Hon MARIAN HOBBS (Labour—Wellington Central) : I move, That the Westpac New Zealand Bill be now read a second time. This private bill, promoted by the Westpac Banking Corporation, provides the mechanism to enable Westpac Banking Corporation’s retail business in New Zealand to be vested in a New Zealand incorporated subsidiary—Westpac New Zealand Ltd. Westpac Banking Corporation has operated in New Zealand since 1861, and currently operates in New Zealand as a branch of the Australian parent. The establishment of a subsidiary enables Westpac to comply with the Reserve Bank of New Zealand’s local incorporation policy, introduced in 2003. That policy provides that foreign-owned banks over a certain size are required to establish a New Zealand subsidiary with its own board of directors, members of which are required to comply with New Zealand company law.

I wish to offer particular thanks to members of the Finance and Expenditure Committee, who ensured the timely return of this legislation to the House. Their work on this bill has gone a long way to help Westpac New Zealand Ltd meet its intention to allow the transfer of its assets and liabilities on 1 November 2006.

When I moved the first reading of this bill, I noted that Westpac and the Reserve Bank negotiated for some time over whether it would be necessary for Westpac to establish a subsidiary or whether there was another suitable solution. Ultimately, the Reserve Bank was not satisfied that another suitable solution could be found, so this bill creates a legal framework for the vesting of assets of Westpac Banking Corporation’s New Zealand retail business into a New Zealand company, Westpac New Zealand Ltd. The select committee was advised that the Reserve Bank, Treasury, and the Inland Revenue Department agree that legislating is the best way of transferring the relevant parts of Westpac New Zealand’s business to the new entity. The committee has also been assured that Westpac New Zealand Ltd’s application to be registered as a bank will be assessed against the Reserve Bank’s standard requirements, and that registration will need to occur before the transfer of assets and liabilities facilitated by the bill takes place.

It has needed a very tight and intricate time frame to get all the actions within the correct time sequence, but the public should take comfort that the change in corporate form of the New Zealand branch of Westpac will have no adverse effect on Westpac’s customers, employees, and suppliers of services, or its ability to meet its obligations to Government entities. Four technical amendments were proposed; those have been accepted by the committee and are laid out in the bill.

Once again, I offer my thanks to the committee for its thorough examination of this bill and for the timeliness of it. I ask the House to move this bill through the remaining stages as expeditiously as possible, in order to meet Westpac’s finely balanced time line.

CRAIG FOSS (National—Tukituki) : The National Party continues to support the Westpac New Zealand Bill through the House. This private bill allows the incorporation of Westpac New Zealand Ltd from the old Westpac Banking Corporation. First of all, I thank all the officials who have been involved with the formulation of the bill. I know they have spent many, many hours on the bill. I also thank the honourable member Marian Hobbs for bringing the bill to the House and helping us get it through the Finance and Expenditure Committee. I also thank our committee members for their well-considered examination of the bill, and for the time they spent on it and the questions they asked of officials.

When we look at the environment in which the bill is being presented, we see that the Reserve Bank of New Zealand, Westpac, and various other Government agencies all operated with good intent and good faith. Their focus was on a good and fair outcome, at the very least for the depositors in Westpac in its current form in New Zealand and, in a greater sense, the taxpayers of New Zealand, who, if anything untoward were to happen to Westpac, would, no doubt, be called to help out.

It cannot go without note that this financial transaction is probably the largest-ever in New Zealand’s history. It is quite possibly the largest transaction affecting more New Zealanders than any other I can think of. About 1.3 million customers of the existing Westpac will be impacted by this change-over. To be fair—and in Westpac’s words, I think—the transaction will be almost invisible to those 1.3 million customers. But we need, perhaps, to consider the information and the awareness that those New Zealanders have of the institution into which they are putting their funds. I think the size of the balance sheet is about $30 billion to $40 billion. That is New Zealand’s largest-ever transaction. Although this is largely an administration bill, I am sure some members are noting that the transaction is huge, and on 1 November 2006, let us say, $35 billion of New Zealand’s assets—deposits, mortgages, liabilities, etc.—will be transferred at the stroke of a pen. That is a quite phenomenal amount, and it still surprises me somewhat the lack of media interest and public interest in the bill. Having said that, I am aware that some members have tried to raise this issue and perhaps we will hear more from them later.

Overall, the Westpac New Zealand Bill is a win to the Reserve Bank of New Zealand, to the depositors in Westpac, and to the New Zealand taxpayers. It is a small win, perhaps, because most of the other Australian-owned banks are already of this form. I guess wins for New Zealand institutions—governmental institutions in particular, as they contest and even argue and fight regulatory arrangements with our Australian cousins—are few and far between. We have had another one today with the announcement that New Zealand stone fruit will be allowed into Australia, but a cynic may argue that stone fruit was traded for importation to New Zealand of Australian honey. Of course, being a patriotic Hawke’s Bay member of Parliament, I note that New Zealand apples are still not yet going into Australia.

The Reserve Bank has spent an awful lot of time and resources on formulating this bill and getting it through the various hoops, and perhaps that is why the bank may have taken its eye off some other matters. I will come back to that in a moment. Why is this bill necessary? Bank failure in Australia, or some systemic failure over there, could have—will have—a resounding impact on New Zealand. That is not healthy for New Zealand. But I think we have to note that regardless of what this bill does—and, yes, it securitises New Zealanders’ assets within New Zealand—quite frankly, if there were to be a large bank failure in Australia, then the financial system of New Zealand would also probably be in a pretty poor state. I again argue that the risk of an Australian problem no longer having an impact on New Zealand does not hold much water in a practical sense. I certainly hope that will never happen or need to be tested.

I note that the select committee had constant solid assurances from officials of Westpac in its various forms that there would be no restructuring, that there had been no arbitrage possibilities, and that there has been no exploitation of New Zealand tax law, regulatory law, Reserve Bank prudential requirements, etc.; they were simply agreeing to do the right thing in the eyes of the Reserve Bank. I am sure they will hold to those words. The Reserve Bank also assured us that the prudential requirements of the new balance sheet of the new entity—Westpac New Zealand Limited—has, and will, pass all its prudential requirements, asset ratios, capital asset ratios, etc. Again, at first cut, that looks good and solid for New Zealand. We are also assured that Inland Revenue Department officials were quite comfortable and were convinced that this was a tax-neutral transaction and that there were no fiscal risks surrounding the transaction. Again, the outcome was, in fact, the best outcome that could be envisaged for New Zealand.

Concern was expressed over the line in the sand of 1 November 2006. Officials came back to the committee and gave various assurances that that date was not quite as risky as I had earlier thought, particularly when I first read the bill. But I still reserve an opinion there, because in this current form we do not know where banks, bank officers, their servers, their back office, and so on—all contributing and helping to make this happen on 1 November—will be based. They could be in Melbourne, in Sydney, or in New Delhi—we do not know. New Zealand law, of course, cannot extend that far, but I always look for any risk and try to manage it out of the transaction. I certainly hope nothing untoward happens on 1 November, so all speed to everyone involved.

I noted earlier that the Reserve Bank has spent a lot of time, resource, staff-number hours, and outside consultation on this bill. Perhaps that is why the eyes of bank officials might have gone off the inflationary ball. The economy is under threat. The historic consumer price index is now running at 4 percent. The consumer price index is projected to stay at 4 percent or higher for the next 18 months.

The Reserve Bank certainly needs to pay somewhat more attention to what is happening in our economy as a result of the actions of the Minister of Finance. In the current environment, growth is running at only 1 percent. State sector wages are absolutely exploding at the cost of private sector wages. No one will see any productivity gain for New Zealand in that, and productivity gains are the only way out of the current demise of the New Zealand economy. The Reserve Bank has not adjusted monetary policy to counter the actions of a flippant Minister of Finance—the over-taxation, the inflationary spend-up, the waste, and the unproductive use of taxpayers’ funds. A prime example is the pledge card we have been hearing so much about today.

Finally, National welcomes this bill and supports its passage through the House. I am concerned, though, about the new Westpac New Zealand’s ability to retain its staff, given the higher incomes available in Australia and the proposed capital gains tax and the effects that will have on their remuneration. I certainly hope the new officials do not join the 640-odd other New Zealanders going to Australia every week and apply for jobs at Westpac New Zealand’s head office in Australia.

RODNEY HIDE (Leader—ACT) : It will not be me who refers to the fact that the Westpac New Zealand Bill is a private bill. It is not common in our Parliament that an MP brings such a bill to the House. I observe that this bill is a big bill in terms of its implications. I will not point out that the member whose name is on the bill is not even here. I will not do that, not at all, not once. I should also point out that the ACT party will be, sadly and unfortunately, opposing this bill and I will set out why.

I was interested to hear my colleague Mr Craig Foss speak on this bill and raise some concerns, and then say he will vote for it anyway because the Reserve Bank and Westpac have given him assurances that everything is OK. The difficulty with that is that the Reserve Bank does not guarantee any bank in New Zealand, and the Government does not guarantee any bank in New Zealand; people are out there on their own as customers. I must say that when I see a bill with Marian Hobbs’ name on it, experience has taught me to look most carefully at what is going on. There is a reason she is no longer a Minister and is able to bring forward a private bill—it is because she was not very good at it. So Marian Hobbs, who—and I do not think this is unparliamentary, given what has gone on here today—has been referred to in the media as “Boo Boo” because of her constant screw-ups while a Minister, now has a bill that affects 1.3 million customers and involves a transaction of $35 billion to $40 billion. Would one put that bill in the charge of someone whose nickname became “Boo Boo”, who never rose above Minister of Broadcasting, and who got fired from that job?

National members are quite happy to vote for the bill because they have had an assurance from the Reserve Bank that everything will be OK. Let us examine this. When people go and put money into a bank, it is no longer their money. All they have is a credit against that bank. If that bank falls over, which would be a terrible thing, they lose their money and the Government ain’t going to bail them out, the Reserve Bank ain’t going to bail them out, and Marian Hobbs is not going to reach into her back pocket and bail them out. No, they lose their money. I am amazed that this House is going along so casually with this. So let us just think what happens. Right now, if you are a Westpac customer, you have a claim against Westpac, which is a large bank across Australia and New Zealand. You know, through the disclosure regime, the assets and liabilities of that bank, and you know it is a large bank.

The ASSISTANT SPEAKER (H V Ross Robertson): The member keeps on bringing in the Speaker.

RODNEY HIDE: Why?

The ASSISTANT SPEAKER (H V Ross Robertson): You know that you cannot bring the Speaker into the debate. Please continue.

RODNEY HIDE: I would not do that, Mr Assistant Speaker, but I can talk about customers—and that is what I am talking about, Mr Assistant Speaker. I know that you do not bank with Westpac, but I can talk about a person going and putting his or her money into the bank. Right now, customers have a claim against Westpac, including its operations in Australia and New Zealand. But when this bill comes into effect on 1 November, suddenly their claim will be against another legal entity. Is that not true, Mr Foss? It is now a much smaller entity, is it not—it no longer represents the bank in Australia and New Zealand; it represents the bank in New Zealand. So what customers are banking with has changed. The legal entity has fundamentally changed. Customers did not agree to that; Parliament is doing it.

Craig Foss: Yes, but they’re ranked higher.

RODNEY HIDE: Oh, well, Mr Foss says they are ranked higher. He actually does not know that, because the next kicker is that that has been done before, in the 1970s. Of course, Parliament then, when it drafted the bill, included in the bill the assets and liabilities that were being transferred across. What do we discover in this bill? There is no description of the assets and liabilities that will be in Westpac New Zealand. I defy anyone to tell me what the assets and liabilities of Westpac New Zealand will be. So that is interesting—we are setting up this legislation, but who will decide that?

Chris Tremain: The Reserve Bank.

RODNEY HIDE: Oh, well, that is a worry—Mr Tremain yells out that he thinks it will be the Reserve Bank. I tell him that, no, it is not; it will be the Minister by Order in Council. Is that not correct?

Shane Jones: Yes.

RODNEY HIDE: Shane Jones is on to it; at least he kept awake during the hearings. So now we will have Michael Cullen, that economic wizard—it goes from Marian Hobbs, who is the author of this legislation, to Michael Cullen—and we all know to trust him, do we not? Here is the National Party now saying; “Don’t worry, you 1.3 million customers; you can trust Michael Cullen.”—Yeah, right! So for those 1.3 million people, by Order in Council—Mr Jones has confirmed that; a very good chairman he has become, I might add, and that will sink his career—Michael Cullen will decide what the assets and liabilities of Westpac New Zealand are. Well, bloody hell, as they say! So people go to bed one night with their money in Westpac, but they wake up next day and, because of what we are passing here today, in part, it is a new legal entity. The assets and liabilities of that entity have been decided by the Minister of Finance, Michael Cullen, with no parliamentary scrutiny or check.

It might have escaped members’ attention, but there is a dispute on between the New Zealand Government and Westpac, over a small tax bill totalling $750 million, not including penalties. If we put the penalties in, the sum goes to a billion dollars. The question has to be asked: “Oh, I wonder who’s going to end up carrying that?” The Reserve Bank advised us not to worry; it would not be Westpac New Zealand. If we ask why not, the bank says that it would never advise the Minister to sign that. That is how shonky this is. And I say to the House that if we are to agree to something that Marian Hobbs, having been fired as a Minister because she was a booboo, has come up with; if we let her come along here with a private bill for which she cannot even sit in Parliament and listen to the debate on; if we are just to rubber stamp the bill for 1.3 million people—the bill that involves a transaction forced, by compulsion, by this Parliament, with no customers agreeing to this, they do not have a say—if we are going to be doing all that, then we do need to worry.

Let us imagine that everything is kosher and absolutely as the officials have advised. Let us imagine that Craig Foss is right—that we can trust everyone who comes before a committee and says not to worry, because everything will be OK, Michael Cullen will do a great job, and Marian Hobbs knows what she is doing. Let us imagine all that is true, which is hard, then even if all that is true, I still think the process is wrong. I am not criticising Westpac here; I am actually criticising Parliament. I do not believe that we have given this bill proper scrutiny, we have not considered it properly, we are not following a correct process on behalf of 1.3 million customers, and we are not actually considering the gravity of a $35 billion forced transaction. So the ACT party, proudly, on its own, stands opposed to what is a shonky process.

GORDON COPELAND (United Future) : I want to take a brief call on the Westpac New Zealand Bill, firstly, to say that we have in the Reserve Bank of New Zealand a world-class institution. In previous lives before coming to Parliament, I was aware of some of the work the bank does in its prudential supervision role of the New Zealand banking system. It is at the bank’s request and at its initiation, in undertaking that role, that we have this bill before us. The Reserve Bank had formed the view—and, I think, quite correctly—that a mere branch of a major Australian bank operating in New Zealand, with hundreds of thousands of New Zealand customers, and answerable completely as a branch to the board of Westpac based in Australia—if you like, in a foreign jurisdiction—has risks from the point of view of people depositing with that bank in this country.

For example, if the Westpac Banking Corporation holding company, the bank that actually runs the operation in Australia, were to come under stress for whatever reason, which could perhaps be completely unrelated to anything happening in this nation, then, under the four pillars policy of the Australian Government, it is my understanding that Australian depositors in Westpac would be given preference over New Zealand depositors in the New Zealand branch of the Westpac Banking Corporation. That, of course, is a most unsatisfactory situation from the point of view of New Zealand depositors. In fact, it is the Reserve Bank’s role to protect those depositors.

I say, in all honesty, that those of us who were at the Finance and Expenditure Committee when the bill was considered would find the comments of the previous speaker, Rodney Hide, somewhat strange and, I would have to say, greatly misinformed. Why that should be probably has something to do with his preoccupation with dancing during the relevant period.

But the reality is that the Reserve Bank of New Zealand has a thing called a capital adequacy ratio. Therefore, when this new bank is incorporated in this country, the Reserve Bank will ensure that the capital, which is the difference between the assets and the liabilities of the bank, will be sufficient and in line with best banking practice. Exactly the same thing will occur if Westpac New Zealand has to settle a large tax bill. To the extent that doing that drains the local company’s capital—[Interruption]—it will be required, I tell Mr Hide, to inject new capital so that the protection of its New Zealand depositors is continued long on. So really, the pride the ACT party has in its lone voice on this issue is, I think, somewhat misplaced, and perhaps a humbler approach would be more appropriate in the circumstances.

With those few words, I just say that United Future will support the second reading of this bill. We will support it going through all its remaining stages in the House, which I understand will be on the next members’ day, 6 September.

CHRIS TREMAIN (National—Napier) : I rise to speak on the Westpac New Zealand Bill. It seems somehow inappropriate to be debating the Westpac New Zealand Bill at the same time as many great State events have taken place in our nation in recent days—the tangi of a Queen; the coronation of a King; the swearing-in of a new Governor-General; and the Westpac New Zealand Bill.

Firstly, I congratulate Anand Satyanand, and his wife, Susan, on taking up the role of the 19th Governor-General of this great nation. I believe that his speech today was reflective of where our nation currently sits, and that his use of Witi Ihimaera’s quote was timely given the passing of our Māori Queen and the outpouring of grief surrounding her tangi. If that quote sets the framework for the new Governor-General’s term, then indeed he will be a man for our time. I wish our new Governor-General and his wife the very best in their new role.

I will be returning to the bill in a minute, Mr Assistant Speaker. I just wish to acknowledge the passing of our Māori Queen before I do that. My sympathies are shared with all New Zealanders over the passing of the Māori Queen, Te Arikinui Dame Te Atairangikaahu. Her funeral marked the occasion of a great humble leader under whose tutelage we saw remarkable steps forward for her people and, at the same time, for all New Zealanders. I take this opportunity to wish the new King Tuheitia Paki a reign marked by achievements for his people and for all New Zealanders. Finally, I mihi him with a proverb I used in my own maiden speech: “Whāia te pae tawhiti kia tata, Whāia te pae tata. Whakamaua kia ū, kia Tī-na!” Reach to the stars for New Zealand. For your people, pull them close and hold them tight.

So in this vein it is somewhat of a let-down that we are debating the passing of the Westpac New Zealand Bill as the first legislation before Parliament following such great events. As with the new Māori King and the new Governor-General, there are very few dissenters—with the exception of the ACT party in this case—and this provides somewhat of a comparison with the Westpac bill, which all sides of the House support, with the exception of ACT. But I guess that is where the comparisons cease.

This bill will enable Westpac New Zealand to sever the apron strings currently binding it to its Australian parent. The bank hopes to achieve that goal in November, provided that this legislation is passed through the House in good time. In that regard the new Governor-General does have some authority and connection in the granting of Royal assent to this bill. However, as Marian Hobbs, who is no longer in the House, pointed out in regard to this legislation, there needs to be an expeditious nature to the bill to get it through by 1 November.

If the legislation is timely, Westpac will incorporate on 1 November, passing all its retail assets and liabilities to a new company registered here in New Zealand. Westpac is currently the only one of the four major banks in this country not locally incorporated. Reserve Bank policy is that systemically important banks should be locally incorporated to wall off the country’s financial system from problems with overseas parent banks—although I take the point made by my colleague Craig Foss, who pointed out very clearly that problems in the Australian market will have a significant impact on the New Zealand market in our banking institutions.

Local incorporation requires the establishment of an entity with its own board. Under the Reserve Bank’s conditions, the New Zealand board must operate solely in the best interests of the locally incorporated bank, even if this is in conflict with the parent bank, and to an extent this caters to Mr Hide’s concerns. It brings an added degree of protection otherwise not available to the bank in its current structure. This is especially the case given that the Reserve Bank can veto the appointment of directors and the chief executive to their locally incorporated bank, once again giving a protection to local consumers and local suppliers that the bank will be in safe hands going forward. In addition, the assets and liabilities of the bank must be transferred at the same time to the New Zealand company. It is important to understand that this includes only the retail arm of the Westpac New Zealand business, and that the wholesale arm will remain in a separate company that will continue to be registered in Australia.

There is no doubt that an Act of Parliament is the best way to implement local incorporation. To do it in any other way, with a transaction of the size we are talking about, would be simply crazy. An Act of Parliament will result in the least disruption to all parties concerned, and there are many in this case. We should remember that this bank is one of New Zealand’s four largest banking organisations and it is a transaction in the vicinity of $35 billion to $40 billion, and that we are talking about 1.3 million customers and over 6,000 staff. We should also remember that the bank’s biggest customer is the Government of this nation. On top of that, the bank deals on a daily basis with thousands of suppliers who will also be connected with this change. The potential for disruption in the New Zealand economy is significant and therefore it is important that this change happens quickly and efficiently. Only an Act of Parliament will allow Westpac’s retail banking operations to be vested within Westpac New Zealand without affecting the conduct and continuity of the bank’s operations.

Firstly, this Act will reduce the impact on customers, with very little or no disruption. Mr Hide points out that customers should have been consulted, and each and every one of them should have had a copy of the bank’s new balance sheet. Well, this is not to belittle customers of the Westpac Banking Corporation, but I suggest that by far the majority of them would not understand the balance sheet and do indeed put their trust in the Reserve Bank of this country and in the Government to ensure that the financial capacity of the new bank is strong and that the prudential ratios are ensured.

The bill will ensure that customers’ accounts and loans, the assets and liabilities, will automatically vest immediately in Westpac New Zealand. It will ensure that customers have the same relationship with the bank. It will also ensure that customers are not required to sign new security documents on the transaction changeover date. In essence, the transfer should be seamless.

Secondly, the bill will also reduce the impact on the employees of the bank, of which there are over 6,000. The relationship between employee and employer is unaffected. There are no new employment contracts that need to be signed to effect the change, and there is no detriment on employees losing their jobs or on the employer being in the position of having to pay out redundancy in this situation and then having to rehire. In this regard the transaction should be seamless. Thirdly, the bill will reduce the impact on suppliers, and in this regard suppliers will not have to re-contract with the bank on the day of the transfer.

Most important, the bill will minimise disruption to the banking system. It allows for the assets and liabilities to be vested immediately into the new entity, therefore allowing a seamless change. It also provides for any proceedings, arbitrations, actions, or claims against the bank to continue. Importantly, it provides that property registers do not need to be changed. One can imagine having to go out there and find every property that has a bank mortgage registered against it and changing it on the property registers around the country. It would be virtually impossible.

The bill will ensure tax neutrality. It is a key thing with an organisation of this magnitude that on GST, the tax payable, neutrality is maximised. As a result of this, compliance with the Reserve Bank’s New Zealand incorporation policy is achieved in the most efficient manner possible for customers, for staff, for the banking system, and for suppliers. So, with the support of both sides of the House, this bill should pass within the necessary time frame to meet the bank’s goals of a transfer on 1 November; failing that, the transfer will be delayed until April 2007.

Finally, this may be one of the first bills for which our new Governor-General, Anand Satyanand, will need to provide Royal assent in order for it to pass. I am sure it will not be his most controversial, but it will be an important Act for this country.

HONE HARAWIRA (Māori Party—Te Tai Tokerau) : I te tuatahi, me mihi atu ki taku hoa ki a koe, Chris, e tuku poroporoaki ki tō tātou Kuini a Te Atairangikaahu. E mihi atu anō hoki ki tō tātou Kīngi hōu a Tuheitia me tēnā wawata anō hoki, kia tū kotahi ai tātou a ngā rā kei te haere mai. First of all, I thank my colleague Mr Chris Tremain for his gracious farewell to our Queen, for his best wishes to our new King, Tuheitia, and for his hopes that we may move forward together as a nation as a result of the events in the Waikato of last week.

Being mindful of those events, I did a bit of research. I found that King Tawhiao had a Cabinet of some 12 Ministers and raised revenue himself through a variety of means—donations, taxation charges, fees, fines, and, in a big way, the tithing of the salaries of Māori who worked for the Government. The idea that big banks should be locally incorporated is consistent with the well-established history of Māori supporting banks that themselves support local practice.

At the first reading of this bill, I talked of the Maungatautiri Whare Uta, the Māori bank established in the 1880s because local Māori were concerned that they were being cheated by Pākehā bankers and wanted control over their own economic sovereignty. In Taranaki in the 1800s Te Whiti operated a bank that apparently held many thousands of pounds. Early in the 1900s Rua Kēnana established a bank under his council of elders to promote savings and to attract capital. During the 1920s Rātana’s followers also established a bank to advance funds to needy members, to gather contributions, and also to force the Government to recognise its obligation to provide for Māori welfare. If we fast-forward some 60 years to the very first reports admitted to the Waitangi Tribunal, we find a claim by Joe Hawke, and others, to form the Bank of Tāmaki, to be administered by Ngāti Whātua.

When Marian Hobbs referred this bill she made the comment that she did not think that the Finance and Expenditure Committee needed to do the detailed work suggested by the Māori Party or the Greens. But why not? Just because my whanaunga, the chairman of the committee, told the House that consultation meant a fortnight’s advertising, and that giving the bill to Westpac, the Reserve Bank, Treasury, and the Inland Revenue Department was enough, does not mean that the select committee should not look at positive initiatives to assist Māori development. In fact—and I am sure Mr Jones himself would agree—there are likely to be some very good ideas coming out of some of the big Māori agencies, such as the New Zealand Māori Council, the Federation of Māori Authorities, Ngāi Tahu Finance, Te Ohu Kai Moana itself, the Poutama Trust, and even Māori Women’s Development Inc., launched back in the 1980s to provide loans to Māori to help set up and expand existing businesses and to provide financial advice and mentoring services. Interestingly, Māori Women’s Development Inc. grew out of the Hui Taumata of 1984, when it was suggested by Mr Jones’ relation, Rīpeka Evans, that Māori should revolutionise the tax system and channel all taxes back into a Māori development bank. Sir Tīpene O’Regan himself also supported the call for a Māori development bank to enable Māori to better utilise the equity tied up in tribal lands. Even Denese Hēnare spoke in support of a Māori bank to administer finance for housing, land purchase, farming, and business development.

The idea of Māori owning a bank, and controlling local savings and investments, even came up at last year’s Hui Taumata. In fact, this is an idea whose time has come. The Toi - Economic Development Agency, which promotes regional development in the Eastern Bay of Plenty is a good example. This group involves economic leaders such as investment banker Taari Nicholas; Rikirangi Gage, chief executive officer ofTe Rūnanga o Te Whānau a Apanui; Joe Mason, director forNgāti Awa Group Holdings; and others. Since successive Governments have been unwilling to provide the necessary financing for Māori, initiatives such as the Toi - Economic Development Agency are important in laying a path towards self-determination.

We recognise Westpac’s urgency in getting this bill through by 1 November to ensure the vesting of assets and liability to Westpac New Zealand, but our support for this bill is because we absolutely support the principle that the rules of this nation should control the banking system of Aotearoa. That support is also in line with the longstanding call in Māoridom for banking to reflect local economic development. We note, however, that little has changed, really, since 1984 when Koro Wētere suggested that banks and development corporations look seriously at how to assist Māori to foster commercial and banking skills to drive our economic advancement.

There are other areas for improvement before this bill becomes law. Firstly, the haste to get this bill through must not occur at the expense of poor industrial relations. As my friend Sue Bradford mentioned at the first reading, Westpac, the winner of the Roger Award for the worst transnational operating in New Zealand in 2006, has dropped 25 percent of its staff over the past 10 years and has forced the reduced staff to increase their profit output by 110 percent, and net profit by nearly 400 percent. Westpac also has a very poor record with the finance workers union in respect of holiday infringements, working overtime without compensation, high workload, pressure to work through sickness, injury, and pregnancy, poor staff support, and huge performance expectations that are not matched by performance payments.

Secondly, Westpac might wish to review its lending and investment policies and its assistance to Māori to ensure that investment does not lead to failures such as those that have happened in the past as described by Denese Hēnare—failures in terms of poor land utilisation, inactive trusts, underfunded development schemes, poor business planning, and inadequate lending for housing.

Finally, we note the point raised by Mr Rodney Hide, who warned against Westpac customers being forced into a new company without knowing what assets and liabilities would back their investments. Westpac’s record profit of $708 million suggests that it certainly has the money for a simple mail-out to advise companies of the implications of the transfer of assets and liabilities.

The Māori Party will support this bill at the second reading, but we look forward to seeing a huge improvement in Westpac’s employment relations, and an equal improvement in its helping to advance Māori interests for the benefit of the whole nation. Kia ora tātou katoa.

SHANE JONES (Labour) : I rise to take a short call in relation to the Westpac New Zealand Bill. I had the pleasure of chairing the Finance and Expenditure Committee that dealt with this bill. Yes, we did form a view that consultation regarding every nook and cranny was not necessary. Yes, we were conscious of the time exigencies related to this bill. We sought and took quality advice from helpful agencies, including the Reserve Bank.

I refer in particular to a point that the honourable member Mr Hide made. Although he made a very good point, I rather fear that the one or three members of the public who might be interested in listening to this debate—which is actually rhetoric in inverse proportions to the content of the bill—may be left with a mistaken assumption. The bill most certainly provides for safeguards in relation to the construction and presentation of a proposal to enable the transfer of assets to take place.

Earlier, Mr Hide reflected his deep anxieties that because the Minister, and not members of this House or some other organ of the House, was dealing with the proposed transfer, there might be a weaker accountability. Part 2 deals with the vesting of designated assets and liabilities, and in clause 6 the Governor-General, on the advice of the Minister, after he or she has received the recommendation from the Reserve Bank of New Zealand, will, or shall, consider and may approve a proposal. That proposal not only specifies the appointed day but also describes the designated assets and liabilities. Along with Mr Gordon Copeland, our committee was left with no doubts about the quality of judgment and the expertise of a prudential nature in the Reserve Bank to provide a high-quality stream of advice to the Minister.

Yes, this is a massive enterprise. Yes, there are many savers and employees, and the sums of money are large, but it is based on an important principle. The principle is that in the event that there was a failure of a systemic nature and it had Australasian dimensions, then those assets and those aspects of Westpac’s business that are domiciled here in Aotearoa New Zealand must not, cannot, and should not be spirited away to solve other problems in the massive network of the Westpac bank.

Of course, that is a subset of a large issue, and the issue is between the Reserve Bank of Australia and the Reserve Bank of New Zealand. Given the development of closer relations in our Australasian interests, how are we to ensure that the very banking system that we rely on to provide the lifeblood of day-to-day business and the smooth functioning of the economy remains under adequate prudential oversight? I followed with considerable interest over the last couple of years whether the role that our own Reserve Bank of New Zealand might occupy in that prudential exercise is to be as an adjunct or subservient to the Reserve Bank of Australia.

In the course of consideration of the bill, the side issue of whether our Reserve Bank of New Zealand would be capable of fulfilling this role was discussed very briefly. We were told that not only would it have the ability to discharge its role in relation to prudential oversight but also that we, and the bank, would not be surrendering an unnecessary level of control to the Reserve Bank of Australia and that there would be more news and developments on that matter. But it is a key point that goes to the nature of our status and the ability for us to rely on political or governmental sovereignty when we make laws to ensure that we are not surrendering far too much to the Reserve Bank of Australia. So for those who are doubting Thomases and are bothered as to whether our Reserve Bank has the ability to fulfil the task, I feel, and said so at the time during the course of the Finance and Expenditure Committee’s considerations and discussions, that those fears are misplaced.

This is a big enterprise. The bank is looking forward to us dealing with it expeditiously. The committee, I feel, dealt with it in a very professional and thorough manner, and like all matters of a technical nature one relies on the quality and the integrity of the advice. That came from other places, yes, but predominantly from the Reserve Bank of New Zealand, and I have not a sliver of doubt about the quality of the advice we received.

KEITH LOCKE (Green) : The Green Party will be supporting this bill. We think that legislating the incorporation of Westpac is a move in the right direction. Westpac has been the hold-out bank that resisted pressures in that direction through 2004, arguing that it was very unlikely there would be a collapse of the bank, so people did not need to get worried. But as Rodney Hide pointed out, there are no guarantees against a bank failing. The problem is that if the bank had failed, as a purely Australian bank New Zealanders might not have got anything out of it. There were no guarantees that what money there was would not have been paid to Australians before New Zealanders.

We have had a history of failure of financial institutions in New Zealand, including banks. The BNZ in the 1980s was a prime case from the banking system. Of course, systems have been improved since then in terms of the monitoring of banks, and speakers today have referred to some of the ways in which the newly incorporated Westpac bank will be monitored.

I think there is some problem for New Zealand society in the way that all our banks, except for the TSB Bank, have been taken over by foreign banks, particularly Australian banks. It is a large part of our bigger problem of having $80 billion of foreign-owned assets in New Zealand, whereas New Zealanders own only $20 billion in assets overseas. That difference, in terms of dividend transfers, is a major contributor to our huge current account deficit of $14.5 billion. As Hone Harawira just pointed out, the profit of the Westpac bank is $708 million, and a lot of that profit is being sent back to Australia, along with profit from all the other banking institutions that are Australian owned. It is a big problem, as I say, in our current account deficit.

Australian-owned banks, including Westpac, have not always played very fair in New Zealand society. There was, of course, a big battle with the Commerce Commission over currency transaction fees relating to credit cards. It is interesting to note that Westpac was the worst offender in that respect. As of 2004 it had four types of credit card, and the currency conversion rates ranged from 2.95 percent to 3.05 percent, whereas the New Zealand-owned bank, the TSB Bank, had the lowest rate of 1.75 percent. The banks that offended in that way were forced by the Commerce Commission to apologise to their customers. The banks’ argument that the currency conversion fee could be seen just as part of the exchange rate was not accepted. So we are not looking at owners who have New Zealanders’ interests foremost, in that respect.

Another problem for New Zealand society is the way in which the banking system has operated, particularly in the absence of any capital gains tax on housing—not, of course, in terms of one’s own home but in terms of investment housing beyond one’s own home. In respect of that, investment money has really poured in from Australia. I think there has been about $30 billion of foreign-owned money pouring in over the last 2½ years, and that is essentially equivalent to the extra amount that has gone into housing, with the value of housing loans over the last 8 years going from $55 billion to $130 billion. That is a huge burden on this economy, and when we pay our mortgages a lot of that money does disappear back to Australia, and a lot of it does disappear back to Westpac.

So that is a problem we have to bear in mind, and we have to keep a very close scrutiny on those Australian-owned banks. It is good that they will now be locally incorporated and that we will be able to apply proper supervision to them.

GORDON COPELAND (United Future) : When I first read through the arithmetic set out in the first and second clauses of the Local Government (Rating Cap) Amendment Bill, it was a little bit like déjà vu. I thought to myself that it was an interesting way of tackling legislation in the 21st century. The bill seeks to regulate rates by putting in place a formula, which is the movement in the consumer price index plus 2 percent in the first 12 months, or the consumer price index plus no more than 4 percent over a 3-year period—about 1.3 percent per annum in addition to the consumer price index.

When I read that I thought to myself that it was very reminiscent of the kind of legislation we used to see under Rob Muldoon. That thought was further strengthened when I got down to clause 3, where I read that if a local authority wishes to exceed that cap, it can ask the Minister of Local Government to make a decision about it. So I thought that that was the kind of cap the bill had in mind. It has local authorities, duly elected by the citizens of that territory, going cap in hand to the Minister and saying: “Minister, can we please take our rates up next year by, let’s say, consumer price index plus 2.5 percent? Would that be OK?”. Really, at that stage, I asked myself whose bill it was. I actually thought I would see the name “Robert Muldoon” on the bill, but it turned out to be “Rodney Hide”. I am amazed that a bill like this has actually come from the ACT party, because it is not the kind of approach I associate with the history of ACT. However, it is the kind of approach I associate very strongly with Muldoon, who, in the immortal words of David Lange, ran the country like a Polish shipyard. I think that was a bit of an insult to Polish shipyards, in many ways.

The fundamental problem I have with the bill is that it is contrary to United Future’s political philosophy, which is dependent on subsidiarity—namely, that we devolve political decision-making to the appropriate level and that local authorities, duly elected by their citizens, should be making decisions on behalf of their communities, and that includes decisions about rates.

Having said that, members might be surprised to hear we are going to vote in favour of the bill. It is simply a quirk of fate that the drawing of this bill from the ballot—and I congratulate Rodney Hide on being successful in the ballot—coincided with massive outrage right throughout this country, but particularly in Auckland, about the fact that rates increases have now become unsustainable for many of our citizens. We know, for example, that in Auckland City the cost of water is going up by 9 percent and the cost of rates is also going up by about that percentage or more. For many people, now, that is just too much. There is great concern, particularly amongst those people on fixed incomes and in their retirement years, that that is just not affordable. Therefore, our vote in favour of this bill is to signal United Future’s strong support for an inquiry into local government in New Zealand and the reason why we are seeing these massive rates increases occurring.

I know that the Local Government and Environment Committee has already said it wants to have an inquiry. We think that might be useful, but it will not get the job done. We want there to be an independent commission of inquiry into the whole structure of local government in this country. After all, when one really thinks it through one realises that these massive rates increases are just a symptom of many things; perhaps it might be local and central government duplication of effort, or perhaps the massive forward plans that local bodies now do at great cost—they circulate books of the size of the Wellington phone book to every citizen in their city stating their plan for the next 10 years. I wonder whether we have now reached the stage of paralysis through analysis, which really is like it was under Rob Muldoon, as well. With those reservations we support the first reading of the bill.

MARK BLUMSKY (National) : I have a real sense of déjà vu standing here talking about rates in Parliament, because 6 years ago I was very much involved in the game of setting rates. Little did I think that 6 years later I would be standing here in Parliament talking about rates. But I can assure members now that a lot has obviously happened in those last 6 years within local government regarding rates. More and more ratepayers are highly dissatisfied and are just bloody angry with the levels of rates that are being set around the country. They want to apportion blame. Members just need to listen to talkback radio and read the newspapers to see that ratepayers want to apportion blame. Local government has lost touch with its ratepayers.

But what is more concerning is that when I have been moving round the country talking to local government leaders I have seen there is real frustration, anger, and helplessness being felt by local government leaders in New Zealand. Why? Because local government leaders are losing local leadership. Compliance and paperwork being thrown at them by this Government are swamping them. There is a real concern within local government that it is losing its local leadership. To quote from a report by a very senior, long-time chief executive officer in local government: “The processes associated with our business have been made more complex as a result of the 2002 legislation. I fear we will see a growth in the relative power and influence of the salaried official. As processes dominate and become more complicated, the role of the official will be enhanced and, as a consequence, the role of the elected member will be diminished.”

This Government is redefining the role of local government by all the compliance work and legislation that it is putting on local government. This Government is being very prescriptive and not allowing local solutions for local problems, for local issues. One size does not fit all. A message is being sent to the Government by ratepayers: they want local solutions; they want local government to be elected to do what they want local government to do, not what this Government wants it to do. This Government’s provisions about compliance and standards put a huge cost on local government. The Prime Minister is wrong. She had her head in the sand when she said on 7 August that the ultimate course of action for people who do not like rate rises is to vote the council out at the next election. I say to Helen Clark, Prime Minister, that it is not all the councils’ fault. A lot of the problems with rates are the Prime Minister’s fault, and she has to front up to that. She should be under no illusion that the compliance costs arising from the audit requirement, the Building Act, and the legislation on gambling, prostitution, dog microchipping—there is a list of 67 Acts in which she has put compliance costs on local government—have impacted on rates.

Then the Prime Minister and the Government members talk standards. They want to bring in a new water standard. Believe it or not, a little council like that in Waimate, which I had the pleasure of visiting, had to spend $500,000 to service 34 households. That is disgraceful. Leadership needs to be shown by local government. Ratepayers need and deserve answers, and they need to be given new tools and new confidence that the current situation will be changed and rectified—hence National’s support for this bill, to allow that opportunity to happen.

There is talk of an inquiry. I have not seen the terms of reference. Also, there is an issue to do with my confidence in how an inquiry would operate and how independent it would be. The previous history of this Government with its inquiries—as with Dr Ingram’s inquiry—does not give me confidence that the correct answer will be delivered. The ratepayers in New Zealand deserve the correct answer, because their rates are too high. The Government has to stand up and take some responsibility for that.

MARTIN GALLAGHER (Labour—Hamilton West) : The aim of the Local Government (Rating Cap) Amendment Bill is, as I understand it, to amend the Local Government (Rating) Act 2002 to limit the increase in rates revenue sought by a local authority in any year. The bill provides for a maximum rate increase in any year of the rate of consumer price inflation for the preceding year plus 2 percent. The maximum in any 3-year period is to be the rate of consumer price inflation for the preceding 3 years plus 4 percent.

I find it somewhat surprising that the former Mayor of Wellington, which is a very lovely and great city, in my view—nearly as good as Hamilton—would actually support a bill whereby the central government of the day could—

The ASSISTANT SPEAKER (H V Ross Robertson): I am sorry to interrupt the honourable member, but the time has come for me to leave the Chair for the dinner break.

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

MARTIN GALLAGHER: Obviously, I do not support this bill, but I assure the Speaker that I will not be engaging in the kind of personal attack we witnessed in the general debate by Chris Finlayson on the Minister of Revenue, the Hon Peter Dunne. I thought that was the most appalling attack on a member that I have heard for some time. It was quite incredible.

Hon Ruth Dyson: What was that?

MARTIN GALLAGHER: That was Chris Finlayson maligning the integrity of the Hon Peter Dunne. It was quite a bizarre attack.

I do not agree with this bill, but I will not attack its author. What I will say is that I believe that this bill would take us to an era of central government control through the Minister of Local Government, irrespective of who that Minister was and what that Minister’s political shade might be. It would effectively destroy local decision-making, local accountability, and, in fact, local government. The Local Government Act has a very, very rigorous form of community accountability. It is called the 10-year plan, and it is reviewed on an annualised basis.

Speaking as a citizen from Hamilton, I say that we have a very, very good council. We have an excellent mayor, Michael Redman, and an excellent council team. I do not want a Minister of Local Government, of whatever political colour, to be dictating to people in the Waikato and in Hamilton as to what projects we can undertake and how we structure our budget. This bill would mean, for example, that if we needed a special rate to build the wonderful Waikato Stadium, which took us above the criteria of this bill, we would have to go cap in hand, literally, and beg the Minister of Local Government of the day for the funds to do that. That is not local democracy; that is not local accountability.

The argument, very clearly and concisely, is simply this: we have two tiers of government in this country. Lest this Parliament should forget, there is another tier of democratic governance in this country. We are not the only game in town, so to speak—there are councils up and down the country, which citizens elect and which also have a democratic mandate in their own right.

Obviously, I agree to differ with the author of this bill about how we address what is the significant issue of how we fund and finance local government. As a former deputy mayor of Hamilton and also as a member of the Local Government and Environment Committee, I acknowledge that the issue of what is a fair and equitable way of funding local government is a very significant one. I commend our very good Minister of Local Government, Mr Mark Burton, who today announced the establishment of an independent inquiry into issues around local government rates funding. In fact, the Minister has stated: “The Government will develop the inquiry’s terms of reference in consultation with other parties. The terms of reference and other details will be released in due course.” The Minister also said, and I think it is a very good quote: “This is an important issue which is concerning central government, local government, and ratepayers. The … Government believes an independent inquiry is the best way to consider these issues. We have been working closely with New Zealand First because, like us, they are concerned to ensure that this issue is dealt with in an independent manner. I look forward to wide parliamentary support for this inquiry process.” Indeed, the Minister stated: “The inquiry will be able to consider the work of the joint Central Government/Local Authority funding project, which will report to the Central Government/Local Government Forum in October.”

Quite frankly, I pay tribute to the work that Local Government New Zealand, mayors, councils, and chairs of regional councils are already doing in this country. This is about local democracy. We in Parliament acknowledge that we have to look at more innovative ways of funding local government. I also acknowledge the huge transfer of taxpayer funds from central government in Wellington to local government projects that is already in effect. Let me acknowledge that it is at an all-time record. I do not agree with this bill. The independent inquiry is the way to go.

TE URUROA FLAVELL (Māori Party—Waiariki) : Kia ora tātou. I am pleased to stand this evening to contribute to the debate on the premise that the Māori Party supports initiatives where accountability and transparency are important. As others have mentioned, the bill amends the Local Government (Rating) Act 2002 by capping the level of rates increases that local authorities may impose on residents. It stops local authorities setting excessive increases.

For tangata whenua, the history of rating in Aotearoa has been variable and inconsistent. Our research tells us that in 1883 the Property-Tax Department was found to be valuing Māori land at well above the market rate. This was at a time when the Government reimbursed local authorities directly for rates owing on Māori land. In another incident in 1915, we learnt that lands in the King Country were being valued low, in order to make it easier for Europeans to buy them. The argument was that the land was worthless. Indeed, it was worthless, because it was in multiple ownership. So the manipulation of valuation legislation is, unfortunately, a shameful part of our history, and Māori have been rated off our lands. Large tracts of Māori freehold land are unoccupied and unimproved. This land creates a significant rating burden on the Māori owners, who often do not have the means, or in some cases the desire, to make economic use of the land. Often that is due to the nature of the ownership, or perhaps because the land has some special significance that will make it undesirable to develop or reside on, or perhaps because it is isolated and marginal in quality.

I understand that schedule 11 of the Local Government Act 2002 supported the use of Māori land by the owners for traditional purposes. It was also introduced to make it easy for owners to develop the land for economic use, while taking into account the presence of wāhi tapu that may affect the use of the land for other purposes. I understand also that section 91 of the Local Government (Rating) Act requires that Māori freehold land be liable for rates in the same manner as if it were general land. But what has happened in the last few years is that tangata whenua have experienced excessive rates increases of three to four times the inflation rate, which are imposed by some councils. As I say, in essence, Māori are being rated off our lands. That is why the Māori Party voted against lump-sum payments for capital projects in the Local Government Law Reform Bill, which were just another form of rating increase.

Pita Rykers, in his paper “Valuation and Rating of Māori Lands”, stated that it was critical for Māori to get the power relationship right via a clear Treaty statement and the provision of effective mechanisms and structures. Mechanisms must provide real accountability, and the structures must allow for effective rangatiratanga. The Māori Party believes that mana whenua should have an equal say with local and regional authorities on all matters concerned with the rating or non-rating of Māori land. We also believe that Māori and the wider public should have a say as to whether a rating cap is the best way to regulate and monitor rates increases, and whether the current method of assessing rates is the best one. There are real issues there for Māori people’s relationship to the land and the practical circumstances of Māori land held in joint ownership.

We look forward to this bill providing clarity, transparency, and accountability in establishing the critical foundation that our whenua provides in our world view. We cannot underestimate the crucial importance of whenua in our world view. In 1987, in the court case New Zealand Māori Council and Latimer v , the New Zealand Māori Council stated: “[Maori land] provides us with a sense of identity, belonging, and continuity. It is proof of our continued existence not only as a people, but as the tangata whenua of this country. It is proof of our tribal and kin group ties. Maori land represents turangawaewae. It is proof of our link with the ancestors of our past, and with the generations yet to come. It is an assurance that we shall forever exist as a people, for as long as the land shall last.” These are the values that we bring to the discussion of this bill, as we do with every other bill coming before the House.

We will vote to support this bill, based on our belief that controls and consistency need to be in place so that we can stay on our land, care for our land, and be tangata whenua in the truest form. Kia ora tātou.

RODNEY HIDE (Leader—ACT) : May I thank the Māori Party members for their support for the bill and indeed for their analysis, and for the realisation that Māori were the first people in New Zealand to feel the effect of outrageous rates forcing them off their land, and the fact that now many New Zealanders, particularly the elderly and those on a fixed income, are feeling what Māori felt 100 years ago. I should also acknowledge National Party members for their contribution and their support, and also, too, United Future.

Indeed, United Future’s contribution was through Gordon Copeland, and he suggested to me that allowing the cap to be broken, with the permission of the Minister of Local Government, was a bit Muldoonist. I put that in there because I thought it was a cheap way of providing some transparency, and I certainly believe that it is a mistake. I suggest that we should have a cap, and if councils want to break that cap for good reason, then let us have a local referendum and get the permission of the people who will be paying the rates—that is, the ratepayers. We heard a lot today about democracy, but true democracy would be to say that if we are going to put up rates, we should get the people’s consent first. I am sure if there is a good reason for putting up rates, they will give their consent.

I have to say that I am not surprised at the Labour Party opposing this bill. I notice Labour members spoke at length about 10-year plans and how they will provide a democracy. I know they do not say 5-year plans, because they have a rather bad connotation, so they have gone one better than Stalin. Labour will have a 10-year plan for New Zealanders, which will see more New Zealanders forced off their property. How sad is that?

We all as MPs know of people who have worked hard, built their houses, paid off their mortgages, and raised their children. Yes, they have had the windfall of their properties going up in value because of rising property values, but to them those properties are their homes. Then their rates go up, but they are pensioners of a fixed value and they cannot afford to pay the rates. The council tells them either to take out a loan—that is, go back to having a mortgage, like a young couple starting out, 40 or 50 years ago—or sell up. It is as if we have New Zealanders living in a home that they own, but they rent it from local government; if they cannot pay the rent they will get kicked out. That is what my bill, with the support of National, United Future, and the Māori Party, was designed to stop.

It is Parliament that gives local government the power to strike rates. It is Parliament that sets the rules. I was saying, through this bill, that we should set a rule for the amount by which local councils can increase rates in any one year, and if they want to go above that amount they should get the permission of the people. That is democracy. Ask the Māori people whether they want to pay more rates for the service they will get as a consequence; let us not just take it.

I have to say that I am disappointed with New Zealand First members—that will not come as a shock to them—and that the people of New Zealand are disappointed with New Zealand First. I was surprised by Doug Woolerton’s attack on Grey Power today—for what? Not being sufficiently in love with New Zealand First; not going along with everything New Zealand First does? But New Zealand First members voted for my bill—an identical bill to this—in 2004. They thought it was a good idea for it to go to the select committee so the people could have their say. It was all right then, but now it is not. What has happened since then? The only thing that has happened since then is that people’s rates have gone up. Oh, and there is one other thing: Winston has got his bauble, and he no longer cares. If he can keep his bauble, then it is to hell with the people and their rates.

I ask members to look at this newspaper I am holding. I am quite proud of this headline, which reads “Finally, action on rates”. That is because of what this bill has done, the people of New Zealand have done, and this Parliament has done. Finally, is it action? Well, we will see. Look at these rates increases, I say to Mr Brown and Mr Peters, Auckland City 13.4 percent, Tauranga 13 percent, Rodney District 10.2 percent, and North Shore City 9.5 percent. The Sheriff of Nottingham would blush at those sorts of increases. He never threw old people out of their houses, but New Zealand First is saying it is OK for local government to throw people out of their houses, particularly if they are old. [Interruption] Brian Donnelly is saying yes, that is what New Zealand First is saying—throw them out of their houses.

What will we have? Mr Peters and his bauble and some inquiry announced by press release, which we have not seen. There have been no terms of reference and no promise. This bill will put an end to rate increases. I say to New Zealand First members that they should vote for it.

DARIEN FENTON (Labour) : I move, That the Minimum Wage and Remuneration Amendment Bill be now read a first time. It gives me great pleasure to introduce the first reading of this bill, and at the appropriate time I intend to move that the bill be considered by the Transport and Industrial Relations Committee. The Minimum Wage and Remuneration Amendment Bill provides that the Governor-General is able, by Order in Council, to make regulations prescribing the minimum rates of remuneration payable to any person working under a contract for services. Such minimum rates may be prescribed as a monetary amount or as a percentage of any other minimum rate prescribed under the regulations.

The bill does not attempt to define the difference between independent contractors and employees. It simply sets out a process for minimum remuneration to be determined for contractors and enables that to be enforced. Contractors lack the most fundamental of protections—the right to be paid no less than what is considered socially acceptable for other workers who have the protection of the minimum wage. Minimum remuneration is a baseline protection and should apply equally to all workers, regardless of whether they are in a traditional employment relationship or whether they have entered into a contract for services. This bill will provide that protection.

The intent of the bill is not to defeat agreements being made under commercial relationships between two parties. It is not designed to restrict those who are entrepreneurs making whatever arrangements suit when contracting for services, but there is a difference between workers who depend on selling their services in order to survive and entrepreneurs who invest capital and hire workers.

Like the rest of the world, New Zealand has experienced a rapidly changing labour market. The nature of the world of work has changed dramatically and will continue to change in the future. Over the past 15 years there has been a growth in non-standard employment, from full-time permanent employment to part-time casual temporary and contracted jobs. Employment patterns in a range of sectors and industries have changed drastically, and contract work is becoming one of the most preferred work arrangements of employers throughout the world. It is the new casualisation. As with almost all atypical work, contracting is contributing to a growing disparity between the actual results of the labour market and labour laws, where protections for workers are based on the traditional employment relationship.

New Zealand has seen considerable growth in the number of self-employed as a percentage of the total workforce. Approximately 20 percent of the labour market is described as self-employed, and is likely to be working under a contract for services. Who are these workers? Many immigrants opt for this kind of employment because of the difficulty in obtaining suitable waged or salaried employment. They are likely to be Māori and Pacific Islanders. New Zealand women are becoming self-employed at over twice the rate of men, yet most of those businesses start smaller, remain smaller, and generate lower incomes.

Contract workers are used in both the private and public sectors in a broad range of industries. There are many reasons why firms often prefer to obtain services through means other than employment contracts, such as simplified payroll and human resources administration and greater flexibility in terms of dealing with workers. For many contract workers this works well, and, in fact, they will be earning well above the equivalent to the current minimum wage. But having no floor above which remuneration can be paid means that some companies are unfairly exploiting the competition between contractors.

Contracting arrangements are often used for the purpose of denying rights and avoiding obligations under labour laws. Where independent and dependent contracting is used improperly, the consequences for those who perform the work are losses in wages, job security, and working conditions. Differences in the treatment of workers on the basis of the contractual form of their work relationship can induce the stronger party, usually the purchaser of labour, to create less-regulated commercial relationships over more-regulated employment relationships. This creates a downward pressure on wages, working conditions, and living standards for other workers.

Numerous examples of contracting are occurring in New Zealand, including, for example, in personal care, forestry, construction, courier services, transport, agriculture, and telecommunications. Pamphlet and newspaper deliveries used to be the domain of young people trying to earn a few extra dollars, but today parents and older people are very often contracted for these deliveries. Although some of us might think it is OK to pay young workers very little—and I am not one of them—this kind of contract work becomes a real problem when families and older workers are relying on it as a source of income.

Contracting often comes in the guise of a commercial contract in which labour is the main service provided. Contractors work for one employer or company, or even a former employer. Although the Employment Relations Authority has the ability to investigate the real nature of an employment relationship—and there is established case law on the definitions of contractors versus employees—workers can be accorded the status, rights, and protections of employees only if they undertake the risk and expense of challenging their employer in court.

This bill is not about whether or not someone is an employee but whether that person should be afforded some basic protection in law. Social security, health and safety protection, and accident compensation are already provided to workers who are not considered employees. So what is so different about providing the protection of a minimum level of remuneration? Information on contractors and what they are paid is not available in New Zealand. I have no doubt that at the select committee there will be many complex arguments about different arrangements, and they will need to be considered carefully. But this bill raises the question of whether we consider it acceptable in a First World economy like New Zealand’s to allow arrangements whereby workers can be used to work for less than a socially accepted minimum remuneration.

My bill will provide minimum protection for those contractors who have little experience and no advice, and who are vulnerable to exploitation. It will also put some minimal controls on the vicious practice of underbidding for contracts for services. If we are serious about improving the earnings of all New Zealanders, this House cannot continue to ignore the growing group of workers who make an important contribution to our economy and our society but who are denied this most basic right in law to minimum pay. New Zealanders believe in fairness, and this means ensuring some equality of treatment for workers, regardless of their legal employment status. We need this most basic of protections to reflect the realities of new forms of work, and to keep pace with the changing world of work in the 21st century.

Dr WAYNE MAPP (National—North Shore) : It certainly is embarrassing, is it not, to see in the House tonight Mr Phillip Field, who I guess has been press-ganged today into voting for the Minimum Wage and Remuneration Amendment Bill. In fact, I saw the whip approach him earlier. Was there a bit of a question as to how Mr Field would vote on the bill? Will he eat—I guess one might say—humble pie and curry favour? Will he speak on the bill, because I would certainly be very interested in what he had to say? What is even more remarkable is that Labour would have the gall to introduce the bill at this stage. This will not help its situation of embarrassment.

I draw the House’s attention to this particular fact in the Ingram report. I asked a question today of the Minister of Labour, who is sitting in the House tonight. My question was really quite straightforward, and I will read it out again, just for the Minister’s benefit: “Does the Minister have any concerns that Dr Ingram was not satisfied about the authenticity of the invoices provided by Mr Field for the work at 51 Church Street, and surely that means the department must investigate whether these people were in fact employees,”. Do members know what her answer was? She was not concerned; she did not care that Dr Ingram questioned the authenticity of invoices. This is important because it actually goes to the very heart of work relationships. Genuine invoices, such as Dr Ingram expected to see, are evidence of an independent contract relationship. The authenticity of the invoices has been extensively questioned in the report, and if the Minister of Labour cared to read the report—I guess she has not done so—she would know he raised the gravest of questions about the authenticity of those invoices.

When one has to raise that question, the issue becomes whether those people were employees. I have to say I believe the Department of Labour, which has independent investigatory powers under both the minimum wages legislation and the Employment Relations Act, should be digging deep on that issue. The validity or “authenticity”—to use Dr Ingram’s word—of those invoices goes to the very question of the relationship. If they are authentic, then one might say the people are independent contractors. If they are not authentic, and that is what Dr Ingram questioned—

Taito Phillip Field: How did you get your PhD?

Dr WAYNE MAPP: Mr Field went on national television and said he had been completely vindicated. What an absurd statement that was to anyone who had actually read the report—he had not been vindicated. Mr Field actually had read the report; he had it with his lawyers for months in advance, trying to get Dr Ingram to change his mind. Well, Dr Ingram was not fooled by any of that particular nonsense, and he made extremely critical findings on Mr Field. The invoices were one of the key issues. I will be watching television this Sunday night, because the nature of those invoices will be raised in a television programme.

As I say, that issue goes to the very heart of the bill. A valid independent contractor relationship is, in the words of Darien Fenton, a contract of services. That is in contrast to a contract for services.

Hon Members: For services.

Dr WAYNE MAPP: That is correct. The independent contract is a contract for services; the employment relationship is a contract of services. A lot of laypeople will not necessarily understand that term. The practical difference is this: does the person do the work according to the instructions of the employer? If the person does the work in accordance with the instructions of the employer, then he or she is an employee. If, on the other hand, the person is simply doing the job—building a house, painting a wall, mowing a lawn—and it is left up to the individual how he or she does the work and, in other words, it is not directed, then he or she is basically an independent contractor. It is not the case there that the law should be intervening, because in truth people have choices; they have freedom.

That is the philosophical point that the member simply does not understand. How on earth Darien Fenton managed to convince her colleagues to vote for this, frankly, ridiculous bill truly baffles me. This week she has been the subject of an Investigate article. On this side of the House we talk about the “stench of corruption”—it sits on the other side of the House. I ask how Darien Fenton, in her union role, managed to spend $240,000 on her election and that of her employers. I ask that member whether that was declared in Labour Party spending.

Hon Members: Oh no!

Dr WAYNE MAPP: Oh no! I guess it certainly was not. So a Labour list candidate was directing how money would be spent on a campaign, then not declaring it. That is exactly the same problem we see with the Prime Minister. They are in the scheme of denial. What will they do? I guess they will be asking their mates in the New Zealand First Party to help them out by supporting some retrospective legislation. I say to the New Zealand First Party: “Don’t be fooled; don’t be sucked in.” I say to the United Future party: “Don’t be fooled; don’t be sucked in.” People who grossly exceed their spending limits ought to pay a real sanction, and that is one of two things. As Dr Brash said today, when a Government steals an election it ends up, as has happened in many other countries, resigning.

So to have this ridiculous bill presented to us today by a member of Parliament who is guilty of what I would have to say looks like corrupt electoral practices, just rankles. Apart from the complete philosophical inconsistencies that are represented by this bill, this House and this country deserve better than this Government; and the sooner it goes, the better.

GORDON COPELAND (United Future) : I rise to take a brief call on the Minimum Wage and Remuneration Amendment Bill. Firstly, I congratulate Darien Fenton on having a bill drawn in the ballot. I know, from my first term in Parliament, that it is always quite a thrill. It would be like winning Lotto.

Hon Harry Duynhoven: In your first term?

GORDON COPELAND: I had two in my first term, actually. One bill has gone to the select committee and is still languishing there, and the other was voted against by both National and Labour. But that is another story, for another day.

I think the principle of ensuring that all people in New Zealand undertaking work receive the minimum wage is a sound one, based on social justice, and all New Zealanders want to ensure that—at least insofar as Parliament can ensure—people receive a minimum rate of pay for the work they do. Of course, many people fall below an acceptable standard of living, in any event, because of addictions, family problems, and all sorts of other things that are part and parcel of the human condition. We can do nothing about that through legislation, but we can, at least, say there is a basic minimum wage below which we are not prepared to see anyone fall. I think that from that point of view, there is an issue the bill addresses.

Having said that, however, we also acknowledge the other side of the coin, and that is traditionally the situation when, for example, I call for tenders for people to paint my house and I get four or five prices. I look at all the people to see whether they have some general competence in painting, decide to accept a price, and expect my house to be painted for that price. If it ends up that the person doing the painting works twice as many hours as he or she forecast when putting the contract in place—which may mean that on an hourly basis the person gets well below the minimum wage—then under our system that is kind of tough. So the person has to be experienced enough to try to figure that out correctly and ensure a sufficient wage.

When we consider the practicalities of trying to put in place a bill like this, we may just find that it is not practicable to do so. Bearing the pluses and minuses in mind, United Future has decided it will vote for this bill to go to the select committee. That will at least give people an opportunity to make submissions and for the committee to see whether the bill is sound or fundamentally flawed. In saying that, I also need to signal that our support is for the first reading only and is not assured beyond that stage.

HONE HARAWIRA (Māori Party—Te Tai Tokerau) : Kia ora tātou te Whare.There has been a lot of debate in the media about whether we can afford to increase the minimum wage. Earlier this year we saw a big debate over Sue Bradford’s bill to amend the minimum wage order in order to stop employers setting low youth rates, and now we have this bill to amend the Act to ensure that contractors are also covered. The questions are, how much will it cost and can we afford it? In fact, the real question is whether we can afford not to. The minimum wage is $10.25 an hour, and the minimum youth wage is $8.20. That is simply not enough.

Just a couple of weeks back, while the House was in adjournment, the Government tabled the Social Report 2006, which showed what we have been saying for yonks—that is, the number of poor people in this country has nearly doubled in only 6 years. The proportion of the population with low incomes shows that 19 percent were living below the 60 percent threshold in 2004 compared with just 12 percent in 1998, and that those experiencing severe hardship had greatly increased, as well. The same report also pointed out that the proportion of poor people who spend more than 30 percent of their income on housing has more than doubled in that time.

It is not just about the rich getting richer and the poor getting poorer. One does not have to be a rocket scientist to work out that those who are suffering are those who live in Māngere and Northcote rather than in Remuera and Takapuna. In fact, the New Zealand income survey shows that the average income for Māori is $471 per week, compared with $598 for non-Māori—a difference of $127 per week. Māori’s history as the lowest-paid group in the workforce, and the problems that result from that poverty. are the reasons why on many, many occasions in this House, the Māori Party has condemned low rates of pay as a form of economic violence.

It was with that knowledge that we went into last year’s election with a bid to raise the minimum wage to $12.50 per hour, because when we feed the worker, we feed the whānau, nurture the well-being and safety of children, and offer hope for their future. Yet this is not a call from the Māori Party. In a country that likes to pride itself on its growth and its wealth, it is to our enduring shame that we can even have an organisation called the Child Poverty Action Group. Yet we do. That group has also supported the call for a rise in the minimum wage in order for our poorest children’s life chances to improve. The key aim of the fast-food workers’ “Supersize my pay!” campaign is to raise the minimum wage to $12 an hour. Unions have been pushing for it for years; so have the Greens. So we are in good company in supporting this bill today.

There are many workers in forestry, construction, courier services, transport, labour hire, pamphlet delivery, and other such services who may be exploited through unfair contracting. So the changes proposed by Darien Fenton to ensure that contractors must be paid a minimum rate are a positive move for both youth and adult workers. But I have one word of caution for the select committee. We note the results of a major study carried out by Gail Pacheco, a senior economics lecturer at the Auckland University of Technology, which suggested that Māori and Pasifika will be the ones most adversely affected by a rise in the minimum wage. In her study she noted that Māori and Pasifika made up more than 20 percent of low-income workers, and that if the increased minimum wage were approved, it would be they who got the sack first if employers were forced to lay off staff. How sad that is, but, unfortunately, how true as well.

The Māori Party supports this bill because it is part of our campaign against the wages of poverty and the deprivation that poor people suffer. But we caution against any move that may further jeopardise the standing of the workers in bro’Town. Kia ora tātou.

PETER BROWN (Deputy Leader—NZ First) : Let me be clear from the outset. New Zealand First is not supporting the Minimum Wage and Remuneration Amendment Bill because, basically, we do not see a need for it. Not one person or contractor has come to us and said he or she needed Parliament’s help to get a fair deal; not one person. The contractors I have spoken to—and I have spoken to a few recently—say: We’re doing OK, Peter. We don’t need your help. Don’t come and interfere. We can do it OK.”

I listened to the member from the Māori Party who has just resumed his seat. I sympathise with him and the case he was espousing. He was talking about employees who are earning a low minimum wage. That is why New Zealand First included in its confidence and supply agreement the proposal to increase the minimum wage to $12 an hour within this term of Government.

I say to the honourable member Darien Fenton that in her letter she did not make clear the explanation of what she is trying to achieve. With due respect to the member—and I do not want to break confidences—I asked her what the bill was about and she said the select committee could sort that out. New Zealand First is not prepared to sort bills out at the select committee, if we do not understand what they are trying to achieve in the first place and if we think they are to the detriment of the country as a whole. In her letter to me she writes at one point: “I note that many jurisdictions throughout the world are seeking ways to extend minimum labour protections to those not in traditional employer-employee relationships.”

Why did she not give us some examples? Why do we have to research that to see the substance of it? We would have appreciated some examples. I will give the honourable member an example. Someone wants to paint a house, and agrees on 10 hours’ work at $20 an hour, and the first day is rained out. So in effect it doubles the time, and, obviously, if the employer and employee stick to the contract rate, it goes from 10 hours at $20 an hour to 20 hours at $10 an hour. Would that contractor have a claim against the owner who wants the house painted? I ask Mr Copeland whether he thinks the contractor has a claim against the householder who has engaged him to do the 10 hours’ work?

Gordon Copeland: I don’t think it’s practicable.

PETER BROWN: He does not think it is practicable, but he is going to vote for it. United Future members are going to vote for this bill to go to the select committee, but Gordon Copeland does not think it is practicable and he does not know what the answer is.

Paula Bennett: The select committee will sort it out!

PETER BROWN: The unfortunate thing is that, in listening to the Māori Party, the Greens no doubt, and the Labour Party, I heard the bill is likely to go to the select committee that I will be on. The only promise I am prepared to make is that, as a conscientious MP, I will do my best to help sort it out. If this legislation is going to be the law of the land, we have to have sound law of the land.

Gordon Copeland: I’ve got full confidence in you.

PETER BROWN: The honourable member says he has full confidence. I bet he is not there. He does not even intend to be there. Will he put his name up to be on the select committee? No, he will not. So he has full confidence in me. I think the member ought to have, if he is voting for a job for me and is not prepared to help me out to do it.

Bob Clarkson: Peter, just open your mouth and let the wind blow your tongue around.

PETER BROWN: I did not catch that. I imagine it is some witticism. I think Bob Clarkson should say it again, because we do not hear him speak terribly often in this House and we want to know the sound of his voice. [Interruption] It was good, was it? I will read with interest tomorrow.

People put in contract prices for a number of reasons. Some do it to get a job that might be prestigious. Before I came into this place, I was a contractor. I never had to work for the minimum wage, but I would put in a price at a lower rate than normal because I wanted to be able to do that particular job. Some people put in prices because they need the work to keep them going, and to feed their children, and are prepared to take a risk on it. Others put in a price to keep out a competitor over a short period of time.

If we produce a law that states that on every occasion these guys have to have their wages inflated to the minimum wage when they drop beneath it, then I say we are doing a huge disservice to contractors. We might well have to sort out the engagement of contractors, but this bill is not going to do that. From New Zealand First’s perspective, we are going to vote against it, but we will help to sort it out at the select committee.

SUE BRADFORD (Green) : This is a good bill, and on behalf of the Green Party I would like to offer my congratulations to Darien Fenton on introducing it to the House. I am very pleased to hear that the Māori Party supports it, and very disappointed to hear what Peter Brown has just said, as surely, as a member of New Zealand First of all the parties, and as a gentleman who has talked a lot about the need to support and improve the lot of casual and low-paid workers, I think it is a disgrace that he has taken the position he has.

This bill closes another loophole in the Minimum Wage Act, a loophole that sees some workers being grossly exploited and being paid less than the minimum wage provisions of the Act. This bill could be called the “Minimum Wage (Abolition of Employment Status) Discrimination Bill”, and as such it is a good companion to my Minimum Wage (Abolition of Age Discrimination) Amendment Bill. Given the concern over recent weeks by a number of parties at the remuneration paid to individuals working on a contract for service on properties owned by a member of this House, I would hope, vainly I know, that this bill would receive unanimous support from all parties to go to the select committee.

It is anathema that in today’s world young people and those on contracts for service do not receive the full protection of the Minimum Wage Act. Such gross exploitation cannot be allowed to continue. My Minimum Wage (Abolition of Age Discrimination) Amendment Bill will stop this gross exploitation by removing the ability arbitrarily to discriminate on the grounds of age when minimum wages are set.

This new bill will address the gross exploitation of those workers who work under contracts for service. This includes not only the pamphlet deliverers mentioned in the explanatory note of the bill but also people such as painters, builders, pizza drivers, security officers, commission sales people, and many others. It must also include homeworkers—a growing but very vulnerable group of mainly women workers who attempt to stretch the family income through taking in work such as clothing manufacture, other light manufacturing, computer-based work, childcare, and so on. The exclusion of these people from minimum wage legislation simply on the basis that they are not employees in the legal sense of the term is wrong, and simply adds to the growing underclass that exists in this country. We have only to look at the recent New Zealand Living Standards report and S for confirmation that the gap between the well-off and the very poor is actually intensifying at the moment.

In many cases these people on contracts may even be employees within the meaning of the law, but low awareness of employment rights allows unscrupulous employers to convince them that they are contractors rather than employees. This is an increasing problem as more employers seek to escape their employment responsibilities by renaming employees as contractors. This small but growing group of employers is not only grossly exploiting those working for them but also putting better employers who play by the rules out of business by undercutting their prices.

I would expect employer groups to strongly support this bill, to protect their own members. However, I was disappointed to see the other day that the Employers and Manufacturers Association (Northern) is unfortunately once again opposing progressive employment legislation—and, in fact, turning its back on its own members who are law abiding on the whole—and, instead, siding with the exploitative employment practices of the undercutters and fly-by-nighters. With this amendment to the legislation in place, there will be less temptation for workers to be called contractors when they are not, or to be paid under the table rather than by proper wages taxed at source. I would think that the parties to my right would actually support that notion.

This bill will throw more light on the underground economy. It will see the regularisation of employment relations that are very much in the grey area at the moment, and we will all benefit by seeing a greater tax take that can fund our health, education, and social services.

Before I finish, I would just like to note a few concerns. Firstly, the proposed new section 4A(2) in clause 7 still provides for age discrimination. The Green Party believes that age discrimination is not acceptable in either contracts of service or contracts for services. Secondly, there does not appear to be any amendment to section 5 of the Minimum Wage Act to require an annual review of minimum remuneration for contractors. That might just be a drafting oversight. The real detail will come in the regulations prescribing minimum remuneration for contractors themselves. These will not be easy to draft, and will not come under select committee scrutiny prior to their being promulgated. However, I hope Darien will give an outline of the proposed regulations to the select committee.

The Greens will support this bill, and expect National especially to be a strong supporter of it. I also expect Darien Fenton and the Labour Party to continue to strongly support my Minimum Wage (Abolition of Age Discrimination) Amendment Bill, as I believe these two members’ bills belong together in helping to implement fundamental and much-needed reform of our minimum wage framework.

PAULA BENNETT (National) : I rise on the Minimum Wage and Remuneration Amendment Bill, and find just so many problems with it. Having read Darien Fenton’s letter about it, as well, I find—a little like Peter Brown—that it is just so hard to understand exactly what she is trying to accomplish. I suppose what it fundamentally comes down to, for us in the National Party, is that it is about freedom—freedom of choice and freedom for people to manage their own work to suit themselves. In many cases, that is why people choose to contract. They choose to go under a contract.

Let us take the example of pamphlet deliveries, because that is the one example I have heard Labour use. Under that example, we have people who will choose to take their time, who will choose to do the job at their own will or whim, who will stop and start, who will call into houses, and who actually like the freedom to be able to do the job without having to be under an hourly rate—or, as it would be, an hourly contract to someone. So they choose merely to be paid for what they deliver, and they are quite happy with that arrangement. I am in agreement with that, because I have yet to hear of someone who is unhappy with the arrangement, after talking to them and hearing of the freedom they enjoy.

It will be people such as older people who will find themselves out of a job, because employers in that situation will think that the push from the Government is to put people on an hourly rate. So they will put them under an hourly rate, but that will not be an ideal situation for many of them and they will choose not to do the job. They enjoy the freedom that comes with the work they can do.

A classic example was a contractor I was speaking to, with a very small business, who was contracting to go out and do gardens, and things like that. He did not sit down and think about how long it would take him to do the job; he worked out what he felt the job was worth, then he put a price to it, accordingly. Under this bill, it seems to be the case that, depending on the time it would take, it could actually cost a heck of a lot more for people to get their lawns or gardens done. So how can that be fair for anyone, because they will not then get the work? In the case of the person with the small business, he enjoys the freedom to work when he wants to, and to get the work done in the time he does it.

Under this bill, I am wondering, as well, how that would possibly work. Would people have to clock in for every 10 minutes they worked, and clock out for when they did not, then have that recorded? It is talked about that it will be legislated and investigated. Will we have labour investigators going out to look at how long jobs actually take, so that we can then decide? It could all be sorted out at the select committee, of course. The bill is about regulating the market even more, when it is the freedom of the market that works for people. It is as simple as that, really. We will be regulating, because we do not wish to let those people have a choice. In many cases, it really is about choice.

The other thing concerns the reason why people choose not to go into the contracted hourly rate of an employee. More often than not, when people are being paid by the hour, they feel as if their time is owned. As such, when I am an employee, my time is owned for the period of that job, and I am obliged to do the job at the pace required by my employer—and at the rate required by the employer. Again, that is taking away that choice.

I have concerns about another issue, and let us use the example of someone cleaning carpets. Like the member from United Future, I would go out and get different quotes for the job that is to be done, but then when that job is actually done I might look at it and think that it has not been done satisfactorily. The carpet cleaner then has to go back into the house and do the job again. So the cleaner has had to do twice the time for what the service had been contracted out for in the beginning, because the job had not been done effectively in the first place. So what does that mean? Because the job has taken the contractor twice as long, all of a sudden he or she may be outside the minimum hourly range and, as a consequence, the rate has to be cut.

It can be the same in the case of pamphlet deliveries, if we want to use that example. Occasionally a job is not done properly, so the contractor is told to go back and do it again, how to do it, and everything else. Because contractors are not doing jobs effectively in the designated times they agreed to themselves, and because they are having to do jobs twice when they have not been done properly, we will have labour inspectors coming along and having a look at that. It is just absolutely ridiculous. I cannot see how it will possibly work, and it is for that reason that National will most definitely be voting against it.

Hon RUTH DYSON (Minister of Labour) : What an extraordinary exposé of right-wing, pure ideology from that member. It is just extraordinary to steal language, words like “freedom”, and then put them alongside the right for people to be paid $1 an hour, $2 an hour, $3 an hour, or anything other than the minimum wage of $10.25, and call that freedom. What a disgrace to a civilised society that member is! She should hang her head in shame, and never come to this House and repeat that sort of ideological nonsense. It is just a total outrage.

For people who are the most vulnerable in our society to not be entitled to a minimum wage, in a civilised society in New Zealand in 2006, is just a disgrace. That member purports to understand what it is like for people who are in low-paid jobs, people who are struggling. That member, who brings out her tissues, has crocodile tears appearing because she had such a hard road to pave before her grand entry into this House. Then she comes into the House and says that people should have the freedom to work for less than the minimum wage. Well, if people want the freedom to be like that member, then I think we have a responsibility to save them from that fate. Anybody in New Zealand should be saved from the fate of being like that member; her speech was just a disgrace.

I want to congratulate Darien Fenton. She has been in this House for less than 12 months, and has produced a member’s bill that addresses a very fundamental flaw in our employment relations legislation, in that we do not have a minimum wage provision for those who are working under a contract for service. They may be vulnerable, they may not be very wise, they may decide to cut all sorts of corners in order to get a contract, so not only will this bill give those contractors legislative provision under the minimum wage legislation but it will also ensure that we have fair competition when we are looking at the contracts we provide for.

So the bill seeks to amend the Minimum Wage Act 1983 in order to extend the minimum wage provisions to apply to payments under a contract for service. It is important in a civilised society, as New Zealand prides itself on being, that we should not have people who are able, because they need to undercut another competitor, to do a contract for something that may be doing them or their subcontractors no good at all. It is very ironic that Dr Mapp raised the matter of that legislative gap in the House prior to the adjournment, and again today. Dr Mapp identified that it was a flaw in employment relations legislation, but now, with such an extraordinary attitude, has come into this House and attacked the very legislation designed to fix the flaw he identified. It is no wonder that member is regarded by employers and employees up and down the country as having no integrity when it comes to matters of honesty, openness, and genuineness in ensuring that what one says in the House, and what one says outside, are consistent. I am delighted to support this bill, and I look forward to its progress through the House.

DARREN HUGHES (Junior Whip—Labour) : I raise a point of order, Madam Speaker. I see that the member for Nelson, the Hon Dr Nick Smith, has come into the Chamber. I understood very clearly that he was suspended from the House, or was asked to withdraw from the House, this afternoon for the remainder of the sitting day, because of his behaviour, so I am very surprised to see him in here right now.

The ASSISTANT SPEAKER (Ann Hartley): The member has been advised that he is out of the House until 10 o’clock, so I ask him to leave. Members will please be seated until the member leaves.

• Hon Dr Nick Smith withdrew from the Chamber.

LINDSAY TISCH (Senior Whip—National) : I raise a point of order, Madam Speaker. I accept your ruling, Madam Assistant Speaker. The member’s bill that we are about to debate is in Dr Nick Smith’s name. I ask that leave be granted for him to make his 10-minute speech. It is his bill; it has been drawn out of the ballot, and he has put much time and effort into it. I ask for your reconsideration to enable him to speak for his 10 minutes and, following that, to leave the House, then to return for his 5-minute right of reply.

The ASSISTANT SPEAKER (Ann Hartley): First, another member can move the bill, but what I would say to the National Party whip is that the member’s behaviour was grossly disorderly and he was lucky to get away with just having to leave the House. So the request is not granted by me. Does the member wish to put it as leave?

LINDSAY TISCH (Senior Whip—National) : I seek leave for Dr Nick Smith to be allowed to return to the House to take a 10-minute call on the bill in his name, and for him to make a 5-minute reply at the end of that debate.

The ASSISTANT SPEAKER (Ann Hartley): Leave is sought for that matter. Is there any objection? There is.

Dr Wayne Mapp: Point of order—

The ASSISTANT SPEAKER (Ann Hartley): The matter is dealt with, Dr Mapp.

Dr Wayne Mapp: Madam Assistant Speaker, I do not often take points of order, but I do wish to—

The ASSISTANT SPEAKER (Ann Hartley): The member will please be seated. I will not tolerate any further discussion on this issue. [Interruption] The member assures me that it is a new point of order.

Dr WAYNE MAPP (National—North Shore) : I raise a point of order, Madam Speaker. You will be well aware of the practice of Speakers to do reconsiderations in circumstances like this. I have been in the House a number of years and I have certainly seen Speakers do that. I put it to you, Madam Assistant Speaker, that it would be appropriate to follow the precedents of other Speakers in these kinds of circumstances.

The ASSISTANT SPEAKER (Ann Hartley): The member is lucky to remain here, because he is contesting my ruling. I have already ruled on the matter. It is not a precedent; matters are dealt with as they are seen by Speakers. As I said before, this member was lucky to get away with just being asked to leave the House.

Phil Heatley: Point of order—

The ASSISTANT SPEAKER (Ann Hartley): Is the member contesting my ruling?

Phil Heatley: No, I have further information, Madam Assistant Speaker, that I think you need to be privy to.

The ASSISTANT SPEAKER (Ann Hartley): No, I will not countenance any further discussion.

Phil Heatley: But it is not contesting your ruling.

The ASSISTANT SPEAKER (Ann Hartley): No, I will not countenance any further discussion on this issue. It has been decided.

DARIEN FENTON (Labour) : First, I thank the various parties—the Māori Party, the Greens, United Future, and, of course, the Labour Party—for their contributions and their support. I do appreciate very much their understanding that this is a situation of workers’ rights, regardless of the legal form the work takes. I also appreciate the parties that are prepared to consider this as a genuine concern, not a political football.

I take the opportunity to say to Dr Mapp that if he wants to talk to me about the financial report of the Service and Food Workers Union, I have it here. I am very happy to help him read a balance sheet because I do not think Investigate is able to do it, and I do not think that he is able to do it, either. I am very happy to do that outside of the House if the member would like to do so.

The starting point of the bill is that this is a dimension of labour regulation that should be extended to all workers who are economically dependent on the sale of their capacity to work. As Peter Brown mentioned, I did say that many countries now accept that the traditional concept of an employee no longer provides a satisfactory basis for delineating the scope of labour law. If Mr Brown had asked me, I would have been very happy to provide him with the research I have done. I have worked on this issue for many, many years, going right back to 1998 at the International Labour Organization conference when it looked at the issue around the scope of employment and labour legislation. In Britain, for example, the concept of a worker corresponding with what we call a dependent contractor is now part of the law. It is an attempt to shift the boundary of labour protection to self-employed workers who are not genuinely in business on their own account.

There is no worry about those who are doing well, but there is a worry about those who are not. I would like to let Dr Mapp know about correspondence I have had recently from somebody in his own electorate who applied for a job where paper runners of all ages were being sought, but specifying students, at-home parents, and retired people. On phoning, this person was told that the pay rate for delivering 100 to 125 newspapers is between $3 and $5 for each run, and that the workers have to provide their own trundlers, etc. Is that acceptable? I do not think so.

There is widespread agreement that the traditional legal categories, which are also current in New Zealand—and there are many, many names for them, such as employee, independent contractor, dependent contractor, contract for services, labour subcontractor, labour-only contractor, etc.—no longer fit with the economic and social reality of today’s work relations. This is a challenge for all of us, and this bill represents a very small step towards dissolving the distinction in rights between employees and the self-employed—or contractors—for the purposes of minimum labour protection.

I do not understand the National Party’s reluctance to extend rights to the self-employed who are contracting for services. I recall its criticism of this Government for not providing in a hurry paid parental leave to the self-employed. I am sure it would not want to remove accident compensation, health and safety rights, and social insurance from them, either. So what is the difference in providing the very basic protection of minimum remuneration in law?

The rationale for this bill is fairness and social justice. Fairness requires that similarly situated individuals be treated equally—that is, people who are depending on the sale of their labour should be treated similarly regardless of the form the transaction takes. The social justice argument is that all workers should be protected against harms and risks that are broadly seen as being unacceptable. Minimum wage or remuneration is one of the things our society and all parties have seen as a necessary floor below which people should not be required to provide their labour. There is no more justification for permitting discrimination in terms of minimum wage or remuneration against any worker who provides services personally, regardless of the contractual arrangement under which the service is provided, than there is for permitting racial or sexual discrimination against any worker.

The point of this bill is not to facilitate workers who are contractors to reach the very hard goal of proving they are employees; it is to provide for a minimum entitlement of remuneration regardless of their legal status. New Zealanders believe in fairness and justice; they believe that people should be treated equally. That is what this bill is about.

DARIEN FENTON (Labour) : I move, That the Minimum Wage and Remuneration Amendment Bill be referred to the Transport and Industrial Relations Committeereferred to Transport and Industrial Relations Committee

LINDSAY TISCH (Senior Whip—National) : Under Standing Order 71, there is an option to postpone the bill. Looking at Speaker’s ruling 23/1, I move, That the Building (Late Consent is a Free Consent) Amendment Bill in the name of the Hon Dr Nick Smith be postponed until 6 September, being the next members’ day, which the Standing Orders and Speakers’ rulings provide for.

DARREN HUGHES (Junior Whip—Labour) : I assume the chief Opposition Whip is doing this on the basis that the member in charge of the bill is not present to move the motion for the first reading. The bill would be deferred until the next members’ sitting day?

The ASSISTANT SPEAKER (Ann Hartley): That is what he indicated, yes.

LINDSAY TISCH (Senior Whip—National) : Yes, I confirm that that is the next members’ day. The member is not present and I am moving the motion on his behalf.

Hon Mark Burton: And the member agrees? The member has given his consent?

LINDSAY TISCH: Yes.

The ASSISTANT SPEAKER (Ann Hartley): The member has consented.

• Motion agreed to.