Hon Dr NICK SMITH (Minister for Climate Change Issues) : I move, That the Climate Change Response (Emissions Trading Forestry Sector) Amendment Bill be now read a second time. I first thank the special select committee, the Emissions Trading Scheme Review Committee, chaired by the Hon Peter Dunne, for at short notice giving consideration to this bill. I also thank the members of the select committee, who have made constructive changes to the bill, and also members of the House for agreeing to allow this bill to progress through the House today, 30 June.

I want to quickly recite what this bill does in respect of the broader debate around emissions trading, the forestry sector, and the huge issue of climate change. There are three particular provisions in this bill. The first amends the date on which foresters are able to report deforestation and to surrender units. The intent of this bill is to put forward the dates by which that reporting and the surrendering of the relevant units are required. In the original Act, it was required on 31 January this year. It is intended to push that out to 31 January next year because the level of awareness of the obligation is not high—I am embarrassed to say that even some Government agencies did not meet their requirements to do so by 31 January, and I am sure that many other New Zealanders who own forests that may have been removed last year did not meet that reporting requirement. To give another year, given the complexity of emissions trading, makes good sense.

Two further substantive dates are changed as a result of this bill. The first is the date by which the Government is required to provide for an allocation plan of units under the emissions trading scheme for owners of forests that were planted before 1990. The reasons that it would be unwise to publish an allocation plan at this time are that there has been a formal review of the emissions trading scheme, there have been many topical issues around forestry before the Emissions Trading Scheme Review Committee, and it would be somewhat contradictory and confusing for the Government, at the very time when those key provisions are being reviewed, to proceed with an allocation plan. The bill that I introduced provided for that date to be extended by Order in Council. I note that an amendment for the date to be 1 July, which was advanced by Labour and Mr Charles Chauvel, has been included in the bill as it has come back from the select committee. I think that is a reasonable timetable. I also think it is good to have the flexibility whereby it could be done earlier than that. In my view, the timetable will provide a sensible transition for the issues around the allocation plan.

The third issue that is developed and addressed in this bill is in respect of the timing by which owners of forests of a smaller area—fewer than 50 hectares—apply to have them exempted under the emissions trading scheme. It was to be a requirement that all applications for an exemption be lodged by today. Again, it is the view of the Government that, given the review that has taken place in the select committee and the low level of public awareness of that obligation, it makes sense for that date to be put out into the future. Members opposite propose that the deadline for applications for exemptions be extended to 1 July 2010. Again, that is a sensible change, and one that I am happy to support. We will bring that amendment through into the final bill.

I stress to the House that none of these three changes being made affects any requirements and obligations that foresters have under the emissions trading scheme. It is only a shifting of the dates by which they are required to report, and a shifting of the dates by which the Government is required to provide for an allocation plan. It is the Government’s view that introducing forestry into an emissions trading scheme is a very complex and challenging task. We are the first country in the world to attempt to bring forestry into an emissions trading scheme, and it needs to be done in a considered and careful way.

We should note that in recent years the loss of significant areas of forestry has contributed to quite negative numbers for New Zealand around the issue of climate change. We should acknowledge that the emissions trading scheme has proved successful in stopping a large increase of deforestation since the scheme came into effect on 1 January 2008, but we need to work through these detailed issues in a considered way to ensure that it works.

This is a minor bill. The House will need to consider later this year a more substantive emissions trading amendment bill, to make it into a scheme that is workable and that can carefully balance New Zealand’s environmental and economic interests. The Government awaits with great interest the work being done by the Emissions Trading Scheme Review Committee. When that work is complete, our intent is to bring in a bill that will enable New Zealand to introduce and to get up and running the other parts of the emissions trading scheme.

Again, I thank members of the House. I thank the select committee for its work, and the officials who have supported that select committee work. I commend the bill to the House for its second reading.

CHARLES CHAUVEL (Labour) : As noted by the Minister for Climate Change Issues, the Hon Dr Nick Smith, the Climate Change Response (Emissions Trading Forestry Sector) Amendment Bill, as reported back from the Emissions Trading Scheme Review Committee, includes two changes recommended by the select committee. The first change is to new section 168(1)(ca), which is to be inserted in the Climate Change Response Act by clause 4 of the bill. This provision deals with the forestry sector. The committee has recommended that rather than having a final date for the deadline under that section to be set by Order in Council, there ought to be a firm date set by legislation as to when the actions required under the clause should be taken. Those actions cannot be taken any later than that date.

There is a similar amendment to new section 183(3)(a), which is to be substituted in the Act by clause 5(2), where the plan put in place in the original bill to allow a deadline to be set administratively is replaced by the firm deadline of 1 July 2010. This amendment is an appropriate exercise in parliamentary oversight. Rather than allowing these sorts of things to run on at the pleasure of the Minister, Parliament is asserting its right to set a final deadline in the legislation. I think members of the select committee were unanimous in agreeing to that amendment, so the bill has been reported back on that basis.

As the Minister said, the bill, by agreement of the parties in the House, will be advanced through its stages today to meet the deadline of 30 June. I will address a few comments on the Minister’s assertion that there are deadlines in the Climate Change Response Act that could not have been met in any event, and that this bill would have been necessary no matter what had happened, whether or not we were having an emissions trading review. Unfortunately, I do not think that the facts bear out what the Minister has said. The industry’s reaction is quite telling. When those in the forestry sector were asked about this legislation last week, they said they were not surprised by the delay, because of the state in which climate change policy currently sits in New Zealand. However, they were disappointed. The Forest Owners Association chief executive, David Rhodes, said: “The market depends on supply and demand and if we don’t have demand, we don’t have a market, and that follows on into forest investment.” That comment has been echoed by the forestry sector throughout the history of the emissions trading scheme.

It is as well to remember that forestry, as the Minister said, was bound by this scheme right from the beginning. Yes, we were the first country to bring forestry in, but we have not done well by the foresters in this Parliament. That is why we have 8 million seedlings rotting in the ground. There may well be a halt to deforestation, as the Minister has suggested, but we need to look to whether that is as a result of the recession we are currently in, rather than because of any benign effect of Government policy. The truth probably is that because of the uncertainty in the sector, with the lack of incentives to plant and the lack of profitability—because there is no ability to trade carbon credits, which the foresters all hold—there is no incentive for those foresters to be able to maximise the value of their plantings.

We might have had an end to drastic deforestation. We always expected there would be a bit of deforestation before the coming into force of the emissions trading scheme legislation. Hopefully, that is over, but let us not suggest that that is anything to do with anything other than economic conditions. Let us not suggest that it is a legislative consequence or a consequence of the actions of Parliament.

I will now say a word about the wider state of climate change policy. The Minister rightly says that we can probably look forward to further legislation in this area. I said on the introduction of this legislation that we were trying to assist the Government to get to a position where it could go to Copenhagen at the end of the year with an emissions trading scheme bill intact, with proper targets in place not only for the longer term but for 2020, and with the ability to look forward with confidence to a scheme that would have integrity and would internally hold together well for the sectors to be included—all sectors and all gases. That is still the aim of members on this side of the House, but we must avoid making excuses for not complying with the law.

If officials had been told back in November, when the Minister took office, that they were to get on with the requirements of the law—because it is open-textured legislation; it is an Act that says the Minister and his officials are to get on and make rules for the various sectors that are bound by the legislation—I do not think we would be in the position we are in now; I think we would be in a position where departments would have been compliant with the law and the sectors would have been doing what they should have been doing under the legislation. But, of course, they have had this false sense of security—insecurity, perhaps—about the reality of the forestry sector. They believed that because there was a review by the select committee, somehow there would not be a requirement to comply with the law. This has been a top-down belief; it has come right down from the Minister’s office and through into the industry, and of course it is wrong. When the legislation says that administrative action is required, then administrative action has to be taken. It is a completely unnecessary exercise for this Parliament to now be stepping in and rescuing the Minister, his Government, and the departments involved, let alone the forestry sector, for non-compliance with the legislation. The legislation should have been complied with from day one. Had it been complied with, we would not be spending time in Parliament applying this fix.

The lesson that has to be taken from the situation we are in now is that we cannot let this happen to the further sectors that are to come under the legislation. We have the stationary energy and industrial processes sector due to come into the emissions trading scheme on 1 January next year. It is well known that no allocation plans are being put in place in that sector. No work is being done on the thresholds at which the members of those sectors are to come into the scheme and have units allocated to them. Those sectors have to plan their businesses on the basis that they will be bound by the law on 1 January next year, because that is what the law says, but continual statements by the Minister and others are leading them to believe that we are going to have to pass some sort of legislation to give them some comfort that that will not be the deadline. That puts industries in an impossible situation, as submitters told the Emissions Trading Scheme Review Committee. They cannot plan their businesses on this basis, they cannot make decisions about whether to build new generation plants, and that is very serious for the country.

We have been in situations of electricity shortage before, we have planned assets in the pipeline in the generation sector, and we want those assets to continue to be built so that we can keep the lights on. But in the climate that those in the industry are in at the moment, they do not know whether they are going to be bound by the emissions trading scheme on 1 January or 1 July next year. The Minister cannot give them that certainty, because there is not the political agreement that he thought there was. They are in a real bind.

It is interesting that New Zealand Steel, when it heard of today’s delay, said that it was surprised to hear about it. It has been proceeding on the basis that the scheme would come into force on 1 January, and although there is this uncertainty it is just getting on and doing the best it can. I know that members around the Chamber will reflect on the fact that although the ACT Party supposedly stands for certainty and private property, its contribution to policy in this area is the Emissions Trading Scheme Review Committee, which has destroyed property rights for the forestry sector and created huge uncertainty elsewhere. There is a huge irony there. But here we are: we are where we are, and the legislation is what it is. We will do our best to get on and make a good job of it.

CRAIG FOSS (National—Tukituki) : I rise for a short speech on the second reading of the Climate Change Response (Emissions Trading Forestry Sector) Amendment Bill. I agree with the point the previous speaker, Charles Chauvel, noted regarding deforestation. I agree wholeheartedly and totally, and I hope that deforestation has, in fact, ended. There are many reasons why it may have ended—the member alluded to some of the possibilities, it is true—and the consequences of deforestation for New Zealand, our obligations, and the larger economy are very, very serious indeed. So I acknowledge and agree with that particular point from the previous speaker.

I am a member of the Emissions Trading Scheme Review Committee, and I take this moment to thank all the members of that committee, who I believe will be participating in the debate in its various stages tonight, assuming the bill passes each stage. I was also on the Finance and Expenditure Committee last year when the various emissions trading scheme bills came through, and I think that it is fair to acknowledge that all participants have moved on a fair bit, from some of the debates of last year to the point we are now at. We are here discussing an amendment to some detail of existing legislation and not actually debating the need for the legislation, full stop. Many submitters who submitted a second time around—admittedly not on this bill but on the emissions trading scheme bills themselves—have also moved quite a long way, and are debating and submitting on implementation and execution of the scheme rather than on whether we should have it. Of course, there are some exceptions, and I am sure I will be receiving emails from many of the submitters as I speak, but I am very encouraged that across Parliament the debate is, I think, down to the details. Yes, there may be some political points to be made, as the previous speaker did a little, but there is a very good focus on the greater good. So I acknowledge the genuine effort and cooperation in getting to where we are now, with regard to all things in this Parliament to do with emissions trading and climate change.

I acknowledge that in relation to the bill we have before us, much discussion was had leading up to the time the bill came into the House, and before it went to the select committee. I also acknowledge the initiative of the Opposition and Mr Chauvel in regard to the Supplementary Order Paper he brought in, which the committee discussed and accepted without amendment. The bill we have before us is slightly different to the one that arrived before the select committee, which is a credit to the work of the committee and an acknowledgment of the Supplementary Order Paper from Mr Chauvel.

This is the first piece of legislation to go through the Emissions Trading Scheme Review Committee, albeit a somewhat small piece of legislation about moving some dates out, as the Minister for Climate Change Issues alluded to. But it gives worth and value to the work of the committee. We have heard from many, many submitters on all things to do with emissions trading, but particularly, as both the Minister and the previous speaker noted, on very, very contentious issues on and around forestry: pre-1990 and post-1990 forest land; land less than 50 hectares, or 50 hectares or more; and the issues that many Māori landowners, forestry owners, and managers have raised. I note also that the Minister has signalled there may well be a more substantive piece of legislation towards the end of the year. I am hopeful of a continuation of the cooperation across Parliament that we have seen thus far.

To pick up on one point of the previous speaker, I note that the National-led Government put before the electorate last year its intentions and principles on the emissions trading scheme. There was nothing too controversial about those. They provided some certainty as to where a National Government would go, and about the framework with which the National Government might review or have a look at issues around climate change and emissions trading. Again, I celebrate and acknowledge that point. I just cannot say enough about the buy-in and cooperation across the parties.

I make one final point before I close. The previous speaker also noted that some things have changed, and that there is existing legislation, of which this bill amends a small part—although a very important part, of course. But we are moving towards the Copenhagen conference, and there is a need for New Zealand to confront and really address some of the harder issues and to supply some certainty where there is uncertainty, which is not just around forestry but also on where the Crown and all the other participants such as liquid fuels and stationary energy—you name it—sit in relation to the emissions trading scheme, as the previous speaker alluded to. It is very important that by the time we get to Copenhagen and appear on the international stage we can hold our heads high and stand proud because we are making substantive, sensible, and pragmatic solutions and doing our bit for the world and for climate change, and we are doing it right here in New Zealand, with a constant look at what our competitors are doing. We compete with our friends just across the Ditch in Australia, but on many things we can sit together and, perhaps, start to align as to where we will end up, and where we will be by 2020.

Much information came out of question time today. There was even a new discussion arising from a question from the Greens, which again points to the fact that we are now taking the debate much further than the question of whether we should have an emissions trading scheme. There has been some quite sensible, considered, and pragmatic thought as to how New Zealand can do its bit, have an emissions trading scheme, and fit with the unique features of our economy. I look forward to the Committee stage and to hearing other speakers on this bill, and I acknowledge again the cooperation of all parties so far. Thank you.

Hon PETE HODGSON (Labour—Dunedin North) : I will give just a wee reaffirmation that Labour members will be supporting the Climate Change Response (Emissions Trading Forestry Sector) Amendment Bill. We consider it to be minor, we consider it to be sensible, and we consider that the firm deadlines that the Emissions Trading Scheme Review Committee has put into the legislation are the appropriate things to have. And we signal the obvious—that this legislation represents for part of the emissions trading scheme a delay of 12 months, or thereabouts.

I say a little acerbically that it needs to be put on the record that had there been the necessary cooperation during the 9 years of the Labour Government—cooperation that we think we might be starting to see now—we would not be in this position. We would not be in this position if we had matured earlier. But we did not. We got off to a great start even before then, in the days of Simon Upton, who, by the very nature of the man, was inclined to want to reach out across divides and to have chats about this and that. And those were the days when we signed the Kyoto Protocol. We did not ratify it in that time, of course, but we signed it and got started. Simon Upton never did get to make a lot of progress, because of his own Cabinet and its opposition to the things he was seeking to do. But under the 9 years of the previous Labour Government—and I remember some of these matters well—the National Party routinely opposed everything. It opposed every piece of legislation, and it engendered opposition in society as a whole. It declined to promote alternative plans with any detail. It even had one of its idiot members of caucus ride a tractor up the steps of Parliament. It was only 3 years ago that the Prime Minister—today’s Prime Minister—said he was not sure of the value of the Kyoto Protocol, and, indeed, he was not sure whether climate change was a real matter.

But, you see, in 2002 the Kyoto Protocol was ratified, and at that point an environmental issue became an economic one. That is what the Kyoto Protocol does to climate change. It takes it from being an environmental issue and turns it into an economic issue—at least, for those countries that have targets. If we look a little further along, we see that it immediately becomes a fiscal interest, and, therefore, at the point of ratification, as soon as Treasury has woken up to that in whatever jurisdiction one is in, then the Minister of Finance wakes up to that, and a bit of go-forward is created because of that. But we did not get it right even then. People did not like the carbon charge, and after the 2005 election that was voted down and we went straight to an emissions trading scheme, not via a carbon charge but directly. My predecessor, David Parker, put in place an emissions trading scheme, with support from many parties in this House but not including the National Party.

National could have supported the emissions trading scheme, and then gone and amended it later on, but it did not.

Hon Dr Nick Smith: We voted for the first reading.

Hon PETE HODGSON: It did, at the first reading—I do apologise. But the fact of the matter is that the National Party, in my view, wasted those 9 years in Opposition. That is not to say that all of its members did; there would have been some members within the National caucus who were busy on that, and maybe the current Minister was one of them. But, generally speaking, we are looking at lost opportunities there. None the less, that is where we are at.

At the last election, we had a change back to a National Government, along with the “4 percent environmental vandals” in the form of the ACT Party. Its members basically said “We are 4 percent; you’ll listen to us. We’re off to a select committee to find out yet again whether the issue of climate change is a real one, or whether it isn’t.” So the months have gone by. But National, I would think, can no longer rely on the ACT Party for any reliable support on an emissions trading scheme, even though the Minister of Finance knows that until the allocations are done, and until the obligations are farmed out, there is an impost on the accounts to be paid by the taxpayer, not by the polluter. The ACT Party—the party that stands firmly, as my colleague Charles Chauvel has said, for business certainty—came into this House, helped to form a Government, and immediately created huge uncertainty around a huge issue. In my mind, those ACT members stand condemned for that, because they are truly the Luddites of the land when it comes to this issue.

None the less, this the point at which we find ourselves. We have made hesitant progress, three steps forward and two steps back—some would say two and a half steps back—but, none the less, we have made progress. Now we come to a point where we run the risk of there being an outbreak of peace, at least between the two major parties, on climate change legislation, and I certainly reaffirm our support for this bill. I think this is necessary legislation; it is good legislation in the sense that it has had something forced upon it, and it should proceed through the House without too much further delay.

JEANETTE FITZSIMONS (Green) : By tonight the Government will be in breach of the law, and so will some foresters, unless we pass the Climate Change Response (Emissions Trading Forestry Sector) Amendment Bill. As I indicated in my first reading speech, the Greens will help get the Government off the hook here. We will support this bill. That was conditional, initially, on the Government agreeing to put firm dates for the obligations in the bill, rather than open-ended opportunities to pass dates by Order in Council. The select committee has done that and the Minister responsible for Climate Change Issues has agreed, so we are supporting this bill, and we are also offering our support to the process of giving leave for the bill to go through all stages today.

We had an interesting debate at the select committee about the “no later than 1 July” clause. Some of us wanted to know why we did not just set a firm date of 1 July and reduce uncertainty even further. It was pointed out to us that if in fact that date can be moved forward, then the allocation plans can get under way earlier as well, and that is entirely a good thing. We are comfortable with the degree of flexibility that “up to 1 July 2010” gives us.

However, the forestry industry is still not very impressed with what is happening under the emissions trading scheme. Foresters have no one to sell their credits to and many of them are not convinced that they ever will have. Charles Chauvel and Craig Foss have expressed the hope that deforestation has now ended, but I do not think we can guarantee that. Those who own forests but are interested only in dairying are pushing extremely hard for rules that make it as easy as possible to deforest and convert their land to dairying. They are expecting to get the ability to offset on to different land from this Government, even if it is not accepted under Kyoto. Many people hope that the whole thing will just fall over and go away, because it is not clear how the Government will proceed in terms of getting a majority in the House for whatever it wants to do.

In Opposition, National attacked Labour—justly, in my view—for taking 9 long years to get any economic instrument in place. Now, the National Government itself has delayed and created new uncertainty for 7 months and counting, and we may be counting for a while yet. As the previous speaker said, this has been going on since the mid-1990s, when the Cabinet of the day first tried to get an in principle decision about an emissions trading scheme or a carbon charge, and, for God’s sake, either would have been better than neither, by a very long way. But the fact is that nothing happened for a very long time. If this Government goes to Copenhagen at the end of the year with no clear plan or agreed majority of the House for a way forward, New Zealand will be a laughing stock. It would be extremely bad for our trade and our international relationships.

These last 7 months, when officials should have been able to get busy writing the rules and the allocation plans for the emissions trading scheme, they have instead been spending countless hours servicing a select committee going over old ground and writing yet another summary of the science for the disbelievers showing that, yes, climate change is real, yes, the Intergovernmental Panel on Climate Change has done its job properly, and, yes, climate change is a real and present danger. I think that is a huge waste of the valuable time of our skilled officials, and of many of us on the committee, as well.

Meanwhile, just today, my colleague Metiria Turei tabled in the House the summary report that will be used by many countries as the latest authoritative statement on the science, even if it is not an official Intergovernmental Panel on Climate Change document, during the Copenhagen conference, showing that on many measures we are already above the worst scenario ever put forward by the Intergovernmental Panel on Climate Change. It put forward a range of scenarios showing that it could be this bad, or this much worse, or even, if things are really bad, this much worse, and we are already worse than that, particularly on predictions of sea level rise and predictions of the rate at which Arctic sea ice is melting.

There is no sign so far that the Government actually intends to reduce New Zealand’s emissions by very much, and I find that a tragedy for us and for our descendants. First of all, the Government would like to align with Australia. Of course it makes some sense if we could have similar rules with the country with which we trade so much across the Tasman Sea, but the Australians have just failed to get a majority in their Senate for a scheme that was so weak it was worse than useless. The Australian proposal was worse than useless and that is why the Green members of the Senate did not support it; not because they are against emissions trading, but because they are against a scheme that gave billions of dollars to the worst polluters and was going to have very little effect on emissions. There may never be anything to align with in Australia, so we need to develop our own scheme.

We know that the Government is looking seriously at softer rules than the existing emissions trading scheme, which was only just strong enough for the Greens to agree to its support last year. We know that the Minister said this afternoon that we do not really need complementary measures like standards because we will have a pricing signal instead. We know that transport behaviour is extremely sticky when it comes to following pricing signals because it takes an awfully big increase in the price to induce a little bit of change in transport behaviour. By far the most cost-effective measure for the whole economy for transport is to set some standards, as other countries have done.

Although fuel efficiency standards for the average of the vehicles coming into the country from now on is part of the Energy Efficiency and Conservation Strategy, I cannot see any sign that the Government intends to proceed with it. I hope the Government will think again about that, because our vehicles use on average about twice as much fuel to go 100 kilometres as the European fleet will use when it moves to the new standard already announced. US cars will not meet the fuel economy standards in China, because China has set its horizons higher than what the US is doing. We are left taking what every other country wants to dump because they no longer meet their standards, and it is not the old vehicles that are the problem; it is the new ones because they are bigger, thirstier, and release more carbon than the old ones. There are many areas where a price on carbon will not be enough to solve the problem. It is an important first step and it is a vital first step, but we have to have complementary measures as well.

Returning to this bill, it deals with the timing of coming into force of various parts of the emissions trading scheme but it deals only with forestry. A number of people are now pointing, as I did myself in the first reading debate, to the fact that the coming into effect of the rules for the energy sector, on 1 January, poses some difficulties because there are no allocation plans, and there will not be by 1 January. The sector is just automatically assuming that the Government will legislate a big delay in that, and I am concerned that Labour appears very willing to help it do that. That is not the only way of doing it, and I urge people to think about the fact that companies should have been preparing for the 1 January date for a long time, and that there is no reason why the scheme cannot still come into force on 1 January, provided that by that time the Government is in a position to announce its intentions in terms of allocation plans, and the companies do not become liable to pay for those units until well into the following year. So it would be possible to start without an allocation plan, provided the Government can make its intentions clear by 1 January, and those companies can still comply with the law when the time comes. Let us not fall over backwards to delay even longer doing something about climate change.

Hon TARIANA TURIA (Co-Leader—Māori Party) : Tēnā tātou katoa. In December last year the Government told the United Nations climate change conference in Poznań that far from stepping back from the Kyoto Protocol, the emissions trading review was “a means to find a more politically durable way of moving forward by building a wider policy consensus.” This bill, then, is the first stage of building that wider policy consensus.

Consensus was never a given. For Māori, there are two key issues at hand. The first is related to the emissions trading scheme. We know that many iwi wanted a Treaty provision to be included in order to protect the value of their settlements, and that they were happy for the introduction of the scheme to be delayed in order to achieve that. The second issue is related to the forestry sector. Settlement of the “Treelords” claim has meant that the iwi involved have settled on a price value for their carbon trading units. Delay, through the Climate Change Response (Emissions Trading Forestry Sector) Amendment Bill, will mean there will be a delay in those credits being transferred to them, which means they cannot commence trading, and that by the time they do, the market value of those units may well have decreased. This bill therefore potentially penalises them, but there has been agreement given to it because there has been an assurance from the Crown that they will be no worse off.

We always supported the need to review the emissions trading scheme, while, at the same time, supporting the need to address climate change. But we are also mindful of the views of iwi, who, from all accounts, supported this decision to delay the implementation date. Although the emissions trading scheme was passed into legislation in September 2008, its application was effectively backdated to 1 January 2008. The forestry sector, which is already a significant store of carbon, was the first sector to enter the scheme, effective as of 1 January 2008. So for iwi with forestry interests it became a complex picture, as they faced the challenge of emissions trading scheme compliance. For some iwi, the bottom line was to achieve an undertaking that whatever the reason for the delay, they would not be worse off. So in the context of uncertainty for those directly and immediately affected by the emissions trading scheme, we held on to that commitment.

This bill, in its most basic form, delays the reporting requirements and the publication of an allocation plan while the review process in the Emissions Trading Scheme Review Committee is still under way. As the current law stands, foresters would have been required to report any deforestation during 2008 by 31 January 2009, and to apply for exemptions for small forest blocks by today, 30 June 2009. During the process of the select committee hearings, the iwi leaders group told the committee that the bulk of Māori forest land is pre-1990 forest and is subject to significant deforestation liabilities. To give an idea of the scale of those, they suggested that Kāi Tahu could face deforestation liabilities of between $40 million to $120 million, while Morikaunui Incorporation, in my electorate, would be faced with a liability of $16 million for 11,000 hectares. The major milestone in this bill, therefore, is that it delays the timing of the Government’s obligation to transfer carbon trading units to pre-1990 forest owners, who include iwi. Although we are aware that many iwi are comfortable with the delay, because it comes so late in the piece groups such as Ngāi Tahu have already invested considerably in preparing for the 30 June compliance date.

I return to the focus from iwi: that nothing should be included in this bill that would make them worse off, in relation to setting the eventual date of the first emissions returns. Morikaunui Incorporation, established over 50 years ago near Rānana on the Whanganui River road, spoke on behalf of its 5,500 shareholders about the impact of the emissions trading scheme on their holding, which includes 2,000 hectares of native bush and two small blocks of exotic forest. Morikaunui Incorporation submitted that Māori land should be excluded from the bill, and that a timetable should be set to consult with Māori in order to develop a robust framework within which Māori land can fit without transgressing the basic principles set out in Te Ture Whenua Maori Act 1993. The incorporation stated that whatever was proposed in the bill should require no greater contribution or sacrifices from the owners of Māori land than from the owners of privately owned non-Māori land. That would, after all, represent justice being seen to be done in legislation that will have significant impacts for Māori.

The Wairongomai Incorporation from Ruatōria took the “no worse off” concept to its natural conclusion, and suggested that there needs to be a clause included in the bill that confirms that nothing in the legislation is to be inconsistent with the Treaty of Waitangi. That recommendation was endorsed by the full support of the Federation of Māori Authorities.

Te Rūnanga o Ngāti Awa devoted considerable thought to how the expression of due justice would be demonstrated for those iwi who have already signed Treaty settlements without the impacts of the emissions trading scheme being taken into account. Te Rūnanga o Ngāti Awa acknowledges that there was no consideration of any impacts of an emissions trading scheme during its settlement negotiations, because the scheme did not exist then, nor was it contemplated. The rūnanga’s submission advised the select committee that back in 2001 the worst assumption one could have made would be based on general knowledge at that time, which was that forests absorb carbon dioxide, and therefore any impact would be positive. Based on those instructions, Ngāti Awa therefore paid full market value, in the expectation of an unfettered property right.

If the bill is passed in its current form, restrictions will be placed on the choices that Ngāti Awa can currently make, thereby resulting in significant devaluation in that iwi’s asset value. It was Ngāti Awa’s guidance that those iwi that are in the same position as Ngāti Awa should be eligible for a one-off adjustment to choose how they wish to use their land in the future without reference to the emissions trading scheme. Such an option would mean that they can make the choice that they originally envisaged they would have when they purchased the forest, and thereafter they would be required to comply with the emissions trading scheme.

The process of guaranteeing stability and allaying the concerns of iwi will be critical in assuring iwi that they will be no worse off as a result of this delay. We were pleased to see the range of iwi that made submissions and representations to the select committee, and to see the advice put forward by both the iwi leaders group and the Central North Island Iwi Collective. We continue to believe that the liability for emissions should be shared fairly across all contributing sectors at each stage, with all starting at the same time and with free carbon credits being allocated to sectors on the basis of need. We will continue to support these important dual goals: to advocate for a Treaty clause to be included in the bill, and to protect the integrity and the durability of settlements for iwi affected by the emissions trading scheme. It is never too late for change to occur, and it is on that basis that we will continue to support this bill.

NICKY WAGNER (National) : I rise to support the Climate Change Response (Emissions Trading Forestry Sector) Amendment Bill at its second reading. As we have all heard today, this bill is mostly a technical bill to deal with the timing of emissions trading scheme provisions as they relate to forestry. At the first reading I was extremely heartened to see the support across the House for this bill. All members of Parliament appreciate the need to get the climate change emissions trading scheme right, and the reason to postpone the dates for these forestry requirements. We all know that the cross-party special Emissions Trading Scheme Review Committee is still debating the issues, and that the process is not yet complete. We have heard much debate from foresters and about forestry in that committee. We look forward to presenting that report in the coming few weeks.

It would not make sense for foresters with pre-1990 forest land to have to meet legal obligations before the completion of the final allocation plan for the sector. As today is 30 June, the requirement is unreasonable, considering that the Emissions Trading Scheme Review Committee is still in session. We do not want forest owners to find themselves acting in breach of the law, nor will the Minister, so we are passing this bill today.

I acknowledge also the Supplementary Order Paper from Charles Chauvel that sets the date for foresters to register deforestation and to apply for exemptions, and the requirement for the Minister to produce an allocation plan by, as 1 July 2010. It is an absolute date, and it is now set, rather than as in the original bill, which allowed the date to be set by Order in Council. This date will give more certainty to foresters, although it is an end date and it is possible for the chief executive to bring it forward.

Including forestry in an emissions trading scheme is an interesting challenge. New Zealand is the first country in the world to attempt it, and it is a very complex process. We must take the time and do the work to get it right. We are all well aware of the enormous financial and environmental importance of forestry to New Zealand and our economy, and we must understand that these decisions are critical.

There are roughly 1.8 million hectares of plantation forest in New Zealand, and about 650,000 hectares were planted post-1987. We know from looking around us that the vast majority of those forests, about 90 percent, are Pinus radiata, but we also have increasing amounts of other varieties, the most common being Douglas fir. Foresters are becoming even more innovative in their choice of species. I was surprised to see recently in North Canterbury just south of Kaikōura that a redwood forest is being planted. It is good to see trees being planted again, after years of dramatic deforestation, and it is important for the industry that we get some certainty around emissions trading scheme policy so that more planting can get under way. Of course, we are working towards a substantive climate change amendment bill later in the year, and that is where the final shape of the forestry scheme will be spelt out in detail.

It was very interesting to listen to speakers on the bill last week. There is a strong understanding of, and commitment to, New Zealand’s “clean, green” brand. Like most New Zealanders, parliamentarians are enormously proud of our beautiful natural environment, and we want to make sure that New Zealand does its bit when it comes to dealing with climate change and reducing our greenhouse gas emissions. We understand the importance to our economy and environment of getting this right. We want to be good international citizens, and to make a valuable contribution to the global response to this issue. We want to work closely with other developed countries so that we can all deliver for the environment.

New Zealand’s most important industries are agriculture and tourism, and the success of both is predicated on a clean, green, and beautiful natural environment. Tourists come to see our “100% pure” country, and overseas buyers of our food want to be very sure it is grown in a safe, clean environment. So it is clear to all of us that environmental and economic health go hand in hand. Forestry contributes significantly to the health of our economy, and to the well-being of our environment. It is a significant part of our response to climate change. This bill will ensure that we have time to get the forestry policy right so that it becomes an integral part of an effective, long-lasting, and sustainable emissions trading scheme.

Hon MITA RIRINUI (Labour) : It is my intention to take only a brief call on the Climate Change Response (Emissions Trading Forestry Sector) Amendment Bill, and to reiterate the position of the Labour Opposition by saying that we will support this bill. I listened very carefully to the previous speakers, and I heard the Minister for Climate Change Issues describe this bill as being a minor bill and one of his Government colleagues describe it as being a technical bill that deals with time frames. That is, essentially, the case. But it is also important to point out that although the Government is discussing issues around amendments and is describing the bill as being minor and technical in nature, this bill has the potential to create considerable uncertainty for the forestry sector, given that for a number of weeks there has been considerable to-ing and fro-ing on the future of the emissions trading scheme. I put that down, perhaps, to a lack of information being circulated throughout various communities.

I want to talk about the issues for Māori foresters and, particularly, Māori landowners. Māori Party co-leader the Hon Tariana Turia highlighted a number of key concerns for Māori who are already involved in forestry or considering the utilisation of multiple-owned Māori land for forestry. As the Emissions Trading Scheme Review Committee works its way through the review and considers the wider issues, on which I am sure the Minister will report back to the House, it will be interesting to see just how much certainty there is around the emissions trading scheme. As the House is aware, a number of Treaty settlements have included vast areas of forestry, particularly in the central North Island, and we will see the same in Northland, on the East Coast, and in other areas of the country. The issue for many of those settlement groups that are looking at forestry really is the balance between economic opportunity and environmental protection, as they invest in forestry.

As the House is aware, Māori have assets of somewhere around $16.5 billion, and about 52 percent of that is in the primary sector. I do not think it will take much of a calculation to determine the percentage of forestry in the primary sector that is under Māori control. So there are issues around certainty, and whether Māori are satisfied that investment in forestry in the future will be a worthwhile investment, particularly as there are issues around Māori land. I picked up on Tariana Turia’s comments around Te Ture Whenua Maori Act, but there are issues around unlocking the potential of Māori land so that it could be developed in a number of ways, whether it be for forestry, farming, horticulture, or agriculture. There is a smorgasbord of options.

This leads me to the point regarding the barriers to Māori land development. Although forestry might be one potential avenue for development, in my view and in my experience most of the main barriers are in the Te Ture Whenua Maori Act itself: in attempting to comply with the Act’s requirements, in terms of reaching consensus and agreements on investment in Māori land—in other words, in unlocking that land. We have seen that in many parts of the Bay of Plenty, of Northland, and of the East Coast—and, I am sure, many of other areas—large areas of Māori land are underutilised. I look forward to the debate on the wider issue of unlocking Māori land for future development.

As I said earlier on, I really do not intend to take a long call on this particular matter. This bill, described as being minor or technical in nature, has created quite a high level of uncertainty as to where the Government is heading in terms of the emissions trading scheme. I have some questions that I would like to put to the Minister, and I will do so during the Committee stage. His responses to those questions will be very important.

I was in the Taranaki region on the weekend, and I spoke to one particular group about Māori land development and suggested the issue of forestry. I was surprised at the quick response to my suggestion. The group said there is too much uncertainty around the future of forestry and the emissions trading scheme, and, that being the case, there is too high a risk in terms of investing in forestry where Māori land is concerned. As the Minister said, a wider review is taking place, and in time there will be a report back to the House. I, along with a lot of Māori landowners and forest owners, will be looking forward to what the select committee reports back to the House.

That is all I have to contribute to this particular part of the discussion, but I will certainly put some questions to the Minister during the Committee stage of the bill. Thank you.

NIKKI KAYE (National—Auckland Central) : I rise to support the Climate Change Response (Emissions Trading Forestry Sector) Amendment Bill. Climate change is very important to many young New Zealanders. In terms of the numbers of letters and emails I have had from young people, one of the highest-priority issues that comes through is the environment. A lot of young people have written to me regarding the environment, and I acknowledge them in the House this afternoon.

Our Government is very committed to reducing our greenhouse gas emissions and to coming up with sensible climate change policy. Many members today have noted that this legislation is a technical change, and it is supported by most members in the House today. I acknowledge some of the comments made from members on the opposite side of the House that, hopefully, this is a new era for New Zealand in terms of climate change policy and that we will be able to work across different sides of the House on the issue. Many people are watching this debate—both young and old—who are very keen for us to work in a cross-party way on climate change.

The key purpose of this bill is to amend the Climate Change Response Act 2002 in order to delay a number of requirements, including reporting requirements for foresters, allowing applications for exemptions for certain land holdings, and the publication by the Government of an allocation plan for pre-1990 forest owners. The requirements are applicable to the forestry sector under the New Zealand emissions trading scheme. As a result, the sector with pre-1990 forest land would have had to meet legal obligations before the completion of the final allocation plan for the sector. It is very positive that we are here today introducing these three amendments, because it would not have been right to allow a situation to occur whereby the final allocation plan for the pre-1990 forest land would have had to be passed by 30 June 2009.

I acknowledge the work at this point in time of the Emissions Trading Scheme Review Committee, which has been reviewing climate change in this area. Some good work has happened, but part of the reason we are here today is that the work has taken longer than expected. I think part of the reason for the work taking longer than expected is that there is quite a bit of complexity in terms of some of the issues around the forestry sector. But if we look at some of the issues we have had around calculating our Kyoto liability, then we start to see some of the complexity in terms of determining some of the issues on climate change.

The review has taken longer than we expected, and the committee is likely to report back to Parliament in early August, but one thing we have made very clear is that the use of a financial instrument to introduce a price on carbon is central to our climate change policy. The adoption of an amended emissions trading scheme is our preferred financial instrument. We believe that it will be important for our future efforts to ensure as far as possible that any amended emissions trading scheme is harmonised with the Australasian Carbon Pollution Reduction Scheme. It is really important to make that point. There has been a lot of debate recently, particularly in the media, about what our target will be in the future. We should ensure that we are not moving at a pace that is out of step with other nations, but we should also ensure that when we have a discussion around what our targets may be, we first consult with the public. That is exactly what we are doing. I am pleased we are holding nine public meetings on our target.

The second thing that is quite crucial, in my view, about that target is being very clear about how we will get there. It is all very well to talk of having ambitious targets, but if we do not have a plan about how we will get there, then, in my view, it is just hot air.

I am very pleased that we are here today to pass very sensible legislation. Some people are calling the bill a technical bill, but from my point of view I think it is an opportunity to raise the issue of climate change and recognise that many New Zealanders out there care about our environment and about our target in this area. It is important to realise that unless we have a plan as to how we will achieve that target, then it is hot air.

We should also recognise that for any target we must make sure that we are very clear on the impact on our economy. I think it was my colleague Nicky Wagner who made the point that our economic health and environmental health are very closely aligned.

The final point I will make regarding climate change is that we, as a country, are recognised for our expertise and research and development ability in the agriculture and forestry sectors. In my view, apart from the discussion about targets, one of the key areas of focus we need to get right is on agricultural emissions. I know that our Government has moved forward and I am very pleased that we have established a Centre for Agricultural Greenhouse Gas Research. We are leading the development of an international research centre that will be focused on greenhouse gas emissions from the agricultural sector. I believe that it will be crucial for us in making headway in the area of climate change, moving forward.

I will just touch on a couple of other things we are doing, because I think we can get a little bit lost in some of the academic debate around things like targets. It really is important to recognise what we are doing now to reduce emissions in New Zealand. In the Budget we announced the home insulation fund, for which we have allocated $323 million. That will assist us in terms of moving to reduce emissions, particularly in our homes, and making sure those homes are the most energy efficient.

We have also allocated $36 million to a biodiesel grants programme. We are introducing changes to streamline the Resource Management Act processes, including the renewable energy consent process. We are working on a national policy statement for renewable electricity generation. And also, in terms of transport, which is another key area where are emissions are high, we will be introducing legislation to exempt light electric vehicles from road-user charges.

I support this legislation. It is technical legislation but it has given me the opportunity to recognise the many New Zealanders, particularly young New Zealanders, who care about this issue, and to really send a message to them that we want to have a target, we want it to be achievable, and we want to make sure we have a good plan behind it. But at the moment, at this time, we will have to delay some of these provisions because we cannot move forward until we get good, sound policy right. That will be partly through the Emissions Trading Scheme Review Committee, but it should also be recognised that we are doing a number of things to reduce emissions. I am grateful for the opportunity to speak on the bill.

STUART NASH (Labour) : I rise in support of the Climate Change Response (Emissions Trading Forestry Sector) Amendment Bill. I speak in favour of the bill because there absolutely needs to be some certainty in the forestry sector. This industry requires 30 years of certainty in order to get anything done. Without that certainty, we will have no investment. That is what this bill provides.

I heard the Minister stand up and say this amendment to the principal Act needed to happen because the forestry industry was not ready for the emissions trading scheme to come into place when it was scheduled to this year. I do not agree with that. I think the Minister undervalues and underestimates the professionalism of the industry and the people who are involved in it. Those people have been ready for a long time. The Minister heard them speak about that at their annual conference, which I attended. The theme of the annual conference of the New Zealand Institute of Forestry, which is the premium professional body for foresters, was forestry in a climate of change. It dealt with the issues and questions that are salient to this very issue. For example, the institute had a 1-day workshop on the emissions trading scheme, and it included things like “Procedures for Applying and Registering for the ETS”; “Applying for an NZEUR Holding Account”; “ETS Mapping Standard and Mapping Guide”; and “Use of Carbon Look-up Tables and Filing Emissions Returns.”

There was a very large attendance at the conference. The Minister was there, and he spoke to the attendees. The people at the conference were the consultants, the investors, and the people who know the forestry industry. They were industry leaders, and they were students—a whole range of people. The institute is the professional body that represents foresters right across New Zealand. Its members are ready for the emissions trading scheme. When the Minister announced that the scheme was going to be delayed for another year, there were howls and cries of “Oh my God! Here we are again.” I personally think the industry was well ready for it. I think the Minister and the ministry were not ready for it, because they had not done the work. The forestry industry wanted the scheme, and all the people in the industry understood it. The questions and the discussion at the 1-day workshop were informed. It was an intelligent debate, and intelligent questions were asked. The people whom I spoke to all walked away, saying “We want the emissions trading scheme. Thank goodness for this scheme, because it will allow the forestry industry to refocus and revalue its value proposition for the whole of the country.”

Now, as a consequence of the delay, and as my colleague Mr Chauvel noted, 8 million seedlings are rotting in the ground at the moment—8 million seedlings that have had to be ploughed in. The nurseries are in huge trouble. It will be interesting to see what Mr Key and Mr English will do for those companies, because they will be very, very important going forward. This delay is a huge disservice to the forestry industry. This bill may be technical in terms of the legislative change that it makes, but its impact on the industry is significant.

We all know that Labour developed a programme of global leadership on climate change, and we did that for a number of reasons. First and foremost, as Nikki Kaye mentioned, climate change is vitally important to the people of New Zealand. But the reason Labour developed the emissions trading scheme and the reason Labour took a global overview of, and a leadership role on, climate change is that we were aspirational. Instead of just talking about the issue, we decided to do something about it, I say to Nikki. We decided to go out there, lead the world, and promote our clean, green image. We went out there and told people what we wanted to do. The Labour Party tells New Zealanders what it wants to do, and it does it—it goes and does it. We were in the process of doing that when we were in Government. Labour was acknowledged as a global leader on this issue, I say to Nikki—and she knows that.

I completely agree with Nikki Kaye when she says there has to be a plan. That is why I am standing here with a sense of disappointment, because there was a plan in place. The forestry industry had a plan in place. It was ready to go. Come June 2009, the industry was ready to be off: its marketing plans were in place, and New Zealand was going to become the carbon-farming nation of the world. The plan was there and it was ready to go. All it required was sign-off. But the Government has delayed the emissions trading scheme for a year. The industry is saying “Oh my God! Why didn’t we vote for Labour? We need Labour back to implement a very strong forestry sector.” Finally the industry has realised that Labour is the party of the agricultural sector. It has taken a while, but finally people have opened their eyes and are saying “We need Labour back. Labour had a plan, and the Nats haven’t got a plan. There is no plan.”

Nick Smith was asked a question at the institute’s conference about why he had cut the East Coast reforestation scheme. He said it was because it was undersubscribed. About 50 people jumped up and said it was oversubscribed. Labour knows about forestry, the foresters know about the forest industry, and the foresters were ready for the emissions trading scheme. I can say that is true, without a question of doubt.

Let me look at some of the initiatives Labour put in place, such as carbon neutrality. What a fantastic programme that was. I heard the head of a Kiwi wine company, a really innovative company, say it had gone carbon neutral. The company’s products were sold overseas, in Marks and Spencer, and were gaining a huge competitive advantage because the European market loved the fact that the wine was carbon neutral. This is an example of New Zealand leading the world. Why do we lead the world? We need to understand where our competitive advantages lie in the 21st century. I will tell members where one of them lies.

Nikki Kaye: 13 percent increase in emissions. Is that leading the world?

STUART NASH: It is in international tourism. Every time that member opens her mouth the emissions go way up, because a lot of hot air comes out. Let me tell members about international tourism. I know that Kelvin Davis is the Opposition spokesperson on tourism; I know that and the whole of the tourism industry knows that. I keep forgetting who the Minister of Tourism is. Do any of my colleagues know? I ask Pete Hodgson whether he knows who it is.

Charles Chauvel: Jonathan Coleman?

STUART NASH: Is it Jonathan Coleman? Jonathan Coleman, the Minister of Tourism—[Interruption] It is John Key, is it not? I cannot remember who it is. I would have thought that the Ministry of Tourism and the Minister of Tourism, with this amazing portfolio, had a real opportunity to bank on the great work that the previous Labour Government did on promoting our “100% Pure New Zealand” campaign, and growing tourism to become our highest export earner. Do members know that tourism makes up 20 percent of the economy? Do members know that one in 10 New Zealanders have jobs related to tourism? This is where our competitive advantage lies. It lies in tourism.

I will tell members the basis of the tourism industry. It is our wonderful clean, green image, and the whole emissions trading thing was building on that. We were on our way. The flow-down effects of this scheme were just fantastic, yet here we are, delaying it again and again. The delay not only erodes the confidence that the forestry sector has in the National Government but it erodes the international perspective—the way that people overseas view our country. The flow-down effects are dreadful; I find this delay difficult to believe in. I ask Nick Smith whether it is a joke. Is he really doing this? Is he going to pull something out of the hat and say “No, I made a mistake. The forestry industry is ready for this. Let’s go with it now.”? I suspect not.

The other point is that in this time of recession we need to do everything we possibly can to promote New Zealand overseas. Carbon neutrality is fantastic. The emissions trading scheme is fantastic. Getting the forestry sector on board is fantastic. Growing an industry for carbon farming—how 21st century is that? That is the way forward for this country; it is one of our amazing competitive advantages. But one of the paradoxes of New Zealand’s competitive advantage is agriculture. As we all know, agriculture is one of the largest emitters of greenhouse gases. We have agriculture emitting gases, and we have forestry soaking them up. It is a fantastic way to best use our land. It is about sustainable land use. It is about the best use of land, and we had it all there. The forestry industry was ready, and set. It has been told to wait—to hold it a second. It has been told to take 12 months, delay the investment, delay the marketing, and maybe the scheme will be ready to go next year. Who knows, I say to Nick Smith, maybe it will be.

Let me tell members a little about the forestry industry. Foresters grow trees—funny, that; they grow trees. In the past, the forestry industry has cut down those trees. Fantastic! The industry grows them, then cuts them down and turns them into timber, pulp, or whatever else the product may be. But here is something new: we can grow trees for carbon. Fantastic! We do not have to cut them down, because, of course, every time we cut down a tree, it releases carbon into the atmosphere. If we have carbon credits, then every time we cut down the trees and do not replant them, we have to pay back the money we have earned on those carbon credits. But now there is a fantastic opportunity to grow trees for carbon. The forestry industry is worth $3.2 billion, and in 10 years’ time it will be worth $6.4 billion, if not more than that. It employs 32,000 people. Carbon farming is now an option for forestry. It now provides an option for the industry to plant trees in areas where, in the past, forestry would not have been considered. This is a new way forward for New Zealand. It is a new way forward for the forestry industry, and the Government has set that back for a year.

I do support this bill; I really do. The forestry industry does need to have certainty—it is a good thing—but that needed to happen a year earlier than this. Investment in forestry—goodness me! How do I know about this? Because I have a master’s degree in forestry science, around investment in forestry. When I read about this—planting trees, and farming them for carbon credits—I know it is to New Zealand’s competitive advantage.

CHRIS AUCHINVOLE (National—West Coast - Tasman) : Following the previous speaker in speaking to the Climate Change Response (Emissions Trading Forestry Sector) Amendment Bill, I say that I am not sure we will be able to manage the same degree of commercial expertise in terms of promoting the aspirations of the previous Government. I am afraid it did stay just at the aspirational level. I cannot match that member in his master’s degree in forestry science, but I used to plant a hang of a lot of trees. I think the most significant point he made was that we are talking about an industry with a 30-year economic turnover. That is very, very significant, because what happens today will not have an effect for some considerable time. I understand that this is the first piece of legislation that has gone through the Emissions Trading Scheme Review Committee. I congratulate the committee on it.

There is something here that I gain great confidence from. When I prepared for this speech I read through all the first reading speeches that were given on this particular piece of legislation, and I sensed something that is very important. It is a technical bill; it is not a bill of huge consequence, people say, but it is part of something—

Stuart Nash: Huge consequences!

CHRIS AUCHINVOLE: —it is very, very important, and it has huge consequences—Stuart has not let me finish. Come, come, we did not interrupt that member when he spoke, so he should give us a fair go.

Let me get to the point. This bill is inextricably interwoven with a huge piece of legislation, the emissions trading or carbon control legislation—whatever one likes to call it. It is about the whole prospect of climate change. The great confidence that I gain from it, having read the first reading speeches, is that there is a real sense that people recognise its importance. People recognise its significance and are preparing to work together on this issue. That might be nice for us in the House, but it is particularly significant for the rest of the people of New Zealand. I welcome the speeches that I have heard today, particularly those that talked about all the parties. I think, without any exception, every representative has said that their party is supporting this bill, and that is significant. I think it is very significant that the two major parties are preparing discussions and moving towards working in harmony on this. That does not mean that the views or beliefs of individual parties will be compromised; it is just a matter of getting the best that we can out of this legislation.

The purpose of this bill is very important. It amends the Climate Change Response Act 2002 to delay a number of requirements, including reporting requirements for foresters, allowing applications for exemptions for certain landholdings, and the publication by the Government of an allocation plan for pre-1990 forest owners. To give a little bit of background, the Emissions Trading Scheme Review Committee was set up as a consequence of the confidence and supply agreement between the National Party and the ACT Party. Due to the thoroughness of the work that has been done and the significance of the current work, this committee has now indicated it will report back by the end of July or early August, which is a little later than anticipated. Without this bill the unfortunate consequence would be that a business with pre-1990 forest land would have to meet the legal obligations before the completion of the final allocation plan for the sector.

Hence I consider this to be an uncontroversial bill. Its primary purpose is one that I cannot imagine a sensible person being against. It is simply allowing the law to continue smoothly. The Government, sensibly, in my view, wishes to consider introducing offsetting or another mechanism for pre-1990 forest land. To finalise this policy and ensure that there is compliance, the 30 June 2009 date in the Climate Change Response Act has to be changed. This bill passed its first reading on 23 June and went to the select committee. As a result, the recommendation was made that 1 July 2010 would be the new deadline date for applications to be made for exceptions for landholdings with less than 50 acres of pre-1990 forest land. This particular date, or the setting of it, was a subject of discussion in the first reading speeches. It has now been established that it is the latest possible date by which applications may be made. I understand that the committee has agreed that the chief executive of the Ministry of Agriculture and Forestry should have flexibility to set the date earlier than the 1 July 2010 deadline, if that is suitable. Good law needs a little flexibility, so this is a very positive development indeed.

I say, as other speakers have, that New Zealand is a country that identifies closely with a clean, green image. I include myself when I say that some of us are fortunate enough to live in parts of the country where we are indeed very, very close to the natural environment. It is important that we work hard to reduce greenhouse gas emissions. That is why we are doing so much work to cut our emissions, and that is why, in principle, we support the idea and intentions of an emissions trading scheme. We have a large amount of work to do. Emissions are increasing on a high percentage basis in spite of the aspirations of the previous Government. In early August the Emissions Trading Scheme Review Committee will produce its report for the Government, from which the Government can make substantive decisions around the emissions trading scheme. That will enable us to move forward in a very positive way towards producing the kind of high-quality legislation that one comes to expect from this Government.

To conclude, I say that I am very confident that we will pursue sound, practical, environmental policies to achieve emissions reduction. We want to reduce emissions in balanced ways that result in the least cost to society and to the economy. The final legislation will be based around good incentives and improving the environment and the economy in combination with each other and through good science based on sustainability. I am very happy to support the Climate Change Response (Emissions Trading Forestry Sector) Amendment Bill and the long-term goals and efforts of this Government in the area of climate change. Thank you.

• Bill read a second time.

Hon TREVOR MALLARD (Labour—Hutt South) : I think when I was interrupted by the adjournment at the end of last week I was, in fact, responding to an interjection from the member for Tauranga. We were discussing at that stage the benefits of a variety of cars, and from memory he was promoting a Mercury Cougar. I have looked at the—

Hon Clayton Cosgrove: What does Christine think of this?

Hon TREVOR MALLARD: Well, it was based heavily on discussions that the member has had privately and publicly about the things that are hot and the things that are not. In this particular case, it has become clear that that member is cougar bait. He is bait for a cougar. I am very, very surprised that when there was a discussion about his favourite cars he did not promote the Cougar in the way that he appears to promote it in its Wellington form, as opposed to its United States form.

I had forgotten about Mercury Cougars. I was never a great expert on cars, but I spent a bit of time looking them up on the Internet. Do members know the problem with a Mercury Cougar? The problem, as far as Simon Bridges is concerned, is that it is a two-seater. It is a coupé. It is not particularly useful for the sort of activity the member was contemplating in his discussions with a number of people about things that are hot and things that are not. [Interruption] Does the member want examples of cars that I have had? I have had a wide variety of cars, none of them particularly flash. I am not sure anything other than the old Monaro—

Hon Dr Jonathan Coleman: Tell us about the red van you keep in the basement.

Hon TREVOR MALLARD: The red van, I understand, is one of two Volkswagen Caddies in the country. I have an absolute assurance from the licensed motor vehicle dealer, who has since gone broke, that this particular one was imported entirely by accident. He did not know. He knew he was getting a Volkswagen van, but did not understand about Caddies. He brought it in from Singapore. It is actually useful, because it can take three bikes in the back. I very rarely want to have more than three bikes in the back of my van. Because, like the member’s Mercury Cougar, there are only two seats in the front, three bikes is generally around the limit.

Does Mr Quinn have any other questions about the van? It is well marked up; it is well known around the Hutt. People think it is—

Paul Quinn: You only bring it out once every 3 years.

Hon TREVOR MALLARD: That is not true. I drive it back and forth to work every day.

Chris Hipkins: The member never spends any time in the Hutt!

Hon TREVOR MALLARD: If the member went to the Hutt Valley occasionally and observed cars out there, he would see that—

Paul Quinn: I didn’t see you; I was there yesterday.

Hon TREVOR MALLARD: Were you out there today?

Paul Quinn: Yesterday.

Hon TREVOR MALLARD: The member was out there yesterday. Well, I was out there all day yesterday, mainly in Pētone and Naenae. I did not see him, but then no one notices Paul Quinn. Well, that is not entirely true. They notice him, but if he is around a corner they disappear pretty quickly because they hear him coming. They hear him coming and they take off. I heard that the member has an office. But when is his office ever open? I have been sending everyone who says to me that I cannot help them, but asks whether the Government could help them—

Paul Quinn: I raise a point of order, Mr Speaker. I am not quite sure what the last 10 minutes have had to do with the bill.

The ASSISTANT SPEAKER (Hon Rick Barker): I think the member makes a fair point. The member speaking has been subjected to some interjections, and has responded to them. But I think we should come back to the Motor Vehicle Sales Amendment Bill, which is before the House.

Hon TREVOR MALLARD: I am not going to dispute your ruling, Mr Assistant Speaker, but I think a discussion around the relative merits of Mercury Cougars and Volkswagen Caddies is quite relevant to the bill, especially when one goes to the fact that some licensed motor vehicle dealers—in fact, a lot of them in Wellington—have gone broke, and when this legislation passes into law some people who should not be in business will not be in business.

It is a good bit of legislation—most of it. The amendment to the Act means that it will become more obvious that crooks—the people who should be banned—are banned under this legislation. There is also a further requirement to put the consumer information notices, or CIN notices—something that Mr Bridges might know about as well—in the windows of the cars, or, at least, to attach them to the vehicles. That will also be useful. The bill gives additional powers to the registrar. In fact, it gives powers that I am quite surprised the registrar did not have already. None of it is illogical; it will help get the industry into line. But if there is one thing that I will remember this debate for, it was the timely interjection of Mr Bridges last week.

TE URUROA FLAVELL (Māori Party—Waiariki) : Kia ora tātou. It was a very good choice of yours to let me speak to the Motor Vehicle Sales Amendment Bill, Mr Assistant Speaker, if I may say so with no disrespect to Amy Adams, who is also seeking the call. For the new members of the House, I say that on a couple of occasions in the last few years or so, I have mentioned that there is a very important link between car salespeople and politicians. I did some research on this and found that every year without fail car salespeople take up a lower ranking than politicians in the readers’ surveys on the most trusted professions.

Hon Clayton Cosgrove: The Reader’s Digest.

TE URUROA FLAVELL: In the Reader’s Digest survey—that is right—of the most trusted professions for 2009, car salesmen were rated 38 out of 40 professions. Only sex workers and telemarketers were rated lower. Politicians, however, scored a much more positive rating of, not quite as low as 38 or 39, but 37. So we did all right.

There is another important association between politicians and car traders. I am told that the very first cars in New Zealand arrived in 1898 when a member of Parliament by the name of William McLean, who is well known in Māori circles, and an engineer by the name of Edward Seager imported two Benz automobiles from France. Under the law at the time, the cars had to be treated like traction engines, travelling at a walking pace with men walking ahead and behind. But to overcome that problem, William McLean sponsored a new Act of Parliament. It was called the McLean Motor-car Act 1898, if members did not know that. The new Act specified, I say for the member’s information, a speed limit of a massive 12 miles per hour. A century later here we are. We could be considering the “Heather Roy Motor-car Bill” of 2009. Instead, this bill aims to promote and protect car buyers.

Hone Harawira: And sex workers?

TE URUROA FLAVELL: No, not sex workers. It is an interesting aim, one might say, in the context of the perceptions of New Zealanders in respect of the levels of trust that one can expect from the profession.

My understanding is that the Motor Vehicle Sales Amendment Bill would protect car buyers in a number of ways. The bill amends the process for motor vehicle traders to renew their annual registration, making it quicker and simpler, and thereby reducing compliance costs. It adds a new obligation on trading companies to notify the registrar if a new person becomes involved in the management of the company.

Hone Harawira: The management of the company?

TE URUROA FLAVELL: That is right. Many of the changes proposed in the bill are to improve the operations of the Motor Vehicle Sales Act 2003. That Act introduced a new registration regime for car traders, and new disclosure requirements for used cars. It also established the Motor Vehicle Disputes Tribunal to hear consumer complaints against traders. This new bill, the Heather Roy bill, in effect refines the processes introduced 6 years earlier, and tries to improve upon them. The bill requires that car market operators take reasonable steps to ensure used-car traders display the consumer information notice, and, as other members have talked about, the bill removes car market operators from the definition of motor vehicle traders if they provide only a car sales venue and do not sell cars themselves. All of these steps, we hope, will achieve much needed improvements to protect the safety of car buyers and increase the transparency of transactions between buyers and sellers. The Māori Party has two important points that we want to bring to the discussion. The first point is that overall the number of cars in New Zealand has dropped. New car sales have decreased in number and value, both of which impact on the car sales industry.

Hone Harawira: Five votes for.

TE URUROA FLAVELL: Not quite. There has been a 28.7 percent decrease in new-car sales in New Zealand between 2005 and 2008. On the profit side, there has been a 17.4 percent decrease in car sales value over the last year. That means that the general age of cars used in New Zealand has declined, dropping from an average of 11.28 years in 1999 to the highest yet average of 12.55 years in 2008. Those are all relevant statistics. The need for appropriate practices and transparencies in the interactions New Zealanders will have with used-car traders is, therefore, even more important, as more and more older cars come on to the market. The consequences of the shift are obviously significant when we consider energy efficiency, as discussed in the bill concerning climate change, which was debated prior to this one. Newer cars are generally more efficient and emit fewer emissions due to engineering improvements. We believe, therefore, that additional consideration could be given to the introduction of a fuel efficiency emissions standards regime as part of the buying and selling of motor vehicles, particularly given that the mean age of cars in New Zealand continues to rise. We support any intervention that will improve vehicle fuel efficiencies and reduce emissions.

The policy issue that we hope officials give further thought to relates to cost-benefit arguments around new versus second-hand cars, which Mr Harawira has quite a lot of. Older vehicles tend to have higher exhaust emissions of harmful pollutants—again, the honourable member Mr Harawira is well aware of that—such as carbon monoxide and hydrocarbons. This is partly due not only to the deterioration of the engine’s efficiency, as we know, but also to the older technology used in earlier engine designs. Older vehicles may also have poor efficiency, and, therefore, create more greenhouse gas emissions for each kilometre travelled than similar new vehicles. All of this needs consideration.

In closing, I say that the second big issue for the Māori Party is the removal of the requirements for private sellers to display the consumer information notice. The Māori Party questions whether this move may raise concern with safety issues in the Heather Roy bill. We will be interested to learn the views of the Minister of Consumer Affairs about this particular amendment bill, given that there is a pretty comprehensive review under way of the consumer information notice. Perhaps this amendment may be put on hold pending completion of the review. Despite the barracking from my colleague Hone Harawira tonight, there are some important issues emerging from this “Heather Roy Motor-car Bill” of 2009. Such issues relate to transparency and the need to decrease oil dependency in the face of peak oil and efforts to reduce emissions. There are substantive issues requiring further work, but despite all of that, the Māori Party will certainly support this bill through the first reading in order for that further work to be done. Kia ora tātou.

AMY ADAMS (National—Selwyn) : I also rise to support the Motor Vehicle Sales Amendment Bill. As we have heard already in this debate, this bill amends the Motor Vehicle Sales Act 2003, the principal Act. When that Act was brought into force, it was designed to focus on consumers: to ensure that their interests were protected, that they could operate with some confidence, and that they could make informed choices. The principal Act recognised that often we are dealing with consumers who are naive and who are not experienced business people, and that particular safeguards needed to be in place.

The Minister of Consumer Affairs, the Hon Heather Roy, talked in her speech at the opening of this first reading debate about the necessity for proactive assessment of the relevance and effectiveness of legislation, and that is where this amendment bill has come from. I certainly commend her for saying that, because I agree with her that it is important that we review our compliance regimes on a regular basis and ensure that they continue to meet our needs. From the 2006 review of the principal Act we now have this amendment bill, which does three things. Firstly, it reduces compliance where the Act has been shown to be causing unnecessary time and cost to business; secondly, it removes loopholes that were found to have put weakness into the consumer protection regime; and, thirdly, it enhances the power and jurisdiction of the Motor Vehicle Disputes Tribunal, ensuring that consumers have efficient and effective low-cost remedies available to them in the instances of disputes. In all three regards I think the bill is to be commended. It has shown up useful ways that we can improve the operation of the law, and I commend the Minister for bringing it to the House.

I just want to talk in a little detail about the reduction of compliance; this is something I have spoken about in the House on many occasions. [Interruption] Thank you for that, I say to my dear friend. The National-led Government is always focused on removing compliance. Where we can get the cost of doing business down without decreasing the protections for consumers, we will support that. This bill has identified a number of key areas in which that can be done. It can be done through getting rid of some double-up in the annual certification, and it can be done by getting rid of the consumer information notices in situations that they were never meant to apply to and that they have proved to be of no use in. This bill does those things, and I commend it to the House.

• Bill read a first time.

• Bill referred to the Commerce Committee.

Hon SIMON POWER (Minister of Justice) : I move, That the Anti-Money Laundering and Countering Financing of Terrorism Bill be now read a first time. At the appropriate time I intend to move that the bill be considered by the Foreign Affairs, Defence and Trade Committee, that the committee present its final report on or before 15 September 2009, and that the committee have authority to meet at any time while the House is sitting, except during oral questions and during any evening on a day on which there has been a sitting of the House and on a Friday in a week in which there has been a sitting of the House, despite Standing Orders 187 and 190(1)(b) and (c).

Like the recently enacted Criminal Proceeds (Recovery) Act 2009, the Anti-Money Laundering and Countering Financing of Terrorism Bill is an important part of the fight against organised crime. This Government recognises that those who reap profits from crime are not always the ones who are arrested and held to account by the courts. Conservative estimates put the proceeds of domestic crime at between $500 million and $1 billion every year. This bill will work in concert with the Criminal Proceeds (Recovery) Act by giving law enforcement agencies the right tools to detect and trace criminal profits. Organised criminal groups in New Zealand use sophisticated commercial and financial tools as part of their criminal offending.

Every member of this House is aware of the destruction caused by the production and sale of methamphetamine—P. This bill will reduce the impact of drug-related crime on our communities by giving authorities more stringent powers to deal with money-laundering in the illegal drug trade. Some may argue that money-laundering is not a problem in New Zealand, but unfortunately this is not the case. Last year, I am advised, New Zealand was used by an offender to launder almost $120 million from Australia, through New Zealand, and into Vanuatu.

The Anti-Money Laundering and Countering Financing of Terrorism Bill is also about enhancing New Zealand’s standing on the international stage and increasing confidence in our financial system. As a member of the Financial Action Task Force, New Zealand is committed to having a world-class anti - money-laundering and counter financing of terrorism system. Now more than ever our trading partners are looking for stable, safe economies. The G20 leaders stated in February that they expected countries around the world to implement adequate anti - money-laundering and counter-terrorist financing systems.

The bill’s new powers, penalties, and law enforcement improvements will allow our law enforcement agencies to tackle sophisticated transnational organised crime head on. We are also able to contribute to international intelligence gathering by reporting suspicious transactions through the global network of financial intelligence units. The bill works by requiring businesses that deal with the public to put in place systems that prevent or detect transactions made by those seeking to launder crime-related money. It sets out a number of “know-your-customer” requirements and record-keeping obligations for financial institutions and casinos, and obliges the financial sector to report all suspicious activity to the Financial Intelligence Unit.

For the bill to be a true success, New Zealand’s financial institutions and casinos need to work alongside law enforcement agencies to fine-tune their anti - money-laundering systems. The bill provides a flexible and risk-based set of obligations so that businesses can use their discretion to direct resources to the greatest risks. The Government recognises, as I know the previous Government did, that the bill will place additional costs on New Zealand businesses at a time when many are coming under strain. However, without this bill we could face increased costs for Crown borrowing and higher thresholds for New Zealand businesses trying to access international capital, as well as the higher interest rates that may follow such increased scrutiny.

The Financial Action Task Force has been given a new strong mandate by the G20 and is aggressively pursuing its goal of compelling compliance from reticent States. New Zealand stands in real danger of being publicly criticised for its lack of progress to date. This bill will demonstrate New Zealand’s dedication to global anti - money-laundering and counter-terrorism financing efforts. The obligations set out in the bill are based on international best practice and standards developed by the Financial Action Task Force and the Basel Group of bank supervisors. This bill will help protect and enhance New Zealand’s reputation as a stable and preferred place to do business. I commend this bill to the House.

Hon LIANNE DALZIEL (Labour—Christchurch East) : I welcome the introduction of the Anti-Money Laundering and Countering Financing of Terrorism Bill. I thought I would begin with a little story about a bank in the UK, and it begins with headline news over a weekend from, I think, The Times. One of The Times’ reporters had managed to undercover the fact that this particular bank had sought assistance from the Bank of England and was receiving that assistance. Instead of having the story led by the bank itself and the fact that that assistance was shoring up the bank, because of the headline news it was a bad story for the bank. So then began the weekend from hell for the bank where everyone went online and tried to withdraw as much money from that bank as possible. Of course, the server crashed; it was not used to coping with that amount of traffic over a weekend. On Monday morning people went down to the bank and began to queue. This was a very small bank and it had only two tellers in each of its branches, so it did not take very long for the queue to form. That queue formed because of the Financial Action Task Force requirements; the anti - money-laundering question the bank had to ask everyone who wanted to pull their money out of their account took a considerable amount of time.

I raise that example with a certain degree of humour in what I am saying, but I think it raises a substantial issue; that is, that a combination of events led to what we all now know as the Northern Rock debacle. But part of the problem was the perception of a queue that was created by the questions that had to be asked at the counter. I would like to ask customers—not the customers who turned up to take out their money, but the ones who did not turn up—why the hell they did not turn up, because people were terrified that they would not be able to get their money out. All I am saying is that when the Labour-led Government contributed to the development of the policy in this area, a huge issue was compliance costs and the impact that that would have on the market—and I will leave a lot of that to my colleague the Hon Clayton Cosgrove, who was the Minister in charge of that.

Hon Simon Power: A lot has changed since then.

Hon LIANNE DALZIEL: I am pleased that the Minister of Justice is saying that a lot has changed since then.

I want to put on record that I fully accept the need for New Zealand to meet its obligations, even though they are not legally binding in a strict sense. We are a member of the Financial Action Task Force on Money Laundering and we voted in favour of the revised recommendations in 2004. In my view, we are absolutely obliged to proceed down that pathway. The approach we adopted when we were in Government, though—and I think the Minister has really picked that up in his contribution—concerned those three guiding principles we developed. One was cost effectiveness. The industry should bear the minimum cost necessary to facilitate the effective detection and deterrence of money-laundering. The second was best fit for New Zealand, and I think that that is a huge issue. The regime should reflect New Zealand’s unique economy and the actual anti - money-laundering and countering financing of terrorism risks. The third is one near and dear to my own heart: concordance, as far as possible, with the Australian regime. New Zealand and Australia obviously have a close economic partnership, and there should not be unnecessarily disparate obligations.

One of the things that my colleague Clayton Cosgrove will talk about is the question of cost. The Deloitte’s report was commissioned in order to ensure we had the best possible take on the cost of compliance. That report was developed in probably a slightly more unusual way because we were so concerned to try to get to the bottom of how those costs might pan out, but it was intended to provide a guide to key areas of cost sensitivity and also to try to draw from industry itself an indicative response to what the compliance obligations might be. We were flying a little bit blind in that we were not going out there and saying specifically where we were going to end up. We put out some recommendations and some overseas models for people to draw on, and some preliminary thoughts on policy direction. Deloitte then solicited costing estimates through a series of interviews with the private sector and, again, it was asked to work with a hypothetical regime, which I think creates an issue about the robustness of the result. However, it was quite a significant result, and the figures are mentioned in the regulatory impact statement, which I will come to in a minute. But essentially the first phase of the reforms, relating to bank and non-bank financial sectors and casinos, was estimated to cost those industries a total of $96.84 million in establishment costs and $20.67 million per year in ongoing costs. Of the affected sectors, the banking sector was expected to bear 84 percent of the start-up cost and 75 percent of the ongoing cost. But, again, when we look into the trans-Tasman issue, we know that the fact our banks are Australian banks means they are already having to comply in some of those jurisdictions. Therefore, that does reduce the cost, and that was something we took into account when we were considering those facts.

One of our concerns, though, was that we wanted to have this bill introduced into the House just a little bit earlier than this. We had the idea that it would be before the Foreign Affairs, Defence and Trade Committee when the Financial Action Task Force on Money Laundering team came here. We thought that March or April would have been a really good time to have it there, but obviously the Minister is just a little bit behind where we had hoped to be.

Hon Simon Power: I’ve had a bit on. In fairness, I’ve had a bit on.

Hon LIANNE DALZIEL: I tell the Minister that he has had that portfolio for, what is it, 7 long months now?

Hon Simon Power: That’s right; I’ve had a bit on.

Hon LIANNE DALZIEL: Give it back!

Anyway, I want to raise a serious question, because I think this is the first time that I have ever seen, in a regulatory impact statement as part of the bill’s explanatory note, the words: “information deleted in order to maintain the effective conduct of public affairs through the free and frank expression of opinions between officials and Ministers”. I do not think that I have seen that phrase specifically used in that context before. Sometimes when it is used, and it is used several times in the regulatory impact statement, I can kind of weigh up the sorts of things that maybe officials are providing advice on, and that maybe the Minister and Cabinet would not want to have on the public record, particularly in relation to some of the options that may have been looked at.

The one thing that I find really, really difficult to understand concerns the question of cost. I refer to page 28 of the explanatory note, where the regulatory impact statement states: “The reform is estimated to entail a significant net direct quantifiable cost across industry and government in each of the 2 establishment years of approximately [information deleted in order to maintain the current constitutional conventions protecting the confidentiality of advice tendered by Ministers and officials] per year. However, while difficult to quantify, the benefits of introducing and passing legislation in 2009 are substantial, particularly in terms of protecting New Zealand’s international reputation and associated medium-term trade and other economic objectives.” I think that at some point the Minister will have to explain why that information is being withheld even from the select committee. It may well be that that information will be made available to the select committee in private or in secret, but I feel very uncomfortable looking at a regulatory impact statement that provides so little information. That is particularly so when it is followed by a paragraph that refers to “the net quantifiable benefit of the proposed reform”, which “could range substantially”, so we are told, “between a net cost of $17 million and a net benefit of $59 million …”. In my view, that is just too wide a breach. I think there has to be some substantial debate in the select committee and again in this House over the cost of the proposals that have been brought before members. With that comment in mind, I tell the House that we are happy to support the passage of this bill to the select committee.

JOHN HAYES (National—Wairarapa) : I rise to speak to the Anti-Money Laundering and Countering Financing of Terrorism Bill. As the Minister of Justice has set out, this bill will help to protect New Zealand’s financial systems from money-laundering and the financing of terrorism. As a member of the Financial Action Task Force, New Zealand is committed to having a world-class anti - money-laundering and counter-financing of terrorism system. It is very important that New Zealand continues to meet international standards, and that we do our part in the international fight against money-laundering and terrorism financing. People can be inclined to be a bit offhand about that, but I can tell members that time as a bureaucrat in this country taught me that these issues are very alive and well, including those in some of our territories like Niue, where the Panamanian-based bank Mossack Fonseca and Co. operated at will, beyond New Zealand’s control, and certainly beyond the Niue Government’s control.

Hon Lianne Dalziel: And the Cook Islands.

JOHN HAYES: It was not only there; it was also in the Cook Islands—and in Vanuatu, where these issues have been very, very real. The Anti-Money Laundering and Countering Financing of Terrorism Bill will place a number of obligations on the financial and casino sectors. Many of these obligations, such as reporting suspicious transactions, record-keeping, and carrying out due diligence, are not new. There is also a necessity to ensure that the telephone system is tied up, in this arrangement, because it was very easy to set up a company in Niue, for example, with an 0900 number, and talk to a hot voice or something, in a recording. A call could be made on a Friday afternoon and the phone left off the hook until Monday morning. The caller would invoice himself or herself via the company in Niue, send the cheque to Niue, and launder the money that way. It is quiet-intelligence reporting of suspicious activity that is crucial in the fight against crime. We know that the reporting of the Financial Intelligence Unit works. It is used to unravel complex, organised corporate crime, as well as drug-related crime.

What is new in this bill is that it uses the intelligence of financial institutions to assist in the fight against crime, and that is very, very important. Businesses understand the risks of their services being abused by money-launderers and terrorism financers, and this Government understands that financial institutions are best placed to manage those risks. This bill harnesses the knowledge of businesses. It asks businesses to undertake an assessment of the money-laundering and terrorism-financing risks, and, once those risks are understood, it asks financial institutions and casinos to prioritise those risks. The response is documented in a well-structured anti - money-laundering and counter-financing of terrorism programme. This way, the bill applies an effective risk-based approach in a carefully prioritised and deliberate way. It achieves quiet, intelligent, suspicious-transaction reporting, and it will focus on the highest priorities for detecting and prosecuting crime. If this bill had been in place, I suspect a lot less money would have flowed in the direction of the conflict in Sri Lanka over recent years.

This risk-based approach is the key to a successful and cost-sensitive anti - money-laundering and counter-terrorism financing system. Not only does the risk-based approach provide better intelligence, but also it allows businesses to direct resources to the areas of highest priority or greatest risk. Financial institutions and casinos can focus their resources on the products, situations, and customer types that are the riskiest for the fight against crime.

We recognise that this bill will cost the financial and casino sector, but the risk-based approach means that it will not cost any more than is strictly necessary. This Government also understands that the sector is willing and able as a partner in fighting crime. The bill does not over-regulate this sector through prescription. It primarily sets out the risk-based approach and any other minimum requirements to meet our international obligations. Regulations will flesh out any further requirements that need to be responsive to risk. However, the framework will also provide for safe harbours for situations in which risks may be too uncertain. Flexibility is built in to allow related entities to organise themselves efficiently. The bill allows related businesses to collaborate to manage their money-laundering and financing of terrorism programmes. They may join together to form a designated business group with not just members within New Zealand, but also with parent or subsidiary companies overseas.

The overall structure of the regime is one of self-management, flexibility, and light-handedness with the supervisory support brought by Government through constructive interaction. Let us not forget what my honourable colleague the Minister of Justice was saying earlier: the costs of not proceeding with this bill are high, not just in terms of borrowing for businesses and the Crown. The obvious cost of not implementing this bill is that we allow organised crime to profit from criminal activities, and our financial, banking, and investment markets will be awash with criminal proceeds from across the globe. This bill will help restrict the destabilising flow of criminal proceeds through the New Zealand economy, and although the bill will not stop the proceeds of crime being generated it will empower financial institutions and casinos with the ability to quietly report any suspicious activity they come across. [Interruption] Mr Cosgrove may well be their first target. I commend this bill to the House.

Hon CLAYTON COSGROVE (Labour—Waimakariri) : After that riveting speech made by John Hayes, I say I share with the Minister of Justice our support for the Anti-Money Laundering and Countering Financing of Terrorism Bill. In my role as the previous Minister I was initially in charge of shepherding the bill through, so I commend him for bringing it to the House. He was right when he said it has taken a long process and period of time to get the bill to this point. I want to touch on one of the reasons for that tonight. It is one that I think the Minister and my colleague Lianne Dalziel also touched on: the issue of compliance costs.

One of the dilemmas we faced in Government, and one of the reasons why we delayed this bill coming to the House, was that although we were presented by officials with what I think was a good model, I had visited the equivalent anti - money-laundering agency in the US, which is chopped up between a number of Government agencies, and that had created, I have to say, a bureaucracy with huge resources to deal with this problem. In New Zealand we took the view that we would use existing Government agencies. We decided not to create another department or agency but to use the existing agencies, and, as my colleague Lianne Dalziel said, to try to minimise the costs. One thing I said to stakeholders at the time was that we did not want a “Rolls-Royce” solution. It is not the case that we could get around this obligation; it is an international obligation, and we must take action in order to comply with it. There are international reputation issues if we do not comply with it, and I think business accepted that. But business also told us not to put another zero on the invoice.

It was interesting to talk to some of the Australian banks, when we said we wanted to minimise the costs of compliance. It was interesting to note that those Australian banks said to us that if we went below the level of compliance in Australia, they would have—because our banks are Australian owned, bar one—a trans-Tasman compliance cost. I thought that was an interesting point of view. The officials could not at the time tell us the cost of what they were proposing. I had a high degree of discomfort with that. As I was also the Minister for Small Business at the time, I thought it was appropriate that Government agencies should tell us that, so we could tell stakeholders what the costs of these proposals would be. The difficulty was about trying to elicit the information from the stakeholders, because there was competitive information at stake, and many of the stakeholders did not want to disclose their costs. Equally, of course, if one is trying to consult stakeholders but does not want to pre-empt that consultation by coming up with a rigid framework or a proposal, it is difficult to cost what one does not know will occur.

We put up a draft framework and submitted it to stakeholders, but I asked that we get independent advice. We obtained that from Deloitte. As I recall events, we met in this building with stakeholders and put it to them that the level of assurance that we wanted to give them was encompassed in the independent costings that Deloitte would carry out for us. My objective was that we could go to business and say that we must do this, but that we agree not to “Rolls-Royce” it and to provide business with independent advice that says the compliance cost is as minimal as we can get it, substantial though, as my colleague Lianne Dalziel has pointed out, the dollars are: some $96.84 million in the first phase alone. Ultimately, those costs will be passed on to consumers.

Deloitte did a very good job and looked very closely at the framework of the proposal that the Ministry of Justice had put up, and Deloitte provided that level of assurance. In some ways, that is quite a good model, because Governments, Ministers, and agencies get accused of ramping up costs. To some extent our joint experience, I suspect, would be that it is self-evident in many cases that agencies do put another zero on the invoice. But in this case, this bill arrives in the House with the confidence of the business community.

I will not reiterate, in the time I have available, the points that other members have made; they are valid. Some would ask why little old New Zealand, at the back end of the Earth, is concerned about anti-terrorism, money-laundering, and organised crime. It is the case, and Mr Hayes pointed this out in his contribution, that the smaller a country is, often the greater the target it is. There is a perception—and some of it is the truth historically with regard to our Pacific Island brothers and sisters in some countries that Mr Hayes mentioned—that the jurisdictions in small countries are slightly more loose in their rules, and that those who wish to prey on their Governments and agencies and launder funds for criminal reasons, or for more nefarious reasons in respect of terrorism, can actually do that. Although New Zealand is robust in our regulatory framework, because of our size we can present a target.

In the light of my visit to the US last year, I commend the unit within the New Zealand police force, small though it is, for the work that its members do. They are world renowned, not only because they have limited resources but also because in a good old-fashioned Kiwi way they are very innovative, flexible, professional, and extremely effective in how they investigate and prosecute the crimes associated with this proposal and this bill. The Americans were particularly complimentary about that unit within the New Zealand Police.

There was a fear, and I have to say it bordered slightly on paranoia, on the part of some in the Ministry of Justice that if we did not meet the mark, somehow our financial position would be in jeopardy. I am sure the Minister may share the view that the gentlemen and women from the Financial Action Task Force on Money Laundering who came over and audited us would maybe give us a slap across the wrist because the previous Government did not present a bill to the House, but we were well on the way towards doing that. I do not share the view that our financial position is in jeopardy.

Hon Simon Power: I toughed it out for you.

Hon CLAYTON COSGROVE: Thank you very much, Minister. He toughed it out for us. The Minister shares my view, obviously, given his support for it.

I recall that the Canadians were visited by the Financial Action Task Force on Money Laundering folk a couple of years ago, when they were within, I think, a couple of weeks, possibly even days, of passing their legislation through their Parliament. The eminent men and women from that task force, knowing what was going to be passed and knowing that it was certain to be passed, gave the Canadians a negative vetting. I know the Canadians were particularly upset about that. I have to say I feel that sort of process is a little over the top.

I do not believe that war will be declared, in a financial sense, against New Zealand because this bill has arrived slightly later in the piece. I think we have the advantage, unlike some countries historically—countries that Mr Hayes referred to—of having a robust banking, financial, and legal system, with a highly professional and world-class police force to back it up. The intent is made clear by this legislation; it has been brought into the House. I believe it will be passed, and I hope that will occur without a great deal of time-wasting being associated with it, given that we are bipartisan, I believe—at least the major parties—on this issue. This measure is something we must take. Perhaps some people will be of the view that we do not need to do this, but it is an international obligation that is visited upon us.

In this day and age, certainly since the infamous time of September 11, it is true that the criminal fraternities and the terrorist organisations have become very, very sophisticated in how they can launder and dispose of funds. Indeed, when I was the Minister I recall the police made the claim that some in the terrorism sector, as it were, had found it particularly lucrative to use the generic schemes that organised crime has, to launder funds and inject funds into the system and cleanse them, so they could be used for nefarious means. We have to fight against that every day. The technology improves, and the deviousness of those who want to penetrate our system improves. It is incumbent upon us, if we want to preserve the good name of New Zealand as a sovereign State, and also to preserve the good name of our financial institutions and the associated stakeholders, to ensure that we not only meet our obligations but meet them in a robust way, while balancing against that trying to minimise the compliance costs that are visited on business, and then ultimately on consumers.

I commend the Minister for getting the bill to this stage. We support the bill and look forward to its passage.

JACQUI DEAN (National—Waitaki) : I rise to speak to the Anti-Money Laundering and Countering Financing of Terrorism Bill. Intelligence gathering has played a paramount role in every war: the war against money-laundering has been no exception. It started around 20 years ago as an extension of the battleground on the war on drugs and also in the aftermath of September 11, 2001. It became fused with the new fight against terrorism, of which the fight against the financing of terrorism has become an integral part. With the increasing importance of intelligence in this war, the scope for financial intelligence-gathering has grown as well. Legislative developments in this field have, therefore, risen to unprecedented levels of information collection, allocation, and dissemination.

Particularly critical in the arsenal of Governments internationally has been the global network of financial intelligence units, fed by a host of auxiliary—that is, primary—financial institutions required to report suspicious transactions. This quiet reporting of financial intelligence is crucial in detecting money-laundering and the financing of terrorism. In today’s world one does not need huge sums of money to fund a terrorist attack. Indeed, £15,000 was all it cost the July 7 London bombers to wreak havoc.

Tracing terrorism financiers across the globe requires a globally consistent approach to attaching customer information to wire transfers, alongside reporting expectations. This bill will place New Zealand in line with the international standards of the Financial Action Task Force on Money Laundering, as well as better equipping the New Zealand Police with financial intelligence about our own domestic organised criminal organisations. This bill is important. It is needed and, as the House has already heard, it will bring in a number of obligations for private businesses.

The bill will also bring about some changes to Government agencies. This bill will enhance the existing supervisory roles of the Securities Commission, the Reserve Bank of New Zealand, and the Department of Internal Affairs by making them supervisors of the anti - money-laundering and countering financial terrorism framework. Although the focus of these roles may be new, these agencies are all experienced supervisors in their own right, having complementary supervisory roles under existing legislation. In recent years both the Reserve Bank and the Securities Commission have had their supervisory roles expanded to better address the needs for responsible and considered regulation throughout the financial sector. This bill is another aspect of the proper and responsible regulation that these agencies find themselves leading.

Anti - money-laundering and countering financial terrorism supervisors will work with, not against, the businesses they regulate. Their role is to facilitate businesses putting in place sound and proper anti - money-laundering and countering financial terrorism programmes. However, where a financial provider, or a casino, is being reticent, the supervisors are there to spot the gaps in their industries and work to ensure that all the entities under the supervisor are complying with their statutory obligations. Because there are three supervisors, there is a need to ensure that there is consistency across supervisors, and that the supervisors work together with the Financial Intelligence Unit and each other to support a successfully implemented anti - money-laundering and countering financial terrorism regime. This bill sets out a national coordination committee, which, led by the Ministry of Justice, will ensure that the system beds in effectively and efficiently, and will be the forum that all the Government agencies involved in the running of the Anti-Money Laundering and Countering Financing of Terrorism Bill will work through together.

Money-laundering and the financing of terrorism know no borders. The flow of money through global financial systems is the main focus of this bill. However, the flow of cash across borders is also an area of concern. So this bill also addresses the carrying of cash across the border. The bill increases the penalties for failing to declare, if one is carrying large amounts of cash across the border. Informal cash couriers are an internationally recognised method of financing terrorism, and that is why people coming into or going out of New Zealand must declare if they are carrying more than $10,000. As the enforcers of cross-border cash requirements, this bill also allows the New Zealand Customs Service to use its pre-existing, already scrutinised, powers for questions, search, and, if necessary, seizure of undeclared or mis-declared cash.

This bill will help New Zealand tackle domestic organised crime, allow New Zealand to meaningfully contribute to global counter-terrorism financing efforts, and help ensure that those who are ripping off the New Zealand taxpayer are caught and held to account. I commend this bill to the House.

CLARE CURRAN (Labour—Dunedin South) : I rise in support of the Anti-Money Laundering and Countering Financing of Terrorism Bill. Labour will support the referral of this bill to the Foreign Affairs, Defence and Trade Committee. The purpose of this bill is to enhance New Zealand’s anti - money-laundering and countering financing of terrorism framework, and, in doing so, to progress compliance with the Financial Action Task Force recommendations and ensure the robustness of New Zealand’s financial system.

The Financial Action Task Force recommendations have widespread support, and they were established in 1989 by the G7 countries in response to the threat that money-laundering posed to the international financial system. The Financial Action Task Force is a strategic, inter-Governmental body. Its broad purpose is to develop international standards, and New Zealand, with other nations, is a member of this organisation. The International Monetary Fund and the World Bank, in addition to many other non-governmental bodies, work cooperatively with the task force.

The Anti-Money Laundering and Countering Financing of Terrorism Bill was originally the previous Labour Government’s bill. It was the previous Labour Government that approved the basic framework to underpin New Zealand’s anti - money-laundering reforms, and there were compliance obligations in two phases. In the first phase, the framework would extend to financial institutions and casinos, and in the second phase, to certain types of non-financial businesses and professions. It included a regime for supervision, monitoring, and enforcement of the entities, new civil and criminal offences, and a set of core requirements including customer due diligence, reporting, and anti - money-laundering and countering financing of terrorism policies and practices. It also included a set of objectives and criteria to guide ongoing development and implementation of the regulatory framework. The main objectives of the proposed reforms were, and remain, the effective detection and deterrence of money-laundering and terrorism financing, maintaining and enhancing New Zealand’s international reputation, and contributing to public confidence in the financial system.

The New Zealand approach to the reforms is guided by three key principles. The first one is cost-effectiveness. The industry should bear the minimum cost that is necessary to facilitate the effective detection and deterrence of money-laundering. The second is “the best fit” for New Zealand, which means that the regime should reflect New Zealand’s unique economy and the risks. The third is concordance as far as possible with the Australian regime. New Zealand and Australia have a close economic partnership, and there should not be unnecessary disparate obligations.

Why did the previous Labour Government delay this bill’s introduction? It was delayed simply because it was necessary to undertake detailed analysis of the costs of compliance. That is what drove the Deloitte report, and I am sure that previous speakers on this side of the House have outlined that before me. The bill was planned to have been introduced earlier this year, in time for the April 2009 visit by the Financial Action Task Force, but the National Government did not meet that timetable. Public input will almost certainly be about the cost of compliance and how it can be minimised.

Money-laundering is an important issue. It involves transforming money from crime, or dirty money, into money that has the appearance of coming from a legitimate source, and makes the criminal origin of the money difficult to trace. Effective money-laundering is damaging as it allows criminals to mask their activities and makes it harder to prosecute those who undertake it. There are many ways to launder money, some of which are sophisticated and complicated. The most common examples include “smurfing”, or “structuring”, which is depositing cash at various institutions in amounts less than the amount that must be reported to Government, and subsequently transferring them to a central account. Another example is currency smuggling, or moving funds across borders to disguise their source and ownership, by mail, courier, or body packing, often to countries that have strict bank secrecy laws. Others include exchanging transactions or buying foreign currency that can be transferred to offshore banks; purchasing assets with bulk cash, which involves purchasing cars, boats, or real estate in someone else’s name, selling the assets, and depositing the funds; and gambling, which involves buying gambling chips and, after placing a few bets, redeeming the chips for a casino cheque.

Money-launderers are very creative at masking their activities, as the list I have just mentioned illustrates. The people who engage in these activities do much harm to communities and those who work hard. Looking at this bill, compliance with the Financial Action Task Force minimises the threat to business communities from money-laundering and terrorist financing. The overall objective is to reduce crime in New Zealand and therefore to make our communities safer. After September 11, money-laundering became a major concern of the United States’ “war on terror”, and here in New Zealand most money-laundering takes place in relation to drug crime, organised crime, and fraud. Labour welcomes laws that strengthen and prevent the use of such measures.

Effective anti - money-laundering laws make it easier to detect and investigate money-laundering activities by establishing links between criminal activity and the funds generated by that activity. Restricting the ability of criminals to profit from crime is important, and I look forward to further discussion on this at the select committee. Making it hard to engage in organised crime can only be advantageous to New Zealand communities. Here in New Zealand we are fortunate that we do not have organised crime syndicates such as those mafia gangs that include the Russian Mafia, the Chinese Triad, the Albanian Mafia, Japanese Yakuza, the Neapolitan Camorra, and the Mexican Mafia.

Hon Simon Power: That’s a pretty good sweep.

CLARE CURRAN: Hopefully we do not have many of those here. This bill represents the new international standards that have been put forward by the Financial Action Task Force to prevent and deter money-laundering and terrorist financing. The new legislation will replace the Financial Transactions Reporting Act 1996, which, according to the Minister’s press statement, no longer reflects international best practice.

As I said before, New Zealand joined the Financial Action Task Force in 1991, and was one of the original members. Domestically, a weak regulatory framework in the area of money-laundering and terrorist financing increases the prospect that organised criminals and terrorists will exploit New Zealand’s financial system for criminal ends. This bill attempts to achieve to provide a regulatory framework by offering to undertake due diligence on customers or any person transacting on an account, undertaking transaction and account monitoring, reporting any suspicious transactions to police, and requiring reporting entities to have an anti - money-laundering and countering financing of terrorism compliance programme. I look forward to further discussion on these at the select committee and on how the reporting entities will achieve those obligations. Those reporting entities include banks, credit unions, currency dealers, issuers, money transmitters, life insurers, and stockbrokers, and they will be invited to make submissions to the select committee. In a post-9/11 world this bill, importantly, prevents the financing of a terrorist framework. There is a demonstrated need to pass laws that prevent the financing of terrorist organisations and deter money-laundering. I support the Anti-Money Laundering and Countering Financing of Terrorism Bill at its first reading and its referral to select committee.

Dr PAUL HUTCHISON (National—Hunua) : Thank you, Mr Assistant Speaker, for the opportunity to speak on the Anti-Money Laundering and Countering Financing of Terrorism Bill. Like many other speakers before me, I note that the purpose of the bill is “to enhance New Zealand’s anti-money laundering and countering the financing of terrorism (AML/CFT) framework, and in doing so, progress compliance with the Financial Action Task Force’s (FATF) AML/CFT Recommendations and assure the robustness of New Zealand’s financial system.” I note that Minister Simon Power pointed out that this bill is part of the important fight against crime, both in New Zealand and internationally, and it goes right through the Pacific itself. I understand that the estimates of losses in New Zealand alone are between $0.5 billion and $1 billion a year. That is pretty significant money.

Undoubtedly, organised criminal groups are using more and more sophisticated methods to launder money, particularly in relation to the drug trade. I cannot recount all those different types of organisations that Clare Curran brought up. She might go through them again. Fortunately, the Russian mafia, the Scandinavian mafia, the Triads, and the Mexican mafia are not here in New Zealand, as far as we know.

Hon Parekura Horomia: Yes, they are—over there.

Dr PAUL HUTCHISON: They are over here, says Parekura Horomia. Well, behind every desk there could be a potential Mexican mafia, but we hope not, and we hope that this bill will act towards countering that possibility.

There is no doubt that money-laundering involves transforming money from crime, known as dirty money, into money that, first, has the appearance of coming from a legitimate source, and, second, makes the criminal origin of the money difficult to trace. It is then known in the vernacular as clean money.

Paul Quinn: Parekura’s going to tell us about the gangs.

Dr PAUL HUTCHISON: Hopefully he will. Hopefully there will be a contribution from Parekura.

Fraud and financial crimes have changed and increased as rapid technological development means that our laws become easily out of date, and this type of crime becomes increasingly easy to commit. It is very important not to underestimate just how sophisticated money-laundering is becoming through the new technologies, as Mr Hipkins is readily agreeing across the Chamber. The bill responds to developments in this area and ensures that New Zealand’s anti - money-laundering and countering financing of terrorism laws are up to international standards. These protections are a very powerful tool in the area of drug trafficking and money-laundering, where we have previously struggled to trace and confiscate the proceeds of drug trafficking. I understand that this bill will work in conjunction with the domestic Criminal Proceeds (Recovery) Act 2009.

Some very important international obligations relate to the bill. The National-led Government is committed to maintaining and enforcing effective anti - money-laundering and countering financing of terrorism laws, known as AML/CFT laws. As an active member of the Financial Action Task Force, New Zealand has spoken out strongly in support of this commitment, as did the previous Labour Government, which did not quite get round to culminating the enactment of the legislation, along with many other things that it failed to do. We must do our part in the international fight against money-laundering and financing of terrorism. The dominant view is that the strongest anti - money-laundering and countering financing of terrorism laws are those based on the Financial Action Task Force recommendations. We stand at risk of being criticised for our lack of progress in this area to date. That is a serious concern, as the G20 has recently given its explicit support to the Financial Action Task Force. The United Nations Security Council recently strongly urged nations to comply with the Financial Action Task Force recommendations.

I note that my colleague John Hayes mentioned just how realistic the problem is in the area of the Pacific. He specifically mentioned the Panamanian bank Mossack Fonseca and Co., which apparently was operating in Niue for up to 10 years. I understand that they were not quite aware of what was going on, and how much it benefited them is not clear, but it is a great worry when countries close to us that are so intimately involved with New Zealand are involved. It is very important, as this bill goes to the select committee, that we think of other Pacific countries—the Cooks, Tokelau, and the wider Pacific.

There are a variety of benefits of taking action, which include the fact that terrorism is a threat to domestic and international business communities. The measures in this bill protect our business communities against those threats by reducing crime and making New Zealand a safer place. Non-compliance would result in costs to our domestic business sector. That aspect is very important to be aware of. Increased costs of borrowing overseas for both the Government and the private sector would result as overseas lenders perceive the non-compliant country as a greater financial risk. There would be difficulties in the form of increased costs or lost business opportunities overseas for companies from the non-compliant country, and difficulties in trade negotiations at a Government to Government level, as foreign Governments may be reluctant to extend trading privileges to non-compliant countries.

Other benefits of taking action include impacts on relations with international organisations such as the World Bank, the International Monetary Fund, and the United Nations. There is the possible perception that the non-compliant country may be seen as a soft touch for money-launderers and terrorism financers.

I will end my speech by making a couple of comments on Part 2, “AML/CFT requirements and compliance”, which deals with standard customer due diligence, simplified customer due diligence, enhanced customer due diligence, and ongoing customer due diligence and account monitoring. Clearly, there will be a balance—there was always going to be a balance—between individual privacy and how far the mechanisms associated with the bill can go.

The very final point I will make is regarding the cost-benefit analysis. I agree with the Hon Clayton Cosgrove and others who have mentioned that the Deloitte independent cost estimation, although it talks about start-up costs of financial institutions and casinos, is $97 million to be spread over 2 years, but the data indicate an upper cost of $249 million for start-up costs. That is pretty wide. We hope it would be more accurate than that. However, this bill is a very important bill, and I certainly commend it to the House.

JOHN BOSCAWEN (ACT) : The Anti-Money Laundering and Countering Financing of Terrorism Bill is a bill I was not intending to speak on, but I have come back into the House and picked up the previous two speeches—in particular, the speech from Clare Curran, but also that of Dr Hutchison.

Hon Trevor Mallard: A very good speech.

JOHN BOSCAWEN: It was a very good speech. Clare made three or four key points that came across to me. She talked about the robustness of our financial system, she talked about enhancing our reputation as a country, and she talked about terrorist organisations and transferring money. I pick up her first point, the robustness of our financial system. I have only just come back into the House after spending 40 minutes on the phone talking to a Mr Bruce Graham in Tauranga. Mr Graham is coming up to his 70th birthday. We talked about an issue that a lot of members I speak to have had correspondence on. Some members will have some understanding of the issues, but others will have just a cursory acquaintance with them.

Mr Graham is one of some 13,000 to 14,000 mainly elderly investors who have lost money through investing in the ING Diversified Yield Fund or the ING Regular Income Fund. The point that Mr Graham made to me is that he has lost part of the proceeds that had been built up over 80 years—30 years of income from the work that his father did that he inherited, and 50 years of income from the work that he did himself. He said that his father spent most of his life in England, apart from the time he fought in the Second World War. When he came to New Zealand with his young son he said to him: “You’ve got to be able to trust your bank. If you’re in a country where you can’t trust your bank, it’s time to find a new country.” So when Clare Curran talked about the robustness of our financial system, it challenged me to give this speech this evening.

Earlier this afternoon I spoke to Mrs Liz Brown, the Banking Ombudsman, on this issue. I was fascinated to learn that of the 14,000-odd people who lost money invested in ING New Zealand Ltd through ANZ, some 2,800 were advised by advisers employed by, or in some way linked to, the ANZ bank. Those 2,800 people have an advantage over the other 11,000 people, who were not. They are privileged because they get the services of the Banking Ombudsman. The Banking Ombudsman is someone who can listen to them, hear their complaint, and adjudicate on it. In that regard they are very lucky, because some 11,000 people who invested in those two funds do not have that right. As I understand it, they might have been able to apply to the Insurance and Savings Ombudsman for consideration, but because ING is, I understand, a subsidiary of ING Australia, and the Australian company is not covered by that system, they do not have that protection.

Clare Curran also talked about enhancing our reputation—the reputation of New Zealand—and although I realise that I am drawing a very long bow between terrorism and money-laundering and the situation in which 14,000 investors find themselves, I think it is an important issue to raise. In some cases these people face the loss of significant parts of their life-savings. They have had an offer made to them by ANZ and ING that they have to accept prior to 5 p.m. next Friday. If they accept that offer of 60c or 62c in the dollar, they sign away their rights. Right now there is a Commerce Commission investigation into the activities of those two companies. I am told that it has been going on for more than 6 months, and that the Commerce Commission advises that it is likely to continue for at least a further 6 months. It is quite possible that the Commerce Commission will find, after more than a year of investigation, that there was misleading conduct and deceptive conduct—it may not happen, but it is a possibility—and if that were to happen, it might give rise to those people being able to claim back their money in full. But anyone accepting the offer by 5 p.m. next Friday is signing away his or her rights to get that upside. Mr Graham said to me this evening that that is blackmail. This bank is saying to its investors: “Sign up, take this money, take 60c in the dollar, and sign away your rights.” I ask today whether that is right.

Most of us in this House have received emails from the Frozen Funds Group concerning ANZ and ING. It has called upon parliamentarians to speak out against this situation. I have given a number of speeches on the issue of finance companies. I have never discussed this particular issue, because I have not had the chance to properly investigate it. The Banking Ombudsman said to me that of the 2,800 cases she is entitled to investigate, she has had 450 complaints. So about one-fifth of the people have lodged a complaint. Of those, 150 have been referred back to the ANZ bank, which gives her a file of 300 complaints. Of those 300 complaints, 150 have been decided—approximately 50 percent have been decided, and 50 percent are yet to be adjudicated on. So we have a sample of 150 cases. What I found fascinating in what Mrs Brown said to me is that she has found in favour of the complainants in two-thirds of those cases. So, in rough numbers, of the 150 cases that have been decided on, 100 have been found in favour of the complainant. Two-thirds of the cases have been found in favour of the complainant, and one-third of the cases has been found against the complainant.

So a person lodges a complaint with the Banking Ombudsman because that person is not happy with the answer he or she has had from the ANZ bank, that independent ombudsman looks into it, and in two cases out of three she says that the bank has been wrong and the complainant is right, and awards the complainant all or part of what the complainant has claimed. Let us imagine for a moment that we had consumer protection law that allowed all 13,000 people affected to have the benefit of the Banking Ombudsman; on that rough calculation, maybe 8,000 people would have a genuine complaint and 4,000 would not.

However, it is actually worse than that. Mr Bruce Graham is one of those 50 people whose complaint was declined by the Banking Ombudsman. Liz Brown’s office spent many, many months looking into Mr Graham’s case and he was declined. What I found interesting was the circumstances in which he was declined. He was declined because apparently some 30 pages of fine print were attached to his document. He read only the first four pages. Because he had been given 30 pages, the Banking Ombudsman was able to point to the fact that he had been given notice—he was on notice and therefore he had no claim. That was despite the fact that he had made it quite clear to his financial adviser at the ANZ bank that he wanted an investment that was safe, an investment where he would not lose his capital. He did not need the income, but he wanted his capital to be safe. That was the one thing he stressed. He raised it with his investment adviser, who I understand was an employee of the ANZ bank. He said “Is this safe?”, and she said “It’s as safe as the bank.” His wife witnessed his financial adviser saying that. But one of the reasons he was declined was that apparently the ANZ bank had said to Mrs Brown that its advisers would never have said that. So despite the fact that he is prepared to swear that that was said, Liz Brown appears to have favoured the bank.

I make this point: the KiwiSaver system has default providers. I joined as a member of Parliament, and I am with the AXA New Zealand provider. The ANZ bank has privileges as a result of that system. I believe that the ANZ bank and the ING group owe these investors a lot more than what they are giving them. Thank you, Mr Assistant Speaker Roy.

RAYMOND HUO (Labour) : I rise to support the Anti-Money Laundering and Countering Financing of Terrorism Bill being referred to the Foreign Affairs, Defence and Trade Committee. In the era of globalisation, no country is immune from issues such as money-laundering, terrorism financing, and tax evasion, etc. For countries like New Zealand, there is often initial scepticism in some quarters that money-laundering or financing of terrorism even exist here. That scepticism may pose a question as to whether this is legislation in search of a problem that will incur additional compliance costs. A straight answer to that question is no and yes; like any other measure, legislation will inevitably incur compliance costs.

Many financial institutions are very concerned about those compliance costs. Earlier this evening I briefly scanned the 132-page Deloitte report that was commissioned by the previous Labour-led Government. The front page of that report unlocked the true cost of compliance. It suggested compliance costs of $111.8 million for initial start-up costs and $42.7 million potential incremental costs per annum. A breakdown of the compliance costs into the two phases shows that the first phase of the reforms that relates to the bank and non-bank financial sector and casinos is estimated to cost those industries a total of $96.84 million in establishment costs and $20.67 million per annum in ongoing costs. Of the affected sectors, the banking sector is expected to bear 84 percent of the start-up cost and 75 percent of the ongoing costs. Across most sectors, the compliance programmes for account and transaction monitoring and anti - money-laundering and countering terrorism financing are expected to account for around 90 percent of start-up costs and 80 percent of ongoing costs. Phase two of the reforms that covers the New Zealand Racing Board and professionals such as lawyers and accountants is estimated to cost those industries a total of $14.96 million in establishment costs and $22.03 million per annum.

On the other hand, some experts believe that a number of participants surveyed by Deloitte had a moderate view. They thought that the actual compliance costs could be more than double those amounts given in the report. The complexity of the costs of compliance was one of the main reasons why the introduction of this bill was delayed in the first place—if the honourable member Dr Paul Hutchison, who spoke previously, wishes to know. However, it was slightly disappointing that the bill could not be introduced earlier this year in time for a scheduled revisit of New Zealand’s compliance by the Financial Action Task Force on Money Laundering, of which New Zealand is a member.

Currently, New Zealand has limited compliance with a number of its recommendations on anti - money-laundering and countering of financing of terrorism. On my take of this bill, I see two aspects. On the one hand, this bill is largely driven from offshore multilateral party nation efforts to eradicate money-laundering, which is led by the Financial Action Task Force on Money Laundering. This was founded in 1989 by the G7. The Financial Action Task Force on Money Laundering issued 40 recommendations in 1990 and completely revised them between 1996 and 2003. The 2003 version of the 40 recommendations, among other things, requires countries to implement relevant international conventions, criminalise money-laundering, and enable authorities to confiscate the proceeds of money-laundering, along with requirements to implement customer due diligence, record-keeping, and suspicious transaction reporting. Subsequent to the September 11 terrorist attacks in the United States, the Financial Action Task Force on Money Laundering issued nine special recommendations on terrorist financing in October 2004. It broadly extended the application of the 40 recommendations to terrorism financing and introduced new requirements relating to services such as alternative remittance, transfers, cash couriers, and non-profit organisations. Therefore, the current financial sector reform, encouraged by the 40 recommendations plus the nine special recommendations, will now involve measures in detecting and deterring money-laundering and terrorism financing on a scale of intrusiveness not seen before in New Zealand. On the other hand, the bill is an essential component in New Zealand’s ability to investigate organised crime, to follow the money trail through financial systems, and to enable the police to use the Criminal Proceeds (Recovery) Act passed in April to attack those profits. In order to do so, the affected sectors, including banks, finance companies, casinos, professionals, etc., will have to consider some immediate issues, such as implementing anti - money-laundering reforms including enhanced due diligence, enhanced reporting, and fuller record-keeping measures.

Money-laundering and terrorism financing undermine the economy and creates instability in the financial sector. It is very important for the private sector that New Zealand meet the Financial Action Task Force on Money Laundering standards, but, more directly, failure to comply with those recommendations could result in the Financial Action Task Force on Money Laundering declaring New Zealand a high-risk country for money-laundering and terrorism financing. This would potentially impact on our credit rating and on the cost of borrowing for New Zealand.

Australia has had anti - money-laundering laws for over a year now. It is now our turn to implement similar measures to enhance New Zealand’s anti - money-laundering and countering the financing of terrorism framework, thus strengthening New Zealand’s international reputation and reinforcing public confidence in the financial system. Thank you.

TODD McCLAY (National—Rotorua) : I rise to speak on the Anti-Money Laundering and Countering Financing of Terrorism Bill in its first reading. This bill will ensure that New Zealand’s laws against money-laundering and its laws to counter the financing of terrorism are up to international standards.

We have heard from other speakers tonight about what money-laundering is. It involves transforming money gained from crime into money that appears to be legitimate. It is a process whereby funds gained illegally are cleaned to gain the appearance of having come from legitimate sources. It means that money gained from criminal origins is often difficult to trace. But there is another part to money-laundering; it directly includes legally gained funds of money that are channelled to illegal bodies or organisations, or that are channelled for illegal intent. In particular, this part is directed towards those people around the world who are involved in terrorism. Not all money that is spent by terrorists is gained illegally. In many cases, if one reads the newspapers or looks at the news, one will see that there are legitimate companies that pay their taxes but that support unworthy causes that harm and kill people. In 1996 the International Monetary Fund (IMF) said that the aggregate size of money-laundering in the world could be somewhere between 2 percent and 5 percent of the world’s GDP. Those 1996 statistics would indicate that money-laundering ranged in the size of NZ$1 trillion to NZ$2.5 trillion. Let us put this in context. The lower figure of NZ$1 trillion roughly equates to the value of the total output of an economy the size of Spain.

Fraud and financial crime have changed significantly and increased dramatically as the world’s economies have come closer together. They have come closer together largely because of international agreements and technology. This, in turn, means that, in particular, as a result of rapid technological development, our laws have become and continue to become quickly outdated. Criminals and terrorist organisations are increasingly becoming technologically competent and increasingly harder to track.

We have heard in this House the horror stories of the increase of the P trade in New Zealand. It is a trade that harms too many of our people, young and old, and that does devastating damage to far too many of our families. P is a huge business and it seems to be awash with money in this country. This drug—as with other harmful and illegal drugs and the precursors to manufacture these drugs—is largely imported from countries overseas. The moneys gained from this disgusting trade must, moreover, move across borders, and therefore they must be laundered so that these horrible people can pay others overseas to have these drugs sent to them.

In August 2005 the IMF put together a report based upon observing the standards and codes in place in New Zealand. This, of course, was the Financial Action Task Force report, which others have spoken about to some degree. I notice when it came to the general situation of money-laundering and financing of terrorism, particularly in New Zealand, it said that “The main sources of illegal proceeds are considered to be the cultivation, manufacturing or dealing in illicit drugs, traditionally cannabis, but more recently methamphetamines. Fraud offences have also produced significant proceeds.” Well, there is money-laundering in New Zealand. I am not sure of the size and scale of it, but any that comes from the illegal drug trade is too much, and we must do much more about this.

This legislation is a powerful tool to combat drug trafficking, and drug money that is laundered. I think it will add an extra tool to the box that our law enforcement and customs agents can use as they trace and confiscate the proceeds of drug trafficking. Many other countries of the world and blocs of countries have implemented similar legislation to counter terrorism and money-laundering. The European Union, countries of the Council of Europe, the Caribbean, Asia, other parts of Europe, and South Africa have all created regional task forces or similar organisations to combat money-laundering. Pacific Island countries have also worked closely together on this important issue, and the US administration has had laws in this area for many years.

My colleague John Hayes, who has great experience of the Pacific region, has raised the issue of a number of small countries. A number of Pacific countries—Cook Islands, Niue, Vanuatu, and a few others in particular—were criticised by the IMF and others as far back as the year 2000. Largely the issue was, I think, a lack of accountability and not having the proper procedures to control some of the bodies—the companies or banks—that they allowed to be established for use overseas. For example, I will look at the issue of Niue. With the help of the New Zealand Government, and support from the IMF, Niue put in place a number of changes to its domestic laws to outlaw offshore banks and to change their companies’ regimes. At the time one could not—and still to this day one cannot—establish a company in Niue. In fact, if one wants to trade in Niue and one wants a company, one must establish a company under New Zealand law. But Niue did allow overseas companies—offshore companies and banks—to be in place. When I was the Niue Ambassador to the European Union some years ago the Belgian police called me —

Hon Member: What? Niuean ambassador?

TODD McCLAYI was the Niue ambassador as well as the Cook Islands ambassador, but that is not the best part of the story; that bit is coming now. The Belgian police called me and said that somebody had contacted them purporting to be a Niue diplomat. It was not me. When we looked a bit closer we saw that, in fact, the person seemed to be involved with offshore companies and the money-laundering trade. Through some swift work on the part of the Niue officials and with help from the New Zealand Government and, of course, Niue’s ever-diligent proper ambassador based in Brussels, this man was arrested and is now, one hopes, in jail. In the case of Niue, it was not that the country had any particular intent to flout laws; it was just that as a small country it was difficult for it to control the overseas companies that it had put in place.

I want to draw to a close because I believe the sooner we get this report to the Foreign Affairs, Defence and Trade Committee the better it will be for all of us, and the sooner those who see New Zealand as a place where they may be able to launder their illegally gained funds will realise that we are taking this issue seriously. I want to touch just for one moment on another part of the report from the IMF that I raised earlier. In 1989 the then G7 countries came together to create the Financial Action Task Force. This was in response to the threat that they perceived to countries of the world. In that report the task force evaluated New Zealand, and said that there was more work to be done. Generally our laws in place were reasonable, but, in particular, to make sure that we were meeting international standards, we needed to put in place additional measures. This legislation will do that. I support it, and I cannot wait until it gets to the select committee. Thank you.

TE URUROA FLAVELL (Māori Party—Waiariki) : Kia ora, Mr Assistant Speaker Roy. Kia ora tātou katoa i tēnei pō. I have to say that when our caucus looked at this bill on the Order Paper today, the two phrases that stuck out were “Anti-Money Laundering” and “Terrorism”. We were trying to work out what the hang the link was between the two. Be that as it may, we suggest that the Anti-Money Laundering and Countering Financing of Terrorism Bill is a pretty formidable title, and it is obviously for a fairly formidable area of work. A key strength of this bill is to put in place a process by which we are implementing recommendations from some fairly hefty global documents. Support for this bill will enable Aotearoa to be compliant with three documents, as I understand it: the United Nations Convention Against Transnational Organized Crime; the International Convention for the Suppression of the Financing of Terrorism, to which New Zealand is a State party; and also to progress compliance with the United Nations Convention Against Corruption, signed in December 2003. It also sets in train a process to adopt and implement the Financial Action Task Force recommendations, which are widely regarded as the international standard.

So if the three conventions I mentioned are not significant enough, this task force to all intents and purposes is a body that no one would want to mess with. I understand that it has fairly wide membership: some 32 jurisdictions are involved, including the European Commission and the Gulf Cooperation Council. We—Aotearoa—have been a member of the task force since 1991, and our performance will be on the line in October 2009, just 3 months from now. In fact, it is more than a matter of manners and simple courtesies between countries; the compliance has a slightly more serious shade to it.

The Reserve Bank, in its briefing paper, identified that countries that are non-compliant or partially compliant will be considered by a regional subgroup for inclusion on the Financial Action Task Force International Cooperation Review Group, which can formally blacklist non-compliant countries. The same briefing paper revealed that New Zealand is yet to be assessed, and our level of compliance is significantly below that of other nations with which we typically compare ourselves: Australia, the United States, and Canada, all of which have made substantial progress in implementing the recommendations. So the question of reputation is at stake. If our response to the Standard and Poor’s credit rating is anything to go by, reputation is, indeed, everything.

The stage is set to take this bill seriously, by virtue of the fact that we take our international responsibilities seriously as well. If only that were the case in all aspects! The Government’s inaction and, in fact, wilful disregard of the Declaration of The Rights of Indigenous Peoples has often been commented on in this House, in indigenous forums, and in international human rights hui right across the globe. The Māori Party, as one would expect, places considerable priority on enhancing our international reputation through showing respect to indigenous peoples, to tangata whenua, and to human rights, and in the commitment to the global call for action to end poverty. We will continue to speak out, as one would expect, about the need to be compliant and to respect our international obligations.

However, we make the point that there needs to be a more robust process so that the Government signs up to such arrangements—indeed, like a Treaty-based process. An important variable in any discussion about domestic and international agreements from the Māori Party perspective is the priority of Crown consistency with the Treaty of Waitangi. This is not just a Māori Party commitment; the relationship in the confidence and supply agreement between the National Government and the Māori Party states up front that both parties will act in accordance with Te Tiriti o Waitangi, yet this bill is another example of New Zealand’s gaining membership in a forum without Treaty partner dialogue.

The cost of achieving compliance with Treaty justice is a cost that appears to be left out of the costings included in the preparation of this bill, yet we have every detail, and more, about other costs involved in the implementation of this bill, and Mr Huo spoke about that earlier. An independent cost estimation undertaken for the Ministry of Justice in 2008 assessed that the start-up costs for financial institutions and casinos were $97 million over a 2-year information period, with ongoing costs of $21 million per year after that. The question of how these costs will be met is expected to be within the banking sector, which will bear 84 percent of the start-up costs and 74 percent of the ongoing costs.

But other costs to the Crown require further attention. There are questions around monitoring and supervising reporting entities, the assessment of money-laundering risks at national and sector levels, the analysis of an increased volume and variety of suspicious-transaction reports, and ensuring adequate coordination of regulatory functions across multiple supervisors.

As I said earlier, this bill and the framework proposed are formidable in their scope. This is where it gets relatively tricky, because the costs that banks will pick up will come not just out of the corporate office in Wellington or, more to the point, Sydney. Adopting the recommendations in this framework will increase business costs to consumers, which will be passed on to all ordinary bank customers—all this, when banks have already been shown to be overcharging their customers.

Rahui Katene, the Māori Party member on the Finance and Expenditure Committee, shared with me some of the extremely critical comments made about the banking sector in its June 2009 report. In the report on the financial stability of the Reserve Bank of New Zealand, the select committee noted its surprise that despite the severe impact of the current recession on business and household liquidity, bank profits declined only marginally in the past year. The comment concluded: “Some of us consider it vital that banks neither insulate their profit margins nor charge excessively high interest rates at the expense of the real economy and the taxpayers, because of the potential adverse consequences for business and households.”

These sorts of things are very timely reminders to focus on, as we think about the downstream effects of compliance with the Financial Action Task Force’s recommendations on anti - money-laundering and compliance financing of terrorism. We clearly have many questions about the bill, its impact on Aotearoa, and the status or need for complying with the international framework in the first instance. We do, however, extend the benefit of the doubt to enable a full and frank response to the issues apparent in this bill, and it is for that reason that the Māori Party will support this bill to its first reading. Kia ora tātou.

Hon TREVOR MALLARD (Labour—Hutt South) : It is good to beat the member Nikki Kaye to the call, and I hope that later in the year the experience can be repeated in a bike race, although I am not quite as confident about that as I was about the call.

I want to have a discussion about money-laundering, about the widespread practice that has been well canvassed here whereby money changes from dirty money into clean money through laundering. That is the usual understanding of the term, but occasionally clean money turns into what we might describe as disguised or dirty money. A number of members opposite have some experience of this. I think the Waitemata Trust was probably the most widely used money-laundering vehicle within the New Zealand political system. Over $1.2 million in 2005 was laundered through that trust, in a very similar way to international money-laundering. The trust was seen as a way of moving cash without identifying the original owners or the intermediate owners.

Clare Curran: Secret money.

Hon TREVOR MALLARD: Well, it is not a secret and it is not surprising. I think Buddle Findlay did one such transaction for Labour before the practice stopped; from our perspective, transparency and sunlight were very, very important in this particular area. I see that, as we move forward, National seems to be accepting the fact that that sort of money-laundering is inappropriate. It is unlikely to continue in the future, and I think that is a good thing.

Early in my time as Associate Minister of Finance Labour members looked at this area pretty extensively, and it is fair to say that we came to some different conclusions from those that we have come to now.

Hon Simon Power: A lot has changed!

Hon TREVOR MALLARD: A lot has changed. The world has changed substantially over that period. The whole electronic banking system has developed in a way that is enormously different from where it was at that time. At that time, people who looked at us internationally said that we had a problem in theory but not in practice, and to a certain extent that was right; we did not quite fit with the international models. We had a prudential system around our Reserve Bank, and the supervision of our banking system was a lot better, and that would not have been acceptable in the United States and in the United Kingdom at the time. Clearly, times have changed. There is a lot of transparency of the United Kingdom’s banking system as far as the British Government is concerned; it owns just about all of it as a result of the changes that have occurred there over the last 12 months or so. Therefore, I presume that it would not have any problems around transparency.

As a member has said, there has been a movement, a growth in sophistication, both amongst terrorist groups—and that has become very clear—but also amongst drug dealers. Those of us who have slightly more time now were able to watch a television series recently on Terry Sinclair—the Mr Asia series. It was an Australian series that apparently had some relationship with the truth and—

Clare Curran: Underbelly.

Hon TREVOR MALLARD: The name was Underbelly; I am never good on the titles, or names, or things like that. But it showed that 20 years ago there was not the sophistication in the money-laundering system at that particular time. In fact, there was a lack of sophistication in quite of few of the approaches taken by Mr Sinclair and a number of other people in that period! But since that time organisations that were there 20 years ago have become much more active and sophisticated—in particular, drug gangs. My view is that the ability to follow the money as far as the drug gangs are concerned is very, very important. We know from the assets that, through even casual observation within our electorates, we see accumulating that they cannot have been developed through honest means by the individuals who now own those assets. It is important that we have the ability and as much strength as possible in the regulatory system to dive down under a lot of the fronts that exist and thereby push back against drug dealers in particular, but, clearly, there is the question of terrorists as well.

Without revealing too much of the previous Cabinet’s secrets, I can say that some really interesting debates occurred around proscribed organisations, around who should be on the list of international organisations to be regarded as terrorist organisations, and who should not. There were some very strong views about organisations that some of us had had dealings with over many, many years. Certainly, the fronts were very peaceful and the individuals who were involved in them were seen by a lot of people to be making a big contribution to New Zealand. But there were some international suggestions that money being raised for those groups and those communities was finding its way to terrorists of a wide variety of hues—without getting on to the sides of particular debates and battles that are happening in nations around the world. That goes to the question of whether New Zealanders have knowledge of where their money will go when they make donations to seemingly innocent and good organisations, because sometimes behind them—sometimes quite a long way behind them and quite well-hidden—are organisations that, when we know what they get up to, are in fact organisations we should have nothing to do with, and certainly should not be financing.

This is a good bill. It is an indication that times have changed. There is an acceptance of that, I think, around the House now. There are some things that I would have, probably 7 or even 5 years ago, regarded as an infringement of individual rights or as a breach of civil liberties, but on balance I have changed my view. I think that the majority—

Hon Clayton Cosgrove: True!

Hon TREVOR MALLARD: I have not changed my view about Mr Cosgrove.

Hon Clayton Cosgrove: Nor I about you, Mr Mallard.

Hon TREVOR MALLARD: Well, I think there is a mutuality there. Our view is that the world has changed, we have to stay up with modern methods, and that involves some sacrifices as far as our civil liberties are concerned, and I think it will be a very good debate to have within the select committee. I do not want to signal automatic support for the bill when it comes back, until we have had that debate and heard what the views on it are. Thank you.

• Bill read a first time.

Hon SIMON POWER (Minister of Justice) : I move, That the Foreign Affairs, Defence and Trade Committee consider the Anti-Money Laundering and Countering Financing of Terrorism Bill, that the committee report finally to the House on or before 15 September 2009, and that the committee have authority to meet at any time while the House is sitting (except during oral questions), and during any evening on a day on which there has been a sitting of the House, and on a Friday in a week in which there has been a sitting of the House, despite Standing Orders 187 and 190(1)(b) and (c).

• Motion agreed to.

Hon STEVEN JOYCE (Minister of Transport) : I move, That the Road User Charges Amendment Bill be now read a first time. It is my intention to move at the appropriate time that the Road User Charges Amendment Bill be referred to the Transport and Industrial Relations Committee for consideration; that the committee report to the House by 27 July 2009; and that the committee have the authority to meet at any time the House is sitting except during oral questions, during any evening on a day on which there has been a sitting of the House, and on a Friday of a week in which there has been a sitting of the House, and outside the Wellington area during a sitting of the House, despite Standing Orders 187, 189(a), and 190(1)(b) and (c).

The road-user charges system has been reviewed recently, and I am currently considering the 32 recommendations made to me by the independent Road User Charges Review Group. A separate bill to accommodate any changes that arise from the recommendations of that group is scheduled for introduction later. This short bill before the House tonight deals with two immediate matters that need to be dealt with in a timely manner.

International opinion is now in agreement that the world faces a climate change problem. The problem of increasing global temperatures is caused by excessive emissions of greenhouse gases, including carbon dioxide. Although technology has revolutionised transport and given us the opportunity to grow our economies, it has come with a cost: carbon dioxide emissions.

Technology continues to revolutionise the transport sector. In an effort to stem greenhouse gas emissions, Governments are channelling billions of dollars into the development of low-carbon vehicle technology, which includes efficient vehicles that run either partly or wholly on electricity. Electric vehicles are cheaper to run, use little or no conventional fuel, and are more efficient at converting stored energy into motive power. Significant sales of electric vehicles will reduce our reliance on imported fossil fuels, and increase the energy security of our transport and electricity systems. Electric vehicles emit little or no toxic substances, such as particulate matter and oxides of sulphur and nitrogen.

In the normal course of events, owners of electric vehicles have to pay road-user charges. Although it is an important principle that all road users pay for the costs they impose on the roading network, providing an exemption from road-user charges is a way to encourage the change to electric vehicles. This bill gives the Government the ability to create regulations to exempt owners of light electric vehicles from paying between 3.6c and 4c per kilometre in road-user charges. Regulations to bring about an exemption that continues until 2013 are anticipated as soon as the bill is passed. This incentive is consistent with the Government’s intention to support fuels that assist climate change and energy security objectives. The Government has already announced that New Zealand producers and importers of bio-diesel will receive an advantage of up to 42c per litre over petrol and diesel until 2012.

The second matter in this bill is the issue of giving notice of increases to road-user charges. In July 2008 each of the main centres of this country was brought to a standstill by truckdrivers protesting against increases to road-user charges that were made with no notice. It is reasonable to give notice of road-user charge increases that impose a significant cost on commercial transport operators. This bill proposes that the Road User Charges Act be amended so that operators are given 6 weeks’ notice of any increase to road-user charges. The proposal is supported by the Road User Charges Review Group in its report to me on the road-user charges system.

This bill also contains a measure to minimise the potential loss of revenue through large-scale pre-purchasing of road-user charges once the notice of an increase is given.

Hon Darren Hughes: More bureaucrats!

Hon STEVEN JOYCE: Good on you! The bill provides that road-user licences for heavy vehicles expire 1 month after an increase comes into effect. Heavy vehicle operators would be required to purchase a new road-user licence at the new rate within the month, and would be able to seek a refund for any unused portion of their previous licence.

The licence expiry provision is a reinstatement of a similar provision in the Road User Charges Act that was repealed by the previous Government in 2002. Its repeal was in response to administrative difficulties caused to 400,000 or so light vehicle owners who had the inconvenience of having to relicense their vehicles 1 month after an increase in road-user charges. The licence expiry provision in this bill avoids that administrative burden of relicensing a light vehicle fleet, because it applies only to heavy vehicles. Owners of light vehicles under 3.5 tonnes, including sport utility vehicles and vans, will be able to pre-purchase road-user charges at the lower rate—because this is a very practical Government—but they are unlikely to do so on a large scale.

This bill deals with two specific issues on road-user charges. The proposed amendments are straightforward and I would like them to be dealt with speedily by this House, particularly so that the statutory requirement to give notice of road-user charges increases can be in force before the next scheduled increase to road-user charges on 1 October 2009, which is in regard to the smaller national increases in road taxes to replace the regional fuel tax system. I commend this bill to the House.

Hon DARREN HUGHES (Labour) : I rise to speak to the Road User Charges Amendment Bill moved by the Minister of Transport, who also subtly made reference to the fact that he intends to move an instruction to the Transport and Industrial Relations Committee that it report the bill back by 27 July. That date is not too far from today, but we heard no explanation or justification from the Minister as to why the bill has to be dealt with as quickly as he intends. That is a constant theme of this Government. The few bills that are sent to a select committee are sent with a cut-off time for referrals. We are not seeing the proper scrutiny of legislation that one would expect to see from our Parliament, because we are constantly being told that bills have to be reported back faster than would ordinarily be the case. However, that is how the Minister wants to run it.

In the one minute that remains before the House rises for the night, I say it concerns me enormously that we have had no explanation from the Minister about how the system he is proposing will be administered. We are now told that when an increase is announced, people who buy road-user charges will be able to apply for a refund after the point has come for that increase to take place. One can only imagine the bureaucracy involved in giving those refunds. Moving staff from the front line to the pump line seems to be the National Government’s new theory when it comes to this bill. I look forward to addressing more issues of substance.

• Debate interrupted.