Hon CHRISTOPHER FINLAYSON (Minister for Treaty of Waitangi Negotiations) on behalf of the Prime Minister: I move, That the Members of Parliament (Remuneration and Services) Bill be now read a first time. I nominate the Government Administration Committee to consider the bill. At the appropriate time I intend to move that the committee report to the House on or before 31 August 2012. This bill proposes a new framework for setting entitlements for MPs and members of the executive. The current framework is governed by Parts 3 and 4 of the Civil List Act 1979. It has been criticised as lacking clarity, transparency, and independence. In 2010 the Law Commission recommended that those provisions of the Civil List Act should be repealed and replaced by a new statute. In response to the commission’s recommendations the Government introduced this bill on 5 October 2011.

The key purpose of the bill is to establish a system for determining the services to be provided to elected members. It recognises the need for members to be properly supported, but also maintains confidence in the integrity of Parliament. The entitlements that have the most potential for personal benefit and have caused the most public concern in the past are travel and accommodation services. The changes introduced in this bill will improve the independence of the determination of those services.

The main feature of the bill is the creation of a new framework for the determination of these entitlements for MPs and Ministers. Until now, those entitlements have been determined by the Speaker and the Minister responsible for Ministerial Services. Under the new framework introduced by this bill, in the future most travel and accommodation entitlements of MPs will be set by an independent body made up of members of the Remuneration Authority plus an additional member with the appropriate knowledge, skills, and experience to assist them in this task. The authority will also determine domestic travel and accommodation services for members of the executive.

The cost of international travel, accommodation, and associated costs for members of the executive on ministerial business will be met by the Department of Internal Affairs on the basis of approvals by Cabinet or the Prime Minister, or the Minister with responsibility for Ministerial Services, and will no longer be the subject of a determination.

The current voluntary disclosure regime for MPs’ travel expenses has been widely welcomed as improving transparency. The bill builds on this initiative, requiring quarterly disclosure of MPs’ travel and accommodation expenses. The Speaker will continue to be responsible for issuing directions and setting out the allocation and administration of party and member support funding, and the administrative and support services to be provided to MPs, parties, and qualifying electoral candidates. The Speaker will also continue to issue directions in relation to communication services for MPs, and will determine services for MPs participating in the official inter-parliamentary relations programme.

The existing scheme for MPs’ and Ministers’ entitlements has been described as complicated and confusing. The bill sets out the powers of the authority and the Speaker to determine entitlements to services or issue directions in one single statute. The bill requires them to have regard to the same overarching criteria and principles in exercising their powers, and this is going to reduce the legislative complexity and fragmentation that has dogged the present system.

The bill also changes the provisions relating to salary deductions where an MP is absent from the House for long periods without good cause. Under the Civil List Act 1979, only $10 per day can be deducted from an MP’s salary in such situations. The bill provides for a much more significant deduction where an MP is absent for more than 9 days other than in accordance with the rules of the House. In rare circumstances where non-attendance becomes an issue, this provides a much more meaningful and effective way of addressing the problem than is allowed by the current law.

The bill also includes changes relating to rules around entitlements for former MPs who were elected before the 1999 general election. At the moment those former MPs and their spouses are entitled to rebates on a limited number of domestic and international airfares and have certain road, rail, and ferry travel entitlements. The recipients of those benefits are a closed class. The amount currently spent on former MPs’ travel is about $1.3 million per annum. The Law Commission recommended that these entitlements should be set out in legislation, rather than in Speakers’ directions, to ensure that they cannot be extended or increased except by legislative amendment. The bill implements this recommendation. In the interests of improved transparency, the bill also requires the total expenses incurred to provide those entitlements in respect of each former member to be disclosed annually.

The bill continues the present position under which the Remuneration Authority determines annuities for former Prime Ministers and their spouses. It removes certain outdated restrictions on the availability of the annuity paid to the surviving spouses or partners of former Prime Ministers. Compared with the present regime, the annuity will continue to be available if a surviving spouse or partner remarries or enters a new relationship.

The bill also makes changes to how travel entitlements provided to former Prime Ministers are determined. The bill provides that the decision as to what travel entitlements should be made available to future former Prime Ministers and their spouses or partners will be a matter for determination by the independent authority.

So overall the bill represents a significant improvement in modernising the law relating to elected members’ remuneration and entitlements to services and in ensuring that such entitlements are independently set and are transparent. I extend my thanks to the Law Commission for the work it has done on this matter. I look forward to the bill receiving careful and detailed consideration by both the select committee and the House. A bill of this nature, covering, as it does, the means to ensure that elected members are provided with the services that they require to enable them to carry out their roles and functions efficiently and effectively, deserves nothing less.

Hon TREVOR MALLARD (Labour—Hutt South) : The Labour Party will be supporting the Members of Parliament (Remuneration and Services) Bill’s referral to the select committee and, unless something surprising happens, we will be supporting it through. Before the Attorney-General leaves—gone.

The ASSISTANT SPEAKER (H V Ross Robertson): Order!

Hon TREVOR MALLARD: Sorry, I did not want to draw attention to that, but I do have a—is there a Minister in the House who is currently in charge of the bill or who can answer questions?

Hon Member: Is there a Minister in the House?

Hon TREVOR MALLARD: There is; I think Mr Tremain is a Minister. There are a couple of Ministers. Are any of the Ministers in the House able to answer questions at the moment on the bill?

Louise Upston: I raise a point of order, Mr Speaker. This is a first reading; this is not a Committee stage.

The ASSISTANT SPEAKER (H V Ross Robertson): No, it is not, but the member, of course, is allowed to ask questions. Whether they are answered or not is another matter.

Hon TREVOR MALLARD: The point I would make—and I will make it to the Government whip if there is not a Minister who has got an understanding of the legislation available—is that there has been an undertaking, including with the Business Committee, to consider this bill carefully and properly at the Government Administration Committee. My personal view is that it should not take anything like the period up to August to deal with it. I just do not think it looks good for the House to be putting a limited time on the hearings of the select committee around this bill, which does involve the remuneration and other allowances of members of Parliament. I think it would look better for Parliament if we did not do that. There is an undertaking to deal with it in a proper way—not to delay it, and to get it back as soon as is possible and appropriate—but I think to put an obligation on the Government Administration Committee in the way that has been suggested by the Minister acting for the Minister in charge of the bill makes it look like we are hurrying it through in a way that might not be seen to be appropriate. I just wanted to indicate that it may be better if, in fact, the Minister does not proceed to move the shortening motion, because the Labour Party will oppose that one, and I think it would be a pity because there is an agreement to move this bill forward.

Mr Speaker, I think it would be unwise of me not to point out to you clause 15 of the bill and to make sure that you are looking carefully at that clause to see whether or not your vote is to be exercised in relation to this legislation. Certainly, according to the rumours, the conflict between the salaried positions of high commissioners and members of this Parliament is something in which you might have an interest, Mr Speaker, and certainly anticipate having an interest in the period, I understand, very soon after this bill passes. That is something to be looked at.

I think the Attorney-General summarised the bill well. The Law Commission has done an extensive report on the matter. It has recommended that a lot of the matters that are currently the subject of determinations should, in fact, be in primary legislation. I will be interested in the discussion at the select committee as to whether some of the matters that are suggested to go right into the legislation should be, in fact, left to the new committee that is to be set up, which will be based on the Remuneration Authority and augmented. There is a balance between the clarity of primary legislation and the inflexibility of primary legislation, and I will be interested in hearing from the Remuneration Authority and other public law experts as to how much should be in this legislation and how much should be left to be determined.

It is going to be important that a person with appropriate knowledge, skills, and experience is added to that committee. I will be interested in views as to whether or not a person who is themselves entitled to some of the former members’ entitlements is excluded from that position. It is something to be worked through. I think we have found on occasions that there has been quite a lot of debate around the balance in terms of having someone of expertise—someone who understands the way that Parliament works and the requirements on members of Parliament—involved in these discussions, often, in the past, advising the Speaker as part of a committee. They often have a better level of understanding, but it does become an issue if, in fact, they are dealing with matters in which they personally have an interest, if they are dealing with later remuneration.

The bill also makes it clear that the Speaker continues to be responsible for directions around the allocation and administration of party member support funding, services provided to members, the out-of-Parliament offices, and travel allowances for members of Parliament participating in political and inter-parliamentary programmes. I think there is no doubt that it is appropriate for the Speaker to be responsible for those, but I think it is also worth saying that there are occasions when these boundaries become very blurred, and members are involved in a combination of exchange and personal travel. Getting that balance right is important, and making sure that there is not additional, unbudgeted cost to the Crown in a way that is not approved where, in fact, there are extensions is something that is important. It is good that the bill brings together the criteria—and they are specified in the bill—that the Speaker and the Remuneration Authority are required to have regard to in issuing directions.

There is what is, I think, referred to around the place now as the “Chris Carter clause”—

Chris Auchinvole: That’s your reference to it.

Hon TREVOR MALLARD: Well, no. I think it is fair to say that I did not bring that up. I am not going to claim to be the original author of the description of the “Chris Carter clause”, but the suggestion that people can be docked only $10 a day by the Speaker for not turning up to work without leave is, I think, ludicrous. I actually have a—[Interruption] I think Clayton Cosgrove says that Gerry Brownlee should be paid an extra $270 a day to stay away, but I think that might be unkind, although I tend to say that the Finns might think the same thing.

One of the things I would like to have a discussion about is whether the 0.2 percent is an appropriate amount, and whether we should be considering all the days of the year or whether in fact we should be considering sitting days. What is the balance of parliamentary work versus other work for a member of Parliament? And if a person is just not turning up at all, should we be assuming that they are fulfilling the other duties that they have as a member of Parliament? They might not even be in the country. They might be out of the country. I think it would be worth having that discussion and having a look at whether or not there is discretion in that area.

This is a bill that will take some detailed consideration at the select committee. There could well be some drafting issues, which my colleague Chris Hipkins will raise about it. But one of the things that has changed in my time in this Parliament is a growth in the transparency of arrangements for the remuneration of members of Parliament for the services that they provide. And although there might be a few of our older colleagues who are spinning in their graves or spilling their gins at the current time, I think, generally, transparency has resulted in very good progress.

CHRIS AUCHINVOLE (National) : It is a pleasure to follow the two previous speakers: the Attorney-General, who introduced the bill on behalf of the Prime Minister, and, indeed, the Hon Trevor Mallard, who speaks with a wealth of experience on these matters through the long service he has engaged in. I think this will be a very, very interesting bill to have through the Government Administration Committee, and the discussion will be very, very useful.

We members of this Parliament are truly fortunate in that we are able to run for seats in this Chamber supported by the public purse. We are also fortunate that the people of this nation have shown a similar faith in making that money available through the democratic systems that see us here. It is this faith that the Members of Parliament (Remuneration and Services) Bill seeks to strengthen, because it is probably no news to anybody in the country that we have been through a period of questions over the transparency of the way that we are served in the Parliament through various pay and conditions associated with the job we do. We must never forget where we come from and whose money it is that we are spending.

I think New Zealand does have an enviable international reputation for being free from some of the financial problems that plague other legislatures, where things are not transparent. A lot of work has been done, though, in recent times by the Speaker and by Government to make things more transparent and to make them more obvious. There has been a genuine non-partisan approach, which is a pleasure to see. When it works in Parliament, it works well. It is that transparent, independent, and non-partisan approach that this bill seeks to strengthen, to increase the transparency around entitlements, ensuring most travel and accommodation entitlements for MPs and Ministers will actually not be set by the same people who could be said to be the beneficiaries, but will be set by the Remuneration Authority supported by a person with appropriate experience to assist. The current voluntary disclosure of MPs’ salaries, travel, and accommodation expenses will become mandatory, so that people have the assurance that we are not doing it just to satisfy a passing whim; it will be part of the job that those figures are produced.

I have heard a phrase coined this afternoon, which I do not want to be credited with coining myself: the “Carter clause”. It is not one of my choice, but it probably is appropriate because I think people were stunned to realise that there was a fine of $10 a day for not turning up. Frankly, that is a joke. If I may reflect a personal opinion on former members’ allowances, I often wondered why the grateful nation should continue to shell out after people had left this place of employment. I was a bit surprised by it and I am very pleased to see that that is a contained feature of the past and there is no suggestion that that will be moved into the future.

This bill takes the present steps that have been made considerably further than those already taken. I think there will be good discussions. There will be new questions that come from the submissions we receive, but National is committed to standing by this bill. I am delighted to think it will, hopefully throughout the House, receive support from all parties, so that it is a truly non-partisan bill and not plagued by pettifogging positions of people treating things any differently from the way this deserves to be treated. We know where we come from and this is why I support the bill, and I call on every other member of the House to do the same. Thank you.

CHRIS HIPKINS (Labour—Rimutaka) : I am happy to rise to take a brief call on this Members of Parliament (Remuneration and Services) Bill. I want to, in a moment, get into a couple of issues with the drafting of the bill, which I hope the Government Administration Committee will be able to clarify. But I think at the outset it is important to talk about the principles that lie behind this first. We have seen a move to a much more transparent system for setting the non-salary components of services and entitlements—if we can use the word “entitlements”—provided to members over the last few years. That has been a very welcome thing. I think the public have welcomed that and I think it has led to a higher standard of accountability within the House, and that is a very welcome thing.

What we are doing in this bill is moving a step further, which is to institute a further degree of independence in the determination around some of these matters. At the moment the Remuneration Authority already determines what salaries and allowances members are paid; this bill goes a step further and transfers to it the responsibility for also determining travel and accommodation-related matters. I think that is also useful, because those are the matters, as the Attorney-General pointed out when he spoke, in which members could also be deemed to have more of a personal interest.

It leaves with the Speaker the responsibility for determining matters around members’ support for out-of-Parliament offices and for in-Parliament offices—areas where clearly there is unlikely to be any perception of members having a personal interest in those matters, so they remain with the Speaker. But what it is doing is instituting a further degree of independence in any matters where members may be perceived to have a personal interest, although I would argue in the case of travel and accommodation payments it is more perception than reality—and I say that as a Wellington member of Parliament who does not qualify for Wellington accommodation. I do, however, qualify for travel but have far less need to use it than a member of Parliament who lives significantly farther away than Wellington.

I will quite happily defend those members of Parliament who do live outside the Wellington area having that support. I think it is essential for them to do the job that they are able to travel freely between Wellington and their home base, their constituency. In some cases members need to use air travel within their constituency, because their constituencies are so large. That is something that we also need to support. If you look at the case, for example, of Rino Tirakatene, the Labour member, he has the entire South Island and a chunk of Wellington in his constituency. For him, travel is essential just to meet the people from one end of his electorate to the other, let alone actually to be in Wellington to execute his responsibilities to the House.

So I think making sure that members still have access to travel services that allow them to do the job is very, very important, and providing some degree of independence in how they are determined I hope will remove any suggestion that members are benefiting personally from the provision of those. I would hate to get to the point where in order to serve a constituency effectively as a member of Parliament one had to have a large degree of personal wealth in order to do the job. This is a House of Representatives, and as such we are going to have people from a diverse range of backgrounds. Some come in here with large personal wealth already, but some do not, and some come, I hope, from backgrounds that are far more modest than that. They should still be able to do their jobs effectively without having to dip into their own pockets in order just to do the job. I think that that is one of the really important principles that should be defended, and I hope by providing some more independence in this process we will be able to do that.

Having said that, providing independence is all very well, but if things go wrong, we are still going to get the blame, so we should be quite open about that. Whenever we get a pay rise, even though the pay rise is determined by an independent body, we still get blamed for that, and I do not think it will be any different when we transfer the travel and accommodation services to the Remuneration Authority.

I do want to raise an issue around post-election arrangements. It is a technical issue but it is one that came up following the last election, and one that I hope will be carefully considered in the consideration of this bill. It relates to members of Parliament who may be returned on election day but then in the counting of further votes are out again. This does not relate to the case of an electoral petition, because there is a specific provision in the bill that deals with those members. This is a case where members are back and then they are out, or they might be out and then they are back. If you are out and then you are back, that is not so bad, because you can get your pay and everything; that is not so bad. But if you are in and then you are out, you actually may be in for 2, 3, or 4 weeks after an election and continue to be paid as a member, and then you might find yourself out. But the provisions in this bill with regard to what gets paid to former members and what they can access dates back to polling day, regardless of whether they have been a member of Parliament temporarily for some period of time immediately after polling day.

In the case of support services to members of Parliament this becomes very important. To give the example of an out-of-Parliament office, all of us have our out-of-Parliament offices leased in our own name. These are not leased in the name of the Parliamentary Service. They all have a clause in them that says that the lease terminates 1 month after the person ceases to be a member of Parliament. If the person on polling day thinks that they have been re-elected as a member of Parliament, albeit the narrowest of margins, they are not going to terminate their lease. If 3 weeks later they are out again, they will have 1 week left of the 1-month payment that they can get post polling day but they will still be liable for a whole month on the lease of that out-of-Parliament office. So they will effectively end up paying out of their own personal pocket for something over which they had no control. They lease the office to serve constituents and to provide constituency services for the 3 weeks immediately after the election, and they continue to supply those services, which is fine. Then with only 1 week of their 1-month notice period left to go, they have to pay for the remaining 3 or 4 weeks of their notice period out of their own pocket. That is not fair. It is a minor technical issue. But if a member of Parliament is making the adjustment, having just lost their job, I think we should be fair to those members and make sure we make adequate provision for that in the legislation.

Chris Auchinvole: We’ll call it the “Chris clause”.

CHRIS HIPKINS: Well, I am not the person who is affected by it. The “Chris Auchinvole clause”, maybe.

But moving to the other issue around post-election arrangements, it is to do with the inconsistency in the bill relating to the salary calculation for a member who has stood for re-election but ceases to be a member. In the explanatory note it suggests that someone who is not a Speaker, Deputy Speaker, Minister, or parliamentary under-secretary will be paid at the salary rate of an ordinary member. Yet in the actual legislation itself, it suggests that the member who has not been returned for the 3 months that they will continue to receive their pay will be paid effectively at the rate that they were paid at on election day. So if they were a select committee chair or a whip or somebody who held some other office that was not Speaker, Deputy Speaker, Minister, or parliamentary under-secretary, by the explanatory note they would only be paid at the rate of an ordinary member for the 3 months after an election. But by the actual wording of the legislation, by my understanding of the reading of it, they would be paid at whatever they were being paid on election day.

I think that needs to be clarified, because around all of these things it is just a question of getting the clarity right. You do not want ambiguity in these circumstances. These are people who have just lost their jobs, they are trying to get on with their lives, and we just need to be fair to former members and outgoing members. We need to make sure that they know what they are entitled to access in terms of their pay when they cease to be members of Parliament, so some clarity around that will be important.

The bill introduces formally in legislation the informal, voluntary reporting regime that we have in place at the moment for members’ expenses. That is something that is being widely welcomed, not just by the media but by the public as well. I think that legislating for that, making that a formal requirement now rather than a voluntary regime, is a welcome step. It is good progress and that is something that the Labour Party will certainly be supporting.

Much has been made in the earlier parts of the debate about the absentee MP clause in this. I do sometimes wonder, sitting here, though, whether in fact we should be more worried about some of the MPs who arrive at Parliament, and whether or not we are getting value for money out of them. But those are not matters that are going to be dealt with by this piece of legislation. Those are matters for another day. They are matters for the electorate, in fact, and in 2014, when it returns a Labour Government, I am sure that it will have no qualms about the fact that it is getting exceptionally good value for money from the newly resurgent Labour Party, which it will see post 2014. Thank you very much.

GARETH HUGHES (Green) : Kia ora. Ngā mihi nui ki a koutou. Kia ora. I rise to take a call in support of the Members of Parliament (Remuneration and Services) Bill. The Greens were not involved in the drafting of this legislation, but I think the Greens can take some of the credit behind this bill. The Greens have been champions for transparency in this Parliament for more than 10 years. We have been leading the call. We have been putting our own expenses in the public arena well before the other parties have. We have dragged them, kicking and screaming, but it is great to see this whole Parliament come together now, finally, passing a bill like this that encourages transparency. I will not blow our own horn any more in this speech, but I think it is important to say that we were championing this cause when it was not popular, when we were the only people talking about it. I think in particular Metiria Turei, our co-leader who is in Senegal, I understand, at the moment attending a global Greens conference, would be giving this call, has championed that lead.

This bill does a number of basic things. I will focus on the important issues with this bill. The key issue is that every party, I think, has had its share of less-than-clear, sometimes—[Interruption] We have seen illegal activities by members in other parties, so I think we do have to improve. The key lesson that we learn—whether it be in the UK with the members’ expense scandal there or scandals we have seen in New Zealand—is that sunlight is the best disinfectant. Having an open, transparent regime where the public and the media can investigate is the best way to avoid those scandals occurring in the future. I guess coupled with that what we have to have is clarity. We have to have clear rules that all members understand, and I will discuss that in a little more detail soon.

The key points I have identified in this bill are the change to the decision making on travel and accommodation entitlements for MPs and Ministers. That is moving to the Remuneration Authority. Along with our salaries, we now have our travel and accommodation there. The Speaker still has a huge number of determinations to make in Speaker’s rulings to do with our offices, other services, funding to parties, qualifying for electoral candidates, and travel services in respect of MPs participating in political exchanges.

Hopefully, what we have also seen is this place change again with the election of Mojo Mathers, and the debate that had to be had in this Parliament, which is the principle that every MP, be they disabled or not, should get the same level of services as any other member. We know we have a million dollars worth of speaker systems above our heads, but there was quibbling over $20,000 to $30,000 in expenditure for a single member who could not participate. So there is still a lot left up to the Speaker’s discretion and the Speaker’s rulings, but moving the travel decisions will help.

The member Chris Hipkins noted that MPs are likely to get the flack when salaries are raised, if they are raised in the future, and I think it is a fair comment. I think it is an accurate reflection of the truth, but I think it is also the halfway house that this Parliament has tried to have. We have tried to take away responsibility for our salaries, but considerable areas, such as travel and accommodation, are still left up to us. What the public, I think, most of all does not want to see is that principle that we are making our own decisions—that we have left the wolf in charge of the hen house, in charge of the decisions. So, hopefully, clarifying this, getting rid of that halfway house, and having all of that given to the Remuneration Authority will help clear up the public’s misconceptions, and we will see less of that backlash if there are salary rises in the future.

The current voluntary disclosure regime for MPs’ travel and accommodation gets moved from voluntary to statutory. The Green Party was the first party in Parliament, in 2009, to voluntarily release all of our expenses to the media and the public. I think it is a good thing, and now we are seeing all the other parties follow suit, and now we are putting it into legislation. We think that is good for our democracy, good for transparency, and good for the public’s perception of MPs, which, to be frank, is not always the best.

The “Chris Carter clause”—it was named by Chris Auchinvole; I think we will make him the creator of the said clause—is good. I mean, $10 a day is laughable, and it was hardly a sanction at all. I think, again, that it removes the respect that people have for this institution. It is a good modernisation.

I guess, in particular, skipping through the bill, we think that good changes have been made in relation to the impact of the unfortunate death of an MP on an MP’s spouse or dependent children. We think that makes sense and is a good call. So what we are seeing, in summary, is that sunlight is the best disinfectant. We are taking that approach throughout this bill. That is why we are supporting it. That is why we have called for these measures for a long time. We are very happy that we are seeing them finally.

We think we can do a bit more. International travel for MPs is, I think, a big problem that this House is going to have to grapple with. We could have done it in this legislation. The public does not understand—I do not understand—why we are doing it. The fact that both our superannuation scheme and air travel perks—because they are seen as perks, even though I am absolutely sick of airports and sick of flying and I do not see it as a perk—have been in lieu of remuneration, in lieu of salary rises in the past, is not very clear to the public. It is not very clear to MPs. We are sending the wrong message. I think the former Minister Pansy Wong did get caught up in that. There was obviously some impropriety as well, but I think that the confusion did not help. So we have also got this, perhaps, “Pansy Wong clause”.

I think it would be interesting to undertake a survey of MPs to find out how many MPs actually use the travel privilege for non-work purposes. I think you would find that a number of MPs do not use it. I do not use it. Ever since I entered this House I have never used it. I use it only for work purposes. Where else in the country, in what other sector of the economy, do people get unlimited domestic travel with no business requirement and no checking system? I think the public find it ridiculous. I think it is antiquated. It goes back to the age of steam when we used to arrive here on trains and sail ships. I think we should look at that, and that will also clear up those Pansy Wong - type situations in the future.

So the Green Party joins the other parties in this House voting for the bill. We look forward to the select committee process. We urge the public to have their say in the select committee process. We agree with the Labour Party that we should not be sending the message that we should have a constrained or shortened select committee period. What we need to be doing is sending the message that we are upfront, that we are going to be transparent in terms of all elements of our remuneration, our privileges, and the passing of the laws to enact those. So we think a long select committee process is appropriate. It sends the right message to the public. We are very happy to be supporting this bill today. Kia ora.

NIKKI KAYE (National—Auckland Central) : I am pleased to speak on the Members of Parliament (Remuneration and Services) Bill. I think this legislation is about public confidence in both Parliament and politicians. I want to reflect on two incidents that happened recently. I recently spoke to the Waiheke rotary club, and one of the comments that was made at the rotary club was that they saw it as a positive thing that members of Parliament had moved from being the least trusted profession, up one, from 26 to 25. I think that probably shows how long and how far we have to go.

I want to make a couple of comments generally about the UK expenses scandal. Even though you see surveys, such as the one I have just mentioned, that show that although we might be going in the right direction, we still have a way to go, that was a very damaging thing for the institutions in the United Kingdom. I have previously worked in Government over there, and that was a scandal that saw public confidence in politicians over there drop significantly. I am very pleased to be supporting this legislation, which is aimed at giving greater transparency around the remuneration of members of Parliament.

I also want to reflect on the fact that I think New Zealand generally does have a pretty proud history of being an open democracy. We were a country that led the world in terms of the Official Information Act, and I think we should be very proud of that. I think that as we are a smaller nation we are generally, as politicians, probably a little bit more accountable because we get around our constituencies and people know us well. But we can always do better. With the advent of social media, in terms of Facebook and Twitter, you get real-time updates of what members of Parliament are doing, and I think that is helping in terms of the accountability and transparency of politicians.

But if we actually look at the genesis of this legislation, it was the Law Commission report in 2010. I think that in terms of the other genesis and drive for this bill, I know the Green Party has been trying to take some of the credit, but actually I want to give a little bit of credit to the leadership of this Parliament, and in particular the Prime Minister, the Speaker, and members on both sides of the House, who have driven greater disclosure, particularly around expenses. Obviously, that has been a voluntary regime so far, but we are now going to put that into legislation.

I think we have seen a gradual opening up of expenses. We saw in 1999, as well, that MPs who came into Parliament after 1999 do not get travel perks. So there has been a gradual move to have greater transparency and accountability. I cannot stress enough how important that is. I knocked on 10,000 doors, and I can tell you that I think that generally New Zealanders do think we work quite hard. But there are some issues around that transparency and accountability and having very clear and open information about how MPs are remunerated.

If you look at the key changes in this legislation, we have seen—as many members of Parliament have already mentioned—the “Chris Carter clause”. That clause brings a significant change in that a fine of $10 per day is now, I think, about $270 per day. What that is saying to New Zealanders is that it is not OK to not turn up to Parliament and that, actually, you should be fined significantly for that. That is an important message to other New Zealanders who are working very hard.

There are a number of other changes within the bill in terms of ensuring that former MPs who served before 1999 and their spouses will continue to receive various travel rebates. Some of this is about clarifying what is already happening. I think it is very important that we are going to see a statutory requirement around the disclosure regime for MPs’ travel and accommodation.

I just want to touch on a couple of points that have already been mentioned. Do I think that this bill will solve issues of some members of the public thinking that MPs are paid too much? No, I do not. Do I think it will solve some issues of members of Parliament across the House claiming that people are using their entitlements for incorrect purposes? No, I do not. But what I do think this will do is give independence to our remuneration by having it dealt with by a separate body. It also gives greater transparency.

So I just want to congratulate all members of Parliament. I want to congratulate the Prime Minister, who, I think, has led a bit of a charge on this. I want to congratulate all members across the House on supporting this bill’s referral to the Government Administration Committee, because I think it is a very important piece of legislation that cuts to the heart of public confidence in Parliament and politicians. Thank you.

KANWALJIT SINGH BAKSHI (National) : Mr Speaker, thank you for the opportunity to speak on the Members of Parliament (Remuneration and Services) Bill on its first reading. The legislation, once again, highlights this National-led Government’s commitment to transparency. This bill is the result of the Law Commission’s 2010 report and repeals the Civil List Act 1979. The Members of Parliament (Remuneration and Services) Bill empowers the Remuneration Authority to decide on the travel and accommodation entitlements for MPs and Ministers. Earlier these decisions used to be undertaken by the Minister responsible for Ministerial Services or the Parliament’s Speaker.

The bill further adds to the steps that the honourable Speaker and the Government have already taken to improve transparency around entitlements. In fact, this will create public confidence in the regime for setting entitlements for Ministers and MPs. Furthermore, up until now the disclosure of MPs’ travel and accommodation was voluntary. This bill will make it a statutory requirement for all MPs and Ministers to disclose their travel and accommodation. This bill does not just ask MPs to disclose their accommodation and travel expenses, it also ensures that in the case that they do not attend Parliament they are penalised, and not just for name’s sake. Earlier the penalty for MPs missing Parliament was $10 a day. This bill increases that to $270 a day.

It is important the public has confidence in the management of setting MPs’ and Ministers’ entitlements. These amendments, which put more power in the hands of the independent decision maker, will improve the trust. The authority will have members with appropriate knowledge, skills, and experience to ensure that balance is maintained between zeroing the misuse of taxpayers’ money, while ensuring that MPs and Ministers have enough support to support their constituents and carry out parliamentary business. This bill will provide that the Office of the Speaker of the House of Representatives will continue to make decisions on MPs’ entitlements to communication services, travel for inter-parliamentary exchange, and allocation of party and members’ support funding.

There is a groundswell out there to take action to improve transparency. The Government is therefore listening to the people and taking action. I support the Members of Parliament (Remuneration and Services) Bill on its first reading.

NICKY WAGNER (National—Christchurch Central) : I support this Members of Parliament (Remuneration and Services) Bill, as does the rest of the House. Like most MPs, I am very pleased to see this bill come into the House. It seems that there has been a public perception out there that somehow MPs are getting something for nothing, or that they have entitlements way beyond what MPs are worth and that they—the public—do not know about it. There is also a belief, actually, that there is a whole heap of amazing out-of-this-world perks and self-indulgences that we are all lining up to grab. I have to say if that is true, I have not found them yet. But that sort of mistaken public belief is not good, and at times makes MPs feel pretty uncomfortable and upset. So I welcome this new legislation.

The legislation is all about making MPs’ and Ministers’ entitlements more transparent, more independent, and non-partisan. It will be much better if the public knows and understands MPs’ travel and accommodation entitlements so that they can have confidence that nothing is being hidden from them.

The public were absolutely fascinated by and entertained with the expense scandals of the British Parliament. We found it really hard to believe that British MPs could legitimately have their moat fixed or employ gardeners or butlers on the taxpayer. It turned out that we were right, and four MPs and two members of the House of Lords have ended up in jail. Once we had enjoyed that sort of scandal, the New Zealand public took a look at what was happening in New Zealand and wondered whether they could find anything similar. I think it was to Parliament’s credit that they could not find anything significant. But it did raise the issue of transparency, and this bill has resulted from that.

The legislation is based on the recommendations of the Law Commission made in December 2010. After the legislation is passed, travel and accommodation entitlements will be set by the independent Remuneration Authority rather than the Speaker of the House, as happened in the past. It will also not allow the Minister responsible for Ministerial Services to make any rules, either. Many months ago the Government introduced a voluntary regime to report on travel and accommodation expenses, and now this bill will make it a statutory requirement.

It is quite clear that the public expect that decisions around MPs’ and Ministers’ entitlements should be beyond reproach, and putting decisions in the hands of this independent Remuneration Authority will ensure that they will be. So I commend this bill to the House.

LOUISE UPSTON (National—Taupō) : The issue of the Members of Parliament (Remuneration and Services) Bill has been well covered in the first reading debate. I just want to reinforce the fact that at the heart of this bill is the confidence members of Parliament and Ministers need to have from members of the public that they are conducting their business in the way they need to, and that there is a level of independence in terms of their salary, which is currently reviewed by the independent Remuneration Authority. But this bill takes it a step further in terms of looking at the services MPs require to undertake their jobs in terms of travel, accommodation, and communication costs as well. So I think this bill is a good move. It has been well discussed today. It is uniformly accepted and agreed to in this House, so I do not intend to take much more time on it.

I think the interesting thing is that the members of Parliament on the Government and Administration Committee have obviously put quite a lot of thought into some of the details. I acknowledge Chris Hipkins for some of the issues he has raised in terms of making sure that those who leave Parliament after an election are not unfairly treated or penalised.

I do want to come back to the issue the Hon Trevor Mallard raised in his speech on this bill, and that was around the issue of having a time frame by which the bill would be reported back. The concern he raised was there could be a perception from the public that members of Parliament were rushing this process. There is absolutely no intention to do that, because this is all around transparency, and it is all around the provision of independence. The Minister for Treaty of Waitangi Negotiations has agreed and realises it is important that this process be done and done well without a time frame. So there will not be a motion at the conclusion of this debate for a time frame for the select committee to report back to the House.

I do want to add, though, that I think it is fair to say that the Government Administration Committee will have every intention of progressing the business, so there will be no intention of dragging the chain, either. That tidies up the issue that the Hon Trevor Mallard raised. There is nodding-around-the-House agreement for that. So I am pleased to conclude this first reading of the bill.

HOLLY WALKER (Green) : I am proud to rise to support the Members of Parliament (Remuneration and Services) Bill along with my colleagues, and I acknowledge the cross-party support that it has received. I think it is fair to say that the Green Party wholeheartedly endorses this bill, not just in a grudging way. It represents the culmination of work over a number of years, especially by our co-leader Metiria Turei, to bring greater transparency to MPs’ salaries and entitlements. The Green Party has, I think, set the agenda for this for quite a long time now by voluntarily releasing our expenses and entitlements and publicly encouraging other parties to do the same, so that that has now been adopted as standard practice.

Taking decisions about entitlements out of the hands of MPs will be good for transparency and good for the reputation of this House. We need to deliver a remuneration system that is simple, that is clean, and that is fair. We need changes that the public can have confidence in. It is our responsibility to live up to the standards I think are expected of parliamentarians and to improve the perception of Parliament. My colleague Gareth Hughes touched on this earlier. We do not have a great reputation in this place, and it is very important that we do what we can to improve that perception and live up to those standards.

As my colleague Catherine Delahunty said yesterday in a different debate, in many ways we here as MPs, funded by the taxpayer, are beneficiaries and we have to ensure that we are serving the public well and giving them value for money.

I have heard the view expressed—to explain, perhaps, why this change is so long in coming—that people outside of this House who do not understand or have knowledge of the procedures in here, or what is expected of MPs, will not be in a good position to make decisions about MPs’ entitlements. I fundamentally reject that argument. I think that if that is the case, then it is our fault as MPs that what we do in here is not well understood. We need to make sure that everything we do is bringing greater transparency and accountability into this House.

To briefly cover what the bill does, most travel and accommodation entitlements for MPs and Ministers will now be set by the Remuneration Authority rather than the Speaker or the Minister responsible for Ministerial Services, and we support that. The current voluntary disclosure for MPs’ travel and accommodation expenses will become a statutory requirement. We think that is a direct result of the Green Party’s voluntary leadership and disclosure on this in 2009, and we are greatly in support of that. The amount that can be deducted from MPs’ salaries for non-attendance will increase from the ludicrous $10 a day to 0.2 percent of an MP’s salary, or $270 a day for most ordinary members of Parliament. We are absolutely in favour of that, as well. We have consistently called for an independent body to have control over MPs’ entitlements and pay, so handing over some responsibility to the Remuneration Authority is absolutely a step in the right direction.

It seems to me very clear that travel entitlements for MPs should be for work-related purposes only, and that is how we in the Green Party choose to apply this rule. I think it is very dangerous to mix up travel entitlements with remuneration, including the international travel subsidy. Travel is not a form of remuneration and it should not be treated as such, so it is good that this decision will now be in the hands of the independent authority.

I want to thank members from other parties for their contributions, including those members who will be considering this bill at the Government Administration Committee. As a member of that committee I look forward to considering it. I think it is fair to say we will be giving it due attention and dealing with it as swiftly as we can. I also want to thank Louise Upston for her contribution just now saying that there will not be a motion curtailing the process for this. I think it is absolutely right that it has the full, transparent, and democratic process that we accord to other bills.

I am very proud to stand in support of this bill from the Green Party. I look forward to a constructive debate, and consideration and hearing of submissions at the Government Administration Committee.

• Bill read a first time.

• Bill referred to the Government Administration Committee.

The CHAIRPERSON (H V Ross Robertson): Kia ora tātou, nō reira e te Whare, e ngā iwi, e ngā reo, e ngā hau e whā. Tēnā koutou, tēnā koutou, tēnā koutou katoa. Good afternoon, honourable members. The House is in Committee on the Student Loan Scheme Amendment Bill. The question is that Part 1 stand part. It is the debate on Part 1, clauses 3 through to 33. I recognise the honourable member Grant Robertson.

GRANT ROBERTSON (Deputy Leader—Labour) : And I recognise the Chair, too. I have seen him somewhere before. Thank you very, very much for giving me the call on this bill. Part 1 of this bill is, in fact, pretty much all of the bill. It is all of the substantive clauses of the bill. In this first call I am going to make some general remarks around what is contained in the bill and where it is going, then perhaps move on to some more specific issues coming up that I have concerns about.

The first thing to note about this bill is that there are a large number of mainly technical amendments contained within the bill that are essentially around tidying up matters to do with the student loan scheme. The student loan scheme frequently needs legislation like this, because it is a complex beast. The interaction between the tertiary institutions, StudyLink, the Inland Revenue Department, and StudyLink’s predecessors have always caused some difficulties and issues, and from time to time things happen like the Inland Revenue Department deciding to change its computer system, and that means the law has to change. I sometimes think we have got things a little bit wrong in the student loan scheme when that is the case, but there are some matters in here that are of very limited controversy, and we do sometimes wonder whether they really need legislative change and whether there is not some other mechanism that could be used to advance the changes that are in here. Those issues are not going to get a lot of attention. They are to do with things such as changes in the names of the repayment codes and the way in which certain types of earnings are treated.

The issues that are going to get more attention, I suspect, in this debate are around the issues to do with the changes to the repayment holiday. Before I come to those, one major issue that has been picked up in this bill is the question of a contact person for a borrower who is overseas. When we look at the student loan scheme and the interest-free element of it, the key element that the interest-free loan scheme has had is that if somebody remains in New Zealand, they will not be charged interest; if they go away overseas, they will be. But we have had, from the beginning of the loan scheme, the issue of what happens when borrowers go overseas. I am actually, in principle, no great fan of the student loan scheme, but since it exists we do need to make sure that there are robust processes in place to ensure that people are making the repayment that they are obliged to do.

There have been examples of people travelling overseas and not making the loan repayments that we would expect them to make, and that is unfair on other borrowers. So no matter what someone like me or anyone else might think of the student loan scheme in principle, we need to ensure that borrowers who are making repayments do not look at other people, see them, and say “Why is that person not making a repayment just because they have gone overseas?”. If a borrower is overseas I think it is a reasonable expectation that they will make arrangements to make payments. There will be many parents around New Zealand who, no doubt, will be glued to their crystal sets right now, listening to this debate. They will be saying “Yes, I am familiar with that.” I know that my own mother, for many years, received the student loan information relating to my brother, who had long since left New Zealand—he was making repayments, I hasten to add. But parents all around New Zealand will be familiar with the fact that they have remained the contact point, effectively, for their children when they have gone overseas. Many of them are very diligent in making sure that payments are made and that information is kept up to date.

However, what this bill does is ensure that it elevates, essentially, the role of a contact person, and I do think there are some questions about that. I certainly believe that some people, when they see the changes that have been made to the role of a contact person, will start to think “Do I want to be that contact person?”, because this means that they will have regular communication. There will be communication right at the beginning about what their roles and responsibilities are. I do not think the reality is that it is greatly different from the situation now, but I do think it will elevate what that person’s role is. It does beg the question as to whether, over time, there may be some intent to have some liability for that person, but that is not, I suspect, the intent at this time. But I do think it is worth the Committee taking just a little bit of time to consider what it means now for somebody to be listed as a contact point. It will not, as I say, greatly change that role, but it does mean that the person will be contacted regardless of whether the borrower has defaulted on their payments. At the moment that would be pretty much the only situation in which a contact person would be contacted. Now they will be contacted as a matter of course, once the person is listed. A person has to be listed, so therefore it does increase the attention that a contact person will get.

I just think the Committee does need to reflect on that. We do not want to set up a situation where, for instance, parents feel that they do not want to be a contact person for their children, because it is going to lead to some kind of increased scrutiny on them. I do not have a problem in principle with having to supply some kind of contact details and contact information, but I do think there are some matters here to consider in that regard.

I want to move now to the question of the repayment period changes that are listed in this particular bill. On the Table are amendments of a remarkably similar nature from the Green MP Holly Walker and me, thinking alike here about the change the Government has made. To clarify this for those watching, the Government is proposing to reduce the repayment holiday, which currently stands at 3 years, to 1 year. The repayment holiday comes into force when someone goes overseas, typically a young New Zealander on their OE. They go overseas and they are not obliged under the repayment holiday provisions to make repayments on their loans. They are accruing interest, because the term of the interest-free student loan scheme is that if you are overseas, you will accrue interest. So they are not getting a free ride; they are actually accruing interest. What the repayment holiday has acknowledged is that New Zealanders have a long tradition of going away overseas, often shortly after they graduate, taking some time to experience the world, and then coming back to New Zealand.

The Minister in the chair, the Hon Peter Dunne, understood this in 2007, when as a Minister in a Labour Government, he oversaw the repayment holiday period going to 3 years. I want to quote the Minister, because I do think what he said here is important. He was talking about graduates overseas, and he said: “The reality they all faced was a very massive debt upon their return to New Zealand, which in some cases would be enough for them to make the decision not to come home at all, and our country would be the loser. We needed to take a pragmatic way through this,”—this is the Minister in the chair—“and, being someone who places great virtue on pragmatism,”—I do not think there is any doubt about that—“it struck me that the logical course of action was to derive the solution that we have: to extend the holiday period for 3 years, recognising the fact that young New Zealanders take that extended period overseas;”. I could not agree more with the Minister. It is a pragmatic response to do that.

Hon Peter Dunne: Five years ago.

GRANT ROBERTSON: Five years ago—it has all changed in the 5 years for the Minister.

Unfortunately, it was 5 years ago, and now the pattern of movement of young graduates going overseas is actually exactly the same. The country that many New Zealanders go to for their overseas experience is the UK, and the UK allows for 2 years there.

Andrew Williams: And Finland.

GRANT ROBERTSON: And Finland—that is good, Mr Williams. We do have a working holiday visa exchange with Finland.

Hon Clayton Cosgrove: We used to.

GRANT ROBERTSON: We may not any more, after this week, but we did have it. But typically, most graduates would find their way to the UK, and they will spend that 2-year period, and possibly a little longer; most people know that it is possible to get extensions on those visas when you are away. It seems to me that this change that is being proposed by the Government actually flies in the face of what is the typical behaviour of graduates overseas. That is what makes it wrong.

But it has also been pointed out to the Government that it actually is not going to achieve the things that the Government wants it to do. Treasury told the Government in the Budget documents that there is little evidence that this change will improve repayments. It is actually likely to increase the debt held by overseas borrowers, discouraging them from returning, and therefore increase the annual student loan impairment. That is the very point, and Mr Dunne noted that the pragmatic way through this, the thing to do to actually encourage people to come back to New Zealand, was to leave a period of either 3 years or—and I have got two amendments. One is for 3 years, but we could compromise, Mr Dunne, between 1 year and 3 years, and go for 2 years.

Dr David Clark: That’s pragmatic.

GRANT ROBERTSON: That is pragmatic. There is also that amendment on the Table, because I think that is more realistic.

Moana Mackey: Common sense.

GRANT ROBERTSON: It is more common sense, Moana Mackey—that is right—to actually fit it around what graduates actually do. But we have to bear in mind that Treasury is pointing out that what this is likely to do is increase debt, and therefore discourage people from coming back to New Zealand.

So the two things that we would have thought the Government wanted to do in a bill like this—reduce the debt, and get the New Zealanders who are overseas back home—are both worked against. It was not just Treasury; it was also the Ministry of Education, which said “This can be expected to have a negative impact at the margin on borrowers’ decisions regarding whether to return to New Zealand.” Simply, this bill is wrong, both in terms of the fact that it does not make common sense and it is also not going to achieve the goals.

Hon PETER DUNNE (Minister of Revenue) : I thought I should take a call at this point, because I am the one common link in the chain that the member opposite has referred to. I want to go back to the 2007 situation, because he made some comments early in his contribution that really go to the core of what the issue is. Consequent upon the then Labour Government’s decision to introduce interest-free student loan repayments for domestic borrowers after the 2005 election and to retain an interest component for those who were overseas, we had the immediate challenge of locating who the overseas borrowers were, and where they were. The member may recall that we had a de facto amnesty at that point, whereby we allowed borrowers to come forward and identify where they were, so we could actually get them into the system, because frankly a flat in Dunedin is not actually a good address for a lot of people in northern Europe, and we had many, many people in that case. What we discovered was that although a substantial number did come forward—around 14,000 or 15,000, from memory—there was a large group that we had not got. We still do not know where they are, yet they still have a student loan responsibility.

I guess the starting point that we would all agree on around this Chamber tonight is that people who take out a loan have a responsibility to repay it. I do not think there is any debate about that point. But it is not fair, and I think we would agree on this, to have a situation where some people are being forced to repay and others are not. So you start to move up the scale. What we did in 2007 was to say: “Well, look, there is a trade-off here. If the borrowers will effectively identify themselves as being absent from New Zealand before they leave, we will give them a period of time where they are not required to make repayments.”

I remember the quotation that has been attributed to me. It is dead right. It is utterly accurate. And it was a pragmatic solution, because frankly Dr Cullen and I at that point did not have a clear sense of what a reasonable period of time was. We thought that 3 years seemed reasonable. We thought that was a good test of the New Zealand OE. But looking at subsequent experience—and one ought to be guided by experience; I have always found it to be quite a useful concept to value—what we have found is that most people who go overseas who are notified to us are overseas for less than 3 years. Most are actually overseas for less than 2 years. We also found that the time frame of the length of the holiday had little impact on people’s decision about when they repaid.

So when you start to think about that; you start to think about the signals you want to send, in terms of people overseas having a responsibility to repay; you bear in mind the fact that already their rate of repayment is about three times slower than that of domestically based borrowers, and that they are our real problem; and when you look at the work we have been doing in Australia to track down recalcitrant borrowers, to make them make payments, and, in some cases, to take them to the court to achieve those objectives, then you have to question the validity of retaining the 3-year holiday period. The conclusion that we reached in the context of the framing of this legislation was that for all those reasons, 5 years down the track a 1-year limit was now more reasonable.

I want to make some comments about the nominated person, because these things go hand in hand. As I said earlier, one of the problems we had was that for a large number of borrowers who had fled our shores, with their last-known address a flat in Dunedin or somewhere, there was no effective way of making contact with them. Parents were not all that inclined, for obvious reasons, to want to dob in their recalcitrant borrowing children. Various other people were not particularly inclined to give us information. So what we are saying effectively is that to be part of the scheme you need to nominate a person who will be a contact point. I agree with Mr Grant Robertson, actually. I have heard many, many stories and seen many, many instances of the papers piling up and being ignored. That is pointless. The nominated person is designed to be a point of contact, so that at least the Inland Revenue Department can go to them and say: “Who is responsible? Where is this person? How can we make contact with them?”. What we have also discovered over the last 5 years is that an increasing number—in fact, a significant number—of our borrowers are in contact through various web pages, the internet, and various news sites, etc., so a lot more focus is going in on that point as well. So I say to Mr Robertson and to others that the argument that we are somehow shifting the goalposts by changing the repayment period from 3 years to 1 year does not fit the current reality, in terms of what people are doing overseas. It actually has no impact, based on our experience to date, on their ability and the timing of their willingness to repay.

Thirdly, one factor that is becoming increasingly obvious subsequently is that we are not operating here in a vacuum. The United Kingdom has just made significant changes to its rules regarding residency for people coming from offshore, so many of the people who go over for their OE will not be in the United Kingdom for 3 years, anyway. They will not be able to stay there. So the point of giving them a holiday that they cannot fully access seems to me to be a little beside the point.

What we are seeking to do in this bill is to send the very clear signal that there is a responsibility to repay an outstanding loan—to send the very clear signal that it is not a game of how far you get away from New Zealand means the way in which your responsibilities reduce. I do not think it is at all acceptable that we have a really good rate of repayment for domestic borrowers and a very poor rate for overseas borrowers. The argument that it is difficult for them to make contact or that they are a long way away or that they feel out of touch with New Zealand these days—all these things that I have heard in the last few years—I think is utterly unacceptable. The basic commitment is if you have got a loan, you are expected to repay it. What this bill does is seek to reinforce that basic precept.

So the shift from 3 years to 1 year is, in fact, a recognition of reality. It is not going to deter people from having their time overseas. Coupled with the introduction of the contact person, it makes it better for us and easier for the Inland Revenue Department to keep track of where they are. We will see over time a better rate of repayment. What that does is send a signal to those people who have repaid their loans on time, conscientiously, over the years, that actually their sacrifice has not been in vain. It is simply not fair for some people to get away with paying little or nothing, while others diligently, at a time in their lives when they might well want to be doing something else, are meeting their loan repayments. This bill is a—if I can use the member’s term—pragmatic response to the current situation. It is a common-sense solution, and it will work. It goes without saying, as I conclude, that the amendments that he and the Greens have proposed will not be supported by this side of the House.

Dr DAVID CLARK (Labour—Dunedin North) : I rise to take a call in the Committee stage of the Student Loan Scheme Amendment Bill. Labour supports efforts, of course, to make the student loan scheme more efficient and to improve repayment rates. The Hon Peter Dunne has talked about a pragmatic approach to this. We believe that there is a pragmatic approach to this, and we want to talk in further detail about the repayment holiday changes that are proposed, as they appear in clauses 4(b) and 17 of the bill. We have our own proposed amendment.

The changes to the scheme must be aligned, in our view, to the basic principles of fairness and opportunity—principles that National has ignored in dealing with the student loan scheme, in our view, in respect of this particular aspect. Fairness and opportunity must always be kept in mind in respect of this legislation, but we are particularly concerned about clause 17, as I said, which slashes the repayment holiday period for overseas borrowers from 3 years to 1 year. That is a significant reduction of 2 years, and we are proposing that it be put back to 3 years or, indeed, to 2 years if that is a more pragmatic solution that can be agreed across the House. The OE is a rite of passage for young Kiwis, and it is important that those young Kiwis gather the skills they need to return and be successful in New Zealand. They give back to our country when they return, they develop useful contacts, and they mature—all things that benefit us as a country in the longer term. Cutting that repayment holiday from 3 years to 1 year places in jeopardy the ability of young New Zealanders to go on an OE, and, worse, it risks forcing them not to come back.

I think the evidence presented to us in the Finance and Expenditure Committee by the Inland Revenue Department drew attention to the dodgy nature, if I can use that colloquial term, of the department’s guess about what would happen in terms of repayment. It admitted it was a guess of sorts, and that is not good enough. Both Treasury and the Ministry of Education have indicated that, in their view, this change will in fact increase obligations on people, as they will decide to stay overseas. Part of the evidence the Inland Revenue Department presented to us was that it had done a survey through the Kiwi Expat Association, the KEA network, that suggested most young Kiwis stay overseas on their OE for about 3 to 5 years, but also that it takes between 12 and 18 months to secure meaningful employment.

A lot of Kiwis go overseas and they will work bar jobs, they will do what it takes to make ends meet, but when they are looking for a professional career or they are looking for the kind of work that they want to be based in long term, it takes them a little bit longer to get there. I submit that cutting them off from their OE, from their repayment holiday, before they have secured that meaningful work will force many of them to stay in those jobs, which are not the jobs that they want to contribute to long term. It will cut them short from developing the contacts and other experiences that they need to contribute as much as they can to the New Zealand economy in the years that follow their return. Worst of all, it does risk forcing them not to come back. If they then find that their debt mounts because they have not yet secured that most meaningful employment, they are more likely not to come back, and that is in line with the broad opinion expressed by Treasury and by the Ministry of Education.

I want to come back to what these student loans are here for. Presumably, their purpose is to provide access to tertiary education, not to provide barriers. That context is important, because the clause in the bill that takes their repayment holiday from 3 years to 1 year is in fact presenting another cost barrier as those costs mount. I had the privilege to work in Treasury a number of years ago on a study that looked at the returns on education, and one of the important conclusions of that relates directly to this. It relates to the barriers to access to tertiary education. There are studies overseas, and there have been significant studies, that show that those from lower socio-economic backgrounds overestimate the costs of education by many more times than those from more privileged backgrounds. I will give the exact numbers—no, I do not have them with me, but the order of magnitude is about right. Those from wealthier backgrounds overestimate the costs by about three times and underestimate the returns by about 10 times. That is because people do not generally understand the nature of compounding interest. Those from less privileged backgrounds actually overestimate the costs by something like 10 times and they underestimate the returns by something like 30 times, so it is a much more significant problem. This has a further implication. When we add this already existing problem of perception of the costs of, and barriers to, access to tertiary education to the Government’s proposal to reduce the repayment holiday, we have one further barrier in the way of those who would undertake tertiary education for their own good, for their own betterment, for the betterment of the lot of their family, and, ultimately, for the good of our country.

The project at Treasury covered a number of other things that also bear direct interest to this particular clause. We were asked to spend the $10 billion metaphorically that was attributed to tertiary education at that time as best we could, and lay out what that might involve. That involved looking at governance arrangements, whether the returns on degrees were better than those on diplomas, and whether the institutions we have currently serve us well. What we found, theoretically at least, was that the returns on a degree are phenomenal for our country. So those people who undertake tertiary study benefit our broader well-being as a country. They bring revenue to our country. They are likely to operate in a way that means they will be good taxpayers in the future. If we present barriers to people getting degrees, we are foolish. So those who are from lower socio-economic backgrounds who would find a barrier in the student loan legislation and, indeed, in taking on a student loan should be encouraged. There is Nobel Prize - winning work on this. They should be encouraged to undertake tertiary research, even if that means that the State pays for all of their education, not just the loan but for all of their education.

So this move to reduce the repayment holiday moves in exactly the wrong direction for us as a country. We want to make tertiary education more accessible, not less. What this bill does and what Treasury effectively says is that it puts one more barrier in place for people who want to undertake tertiary education. It is working for those who are privileged, who will be able to undertake tertiary education anyway, but it works against those who perceive a barrier to getting into the tertiary sector. To finish, I want to suggest that we should amend clause 4(b) and the enactment clause, clause 17, to enable that repayment holiday to stay at 3 years, for the good of all of us in our country. Thank you.

JOHN HAYES (National—Wairarapa) : It is a privilege to speak on the Student Loan Scheme Amendment Bill. Can I discuss in this Committee the issue of fairness and opportunity raised by the previous speaker, Dr David Clark. Here are some small facts. When we are considering the clauses of this bill, we need to keep in mind that the Government lent $1.6 billion last year; it had $690 million paid back. The current value of new lending is 54c, and the Government writes down 45c of every dollar lent.

As of June last year overseas borrowers of these student loans, which I absolutely support, represented 15 percent of all of those students in New Zealand who took out student loans. Fifty percent of that 15 percent were in default, and those who were in default owed 70 percent of the money that was overdue. That is why this bill has been put in place, and I commend the Minister of Revenue for doing so. When we think about the fairness, which the previous speaker spoke of, it is worth keeping in mind that the median repayment time for overseas-based borrowers is 14.1 years.

Hon Member: How long?

JOHN HAYES: It is 14.1 years—compare that with borrowers here in New Zealand, and you are talking 5.2 years. If you are going to borrow somebody’s money and you are thinking about fairness, keep in mind that that money came from a taxpayer’s pocket. Many of them are not wealthy. Many of them are genuine, hard-working people. If you are going to borrow somebody’s money, you have got two choices: one is you pay the money back; the other is you default. It is not acceptable for a borrower to think that they can hide overseas. If I took the money it is not acceptable that I should think that I should be able to go overseas, completely disappear, and have no obligation to pay it back.

Chris Auchinvole: You wouldn’t do that.

JOHN HAYES: Not that I would do that, and I am sure Chris Auchinvole would not do that—although he does try to hide on the West Coast.

It is really important to think about this issue of fairness. If you are going to take money, it does not grow on trees. It comes out of other people’s pockets, and it needs to be repaid. As a community, we are giving a good opportunity to young people to educate themselves, and what I can say to this Committee is that that money has to be paid back, and if they do not pay it back it is unfair. If the borrowers do not pay it back, if they disappear off and they think they can have an extended 15-year payment holiday, then you have got to think about whether that is fair and reasonable to the person they borrowed it from. I do not believe it is. That is why I absolutely support this bill, and that is why I support clauses 1 to 33. Thank you.

HOLLY WALKER (Green) : I am pleased to take a call in this Committee stage of the Student Loan Scheme Amendment Bill, and I am proud to move an amendment to this bill via my first Supplementary Order Paper in this House. I spoke yesterday in the second reading debate about the Green Party’s concerns about this bill, particularly our concern about reducing the duration of the repayment holiday for overseas borrowers from 3 years to 1 year. So I am very pleased to move an amendment today to retain the maximum duration of the repayment holiday at 3 years.

I am also pleased to see that great minds think alike and that Labour has also moved substantively similar amendments. I hope that Labour will be supporting mine. I also challenge the Labour Party, if these amendments that we have both proposed are defeated in this Committee stage tonight, to vote against the bill when it comes up for the third reading.

I would like to revisit why we have a 3-year repayment holiday in the first place. A repayment holiday is an automatic suspension from the repayment obligations of your student loan while you are living overseas. A borrower still accrues interest but is not required to make repayments and, therefore, cannot fall into arrears. This is important, because, as was noted in the Finance and Expenditure Committee’s report, a typical borrower overseas may face interest and arrears obligations after a repayment holiday that amount to two to three times the original value of their loan, and that could militate against the likelihood of their ever returning to New Zealand or repaying their loan. It is very important that we get policy settings right—policy settings that incentivise people to, firstly, pay off their loans and, secondly, return to New Zealand.

It has been quoted extensively in the debate on this bill, but I think it is worth repeating once again. The reasons that Minister Dunne had for introducing the 3-year repayment holiday in 2007 are no less relevant in 2012, and those reasons are to help remove a potential disincentive to skilled New Zealanders from returning home. We have heard the quote: “The reality they all faced was a very massive debt upon their return to New Zealand, which in some cases would be enough for them to make the decision not to come home at all, and our country would be the loser.” That is still the case.

I want to address the Minister’s contribution earlier. He said that 5 years is a long time, that things have changed since then, and that it is a recognition of reality. Well, I sat in on the select committee while it was hearing evidence on this bill, and we heard from officials that very little research has been done on the impact of having a 3-year repayment holiday. It has been only 5 years since it was introduced, so there has been only one full 3-year period for people within that 5 years to take a repayment holiday. There has been very little research to address what impact it actually has on borrowers’ behaviour. I will quote again from the select committee report: “there was not enough empirical evidence to evaluate the effect of the three-year repayment holiday introduced in 2007, and that limited modelling has been done on the likely effect of curtailing the holiday, as borrowers’ response to the change is uncertain.”

It just seems like bad lawmaking to me to be making this change in a vacuum of knowledge. It seems to be based solely on ideology and—if I may borrow the phrase that has been used earlier—it is completely the opposite of a pragmatic approach. The Government, we know, is looking for ways to rein in student loans without touching interest-free student loans, and this just seems to me to be its attempt to do that.

My Supplementary Order Paper 16 aims to prevent this bad lawmaking by retaining the maximum duration of the repayment holiday at 3 years. I invite members to support it and, as I mentioned before, I challenge the Labour Party that if these amendments do not pass and if Labour really believes that the repayment holiday should be kept at 3 years, then it should not be supporting this bill through the rest of its stages through this House. The reasons given in 2007 from the Minister are no less relevant now, and the fact is that we could be creating policy settings that will make it less likely for people to return to New Zealand and pay off their loans.

I would like to note that one thing that has changed since 2007 is that even more New Zealanders are moving permanently overseas, and we know that the figures for this in this year are the highest they have ever been. So, in that context, it seems very important that we make careful law that is based on evidence, that does not fly in the face of advice that has been received, and that has actual empirical backing behind it. We just have not had the chance since 2007, when this was introduced, for that to be the case. It is irresponsible to be reducing it down to 1 year. So I invite the House to support my amendments. Thank you.

PAUL GOLDSMITH (National) : I want to concentrate on two clauses in this very worthy bill, the Student Loan Scheme Amendment Bill, which I support wholeheartedly. One is new section 88A in clause 14, which is focused on the area of adjusted net income being a means of calculating the borrower’s income in accordance with a formula. The idea there is to maximise repayments from New Zealand - based borrowers. The bill makes amendments to exclude losses such as rental losses from the calculation of net income. I think this is very worthwhile.

Ultimately, what we are trying to achieve here is a higher rate of repayment. There is a very, very large liability here on the part of the taxpayers as part of a very expensive scheme, and the fact is that repayments are slow. We are writing it down to 54c for every dollar that we have lent. So any means that can increase the repayments I think are worthwhile. This new section 88A, which excludes such things as being able to offset losses generated from rental properties, is just one way to draw back to people their responsibilities for repaying these loans.

The other area that I want to focus on is new section 107A in clause 17, which, again, is this issue of the contact person to be nominated. Here in subsection (3) it talks about specifying the details of the name of an individual, a New Zealand postal address, an electronic address if the individual has one—and we all do these days—and a New Zealand telephone number. Again, this is very basic stuff in response to the reality that we have lost track of many of these people with student loans.

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

PAUL GOLDSMITH: As we were having our dinner break it gave me pause for thought to think about why this bill is particularly important. It is not so much a huge amount of money, although it is not irrelevant; we are looking at potential increased repayments of around $14 million. I think that is a very conservative figure, and that will reduce the need for further borrowing on the part of the Government—$14 million is probably an increase of 2 or 3 percent in the repayments, and we are hoping for more.

But that is not the key ingredient. The key ingredient is that it sends a clear message that when you do borrow money, you should pay it back. This bill is all about just turning the knob a little in the direction of encouraging people and making it clearer that we need people to think about paying back those student loans sooner rather than later. I commend this bill to the Committee on that score. Thank you.

TRACEY MARTIN (NZ First) : Kia ora, Mr Chairperson. I rise on behalf of New Zealand First to again state that we will be providing our conditional support for the Student Loan Scheme Amendment Bill to go to the third reading stage. New Zealand First supports the New Zealand - based contact person, although we again reiterate that there is no indication in the papers that we have been able to access as to what will happen should that person choose not to provide subsequent contact details of the borrower. New Zealand First supports the exclusion of investment and business losses from the calculation of net income when accessing loan repayments.

We take no issue with the reduction from a 3-year to a 1-year loan repayment holiday. I note that the Minister of Revenue explained to the Committee that one of the reasons why the 3-year term was incorporated originally was due to the lack of experience or reference points that would have factored into the best period of time for such a repayment holiday when this legislation was originally drafted. I would respectfully suggest that those involved should have actually gone and found themselves a debt collector or taken advice from a credit controller. It is a known reality that the longer debt is unpaid, the less likely it is that it will be repaid. It is a known reality of those in those quoted professions that after 3 years, you are exceptionally lucky to be able to track down that debtor. In the credit control world, 6 months is about as far as you ever want to allow a debt to be neglected. But, as I say, New Zealand First will be supporting the 1-year repayment holiday amendment.

I note the number of times my Labour and Green colleagues have used the example of New Zealanders not returning to this nation with their skills due to the shortening of the repayment holiday. Can I be so bold as to suggest that in some cases it might just have the opposite effect: if individuals have not found the job of their dreams overseas within a 12-month period, then it may well be time to bring their skills back to New Zealand—to enter a no-interest environment and contribute to the nation that assisted them to obtain those skills in the first instance. But this bill is not about finding the job of individuals’ dreams; this bill is about debt reduction. Again, from personal experience, the sooner debtors address their debt, the greater the likelihood that that debt will be repaid, and the sooner the stress—and it is stressful to know that one has a debt—is removed.

I want to take particular note of the words “fair” and “fairness” in discussion around this particular clause, clause 17. If this bill is about being fair to New Zealand students with a student loan, then why is it only those who leave our country who have an established recognition that sometimes life, either through accident or design, just does not go as planned, and that people may need to take a break from those repayments? I gave an example yesterday of how that might manifest itself in the lives of women, whether they are overseas or whether they are here in New Zealand.

No bill works in isolation. This bill should not be just about debt reduction, and, obviously, if the Minister is using words like “fair” and “fairness”, it is not. But there is a bigger picture that this amendment could have brought to the issue of debt reduction. Couple that with the issue of skill retention, and then we have a bill that really works for New Zealand, if this bill extended itself to alternative debt reduction ideas, such as New Zealand First’s dollar for dollar student loan reduction policy for those students who recognise that New Zealand assisted them to gain these qualifications by paying that forward through their skills by staying in New Zealand. That commitment should also be acknowledged.

I need to close by saying that a $12 billion debt is not an asset; it is dead money, and a contributor to our skills shortage. And although we support this bill going forward to its third reading, we are disappointed with its lack of vision. Thank you.

Hon NANAIA MAHUTA (Labour—Hauraki-Waikato) : Following on from that particular contribution from Tracy Martin, I want to pick up on the last point first, and that is whether, in the interests of fairness, the holiday period should be applied to domestic student loan borrowers. I would say that if that member does believe that this is an opportunity to convince the Government that applying the same measure to domestic borrowers is something that should be considered, then we would welcome the opportunity to see what her amendment to the Student Loan Scheme Amendment Bill might look like in that regard.

On the second issue, in terms of young people going overseas, I think there has been quite an extensive contribution from across the Chamber on the benefits of young people going on working holidays. I would certainly be of the mind-set, in respect of young people who have gone straight from school, perhaps, to get their qualification and have then wanted to have that experience overseas, that we are certainly richer for it, because we are from a small coastal nation. It is a long way away to get over to what is often the most common destination, which is somewhere in Europe—often the UK—and once you are in the UK you can travel throughout the whole of Europe. That experience, in itself, I think adds value to the skill set that a person has got once they have gained their qualifications. I think you appreciate the context with which you can bring those skills back into the New Zealand working environment. I appreciate that experience. I think that if more New Zealand young people—and more New Zealanders—had the opportunity to travel, we would see our own country through very different eyes. In fact, we would appreciate far more not only the opportunities and experiences we have here but also our ability to really contribute to this country in some very positive ways.

On the period of debt reduction from 3 years to 1 year, I made the point in a previous contribution that it would seem to me just a common-sense approach to align the debt reduction period to what is commonly associated with a working holiday period, which is 2 years, and some of our bilateral agreements with other countries are for the 2-year period. So I was pleased to see that Grant Robertson had introduced an amendment for members to consider and support, which either retained the 3-year period or, in the interests of compromise, set a 2-year period. I think it is worth considering that this matter—and the point was well made—was not well reviewed. In fact, advice was given to the Finance and Expenditure Committee that there was no strong rationale for 3 years and that members should be urged again to consider the time period. But I would go so far as to say that this is probably a part of the bill that should be reviewed so that members actually understand what the effects are of a holiday period for loan repayments on recouping student loans. I want to confirm, certainly in terms of Labour’s position, that we too believe that having a good track record and paying back debt is something that people should be inspired to participate in, if this bill is sending the right signals.

The next point I want to move to is this issue around identifying a contact person. I would like the Minister to take a call on this and, in the interests of clarification, maybe answer these questions. When a contact person is nominated by the borrower in the first instance, does the contact person have the opportunity to opt out? I ask that because implicit in the bill is that the borrower has asked the contact person whether they can pass on those details, and in the frame of thinking of young borrowers, they could be putting their parents’ details there and they might not have asked their parents. That is probably the most relevant example in this situation. For whatever reason, the contact person may choose not to be identified as the person who is to keep track of the borrower, but it is not entirely clear in the bill whether there is an opt-out provision, in the first instance, for the contact person to turn down the opportunity to be named.

In the second instance, it seems to me that the intention of identifying a contact person is so that the Inland Revenue Department can keep tabs on the borrower for communication purposes. I understand that, and I understand the importance of that, but it seems to me that, for example, with regard to the need for the Inland Revenue Department to capture more data or information on that borrower, the contact person has to weigh up and say: “Well, I am not sure whether I have full consent to give more information or not.” And how would they be treated if they do not give over more requirements of information? I take you to the part of the bill that actually says that under the regulations, the loan manager can require—that is, in new section 16A(1)(e) in clause 7—“any further information specified in regulations.” So it appears to me that although there is specific information outlined in the bill that must be required, if there is any further information and the contact person is not sure whether they have the right, or whether there are privacy issues entailed, it is not clear whether they should be, in fact, giving this information. I think it is important for the Minister to clarify that particular issue.

The other part that I would like to point to is that if this is intended to give confidence to borrowers that by identifying a contact person this will ease for administrative purposes the repayment of loans or the capturing of data so that loans could be repaid, then the Inland Revenue Department or the loan manager should be required to review the effectiveness of this particular clause and report on it in some shape or form. I raise that as an issue for the Minister to consider, and I ask whether that has been considered or whether he received advice on it. So he could clarify whether, by reviewing the effectiveness and efficiency of this clause, that could continue to give confidence to people who want to repay loans—confidence in the mechanism used to have a contact person identified and therefore make contact with the borrower.

By and large, there are a number of other aspects to this bill that I think have been well traversed, but, in the first instance, I really think that it is important for the Minister to respond to some of those key points, because we still have not had a satisfactory response to the setting of the period by which loans should be repaid and the reducing of the period of repayment for loans from 3 years to 1 year. That, in itself, is something that would be required, I think, for the benefit of the Committee—to clarify why the Minister of Revenue, who initially supported 3 years, is now proposing 1 year.

There is a simple amendment on the Table from Grant Robertson that could be considered by members in the Committee. I think it is a common-sense proposal—

Dr David Clark: Pragmatic.

Hon NANAIA MAHUTA: —and very pragmatic, and it does align the repayment holiday period with the working holiday period that young people go overseas for. Kia ora.

CHRIS HIPKINS (Labour—Rimutaka) : Thank you very much, Mr Chair—oh, my goodness, that is loud! And it is not even me, this time. I am very happy to take a call on the Student Loan Scheme Amendment Bill, and I want to begin perhaps just by canvassing a few of the principles behind the student loan scheme. The Labour Party is very proud of the track record we have when it comes to the student loan scheme. The student loan scheme was put in place to ensure that financial barriers do not prevent people from participating in tertiary education. That is one of the reasons why Labour took a number of steps during the term that we were in Government to make student loan scheme repayments faster, which is one of the things this bill purports to want to do. Whether or not it is going to do that is the subject of some comments that I am going to make shortly. But we wanted graduates to get through their debts faster to be able to get on with their lives, and that is one of the reasons why we made student loans interest-free. From memory the average—

Hon Anne Tolley: No, it helps to win an election.

CHRIS HIPKINS: No, actually—oh, so it is to win an election? Well, this just highlights the National Party’s stance on interest-free loans, does it not? One moment John Key said he was going to fight interest-free student loans with every bone in his body; the next minute he said that it was shonky economics. Was that what it was—it was shonky economics?

Dr David Clark: But it was good politics.

CHRIS HIPKINS: But it was good politics. So now it is good politics for National members to support it, but in their heart of hearts, they do not believe in interest-free student loans. They do not believe in the policy that has seen the average repayment times for student loans more or less halved. So here they are bringing this bill to the House today, which they claim is going to result in faster repayment times for student loans—faster repayment times for student loans; that is what they say this bill is going to do—yet they are opposed to the very policy—the very policy—that resulted in much, much faster repayments of student loans. That was interest-free student loans.

But coming back to the bill—I am not going to be distracted by that unruly lot over there. As the wheels start spinning off the Government, you can see the desperation in those members’ eyes, but I will not be distracted by that, because on this side of the Chamber we do believe in faster repayment times for student loans. That is one of the reasons why the amendment put forward by Grant Robertson is a very sensible one. The advice that the Government has received is that by reducing the repayment holiday from 3 years to 1 year, it will actually increase the amount of debt. It will increase the amount of debt.

Now, of course, that is something this Government is quite happy with. It does not really mind about debt—debt on any number of levels. Whether it is student loan debt, current account debt, or Government debt, this Government is happy to see it all increase. It wants to borrow. More borrowing—that is what this Government is all for. It does not matter who is doing the borrowing—whether it is people with student loans, whether it is the Crown, or whether it is households—borrow, borrow, borrow is the message that we get from this Government. Borrow, borrow, borrow. We are not going to borrow our way out of recession, but that is what this Government seems to think. That is what this Government seems to think, because this amendment that the Government is proposing to make in this bill will increase the amount of debt. That is not my view; that is what Treasury is telling the Government. Treasury is telling it that this is going to result in more debt—more debt—and yet it is going to go ahead. Let us be clear about what this is. This is all about the National Government looking like it is doing something. Actually, this bill is not really going to make a huge amount of difference other than the fact that it is going to result in more debt.

So to move to the amendment put forward by my colleague Grant Robertson—which I fully support—to restore the repayment holiday back to 3 years, I believe that this is a very pragmatic decision. I am looking forward—I am really looking forward—to the contribution from Peter Dunne on this. I suspect it is going to be the defining part of this debate. It will be the contribution from Peter Dunne, because he was very clear in 2007 that he thought that extending the repayment holiday from 1 year to 3 years was very sensible. It was pragmatic. That is what Peter Dunne was saying at the time. He seems to have changed his tune.

I will be very interested to see how Peter Dunne votes on Grant Robertson’s amendment. If Peter Dunne votes against the amendment put forward by Grant Robertson, that will simply confirm what everybody suspects—that Peter Dunne’s view of pragmatism is whatever it will take to keep his ministerial warrant. That is Peter Dunne’s view of pragmatism. I am looking forward to him proving us wrong—to Peter Dunne coming into the Chamber and voting in favour of Grant Robertson’s amendment. If he does do that, and if that amendment passes, Labour will vote for the rest of the bill, because we actually do not have a problem with the rest of the bill. But we do have a problem with this provision in the bill that reduces the repayment holiday—the amount of time someone can spend overseas without having to worry about repayments—from 3 years to 1 year, because we do not think it is going to work.

John Key stood in the Westpac Stadium in Wellington and lamented the fact that 30,000 New Zealanders left every year. Of course, we have got more New Zealanders leaving New Zealand every year now than that. In fact, we are at record levels of people leaving New Zealand, and some of the people leaving New Zealand are recent graduates. They are recent graduates going off to do their OE—it is a bit of a rite of passage for New Zealanders. That is something we encourage; we just want them to come back. It is good to do an OE, because you get a whole lot of experience that you might not get in New Zealand. If you are a medical graduate, for example, working for a few years in an overseas hospital is going to give you exposure to a whole lot of different things and experience that you might not get in New Zealand.

Maggie Barry: But why should we pay for it?

CHRIS HIPKINS: We should pay for it, Maggie Barry, because they will be better doctors when they come back to New Zealand. They will be better doctors when they come back to New Zealand. But this Government does not care about getting them back to New Zealand. It is quite happy to say “stay there”. After training them, after spending all that money to train them, this Government would rather have them stay overseas than come back to New Zealand. We in the Labour Party want them to come back to New Zealand. We do not want to see the trend continue as it has under this National Government, under John Key’s Government, for more and more New Zealanders every year to leave the country and not come back. They are not coming back, because this Government is not giving them any hope that the future is going to be better for them when they do come back.

This repayment holiday may seem like only a small thing, but if you have got graduates overseas seeing penalties starting to rack up while they are away, that will act as a major disincentive for them returning to New Zealand, and that is the very last thing we should be doing. For a lot of our graduates, 1 year is simply not enough in terms of the time. They might want to do a bit of work, they might want to have a bit of holiday, they might want to visit a couple of different countries, and 1 year is not probably enough; 3 years is adequate time. After that time I think it is fair for New Zealanders to say: “Hey, you’ve had your university education or tertiary education”—whatever variety it is—“you’ve had your OE, you have had your overseas experience, we now want you to come back and contribute back to New Zealand, and if you don’t do that, we expect you to start making repayments from wherever you are to get your loan balance back under control, to start paying off your student loan.”

That is very reasonable, very fair. The Labour Party supports that. But requiring people to do that after 1 year is going to lead to more graduates in default, more graduates clocking up debts and clocking up penalties, and that is going to act as a disincentive to them coming home. That is one of the reasons why the amendment put forward by Grant Robertson is a very, very sensible amendment—a pragmatic decision recognising that many young New Zealanders take that extended period overseas. That is what Peter Dunne said when he supported the 3-year repayment holiday, before he went back to supporting the 1-year repayment holiday in the space of 3 or 4 years—but that is OK; that is Peter Dunne. As I said, Peter Dunne’s view of pragmatism is whatever keeps his job.

But I am looking forward to his proving us wrong. I am looking forward to the significant contributions from the Māori Party. I notice that we do not seem to hear so much from the Māori Party these days. It could have something to do with the fact that those members are not allowed to read their speeches any more. They have been kind of unplugged, so to speak, and so we do not tend to hear quite so much from the Māori Party. I am looking forward to the contributions of Mr Banks. The ACT Party’s Mr Banks will, I am sure, argue that we should do away with student loans altogether and that it should be the ACT Party’s view of Darwinism: survival of the fittest, and whoever has got the most money should get the tertiary education; everyone else should just join the line.

Moving on to some of the further substance of the bill, I must admit I was intrigued by Minister Peter Dunne’s amendment. Actually it is the commencement clause that I was about to talk about, so I will talk about that when we get to that part of the debate. But I am interested in the fact that one of these provisions comes into effect retrospectively. That is pretty unusual and I will be interested to hear the justification as to why we are imposing a retrospective clause in this bill. I will get to that when we come to that part of the debate.

Just moving back to the points of principle that I was raising at the very beginning, the Labour Party of course supports efforts to make the student loan scheme more efficient. We think that the student loan scheme is a very important way that we can ensure that everybody can participate in tertiary education and make a brighter future for themselves. Graduates should not be shirking their responsibilities to make repayments, but the quid pro quo from that arrangement is that we have to make sure those repayment arrangements are fair. Removing the interest was fair; this is not fair.

DAVID BENNETT (National—Hamilton East) : I move, That the question be now put.

Hon DAVID PARKER (Labour) : I want to deal with the issue as to what it is that is standing between borrowers and repayments. I was on the Finance and Expenditure Committee that heard submissions on the Student Loan Scheme Amendment Bill and we heard from a former official of the Inland Revenue Department who, when she was with the department, had responsibilities that included the recovery of student loans. She informed the committee that although it is appropriate that we have a contact person for a student loan other than the borrower—normally the parents; I do not think anyone in the Chamber disagrees with that being a sensible thing to do—in her opinion she did not think this was going to make much difference to repayments, because the reality is that the vast majority of the outstanding balance of overseas-based student loan borrowers relates to interest and penalties. Once interest and penalties reach a certain point and interest compounds every interest period, the amount that is accruing due to the Crown grows at such a rate that the borrower feels helpless and hopeless. They think that this has become such an insurmountable problem they choose to ignore it, because they do not see any meaningful way that they can get their loan under control.

So her evidence to the select committee was that this problem of outstanding overseas student loan amounts is not going to be properly dealt with until we come to some way of dealing with some of these very significant arrears that we have on some of these older balances. This was also the experience that we had for New Zealand - based student loan borrowers, where New Zealanders were borrowing and paying interest whilst they were at university and then paying interest during the period of repayment. We had quite a number of borrowers who became so behind that they just gave up and they did not even make an attempt to repay the principal or the interest because they could just not get ahead. That is the problem that we have here.

So I would invite the Minister in the chair, Chester Borrows, to take a call and to respond to this issue as to whether that, in fact, is the case. I would suggest it is, because of the evidence that we had from the department on the effect of these measures on student loan repayments—and Dr Clark might be able to help me with supplying a figure here. The amount that this is anticipated reducing overseas student loans is—

Dr David Clark: Apparently the repayment holiday’s $5 million out of $12 billion.

Hon DAVID PARKER: So $12 billion owed in total on student loans and the proportion of those who are overseas is substantial. This legislation improves collections by decreasing the holiday period from 3 years to 1 year and it increases collections by an estimated $5 million.

Dr David Clark: Treasury and the Ministry of Education think it will actually have the opposite effect.

Hon DAVID PARKER: So Treasury—

Hon Member: It’s just a guess.

Hon DAVID PARKER: No, it is a good point. David Clark was on the committee as well and he interjects by making the fair point that indeed the Ministry of Education thinks that rather than encouraging more repayments, this is going to make it worse, because more student borrowers will be getting into trouble earlier. I am not sure that I am completely convinced by that argument, because I do think that if you have a lengthy holiday period, then you are more likely to get used to not repaying. I think there is some benefit in letting people know what the real event is slightly earlier. But I do not think it is going to collect old debts from debtors who are not paying, because their interest bills and their penalties have become so high, and they compound every interest period, that they just cannot get on top of the problem.

So for the Government to present this as a substantial cure to outstanding indebtedness on loans to borrowers overseas, its own analysis shows that that is not true, and therefore this is but tinkering at the edges. Until the Government is willing to grasp the nettle and actually do something with these long-outstanding balances and the accrued interest and penalties that are the major part of the debt now, it is not going to get on top of the problem. To the extent that the Government includes these receivables in its financial statements at probably a higher value than is truly recoverable, then it is misrepresenting the position to itself. I know that it makes an allowance for uncollectable debt, but I suspect that in respect of these international debts that allowance for uncollectable debts is too low. So I would ask the Minister to respond as to whether the underlying problem is, for a lot of these old debtors, the fact that interest is accruing.

SIMON O’CONNOR (National—Tāmaki) : I move, That the question be now put.

KRIS FAAFOI (Labour—Mana) : Thank you very much, Mr Chairman, for allowing me a call on Part 1 of the Student Loan Scheme Amendment Bill. I would just like to touch on a point that Mr Parker made around the sums that are involved in actually taking these measures, and whether or not this is just tinkering at the edges in terms of National’s commitment to student loans. I understand that by taking the measures in this bill—and the member for Dunedin North did point this out in the last call—we are looking at bringing in about $14 million—

Dr David Clark: In total.

KRIS FAAFOI: —in total, more revenue as part of the measures that are being taken in this bill. To put that in—

Dr David Clark: A best guess.

KRIS FAAFOI: That is a best guess—

Dr David Clark: The IRD.

KRIS FAAFOI: —from the Inland Revenue Department. But to put that in perspective, a total of $12 billion is owed by New Zealanders who have taken out a student loan. To put that in a context of those who are now overseas, $2.5 billion is owed in terms of student loans by Kiwis who have now studied, have taken out a loan, and have gone overseas. I understand in the nominal sense that that is 0.12 percent. In terms of what this bill is going to do in terms of taking action against those who have gone overseas and maybe are shirking their responsibilities in terms of paying their student loan back, we do not think on this side of the Chamber that this will make much of a difference.

One of the aspects of that—and there is an amendment on the Table under the name of Grant Robertson pertaining to new section 107B in clause 17—is around the repayment holiday, which will be reduced from 3 years down to 1 year. As someone who has gone overseas for roughly 2 years on an overseas experience, this is something that I would have been caught in if this law had been in place in roughly 2006 and 2007. This would have meant that I would have had only a 1-year repayment holiday, which means that I would have come back to somewhere in the vicinity—and maybe my colleague over here will be able to correct me if I am wrong—of a debt of around $1,000 or $3,000 if I had not repaid my loan while I was away. As I was away for 2 years, the law as it is proposed in the bill at the moment would have meant that I would be a year out, and if I had not repaid, then I would have returned to New Zealand with a considerable debt.

We do think that the Committee should consider the amendment that is on the Table under the name of Grant Robertson, making sure that this bill keeps the repayment holiday period at 3 years. We think it is a good solution. Given the amount of time that Kiwis usually head away overseas to take their OE, we do also note—and it has been mentioned on a number of occasions—that the Minister of Revenue, Peter Dunne, in 2007 did state that a 3-year working holiday period would be a pragmatic approach to making sure that we can get back the revenue that we can get back, and it would suit better the purposes of those students who had taken out a loan and had gone overseas. We also understand that Treasury itself has said that making this change from a 3-year period to a 1-year period may, in fact, mean that less money comes in, in terms of revenue from those who have gone overseas.

In terms of this bill, we have already stated that we are looking forward to the contribution from Peter Dunne. We ask that he return to his position in 2007 where he quite clearly stated that a 3-year holiday period was much more preferred in terms of that holiday than a 1-year period. We also look forward to maybe seeing members on the opposite side of the Chamber who may think that this is a good move supporting the amendment of Grant Robertson. The student loan bill at $12 billion is a significant amount of money. We want to make sure that the students who have taken out a student loan do get into the habit of paying it back, and if they can pay it back, they do. But with $2.5 billion being owed by students who are overseas, we think that much better measures can be taken in this bill in terms of what is in this now, to make sure that we can get some of that $2.5 billion back. It is a significant amount of money.

It is a concern that we had a significant interjection, or a contribution, from Maggie Barry across the Chamber while Chris Hipkins was speaking. We do want to try to draw some of best and brightest back, and maybe taking a load off them in terms of their student loans is a way to do that, but to hear Ms Barry say that we will never get them back is a concern. We want to make sure we get our best and brightest back. As Chris Hipkins said, it was pointed out by John Key ahead of the 2008 election just how many Kiwis are going overseas, and we want to make sure they are coming back.

SCOTT SIMPSON (National—Coromandel) : I move, That the question be now put.

ANDREW LITTLE (Labour) : The principal point about this legislation is that nobody objects to improving the administrative requirements of the student loan scheme under the Student Loan Scheme Amendment Bill. But the point is that the requirements set out in this bill—which Mr Simon O’Connor, my friend opposite, finds so entertaining—is that it simply will not make a material difference to the Crown’s balance sheet and to the efficacy of this scheme.

For a scheme that presently has an outstanding balance of $14 billion, of which $2.5 billion is for overseas students, the value of that $2.5 billion is increasing mainly because of those who are subject to compounding interest. A scheme that is going to net the Government an extra $14 million a year can be described only as creating a drop in the ocean. That is all it is going to do. With all of the other challenges before this Government and before us all, there are different ways not only of skinning this cat but also of achieving a much more material effect that will improve the Crown’s balance sheet and the income and expenditure statement.

The real question is why go to these lengths. Why shorten the repayment holiday when it is simply not going to have a significant effect? The message that it is sending young people who complete their studies is that we will just make it harder. You will not get your 3-year holiday; you will get a 1-year holiday. The signal that it sends, however much that may be psychological or not, is that we are going to take something off you and we are going to make it harder—and all for the benefit of $14 million.

In fact, it is not even that; it is actually $5 million, because $9 million of the $14 million benefit relates to excluding business losses in the calculation of repayments in the particular year. So in reality this is a $5 million gain against a $14 billion problem. It is laughable. It is risible. The real question is why we are going to these lengths for this purpose.

The other point, too, is the contact person requirement. Having to provide a contact person, on paper—and let us face it, it is on paper—might sound like a sensible idea, but the truth is that the way this clause is drafted, it is actually meaningless. It could be anybody whose name is put down as a New Zealand contact person when a person takes their holiday. It might sensibly be the parent, but it may not.

And even if it is the parent, what will be the material effect of that provision? There is no suggestion that the parent will be chased for any outstanding payments or the outstanding loan, nor your best buddy, whose name you might provide, or some name that you made up—because that is not unknown. That is not unknown in this country. It is not unknown for New Zealand citizens to make up names on forms. It is not unknown for New Zealand citizens to apply for passports in names that have been made up, and, indeed, for MPs to behave in that sort of way. Fortunately, they are former MPs now, so we do not have to dwell too much on that.

When it comes to efficacy—not only the efficacy of this bill but also the efficacy of this Parliament—and the time we spend on things, creating a $5 million solution to a $14 billion problem hardly measures up. We have to do more and we have to do better. We all know, and there is a wide consensus, that we want to maximise access to tertiary education for the nation’s young people. At a time of great economic change there is one thing we must do, and that is invest in our young people and invest in their skills and skills formation and their training. That is why the scheme plays a crucial and important role in the life of New Zealand and our young people in our tertiary education system. We do want a more effective repayment regime, but a regime that simply improves the collection in any one year by $5 million when there is so much outstanding is hardly worth the many pieces of paper it is written on. So even with that, even with reducing the repayment holiday, even with that marginal improvement, there is very little else in it.

LOUISE UPSTON (Junior Whip—National) : I move, That the question be now put.

The CHAIRPERSON (Eric Roy): The first Grant Robertson amendment is essentially the same, so it is now ruled out of order as being inconsistent with the previous decision.

• The question was put that the following amendments in the name of Grant Robertson to Part 1 be agreed to:

to replace in clause 4 “365 days” with “2 years”; and

to replace section 107B(3) in clause 17 with:

(3)For the purposes of this subpart, a borrower reaches the borrower’s limit if—

(a)the borrower has had 1 or more repayment holidays, granted under this Act, for a period of 2 years or for periods that total 2 years; or

(b)the borrower has had 1 or more repayment holidays under Part 3 of the Student Loan Scheme Act 1992 for a period of 3 years or for periods that total 3 years; or

(c)the borrower has had—

(i)1 or more repayment holidays under Part 3 of the Student Loan Scheme Act 1992 for a period of less than 3 years or for periods less than 3 years; and

(ii)1 or more repayment holidays, granted under this Act, for a period that equals, or for periods that in total equal, the lesser of—

(A)2 years; and

(B)the remainder of the period of the repayment holiday to which the borrower would have been entitled under Part 3 of the Student Loan Scheme Act 1992 if that Act had been repealed; or

(d)the borrower has had his or her repayment holiday under Part 3 of the Student Loan Scheme Act 1992 continued under section 108A(2) for the maximum period prescribed for that continuation; and

to replace in new section 108A(2)(a) in clause 17 “365 days” with “2 years”.

The CHAIRPERSON (Eric Roy): I have a typescript amendment in the name of the Hon Nanaia Mahuta, but it is not signed, so it is out of order.

GRANT ROBERTSON (Deputy Leader—Labour) : The transitional provision in this Student Loan Scheme Amendment Bill relates mostly—in fact, entirely now, because one clause has been deleted—to the question of the definition of “contact person”, which is a matter that I was discussing in my earlier call. Had I had another call on Part 1, I certainly would have got up and expressed my concern that the National Government had not taken up the compromise position of a 2-year period for the repayment holiday. This was a pragmatic solution proposed by members on this side of the Chamber, and it is very unfortunate that it has not been taken up by the Government. It certainly runs in the face of the good old-fashioned Kiwi OE, and I am very disappointed that the Committee has not seen fit to support New Zealanders in the rite of passage that they have had for many years to take that OE for a couple of years. That is what that amendment would have done.

The transitional provision specifically relates to the question of the definition of “contact person”. The reason there needs to be a transitional provision is that the definition is changing, and those people who already are, I guess, contact people will not necessarily know. So the particular clause in question here contains the definition that will be found in new section 193A(5) of the Student Loan Scheme Act. For people who are reading along at home, that new section is inserted by clause 29 of the bill. Basically, what that is saying is: “(5) In this section … ‘contact person’, in relation to a borrower, means—(a) an individual whose name has been notified under section 16A in relation to the borrower; or (b) an individual nominated by the borrower under section 107A or 193B.”

The big difference here, as we discussed earlier in the debate on this bill, is that the person who has previously been listed as a contact person for a borrower is now going to be more likely to be contacted than they ever were before. Previously when people have given contact details, it has really been a fairly perfunctory exercise. It is one where, simply, contact details are given and, if someone is in default, they would be contacted. Now, the provision—and why there is an important transitional provision on this—is that that is changing. It is a transition, so it is important that the contact people who have been identified by borrowers will now know that they have an additional responsibility. That is covered in new section 193B, which is referred to via new section 193A(5) in the transitional provision.

New section 193B actually lists some of the responsibilities of a contact person. It is worth noting that section 193B(2) states: “If there is a change in any of the details of a borrower’s contact person, the borrower must promptly notify the Commissioner of the changed details.” That is actually something that now impinges not only on the contact person but also on the borrowers themselves. Will they know, necessarily, when they are overseas that the person they have listed as a contact person has moved? Perhaps that is why this new clause ends up being referred to as part of the transitional provision. It is to give time for people to get used to this new role that is put on both the contact person and the borrower.

So these are actually substantive changes, and I guess at one level it is good, then, that there is a grace period through to the end of the year put in place by the transitional provision. But on the other hand, as I said during my earlier call, I actually think these changes are significant enough that it will come as a surprise to some people. As I was discussing earlier on, parents who have become the contact person by default, virtually, for their children now actually have a set of responsibilities. If they move, they had certainly better let their children know, because that is actually the responsibility that now falls upon the borrower. The transitional provision is one that clearly is necessary in order to put in place the changes, but, I guess, on this side of the Chamber we raise some question about those changes, because just being a contact person has been a very low-level activity; now it is a much higher-level activity.

We do have to remember that the student loan is a loan contract between the borrower and the Crown. These contact people actually have no responsibility for the loan itself, so they are getting quite an additional role. They are going to be contacted by the Inland Revenue Department. They are going to be contacted by the State. Their name and their details are going to be kept by the State, and will obviously be updated on a regular basis if the borrower is fulfilling section 193B, which has been included in the bill. So it is actually quite a substantive change, and I know that Mr Dunne acknowledged that when he was in the chair earlier on. I do think that if this bill passes in its current form, it is going to be something that will be different.

I am not going to take much more of a call, other than to note that the transitional provision is not just the normal one about dates and things. It actually relates to a substantive change around what it is to be a contact person for a student loan borrower. It is now a much bigger job; one where you will be contacted more often. I do think that is going to come as quite a surprise, particularly to some of the parents in New Zealand, and I hope they are huddled over their radios tonight to know what the change will be.

Hon NANAIA MAHUTA (Labour—Hauraki-Waikato) : That is a good point to continue, because for those people who are currently identified as contact persons there should be some obligation, I would think, to notify them about the change of their status and the new expectations they will inherit as a result of this Student Loan Scheme Amendment Bill. So the Minister in the chair, the Minister for Courts, should take a call on that particular aspect, because it is only right that people are informed if there are new obligations resulting from this legislation.

That communication should go out for a specific set of people who are currently identified as contact persons, so that when the new bill comes into effect, as of, I guess, 1 January 2013, because that section will be repealed, they should be informed that they have identified with the current set of contact people and that they have new obligations, and they should be asked whether they want to continue to be contact persons in the event that their children, or whomever they are the contact person for, may go overseas. I think that is a really important point, and it is the point that I raised in the previous part.

The opt-out provisions should be very clear for existing contact persons who no longer wish to continue to be of that status going forward. There should at least, as a matter of courtesy, be an opportunity to update and inform them about the new provisions of the Act and, by default, the expectations that they will inherit, and, secondly, the opportunity to opt out, should they no longer wish to be a contact person. That is more an obligation in terms of the Inland Revenue Department, I would think, rather than the borrower, because this is something that is a carry-over function of the existing system. Kia ora.

Dr DAVID CLARK (Labour—Dunedin North) : I rise to take a call, and as I do I want to comment, to start off, that this is perhaps one of the least offensive provisions in the Student Loan Scheme Amendment Bill. So my comments must be taken in that context.

As I start, I just want to remind us of a few facts. I do want to talk about the barriers that this presents, because I think it contributes further, in some small way, to the barriers to tertiary education that I spoke about in debate on Part 1. Reminding ourselves that 58 percent of the borrowers are women, that $17,000 is the average amount held in a student loan, and that the total debt is $12 billion, these provisions in this particular part, Part 2, are all aimed at grabbing back—grasping back, perhaps we could say—some of that debt hole that is running up. The contact person is a means of getting to those who have money owing, and perhaps it is those who have taken a repayment holiday and who have disappeared into the ether.

There is a sense that this is all part of the same objective, and it is all aimed at grasping back $5 million of a $12 billion debt. In that context the fact that we are spending an estimated $2,761,000 worth of parliamentary time to pass this bit of legislation is infuriating. It is spurious to suggest that this will encourage students to repay, when the Government’s own officials at Treasury and the Ministry of Education have questioned whether this is really true. In fact, they suggest that this legislation, as it relates to those who are overseas, may in fact encourage them to stay overseas. It presents a barrier in that respect.

The Labour Party is, of course, opposed to barriers to tertiary education, and this relates to our belief in the basic principles of fairness and opportunity. They are principles that National has historically tended to ignore when it comes to dealing with the student loan scheme. We will remember that Labour introduced interest-free loans and National introduced a fee for administration—

The CHAIRPERSON (Eric Roy): Order! This is quite a narrow debate. It is the transitional provisions.

Dr DAVID CLARK: Just returning to the point, which is about collecting this debt and the role of contact people in that—Mr Chairman, I thank you for your guidance—I really wanted to say, and I will draw to a close shortly, that the parents of a person undertaking tertiary education are the best predictors of that person’s outcome, and they will likely be the people who are those contact people. If there is a sense, when students go to undertake tertiary education, that they are going to be reported on by their parents if they fail to meet some of the payments or they fall into difficult circumstances whilst overseas, that will be very disappointing indeed. That is why I think it is important that this is clearly signalled to those whom it will affect, and that we remain conscious of the potential barrier—another potential barrier—to tertiary education that could exist in naming a contact person and making that contact person provision stronger.

As I have said at the beginning, and to conclude, this is perhaps one of the least offensive provisions in the bill, but I think it is worth considering the implications of it. Thank you.

HOLLY WALKER (Green) : Thank you for the opportunity to take a short call on Part 2 of the Student Loan Scheme Amendment Bill. I will not take up a lot of the Committee’s time, but I would like to reiterate the invitation to the Minister in the chair, the Hon Chester Borrows, to take a call to answer some questions about this part. I thank the Hon Nanaia Mahuta for her contribution on this earlier. I would also like to know how the increased responsibilities for those who will be taking on the role of the contact person will be notified to those who are currently named as contact people in relation to this legislation. I would like to know whether they will have the opportunity to opt out of that, and how they will be provided with that opportunity. I would like to invite the Minister in the chair to take a call to explain that to the Committee.

KRIS FAAFOI (Labour—Mana) : Thank you very much for giving me the opportunity to speak to Part 2, which is a very narrow debate, as you have already mentioned, around transitional provisions around the contact persons for people who have gone overseas and who have student loans. The ears of parents around New Zealand who are watching this debate right now have pricked up, because they want to know what their sons and daughters are going to get them into when they are heading overseas. They are also a little bit worried about what this provision and the provision in Part 1 around the repayment holiday may mean for them, if their sons, daughters, or loved ones are going overseas for more than just the 1 year.

For the benefit of those parents at home, I would just like to point out again what a contact person constitutes, in terms of the Student Loan Scheme Amendment Bill. It means that if someone is going overseas, you have to tell the Inland Revenue Department who this contact person is. You are going to have to, obviously, identify this person, give the Inland Revenue Department their postal address, an email if they have one, a telephone number for this individual, and any other information that may be specified in the regulations. With the transition to this contact person regime within the bill—at the moment we have a quasi-regime, where some people have taken on this duty with their sons, daughters, or loved ones already, and they have an amount of responsibility—now they are going to have a fair deal of responsibility. It is not responsibility for the amount of money that is owed, but if the person who is overseas were to go missing, or not pay their student loan back in time, then this is the person whom the Inland Revenue Department staffers, on behalf of the commissioner, will call to ensure that something is done about the money that is owed. And we do note that there is a transition period, which is dated up to 31 December 2012, I believe. We hope that the Inland Revenue Department, as Nanaia Mahuta has already pointed out, will be able to contact as many people as possible, to tell parents that there is going to be a little bit of added responsibility on them for their loved ones—for their sons and daughters—who have gone overseas.

As David Clark has mentioned already, this is something that we think is relatively pragmatic, to use that word again—

Dr David Clark: It’s common sense.

KRIS FAAFOI: —and relatively common sense, but maybe there will be a degree of concern amongst parents in New Zealand at the moment whose sons and daughters may be reaching graduation, and talking about heading overseas to Europe for their big OE. Their parents—

Grant Robertson: Only there for a year now.

KRIS FAAFOI: And it may be shorter now; that is a good point. But there will be a degree of concern amongst parents who have loved ones who are nearing graduation and looking at going overseas, when they know that these students have student loans. Some of them may have hefty student loans. Those parents may know that they may not be coming back. Those parents may also be worried that they will be receiving a phone call, an email, or a piece of mail through their letterbox to say “Hey, where’s your son? Where’s your daughter? They haven’t paid their student loan back on time, and you’re going to be in the gun for it.”

We welcome the transitional provision within the bill. We think it is relatively pragmatic, but again we do feel the pain and the concern of many parents out there in New Zealand who are worried about what this may mean in terms of their loved ones, who now may be going overseas for a little less time than traditionally has been the case for Kiwis on their OE. Thank you.

SIMON O’CONNOR (National—Tāmaki) : I move, That the question be now put.

The CHAIRPERSON (Eric Roy): I am sorely tempted.

DARIEN FENTON (Labour) : I appreciate the opportunity to take a call on Part 2, “Transitional provision”. I have not taken a call in the Committee stage of this bill but I have been sitting here as a parent with a child overseas, feeling somewhat alarmed.

Grant Robertson: Are you the contact person?

DARIEN FENTON: Have I been named as the contact person by my son and daughter, who happen to live in San Francisco at the moment? They do have a student loan. Am I the contact person, and how would I know? Under this transitional provision, I am not certain, even though it does appear to give some breathing space in that it is a transitional provision until the close of 31 December. So there is some breathing space, I think, so I might have some time to find out whether I am the contact person and whether my address, my email, my phone number, and other details have been given to that very, very frightening but very efficient department called the Inland Revenue Department.

I felt moved to take a call on this transitional provision in Part 2 to ask the Minister in the chair, the Minister for Courts, some questions about this. As I said, as a parent with children overseas, like so many parents I regret that my children have decided that they have to go and live and work overseas. They have taken other opportunities because—

Dr David Clark: More and more New Zealanders are doing it.

DARIEN FENTON: Thirty thousand or so have gone to Australia, but actually my children have gone further afield, as I said, to take up opportunities that they simply cannot get in New Zealand.

I also listened to the debate about repayment holidays. I do not want to go into that now, because I know it is not relevant—and thank you, Mr Chairperson, for your guidance—but, as I said, I do feel very, very moved to take a call, as a concerned parent, about what this transitional provision will mean. For the purposes of those people who are listening on their crystal sets tonight—

Grant Robertson: Thousands of them!

DARIEN FENTON: —thousands of them listening on their crystal sets—let us see what it says. It says in clause 34(1): “Until the close of 31 December 2012, the definition of contact person in section 193A(5) of the principal Act must be read without reference to paragraph (a) of that definition.” I am trying to find my way through the bill and through the principal Act to see what that means, but what it says to me is that there is at least some breathing space for me as a parent, and for my children who have escaped overseas, to reconsider whether—

Grant Robertson: You want them back?

DARIEN FENTON: —of course I want them back—but to reconsider whether I am a suitable person to be a contact person under this bill, and whether they may want to think about whether they want to expose their parents to the vagaries of this bill, particularly with all of its consequences with the shortening of the repayment holiday.

As I have said, I have listened to the debate with great interest. I will follow the debate further. I am deeply disappointed that we have not been able to persuade the Government to make amendments that may well have led the Labour Party to support this bill, but unfortunately, because of the Government’s attitude, the lack of common sense that we have had—

The CHAIRPERSON (Eric Roy): Order! Transitional provision.

DARIEN FENTON: —and the lack of common sense, perhaps, in the transitional provision—

Dr David Clark: There’s no lack of common sense in the transitional provision, though.

DARIEN FENTON: True. Well, we could have had a longer transitional provision, of course. It could have been until 31 December 2013. That might have been of even more comfort to me as a parent. But I do appreciate the opportunity to take a call on the transitional provision in Part 2.

DAVID BENNETT (National—Hamilton East) : I move, That the question be now put.

• Motion agreed to.

GRANT ROBERTSON (Deputy Leader—Labour) : Clauses 1 and 2 are the title and commencement date, which normally would be a short debate, but there are some issues when we come to the commencement clause that I think are worthy of focusing on. But in this call I want to focus on the title of the bill.

The title of the bill is innocuous—the Student Loan Scheme Amendment Bill. In fact, the bill could be better termed the “Student Loan Scheme (Ending the OE) Bill”, because that is, in effect, what this will do for some New Zealanders. What this bill is saying to New Zealanders who want to go away on a normal length OE to the UK of 2 years is that it is not the pragmatic solution that Peter Dunne put forward in 2007, and that he articulately very well in Parliament in 2007. That pragmatic solution was struck to ensure that somebody had a provision to undertake their OE. It was not that they were getting off scot-free—they are still paying interest when they are overseas—but they got some recognition of the fact that we support New Zealanders to do this and encourage them to return.

We have heard already in this debate that, in fact, the evidence that Treasury and the Ministry of Education have provided to the Government is that there is a likelihood that this may discourage people from returning from overseas and therefore increase the annual student loans impairment. So we could easily call the bill the “Student Loan Scheme (Ending the OE) Bill”.

Certainly, a title that it could not be called is the “Student Loan Scheme (Pragmatic) Amendment Bill”, because it loses the pragmatism that formerly was in the legislation. During the earlier debate, Peter Dunne mounted an argument for why the loan repayment holiday should be taken down from 3 years to 1 year. The problem with that argument was that if you followed it all the way to its logical conclusion there should not be a loan repayment holiday. Mr Dunne’s argument was that all borrowers needed to be treated the same, essentially, whether they were in New Zealand or whether they were overseas. Well, if that is the logic, get rid of the loan repayment holiday altogether.

Hon David Parker: And the interest.

GRANT ROBERTSON: That is right—and the interest as well, because borrowers in New Zealand are not paying the interest. So Mr Dunne’s logic has fallen from him here, because he has taken it from 3 years to 1 year, but it does not make any sense in terms of the argument he made. The title of the bill certainly would not be able to be the “Student Loan Scheme (Pragmatic) Amendment Bill”, and it would not be able to be the “Student Loan Scheme (Logical) Amendment Bill”, because it fails both of those tests. The loan repayment holiday was put in place as a pragmatic solution to the fact that we do not want New Zealanders who go overseas for a short period to have things put in front of them that will make it less likely that they will return to New Zealand.

During the dinner break I had a tweet—

Simon Bridges: Sausage roll.

GRANT ROBERTSON: I did not have a sausage roll, actually. I had a very healthy dinner, Mr Bridges: salad, ham, and a roll, just so you know. Mr Bridges, on the other hand, was once again wallowing in his Chinese takeaway from down the road, which we see him have most dinner times.

But what this person told me in the dinner break was that they had worked overseas as a volunteer for a number of years on the basis of the loan repayment holiday. They were actually able to spend 3 years working overseas, paying interest—not actually abdicating their responsibilities; knowing that interest would be accruing on the loan—doing volunteer work, and have the loan repayment holiday for 3 years.

The repayment holiday would be down to 1 year now, under this scheme. That would be good and that would be useful, but it does not support New Zealanders in what has been their traditional activity of going on an OE, knowing that at the end of those 2 years, or possibly 3 years if they got an extension on their visa, they would be able to come back to New Zealand, and they would not have had to make those loan repayments in that time. This is pragmatism, and I do think that if the Student Loan Scheme Amendment Bill was to be titled any other way, it would be around a reference to what now happens for New Zealand graduates who go away on their OE.

On this side of the Chamber we want to make absolutely clear that we want people to pay their loans back. Whatever concerns we might have about student loans and the size of student debt, we want everyone who is in this scheme to feel that people are making their repayments, and that people are doing what they need to do. But when there is an opportunity for people to go overseas and do what New Zealanders have done for decades and for generations, it seems very unfortunate that the Government is not prepared to take up the pragmatic solution it was offered.

KRIS FAAFOI (Labour—Mana) : Thank you very much, Mr Chair, for giving me the opportunity to speak to the title and commencement of the Student Loan Scheme Amendment Bill. A number of suggestions were put forward by Grant Robertson as to a better title for this bill, but I would like to suggest that we call it the “Student Loan Scheme (Second Wave Attack by National) Amendment Bill”. We saw the first wave attack come in its first term of Government, when it restricted the access of older New Zealanders to a student loan. So what we have got in front of us today is the second wave attack from National. Really, it is not much of an attack, because this bill does not achieve what it sets out to achieve. We have already heard that this bill will bring in only another $14 million of revenue by bringing in these provisions around the repayment holiday.

In terms of the second wave attack, it builds up a narrative about National and its commitment to student loans. It does not believe in them, at all. We have already heard from John Key that he thinks it is economic madness to keep interest-free student loans—

The CHAIRPERSON (Eric Roy): Order! Title and commencement.

KRIS FAAFOI: OK. We have already heard my suggestion that the bill should be called the “Student Loan Scheme (Second Wave Attack by a National Government) Amendment Bill”. Why do we think it should be called that? Because of the lack of commitment by National to the student loan scheme. We have already heard from the Prime Minister a rather large missile thrown, in terms of the second wave attack that I am talking about, around his commitment to the student loan scheme. He says it is economic madness to continue the interest-free part of the student loan scheme. In fact, he says that if it was not for the politics of it, he would not keep it. In terms of calling this bill the second wave attack bill, we really do think that National is struggling to continue its commitment to what Labour brought in in 2005 to ensure that there were no barriers to New Zealanders entering tertiary education. We believe that if National actually brought in the bill it wanted to, it would be the “Student Loan Scheme (Interest-free Loan Aspect Repeal) Bill”, because we do not believe that the National Party is committed to interest-free student loans, at all.

In terms of the second wave attack that I have talked about around the title of the bill, we have already heard about the lack of extra revenue that it brings in—

The CHAIRPERSON (Eric Roy): If the member is not going to talk about the title and commencement, I will terminate his speech.

KRIS FAAFOI: Thank you very much, Mr Chair, for that clarification. In terms of the title, I think this bill should be called the “Student Loan Scheme (Second Wave Attack by National) Amendment Bill”. We have already seen—

Simon Bridges: I want to help you get to 5 minutes. Give us some other titles.

KRIS FAAFOI: Sorry, a slight interruption. Well, maybe we should call it the “Student Loan Scheme (Simon Bridges is Getting His Student Loan Interest-free) Bill”. Maybe we should call it that. But the one that I wanted to bring to the Committee today was the “Student Loan (National’s Second Wave Attack on Student Loans) Amendment Bill. [Interruption] It is a good name—thank you very much, Ruth Dyson, and welcome to the Chamber. We do not believe there is a commitment from National to making sure that the student loan scheme stays interest-free. We do not believe that. We believe that it has launched the second wave attack, because of what it did in the first wave by reducing the access—

The CHAIRPERSON (Eric Roy): Right, the speech is terminated.

HOLLY WALKER (Green) : Thank you for the opportunity to take a short call on the title and commencement of the Student Loan Scheme Amendment Bill. I would like to do two things, and the first is to make a suggestion for an alternative title of the bill, which is the “Student Loan Scheme (Reining Student Loans In) Amendment Bill”. That, of course, is what John Key said recently to an audience of property developers in Auckland he wanted to do with the student loan scheme. Of course, as we all know, John Key would really like to get rid of interest-free student loans, but as he outlined to that audience, he does not see that as politically feasible, and—

The CHAIRPERSON (Eric Roy): Order! The same rules apply: title and commencement. That is the subject of this debate.

HOLLY WALKER: Thank you, Mr Chair. That is why I am suggesting that the title of this bill should be the “Student Loan Scheme (Reining Student Loans In) Amendment Bill”, because it is the only way that National can find to rein in student loans, in the absence of doing what it really wants to do.

I want to move to a more substantive point, which is about the commencement. I note that there is a Supplementary Order Paper on the Table from the Minister of Revenue relating to clause 2(4). That clause states: “The rest of the Act comes into force on 1 April 2012.” The Supplementary Order Paper replaces that word “comes” into force with “is deemed to have come” into force. I want to raise a serious concern about this, because what this essentially does is make the bill retrospective, and I would submit to the Committee that this is bad practice and bad lawmaking. We should not be in the practice of making retrospective law in this Chamber. If the bill cannot be passed in time to meet the commencement date set out in the commencement clause, then that date should be extended. We should not be retrospectively applying this bill. So I want to raise a serious concern about that and invite the Minister in the chair, the Minister for Courts, to take a call to explain to us why it is so important that we need to enact retrospective legislation in this Committee in order for this bill to come into force. I suggest that a far more transparent and democratic approach would be to extend the time of commencement, and I will invite the Minister to take a call to explain that.

CHRIS HIPKINS (Labour—Rimutaka) : To respond to Holly Walker’s comment, I do not think the Minister in the chair, the Minister for Courts, is going to respond. He is tied up with a glossy magazine over there; I am not entirely sure what is in it. I also want to talk about the commencement clause, which means new clause 30D is coming into effect retrospectively. It will come into force on 1 January. What is new clause 30D? We have to turn to new clause 30D to find that it amends schedule 5 of the principal Act—

Simon Bridges: “Shedule”, not “skedule”.

CHRIS HIPKINS: “Shedule”, “skedule”, “schmedule”—whatever. It amends it by repealing clause 2 of that schedule. What is clause 2 of that schedule that this is going to be imposing retrospectively? It says that no interest is to be charged by the loan manager, and then the commencement clause is repealing it retrospectively. National is the party that promised us it was not going to reintroduce interest in any form on student loans, yet it is repealing retrospectively, in the commencement clause of this bill, a clause in the schedule of the principal Act that says no interest shall be charged by the loan manager.

We should rename this bill. It should be the “Another Broken Promise by the National Party Bill”. Not only is National going to break the promise but it is going to do it retrospectively. Under the commencement clause of this bill, it imposes that retrospectively. The clause in schedule 5 of the principal Act that says that no interest shall be charged by the loan manager is gone—gone under this Government—and it is doing it retrospectively. It is imposing it from 1 January this year. That would make it a new record for a broken promise by the National Government. Less than 2 months, effectively, after an election, it is doing away with an election promise. Even though it is now 4 or 5 months after the election, National is going to break its promise retrospectively, by repealing this clause in schedule 5 that says that no interest shall be charged by the loan manager. National is repealing it retrospectively.

This has now actually become one of the major clauses. This commencement clause, which imposes this change retrospectively, is now one of the major clauses in this bill, because it is a broken promise by the National Government. It is trying to sneak it through retrospectively in this commencement clause, under clause 2(1A), which says “Section 30D is deemed to have come into force on 1 January 2012.” The clause that says no interest is to be charged by the loan manager is being repealed retrospectively. It is being repealed retrospectively.

For a starter, that is just bad law. It is simply bad law for the Government to be forcing through the Parliament any provisions that apply retrospectively. But this is a provision that breaks a fundamental promise of National’s of not having interest on student loans, albeit in what is potentially quite a minor way. I have not had a chance to review the entirety of the Act, in terms of how that fits into it, but it is pretty clear. I will read out the clause: “The loan manager must not charge interest in relation to any loan advance made by the loan manager in accordance with this schedule.” That is pretty fundamental. It says that the loan manager cannot charge interest, and the Government is repealing it retrospectively. It is doing away with that element of the interest-free student loan scheme retrospectively. Going back to the beginning of the year, that commencement clause will take effect.

That is a broken promise by this National Government. It is no wonder its members did not want to debate this part of the bill. It is no wonder nobody in the National Government is willing to leap up and take a call. It is no wonder the Minister is not willing to take a call, and say why it is that this needs to apply retrospectively. Regardless of whether it breaks the promise—and I think it is outrageous that National is breaking that promise—any clause in a bill that applies retrospectively needs to be explained and needs to be justified. That is what the Committee stage of the House is all about. It is where we go through bills brought before the House clause by clause, and we are now on to the commencement clause. The Minister in the chair needs to stand up and explain why this clause needs to apply retrospectively—this clause that effectively removes the restriction on the loan manager from charging interest on any loan advance made by the loan manager in accordance with that schedule—that “shedule”—of the Act.

David Bennett: Schedule.

CHRIS HIPKINS: That schedule of the Act. I will help old “Cue Ball” over there. He is getting a bit uptight about the pronunciation of the word.

GRANT ROBERTSON (Deputy Leader—Labour) : My colleague Mr Hipkins has raised what is a serious issue, because the commencement clause of the Student Loan Scheme Amendment Bill does bring in a retrospective date for commencement. I think that in principle that is something we should be very careful about in this House—to have legislation having a provision that is retrospectively coming into force. I think it really does require a Minister to stand up and take a call and explain to this Committee, firstly, why it would be that we even have a retrospective commencement date, and, secondly, why on an issue such as this that is deemed to be something that is OK.

For clarification for members, what subclause (1) of clause 2 in schedule 5, which is being removed, says—and as my colleague has said, the clause is entitled “No interest charged by loan manager”—is that “The loan manager must not charge interest in relation to any loan advance made by the loan manager in accordance with this schedule.” We will come back to some of the earlier elements of the schedule in a moment. But to clarify for members of the Committee what a loan advance is, a loan advance means, according to the interpretation section of the Student Loan Scheme Act: “all—(a) money that is advanced by the loan manager to a borrower under the student loan scheme; and (b) student loan establishment fees charged by the loan manager to the borrower under section 14;”—which is what National introduced last year—“and (c) student loan establishment fees and any other type of fee charged by the loan manager to the borrower in accordance with a loan contract.”

That is basically everything. A loan advance is pretty much everything that is provided to borrowers under the scheme. So this clause retrospectively coming into force repeals retrospectively the provision that the loan manager must not charge interest in relation to any loan advance. That is what is now being removed. So this is an interesting change.

The Student Loan Scheme Act is a complicated Act. There may well be an innocent explanation for this, but we do not know. That is the problem with this being done through the commencement clause, rather than through a process that is more open to the Committee, because, as we know, the subject of interest and whether interest is charged or not is obviously at the heart of the debate over the student loan scheme. We have heard already tonight that the Prime Minister and the current Minister for Tertiary Education, Skills and Employment have concerns about whether or not they think the student loan scheme is economically sound. They think it is politically sound, but they do not believe it is economically sound. So that is why we become worried when we see clauses such as this included in the bill.

Essentially it is removing one clause within schedule 5 of the principal Act, and that is the clause that says no interest shall be charged. What this is referring to is actually people who took out loans in a certain period. It refers to people who took out loans between 31 December 2011 and 1 April 2012, so we are in that period now. It is affecting people right now, today, who under this provision in schedule 5 of the Act, passed last year in this House, were to be charged no interest, because that is the situation for every borrower in the student loan scheme at the moment.

So really we do need someone on the other side of the Chamber to take a call to explain what this means, to explain why, for borrowers in the current period we are in now, who had a piece of legislation that told them that no interest would be charged by the loan manager on their loan advances, that has now been taken away. If there is an innocent explanation I am quite sure members opposite are capable of getting up and telling this Committee why that is the case, and then we can get on with the rest of the debate around the title and commencement clauses.

But it is very different to see a commencement clause with a retrospective date in it. We have now been able to identify what that is, and it is a serious matter. There is not much more serious with the student loan scheme than the issue of whether interest should be charged or not. The whole schedule is one that obviously relates to a specific period in time with the loan scheme, but it does raise concerns on this side of the Chamber. If there is an explanation for it we would like to hear it, but in the absence of an explanation we simply are left with the impression that for some borrowers the requirement not to be charged interest has been removed.

We have heard a lot tonight from Government members of the House wanting to see borrowers treated the same, wanting to make sure that people who have borrowed money are treated the same. Well, at the moment, if you are resident in New Zealand there is no interest being charged. Does this clause somehow only apply to people who are overseas? There is nothing in the schedule that I can read here in front of me that indicates that. I think it really highlights the dangers of passing something like this under a commencement clause, rather than doing it in a more open way. This is a serious matter, and I would expect someone from the Government to reply.

SU’A WILLIAM SIO (Labour—Māngere) : When my colleague Chris Hipkins announced that the commencement clause would repeal the interest-free aspects of the Student Loan Scheme Amendment Bill, I noticed that the other members on the other side of the Chamber seemed surprised. It seemed like this was a revelation to them. I notice also that the Minister in the chair, the Minister of Immigration, did not appear to be all that confident about what my colleague has revealed. I am going to echo the call that both Mr Hipkins and Mr Robertson have asked for, and that is to ask the Minister in the chair or even the chair of the Finance and Expenditure Committee whether they would stand and explain why it is that such an important aspect of this bill—an aspect that will have ramifications and dire consequences for thousands of students the length and breadth of New Zealand—is hidden inside this commencement part of the bill. I would have thought that such an important aspect, which is going to affect the future generations of this country, would have been revealed for the entire Committee to see, that it would have been pointed out directly for all to see, and that a significant part of the report be paid to it—but as it is, it is not. So we have had to find out through our research that that particular part of the commencement does repeal the interest-free aspects of the bill, which, again, changes the debate around the title of this bill.

What we are now seeing is that this does not reveal the complete truth about what students should be aware of when it comes to student loans. In fact, the title of this whole bill is wrong. We should not even be calling it the Student Loan Scheme Amendment Bill, because that itself does not reveal this key aspect. It certainly does not reveal that this Government is repealing the interest-free loans for students, and it certainly does not reveal the fact that we are doing away with the 3-year repayment holiday period and diminishing that to 1 year. If you consider the whole environment currently, where there is massive unemployment and people are struggling to find jobs, and this bill is suggesting that we cut the holiday from 3 years to 1 year, how on earth are we expecting these young people, new graduates from university, to be able to repay? I have to ask again, will the Minister sitting next to you, Mr Chairman, please take a call and explain for the benefit of the Committee as to why the repeal of interest-free loans has not been highlighted for the Committee to note. It is hidden in this commencement part here, and it does change the whole aspect of this entire debate.

Yesterday I would have supported this bill. Today, because of the Trojan Horse nature of this Government and the way that this Government is not revealing for all students to know the entire truth about this, I am not going to be supporting it. I know my colleagues stand united in saying that this is the wrong thing to do for students, and it is the wrong thing to do for New Zealand. I say to you again, I ask that Minister to please take a call and respond. There are hundreds—thousands, even—of students listening to this debate, and they would want for this Government to be open and transparent by revealing why it has hidden this particular aspect, which is a very important aspect of the bill, and why it has not even made mention of it in any part of the reports that I have seen. The Government has a lot of explaining to do. I think you owe it to this Committee to demand, in fact, Minister, or even of the chair of the select committee, to explain—

The CHAIRPERSON (Eric Roy): Order! The member cannot bring the Chair into the debate in the manner in which he is.

SU’A WILLIAM SIO: I apologise. I simply was asking by way of the speech that I think we need to compel that Minister and even the chair of the select committee to explain. I do not know whether it is deliberate or not, but I suspect that people listening to the debate will make their own judgment and will suspect that there has been a deliberate attempt by this Government to not reveal that it is repealing the interest-free aspect of this bill. It is the wrong title. In fact, the Government should just call it the “Repeal of Interest-free Loans Bill”, or it could call this bill the “Broken Promises Bill”, because, as I understand it, this Prime Minister—

SIMON O’CONNOR (National—Tāmaki) : I move, That the question be now put.

JACQUI DEAN (National—Waitaki) : Speaking to the second reading of the Trade (Safeguard Measures) Bill, I want to say that this bill repeals the Temporary Safeguard Authorities Act 1987 and implements a new safeguard regime for New Zealand that is consistent with World Trade Organization rules. I think that is particularly important to New Zealand’s economy, because, as this Government knows only too well, enhancing and growing New Zealand’s international trade links and also opportunities is a pretty much key part of our plan to build a competitive and also productive economy. This bill is part of that. It promotes efficient, transparent, and objective investigative decision-making processes. Now to explain.

Safeguard measures are emergency measures applied at the border, usually in the form of a duty, which is a cost to the importer, to temporarily protect the domestic industry from a surge in imported goods. If you think about what kind of product that might mean, you are talking about a container-load of cheap T-shirts, maybe cheap socks, or some product of that nature. The bill prevents New Zealand from receiving a rapid influx of cheap imports. What it does is allow New Zealand businesses time to bring themselves up to the level of international competitiveness required to stay competitive and afloat in this current economic climate. Again I need to say that it is a temporary measure. New Zealand consumers will continue to have the benefit of free-trade principles, which are so important to New Zealand and underpin New Zealand’s trading environment. The bill creates—and this is also significant—a single point of contact for all trade remedy inquiries, which, of course, is a plus for busy businesses, and provides an effective safeguard regime that can help build support for future trade liberalisation among domestic manufacturers who compete with importer trade. I commend the bill to the House.

IAIN LEES-GALLOWAY (Labour—Palmerston North) : It is a pleasure to rise on behalf of the Labour Party and speak in support of the Trade (Safeguard Measures) Bill. As with many trade bills, this is a bill that has received bipartisan support from across the House. In fact, it was originally introduced by the Hon Lianne Dalziel during the last Labour Government. I think that does require a comment to note that it seems to have taken an awfully long time for this Government to progress the bill, because it was introduced by the previous Government and, 4 years later, here we are at just the second reading.

The purpose of the bill is to replace New Zealand’s current safeguards regime with a new regime that is consistent with World Trade Organization rules. The new regime will be a more efficient, transparent, and objective investigative and decision-making process. Safeguards are emergency measures applied at New Zealand’s border, usually in the form of a duty, and facilitate adjustment by a domestic industry to competition from increased imports. That is, I suppose, a flowery way of saying it is a response to the practice of dumping large quantities of often low-quality and low-cost goods on a particular market. This is the regime by which New Zealand will be able to defend its borders against such exercises.

The existing Act, the Temporary Safeguard Authorities Act 1987, was subject to review under the Labour-led Government, which included wide public consultation, and the bill is the result of that work. I note that a lot of the work, a lot of the consultation, and a lot of the activities that take time in preparing a bill were carried out by the previous Government, and, again, the question remains, when this is such an important piece of legislation to support the work of small businesses and large businesses across New Zealand, to support our own local economy and to safeguard our own local economy, why on earth it has taken this Government such an astonishingly long time to progress the bill to the point where it is at—that is, its second reading.

The bill not only ensures compliance with World Trade Organization rules, it streamlines the process of responding to allegations of dumped or subsidised goods on the New Zealand market—something that will certainly be welcomed by New Zealand manufacturers and New Zealand producers. It removes the requirement to establish temporary safeguard authorities and it enables the existing expertise of the Ministry of Economic Development to be utilised instead. It is a cost-effective measure too, and we are all supportive of that.

The bill is timely, as it is important that at the time when domestic spending is constrained in New Zealand we have the right tools to protect our businesses from the impacts of globalisation and increased competition, where appropriate. This is, of course, one part of ensuring that the New Zealand economy is able to compete fairly in the world market, and it is great that we are able to put these measures in place to protect and support New Zealand manufacturers and to protect and support New Zealand producers. But what those manufacturers and producers will really be looking for is a real plan, a real economic plan, from this Government—not 120 points of nothingness, not a 14-point this and a 6-point that, and goodness knows what other plans and bullet points will be introduced by this Government as it seeks any opportunity it has to try to convince New Zealand that there is a plan.

We do not need bullet points; we do not need statements. What New Zealand actually needs to make our economy stronger, to ensure that we can compete internationally, to ensure that our exports are of value, and recognised and valued by markets overseas, is an economic plan from this Government. And I think it really is reflective of how sluggish and how lamentably poor this Government has been at driving our economy out of the recession that it has been in, that this fundamental piece of trade legislation has languished for such a long time—4 long years, if not more, since it was first introduced. It was introduced by a Labour Government, it was progressed by a Labour Government, but it all came to a grinding halt once National got into power.

Some significant changes are certainly proposed by the bill. I have mentioned the safeguard interventions, which will be undertaken by the ministry rather than by independent temporary safeguard authorities. The extension of the current 30-working-day time frame for the completion of a safeguard investigation will now be extended to 75 working days, or, in fact, even 85 days, if provisional safeguard duties are requested. The bill provides that after receiving the chief executive’s report about the safeguard investigation, the Minister may take one or more of the actions in relation to imported goods, if the Minister is satisfied that a range of criteria have been met.

Given that this is the second reading, it is worth reflecting on some of the amendments offered up by the select committee. The first of those is around the “Provisional safeguard duty—termination or reduction”. The commentary on the bill states: “As introduced, clause 15 of the bill would provide the Minister with a wide-reaching discretionary power to terminate or reduce a provisional safeguard duty.” The select committee considered that this power was “too wide, and should be subject to a ‘parameter of compliance’.”, and recommended “an amendment to clause 15(1) to limit the Minister’s discretion to terminate a provisional safeguard measure by requiring that the Minister be no longer satisfied that there are reasonable grounds for believing that the conditions that justified imposing a provisional safeguard duty are met.” The select committee also recommended “an amendment to clause 15(1) to limit the Minister’s discretion to reduce a provisional safeguard duty by requiring that the Minister be satisfied there are good reasons for doing so.”

The select committee also made amendments on the types of safeguard measures that are available, and recommended “the deletion of clause 17(d), which provides that a safeguard measure can consist of ‘any other action the Minister considers appropriate’.” The select committee considered that the “types of safeguard measures in clause 17(a) to (c) are comprehensive; and likely actions other than those provided for in the bill, such as the monitoring of particular imports by the Ministry of Economic Development, would not require legislative authority.” The select committee also recommended “an amendment to clause 17(b) to delete the words ‘or an exemption from any duty’, because there is no case in which a safeguard measure could be an exemption from a duty under the Tariff Act 1988.”

It is a reasonably technical bill, as often these trade bills are. But, as is so often said in this House, with trade being so fundamentally important to our economy as a small nation reliant on primary produce and manufacturing, we are getting these technical bills around trade and ensuring that where possible we are consistent with the World Trade Organization. They are fundamentally important to the growth and development of our economy and our ability to compete internationally.

The National Government talks a good game on this stuff, but the fact remains that a bill like this has been allowed to languish for so long, and we are in the second term of this Government. It was not a bill that was introduced by this Government; it was introduced by the previous Government. This Government has had plenty of time to progress a technical bill like this, which is just so fundamentally important to ensuring that the New Zealand economy is robust. In fact, it would have been extremely useful. In times of low spending and in times of recession in New Zealand, it would have been very useful for this bill to have been implemented 2 or 3 years ago. I think producers and business people in New Zealand would have appreciated that, but no, because this Government can talk a good game on business but when it actually comes to getting on with the job of being in Government, it fails again. New Zealand businesses are starting to wake up to this. They are starting to realise that this is the second, and final, term of this National Government, because, quite simply, it does not have a plan for our economy.

STEFFAN BROWNING (Green) : The Greens are very clear that they like the point of this bill, the Trade (Safeguard Measures) Bill, in terms of it being an anti-dumping bill, effectively, and in terms of it reducing the risk in terms of a World Trade Organization (WTO) trade dispute. However, the Greens are about fair trade, not free trade as we see free trade happening at the moment.

There is a very disturbing aspect in this bill. In fact, the purpose of it is only temporary. Clause 3 provides that the purpose is to: “(a) provide temporary protection to a domestic industry from serious injury caused by increased imports; and (b) facilitates adjustment by a domestic industry to increased competition from increased imports.” There is nothing permanent about this.

This is effectively saying: “Hey fellas, organise a redundancy for your staff, give them their notices, plan for your early retirement, think about what your local community is going to do from now on because, sorry, this bill looks out for only a temporary adjustment.”, while these people actually downgrade their businesses and move out of their businesses.

We have seen so many things happen in New Zealand. We have watched clothing move off to Fiji, and now we know it has moved further afield and even Fiji does not have that as a business, any more. We have watched footwear manufacturers head off overseas. We now are getting more and more primary-production imports, huge amounts of stuff. I would suggest that 40 percent of the pork that is eaten in New Zealand—hundreds and thousands of tonnes a week—is effectively dumping, and what are we doing about that?

This bill is fine if it saves us from a big, expensive court case, but beyond that it continues to send us in the wrong direction. What is “serious injury”? It is really, effectively, looking out for the absolute worst while anybody who is considered small fry—small to medium sized business—will be going down the gurgler all that much quicker. I would suggest it is just the very big businesses that will get any benefit from this. There is no suggestion of any protection for anything less than what is considered serious injury.

We have lost expertise; we have lost self-reliance in this country. As we head into increased impacts from oil shocks, natural disasters, and social and civil disasters internationally we actually need to have a higher level of self-reliance. We have no self-reliance from something like this. This is absolutely temporary.

A problem with the World Trade Organization, which we are connected with and which we look at to try and smooth trade internationally, is that it is very, very strong on trade and very, very weak on environmental and social concerns. We have material coming in here. Sure, we might get a bit of a tariff put on it. However, what adjustment to make an even playing field is there for New Zealand producers and manufacturers? There is very, very little.

We have material pouring into this country as it is. New Zealand manufacturers are expected to compete against low-wage economies—economies that do not have efficient and protective devices such as the Resource Management Act, and other devices such as national environmental standards, that might give some protections. Yet our manufacturers, our producers, have to compete, price on price, without those things being adequately considered.

So although the Greens are concerned and do not want New Zealand to be caught up in expensive litigation—and this bill may, and let us hope it does, go some way to ensuring it does not happen—we will remain concerned about the continuing and often secretive direction towards free trade.

We would love to know what is going on with the Trans-Pacific Partnership arrangement at the moment, where we have no idea as to the level that something like this bill may effectively be needed, or whether a secretive free-trade agreement may, in fact, lock us out of even being able to use our Trade (Safeguard Measures) Bill.

We need to get a better balance in terms of how we do our trade. We need to be moving on from the free-trade mantra to a fair and a socially and environmentally justifiable trade. While we carry on down this path of free-trade agreements, our manufacturers and producers continue to lose out. I notice that, of course, some producers may appear not to be losing out, because it appears that milk powder and maybe a bit of beef—and some coal, of course—might be the dominant beneficiaries of free-trade agreements.

We actually need to be looking at that other range of producers in New Zealand: the producers that used to be here before the free-trade deals. The opening up, in lots of ways, of trade has actually reduced us to having a series of monocultures. We have lost our diversity, and we have lost our self-reliance, and we have sent it off overseas through the unbalanced competition that has come in here. It is outrageous that this is about effectively supporting industry that is quite destructive and unsustainable in the New Zealand environment, as well.

We have so much riding on dairy, and some milk powder is produced in consistently unsustainable ways, and it does not need to be. Yet we have bills coming in that in a roundabout way support that continued unsustainable production. We need to shift to different systems. The sooner that our production is done in a sustainable way, the sooner we push into organisations like the World Trade Organisation the idea that sustainability needs to be at the absolute highest level.

The Greens do want to keep New Zealand out of litigation, but we are presented bills like this that are based on a very unbalanced environmental and social situation. Thank you.

SIMON O’CONNOR (National—Tāmaki) : I will take just a short call on this. I just want to bring a bit of context back to the discussion here tonight, and the context is a Government that has been progressing a number of bills for this country and for the betterment of it. And when we are talking about this Trade (Safeguard Measures) Bill, we are also seeing it in the context of a Government that is leading close to 28 high-level delegations around the world to try to secure better trade for this country—a cooperation that is global, and a cooperation that is good for this country.

The bill itself is relatively simple. It is a safeguard, and it is hard to understand why any safeguard of this nature, which enhances trade in New Zealand, would be rejected. It is a safeguard replacing a prior measure. It is simplifying it for New Zealanders. It is here to stop, as a member mentioned earlier, the rapid influx of cheap imports. It is relatively simple. It is here to try to increase the time frame in which we can consider the need to safeguard our trade. It is simply to provide us with that opportunity to reflect rationally and appropriately and to take on, and take in, all the effects that we need to—the main one being that we do not end up in the World Trade Organization facing problems and financial problems we do not need.

This is a responsible bill. It is a bill that highlights the continuing importance for this Government to promote good trade for the welfare of all New Zealanders, and I totally support it. Thank you.

SU’A WILLIAM SIO (Labour—Māngere) : I am happy to rise on behalf of the Labour Party to support this Trade (Safeguard Measures) Bill. What I will want to do is spend some time articulating why we support it and conclude with some remarks that I hope the other side will accept as constructive criticism.

But before doing so, I do want to make mention of an event that took place yesterday, because I think I might not get another chance to put it on the record. I was privileged yesterday alongside my colleague the Labour Party leader, David Shearer, the Hon Phil Goff, and the Minister of Foreign Affairs to join with the Governor-General and many other MPs to participate in the funeral of the King of Tonga. I think it is important. I have a significant number of the Tongan community living in my electorate and they would want me to express to this House the appreciation that they have, and I convey that to the Governor-General, to the Government Ministers, and to all the parties who were present yesterday.

It was a huge, strong delegation, which, I think, signals the importance of the relationship that New Zealand has in the international area, but, more important in this case, with Tonga and the Pacific Island nations. We do have a close relationship not only on a personal and educational level, but also on trade, and so I thought it was appropriate that I do so at this particular time. I do want to place that on record, because irrespective of what the outside world might feel about the King of Tonga, the people of Tonga have a high regard for their late King.

I want to do that because only today I have been advised by some in the Tongan community that they are complaining to this Government, and I have encouraged that complaint to go to the Minister of Foreign Affairs as well as to the Ministry of Foreign Affairs. I know it is hard for the Government to choose who goes and who does not go, but, in this particular case, I have asked the Tongan Advisory Council to lay its complaint directly as to why it was not part of that delegation. I thought: “Get it on record. Where credit is due, place that. But then also make it known to this Government about what the Tongan Advisory Council is intending to do.” So those are my comments to preface.

As I said, the Labour Party does support this bill. After all, it is a bill that began under the Labour Government with the good work of the Hon Lianne Dalziel, and I think it is important, as mentioned by other speakers, that we take this quite seriously. The safeguard measures are to try to ensure that duties are placed on certain goods that come into the country, particularly where certain industries might be under threat. I am not a member of the Foreign Affairs, Defence and Trade Committee so I did not get a chance to hear the submitters, although I understand there were five submitters from significant organisations in New Zealand.

But it was interesting reading some of the report that, in terms of our used tyres, we have lost some significant industry because we did not place enough safeguards on certain goods. I will give you an example. We have lost the footwear industry as regards all types of children’s, men’s, and women’s footwear. It was interesting that over a 2-year period, when we removed the protections on our borders, the volumes of import in regard to footwear increased by 124 percent. As a result of that not only did we lose the market share, the profitability, and the return on investment, but we lost, I suspect, thousands of jobs. Again, I am belabouring the point that there is a role for appropriate safeguards in order to protect our local industry.

It was interesting that I found for men’s and boys’ underwear that the removal of the licensing controls over those particular goods allowed for imports to increase by 289 percent over a 2-year period. Again, what we have witnessed over the past as a result of not having those safeguards or those protections on our borders with regard to those goods is loss—the complete loss, I would say—in that industry: the loss of profitability, the loss of our sharemarket, and also the loss of hundreds, if not thousands, of jobs. Again with used tyres, I note that in terms of used tyres for motor cars and light commercial vehicles over the 1-year period of 1992-93 there was an increase of 52 percent in our imports.

It was interesting that the temporary safeguard authority did not think that safeguard measures were needed at that particular time. There are also the abrasive discs in 1995, which are the grinding wheels, or the cut-off wheels, and imports increased by 28 percent over a 1-year period. Again the temporary safeguard authority concluded that there was no ground for safeguard measures. The point I am making is that Labour supports having these safeguard measures because I think where certain industries are threatened by imports we need to act fast, and we need to act decisively in order to protect those goods.

But also we need to protect the profitability in our own sharemarket, because in this day and age, as this Government knows, we are not only going through a recession but we have hit depression. I understand from some of my mates who are at the Ports of Auckland that a recession is when their neighbour loses their job, but a depression is when not only their neighbour loses their job but everybody else in that neighbourhood loses their job. There is a real need for us to be protective of our manufacturers in particular, and I hope that in the years ahead we can do more work in order to increase and support and encourage the manufacturing industry. I do not think that we are really taking the full potential of the manufacturing sector and being able to ensure that there is a deliberate and more determined plan.

I suppose that brings me to my criticism of tonight, and, as I said, I hope the Government does take it by way of constructive criticism. It has taken us almost 4 years to have this bill come to the House. As I said earlier, it began with the previous Labour Government, with the good work of my colleague Lianne Dalziel. It went to its first reading in 2009 and there were only five submitters. There were not hundreds or thousands of submitters, so I do not think the select committee really took a lot of time to deliberate on this. But only now is this Government bringing it in for the second reading. We should have had this in the House some time ago.

I suppose what that highlights is that it reinforces what we have been saying all the time about this Government. Where is the deliberate plan for protecting our industries, for boosting our economy, for creating jobs? Is it just simply rolling out the action points? Where is the comprehensive plan? Because of the ad hoc nature of the way this Government has treated this particular bill, we are continually on the back foot. The Government is not just focused on cuts to funding, cuts of public sector jobs; this House will recall when this Government first came into power the mantra for its cuts to the public sector was that it was capping the workforce. It was not cutting the workforce.

Hon Ruth Dyson: Capping, not cutting. Ha, ha!

SU’A WILLIAM SIO: That is right. Today the public sector has lost over 5,000 jobs across all Government departments and other State-owned enterprises. That is over 5,000 jobs. I also understand there are over 2,500 jobs still unfilled, and the morale of the public sector is so low at this particular time that I am hopeful that this Government acts quickly. Simply merging Government departments is not going to get us to where this economy needs to get. We need jobs and this bill should have been in the House a long, long time ago.

• Bill read a second time.

Hon MAURICE WILLIAMSON (Minister for Building and Construction) : I move, That the Building Amendment Bill (No 4) be now read a first time. I intend to move at the appropriate time that this bill, the Building Amendment Bill (No 4), be considered by the Local Government and Environment Committee, and that that committee report back to the House on or before 31 July 2012. The Building Act 2004 is the primary legislation that governs the building and construction sector in New Zealand. I want to make sure that members are fully aware of just how vitally important to our economy the building and construction sector is. I bet you that if we did a survey of this House and asked how big the building and construction sector is as a contributor to our GDP relative to, say, agriculture, everybody would say they were quite different. In fact, they are almost identical in their contribution. They are almost exactly the same in their contribution.

To get some efficiency gains into the sector is vitally important. The National Government conducted a major review of the Building Act. We went out and sought submissions and we got over 380 submissions on the current legislation. I think—to be fair to Labour, because it was Labour’s legislation—in general, submissions were that the current system was not broken, but we did need to reduce some of the costs and some of the red tape that was in there and try to improve some of the efficiency in the system. It is more to do with some amendments to the legislation, rather than holus-bolus throw it out, because productivity in the building sector is very low, there is a lot of risk-averse behaviour, and there are a lot of things that are needed. I welcome and thank the huge number of people from organisations like the Registered Master Builders Federation, the Certified Builders Association, the Building Industry Federation, and a whole range of people who made submissions to this bill and who, I believe, will make submissions to the select committee.

Amendments to the primary Act have been done by two things. Just the other day in the House we passed the Building Amendment Act 2012, which actually started as the Building Amendment Bill (No 3), and now this bill, the No. 4 bill, brings them together. I think members will remember that when I was talking about the No. 3 bill in the last few weeks I said they should not judge it on its own merit but understand that it was part of a comprehensive package of changes. If I took the changes in both that No. 3 bill and now this No. 4 bill together, I think I could really lay out what the Government’s goals are. The Government’s goals are a sector with the necessary skills and capability to build it right first time, because so much of the building and construction sector up until now has been about redoing the work or coming back to fix up what was wrong. So it is about getting it right first time. The Government wants a sector that delivers good quality, affordable homes and buildings and contributes to a prosperous economy; a well-informed sector, a sector that shares its information and quickly identifies problems and corrects them; a sector where everyone involved in building work knows what they are responsible for and what they can rely on others to do; and, finally, consumers in the sector making informed decisions and understanding the risks and consequences of their decision. So that is what we are after.

Let me take members through some of the substance of this bill, which is having its first reading tonight. This bill completes the Government’s changes to the Building Act 2004. The review of it arose from, as I said, the big submissions we had received, and it supports the Government’s goal of achieving a more efficient and productive building sector. I want to outline some of the key changes in this, the No. 4 bill. The bill introduces new consumer protection measures to help New Zealanders who are building or renovating their homes. New Zealand’s housing stock—and this is a good number for members—is worth about $613 billion. That is about 10 times the value of the New Zealand stock exchange. So consumers and builders in the housing market deserve, I believe, to have clear rules about how they are expected to behave in such a ginormous industry with such a phenomenal asset base. The new measures in the bill will help homeowners to hold to account those responsible for building work and get any faults fixed quickly and more efficiently.

The new measures include the requirement that all residential building work above a prescribed price must be documented in a written contract between the homeowner and the building contractor. This will ensure that both parties clearly understand from the outset what their rights and their responsibilities are. Before a contract is signed a building contractor will be required to provide information to their client about their company, the people who will be carrying out the work, their track record, and any surety or financial backing they have to cover the costs of fixing any faults. This, I believe, will help consumers make informed decisions about which contractors to chose, based on knowing those who have got a good track record with very few faults along the way, and that will be where I think the market will gravitate very quickly towards.

All building contractors will be required to fix any defects in their work reported by their clients within 12 months of completion. This obligation is additional to the existing 10-year limit for people to be able to sue for defects in building work. The 12-month period is intended to be a “no questions asked” requirement for the building contractor to stand behind the quality of their work, similar to how faulty goods can be returned and repaired if they are not fit for purpose. We can do it for our colour TVs, we can do it for our new motor cars, so we should be able to for new buildings. The builder must put right any defects so that somebody’s new house—and the service they receive—is fit for purpose and the quality and the standard that they paid for. I think that consumers can expect no less. These measures will put in law what is already best practice in the industry—and I need to stress that. There are a number of good practices out there that do a lot of this. Builders will be more likely to build it right the first time, because they clearly will be accountable for fixing their own mistakes. The Government anticipates these new consumer protection measures will support responsible, professional building contractors, and we expect to see contractors competing on quality as well as on price. The measures will also help owners to distinguish the professionals out there from the cowboys.

The bill also contains some other important amendments to the Building Act 2004 to improve efficiency and accountability in the sector. These include increasing from $100,000 to $200,000 the maximum penalty for doing building work without a building consent, which will better signal that the offence is one of the most serious offences that can be conducted in the Building Act; rewriting and reformatting schedule 1, which provides for exemptions for building consent requirements—schedule 1 has been amended several times since 2004 and has become difficult to access and to understand—and adding new powers for territorial authorities to deal with non-dangerous buildings that are near to dangerous buildings. Again, I think members from Canterbury will know that is an issue that has cropped up time and time again—a building that is not dangerous but is right next to one that is—and this is giving the local authorities some power to act on that building, which may be in danger. The Canterbury earthquake showed that there can be significant risks to undamaged buildings if they are next to those that are dangerous. Councils should be able to warn people about the danger, or, in the worst-case scenario, prevent people from entering those buildings that may be adversely affected by what is next door. There is better targeting of the requirements of the Dam Safety Scheme to include dams that are large dams by virtue of their size, and based on risk factors. Again, I am a Minister who is, and I think this Government is, very fixated on trying to actually deal with things on a risk-rated basis, and not on a one-size-fits-all basis. So this will, I think, improve the efficiency and effectiveness of the Dam Safety Scheme and reduce a lot of compliance costs for a lot of rural farmers, in particular, who have quite small dams on their land, but have actually had to comply.

This bill will empower consumers. It will increase confidence in the sector. It will reinforce incentives for the sector to upskill, and it will reduce compliance costs by clarifying regulatory requirements. I am delighted to say that I think that every one of the major organisations and industry groups that I have talked to about the substance of this bill are supportive of it. In fact, it was many of them that contributed to the writing of this as we got it to this point. I expect at the select committee it will get some modifications, but the actual general intent of it, I think, will weather the select committee and come back to this House in July. I commend the bill to the House.

RAYMOND HUO (Labour) : Labour will support the Building Amendment Bill (No 4) to go to the Local Government and Environment Committee. We are in broad agreement with the direction of the Building Act review, which was initiated under the last Labour Government. I acknowledge that there has been a high degree of cross-party commitment to the Building Act review. Much has been said about the Building Act 1991 and the Building Act 2004. The 2004 Act was introduced in response to widespread weathertightness failure in the residential housing sector, which resulted from systemic problems, which we need to look at closely during the review process. It is important for us to fully understand what went wrong in all instances, not to apportion blame, but to learn valuable lessons that will minimise the risk of a failure in the future. This means we will need to be ready to adjust our regulatory frameworks in light of what we have learnt, and it is important for us to take a comprehensive approach. Let us say, for example, if I may use an analogy, that it is like launching a satellite. We simply cannot say: “Hey, let’s get the satellite launched first and then sort out the navigation system later.” We cannot do that. If we do, we will have dire consequences.

On reflection of the way in which the Building Amendment Bill (No 3) was progressed, I think it is a fair for me to suggest that we should not give too much of a hard time to the Minister. The No. 3 bill was introduced in November 2010, received its first reading in December 2010, was referred to the Local Government and Environment Committee, and we received the select committee report 3 months later, which was 28 June 2011. The bill did not, however, receive its second reading until 28 February 2012, and that was less than 2 days before the licensed building practitioner scheme kicked in. The reason that this bill was rushed through was probably that unless it was passed into law, a number of good initiatives, including New Zealand’s long DIY tradition, would not be able to continue in its current form. Overall, that bill was passed into law in a “wait, wait” and “hurry, hurry” fashion. That was not a good way to demonstrate competency of how the House should be run, but that should be the responsibility of the Leader of the House, not of the Minister for Building and Construction.

The creation of a superministry looks interesting. From 1 July it will absorb the Ministry of Economic Development, Department of Labour, Ministry of Science and Innovation, and the Department of Building and Housing. To make it sound more like a military operation, shall I add that at 2400 hours on 1 July 2012 the superministry will absorb four ministries/agencies.

It was only 2 years ago that the Ministry of Science and Innovation was even formed. Worse still, it was only last year that the Department of Building and Housing took over social housing policy. Transferring social housing policy from the Housing New Zealand Corporation to the Department of Building and Housing, and now removing it from the Department of Building and Housing to transfer it to somewhere else is just one example of National’s expensive shuffling. Although its impact has yet to be felt, some say it is a good idea and that it may improve business efficacy; some say it is not a big deal and that it is just rearranging the deckchairs; some say it is a bad idea.

I am sure the Minister will have received an email from one of the top structural engineers in this country, Mr John Scarry, and I quote: “This is far worse than rearranging the deckchairs. It is like burning what few lifeboats there were on the deck of the Titanic after it hit the iceberg in order to keep the officers warm. Honestly, this is a continuation of all of the disasters that have afflicted the construction industry, and especially the structure profession for decades. Long periods of neglect, then the worst of changes at the worst possible time. One also has to question how a Government can do this sort of thing with regard to the Department of Building and Housing when its own royal commission into the Canterbury earthquake will not report back fully until near the end of this year.”

I will quote from the briefing for the Minister for Building and Construction released under the Official Information Act: “It is estimated that social housing accounts for around one in five dwellings in New Zealand … The current delivery model for social housing is failing to meet the needs of a growing number of households …”. In addition to that, the Department of Building and Housing has taken on other work concerning the financial assistance package for owners of leaky homes and provided information, advice, and dispute resolution services for unit title holders. I quote: “With additional functions has come increased complexity in our work.” That was what the officials said. What future impact it will have on the Department of Building and Housing we do not know. What is certain is uncertainty.

Let us have a look at the Building Amendment Bill (No 4). Firstly, with regard to building consent authorities, there is an unbalanced allocation of risk and responsibility in practice. The bill will introduce a stepped, risk-based system that would see consenting and inspection effort by building consent authorities more tightly focused on that building work where the greatest risk exists. Secondly, with regard to building practitioners, under the Building Act 2004 the Department of Building and Housing established in November 2007 the licensed building practitioner scheme, which became effective from 1 March this year. Qualification and competency, in combination with other measures such as warranty and insurance, will help protect the interests of consumers. Thirdly, for better consumer protection there are some discussions about the joint and several liability model and the proportionate liability model. There are pros and cons, as evidenced from the Australian experience. I will be interested in listening to our stakeholders in that regard.

Also, I am interested in the ideas of a surety. The 2010 data shows that approximately 50 percent of new buildings are covered by the surety products available in the market. That brings me to the fourth issue in respect of the New Zealand standards. From the briefing we note that an independent review found that the way standards are used in the system has not changed, despite changes in legislation in 1991 and 2004. Of the over 650 building-related international and New Zealand standards—

The ASSISTANT SPEAKER (Lindsay Tisch): I am sorry to interrupt the honourable member, the time has come for me to leave the Chair.

Hon Members: Oh!

The ASSISTANT SPEAKER (Lindsay Tisch): Order! This debate is interrupted and set down for resumption next sitting day. I will resume the Chair at 9 a.m. tomorrow for the extended sitting.

• Debate interrupted.