions Trading) Amendment Bill. It is fair to say that one or two of the ideas that were put before the Minister for Climate Change Issues and were, I think, rejected by him would have been reasonably attractive to us, and we could have supported them. I think it is well known that we would support a low carbon tax, because it is possible with a carbon tax to get the economic incentives right in a way that is not possible under the bill. But it also seems to me that this particular bill, and the deal-making that went on around it, is of the worst kind.

It seems to me that politicians around the world have been attracted to the emissions trading scheme because it does not look or sound like a tax. Moreover, politicians can hand out the credits in a politically advantageous way, and I suggest that that is what is likely to happen under the legislation.

Already we hear that the emissions trading scheme legislation will include a Treaty of Waitangi clause, which means that Treaty settlements will be looked at afresh, that iwi fishing interests will be allocated carbon credits, and that there is pressure to increase some welfare benefits. As it turns out, National has the support of the Māori Party only for the bill to be referred to the select committee. It is obvious who has the leverage here.

The Government is congratulating itself on the delayed entry and gradual transition that is envisaged for different sectors. But the direction of policy is a crucial signal to investors. That is the important factor, not the precise date. A gradual transition does not help much as far as jobs and investment are concerned. The destination is the problem, and the signal to businesses is loud and clear: they should invest elsewhere.

The business sector and investors know very well that the Government is putting in place a mechanism that a future Labour-Green Government could use to massively penalise various energy-intensive industries. For farmers the future costs are not far off, and the inevitable consequence is that those costs will be capitalised into farm prices. That will mean lower farm prices than would otherwise be the case. For existing farmers the emissions trading scheme means a wealth loss and reduced future income, together with massive uncertainty. For marginal businesses that will not face the emissions trading scheme costs in other countries, the signal is very clearly to redirect investment to those other countries.

It seems to me, too, that the problem with this process is that it has not been particularly transparent. Some of the advice in relation to the emissions reduction targets—particularly from Treasury—has not, I believe, been effectively answered by the Government. Treasury is saying that the Minister’s proposals assume a best-case scenario and do not adequately recognise a number of the associated risks.

Specific concerns are that the Minister is setting a target that, in Treasury’s words, imposes higher costs on New Zealand compared with our trading partners, does not have an unconditional target as a possible fall-back position, includes forest credits that are uncertain and have a future liability, puts too much emphasis on the current Kyoto Protocol targets, and does not adequately consider international financing commitments.

The Minister may well know more than Treasury does—I accept that that might be the case—but the point I want to make is that if we are going to have a process like this, then it should be transparent. Surely, the people of this country are entitled to know why the Minister rejected Treasury’s advice. Does the Minister not agree that his proposal will cost another $12 billion to $16 billion over a 9-year period? Is Treasury wrong, or is the Minister saying that Treasury is right but that we should bear that cost? Is it true that, as Treasury is saying, we are imposing a higher cost on New Zealand companies than on our trading partners? If that is the case, it should be made public.

If the Minister wants public acceptance of the scheme, he would be wise to go through the sort of process that the Labour Government of the 1980s did with GST. We put out a white paper, and submissions were invited from the public. We had a committee, which was headed by a National Party candidate from 1984 in order to give it transparency, and we took recommendations and gave a response. The problem I have with the Minister is that I think he is going through a process where there is not an awful lot of transparency or accountability. I wonder how many of National’s Cabinet and caucus actually understand precisely what the Minister is doing.

TE URUROA FLAVELL (Māori Party—Waiariki) : Tēnā koe, Mr Deputy Speaker, kia ora anō tātau katoa i tēnei rā. Ā, i te ahiahi nei i poroporoakihia a Tā Hauata Morihana engari, nō nā tatanei kua rongo ake kua hinga a Tikirau Stevens rāua ko James Ritchie. Nō reira, koia nei te poroporoaki ki tērā kāhui a te tokotoru kua hinga i te rangi tonu nei. Waiho rātau kia moe, anei tātau e hui nei i tēnei ahiahi. Kia ora tātau.

• [An interpretation in English was given to the House.]

[Thank you, Mr Deputy Speaker, and greetings again to us all today. Earlier this afternoon we paid a tribute to Sir Howard Morrison, but word has just arrived that Tikirau Stevens and James Ritchie have died. This tribute, then, to that cluster of three who died today. Leave them there to rest, while we meet here this afternoon. Greetings to us.]

I rise to take a call on the first reading of the Climate Change Response (Moderated Emissions Trading) Amendment Bill. While we debate the bill in the House today we know that a high-level summit on climate change is meeting in New York, bringing together over 100 heads of State and Government in the biggest ever gathering of political leadership. In addressing the summit, the United Nations Secretary-General, Ban Ki-moon, prepared the ground for the United Nations climate change conference to be held in Copenhagen in December in just 74 days’ time. His words are worth repeating for the record. He said: “Failure to reach broad agreement in Copenhagen would be morally inexcusable, economically short-sighted and politically unwise.” Those words tell us that we need to get our act together, and fast.

Climate change affects us all, and we all have a part to play in encouraging environmentally responsible choices. The Māori Party has consistently raised our call for an emissions trading scheme to be effective, fair, and transparent. It must be effective in the way in which it reduces emissions to enable Kyoto targets to be met. It must be fair, in that all sectors should be included, units should be allocated fairly between and within sectors, and no sectors should receive more free units than necessary or face disproportionate costs. It must be transparent, in that all allocations, including free unit allocations to industry and other sectors, should be incorporated in the legislation.

Our explicit support for the first reading of the bill is predicated on the basis of the preservation of our environment and the need to invest in ensuring that the finite resources of Papatūānuku are safeguarded. We do not support subsidisation of the nation’s largest polluters at the cost of householders and small to medium sized businesses. The over-representation of Māori in lower socio-economic areas, when coupled with the concentration of iwi interests in the primary sector—forestry, agriculture, and fisheries—has always meant that the emissions trading scheme is very high on our agenda.

The bill states that the key purpose of an emissions trading scheme is to enable New Zealand to comply with obligations at the least cost to the economy, while providing certainty for economic growth. To be meaningful in its application, we suggest that its purpose must also be to transform the economy in a way that takes account of our social and environmental well-being. How should that transformation take place? As a starting point the bill must include some form of statutory provision for the Treaty relationship. We have spoken passionately about the need to protect the property rights of iwi and the citizen interests of Māori. We have taken as our lead the recommendation to the Government from the Climate Change Iwi Leadership Group. That recommendation was that “the obligations of the Crown to Māori, including those under the Treaty of Waitangi, not be compromised by the New Zealand emissions trading scheme.”

We acknowledge the support of the Government for an amendment to the bill to include a specific reference to Te Tiriti o Waitangi, and we will be working with officials and Crown Law to draft an appropriate amendment. In recognition of the Treaty relationship, we will ensure that Māori do not bear a disproportionate share of the burden. We are committed to ensuring that a full array of assistance measures be considered and targeted at rural communities, lower-income households, and other members of our community who are likely to be more vulnerable to the impacts of climate change. Those individuals are likely to be less able to meet the costs involved.

The Māori Party has been concerned throughout the process that households and small businesses will face disproportionate costs under an emissions trading scheme. On reading the bill, we note that the Household Fund will be disestablished. What is not in the bill, but is a key priority for the Māori Party, is specific detail around the mitigation of the impacts of the emissions trading scheme at a household level. The Māori Party seeks an extension of the Government’s energy efficiency assistance scheme specifically targeted at low-income households. That is not currently provided for in the bill, but we are working with the Government to ensure that there will be particular measures to support households that will simply not be able to sustain increased costs.

The bill enables the planned increase in the cost of petrol and electricity as a result of the scheme to be halved, from 7c per litre to 3.5c per litre for petrol, and from a 10 percent increase to a 5 percent increase for electricity, over the first 2 and a half year period of the emissions trading scheme. It is estimated that increases in household electricity and petrol costs will be $165 per year, rather than $330 per year, in the transition phase. We are pleased that specific provision is being made, but we emphasise that the two-for-one deal, along with the household insulation fund, is not a sufficient mitigation of the impacts of the emissions trading scheme for lower-income families.

Another set of issues that we promoted in the revision of the scheme was around afforestation and engagement in offsetting. We have come to the Government with some very specific proposals, which have been outlined publicly. For the record, we expected there to be some compensation for iwi who have forests that were returned in Treaty settlements prior to the emissions trading scheme, and a commitment from the Government to work with those iwi and the Māori Party to find solutions. We expect that the Climate Change Iwi Leadership Group will play an ongoing role in international negotiations to allow for offsetting. We expect that the possibility of a Crown and iwi partnership will be scoped, including exploration of the viability of accessing the Department of Conservation estate. Our commitment to iwi has been that we will do all that we can to create a robust afforestation policy, which would include a commitment to iwi-Crown joint afforestation programmes. We have also identified the need for a biodiversity standard to prevent planting over regenerating indigenous forest. Another element of the ongoing work will be to review the rules of the Permanent Forest Sink Initiative to remove any unfair bias against landowners, who, under the current covenants, have to take all of the risk.

We are arguing for the inclusion of post-1989 indigenous forests and the publishing of accurate tables of the carbon sequestered in them. Although we are pleased that more unit allocation plans are included in the bill than are in the existing legislation, the rules for unit allocation for the forestry and fisheries sectors are not in the bill, because they are to be set by regulation. There are other matters outlined in the bill that warrant much fuller discussion, including the proposed intensity-based allocation of units and the proposed price cap.

Finally, the urgency of the climate change crisis demands the development and implementation of an effective scheme that is not reliant on if or when the price of carbon increases to a sufficient level to incentivise change. The nation urgently needs to grapple with the notion of sustainability and the increasing challenge made by a changing climate system and impending peak oil to think and live differently. It was along those lines that we argued that the Māori Party should be actively engaged in ongoing dialogue on a broader environmental policy programme. We will also continue to urge that iwi be directly engaged in policy design and implementation as the emissions trading scheme develops.

The Māori Party has open discussions with National; it is no secret. We intend to work hard to balance economic imperatives with environmental issues. This is the first reading debate on the bill; there is a lot to talk about and to nail down as we advance. We want to move positively forward, and we intend to make our requirements very clear as we go, to ensure that we can indeed live with the final product. In the expectation of our agreements being honoured, the Māori Party supports the Climate Change Response (Moderated Emissions Trading) Amendment Bill at its first reading.

Dr PAUL HUTCHISON (National—Hunua) : Thank you for the opportunity to speak on the incredibly important Climate Change Response (Modified Emissions Trading) Amendment Bill. It is very much about ensuring that New Zealand’s response to greenhouse gas emissions better balances our environmental responsibilities with our economic opportunities and realities. This scheme balances it far better than Labour’s proposed scheme. The introduction of this bill comes prior to a vital world climate change meeting in Copenhagen, and after a huge amount of work was done by the National Government, its officials, and a special select committee. The Emissions Trading Scheme Review Committee reviewed the previous Labour Government’s emissions trading scheme and related matters. The review was initiated by the coalition agreement between National and ACT. I acknowledge the huge amount of work put into this bill by the Hon Dr Nick Smith and his officials. I also acknowledge the amount of work put in by the chairman of the select committee, the Hon Peter Dunne.

I believe that the committee worked incredibly diligently, particularly on the National side and the Māori Party side, but I do acknowledge the special detailed knowledge of individuals like David Parker and Jeanette Fitzsimons. Although I do not agree with their views—I do not believe they have a realistic hold of the realities of the impact of their schemes on the New Zealand economy—I certainly admire greatly their detailed knowledge and their continual probing of the officials during the select committee process.

In the committee report to Parliament there was a consensus, apart from the ACT Party, about the United Nations central and benchmark projections. The committee recommended two things: firstly, that the Intergovernmental Panel on Climate Change’s projections and findings of the fourth assessment report underpin New Zealand’s future international policy negotiations, and that is happening right as we speak. It was noted that there remain, however, uncertainties in the science, but that these uncertainties should not be a reason to delay action by the international community.

Secondly, the committee recommended that New Zealand take action now to reduce its emissions, and send a credible signal about future policy in order to protect our international reputation, particularly in the area of trade and tourism. The committee accepted that human-induced climate change poses a global threat, and that there is a need for a global mitigation effort. This amendment bill certainly fulfils those recommendations.

It is a great pity that Labour was not prepared to reach a realistic consensus on this modified emissions trading scheme bill. I understand that National offered a compromise position, but Labour refused it. There was certainly quite a different view from Charles Chauvel than from other people I have spoken to. But I have sensed right throughout the committee process that Labour was going to be very difficult to shift from its position on its Climate Change Response Act last year. I accept that there were two major issues, and they were about allocation and the entry of agriculture into the scheme. But it seems to me that Labour has little appreciation of the severe effects that its heavy-handed approach could have on our economy and, therefore, on our ability to afford dealing with climate change. The agriculture sector will welcome the extension of its involvement from 2013 to 2015, and this change will also help align New Zealand with the Australian scheme.

However, what neither Labour nor the Greens seems to appreciate is that agriculture is the backbone of New Zealand’s economy. They do not appreciate that it supplies us and the world with much-needed protein in a very cost-efficient way, that sectors like the dairy industry have a combined debt right now of $20 billion to $30 billion, and that the Labour scheme would mean that many hundreds, if not thousands, of New Zealand farmers would be put out of business. Although Labour and the Greens wanted to lead the world in punishing our farmers, the National Government wants New Zealand to lead the world in agricultural emissions research. In the last 48 hours it has been announced that both India and the USA are keen to join New Zealand’s centre of research excellence and to contribute financially to it. They realise that New Zealand has a real contribution to make in the reduction of agricultural emissions research. I am personally extremely pleased with these developments, as I crafted much of National’s science manifesto last year, which focused on the idea of New Zealand leading the world in agriculture emissions research.

Lastly, the bill’s introduction of an allocation intensity model without a cap will achieve a much more pragmatic balance for industries such as steel, aluminium, and cement. New Zealand Steel in the electorate of Hunua, which I proudly represent, employs 12,000 people locally at an average wage of $90,000, and 5,000 to 6,000 people around the country. It has been audited to have the world’s best practice efficiency, and it co-generates something like 60 percent of its own energy. Under Labour’s scheme it may well have gone out of business, meaning that New Zealand would become dependent on importing steel, and that steel would probably be made in less efficient mills around the world, thus leaking more greenhouse gases into the atmosphere and making world greenhouse pollution even worse. That is the very principle that Labour has failed to understand, either in its negotiations, or its previous scheme.

Under this amending bill, our vital energy-intensive trade-exposed industries are incentivised to become more efficient, thus contributing to a lower carbon world economy. This amendment bill positions New Zealand very credibly in the international scene to combat climate change. It clearly balances our environmental responsibilities with the economic realities and opportunities facing New Zealand right now.

MOANA MACKEY (Labour) : I would say that I am happy to stand and take a call, but I am actually not at all happy to stand and take a call on this Climate Change Response (Moderated Emissions Trading) Amendment Bill. I am not sure whether I am disappointed and angry more about the way that the Government has conducted the negotiations on this issue or about the product that we are now debating.

I think one of the saddest things about today and about this legislation is that the Minister for Climate Change Issues, Dr Nick Smith, who is in charge of the bill, was once the great, proud beacon of the Bluegreens. This National Minister once stood up and talked proudly about his passion for the environment. He talked proudly about the work he was doing within National to ensure that environmental legislation with integrity was bought in. Now this Minister will be for ever remembered as a sell-out. He will be remembered as someone who brought into this House terrible, flawed legislation that does nothing except transfer the cost from polluters—

Hon Dr Nick Smith: A month ago you were in my office agreeing with it.

MOANA MACKEY: I say to Dr Nick Smith that I will get to that; he should not worry. The bill does nothing but transfer the cost from polluters to taxpayers. Nothing could be more telling than the fact that the Minister did not even talk about the environment in his speech. He did not even talk about reducing greenhouse gas emissions.

Hon Dr Nick Smith: Yes, I did.

MOANA MACKEY: No, he did not. All that the Minister could talk about was his hollow justifications for why his blue-green credentials have been completely destroyed. I think that is sad. Once upon a time Dr Nick Smith was seen as someone who was genuinely trying to bring a change to National.

When we were in negotiations towards the beginning of this year, Dr Smith told us that the entry date for the agricultural sector was not a bottom line for him and that if it was the bottom line for us, then that was fine. Then he went back to his caucus and his caucus reined him in. David Carter had been going around telling Federated Farmers that the agricultural sector would never come in and the Government would be able to delay it and delay it. My local Federated Farmers branch told me that. When Dr Smith told us in those negotiations that the agricultural sector was not a bottom line and that he was happy for it to come in in 2013, I thought: “I bet he has not talked to his caucus about that.”, and that is exactly what had happened.

One of the really flawed parts of this process is that members have not even read this bill. We got it seconds after the Minister started his speech. How in God’s name are we expected to give speeches on such important legislation when the bill has been sitting in the Bills Office all day today? The Government would not release it so that the Opposition and the public could take the time to scrutinise it before members were debating it. Charles Chauvel went to a briefing last night where members were not even shown the bill. They were given a copy of a draft; the bill was not even finished. We are being told that some clauses will be introduced during the Committee of the whole House stage. Even the Finance and Expenditure Committee will not have the chance to look at those clauses. I think that this is an absolute travesty.

I say to Craig Foss that it is not true that Labour introduced its emissions trading scheme legislation under urgency. Yet again, National is rewriting history because the facts do not suit it. The facts do not back up what it is doing with this bill. I want Dr Nick Smith to release those Cabinet papers so that the public can know what the cost will be. I think that Dr Smith should release those Cabinet papers and explain to New Zealand taxpayers why he is telling them: “They pollute, you pay.”, because that is what Dr Smith is doing with this legislation.

We have just had the report back of the Emissions Trading Scheme Review Committee. Everyone on the committee worked very hard, but that committee was an utter waste of time. Dr Smith has no one to blame but himself for the fact that he has faffed around for nearly a year, and now this legislation will be forced through in a few months. Those of us who were members on the committee did not even know what we were meant to be doing. We had terms of reference that covered everything. Apparently, the committee was not meant to re-examine the science, but it did, and we spent a lot of time on that stuff. Just when we were starting to get down to debating some of the real issues and talking about how we could address them, suddenly the Government members had obviously been told to hurry up and finish as they had to get it over and done with. The committee was shut down. That is reflected in the minority reports where we say that we cannot have confidence in the report because we did not even have a chance to talk about most of the issues. We were feeling our way around blindly because we had no legislation. The submitters did not know exactly what they were submitting on. They were just concerned that the process meant more and more delay.

National members say that Labour was not prepared to compromise at all on our scheme. I ask Dr Paul Hutchison whether he has read the Labour Party minority report, where we deliberately outlined all the areas where we thought that we could bridge the gap between National and Labour on the emissions trading scheme. We get it that we lost the election. We get it that National campaigned on changing the emissions trading scheme, and we are fine with that. As long as the scheme continued to have environmental integrity, we were happy to support it.

Hon Steve Chadwick: That’s our bottom line.

MOANA MACKEY: That is our bottom line: an economically sensible scheme with environmental integrity. Labour would have been happy to support such a scheme, and I believe that we could have got there. I believe that we could have got there.

I say to Dr Paul Hutchison, who was in none of the negotiation meetings that we had but who seems to talk as though he knows exactly what went on, that he has no idea of what went on. We had a very good meeting with the Minister in the week before the announcement of the deal with the Māori Party—a very good meeting. We discussed a lot of issues in extensive detail and we discussed how we could get past them, as my colleague David Parker has said. We indicated the areas that we might be able to compromise on, but we said that we needed to see the Treasury papers. We needed to see the officials’ advice, we needed access to the officials, and we needed to run some of those economic models past them to see what the cost to taxpayers and to the economy would be before we could say that, yes, we would absolutely agree to the scheme. The Hon Dr Nick Smith said that he understood that.

So imagine my surprise when I got off a plane in Wellington on Monday and turned on my BlackBerry to find out that, even though that very morning Labour had sent through the memorandum of understanding—where we thought we needed to go to from here—before Dr Smith went to Cabinet, a deal had been done. Labour members were not told. Dr Smith did not even pick up the phone to call Charles Chauvel to tell him that it was all over. He did not even do that.

Dr Nick Smith then went on the radio and made up a story that, apparently, he had given us a deadline, which he had not, and three Labour members who were at that meeting will say that he absolutely had not done that. Why would we have sent through the memorandum of understanding with the next steps to Dr Nick Smith if we had deliberately breached some kind of deadline? We had not. He then invented a story that he had had a conversation with David Parker, which did not happen, and then he reverted. It is unbelievable that a Minister of the Crown would act in that way.

Labour wanted to work with National to get an enduring emissions trading scheme. We see that as being absolutely in the best interests of New Zealand. We were more than prepared to compromise. We thought that the discussions were ongoing. We were happy to be part of those discussions, provided we had access to the officials and the advice. We told the Minister that, and then he went out and announced another deal that has no environmental integrity whatsoever.

Hon Member: Cobbled together.

MOANA MACKEY: It has been cobbled together. The Minister has not even told us that the negotiations are over, and now he has tried to accuse us of acting in bad faith. I think that the public will judge that comment from the Minister for what it is, which is absolute, absolute fiction.

The Minister then tried to say that the difference between National and Labour is so small that we should just get over it and support his legislation. But Labour does not think that one of the biggest transfers of wealth from polluters to taxpayers is a small issue. We do not think that giving incentives for big polluters to go on polluting and, in fact, to increase their pollution is in the interests of the environment or the New Zealand taxpayer. If we go by what David Carter said, he sees this stuff being phased out over 90 years. That is what we are looking at with this emissions trading scheme. For the Minister to say that he thinks we are being unreasonable, because we do not think that Kiwi taxpayers should have to pay for increases in greenhouse gas emissions, is absolutely ridiculous.

But perhaps the most disappointing thing about this entire experience is the position of the Māori Party. Rahui Katene was a very, very good member on the select committee. She was passionate about protecting the environment. She was adamant that the Māori Party would never ever support an intensity approach without a cap. The Māori Party said so in its minority report. It stated that it would never support an intensity approach without a cap. We had Craig Foss running around in the select committee. He was talking to the Māori Party chief of staff and trying to make sure that the Māori Party did not put its name to that statement in the report, but it did. It stated that there should be no intensity approach without a cap.

Te Ururoa Flavell gave a speech earlier. I wonder whether he even knows what he has signed up to. He said that he would not support something that would allow emissions to increase. Well, I say to Mr Flavell that that is exactly what this legislation does. He said that he would not support a weakened emissions trading scheme. That is exactly what this legislation does.

I do not know whether the Māori Party members have their heads in the sand, whether Dr Smith has told them things that are not true, or whether they have some sweetheart deal that they are not telling us about. I think that the taxpayers who will have to foot the bill for this scheme deserve to know, because this is a weakened emissions trading scheme. This will increase our greenhouse gas emissions, and that is not good for the environment. The people whom Mr Flavell talked about, low-income New Zealanders, will now have to foot the bill for the big polluters. They will now be allowed to continue to pollute with absolutely no restriction.

HEKIA PARATA (National) :Tēnā koe, Mr Deputy Speaker. Tuatahi, e tū ana ki te tautoko i ngā poroporoaki kua poroporoakihia ki a Tā Howard me tōna whānau me taku hoa tata, tōna tamāhine a Donna. Haere, haere, haere atu rā. Ā, kātahi anō au ka rongo kua hinga anō tētahi tangata nō tērā wāhi, arā, ko ahorangi Hēmi Ritchie. Nā reira, me tangi atu ahau hoki ki a rāua tahi. Haere, oti atu, ā, oti atu.

I wish, first of all, to join in the farewells to Sir Howard Morrison and to express my condolences to his family, Lady Morrison, and my long-term friend, his only daughter, Donna Morrison. I recently heard in the House tonight that Professor James Ritchie has also passed away, and I extend my condolences to his family too.

I stand in support of the Climate Change Response (Moderated Emissions Trading) Amendment Bill. I stand alongside the Minister, the Hon Dr Nick Smith, and my colleagues in putting this bill before the House. As the Minister has stated, this bill is about implementing for New Zealand a workable and affordable emissions trading scheme. It takes a responsible approach to the climate change problems caused by greenhouse gas emissions, although it is also realistic about how much a small country like New Zealand can contribute. We said we would legislate for and implement a carefully balanced, “all gases, all sectors” emissions trading scheme. This bill does just that.

The bill is also consistent with the recommendations of the Emissions Trading Scheme Review Committee. At this point I should like to acknowledge the chair of that committee, the Hon Peter Dunne, for his careful and well-balanced chairing of the committee, and also the members of the committee. I do not share the sentiments of Opposition members that it was a waste of time. I thought that a lot of work was covered by the committee, and I would like to share in Dr Hutchison’s acknowledgments of, in particular, the very detailed knowledge of the Hon David Carter and Jeanette Fitzsimons. The members of the committee, including my colleague Rahui Katene, brought a balanced perspective to the debate, with a strong commitment to Papatūānuku as well as a real concern about jobs, the immediate impacts on household costs, and an understanding of the importance of primary industry to New Zealand’s economic future. This bill recognises these views.

In the report of the Emissions Trading Scheme Review Committee, four principles were identified in the chapter on Māori interests. The first was fairness and equity. It was that an emissions trading scheme must not disproportionately affect Māori, either as iwi collective asset-holders or as individuals and householders. The changes we are making to the emissions trading scheme are about ensuring that the scheme is workable and affordable, so that the New Zealand economy and Kiwi jobs are not put at risk, which they would have been under Labour’s scheme. The changes halve the cost of the current emissions trading scheme for families and households for the next 3 years of the scheme—

Hon Steve Chadwick: You’re just reading the lines.

HEKIA PARATA: I say to Mrs Chadwick that I am not lying. The changes halve the costs of the current emissions trading scheme for families and households for the next 3 years of the scheme, by reducing power price increases from 10 percent to 5 percent, and by reducing fuel cost increases from 7c per litre to 3.5c per litre. Through the negotiation of the Māori Party a number of changes are in prospect to the bill.

The second principle recorded by the committee related to the Treaty of Waitangi. It was that the property rights of iwi and the citizenship interests of individual Māori must be protected. Through the negotiation of the Māori Party, a Treaty clause is to be included in the bill. There is recognition that iwi have issues in respect of the deforestation provisions and their specific Treaty settlements, and there is a commitment from the Government to work with iwi and the Māori Party in order to find solutions for iwi that have had forests returned to them and that have had Treaty settlements.

Hon Steve Chadwick: The tail wagging the dog.

HEKIA PARATA: Na reira, mehemea kei te whakarongo tērā mema, ka mōhio a ia ko Ngāi Tahu tētahi o ngā iwi kei roto i tērā wāhanga. If the member would care to listen, I tell her Ngāi Tahu is one of the iwi included in that category.

The third principle was about tangata whenua. It was that iwi are enduring shareholders in their land-based and natural resource assets in New Zealand, and that they take a long-term, multigenerational view. The changes ensure we do not destroy the backbone of our economy by jeopardising the key industries of agriculture and fishing. They defer the date that agriculture is brought into the scheme to the more realistic timetable of 2015 and improve the transitional support for the fishing industry. The changes encourage tree planting, by creating internationally valuable credits for forest owners.

The fourth principle incorporated in that report was about social and environmental concerns. It was that economic effects and benefits must be balanced against social and environmental effects and benefits. The Māori Party has negotiated a specific proposal to enhance the Government’s energy efficiency assistance, including home heating and insulation for low-income households, and there is potential for the Treaty partners to be jointly involved in afforestation programmes to deliver both climate change and biodiversity benefits.

I should like to acknowledge the role that the Māori Party has played. Through its commitment to a long-term, sustainable future for Aotearoa New Zealand that balances a complex range of issues, the Māori Party has shown the kind of leadership that this House requires and respects. I commend this bill to the House.

Hon SHANE JONES (Labour) : Tēnā tātou katoa. I begin by broadcasting to every taxpayer that the Climate Change Response (Moderated Emissions Trading) Amendment Bill puts in place a scheme that they will go on paying for, whilst at the same time the architects of the bill—the Government—give them daily, weekly, and monthly lectures that there is not enough money to go around. There is enough taxpayer largesse for the Government to reward the vested interests and the corporate forces that actually sustain its support base. This is a shocking and utter ravaging of our tax base.

Hon Dr Nick Smith: It’s not true. Treasury says it’s not true.

Hon SHANE JONES: There was a point when the Minister for Climate Change Issues was a credible voice for environmentalism in his own party. He was a strong speaker, but now he is a weak man. His sardonic tone throughout this entire debate has soured what could have been a very strong win-win situation.

I turn to what an earlier speaker, David Parker, said about the Treaty settlement process. Our country has international obligations, which the Kyoto Protocol represents. Climate change obligations affect all New Zealanders; I say to National that, despite its desire to partition Māori and Pākehā, there are no differences, Hone Harawira notwithstanding, between a Māori emission and a Pākehā emission. This notion that the Government can cut a side deal for the Ngāi Tahu tribe brings into incredible disrepute the whole Treaty settlement process. During the time Labour was in Government we had a very senior lawyer, a QC, who was—if memory serves me correctly—agreeable to the Ngāi Tahu advisers as well. That QC went acre, rood, and perch through the entirety of their settlement and did not find a basis for reopening that settlement and giving them an opportunity for further lucre. At the same time, people who have similar classes of assets will not get that privileged treatment. This is from the person and the party who railed about “iwi” and “Kiwi”—they are giving a sweetheart deal to one community in Māoridom—

Hon Member: Only one.

Hon SHANE JONES: One. They are foisting it on the rest of us, and they will not release the advice or the papers as to why that tiny segment of Māoridom ought to get this privileged status. There is no reason whatsoever why they should shirk their international obligations and not stand side by side with the rest of us. An industry or a sector has to go through a transitional stage; our colleagues have already addressed that fact. Of course there was always going to be a transition. Of course there will always have to be offsetting features. But that is different from choosing one privileged group on the basis of its tribal claims process. The question is why the Māori Party continued to oppose the introduction of an emissions trading scheme that was intensity based, but after a small degree of lobbying in the South Island, it rolled over.

It has yet to explain that this is a massive shift of burden and financial liability from corporate interests on to taxpayers. That is the sort of thing that happened in the 1960s and the 1970s, and it was actually our party that reversed that very bad trend. Today, despite all the camouflage and the rhetoric around climate change, the Government is effecting the transfer of that burden. It has been aided and abetted by the Māori Party, a group that stands up every week and reminds New Zealanders that Māori are hard-done-by. So what will that party do? It will cuddle up to the international investors who continue to threaten, swagger, and say that they will take their toys elsewhere if they do not get what they want. Who did those investors pick off? They picked off the Māori Party, whose very members have made a reputation and have created their own status through exaggerating the Māori level of woe and economic plight. But, perversely enough, they have bought into a scheme that actually worsens the taxpayer’s ability to address the very things that they believe lie at the core of their identity: equity, fairness, justice, special pleading, secret deals, and sell-outs. They will not be able to get away with it.

At this stage, naturally we look forward to the fact that the Māori Party members may change their minds at the Finance and Expenditure Committee, because they have said that, perhaps, they will address those issues at the committee. We will campaign incessantly so that every single member knows that the Māori Party is the party that writes in the minority report that it opposes the bill because of its inequalities, including the subsidisation of the nation’s largest polluters at the cost of households and small and medium sized businesses, then turns round and shafts those very households. Members of the Māori Party may think that the people who read papers, listen to the news, and watch television do not understand. It is bad enough that those members do not understand it, but the rest of them, when we have finished our campaign spreading the facts—the gospel of truth—will know. They will know up and down the country.

Throughout the entirety of this process we have had to put up with the Minister’s choleric disposition. He sells the notion that a market-based approach will effect a change in investment behaviour. He sells the notion that we can use an emissions trading scheme model whereby investment decisions will be given the signal that if people continue to invest in a particular way, then the Government will impose further levies on them because it is not right that the entirety of the nation should bear the burden for the privileged status of a narrow range of shareholders. That is what the Minister started off by saying. But in actual fact, one cannot have a market-based solution if one does not have a cap. Otherwise it is akin to changing the fisheries quota system and saying people can catch their quota, but we will stop sustainability measures and remove the cap so that they can catch as much as they like, and if they catch the last fish in the sea, we will get the taxpayer to meet the cost of it. That is not only absurd, it is actually very sad, because it is an accurate reflection of one of the key principles underlying this Minister’s approach originally, which was to go for a market system and not a tax. The Minister says he wants to be a party of light regulation, yet he sets up a system that can do nothing other than impose the financial medium to long term costs on taxpayers, thereby worsening their financial status over the medium to long term and doing absolutely nothing to move New Zealand investors towards a position where they represent less of a liability in terms of our international obligations.

The final point I will focus on is accountability. Dr Nick Smith has come to this House and circuitously imposed an indefinable liability on the balance sheet. He has introduced an enormously gruesome, possibly unaffordable liability and he is not prepared to observe accountability, provide the information and the papers, or have a debate as to why this balance sheet should be so burdened with this new policy. I hope during the course of the select committee we get ample opportunity not so much to pin him personally—because he has now destroyed his own personal credibility as a blue-green member—but to hold the Government accountable so that it does not use climate change as a way of further adding weight to an already straining balance sheet. This is not climate change - friendly; this is a jack-up and a corporate takeover. Kia ora tātou katoa.

Hon PETER DUNNE (Leader—United Future) : The most significant events with regard to global climate change are not occurring in this Chamber, despite the hot air that is being emitted this afternoon. The most significant events are actually taking place in New York, with the acknowledgment from China and the United States about the commitment they have to make to resolve the consequences of human-induced climate change. It is in that context that we need to look at the adequacy of New Zealand’s response.

We are responsible for some 0.2 percent of global emissions. We do need to play our part, and we do need to respond, but, in my view, we need to respond in proportion to our contribution to the overall problem. Around this Chamber there is a consensus that an emissions trading scheme—

Hon Steve Chadwick: How inspiring—to sit in the middle! How inspiring!

Hon PETER DUNNE: Oh dear! There is geyser from Rotorua that is petering out, still trying to erupt. Around this Chamber there is a consensus that an emissions trading scheme is the most effective way for New Zealand to respond to the challenge of human-induced climate change. There is a consensus that the science is overwhelming in respect of the problem that we need to address. When we look at the select committee’s report—and I acknowledge the members of the committee for the work they have done—we see that there was a remarkable consensus on 32 of the 34 recommendations from that committee. The points of difference are these: whether we have an intensity-based approach, and the timing of the introduction of agriculture into an emissions trading scheme.

The bill that was passed by the previous Government in 2008 provided that agriculture enter the scheme in 2013. This bill proposes 2015. Given the fact that we have had a review as part of post-election agreements, I think that the very logical compromise solution, which I hope the select committee will explore, was that 2014 was a reasonable date for that transition to take effect. I acknowledge that the issue of intensity is a little more complicated and that the feelings around that will be more deep-seated. But I do get annoyed when I hear the argument that somehow a massive transfer of obligation and cost is taking place. That transfer is inherent in any emissions trading regime. The question is the extent and the timing.

When we boil it down, we are not talking about the most effective way for New Zealand to respond, because the clear consensus in this House is for an emissions trading scheme. We are debating, essentially, some of the finer points of detail of that scheme. While the world is arguing about its response—and increasingly nations talk about emissions trading as the way to go—it seems somewhat banal that in this country, where the broad basis of a scheme is largely accepted, we are arguing on two particular points and that that argument somehow threatens to derail the whole process.

One of the things that was clear to the select committee was that those who came before us promoting the view we might describe as akin to that of the sceptics were very much in a minority. The vast mass of the population would accept the proposition that we have to play our part and we have to make a response. The issue, then, is the nature of that response. The issue, then, is whether this bill is adequate in that sense. Given the fact that the essential differences between the two major parties are now so small and so specific, I find it incredible that they have been unable to date to work out an effective compromise between them.

Moana Mackey: It’s not our fault. It was Nick Smith.

Hon PETER DUNNE: It was not her fault, the member says. I say to the country and to the House that if we are going to judge the success of climate change policy and New Zealand’s response by the political prejudices of particular parties, we are adopting a very small-minded attitude indeed.

The issue is actually bigger than the egos of anyone in this House, and maybe the member opposite should realise that. When we are all gone the problem we have been part of causing will remain, and the solutions we put in place today, which may be altered from time to time, will be those on which we are judged. We will not be judged on whether egos have been satisfied or whether prejudices have been met. We will be judged on the commitment that we as a Parliament are prepared to make. Given the lack of difference between parties, this bill is a comprehensive and effective way forward, and we should proceed to pass it.

COLIN KING (National—Kaikōura) : It is a privilege to speak in support of the Climate Change Response (Moderated Emissions Trading) Amendment Bill. In doing so, I start off by saying that we should stop the politicking, and, as the Minister urged, work collectively so that we can take this country forward in the best interests of all New Zealanders.

I stand and speak here primarily as a former farmer and a former director of Meat and Wool New Zealand. Since 2000, Meat and Wool New Zealand has been part of the Pastoral Greenhouse Gas Research Consortium, which has invested millions of dollars of farmers’ money into searching for solutions to find a way through the issue of methane emissions. Putting it very simply, there is effectively no simple answer at the moment to the problem of mitigating methane emissions from animals. I make that point because I would like to develop that just a little bit further. It is a major challenge. It is also worth noting that the bill we have in front of us is the process through which we are introducing agriculture into an emissions trading scheme. We are a world leader in that, and we want to remember that.

The argument that farmers should be in an emissions trading scheme is, on balance, sound and reasonable. Let us consider some of the things that make it sound and reasonable. Agriculture is 50 percent of our emissions profile—give or take a little—so we must consider that we are the only country in the OECD in which agriculture makes such a high contribution to our GDP—20 percent. That effectively gives us the profile of a developing economy, and developing economies, at the moment, do not have obligations under the Kyoto Protocol. New Zealand is a major exporter. In fact, we export 85 percent of what we produce, and in the case of dairy and lamb it is over 90 percent. So we have to work very hard towards finding a way through the impasse of the need to reduce our methane emissions as an agricultural nation. That is what the Government is endeavouring to do.

Apart from this bill, it is very important that we look at what this Government is doing to assist the major challenge confronting this country’s economy. Firstly, and most sensibly, the legislation is introducing agriculture fully into New Zealand’s climate change response by 2015. Secondly, we have set up the Primary Growth Partnership, which endeavours to advance $70 million worth of research funding to be matched dollar for dollar. Potentially that will grow to $170 million in a year, to assist in that research. Thirdly, the Minister of Agriculture is about to announce the centre of excellence that will focus on discovery science to reproduce and develop technologies, so that farmers can mitigate methane emissions within agriculture. The fourth most important thing probably happened just yesterday, in my view. It was the announcement by the Prime Minister that we will be doing our utmost to form a global alliance to establish and maximise the collective brainpower of the world’s top ruminant scientists to crack the dichotomy that exists presently. That is the dichotomy of a world that is grappling with climate change, but that, by 2050, will need to produce twice as much food as it does today.

New Zealanders can take great confidence from a Government that has maturity and vision, and that will allow agriculture to harvest its potential, and in doing so reach the performance needed. However, it would be remiss of me if I did not make the statement that agriculture will be in New Zealand’s climate change response by 2010 by virtue of the amount of electricity, fossil fuels, and transport that rural businesses use. I worked out that a 1,000-cow dairy farm with irrigation will spend $170,000 annually on electricity, and that does not take into account fuel or transport. Given the isolated basis of those businesses, everything those people do in the country will be affected and controlled by the New Zealand climate change response.

This bill takes a balanced approach to introducing agriculture into climate change, and my advice to all members in the House is, as we have overcome every other problem, let us go forward together, united and focused on what is best for New Zealand. Thank you very much.

Hon Dr NICK SMITH (Minister for Climate Change Issues) : I move, That the Finance and Expenditure Committee consider the Climate Change (Moderated Emissions Trading) Amendment Bill, that the committee report finally to the House on or before 16 November 2009, and that the committee have the authority to meet at any time while the House is sitting except during oral questions, and during any evening on a day on which there has been a sitting of the House, and on a Friday in a week in which there has been a sitting of the House, and outside the Wellington area during a sitting of the House, despite Standing Orders 187, 189, and 190(1)(b) and (c).

Hon SIMON POWER (Minister of Justice) : I move, That the Anti-Money Laundering and Countering Financing of Terrorism Bill be now read a second time. I firstly offer thanks to the Foreign Affairs, Defence and Trade Committee for its dedication to returning this bill to the House within 3 months, and in particular to the chairperson, John Hayes, for his hard work in considering the bill. The committee’s report includes a number of sensible recommendations that will make the regime work better in practice and reduce business compliance costs. There is a high degree of cross-party support for this bill, as I understand it, acknowledging that New Zealand’s current shortcomings have the potential to put at risk our international reputation as a transparent and stable place to do business.

The Anti-Money Laundering and Countering Financing of Terrorism Bill represents the first phase of reform that will eventually see the replacement of the Financial Transactions Reporting Act. We are seeking to meet international standards for managing money-laundering and terrorist financing risks, particularly the recommendations of the Financial Action Task Force. This bill places new obligations and strengthens existing obligations on financial institutions and casinos, collectively referred to hereinafter as reporting entities. The bill establishes the Reserve Bank of New Zealand, the Securities Commission, and the Department of Internal Affairs as supervisors that will monitor the compliance of reporting entities. These supervisors already have oversight roles in respect of reporting entities, and these existing relationships should enable efficiencies in regulation.

The bill as reported back brings our regime closer to that of Australia, and is more responsive to some of the operational difficulties that come with applying the task force’s obligations. I will briefly outline these changes. The purpose clause now explicitly describes the Government’s intention that the private and public sectors cooperate in the implementation and operation of the bill’s regime. For the bill to succeed in its crime detection goals, we need the assistance of financial sectors and casinos to improve and fine-tune their systems for the detection and prevention of money-laundering and terrorist financing. The bill now provides for some necessary institutional arrangements to come into force on enactment, such as regulation and code of practice - making powers. The more robust border cash reporting system, overseen by the New Zealand Customs Service, will come into force 1 year after the bill receives Royal assent. Part 2, which contains the obligations for reporting entities, will come into force on a date to be set by Order in Council, recognising that there are start-up costs for industry that require a decent lead-in time. That is very sensible. The time frames for implementation will in part be determined by progress on the regulations and codes of practice, which will be developed in consultation with industry.

It is the intention of the Government that the bill, as far as possible, enables reporting entities to focus their resources on those customers or products that represent the most risk. In this regard, the committee has made some improvements to the risk management framework in the bill, and those improvements are welcomed. For example, the threshold at which a reporting entity should seek to verify its identity information for existing customers has been raised so that reporting entities will not need to disturb their low-risk customers. Instead, reporting entities will be required to conduct due diligence on existing customers only where, according to an assessment of risk, there is material change in the business relationship and there is insufficient information about a customer. The bill does not set strict limits on time frames for verifying a customer’s identity in situations where money-laundering risks can be managed. The committee has also recommended that reporting entities not be required to conduct enhanced scrutiny of domestic politically exposed persons. As enhanced scrutiny of domestic politically exposed persons is not a strict requirement of the Financial Action Task Force, I intend to consider this matter outside this particular legislation in the context of the United Nations Convention Against Corruption, and more work will be done on that issue.

The most substantive recommendation in Part 3 of the bill is an amendment to remove explicit personal senior management liability, while the entities remain liable. The committee also recommended that reporting entities be protected from civil or criminal action where they are acting to comply with the legislation. For example, where a reporting entity ends business relationships with customers who will not verify their identity, they will be protected from civil action. Part 4 sets out the institutional arrangements necessary to ensure that the new framework will operate smoothly. The committee recommended the inclusion of outsourcing provisions in this part to allow supervising agencies to contract expertise where needed. Again, this is a sensible proposal.

As a Government we want to ensure that our financial sectors are robust, are attractive to legitimate international investors, and are not seen as a safe haven for organised criminals. This bill helps to achieve those ends. I am grateful for the hard work undertaken by the Foreign Affairs, Defence and Trade Committee in that regard, for the helpful suggestions made, and for the broad cross-party support for this legislation. I commend this bill to the House.

• Debate interrupted.

Hon LIANNE DALZIEL (Labour—Christchurch East) : I am somewhat tired of listening to the Minister of Justice constantly overlooking the contribution on the bill of the previous Labour Government. If it had not been for the previous Government, a cost-benefit analysis would not have been undertaken on the impact of the changes that were proposed in the bill that we were working on when we were in Government. I say “the bill that we were working on in Government” because the Anti-Money Laundering and Countering Financing of Terrorism Bill as introduced looked nothing like the bill our Government would have introduced. I want to know why that is, and when we get to the Committee of the whole House stage on the bill I will certainly be asking the Minister of Justice why he took his eye off the ball.

Every time the Minister gets up in the Chamber and promotes a change to a policy or announces some new thing that is based on a pilot that our Government did or on a discussion document that our Government put out, he never ever recognises the contribution we made. [Interruption] We never ever did that the other way round. We were working on this issue when we were in Government—

Hon Steve Chadwick: I raise a point of order, Mr Speaker. The member opposite keeps pointing, interjecting, and using the word “you”.

Hon LIANNE DALZIEL: And he is not even sitting in his own seat.

The ASSISTANT SPEAKER (Eric Roy): I will uphold the point of order. The member should not be interjecting in such a manner, and he will desist immediately.

Hon LIANNE DALZIEL: The point I am making is that the bill as introduced was completely and utterly dishonest. The reason it was dishonest was that the regulatory impact statement was based on the cost-benefit analysis that had been done on the bill that we were going to introduce. This bill looks nothing like the bill we were going to introduce.

Jacqui Dean: I raise a point of order, Mr Speaker. I understand that members should be speaking on the bill that is before us, not on a bill that would have been introduced.

The ASSISTANT SPEAKER (Eric Roy): My interpretation is that the member is referring to what has happened in the process of this bill. To date, I think she has been speaking in the context of the report back of the bill.

Hon LIANNE DALZIEL: The bill as introduced went to the Foreign Affairs, Defence and Trade Committee, and I can hardly refer to what the select committee did to the bill if I do not describe—

The ASSISTANT SPEAKER (Eric Roy): I have already ruled; the member does not have to convince me.

Hon LIANNE DALZIEL: I am not raising a point of order; I am just speaking on the bill. The member opposite is very new and does not know how the place operates, but that is fine. I am referring to the bill as introduced, and the bill as introduced into the House looked nothing like the bill that was described in the regulatory impact statement. People have to take some responsibility for the quality of regulatory impact statements. For the first time in any Parliament we have a Minister for Regulatory Reform, and the quality of regulatory impact statements has never been poorer. It has never been worse than it is today, and that reflects very interestingly on a Government that says it is interested in quality regulatory frameworks but, in fact, is not.

The reason that this bill is now in much better shape is the select committee. I will pay tribute to the select committee, but if the chair of the select committee does not want to receive any compliments from me, then I am happy to assist in that regard. I will pay tribute to my colleague the Hon Pete Hodgson, who took the trouble to get his head round what is incredibly complex legislation. [Interruption] This bill now looks like the bill we would have introduced.

Hon Steve Chadwick: I raise a point of order, Mr Speaker. The member Jacqui Dean, who is not sitting in her own seat, is referring to a member not being present in the Chamber. That is not appropriate.

The ASSISTANT SPEAKER (Eric Roy): I did not hear what the member said, but she will desist if that was the case.

Hon LIANNE DALZIEL: The point I am making is that at the select committee hearing we ended up with the situation where the banks were essentially able to assist the select committee through the hearing of submissions. The officials were able to work with members of the committee to get the bill right. But for the Minister to come into the Chamber and simply say that a few changes were made in the select committee is to completely understate how bad the bill was when it was introduced. I blame the Minister of Justice for taking his eye off the ball, and we will be asking him questions when we get to the Committee stage. If I was not aware of the Standing Orders, I might reflect on where he sits on the matter right at this present moment, but of course I would not reflect on that matter.

The point I make is that a substantial sum in compliance costs was to be inflicted on the banks if we had gone down the track of the bill that was introduced, which, as I said, was completely different from the bill now, and completely different from the basis of the work that the cost-benefit analysis was done on. That is why I am saying that the bill as introduced was completely dishonest. It did not accurately reflect the true cost of what would be imposed on Australian banks operating in New Zealand.

I have some figures here, just to give a little example of what the situation would have been if it had not been for the members of the select committee taking a very serious look at what was a completely inadequately drafted bill. In one instance, one of the banks identified that the cost of introducing the system that was created in the bill as introduced, as compared with the case today, would have been between $10 million and $22 million. That was just one bank’s assessment of how much the cost differential would have been.

John Hayes: The NIS paper said $97 million.

Hon LIANNE DALZIEL: On top of that amount. I was saying that for that one bank alone it was between $10 million and $22 million. I do not know whether that impact—

John Hayes: I’m talking the whole cost.

Hon LIANNE DALZIEL: I am getting some help from the chair of the select committee, so maybe I will say something nice about him, then. The point that I think he is trying to make is that when we multiply that effect across all of the banks that would have been affected by the changes, then we are talking in the region of $90 million. That is a substantial sum of money to be imposing by way of compliance costs on the banking sector and on any business covered by the bill.

I am so surprised that the Minister of Justice took such a flippant and short call on this matter. The reason I am surprised is that when he refers to minor changes he has completely missed the point of the work the select committee has done. Major changes are contained within the bill. Let me use the example of clause 23, which has been deleted and replaced. Previously, the clause dealt with the requirement that the Government wanted to put on the banks: “Before a reporting entity establishes a business relationship or conducts an occasional transaction that involves a customer or a beneficial owner who is a politically exposed person, the reporting entity must, in addition to the requirements in sections 21 and 22,—(a) have approval from its senior management for establishing the business relationship in accordance with the regulations (if any); and (b) meet any other requirements prescribed by regulations and that apply to politically exposed persons.”

The clause has been completely altered and now begins with the phrase: “The reporting entity must, as soon as practicable after establishing a business relationship or conducting an occasional transaction, take reasonable steps to determine whether the customer or any beneficial owner is a politically exposed person.” I think some of the members in the House will be surprised to know that everyone in the House is a politically exposed person. We are on the list because we are politicians. A requirement on the banks even to go into an occasional transaction would have required an assessment to be undertaken of the requirements of sections 21 and 22 before that could occur.

I acknowledge the work that has been done at the select committee. I particularly acknowledge the banks that have made the effort to provide information to the select committee and to others with an interest in this particular area. The costs that would have been imposed if everyone had taken his or her eye off the ball in the way the Minister of Justice took his eye off the ball, when he let the bill be introduced in a way that was never intended, have been improved by the process at the select committee as a result of all of the work that was undertaken by the previous Government and also by my very good colleague Clayton Cosgrove, who required the cost-benefit analysis to be undertaken that underpins quality regulation. I congratulate the select committee, but at the Committee stage I will be asking the Minister of Justice some pretty hard questions, because he did take his eye off the ball. I am sure others will have some questions about other matters that are associated with suspicious transactions.

I will leave my contribution there, and I ask the House to support the passage of the bill in its new form.

JOHN HAYES (National—Wairarapa) : Thank you for the opportunity to address the House this afternoon on the Anti-Money Laundering and Countering Financing of Terrorism Bill. I say the previous speaker, Lianne Dalziel, was absolutely off the planet in her assertions that my good friend and colleague the Minister of Justice had taken his eye off the ball. That is absolutely wrong. You had 9 years to sort this out and you did not do so, and I know that you had 9 years in which to do it because I was a bureaucrat under your Government.

Hon Trevor Mallard: I raise a point of order, Mr Speaker.

The ASSISTANT SPEAKER (Eric Roy): I know what the point of order is.

Hon Trevor Mallard: Well, it is mainly for reasons of the member’s health, actually.

The ASSISTANT SPEAKER (Eric Roy): The member did bring the Speaker into his comments. I ask him to please desist from doing that.

JOHN HAYES: I did not intend to do that, but I can assure this House that as a bureaucrat who worked under the previous administration, I know it stymied the progress of this bill, which is in accordance with what is required under our international obligations. This is not the current Minister of Justice’s problem. I would like to put the problem squarely where it belongs: with the outgoing Government. It had 9 years in which to fix the law; it did not. Within 6 months of the election our Minister of Justice had gone through the legislation and brought a very good bill to this Parliament, and that is significantly different from the messing around by his predecessors.

While I am on my feet I want to thank my colleagues on the Foreign Affairs, Defence and Trade Committee. I thank the three members who are in the House now from our side of the committee, and my colleague Keith Locke from the Green Party. I would have liked to thank the other members in person, but they are not here. I would particularly like to thank Pete Hodgson for making a very serious contribution to the work of the committee. He did an extremely good job, and I thank him for that. Our committee decided to work very closely together, and one of the problems that we had to overcome was the inculcated habit in the bureaucracy of writing things for nanny State. They were far too prescriptive—way too prescriptive in terms of what this country needs. So the main reason that our select committee had to make changes to the bill was that the over-drafting of the nanny State had been inculcated in the bureaucracy for the past 9 years. We had to straighten up that issue.

In order to do that, and given the importance of making sure that this legislation was hand in glove with Australia’s banking legislation because of the Australian connection with our banks, we decided to appoint as advisers to the committee four representatives of the banking community. I want to particularly thank them. They brought a degree of expertise to the committee that is not available in the Public Service, and that process worked out very well. When we decided on the game plan for reviewing this bill, we wanted to return to the House a bill that was future-proofed, that was forward-looking, and that was risk-based, because we wanted to minimise compliance costs for the banks. That was a constant thread that came through from submitters, and as far as practicable we wanted the legislation to be in harmony with Australia’s.

One of the things that we decided after consultation, particularly with the bankers appointed to assist us, was that the bill as introduced did not give sufficient emphasis to a risk-based framework. Although the Minister had given us a very good bill to work from, we needed to move the bill a little further in the direction of a risk-based framework so that we could minimise compliance costs for all concerned. Contrary to the figures bandied about by the previous speaker, Lianne Dalziel, I say the national interest analysis paper that came to the select committee said the cost of introducing this legislation will be in the order of $97 million. We were quite conscious of it being very expensive.

Another issue that came through in the work of the select committee was that in Australia there is one entity that manages entirely the operation of monitoring money transactions. In New Zealand we have three entities. One of the informal suggestions we made in our report to the Minister is that consideration be given to setting up one entity in New Zealand rather than having the work spread across three entities. We also wanted to make sure that there were really seamless links with the Australian financial sector, and we considered that if we had just one entity here, that seamless arrangement could be sorted through.

The bill is very complex, and because of that we think that the financial entities required to comply with this legislation, which are not just banks, will need a reasonable time in which to develop systems and procedures to comply with the provisions of the legislation.

The majority of submitters wanted us to adopt a flexible approach. I will give one example of an issue where we have done that. It was on the question of politically exposed persons. For the benefit of members of the House who may not fully understand the detail of this as well as the select committee members do, I say the issue goes like this. A Financial Action Task Force grew out of the OECD and the desire to stop corruption in banking systems. As a result of that, rules were set up, to be applied to all countries. This was done in a mixture of pressure from banking systems, which, for example, resulted in the closure of banks in Niue and the Cook Islands. In New Zealand, and globally, the rules were going to require all politically exposed persons—that is, everybody in this Chamber—to be subject to special scrutiny. The draft that came to us from officials included not just members of Parliament but also their partner, their partner’s children, their partner’s children’s partners, and their children.

When we stood back and looked at this issue, we thought that trying to apply one rule to all politically exposed persons across many countries was nonsense. I do not particularly want to annoy any other country, but let us say that if there is a deep, dark African country where the standards of accounting, law, and other issues are not as well developed as they are in New Zealand, then one might want to implement rules on the basis of the legislation that was given to the committee. In practice, however, we decided that New Zealand had very high standards of accounting practice, legal practice, and public scrutiny, and that what would apply in, say, Nigeria did not necessarily need to apply in New Zealand. For that reason, the committee decided to recommend to the Minister and to this Parliament that we should not include politically exposed people as part of this legislation, unless they are foreigners who are making financial transactions in New Zealand. We made that a very strong recommendation.

Those are really the points that I would like to make to the House at this time. I again thank my colleagues who contributed to a very serious work programme. I thank the bankers who advised us, because without their help we would not have ended up with the excellent report on this bill. Thank you very much.

Hon TREVOR MALLARD (Labour—Hutt South) : I think it is wonderful timing on the part of the Government to bring the Anti-Money Laundering and Countering Financing of Terrorism Bill into the House after so long, and under urgency, because the bill deals with the role of the Department of Internal Affairs, which includes Ministerial Services. The bill deals with suspicious transactions, and there are a few of them going on at the moment. It deals with politically exposed persons, and, clearly there is one of those in the case of Bill English. It deals with the United Nations Convention against Corruption.

I tell the House that if what was going on here—public money going to hidden trusts—was going on in Zimbabwe, then we would call it corruption in Zimbabwe. What is the difference when there is an absolute lack of transparency? What is the difference when taxpayers’ money is going to trusts about which the details are not public, other than the fact that they are involved with a politically exposed person, as defined in this bill as introduced? The term “politically exposed person” is in this bill as introduced, and we have taxpayers’ funds going to that person in New Zealand.

We are working towards ratifying the United Nations Convention against Corruption, and this country is regularly seen as the cleanest country in the world. But how can we maintain that reputation when we have a Minister of Finance under a cloud in the way that that Minister of Finance is under a cloud at the moment?

This bill goes to the question of whether there are sufficient details on a customer with which those organisations are dealing. I want to know whether the Department of Internal Affairs has, within Ministerial Services, sufficient details on its customer, the Endeavour Trust, with whom it has a transaction that can probably be described as a suspicious transaction; something that has been set up in order to qualify for—

John Hayes: I raise a point of order, Mr Speaker. I draw your attention, and the House’s attention, to the fact that the Endeavour Trust is not a subject of this bill and does not form any part of this bill.

Hon TREVOR MALLARD: Speaking to the point of order, I make it clear that under the bill as it was introduced—and I am looking at areas where people have beneficial interests—there is no doubt that family members of a Cabinet Minister have a beneficial interest, and, therefore, the trust is an area that comes within the discussion on this bill.

John Hayes: I raise a point of order, Mr Speaker. This bill specifically excludes all politically exposed persons in New Zealand domestically. This bill excludes every domestic politician from its consideration.

Hon TREVOR MALLARD: Mr Assistant Speaker—

The ASSISTANT SPEAKER (Eric Roy): No, I will rule now. I kind of anticipated, from the member’s interjections, that he would pursue this line, and I am listening very carefully to what the member says. I do not want to be seen as dancing on the head of a pin in this regard, but I am trying to find in his speech the purpose of the bill and some relevance about that. I am not sure that the member has transgressed yet, but he is getting fairly close to it. I am listening carefully.

Hon TREVOR MALLARD: Thank you, Mr Assistant Speaker. I disagree absolutely with John Hayes. The Endeavour Trust was caught by this bill as it was introduced. If the Endeavour Trust is involved in a suspicious transaction, as it does seem, then I have no doubt whatsoever—

Jacqui Dean: I raise a point of order, Mr Speaker. You might be able to help me. I understood that the debate today was addressing the bill as reported back by the Foreign Affairs, Defence and Trade Committee, not the bill as introduced.

Hon TREVOR MALLARD: Mr Assistant Speaker, can I speak to that point?

The ASSISTANT SPEAKER (Eric Roy): No, I have already ruled on that. The bill was introduced, and if it changes its form in the select committee, then that is still relevant to the debate—because the debate is still subject to the way in which the committee dealt with the bill.

Hon TREVOR MALLARD: Thank you, Mr Assistant Speaker. Clause 43 deals with the disclosure of information. As far as the Endeavour Trust and its suspicious transaction with the Department of Internal Affairs is concerned, I want to know whether all relevant information has been disclosed. It certainly has not been disclosed to Gerry Brownlee, who is the Acting Minister responsible for Ministerial Services and the Minister responsible for that part of the department. That suspicious transaction—

The ASSISTANT SPEAKER (Eric Roy): I will just ask the member to choose his words a little bit more carefully. Instead of saying “suspicious” the words “allegedly suspicious” are probably more appropriate.

Hon TREVOR MALLARD: No—

The ASSISTANT SPEAKER (Eric Roy): No—I have ruled on that.

Hon TREVOR MALLARD: I raise a point of order, Mr Speaker. The term “suspicious transaction” in itself carries a wide range of things, some of which may be illegal and some of which may be suspicious but not illegal. I have not alleged that these transactions are illegal, but certainly they are suspicious. One cannot say “allegedly suspicious”. They are either suspicious or they are not.

The ASSISTANT SPEAKER (Eric Roy): I accept the member’s point, but we are not accepting them as proven.

Hon TREVOR MALLARD: No.

The ASSISTANT SPEAKER (Eric Roy): The member may continue.

Hon TREVOR MALLARD: No, there is a long way before the court proves that those suspicious transactions are illegal. There is a long, long way before Mr English’s Endeavour Trust, of which he was a trustee last year, and which is now involved in the suspicious transaction—

Hon Lianne Dalziel: I think he had a pecuniary interest in that.

Hon TREVOR MALLARD: Last year he had a pecuniary interest. There is another area—and it may be that Mr English might want to rely on it—and that is the immunities from criminal or civil liability.

In fact, in this particular area Duncan Garner has made a suggestion for immunity for civil liability for Mr English. Mr Garner, in a very good blog, has suggested that if Bill English accepts, now, that he has been falsely claiming in this area, then he would not have to repay the taxpayer the $300,000 or $400,000 that he has claimed in the past. I disagree. I think it would be inappropriate for there to be immunity from civil liability in the case of Mr English in this particular area.

• Sitting suspended from 6 p.m. to 7.30 p.m.

Hon TREVOR MALLARD: As I was saying before the dinner break, this bill has to do with anti-money laundering. I want to know which member opposite hates Bill English so much that he chose to put this bill forward this week. Was it Simon Power, the Minister in charge of the bill, who wants to be the Deputy Prime Minister?

H V Ross Robertson: Gerry Brownlee!

Hon TREVOR MALLARD: Was it Gerry Brownlee, who hates Bill English because he put him out of his position? He wants the Deputy Prime Minister job back. Or was it Steven Joyce, who wants the job of Minister of Finance?

There are some real gifts in this bill, because under the bill, as it was introduced, both Bill English and the Endeavour Trust are caught as politically exposed persons for the purposes of corruption and anti-money laundering. On the subject of corruption, I want to ask this question: what is the difference between New Zealand and some other countries? What is the difference when someone sets up a trust and changes the trust deed in order to hide getting money for him or herself or persons he or she is associated with? If it was happening in Zimbabwe, we would say it was corruption. If it was happening in Nigeria, we would say it was corruption. Why are we not saying it here? Is it because we are an English-speaking country? Is it because we speak English here that it is not corruption?

Anywhere else in the world that sort of arrangement—to hide one’s money; to pretend one is not getting it; to say “It’s not for me.”; to have a third person, as defined in the Act, ordering money into accounts—would be caught by this bill. In this particular case, there are also very good definitions of suspicious transactions, and the Department of Internal Affairs, which, of course, includes Ministerial Services, is responsible for identifying those suspicious transactions. I want to know whether they are responsible for reporting on themselves. Would the head of the Department of Internal Affairs say: “I laundered money to the Endeavour Trust.”? Is he responsible for saying that? Certainly, if that is not the case, then we need someone else to look at that particular area.

There is a question of verification of identity. People are not allowed to hide their identity. They have to make their identity clear. Under the money laundering legislation, people cannot hide behind trusts. There are systems for verification of that. I want to know what sort of principle Simon Power has. Did he order the change of this bill—to take Bill English out—in order to protect Bill English, or was he ignorant?

There is one final point I want to make about corruption, and that is about the control of the media. I think it is absolutely corrupt for a Cabinet Minister to ring a television official, swear at that official, and use a seven-letter word followed by a four-letter word twice or three times in that conversation. Following that, Television New Zealand took down the link to the television item. Not only do we have a politician acting to intimidate the media but also, worse still, we have a State-owned organisation, for which the very Minister is a shareholder, ordering it to take down a link, and it does. That is the sort of corruption we see in Zimbabwe. It is the sort of corruption that used to happen in Russia—although I do not think we see it now. It also happens in China, and it is not good enough to have that sort of approach in New Zealand.

JACQUI DEAN (National—Waitaki) : It gives me a great deal of pleasure to rise to speak to the second reading of the Anti-Money Laundering and Countering Financing of Terrorism Bill. I follow in the footsteps of the most excellent Minister of Justice, the Hon Simon Power, who very succinctly elucidated the purpose of the bill, and of the chairman of my Foreign Affairs, Defence and Trade Committee, John Hayes, who followed on with a very good exposition of what was contained in the bill.

Unfortunately, we have had several contributions from the Labour side of the House that have been embarrassing and sadly lacking. Firstly, we had Lianne Dalziel, who spent the first 5 minutes lamenting the fact that Labour is no longer in Government. Well, hello, I tell that member to wake up—it is not. She was lamenting the fact that the bill was not a bill that a Labour Government would have introduced. I am sorry but this bill is an excellent bill that was worked on by the National members of Parliament of the Foreign Affairs, Defence and Trade Committee, and we made some good changes to the bill. Then, of course, Trevor Mallard went on and on about trust.

I find it sad that Labour members do not trust their colleagues to speak on this bill. The two Labour members who have spoken on this bill so far do not even sit on the select committee. Talk about trust! I think it is a shame, because this select committee worked very well on this bill. It is a shame that Labour has seen fit to put up two speakers who were not even on the select committee and, quite frankly, do not understand the content of the bill. They have been fixated on the bill as it was introduced. Luckily, the select committee did some very good work, and we have moved on from that point to where we have reintroduced the bill to the House with some excellent changes to it in order to make it more closely fit the needs of today and New Zealand’s obligations under the Financial Action Task Force regime.

This bill is designed to enhance New Zealand’s legislation against money-laundering and the financing of terrorism. Close and careful attention has been paid to ensuring it is in line with the recommendations of the Financial Action Task Force. It will enhance New Zealand’s financial system.

I want to go over the key objectives of the bill. They are to improve the detection and deterrence of money-laundering and the financing of terrorism within the New Zealand—

Dr Paul Hutchison: This is a serious matter.

JACQUI DEAN: My colleague raises a very good point. It is a serious bill, and it is regrettable that the Labour members of the House have not read the bill. They are fixated on what they would have done if they were still in Government. New Zealand has moved on from that. I regret that the good work of the select committee is not being reflected in the House this evening. I know that my colleagues on the select committee will continue with the exposition of this bill.

To continue with the key objectives, this bill will enhance New Zealand’s international reputation, and, indeed, it is critical that New Zealand’s legislation comes in line with overseas legislation. A number of changes were made by the select committee, and I will go through some of them. Implementation will be staggered to reflect the difficulty and the complexity for those who are affected by the imposition of this bill—that is, the banking system. I note the cooperation and great help the committee received from representatives from the banking industry from both here and across the Tasman.

Another purpose of this bill was to align our legislation as closely as possible to legislation in Australia. For those members opposite who have not looked at the bill, I tell them that it looks like this, by the way, and they can get a copy of it from the Table. Clause 3 makes it clear that one of the purposes of the bill is “to detect and deter money laundering and the financing of terrorism;”. It is designed to facilitate cooperation—and the select committee took great care over this point—between reporting entities, supervisors, and Government agencies, particularly law enforcement and regulating agencies.

I know I have a couple of good speakers following me, so I will leave it at that. I recommend this bill to the House.

KEITH LOCKE (Green) : I endorse the comments of the previous speakers, in that the Foreign Affairs, Defence and Trade Committee did work very well on the Anti-Money Laundering and Countering Financing of Terrorism Bill. The committee’s Government members, including the chair, saw the serious problems in the bill and listened closely to the submissions, particularly from the banks. The Labour members, and myself as the Green member, worked cooperatively to address those problems. The bill that came back from the select committee is quite transformed from the original bill. I congratulate the Minister on not heavying the members of the select committee to go along with the original conception and also on listening to what were obviously sensible suggestions from the submitters and banks.

The Greens support the bill because it helps to deal with money-laundering, which is a serious criminal problem around the world. The Financial Action Task Force, whose prescriptions the bill is implementing, has put pressure on some tax-haven countries, including some Pacific countries, to be a bit more transparent and to do proper checks on dodgy transactions. That has reduced the use of money-laundering for crime in the world, but there is still a gigantic problem of money escaping into tax havens and also escaping tax in the home country. That is a significant element in the world’s financial crisis.

I read the October 2008 issue of the New Internationalist. It estimates that the world’s wealthy have parked $11,500 billion offshore. That is $11.5 trillion. By doing so they dodge about $250 billion in tax each year, which is an amount that far exceeds what the United Nations has asked from the rich countries for its millennium projects in order to tackle global poverty. I do not think we should necessarily look to the Financial Action Task Force to totally get rid of the tax havens, partly because the task force is a creation of the richer nations. It was set up by the OECD—the rich nations—rather than the UN, and to a significant extent it represents the interests of big investors in the rich countries, including in its aim to make the world safer for investors in and from the OECD countries.

The reason why we are discussing the bill in urgency tonight is the Government was desperate to get the bill enacted in time for the October plenary meeting of the Financial Action Task Force and the investigation that it will be doing into New Zealand. The fact that we have the bill was not good enough for the Government, apparently; the bill has to be enacted in time for that meeting. One of the reasons behind the Government’s decision was that if we do not get a good Financial Action Task Force endorsement, then foreign investors will perhaps think we are a little bit dodgy, in terms of a home for their investments.

The work of the Financial Action Task Force helps to reduce corruption, which is a big problem, but, as other speakers have said, not so much in New Zealand. The problem of corruption is behind the extra scrutiny that banks are supposed to put on the transactions of politically exposed persons, as listed in the bill. It makes sense to look at the transactions of top Government people and judges in places like Nigeria, where there is serious corruption if my email is anything to go by. I am getting a hard-to-refuse offer from Nigerians by email every day. The select committee rightly thought that to apply such hard scrutiny to New Zealand’s politically exposed persons would be a bit over the top, given our other stringent accountability mechanisms.

Another particular problem of some interest was the undermining of the traditional independence of the judiciary from the Government. Under the bill, as it was originally, the New Zealand Government, through its different agencies, would have a licence to conduct an extra poke into the financial affairs of Supreme Court judges and their families. Of course, it is unlikely that here in New Zealand in 2009 a police finance crimes unit would obey a Government directive to search the accounts of judges and their families in a political vendetta, but law has to be written for worst-case scenarios when we might have a less benign Government. As we have seen in places like Pakistan and Fiji over the last year or two, when Governments start moving in a more authoritarian direction they try to restrict the judiciary. The authoritarian regimes sometimes trump up charges against the judiciary so that they can override the law. Judges are the protectors of democracy against excessive executive power.

It is quite clear from what was discussed in the select committee that some excessive bureaucratic prescriptions have been coming out of the Financial Action Task Force, which were included in the original bill. They are partly a result of the post-2001 war on terror and the prescriptions to try to make sure that no terrorist anywhere in the world transacted over $10,000, although I have not seen reports on how much terrorists have actually been restricted by the measures. Terrorists tend not to go down to the local bank and conduct transactions under their own names. They are probably the smartest people, in terms of getting round any regulations such as are set up here.

I asked the bankers and the officials at the select committee who would actually filter the international transactions coming into New Zealand to see whether a terrorist was involved somewhere, and I asked whose terrorist list would be applied. Essentially, I found out that it would not be a New Zealand list, as New Zealand does not have much of a list; it would be an American list. The American Government has a slightly different definition of who is and is not a terrorist from New Zealand, and it has quite a few more names on its list. In fact, the tracking is done through a United States Treasury - CIA initiative called the Terrorist Financing Tracking Program. The programme, with its list, is linked up to an international financial transaction system called SWIFT. Virtually all international banking transactions pass through the SWIFT system, including most of New Zealand’s international financial transactions. There has been a big fight between the United States and the European Union over the Terrorist Financing Tracking Program, in terms of its pulling all the names and transactions off the SWIFT system and running it through the terrorist database.

The FBI has a terrorist screening centre with hundreds of thousands of names on its database. The Associated Press recently gave the figure of 400,000 names of people associated with terrorism on this FBI list. At the moment a shaky accord has developed between the EU and America to try to protect the privacy of people conducting banking transactions. But there is also a huge inconvenience factor of people wrongly caught up in the excessive list that the Americans have. That is a side problem associated with this bill, but it is good that the banks, particularly the Australian banks, engaged with the select committee to try to get away from an overly prescriptive approach whereby they would spend all their time trying to find out the names and details of ordinary New Zealanders engaged in financial transactions.

We now have a regime in Australia and New Zealand where through the computer systems the banks will focus only on truly risky people. That is a step forward. Although the Greens have often had a lot of criticisms of the Australian banks, in terms of interest rates, profits, and all kinds of things, it was interesting to be in a select committee where in some ways the Greens were allied with the banks in trying to bring more sense to the system. It is largely because they did not want the huge cost on their administration that the original bill would have put in. Thank you.

Hon PETE HODGSON (Labour—Dunedin North) : It might surprise members, but I am going to address my comments to the Anti-Money Laundering and Countering Financing of Terrorism Bill. I start off by saying that the bill as reported back from the Foreign Affairs, Defence and Trade Committee is pretty much the same bill that a Labour Government would have introduced.

Hon Simon Power: It’s not the one I saw.

Hon PETE HODGSON: It is not the one the Minister saw; that is the point. I direct some initial comments to the Minister in charge of the bill, the Hon Simon Power. I know a bit of a blame game is going on here, but here is my insight, in case it is of any use to the Minister. I think that Labour would not have gone with the bill that the Minister saw. In the months leading up to its introduction, a certain amount of ministerial pressure came from my colleague Minister Cosgrove, and I am sure Minister Dalziel had a hand in the matter as well, who was pretty keen to get costs down. For that reason a delay was put on the legislation in our time in Government. With respect to the Minister, I think, frankly, officials got away on him a little bit, because the bill that we had introduced had too much prescription, too little future-proofing, too much unnecessary transaction cost on the economy, too big a difference with Australia’s system, and not enough of a risk-based approach. Officials were in too much of a hurry. I will come back to the business of being in a hurry in a minute.

The committee, across all parties, roughly came to the view that its aims would be to deliver legislation that was compliant with the Financial Action Task Force, or at least compliant with its essential aspects, and with some but not all of its desirable aspects; to keep transaction costs low to be consistent with the first aim; and to have as much harmonisation with Australia as possible, given our history in CER and now our single economic market. When we applied those criteria to the bill in front of us, we saw it was not any good. Further, the submitters informed the committee in quite a lot of detail of what they thought was wrong with the bill; indeed, a number on the committee were lobbied in private, especially by the banking sector. The message to the Minister is that when Ministers take their eyes off the ball—and I think this probably inevitably happens in the lead-up to an election and in the immediate aftermath thereof—they can end up in a situation where officials get away on them. Not that officials are bad people or do things behind someone else’s back; they have a view of what is best, and it may not be shared by the people who are being regulated, and, in this case, it was not shared by the select committee.

On the business of being in too much of a hurry, I have a sense—and I do not offer it up as a truth so much as an opinion—that the Government got somewhat panicked by the recent arrival in the country of officials from the Financial Action Task Force. The Government decided it wanted to make serious progress on this matter, so that when the report finally came out, it could hold its head up high, present the legislation, and say that it is now part of New Zealand law and that all problems had gone away. I can understand that. I can understand a Government being a little bit defensive about the fact that the New Zealand system at the moment is not compliant with the task force. In fact, it is not very compliant with the task force, at all. This bill is necessary. This is good law. It is important that we do this, but it is not important that we do it at breakneck speed in order to lay to rest some of the concerns of visiting folk from overseas. Of course they will find this legislation an improvement. But the fact is until it has been implemented, which will take years, they will not give us a good vet. That is not their job. Their job is not to predict how good the country will be when the legislation has been fully implemented; their job is to take a look at the country now. If one is in any doubt about that, then one needs only to look at the task force’s report as it applied to Canada.

We had a situation where, in my view, officials found themselves delayed, including delay caused by the previous Labour Government, which wanted to get transaction costs lower than they were at the time, and wanted to make sure that, having suffered the delay, its members were able to rush around and assure the task force officials that good legislation was on its way, even though the task force officials were not interested in legislation; they were interested in how it worked when implemented. That meant a good deal of pressure was put on the committee. As it happened, the committee responded. I am sure the chairman of the committee has made the remark—I may have not been in the House at that time, so I will make the point again—that the committee worked very, very well on this bill. All members on the committee, from the chair across to all other members, ought to be congratulated on the way we got down, got the job done, and got it done in time. I still hold the view that we were panicked. I still hold the view that it was a dumb timetable to operate to. I still hold the view that we should have gone to the Business Committee, and it should have given ground. But the advice received was that if we did that, the bill would come back unamended and would have to be amended in the Committee of the whole House, which is not ideal.

I think there are some lessons to be learnt. I say that because another issue is coming. The new United Nations Convention Against Corruption legislation is coming before the House in due course this year. In fact, the national interest analysis is in front of the committee already. We will see, as we have seen with this legislation, the issue of domestic politically exposed persons come forward in that legislation, and again we will have a bit of a scrap over it.

The reason we had a scrap in respect of the legislation in front of us is simply that the officials decided that that would make them wonderfully compliant with the task force, even though it made them completely different from Australia. Those officials did not have the right frame in which to look at the legislation; they were simply building something to a bunch of people called the Financial Action Task Force so that they could tick their boxes and go out to dinner and be told that they had done a fine job. It is not good enough. It is not good enough when those two economies, Australia and New Zealand, are moving as inexorably close to each other as they are.

The other aspect of the select committee process that I think should be put on the record—I am sure it already has, but let me give the House my variant on it—is that a group of the submitters became ancillary advisers. That worked well; it need not have. It might have turned to custard. It was a bit of a risk. The New Zealand Bankers’ Association agreed when the idea was proposed by the chairman that they would come up with four people to help us, that those people would work in confidence, and that they would work with officials. It needs to be said that the officials, initially surprised by the action taken by the select committee, very quickly got the idea and worked very well, openly, and honestly, and that is how we ended up with the legislation that is before us now. In the course of that process, one financial institution might have tried to pull rank on another, but I am not aware of that happening. One financial institution that was not represented in the gang of four might have got its nose out of joint, but I am unaware of that happening. That process, which was risky—or could have been risky—turned out to work very well.

I just say to the Minister that I hope we do not have too much trouble with the United Nations Convention Against Corruption legislation, but if we do, we look forward to his giving us the room to move that he gave us last time. I thank the Minister for that latitude; he need not have given it, but we have better legislation in my view because he did. I think we might have a replay with that other legislation, but I would not want to—touch wood—damn anyone before we see what the legislation looks like.

I make one final point: when the legislation came into the House it had a regulatory impact statement that I think was out of order. It removed the compliance costs, or the estimates thereof. It did so because it wanted to maintain confidentiality with the Minister. There is some ability to understand that, and I do understand it. But it is not a sufficient reason. The Minister is a servant of the House. The Minister must allow the House to have a compliant regulatory impact statement. This one was not. We saw that before dinner. We had a compliant regulatory impact statement in respect of the legislation considered, the Climate Change Response (Moderated Emissions Trading) Amendment Bill, and we saw what good, honest—

Hon Member: Robust.

Hon PETE HODGSON: —and robust advice looks like. In this case we were denied that advice at the introduction stage. That is a very bad look, and, in my view, ought never to happen again.

Dr PAUL HUTCHISON (National—Hunua) : Thank you for the opportunity to speak on the Anti-Money Laundering and Countering Financing of Terrorism Bill. I note that the version of the genesis of the bill given by the Hon Lianne Dalziel and the Hon Pete Hodgson is quite different from the facts as I know them. The Labour Government had 9 long years to bring this bill to enactment and it failed to do so.

It is highly relevant that in the first reading debate on the bill, the Hon Simon Power pointed out that the cost to New Zealand is between half a billion dollars and $1 billion. That is a very significant amount of money lost in terms of money-laundering. I also understand that the situation is endemic right throughout the South Pacific, if not throughout the world. There is no doubt that there is a great need to ensure that this bill becomes enacted and that New Zealand fulfils our international obligations and the requirements of the Financial Action Task Force.

The Hon Pete Hodgson said that he believes that the Government was panicked into getting this bill through reasonably quickly. But, once again, I say that the Labour Government had 9 long years and failed to do anything whatsoever.

I think John Hayes is quite right in suggesting that the Hon Lianne Dalziel is off the planet with regard to the bill. I note that the particular issues have been without reform since 1996. In that time there has been a rapid change in the technologies that criminals can use in order to launder money. That really backs up the total negligence and slackness of the previous Labour Government; it failed to do anything over those 9 years. I look across at the Hon George Hawkins, a former Minister of Police, and I think that at least he would have done something about this situation. But, no, he failed.

The Foreign Affairs, Defence and Trade Committee was extremely ably led by the chairman, Mr John Hayes. I very much acknowledge that the Hon Pete Hodgson was very interested in the bill and that he took a great deal of notice of the detail, particularly when it came to politically exposed people and various other aspects of the bill. There is no doubt that the committee set out to be forward-looking, and to ensure that the bill was future-proofed, that it was risk-based to minimise compliance costs, and, as far as is practicable, that it harmonised with the Australian legislation. I believe that the initiative undertaken by the chairman, John Hayes, to get members of the banking profession to come in and have a dialogue with the Government officials was quite a unique process. It was something I had never seen before in my time in Parliament, and it was very productive indeed. Four experts from the bank floor had a dialogue with the officials, who obviously did not have the practical experience in relation to this very complex bill that the experts did.

Although it is beyond the scope of the bill, it is important to note that Australia has a single supervisory agency, the Australian Transaction Reports and Analysis Centre—known as AUSTRAC. One recommendation that we thought was preferable was that the supervision arrangements of the four New Zealand entities—the Reserve Bank of New Zealand, the Securities Commission, the Department of Internal Affairs, and the Police, which are all involved at present—could in the future be wrapped into one body. That would ensure that there would be a smoother enactment of this bill.

I will finish by making one technical point about Western Union, which was one of the submitters on this bill. It was very concerned about the fact that, in terms of designated business groups, its 700 sub-agencies in New Zealand would all have to go through exactly the same transaction reporting that the central agency did. Fortunately, that matter was solved in the select committee process, and that is very, very satisfactory.

I am very glad to support the bill, which does the things that we set out to do. It is forward-looking, it is risk-based to minimise compliance costs, and it is, as far as practicable, harmonised with the Australian legislation.

Hon MARYAN STREET (Labour) : I rise to take a call on the Anti-Money Laundering and Countering Financing of Terrorism Bill. My colleague Pete Hodgson has put to the House, quite eloquently, some of the difficulties in the process around this bill and I want to allude to some of those myself. The bill, as it arrived at the Foreign Affairs, Defence and Trade Committee, had a number of very substantial problems with it, not least the definition of “politically exposed person” in the legislation. But with a decent amount of goodwill in the select committee, we were able to work to make improvements. John Hayes, as chair of the select committee, was keen to do what the Minister of Justice required and took with some equanimity our grumbles at the kind of pace that we had to move it at, and I compliment him on that. It is a shame that that had to be the case.

There has been some opinion expressed that this bill should have been in place some time ago, under the Labour Government’s watch. This was a work in progress. When the bill first emerged in its draft concept, it was taken up by my colleague the then Minister Clayton Cosgrove, because he had particular responsibility for small business. His special concern was that the compliance costs for small businesses would be so great that the bill would be onerous and extremely difficult for small businesses to comply with it. As Associate Minister of Justice he also took up the role in much the same way as the current Minister of Justice, Simon Power, is now doing. But he required that a regulatory impact statement be made, and that was the point at which some of the work then had to slow down, because the regulatory impact statement was insufficient. The bill that appeared before the select committee was also insufficient.

I also believe that the Government has been panicked into addressing this issue in a way that did not give the select committee the dignity of an appropriate amount of time to consider the legislation, given the huge defects in it. However, the select committee did take that time by working out of hours and working extremely hard to meet a timetable that the Minister of Justice was not required to impose on the select committee. The fact that the Financial Action Task Force was due to do a report on New Zealand’s compliance with anti - money-laundering requirements was certainly a prompt, and I acknowledge that. But the bill did not have to be rushed in that way, resulting in an inadequate piece of legislation that required a major overhaul. There would not be one person on the select committee who does not agree that what the select committee did was a major overhaul of significant provisions of this legislation. That overhaul would not have been necessary if we had not been under considerable pressure from the Minister, who himself clearly was panicked by the requirements of the Financial Action Task Force.

One of the things we did quite successfully was to take one of the completely unworkable bits out of the legislation, which I think John Hayes referred to earlier in his speech this afternoon, and it was about the definition of “politically exposed person”. In the original legislation there were domestic politically exposed persons as well as foreign politically exposed persons. The truth of the matter is that there are already in existence databases that retain information about people who have caused financial institutions or casinos, for example, anxiety about exactly where their money has come from. That anxiety is alleviated by those huge databases that in fact the financial institutions, and banks in particular, compete for. To have domestic politically exposed persons added a layer of complexity that was completely unnecessary, given some of the data that already exists and is already available to financial institutions. The problem that existed in the legislation as it came to the select committee—that a bank would not know, from the moment that a person walked through the door, that that person, whose name was different from the Prime Minister’s, was related to him—was taken away. That is an improvement that has been made. I think also that that will be something we will return to when it comes to the Committee of the whole House stage of this bill. In the meantime this bill could have been introduced at the beginning of this year.

A question remains that the Minister of Justice needs to answer, and it is why there was this slip, and why the eye was taken off the ball with this bill, as I think one of my colleagues characterised it earlier. The legislation had real problems. I think everybody on the select committee would acknowledge the work that my colleague Pete Hodgson did. I also pay tribute to the officials and the way they worked with the Bankers’ Association advisers. I think that that was not a marriage made in heaven, but it was one that worked under the circumstances. I think all parties are to be congratulated on the fact that they saw the problems with the legislation as it had been presented, and they set about trying to fix them in a way that meant that this legislation could be implemented, and then in time—because it will take time—the Financial Action Task Force will be able to examine whether it is doing the job that it is meant to do. That will be the subject of a report from the Financial Action Task Force in due course.

In the end, I think, between us, my colleagues and I have made the point about the inadequacy of the legislation in the first instance; however, it has been vastly improved. Although we have been critical of process, and at times a little resentful of the pressure in the select committee, we have stumped up, rolled up our sleeves, and done the work in the time that the Minister required, and I hope he acknowledges that in due course, also. Thank you.

TODD McCLAY (National—Rotorua) : It gives me pleasure to rise to speak on the Anti-Money Laundering and Countering Financing of Terrorism Bill. Before I do, as it is the first time that I have had an opportunity to speak today as the member of Parliament for Rotorua, I mention how greatly saddened I was to learn of the death of Sir Howard Morrison. Sir Howard was a great, great man, and his passing will be felt widely, not only in Rotorua but also, I believe, around the world. He was an exceptional entertainer, a real statesman, and a man who led by example. Rotorua has lost one of its proud sons today. Along with other members of the House, my thoughts, feelings, and sympathy go out to Sir Howard’s family at what must be a very difficult time.

The bill before us today after having come back from the Foreign Affairs, Defence and Trade Committee is very different from when I first stood in the House to speak about it at the first reading. That is because the committee took the position and the approach that the legislation should not be overly prescriptive, and it should not provide additional burden and cost upon those who would implement it. We asked whether there could be a better approach. There has been a lot of soul-searching, but in a very short time frame we came to the position we see before us today, and I recognise the work that all members of the committee put in.

I noticed that there was a lot of self-congratulation from the Opposition earlier. I would say that if it was as simple as Labour members suggested, they might have introduced such legislation. Indeed, as the Minister said, they might have drafted legislation before the last election, put it in, adopted it, and of course we would have already been meeting some of these obligations. Having said that, I point out that our chairman, John Hayes, worked very hard, as did all members of the committee. There was quite some consensus. I would say, in relation to the Opposition members of the committee who have just spoken, that we worked well together. They have a very good understanding of the issue and where we ended up, and it was good to hear them speak tonight, in comparison with those who spoke earlier who perhaps did not spend as much time focusing on the issues, and, therefore, there was a lot of rhetoric, as opposed to forward movement.

What does this legislation do? What did the committee decide in the end? Well, it decided that it must be future-proof. We do not want to change it again in a hurry. It should be risk-based, so that we can minimise compliance cost and so that a great cost is not imposed, not only on financial institutions but also on those they serve—their customers. As far as possible, it should be similar to the Australian legislation. Our approach was not to reinvent the wheel, but to look at the good things that are happening in Australia, and, where our laws and systems were similar, to see whether we could emulate them, and there were a lot of areas where we could.

I want to touch very briefly on a number of issues. I do not want to speak on this bill at great length tonight. I believe that the sooner we get it into law, the better we will be and the safer we will be from people who would launder money—in particular, drug dealers, and others who prey on those in society who are more innocent.

We looked at a risk-based approach, and I will give one example that showed the committee very clearly why it was important for us to make these changes. Let us say that a bank has a relationship with a customer who is, say, a lady in her 70s or 80s who has always banked with that bank, perhaps for 40 years. As the legislation was drafted, when it came into force the bank would have had to do additional due diligence on that elderly person. She would have needed to prove who she was, where she was living, and so on. A cost would be involved in that, and it would mean that possibly every single bank customer in New Zealand would receive a letter asking for additional information. The bank knows who that lady is; it has had a relationship with her for 40 years. Therefore, if all she does is get a pension and pay her rent and nothing greatly changes, how would she be a risk? The risk-based approach that will be possible under this legislation allows a bank to do additional due diligence and collect more information on that lady only if her relationship with the bank substantially changes. So if, instead of having just the pension, she shows up with $1 million in cash from having done really well at the casino or something like that, then it would do additional due diligence on her. I think that is a very good approach.

I, too, would like to recognise the officials, who worked closely with representatives of the banking sector to help us get it right. It is a very good piece of legislation. We have changed it greatly. It was good to have the Opposition onside. I am sure that my colleagues and I worked harder than they did, although they worked very hard none the less. I am glad we have brought the bill here, and I am happy to support it. Thank you.

• Bill read a second time.

Hon JOHN CARTER (Minister of Civil Defence) on behalf of the Minister of Labour: I move, That the Remuneration Authority Amendment Bill be now read a first time. At the appropriate time I will move that the bill be referred to the Transport and Industrial Relations Committee, that the committee reports finally to the House on or before 16 November 2009, and that the committee have the authority to meet at any time the House is sitting, except during oral questions, during any evening on a day on which there has been a sitting of the House, and on a Friday in a week when there has been a sitting of the House, despite Standing Orders 187 and 190(1)(b) and (c).

The Remuneration Authority is responsible for considering and determining the salaries and allowances for specific persons as defined by the Remuneration Authority Act 1977. The authority plays an important role through this function, and the Government is grateful for its work. Recently, however, determinations of the Remuneration Authority have led to public debate about the appropriateness of salary increases in the present economic climate. These concerns were also shared by many of those to whom the determinations applied, including members of every party of this House, and the Governor-General. Further, the salary increases are viewed by some to be out of step with several trends. These trends include a general appreciation of the need for belt tightening, and this Government’s expectations of the public sector. Reports of household financial hardships and job losses experienced by ordinary New Zealanders require a reassessment of how salaries governed by the Remuneration Authority are set. Although we may be seeing signs of economic recovery, unemployment levels continue to rise and families are maintaining tight budgets.

There is a perception that the criteria by which the Remuneration Authority arrives at its recommendations may not provide adequate guidance about the extent to which adverse economic conditions ought to be taken into account. It is important that the public has confidence in the authority, and that any perceptions that pay increases are simply automatic are addressed. The public has every right to question whether politicians, judges, and senior public servants should be handed guaranteed salary increases each year, when everyday Kiwi families are under financial pressure due to tough economic times. Consequently, the Government has decided to propose changes to the Remuneration Authority Act 1977.

This bill amends the Remuneration Authority Act 1977 to allow the authority to explicitly take account of adverse economic conditions when making its determinations, as well as a number of minor and technical amendments. Crucially, this Government wants to ensure that the authority maintains its independence when making its decisions. Decisions on pay for politicians should not be made by politicians. We also need to ensure that the authority has the tools to make decisions the public can have confidence in. The authority will have sufficient guidelines in place to acknowledge difficult times and to act accordingly, by recommending a wage freeze or setting remuneration increases at a lower rate than it would otherwise have determined. The bill requires that the authority base its assessment of economic conditions on evidence from an existing authoritative source, such as Treasury, the Reserve Bank, or Statistics New Zealand data. This will avoid the authority being required to do additional work to gather economic data.

Additionally, the bill makes a number of minor and technical amendments to the Remuneration Authority Act. These amendments concern the deletion of outdated positions in the schedules of the Act, updating positions in the New Zealand Defence Force, and the alignment of the annual reporting requirements of the Remuneration Authority with those of the State sector. These minor amendments are very straightforward. The entire bill, in fact, is very straightforward, and I look forward to it receiving the full support of the House. This bill responds to the concerns of the public and the position holders about the process by which the Remuneration Authority arrives at its determinations. By requiring the authority to explicitly consider adverse economic conditions, the bill will add transparency to the determination process while maintaining its independence. I commend the bill to the House.

Hon TREVOR MALLARD (Labour—Hutt South) : I think that in normal circumstances this bill, the Remuneration Authority Amendment Bill, would be waved through all its stages without much debate. But, unfortunately, as members are aware, the Government has taken a set of decisions that mean that the bill is no longer non-controversial. The broad remuneration of Ministers is something that Cabinet has decided to take beyond the Remuneration Authority; therefore, there will be a debate on the bill through all its stages. The Labour Opposition will be voting for the bill to be referred to a select committee.

I regret that it has taken the Hon Kate Wilkinson so long to bring the bill before the House. The policy decisions around the bill were, I think, debated some time close to Christmas. I can certainly remember Michael Cullen being in our caucus at the time that discussions were had on this bill. I think that Bill English is someone who would have been keen for the bill to have been dealt with before his current problem developed.

There is a general acceptance of the need for belt tightening. I am not absolutely certain that this legislation will make a lot of difference. I think it might make a difference to the timing of pay increases for members of Parliament, judges, the Governor-General, and some others; they might get them a little bit later than they would have otherwise. But if the relativities and the other approaches of the Remuneration Authority were used, then it would all come out in the wash, and it would all be the same thing.

I now want to focus on the reason why I question whether this bill should be being debated under urgency this week. It goes to a matter, frankly, of sheer hypocrisy. It is sheer hypocrisy—

Jo Goodhew: I raise a point of order, Mr Speaker. I believe that it would be known to all members of the House that to use that word in this Chamber is not acceptable. I ask you to ask the member to desist.

Hon TREVOR MALLARD: Speaking to the point of order, I say that I had not applied that word to any member of the House. I was very careful in what I said.

Hon Simon Power: I note that the member carefully avoided naming any one individual, but the former Minister, one of the longest-standing members of the House, will know that to raise a matter like that, and to use that word in a generic sense, actually brings all members and their reputations into disrepute and reflects badly on the House more broadly than would a reflection on one individual member. That in itself is out of order.

The ASSISTANT SPEAKER (Hon Rick Barker): I am in a slight quandary here, to be perfectly frank with both sides. Firstly, it is clear that it is out of order to call a member hypocritical or to accuse a member of hypocrisy. Secondly, it is out of order to accuse a party of hypocrisy or of being hypocritical. But use of the words “hypocrisy” or “hypocritical” is not unilaterally ruled out. A member might want to raise an issue about something being hypocritical but not attribute it directly to an individual or to a party. On this particular occasion, the member speaking has skated very close to the wind. He has called the issues hypocritical. He has not named the individual member or the particular party. I will not rule the member out of order on this particular occasion, but I say to him that he is exactly on the edge. The Hon Trevor Mallard has now heard that the House is concerned about this, and I advise the member not to pursue this line of debate from this point onwards.

Hon TREVOR MALLARD: I will not challenge your ruling, Mr Assistant Speaker, or pursue that line at all. In fact, what I am going to do is lay down a challenge to the House: I ask members opposite what the word is for a Cabinet that decides on the one hand to pretend to limit the salaries of Cabinet members, and on the other hand to say to the Deputy Prime Minister that he can have $37,500, with no receipts required, for pretending to live in Dipton. What is the word that one uses for giving a person who is one of National’s number $37,500 extra for pretending to live in Dipton when that person actually lives in Wellington? Why did Cabinet take away the rules around this in order to protect one of its own? In order to give money to the Hon Bill English, John Key, who is in charge of Cabinet, decided to undo the rules in order to effectively give Bill English a pay increase.

I do not care if that money goes to a trust—there is a whole pile of issues around the trust, and those will be pursued—but it is effectively paying Bill English’s rent. It is paying for him to live in Wellington. It is paying for a mortgage that should be paid for out of his own pocket, out of the very generous salary that the Government is pretending to limit at this time. I again challenge members opposite: I ask them what the word is for a Government that pretends to be keeping down salaries but at the same time gives $37,500 to someone who is not eligible for it. They do not have a word for that. I do not think there is a word for it that we are allowed to use in this House when we apply it to John Key or Bill English. We know that it is wrong.

We also want to know, again, as with the money-laundering bill, whose brilliant decision it was to bring up this bill this week under urgency.

Chris Hipkins: Gerry Brownlee.

Hon TREVOR MALLARD: It might have been Gerry Brownlee; he does not like Bill English very much, because he put him out of his job. I tell members that it might have been John Key. John Key might have asked his Cabinet to try to get rid of this while he is out of the country, to please try to get rid of the stuff, which points at a scandal that he is responsible for, because he is the person who is in charge of Ministerial Services, and he is the Minister responsible for the extra funding—funding that goes nowhere near the Remuneration Authority. I tell members what someone with integrity would have done. That person would have referred the issue to the Remuneration Authority. That person would have said to the Remuneration Authority that its job is to sort out the rules and make them clear. But what do those members do? They decide to take some money out of taxpayers’ pockets—some of the poorest people in New Zealand are paying extra tax as a result of the decisions that this Government made—and to give it to the Deputy Prime Minister. They are putting it into his pocket in a way that I am certain an independent body like the Remuneration Authority would never do.

I just do not know how wrong one can get in this particular area. If Mugabe did this, we would call him corrupt. I do not know the names of the rulers of Nigeria, but I know that they are corrupt. If they were doing this sort of thing, if they were saying publicly that they were holding their own wages down, but at the same time were making decisions that were sneakily putting cash into the pockets of people associated with Ministers, we would call it corruption. I cannot believe that a country like New Zealand has come to this. It is absolutely outrageous.

We are a country that regularly comes out at No. 1 in the world for lack of corruption. We are a clean country. All of us were absolutely ashamed at what Phillip Field did—what he was convicted of doing. We saw the court case and we know how wrong his actions were. But Phillip Field was a junior Minister outside Cabinet. And what do we have here? Our Minister of Finance is meant to have international credibility. He is the one who fronts up around the world to say that New Zealand is in a position to pay its debts. “We are a clean country. We are a transparent country.” is what Bill English is meant to say. I ask why the Government brings in legislation like this at the same time as it is handing tens of thousands of dollars to its Cabinet Ministers on a tax-free basis with no receipts required and without going to the Remuneration Authority. I thought Simon Power was better than that. Frankly, I thought that Chris Finlayson, as Attorney-General, would have put up his hand when that money was going through Cabinet to his colleagues and said that it does not look good, that it is not credible. As the highest law officer of Parliament he should say that it is wrong, and that it is not good for New Zealand’s reputation, because It makes our Government look like Zimbabwe’s, and it is just wrong.

DAVID BENNETT (National—Hamilton East) : Tonight we are discussing the Remuneration Authority Amendment Bill. The bill is an amendment to the Remuneration Authority Act 1977, and basically requires the Remuneration Authority to take into account adverse economic conditions, based on evidence from an authoritative source, in determining the salary or remuneration of persons or groups of persons covered by the Act. The bill also makes a number of technical changes, which are quite minor.

The heart of what we are looking at tonight is a bill that seeks to take into account the economic conditions of our time. In recent years there has been a major impact on the world economy of the financial crisis that has predominantly occurred in North America, but has gone round Europe and the rest of the world. That has led to a situation where many New Zealanders face uncertainty in their lives, especially financial uncertainty. It is a time when Governments have had to take on board an approach that delivers a strong economic base so that a country can survive and prosper in the long term.

Part of that process for the Government was to take into account any costs that may be incurred by it. The Government is, therefore, looking at the Remuneration Authority, which has the ability to set, for example, the wages of members of Parliament. It is giving it the authority to take into account the economic conditions of the time in making such a determination. The bill is a result of the economic situation we have found ourselves in through the international crisis. It is an attempt to make sure that the Remuneration Authority takes into account such conditions when setting the salaries of members of Parliament.

Hon Member: It’s the right thing to do.

DAVID BENNETT: It is the right thing to do, as my colleague on my right says. We look forward to the bill progressing through the House.

Hon PETE HODGSON (Labour—Dunedin North) : I would like to start by acknowledging the comments of the Hon John Carter when he said in his introductory remarks to the Remuneration Authority Amendment Bill that every day New Zealand families are under pressure. I thought that was a good thing to say. Furthermore, I think that John Carter, who comes from Northland where very few people are on the salary of $131,000 that I am on, would get a sense that that was a good idea. Indeed, there are very few people in Dunedin, where I come from, who are on $131,000.

But unfortunately some of the actions of the Government have not been consistent with that sentiment, and Trevor Mallard has laid one of them out. As from 1 January 2010 the entire executive, as long as they do not live in Wellington or as long as they, in the words of Trevor Mallard, “pretend to live in Dipton”, will be able to pocket up to $37,5000. That is unless, of course, they own their own house, in which case it is $30,000. The point is that it is a reduction in transparency.

When I am in my motorcar going to the airport, or wherever, I must maintain a logbook. If I were a Minister, and indeed I was, and there were to be any expense incurred, then it would have to be an actual and reasonable expense. I would have to get the docket. There would be no refund without the docket. This was the position until Mr Key came along and said: “Oh, let’s give them the money and let it go.” Every member of the executive, irrespective of their costs, irrespective of whether they are or are not staying with their second cousin at a cost of 150 bucks a week, will be able to pocket $37,500, minus any expenses. That is not good. It is not good because it means there is not only a reduction in transparency but also an increase in the well-being of those who are best off. Cabinet Ministers are well paid. That is a reflection of this Government. On 1 April the one and only bunch of tax cuts the Government will ever put in place for the next little while went almost entirely to the well paid. Here we are, making sure that the chances are that a politician’s wage rise in December will be modest or zero, and that is a good thing, and Labour will be voting for this legislation. But at the same time as the Government speaks in favour of that, it ensures that anyone who is already rich gets a tax cut and that from next year any Minister gets 37,500 bucks, minus actual expenses incurred—and not a receipt in sight. It goes straight into the back pocket. That is not good enough.

What else is not good enough is that in times of economic constraint, and this legislation is predicated on the idea of economic constraint, the rich get richer and the poor get poorer. Earlier this week we have seen the corporate fat cats pocket big money, and we have seen unemployment go up by another 2,000 jobs this week. The majority of the people who have lost their jobs were already in low-paid jobs. They have moved from low pay to no pay, or from low pay to an unemployment benefit if they qualify. When times are good, there is the possibility of closing the rich-poor gap. It seems that when times are bad, the Government has abandoned that idea. That seems to me to be sad. When we are tucked up in bed tonight, people will come into our offices and clean our rooms, and some of those cleaners will be on $12.55 an hour. They will get up in the middle of the night, strap a portable vacuum cleaner on their back, and go around and clean the offices of people who are on $131,000 a year, or in the case of the Minister of Finance, on twice that plus whatever he is pocketing—and all for $12.55 an hour. We ought to be reflective of the fact that in harsh economic times, much as we want to congratulate ourselves on signalling that we do not want a pay rise this year, the poor are getting it in the neck anyway.

There is something else I want to say. The Hon Bill English, the man who has been the centre of attention this week and last week, and who will be when the House resumes, went to the Public Service yesterday and said: “You guys are not going to get a pay increase for years; not for years. Don’t even think about it.” Some of those people who work in our public facilities, who work as public servants in our schools and hospitals, are on something approaching the minimum wage already, and he is saying that that is all they are going to get. He is saying that to some of our public servants who are known to be in short supply. We know that some health professionals, for example, are still in short supply, yet he is saying: “I don’t care. Prices will be frozen.” The Minister of State Services, Tony Ryall, has been caught telling polytech chief executives and councils not to negotiate pay increases, even in circumstances when negotiations were under way. If there is anything that contradicts the provisions of our industrial relations legislation, it is that sort of heavy-handedness. In fact, I can report to the House that I know that the Minister of State Services himself, of an evening, rang certain individuals in the polytech sector and said, in the middle of industrial negotiations, “zero increase”.

Chris Hipkins: That’s outrageous.

Hon PETE HODGSON: That is outrageous. It is overstepping the mark. It is exceeding authority. That same Minister will, from 1 January next year, pocket $37,500 of taxpayers’ money, minus any expenses he incurs. That is a salary that some people would like to have. An amount of $37,500 is more than many people in the State sector earn in a year in total.

It is important that we support this legislation, but it is also important that we do not do so unctuously. There is inequality in this country. The inequality is growing in this economy. The tax legislation earlier this year caused an increase in inequality in this country. The pocketing of ministerial expenses from 1 January next year will cause an increase in inequality in this country, and the activity of the Minister of Finance yesterday, saying to all public servants, including those on very low pay: “Don’t even think about a wage rise.”, will create further inequality in this country. We need not be too pleased with ourselves. The poor are getting it in the neck, and we are not. The poor are being moved out of work, and we are not. We come up for our job interviews in another 2 years. Some of those people are going out of work now—2,000 a week.

Let us be careful here. Let us be sure that although we vote for this legislation and support this legislation, we had better be clear that we do not have any moral authority in this matter—at least the Government has no moral authority in this matter. The Government has been looking after itself, or its senior members, extremely well, and it has been using the economic downturn to make sure that low-paid people stay low paid. It is not good enough. I think we ought to be careful as we proceed with this legislation, but proceed with it we must.

Dr KENNEDY GRAHAM (Green) : I rise to support the first reading debate on the Remuneration Authority Amendment Bill 2009. I would like to begin by picking up on the concept of moral authority, which was articulated a moment ago by my colleague Pete Hodgson. I think that is the essence of what we are addressing. This bill would require the Remuneration Authority to take into account adverse economic conditions when determining the salary or remuneration of persons covered by the Act. As of now, the authority is not required to take this into account. The bill reflects the growing mood of the public in a time of economic downturn. The latest news that the recession is turning may be taken with a grain of salt. But in any event, whether or not we are emerging from recession, that is not the point of the bill. The point of the bill is that at any one time, in times of economic buoyancy or otherwise, we must have regard for the state of the economy.

The bill derives, I believe, from an initiative taken last year by the Green Party immediately after the general election. There was some public concern over a salary increase being paid to MPs at the time the global recession was beginning to bite. We in the Green caucus discussed this matter in some detail. The result was a motion lodged in the House by our then co-leader Jeanette Fitzsimons. The motion was that no further salary increase should be given to MPs for the duration of the forty-ninth Parliament—or at least an intention to do that—over the following 3 years. This was opposed by the Government on the grounds that it presumed that the recession would last for 3 years.

The Government advanced a counter-proposal, to the effect that a determination this coming November should not be made. The Remuneration Authority would then reconsider the matter thereafter. That proposal was adopted by the House, and the Green Party was happy to support it. Even though it was far less far-reaching than our own, it was at least something. The question of restraint over MPs’ salary levels has attained added sensitivity since then, as a result of the various scandals in the UK and their modest spillover into the New Zealand scene. Here again, the Green Party has led the way with a call for a review, not only of ministerial housing regulations, as the Prime Minister has decided, but also a full review of all MP expenses.

This view of the Green Party does not rest on any belief that MPs are hideously overpaid or that there is deep and dark fraudulent behaviour going on. The New Zealand system and our people generally have a genuine integrity, but there is reasonable public concern over what is going on, and, therefore, a higher level of scrutiny and transparency is in order. We are, after all, the servants of the people as well as being legislators on their behalf. Therefore, a naturally high standard of behaviour is required. A reassurance is being sought, not a witch-hunt, and we should not be afraid or be seen to be so.

In opposing the Green Party’s proposal, the Government displayed, I think, a slight misconception. Our view of the need for financial restraint did not rest on the exigencies of economic recession. It rested on the deeper underlying issue that MPs’ salaries should always reflect a degree of self-abnegation on our part. So it depended less on picking when we might clamber out of the recession, and more on some natural standards over where we sit in society and how we serve society. In that respect, I must say that in my short time in this House I find a fundamental difference among members. That difference reflects, to some extent, differences of philosophical persuasion. There are those people who compare us with the private sector, and the highly paid corporate sector at that. Therefore, they conclude that we are badly paid relatively. This colours their perception of what we should expect in financial remuneration, and also of how we might respond to any public scrutiny. Others amongst us compare ourselves with, say, the average salary within New Zealand. Of course, we are relatively well-paid in comparison. The expectations and predispositions are palpably different.

These issues are sensitive. For my own part—and now I am speaking personally— on entering this House I was surprised as to the difficulty of exploring this issue. I did inquire on entry about whether it was possible to refuse a salary increase. I was advised that it was not. I asked for the legal basis of this, and I was told that it was up to the Remuneration Authority. I asked what the legal basis was on which the authority made its decision. I said that I was interested to explore a little more the question of the legal compulsion of MPs to accept a salary increase, as determined by the Remuneration Authority.

I noted that the relevant section in the Remuneration Authority Act 1977, section 14, was as follows: “(1) Every determination of the Authority has effect according to its tenor and, despite anything in any other enactment, an Order in Council is not required in order to fix the rates or scales of any salary or allowances that are determined by the Authority in a determination.” Also, and this was the critical point, it states: “(2) It is unlawful for any person to act contrary to a determination under this Act or to fail to observe the criteria or limits specified in a determination.” So I asked whether Parliamentary Service had ever obtained a legal opinion on whether this meant categorically that recipients of a salary increase may refuse it or may not refuse it. I was advised that Parliamentary Service had not previously sought an opinion, as it would seem that this question had not been raised before. I replied that this seemed to mean that the issue of accepting a salary rise through a Remuneration Authority determination was an issue for members. If so, I asked whether it was an issue for each member individually or all members collectively. I was told that this would be an issue that I would really need to discuss with the Remuneration Authority and that it would have a view on what its role and responsibility are, and what that means for MPs singly or collectively. I left it at that.

I do not pretend to have emerged with any great insights on this matter. Perhaps the question of MPs’ salaries might be seen as a personal conscience issue. I do not know. I do know that it is a sensitive issue and that each individual will have a different view from that of others, and I would certainly respect them all. I think that we still have some way to go on this issue. The relationship between the personal interest and the national interest is at issue; so is the relationship, incidentally, between the public sector and the private sector. Suffice it to say, for the moment the Green Party is happy to support the bill’s referral to a select committee, and we will look forward to the deliberations therein.

RAHUI KATENE (Māori Party—Te Tai Tonga) : Before I start my speech I join with the rest of the House in expressing my sadness at the passing of Tā Howard Morrison, and to extend my condolences to his whānau.

The timing of the first reading of the Remuneration Authority Amendment Bill under urgency is interesting, to say the least. Yesterday’s newspapers all came together, shining the green light for gross national spending. With headlines like “Things have stopped getting worse”, “Outlook brightening, economists say”, and “English welcomes GDP growth”, one might be mistaken for thinking that golden weather is just around the corner. They might also soften the blow when looking at the details of remuneration for persons or groups of persons covered by the Remuneration Authority Act 1977.

One of the more interesting facts when looking at the determinations from the authority is to rank the top 22 positions by salary, down to a $300,000 threshold. The Prime Minister comes in at No. 9, trailing behind, in order, the Solicitor-General, the State Services Commissioner, the Commissioner of Police, the chair of the Commerce Commission, the Chief Justice, a judge of the Supreme Court, the President of the Court of Appeal, the chief of the New Zealand Defence Force, and the Controller and Auditor-General. All those people who think that politicians are rich should realise that not one MP other than the Prime Minister makes it to that forum.

Notwithstanding the six-digit salaries earned by the judiciary and commissioners, as previously mentioned, there is still a massive jump from the remuneration of people covered by the Remuneration Authority Act and the remuneration of the people in the street. Those in the positions of Solicitor-General, State Services Commissioner, Commissioner of Police, chair of the Commerce Commission, and Chief Justice are all sitting on annual salaries of close to half a million dollars. When one compares those salaries with the average wage for all New Zealanders, quite frankly there is little to compare. The average Māori wage for all persons aged 15 years and over as at June 2008 was $20,904, compared with $23,508 for non-Māori. The Remuneration Authority Amendment Bill does not make mention of these inequities, which is inevitably to be expected.

The purpose of the bill is quite specific. It amends the Remuneration Authority Act 1977 to require the authority to take account of any prevailing adverse economic conditions when determining the remuneration of persons or groups of persons covered by the Act. This is where it becomes interesting, because taking into account the economic conditions will obviously result in lower remuneration rates than would otherwise have been determined.

The regulatory impact statement of the bill explains quite clearly that the authority is not currently required to take into account the prevailing economic conditions when making a determination of wages. Failure to respond to the changing economic profile may, in turn, lead to negative public perceptions of the authority and those in public office, in light of the difficult economic climate currently confronting all other New Zealanders. That would also be inconsistent with the belt-tightening approach being promulgated by the Government in signalling its expectations around the likely impacts for wage rounds in the public sector. It would be even more incongruous in light of the frequent reports of household financial hardship and job losses experienced by ordinary New Zealanders. Despite glowing reports that the recession is over, we need to remember that we are not out of the woods yet.

The 2009 United Nations Conference on Trade and Development report has suggested that the crisis that initially began in the financial sector has now turned into a dramatic downturn in the wider economy, with global gross domestic product expected to fall by more than 2.5 percent this year. Indeed, Heiner Flassbeck, a director with the United Nations Conference on Trade and Development, has described the outlook as bleak, cautioning that even in the most optimistic circumstances it could take up to 6 years for most countries to return to the levels of GDP reached in 2007 before the crisis. Against that context, the Māori Party is happy to support the intention of the bill to amend the Remuneration Authority Act.

In the event of evidence of prevailing adverse economic conditions, the authority will exercise its discretion as to whether it will determine remuneration at a lower rate than it would otherwise determine. We believe that that is only due and fair, and we have supported the need to hear the bill under urgency out of our concern for urgency to be accorded to the critical need to help reduce the gap between high and low incomes, and to better focus and target public spending.

This is where we come back to our prevailing concern about doing everything we can to make adequate provision for those New Zealanders who are particularly vulnerable to the impact of adverse economic conditions. Rising food prices and a proposed increase to GST suggest to us that low-income families will continue to be disproportionately affected. Here I recognise the work of Te Rōpū Wāhine Māori Toko i te Ora, whose hui opened in Whanganui this morning. On the agenda tomorrow is a workshop about finances and financial literacy. It is sad that we have to be taught about financial literacy when we have less money than people who actually know about financial literacy. I hope that the Māori Women’s Welfare League continues in its good work.

Manaakitanga and rangatiratanga lead us to support low-income taxpayers. We believe that it is entirely appropriate that while we are talking about the context of remuneration for a certain sector we also take into consideration the very real costs to other New Zealanders. I will bring to the debate the disparity that continues to impact on the lives of Māori in terms of their median weekly personal income. At $500 per week, Māori weekly income is a whole 33 percent lower than the weekly income for the total population of $537 per week. Why is that a concern for this Parliament? Rob McLeod, chairman of the New Zealand Business Roundtable, summed it up in a Treaty debate at Te Papa earlier this year. He said: “The current and increasing relative population of Maori mean that Maori are very significant to the New Zealand economy, both today and tomorrow. Furthermore, the economic and social wellbeing of Maori and non-Maori are interdependent. An economically affluent Maori people will enhance the economic prospects of non-Maori. Conversely, an under-performing Maori population will hinder the progress of non-Maori.”

My point is that Māori unemployment levels continue to increase and incomes reduce as a consequence of the prevailing adverse economic conditions. Although no one would want to suggest that any incomes should reduce, we think it only fair that the impacts of economic uncertainties are experienced universally and comprehensively across the sectors. We note too that the coverage of the Remuneration Authority Act is limited to only those occupations listed under the Act. Other mechanisms must be considered to ensure that the salaries of a greater range of top offices and positions can also be considered in relation to the prevailing economic environment.

Finally, we recognise that although a review of recent determinations made by the authority suggests that it has been cognisant of the prevailing adverse economic conditions, it is vital that we have a formal mechanism for ensuring that it happens. To this end, we support the bill at its first reading, and we place on record again our commitment to helping to reduce the gap between low-income taxpayers and the average income of the nation. Kia ora.

• Bill read a first time.

Hon JOHN CARTER (Minister of Civil Defence) on behalf of the Minister of Labour: I move, That the Transport and Industrial Relations Committee consider the Remuneration Authority Amendment Bill, that the committee report finally to the House on or before 16 November 2009, and that the committee have the authority to meet at any time while the House is sitting except during oral questions, and during any evening on a day on which there has been a sitting of the House, and on a Friday in a week in which there has been a sitting of the House, despite Standing Orders 187 and 190(1)(b) and (c).

• Motion agreed to.