Hon SIMON POWER (Associate Minister of Finance) on behalf of the Minister of Revenue: I move, That the Taxation (Business Tax Measures) Bill be now read a second time. The main purpose of the bill is to ease the burden of taxes on firms’ cash flows, and to make paying tax easier by reducing tax compliance costs for businesses. It is a clear fact that in the current climate many businesses are experiencing pressure on their cash flows—none more so than the smaller businesses that make up more than 96 percent of New Zealand’s business community.

The Government recognises the impact that the current economic climate is having on these businesses, and has responded with a $480 million suite of compliance-free measures. Many of these measures are contained in this bill. Others, such as reducing the rates of use-of-money interest for underpayments and overpayments of tax, have already been progressed by Orders in Council.

Hon Darren Hughes: I raise a point of order, Mr Speaker. I know the Minister is taking the Bill Birch imitation the whole way, but there is a lot of noise in the House at the moment while he is trying to deliver his speech and it is just impossible to hear him. The Leader of the Opposition has his back to you, Mr Deputy Speaker, and is conducting a meeting with the Māori Party. There is a lot of disorder in the House, and we cannot hear this fine Minister’s contributions.

Mr DEPUTY SPEAKER: I thank the member for that. I would ask members, please, who are not participating in the debate and who wish to have discussions to have them out in the lobbies and not within the House. Thank you for that point of order.

Hon SIMON POWER: I am grateful for the intervention of the senior Opposition whip, and I know that he is always watching my back.

The proposals in this bill cover a range of provisions to allow businesses to hold tax moneys longer, and to lower the cost of doing business by reducing the amount of form-filling they have to do, and the calculations and payments they have to make.

The first of these changes is the removal of the 5 percent uplift in the calculation and payment of provisional tax. Currently, payers of provisional tax who use this method must use the previous year’s income tax and add 5 percent to the total in order to calculate the amount of provisional tax they must pay in the coming year. That extra 5 percent, or uplift factor, is based on the assumption that income will grow over the new income year. In today’s economic climate that assumption is no longer clear-cut. The bill therefore allows the uplift of the provisional tax calculation to be reduced for the current and next income years. This should help relieve some of the pressure that small businesses are facing, by reducing the amount of provisional tax payments that businesses must make, and, in turn, this will free up much-needed cash-flow for those businesses. A further proposal makes it possible for a greater number of individual taxpayers to reduce their exposure to use-of-money interest. This change was previously part of the omnibus taxation bill introduced last July, but has been included in this bill to ensure its speedy enactment.

Other changes in the previous tax bill have been significantly enhanced in this bill, which also introduces some important new measures. These measures are designed to lower costs for many businesses by reducing the number of returns they have to complete, the number of calculations they have to make, and, ultimately, the number of tax payments they have to make. For example, the GST payments threshold will be raised from $1.3 million to $2 million. This will give more businesses the cash-flow advantages of accounting for GST when payment from an invoice is actually received, rather than when the invoice is issued. In addition, the income threshold over which the GST registration is mandatory will be raised from $40,000 to $60,000. This will allow businesses that earn less than $60,000 to opt out of the GST system should they wish, so they no longer have to bear the compliance costs associated with accounting for GST.

The turnover threshold under which businesses can make GST returns 6-monthly instead of 2-monthly will also rise from $250,000 to $500,000. This move will be especially welcomed by businesses with seasonally based income, such as the horticulture industry. The PAYE once-a-month filing threshold will be raised from $100,000 to $500,000, to allow more employers to file PAYE returns and pay PAYE once, rather than twice, a month. The threshold under which businesses may file fringe benefit returns annually is also being raised from $100,000 to $500,000. Similarly, the value of minor fringe benefits that employers can give their employees without attracting fringe benefit tax will rise from $15,000 to $22,500 a year per employer, and rise from $200 to $300 per quarter per employee. This means fewer employers will have to account for fringe benefit tax in relation to minor benefits they may provide to their employees.

Finally, the bill introduces a new $10,000 threshold for business-related legal expenditure. This means that if a business’ total bill for business-related legal fees in a given income year is $10,000 or below, the entire amount will be tax deductible, without having to identify which amounts relate to non-deductible capital expenditure and which amounts are deductible revenue expenditure. Together these provisions present a package of assistance to smaller businesses that will help them to save time and money, and to weather the current economic climate.

In bringing the bill to its second reading, the Finance and Expenditure Committee has recommended a small number of minor drafting changes of a technical nature. On behalf of the Minister of Revenue, I wish to express my sincere thanks to the members of the committee for the cooperative and constructive way in which they have progressed this bill, which I now have great pleasure in commending to the House.

Hon DAVID CUNLIFFE (Labour—New Lynn) : The Opposition notes with some regret that on the very day that the Taxation (Business Tax Measures) Bill reaches its second reading, the Performance of Manufacturing Index has reached its lowest point ever. Today is also the day when the Reserve Bank has dropped the official cash rate to 3 percent—one of its lowest levels for many, many years—in view of the deepening and worsening recession that will hit small business hard. I know that out there beyond the confines of Parliament many small-business people are worrying about meeting their payroll each week, and people are fearing the loss of their jobs. It might be said that people are taking very little comfort in their small businesses because they are not covered by the 9-day fortnight idea.

Against that background we are here to discuss a tax bill that is good as far as it goes and that we will be supporting. But this bill was largely written by the previous Government in about August last year—before the global recession was really felt and before we had the opportunity to take stock and drive the bill further. I echo the comments made by the Associate Minister of Finance, Simon Power, on behalf of the Minister of Revenue, in thanking all members of the Finance and Expenditure Committee and acknowledging its chair, Craig Foss, and his colleagues. Members of small businesses would be encouraged by the level of cooperation around the House on getting this bill through. We have worked together to identify measures where the bill could be extended, and they are written in the committee’s report.

I give notice today on behalf of the Opposition that in the Committee stage of the bill the Opposition will introduce a series of amendments. All of these amendments are taxpayer-friendly and will take the bill further, as we would have done if confronted by this situation in Government. Further, we formally indicate to the Government that we would be happy to cooperate with the Government in a bipartisan way and see those amendments introduced in a Supplementary Order Paper rather than through an Opposition amendment, should the Government wish to cooperate in the interests of giving small business an even greater tax remission in this way.

In many respects, therefore, this is a good bill, and it largely implements ideas that we worked on earlier. But it is also a missed opportunity. National has come to office and simply lifted ideas that were around or in process, or in Labour’s manifesto. Of the 13 substantive elements of the bill, nine of them fall into the category of matters previously legislated or for which work streams were already under way. National has no broad-based plan to give New Zealand’s public confidence that this Government has taken the action necessary to tackle the gravity of this recession and to protect the most vulnerable, or to prepare New Zealand for the opportunity of taking advantage of the inevitable upturn.

As many international commentators have started to work out—and as, I think, New Zealanders are starting to recognise—this Government is becoming isolated in international terms. It is one of the very few that is committed to a conservative approach although the global recession demands robust action. Even in the best spirit, one could hardly call this small bill robust. Where is the plan? Where is the stimulus? New Zealanders have watched an American President take office and take action, passing a NZ$1.5 trillion stimulus bill. They look across the Tasman, and they see a Government prepared to move heaven and earth with a NZ$67 billion stimulus package.

This is the greatest financial crisis the world has faced since the Great Depression. It is the first time that the whole world economy has gone backwards since World War II. The International Monetary Fund chief economist has advised world Governments to commit whatever it takes to avoid a depression, and, above all, to adopt clear policies and act decisively. It is better to do too much than too little—so says the International Monetary Fund. The US Secretary of the Treasury in the Obama administration, Tim Geithner, has warned that, given the scale of this economic crisis, “the policy response has to be comprehensive and forceful. There is more risk and greater cost in gradualism than in aggressive action”. Not two days ago, the World Bank—no less—revealed that the global economy will shrink this year for the first time since World War II. Only today, President Obama called for other nations to enact similar stimulus packages to that of the US. So where is New Zealand’s National Government? According to the Wall Street Journal, looking from the United States, it is a global outlier taking a fiscally conservative, deregulatory approach to a recession that was caused in the first place by a lack of adequate regulation and supervision over financial markets.

Up to now, the National Party has got by through copying and pasting measures that the outgoing Labour Government already had in the works. That is exactly what this bill represents.

Nathan Guy: You’re voting for it, so you agree with it.

Hon DAVID CUNLIFFE: I am voting for it because we wrote it—surprise, surprise for the senior Government whip. We are voting for it because we wrote most of it. The question is what the Government has done in the 6 months since the bill was written. Where is the Government’s insight? Where is the Government’s robust approach to tax legislation? Why does it take the Labour Opposition to drive further to introduce amendments appropriate to the scale of the recession in order to make our tax law even more business-friendly?

Labour supports this bill so far as it goes, but it does not go far enough. As a tangible demonstration of good faith with the struggling small and medium sized businesses of New Zealand—the 99.5 percent of all businesses that employ fewer than 100 people; the 99.5 percent of all businesses that are excluded from participation in Government funding of the 9-day fortnight; and the 99.5 percent of businesses that will be vitally interested in the contents of this bill—we urge the Government to retarget its tax cut programme. It makes no equity sense and no economic sense to shift the bulk of tax cuts from people who need them, who will spend them, and who have below-average incomes to people on above-average incomes. It is not needed there, and it will have no substantial effect on our economy. The Government is nickel-and-diming small business: the measures in this bill are worth only a few hundred million dollars—far less than the cancellation of the research and development tax credits and far less than the income tax cut to upper-income earners. There will be precious few upper-income earners amongst small businesses, which this bill was originally designed to help.

I say again that this is not a bad bill; we will be voting for it. We wrote most of it. But members opposite can bet their bottom dollars that if Labour had been in Government since last August when these ideas were mooted, we would be seeing a whole lot more content and substance in this bill than we are seeing today. That is why the Labour Opposition will introduce substantive amendments—unless the Government wishes to adopt them—at the Committee stage. We welcome the Government taking up the amendments as Supplementary Order Papers and working on them.

Chris Tremain: That would be more unfunded amendments. Or are these ones allegedly unfunded?

Hon DAVID CUNLIFFE: I call on Mr Tremain, who is seeking to interject, to rise above politics and to help the small businesses of the Hawke’s Bay, a province he loves. I call on him to help small businesses, to rise above politics, and to introduce the amendments by way of Supplementary Order Papers. Labour does not need to own the amendments, just like it does not need to own the rest of this bill. We wrote most of it; we are happy to vote for it. Those members opposite can bet their bottom dollars that the bill would have been a lot more substantive if we had known that the global recession would be as big and bad as it is. We would have spent the last 6 months putting more taxpayer-friendly measures in this bill.

In conclusion, this bill is good as far as it goes. Labour appreciates members’ cooperation on it. We will be voting for it. We will be introducing amendments to take it further, and we would welcome cooperation from the Government to introduce those amendments by way of Supplementary Order Papers so that the struggling small businesses—the people who are feeling unprecedented pain, and the people who are represented by today’s historic low in the Performance of Manufacturing Index—will get the help they need.

CRAIG FOSS (National—Tukituki) : Good grief, what a difference an election defeat makes! Suddenly we have members on the other side of the House in favour of tax cuts. The cuts are maybe not big enough, wide enough, or deep enough at the moment, but those members are in favour of giving back—or at least not taking, in the first place—the excess revenue that while they were in charge they did not need to take in the first place. But now that we are in a recession they are actually trying to expand the measures. So I do welcome that road to Damascus experience.

I would also just like to note that the previous speaker, David Cunliffe, talked about some mythical place called “the Hawke’s Bay”. It is “Hawke’s Bay”—full stop. It is “Hawke’s Bay”, not “the Hawke’s Bay”.

Hon David Cunliffe: That’s pedantic, even for this House.

CRAIG FOSS: It is pedantic, I know, and I will come to other pedantic matters in a minute. But I note that we are on the second reading of the Taxation (Business Tax Measures) Bill, and I will refer to what I said in my first reading speech. I noted that there had been cross-party support indicated for this bill, and I am very pleased to acknowledge that that was followed through on. The Minister, the Hon Simon Power, also alluded to that. I freely and totally acknowledge the full cooperation of the members of the parties involved on the Finance and Expenditure Committee, not only for facilitating the process of getting the bill quickly back into the House for its second reading but also for the way in which all members enabled the committee to work through the process. We all, across the parties, recognised the urgency of getting some cash flow back into the economy, and I am more than happy to be on record as saying that. I thank members again for following through on their early indication of support for the bill.

The bill has been reported back without any substantial amendments. There had been robust discussion about the bill and various parts in it, but most debate and discussion was about whether particular rates should be higher, or thresholds lower, etc. Again, I acknowledge that there was good and fulsome cooperation, and very good advice from officials on the way through, to get the bill to the stage we have now.

But there was some discussion in the committee that I am sure the previous member who spoke, David Cunliffe, will be very interested in. He just talked about being pedantic, and there is a clause in the bill that gave rise to strong, robust debate—clause 21 in Part 1, under which section RZ5 is replaced. There was very strong discussion—and it was an interesting point—around the words “instead of” in new section RZ5(3)(a). The use of the words “instead of” was quite controversial—and I tell members I am looking at the track-changes version of the bill. There were various discussions about the words “instead of”, and members were quite interested in the knowledge of some on the committee about those words. It was originally alleged that the words had never been seen in any other bill or other legislation, but the committee did in fact discover, or become aware of, another bill in 1959, and numerous bills since, containing those words. I do not mean to be facetious, but the word pedantic was talked about a minute ago. However, I will stop there and allude again to the good intent of everyone on the committee.

I note that the previous speaker talked about some other measures Opposition members perhaps will want to discuss at the Committee stage. We will wait with interest to see what they might be. I suggest that if members go through the commentary they will probably get a good clue as to the direction that other members might be suggesting for different improvements. Members made the point that one thing talked about in the commentary—and I will talk to this—is that many of the measures here formed part of the larger Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill, which was introduced in July last year. But in the commentary we note that, yes, it is acknowledged that a number of initiatives in this bill reflect proposed changes in previous legislation, or in Inland Revenue work streams or discussion documents—and, as we know, the previous administration was very, very good at those. That is the key difference between the previous administration and this new Government; we are focused on action not words, on implementing not discussing, and on not having another review.

Actually, this particular bill did not form part of our 100-day plan, but it may well have. Again, I appreciate the fact that members opposite are voting for it, but it took their getting into Opposition to expedite the bill and to try to make the tax-friendly parts of it even more so, and it took them 9 years to even get around to thinking about it. A National Government that had gone through the period of economic, commodity-driven growth the Labour Government had gone through would have brought these measures in, probably, as a matter of fact. In fact, if these measures had been in place sometime in the last 9 years at the height of the commodity-driven surpluses, businesses in New Zealand right now would be in a much better position to work their way through the current recession, which, unfortunately, we did go into a year or so ago.

Other members have talked about the recession. Even since the introduction of this bill a month or so ago, global and domestic conditions have deteriorated—unfortunately. But this example and a suite of other measures are part of the programmes the National Government is bringing in to help us through the recession, and they are but small steps to a greater whole. I just want to touch base on some of those other measures, because this bill particularly targets small to medium sized enterprises, at the smaller end. But personal tax cuts were announced and put in legislation prior to Christmas, and a programme was announced yesterday to particularly help larger enterprises with 100-plus employees. Personal tax cuts, which formed part of our plan, have been implemented. Infrastructure spending on housing, schools, and roads has formed part of our plan, and is being implemented. The Minister of Education has announced about $41 million, I think, of new spending, or sped-up spending in the education sector today—there is action and activity, not just more discussion papers. A part of this plan, also, has been the introduction of amendments to improve the Resource Management Act, which are mostly just to reduce compliance costs and speed up the process. There is the ReStart package, which was announced prior to Christmas, to help people through redundancy. We have also had the plans announced in the last few days, by the Hon Paula Bennett, about the 9-day fortnight, and the issues around that. These things must all be looked at as a whole; they are but part of our solution and our measures to be put in place to help New Zealand weather its way through the sharpest edges of the recession. We do not just want to discuss, to have discussion papers, and to have proposals, as the previous Government did. The 100-day plan also had many, many actions that will assist small businesses to get through this recession.

It was very interesting to hear Dr Bollard today speak on the Monetary Policy Statement, and to hear his comments around the official cash rate reduction. He acknowledged, as many other forecasters and commentators have now acknowledged, the seriousness of the current state of the books of New Zealand—of what this Government inherited. Putting aside for the moment the debacles in and around the accident compensation scheme, housing—and the list goes on and on—the bottom line is that the underlying costs and liabilities are up across the board and the tax revenue is down. But Dr Bollard noted today that the fiscal impulse, the stimulus measures coming from the lower interest rates, the fiscal actions and stimulus that this Government has put in place—not just talked about putting in place—plus the official cash rate announcements today, and a lower currency, mean that he is very hopeful that New Zealand will start to lift its way out of this recession in early to mid-2010. That is fantastic news, because this Taxation (Business Tax Measures) Bill brings in measures that will assist New Zealand to come out of recession quicker, sooner, and better than many, many other countries around the world. I congratulate my colleagues and the Minister of Revenue on bringing in this bill. I am looking forward to voting for this bill. Thank you.

Hon CLAYTON COSGROVE (Labour—Waimakariri) : The previous speaker, Craig Foss, made an interesting point. He tried to illustrate the difference between the National Party in Government and the Labour Party when it was in Government, but the truth about that is simply this: there was a huge difference. The difference is that when we were in Government we had a plan, as my colleague David Cunliffe has said.

For instance, unlike the National crew, we had announced, had costed, and—had the election had a different result—would have provided New Zealanders who were made redundant with 12 months’ funding. That was to have been given regardless of their collective household income circumstances or those of their spouse, to enable them to retrain and, therefore, redeploy into the workforce, perhaps in a different sector, within 12 months. The biggest idea that has come from the National crew over there is that those people might get, what is it, $62 a fortnight—

Hon David Cunliffe: $4.27 an hour.

Hon CLAYTON COSGROVE: —$4.27 an hour, which might go towards some form of training. That is a nice, sneaky way of gutting 10 percent of the pay of workers in New Zealand.

We had a plan, you see, and we had budgeted for it, despite what members opposite might say. We had a plan to invest $1 billion in respect of home insulation. We had a plan, and we would not have gone to lie on the beach for 3 months. We would have had a mini-Budget before Christmas last year, and it would have identified a whole series of projects. Those would not have been the infrastructure projects that have been brought forward by 3 months—one has been brought forward, I think, by a year. No; we would have had a proper mini-Budget—

Hon John Carter: Was it popular?

Hon CLAYTON COSGROVE: The Minister John Carter asks whether it would have been popular. Here is the deal with leadership: some of the things one has to do in Government are not very popular, but that is the essence of real leadership. One has to make some tough decisions in order to look after and protect people, and often those decisions are not popular. Often they are not popular, I say for Mr Carter’s edification, but that is the essence of real political leadership. It is very nice and easy for a leader to go around, as John Key does, like a sort of smiling assassin, grinning and laughing. Maybe he is being accepted as a nice bloke, but he does not actually have a plan and is not effectively protecting people’s jobs.

We were told in this House by Mr Joyce that the entire infrastructure package—putting aside the political argument over whether it is new money; we know that it is not—would generate and save in the order of 2,000 jobs. Before Ms Bennett says that Labour members do not care about saving jobs, I will note that 2,000 jobs would be saved. That is a good thing; I am sure all colleagues would agree with that. But it is a pebble on the beach, or a drop in the ocean, when we know from Treasury advice that we have already lost over 10,000 jobs and we are losing a thousand jobs a week—

Hon David Cunliffe: At least.

Hon CLAYTON COSGROVE: —at least, for the next 15 months. The political tactic from National is to adopt a bill that we authored, such as this Taxation (Business Tax Measures) Bill, which we will support—as my colleague said, nine of the key 13 elements were authored by the previous Government, as there was no plan from members opposite—or to abolish programmes that the previous Government put in place, then to reinvent them and say there is a great victory in, for instance, housing.

The Government abolished our housing programme, with the many hundreds of houses that we were either to refurbish or build, and then announced that it will build 69 houses. What a ripper that is! I talk to people in the construction industry who ask how 69 houses will save their jobs as painters, joiners, carpenters, or the other jobs in all the ancillary services that go along with that industry. And Mr Heatley announced that as a great political victory!

Then, of course, a key element of our plan was the research and development tax credit, was it not? We constructed it, we put it in place, and the National Government butchered it. I ask whether any member on the other side of the House, such as that genius Mr Foss, a member of the Finance and Expenditure Committee and our resident expert on tax returns and other extraneous matters, can get up and give us a rationale as to why this Government would not support businesses that elaborately transform our economy, such as manufacturers and others that do research and development. If ever there was a time when we needed our manufacturing sector and others to be doing research and development in order to create new products and services and new jobs, hey presto, it is now. So Mr Foss should tell us why those members got rid of that tax credit and destroyed it before businesses had even put their first returns in.

Australia has had such a measure for many years. National members see Australia as a nirvana; that is what they said when in Opposition. They saw it as a land of milk and honey, and thought that everything was better if it was in Australia. Let me tell Mr Foss and other members opposite that the Australians have had a research and development tax credit system for many years. We introduced one, and those members abolished it. That was our plan. It would have saved—not saved, actually; it would have created—many, many jobs.

Hon David Cunliffe: Yeah, thousands.

Hon CLAYTON COSGROVE: Thousands of jobs would have been created. It is not only that, but new industries would have been created. There are manufacturers in my patch and, I suspect, in all members’ electorates around the country that are full of innovative, entrepreneurial Kiwis. Manufacturers will now say that if they can get a tax credit in Australia, they will do the research and development there, and that if they do the research and development there, then it would make logical sense to take the whole operation there.

But, oh no! Oh no! The National Government’s plan was to simply get rid of the research and development tax credit. Its plan was simply to get rid of insulation money. Its plan was simply to ditch all the housing and construction work. Its plan was to re-announce and repackage it—dressed up like an old Christmas present that has been wrapped up again and given to two or three people—and to hoodwink people with it. And the plan is to build 69 houses—69 houses. Would any member care to get up and tell the House how many jobs that will create and save, when we are losing a thousand jobs a week? Would any member care to get up and tell the House whether there will be a major impact on our economy by spending a couple of hundred million dollars on infrastructure, dusting off the projects that we had already identified, and bringing them forward by 3 or 4 months, knowing that only 2,000 jobs will be saved when a thousand jobs are being lost weekly? Would any member like to crawl up from behind his or her desk and tell the New Zealand people how one can justify that?

I will tell members the danger with National’s approach. The danger, as my colleague David Cunliffe pointed out, is that every other robust economy in the world is hitting this economic tsunami head-on. New Zealand now has an outlier economy. Whether we are talking about the economy of Australia, the United Kingdom, or the United States, we find the relevant Government knows the tsunami is coming towards it. Those Governments have had warning of that, and they have launched their plan. We have a Government, a Minister of Finance, and a Prime Minister who have put politics before the interests of the country. The rolling maul of a drip-fed announcement here, there, and everywhere is not an economic strategy; it is a political strategy. It allows the Government to make an announcement, a little press release every week, where it says: “Aren’t we good little boys and girls in Government, because we are announcing another little drop in the ocean, a pebble on the beach, as a project?”.

Kevin Rudd launched his economic package, hit it head-on, and said it was not good enough. He launched another package, and executed it. This crew over here see the economic tsunami coming towards them. They do not have a plan. They have had a warning, though. Mr Key and Mr English will stand on the beach and wait to see how high the water level will get, and whether it will be over the heads of the Kiwi people or whether it will be just below that. But we know that economic tragedy and impact is on its way soon. I do not celebrate that. I think it is terrible, because every day one sees people in one’s electorate losing their jobs. This crew over here was elected, and they told everybody they had a plan. Now we know from their Job Summit—and I saw Miss Bennett get up and speak—that their plan was to get a lot of people, most of them were a captive audience, into a room and ask to be told what to do. It was not to go to that audience and say: “We were elected, we have a plan, and we want the business sector and the commercial sector to sign up to it.” It was a case of asking to be given an idea, please. That was only 3 to 4 months after National was elected, and it stands in comparison with what Obama did, when he jawboned his package through even when he had no constitutional levers to pull.

The Government went to the Job Summit and asked for a plan. It came out of the Job Summit, and what is the plan? The plan is to build a cycleway. I can see Gerry Brownlee on a penny farthing—well, I may not be able to see the penny farthing. The Job Summit’s plan is to build a cycleway. Can members imagine what the media would have done to us if we had announced that the biggest economic hit we were to have in order to solve the biggest economic crisis in our history was a cycleway? What a cracker! The next plan was to have a 9-day working fortnight. That might work if the Government would back Kiwis, but it has proved that it does not.

KEVIN HAGUE (Green) : When I spoke in the first reading debate on the Taxation (Business Tax Measures) Bill I offered the Green Party’s support for it. I thank the Finance and Expenditure Committee for its work, which has been expeditious, and I indicate now that the Green Party will continue to support the bill.

I note that the select committee did have to make a number of technical amendments to the bill. In the first reading debate I registered my and the Green Party’s objection to the bill’s introduction under urgency. I expressed our commitment to healthy politics where urgency is used strictly only when it is required. One cannot help but wonder whether the technical errors in this bill could have been avoided if some more time had been taken in the first place.

I agree with my colleague Craig Foss that the Government’s package to deal with the economic crisis needs to be taken as a whole. When one does that, it becomes absolutely clear that the package totally lacks coherence, as I have mentioned in a previous speech on this bill and in speeches on other bills. The Government’s response to the economic crisis is incoherent, but it also fails to understand that the best approach to addressing the economic crisis is to do so concurrently with other crises we are experiencing, both in the environment, particularly in terms of climate change, and in the area of energy.

The example I previously used of the Government’s lack of coherence and policy is the withdrawal of the research and development tax credit. On the one hand the Government is saying “Here’s a hand-up with this tax relief.”, and on the other hand it is pulling out the rug from under small businesses with the withdrawal of this reward for innovation in research and development.

Yesterday the Government, with its package to support workers in large businesses and for a 9-day working fortnight, provided another example of the lack of coherence in its economic package. Some 20,000 to 25,000 people are expected to benefit from the measure. But what about the very much larger number of people working in small businesses? Will the devastation of unemployment be any easier to cope with because a person used to work in a smaller workforce? Of course not. There is no difference in the needs of the workers in smaller and larger businesses and therefore no sound and rational basis for the Government’s distinction.

What is more, the Government’s failure to extend a helping hand to workers in these small to medium sized businesses is a kick in the teeth not only for those working people but also for the businesses that employ them. It is one step forward with this bill but another step back with the failure to support the employment relationships within small businesses that are stressed by the economic situation.

What else has the Government been doing to support small businesses? The Minister of Finance, in his first reading speech on the bill, said the Government would be looking at the recommendations of the Small Business Advisory Group, which I supported at the time. I mentioned a couple of that group’s more recent recommendations. It recommended that “publications be produced that give practical and implementable advice and support for small to medium sized enterprises, to improve their environmental performance and to derive business benefit from the recognised or certified environmental sustainability of their products and services.”

This is something the Government could easily have moved on. It could have funded the Sustainable Business Network, for example, to produce exactly such resources. One month on, there is nothing. The Small Business Advisory Group recommended that “all foodstuffs sold in New Zealand be required to be labelled with the country of origin of the defining component or the most significant component of the foodstuff.” One month on, there is nothing. Small and medium sized businesses must surely have noted that despite all the rhetoric about urgency and pragmatism, nothing besides this modest tax relief has been done to lend them a hand while the rug is being firmly and rapidly pulled out from under the feet of many.

I spoke in the first reading, perhaps a little obscurely, about bees. I likened the Government’s dogged and robotic fixation on continuing to try to run the economy on the same unsustainable basis that caused this economic crisis in the first place to bees trying to find their way home and being trapped by a building lying in their path. The inability to consider other possibilities leads to disastrous consequences, both for the bees and for our nation under this Government.

There are some positive signs, and I take issue with the comments of my colleague Clayton Cosgrove. The national cycleway is a great first step, and I commend the Government for it. It will bring in sustainable tourism dollars, will assist in reducing greenhouse gas emissions by encouraging people in some major urban centres to ride bikes instead of using motor vehicles, and will produce health gains, but it will also create jobs. Yesterday the New Zealand Contractors Federation called the cycleway “a vital boost for small and medium sized contractors.” Those members who have cycled the Otago Central Rail Trail or the Little River Rail Trail, for example, or similar cycle routes overseas, such as the Sustrans network in Britain, will know that this kind of cycling facility provides the lifeblood of many small businesses and indeed whole rural communities.

I remember on one of the occasions when I rode the Otago Central Rail Trail, another group of riders staying in the Lauder Hotel with us—a business that probably would have closed by now, if it had not been for the trail—consisted of the Minister of Finance, Mr English, and a large family group. He will certainly have seen the profound impact the cycleway has had on the local economy. I hope he may begin to agree that it is possible to deal with more than one crisis at a time.

That is an example of how it is possible to address the twin crises in environment and economy by taking action to transform the economy to one that has a sustainable basis—what the Green Party and many world leaders have dubbed the Green New Deal. Early Green jobs visionary Van Jones has just been appointed a special adviser for green jobs enterprise and innovation at the White House Council on Environmental Quality. When the Green Party has asked in this Chamber about the Government’s intention to create green-collar jobs, the Prime Minister has indicated that he neither knew nor cared. I guess that is another way John Key is not like Barack Obama. I am starting to keep a list. There is another list on ways John Key is not like Nelson Mandela.

The new American President absolutely seems to get it. We are facing multiple crises right now. It simply is not possible to say we are going to choose just one. If it is possible to create jobs and help to move the economy towards long-term sustainability at the same time, then why on earth would we not do that? If it is possible to create jobs and help protect or, better still, restore the environment, then why on earth would we not do so? If it is possible to create jobs and ensure the entitlement of New Zealanders to the fundamentals of life, such as affordable healthy food, warm and safe housing, and effective and efficient public transport, then why on earth would we not do so?

Let us see the jobs in insulating homes, retrofitting homes and offices for energy efficiency, installing solar water heating on every State house, riparian planting, native reforestation, cleaning up toxic sites, enhanced public transport services, communities growing food locally, and distributed electricity generation. Out of the teeth of these multiple crises it is possible to snatch the opportunity to shift New Zealand on to a new path that will ensure a future worth having for our children and grandchildren.

We urge the Government not to blow it, and we offer our support and assistance. The nature of the Green New Deal incorporates an inclusive society moving towards this positive common purpose. I will close by quoting Van Jones in this book The Green Collar Economy: How One Solution Can Fix Our Two Biggest Problems.“And now we stand at our own crossroads, looking out upon two futures: one with rising temperatures, rising oceans, and rising violence on a hot and strip-mined planet and another with expanding organic harvests, growing solar arrays, and deepening global partnerships on a green and thriving Earth. Given those choices, we know in our hearts what our parents’ generation—and our grandparents’ generation—would have done for us. Come, then, let us go forward together with our united strength—and win that better future for the generations to come.” Thank you.

JOHN BOSCAWEN (ACT) : I rise in support of this Taxation (Business Tax Measures) Bill. The ACT Party will be voting for this bill.

I will start by saying that this is the first experience I have had of sitting on a select committee—the Finance and Expenditure Committee—and speaking following its deliberations. I congratulate the chairmanship of Craig Foss and I also congratulate the bipartisan support that this bill has received from the Labour members on that committee, including the deputy chairman, David Cunliffe. I also acknowledge the support of the officials and, in particular, the submitters.

We received only six submissions, but one was a detailed submission from the Institute of Chartered Accountants of New Zealand. Members of the institute made an oral submission and, as a new member of Parliament, I noted that it reflected on the amount of work that these groups do for the good of the people of New Zealand. Only yesterday we heard submissions from a number of legal and accounting firms on the new international tax bill. Two of those submissions totalled 150 pages each. So a huge amount of work is done freely for the benefit of New Zealanders.

This bill makes a number of changes. It is designed to support small to medium sized businesses by easing the pressure of taxes on their cash flow and compliance costs. When the Minister of Justice was speaking on behalf of the Minister of Revenue, he outlined some of those changes, so I do not propose to go into them in a great deal of detail. But I will say that they lift the thresholds for a number of issues to do with GST and fringe benefit tax. For example, the threshold for having to register for GST is lifted from $40,000 to $60,000, which enables a number of smaller enterprises that might otherwise have had to register for GST and be subject to those compliance costs to be exempt. Similarly, larger organisations with a turnover in excess of $200,000 that might have had to file 2-monthly GST returns can now file their returns every 6 months, under the provisions of this bill, as long as their turnover is less than $500,000.

It was also interesting that we received during the course of the select committee submission process a very detailed submission on the taxation of patents. I think it is fair to say that it was not an issue that many members of the committee had given a great deal of thought to. Once again, that was a benefit of being involved in the process of hearing submissions.

In rising to speak on this bill, the deputy chairman of the select committee, the Hon David Cunliffe, talked about the deepening and worsening financial crisis that this country faces and about the fact that people fear the loss of their jobs. He noted that the Governor of the Reserve Bank reduced the official cash rate by 0.5 percent today, and he also said that the world was going backwards. The issues that David Cunliffe raised are all very true.

But I would comment that although this bill is aimed at small to medium sized businesses—and we heard earlier that the relief available under the 9-day working fortnight is available only to employers with more than 100 employees—another group in society is also very much affected by the recession the country is in. This group does not get a lot of air time in this country. This group is what I call the people who save. They are the people who save, who go out to do their work, and who, rather than spend $1.10 or $1.15 for every $1 they earn, spend 95c and put something away for saving. The issue of saving is very, very important. Although we always look to the lowering of the official cash rate, which has been good for those of us with mortgages, the reality is that it actually reduces the income of our savers. They are mainly, but not exclusively, elderly people. It is very easy to ignore the effect of a reduction in interest rates on those savers.

I stood in this House yesterday and said that I would raise at the Commerce Committee this morning the issue of an inquiry into the activities of various finance companies and into the issues associated with the failure of finance companies. I was very heartened to have the support of the chair of that committee, the Hon Lianne Dalziel, who said she has a very open mind on this issue. She has offered her assistance to me in drawing up a draft terms of reference for that inquiry, and I shall be very pleased to have her help. I should also say that I have the full support of the ACT caucus in calling for that inquiry.

My inquiry is made even more relevant by the submission given to the Commerce Committee this morning by Jane Diplock, the chairperson of the Securities Commission. Jane Diplock appeared before the committee during the course of the committee’s annual review of the commission’s activities, and she raised a number of issues of public policy. These are very serious issues, and I do not believe that they can be swept under the carpet. It is very easy to look at what will benefit small to medium sized businesses and at what will affect big business, but we cannot afford to forget the ordinary New Zealanders—the savers in society.

I will start by looking at the issue of trustees. For the benefit of members of the House, I inform them that a trust is a commercial relationship, if you like, between a trustee company or a trustee organisation and the directors or owners of a finance company. Jane Diplock pointed out that it is competitive; it is a business. We have seen over the last 3 or 4 years that trustee companies have been bidding against each other to get business. They have brought down their fees, they have offered to do the work for a lower and lower price to gain the business, and this has probably resulted in a lower quality of supervision of management. Jane Diplock pointed out that the trustees are not entitled to demand under the trust deed a number of things that they might like to do. Lianne Dalziel said that it was an issue of their own making because, when they enter into a contract with a finance company to provide a trustee relationship, they are negotiating a fee to do a certain package of duties, and that, therefore, they have brought this issue upon themselves.

Jane Diplock raised a number of issues of conflict of interest, which I thought were very interesting. If a finance company is likely to fail, or looks like it is close to failing, one option is for the trustee to appoint a receiver. If a receiver is appointed to the finance company, the receiver will go into that company and may find some failure on the part of the trustee. One of the receiver’s options is to bring a civil action against the trustee, because until recently no criminal proceedings could be brought against a trustee. There is a conflict of interest, because the receivers get their business from the trustees. Which receiver will dob in—to use Lianne Dalziel’s words—the trustee that is likely to give it its work?

We also have the issue of moratoria. Under a moratoria the company—

Hon Trevor Mallard: A moratorium.

JOHN BOSCAWEN: A moratorium—that is right; I thank Mr Mallard. Under a moratorium the company is kept running under its current management, and it is unlikely that the management will bring an action against the trustees. Once again, there is a conflict of interest. The trustees have motivation, if you like, to support a moratorium rather than a receivership, because, if there is a receivership, it lays open the opportunity for the receivers to make a challenge of that trustee.

The other issue that Jane Diplock referred to was related party transactions. She said that a finance company can put out a prospectus and call for funds, and as long as the prospectus meets the Securities Commission’s legal requirements, there is nothing the commission can do. The commission does not act as an arbiter on the quality of that prospectus. It does not act as referee. What has happened is that a number of finance companies have used money they had raised for purposes other than were laid out in their prospectus.

Finally, I also attended the briefing of the Governor of the Reserve Bank to the Finance and Expenditure Committee this afternoon. When asked, he made the point that when this country comes out of the recession, what will be important are savings. This country has relied on a bigger and bigger quantity of the cheap savings of foreigners, and we will need to save for ourselves. If we are to create a savings environment, then we need to look at why finance companies fail and at the conflicts of interest.

RAHUI KATENE (Māori Party—Te Tai Tonga) : The Taxation (Business Tax Measures) Bill represents one of the more unusual moments in this House, whereby the rapid passage of legislation is acceptable. Indeed, I would go so far as to say that this bill should earn the unqualified support of the entire House, because it is very much a product of the unique set of circumstances of the time. The Taxation (Business Tax Measures) Bill aims to improve the business environment for small and medium sized enterprises by easing the pressure of taxes on business cash flows and reducing business tax compliance costs. It responds to a call that was heard by a new Government with an eye to smoothing the inevitable rough journey ahead in the impending recession.

We know, from the expert advice of organisations such as the Federation of Māori Authorities, that the arena of tax laws and business compliance costs for small and medium sized businesses is an area full of challenge. The federation has consistently promoted the view that the whole area of business tax needs urgent review. Its view is that tax laws need to be adjusted to allow businesses to grow and develop wealth for the whole nation. If the business tax laws are amended to support the growth of small and medium sized businesses, the logical flow-on effects will be seen in employment, higher wages, investment, research development, and innovation. We know that Māori small businesses would particularly benefit from early intervention and the opportunity to undertake a process of being managed through difficulties. The advice, again of those in the field, is that such support would assist many to either stay afloat or, if need be, finish up with the minimum of administration and expenses.

I said earlier that this bill is a product of its time, and to persuade the House just how timely it is I bring attention to the initiative established by my colleague the hard-working Minister of Māori Affairs, the Hon Dr Pita Sharples. My colleague is an action man. Dr Sharples moved fast, hosting a very successful Māori economic workshop on 28 January 2009—a mere 7 parliamentary sitting days after he was appointed the Minister. I have it on very good authority that the world was created in 7 days. My colleague Dr Sharples was clearly setting out to follow that precedent.

At the Māori economic workshop held in January there was considerable interest in this whole area of the nature of the assistance that would be useful to support small and medium sized enterprises facing difficulties in the current economic climate. Participants at the hui thought it was important to look at ways of reducing both the amount of regulation affecting business and the costs of complying with regulations. Specific concerns raised at the forum were to do with tax legislation, and some of the suggestions proposed included tax relief for small and medium sized enterprises. Another proposal mooted at the Māori economic workshop was the deferral of provisional tax to small and medium sized enterprises over the next 3 years. A range of initiatives to support small and medium sized enterprises were proposed, including developing an overarching organisation and investment fund, to assist such enterprises to access finance. The thinking was that this could act as a clearing house to pool small and medium sized enterprise investment opportunities.

Māori small and medium sized enterprises need to be positioned, through advice and other support, to take advantage of opportunities presented by the recession and future economic trends. I share some of these good points—OK, brilliant ideas—with the House to make the point that Māori are investing in creative enterprise and applying their full entrepreneurial talents to create workable solutions to address the current economic climate. This therefore provides a very fertile ground for receiving the number of measures proposed in this bill. In fact, when I consider that only six submissions were received, and just 1 day was dedicated to hearing from interested groups and individuals, I think the House should be very appreciative of the feedback I have been able to provide from these key stakeholders—the movers and shakers of the Māori business world. Indeed, it is very good news for the Māori business community to be able to look over the host of amendments to current and proposed tax laws that are included in this bill.

The aims of the bill are to reduce business compliance costs for small and medium sized businesses by raising reporting thresholds on PAYE, fringe benefit tax, and GST, and by introducing simplified rules for deducting legal expenditure. These are, in fact, initiatives that reflect much of the kōrero that was laid down at the Māori economic hui. There was unreserved support from all participants at the hui to invest in job and business retention and stabilisation as the key short-term priorities. Change to reduce the tax liability faced by small and medium sized businesses was seen as a targeted measure to achieve the aspiration for job security and stabilisation.

One of the particular strategies proposed by the small to medium enterprises cluster group was that tax relief should be provided for small and medium enterprises, such as goods and services tax and pay-as-you-earn tax. Another proposal was grouped around the relaxation of penalties for late payment, or staggered payment of compliances such as those related to Accident Compensation Corporation levies or GST.We believe that the Government could play a useful role in this period of transition, through the means of tax relief and investment to maintain small and medium enterprise employment and cash flow.

Another aspect of this taxation bill is related to instalments. Like Mr Boscawen, I am a new member of the Finance and Expenditure Committee. The committee’s view on instalments, in the context of difficult times, was that it would be useful if taxpayers were able to enter into instalment arrangements with the Inland Revenue Department regarding tax payments This thoroughly good idea was shared with officials from the Inland Revenue Department, and we were told that some new initiatives are being investigated to do exactly that. We in the Maori Party believe this initiative could be thoroughly relevant for providing assistance against the sharp edge of recession, so we will be keenly looking forward to any updates from the Inland Revenue Department to this effect.

We will be supporting this bill, because we support any initiatives and interventions that allow businesses to grow. We support the reduction in business compliance costs; we support changes to reduce the tax liability faced by small and medium sized businesses; and we most particularly support the great initiatives taken by the Minister of Māori Affairs in bringing to the debate the perspectives of Māori in business, of whānau, hapū, and iwi, and of the greater Māori population about how to achieve growth and well-being while at the same time facing the current economic climate. I say to members that they should watch this space, because very soon there will be more announcements to come regarding opportunities for Māori economic development. Kia ora.

CHRIS TREMAIN (National—Napier) : It is a pleasure to rise to speak after my Māori Party colleague Rahui Katene. She finished her speech by saying that the Māori Party supports any initiative that allows small businesses to grow. I could not agree more. It is absolutely fantastic that this evening we are introducing yet another key piece of National’s plan to blunt the edges of this recession and prepare our country to be in the best space to grow as a nation as we go forward.

It was interesting that a couple of the leading acolytes in the race for the Labour Party leadership took the first calls on the bill for Labour tonight.

Hon Trevor Mallard: Oh! I didn’t speak.

CHRIS TREMAIN: Mr Mallard has not spoken yet, but I am sure he would echo the same wish. Both Mr Cosgrove and Mr Cunliffe stood up and asked where National’s plan was, so it gives me great pleasure to be able to enunciate and talk about that plan tonight and to expand on where it is at. This debate is a great platform on which to do that. We came into office just over 100 days ago and we have had a huge rollout of economic policies. I will go through some of them tonight. Firstly, we said we would introduce and pass National’s tax package into law before Christmas for the tax cuts beginning on 1 April. Did we do that?

Hon Members: Yes!

CHRIS TREMAIN: Yes, we did. Secondly, we said we would appoint a Minister for Infrastructure and begin implementing our infrastructure plans. Did we do that?

Hon Members: Yes!

CHRIS TREMAIN: Yes, we did. Thirdly, we said we would introduce a Resource Management Act reform bill to reduce the cost of delays and the uncertainties in the Act. Did we do that?

Hon Members: Yes!

CHRIS TREMAIN: Yes, we did. Fourthly, we said that we would introduce and pass National’s transitional relief package into law in order to offer extra assistance to Kiwis who are worst hit by redundancy. Did we do that?

Hon Members: Yes!

CHRIS TREMAIN: Yes, we did, and a number of my own constituents have been able to benefit from that as I have already put them on to that plan. We said that we would call in the Public Service chief executives and instruct them to undertake a line-by-line review of their departments’ spending. Did we do that?

Hon Members: Yes!

CHRIS TREMAIN: Yes, we did, and we are seeing that roll-out as we speak—despite the cries of the Opposition members. We said that we would establish a Cabinet expenditure control committee. Did we do that?

Hon Members: Yes!

CHRIS TREMAIN: Yes, we did. The seventh thing we said we would do is begin a regulatory review programme to identify and remove inefficient and superfluous regulation. We have done that. But what is even better is that we have a number of other parts to our plan rolling forward. We said that we would continue to build on our jobs and growth plan to combat the global recession with action and action ideas. Over 20 ideas came out of that plan and a range of work streams are progressing out there. Already the Minister for Social Development and Employment, Paula Bennett, has rolled out the 9-day fortnight package, which is a fantastic package that will help employers to stay in business and keep jobs going. It amazed me today when members opposite criticised that package and said it was not good enough. The fact of the matter is that that package will save companies, keep them in business, and keep jobs in place. It is a fantastic package.

We are also going forward by cutting personal taxes on 1 April. We are doing that. As part of the rolling maul of packages in our plan, we said that we would implement the tax changes in our small-business package, and that is happening right now with the Taxation (Business Tax Measures) Bill. That is excellent. We also said we would begin to fast track infrastructure projects to upgrade State highways, build new State houses, and improve schools. In my own electorate of Napier, and in the wider region of Hawke’s Bay, we have heard two announcements in terms of the southern expressway extension and the bringing forward by 9 months of the Matahōrua Gorge project. Again, that will bring jobs to that part of the region. I have to say that that is a tough part up there, on that Napier-Wairoa road, but those projects will bring jobs to that region and help our local economy there. That is absolutely fantastic stuff.

It defies logic for anyone to stand there and say that there is no plan, or that we are not taking this country forward in tough and difficult times. There is a plan, and this bill is only just part of it. I am not going to go through the education things we have rolled out, the health things we have rolled out, the electoral law reform, and the law and order provisions. They are all part of the wider plan that we have rolled out in a very short space of time since we have been in Government. It has been excellent.

As I said earlier, the goal of the Government has been to blunt the edge of this recession and to put us in the best position to grow quickly following the recovery. We saw that today, actually—the first signs of that—with Governor of the Reserve Bank, Alan Bollard, giving the Monetary Policy Statement. He started, interestingly, to predict a recovery for us somewhat sooner than for other nations around the world. Clearly, that was a gutsy call given the uncertainties in the wider global situation, but on page 3 of that statement we can read that in the first quarter of this year we have already started to see a real rise in the growth of the country, and that we will see up to 4 percent potential growth leading into the 2010 year. The strong V-shaped recovery profile that will come thereafter is absolutely fantastic. Combined with the official cash rate reduction—a drop of over 525 base points over the last period—and inflation pressure abating really rapidly, monetary policy is now “very stimulatory”. Those are the governor’s words—“very stimulatory”.

Across the House, Mr Cunliffe was saying that we are not doing enough. Well, when we questioned Mr Bollard at the Finance and Expenditure Committee today he said that we were in a very good position, and that we were in a great position to take the economy forward as long as we rolled out the things we had already promised. We will also see further lending rate reductions in the pipeline, we can expect to see banks helping in the recovery, and we are seeing a combination of monetary and fiscal policy stimulus—particularly with the NZ$1 going down. That is absolutely helping our economy to recover. I was at a summit back in Hawke’s Bay last Friday, with Mr Nash from across the House and Craig Foss, my colleague who heads up the Finance and Expenditure Committee. It was very good to hear where a number of the business sectors were at in the wider economy. There was not the doom and gloom that those Labour members over there predict—like Mr Cosgrove, the doomsayer. We heard a number of businesses up in Hawke’s Bay say that it is not easy and the going is still tough. But they are consolidating and they are looking forward into the future, looking at where markets will be, and looking at those free-trade agreements that Labour started and that National is driving forward. I think we are actually in a great position going forward. Those businesses were comfortable to consolidate going forward; they were in good shape in that regard.

I come back to the detail of this bill as part of our plan, because I have clearly covered the fact that we have a strong plan going forward—

Hon Paula Bennett: Strong!

CHRIS TREMAIN: —a very strong plan. We have rolled out a significant amount of it, or are in the process of rolling it out as some of these bills come through select committees. In this particular bill we see some really good initiatives for small businesses like that 5 percent uplift rate on provisional tax, which is absolutely excellent; the increase in the GST threshold rate, so that compliance costs are reduced for small businesses; the raising of the PAYE once-a-month filing payment threshold from $100,000 to $500,000; and the raising of the fringe benefit tax annual filing threshold from $100,000 to $500,000, again reducing that threshold for small businesses in terms of having to get in there and do fringe benefit tax returns. These are all positive initiatives, and are all part of a wider plan to blunt the edge of this recession and put New Zealand in the best place to go forward. I am confident that with a John Key - led Government we will take this nation forward, deliver on the forecasts of the governor, and, by the end of this financial year, be on the way to recovery. Thank you very much.

STUART NASH (Labour) : Members who wanted to know about the Taxation (Business Tax Measures) Bill would have had no idea what Mr Tremain was talking about, because I think he mentioned it only once.

I stand in support of the Taxation (Business Tax Measures) Bill, because the Labour Party supports small businesses. In fact, Labour supports all New Zealand businesses in a positive and proactive way, as no other political party does. First of all, let me say that I think all parties need to work together in this time of economic crisis to do what is best for the country. That is why I support this bill. Does it go far enough? No, and Labour would have taken it further.

David Bennett: In your dreams, mate—in your dreams.

STUART NASH: However, members of the Finance and Expenditure Committee all agreed on a bipartisan approach—did we not, I ask Mr Bennett—to immediate economic reform in a way that does not allow for political interference, and at a time when the country’s best interests need to be considered. In line with the country’s best interests, Labour will be putting forward amendments that we feel will considerably improve the bill, and we hope that they will be received in the same bipartisan spirit of support that we have provided to date, in pursuit of the nation’s economic health.

This bill is targeted at the 96 percent of Kiwi businesses that are classed as small to medium sized enterprises. The New Zealand definition of a small to medium sized enterprise is a business with 19 employees or fewer. Such businesses employ approximately 60 percent of the country’s workforce, and without a question of a doubt they are the backbone of the New Zealand economy.

What does this bill set out to achieve? First and foremost, there is recognition from all parties that this economic recession the country now finds itself in is hurting New Zealand businesses and industries. I was speaking to an importer of petrochemical derivatives just yesterday, and he was saying that business is terrible. For most of his clients now, it is just a matter of survival. These are the manufacturers who often see the signs of destruction first, because they are producing for the retailers and wholesalers, who then onsell to the customers and consumers. If business is hard for those at the back end of the supply chain, then it will be reflected in the environment and conditions at the front end.

If we who are resident in this House can help in any way to mitigate the effects of this crisis, and therefore alleviate the suffering in the manufacturing sites and shop fronts of New Zealand’s towns and cities, as well as in the living rooms of the nation’s homes, then we as elected representatives charged with the mandate of securing this wonderful country’s future must act in a manner that delivers the optimal benefit in a timely manner. This bill is but a start. I ask Mr English where the rest of the plan is.

This bill could have been bolder and should have been stronger. Now we must accept the substance of this bill, which we in the Labour Party will help to improve through the Supplementary Order Paper process. We must then provide the Government agencies responsible for delivering its outcomes with the resources needed to implement it in the way intended by Parliament. I hope that Mr Dunne has advised the Inland Revenue Department in advance that it has a very important and proactive role to play in the easing of the economic and financial woes of many good New Zealand citizens. From what I have seen of the performance of Inland Revenue Department staff while in my role as a Finance and Expenditure Committee member, I have formed a view that they are hugely competent and highly committed to doing what is right for the people of New Zealand.

I go back to my original question. What does this bill seek to achieve? Well, four new measures have been introduced by the coalition Government. First, there is the reduction of the provisional tax uplift rate to apply from 1 April 2009. This rate drops from 105 - 110 percent to 100 - 105 percent. This uplift rate is essentially the rate at which companies are allowed to estimate their tax for the following year, based on previous earnings.

Labour argued that this rate should have been lowered even further. One submitter who presented to the Finance and Expenditure Committee suggested that this rate should have been dropped to 80 percent, given the dire economic climate and the pain that many businesses are feeling. It was acknowledged by all that 80 percent was perhaps too low, and Labour argued that it should have been closer to 100 percent, while still acknowledging that even this may have been optimistic considering the economic times and the hardship that many companies are facing. I doubt that many companies today will be predicting the same level of taxable earnings as they were 12 months ago. But this measure is a start and a move in the right direction.

There is an increase in GST payment thresholds, from $1.3 million to $2 million, which will apply from 1 April 2009. There is the introduction of the new threshold of $10,000, below which all business-related legal expenses are fully deductible, which will apply from the 2009-10 income year. There is an increase in the threshold under which the fringe benefit tax (FBT) is not required to be accounted for with regard to minor benefits provided to employees. This increases from $15,000 per year and $200 per quarter per employee, to $22,500 per year and $300 per quarter per employee.

Then there are eight proposed measures that are either directly from the Labour Party manifesto or are slightly altered but are still Labour Party policy. I guess the old cliché is true—imitation is the greatest form of flattery. If so, we in the Labour Party blush and tip our hats, because this bill is very similar to one that we would have introduced, only not as robust, forward-thinking, or stimulatory. Dr Cullen should take a bow, because in essence and form, if not substance, this is his bill. For example, the enhanced Labour measures include the increase in pay-as-you-earn, once-a-month filing and payment threshold, from $100,000 to $500,000; the increase in the FBT annual filing threshold, from $100,000 to $500,000; and the increase in the GST registration threshold, from $40,000 to $60,000. All these measures apply from 1 April 2009.

If we look at the five measures that have been directly lifted from Labour Party policy, we see the increase in low-value stock trading thresholds, to apply from the 2009-10 income year; accounting for financial arrangements, also to apply for the 2009-10 tax year; the extension of FBT annual filing to include closely held businesses whose FBT liabilities are restricted to one or two vehicles used by owner-employees, regardless of their annual PAYE deduction; the increase in provisional tax use of the “safe harbour” threshold, to apply from the 2009-10 tax year; and an increase in the GST 6-monthly return filing threshold, to apply from 1 April 2009.

That is nice, but perhaps I was a little hasty in asking the good doctor to take a bow, as I would not want the honourable member’s fine legacy to be associated with a bill that he would have substantially changed to better reflect the dire economic mood at the time of final drafting. These were Labour ideas before the full force of the economic crisis was at least recognised, if not its true magnitude fully understood. Dr Cullen would have gone a lot further.

We know that the Labour Party is the party for small business—we all know this.

David Bennett: Come on!

STUART NASH: I say to Mr Bennett that one has only to look at the statistics to see that this is true. Mr Tremain’s firm in Hawke’s Bay did a hell of a lot better under Labour than it has ever done under National. Let me give members just one statistic. Annual business growth in the time of the last National Government was between 5 and 8 percent. In the first 6 years of the previous Labour Government that growth was between 15 and 18 percent. The economy actually grew by over 25 percent under the stewardship of Helen Clark and Michael Cullen. What a legacy Messrs English and Key have to follow! [Interruption] I say to Mr English that if this bill is anything to go by, he is not even close to “Labour-lite”; his legacy may be more of a brown colour.

The last great recession took a war to fully solve, and we certainly do not want to go through that even though, globally, geopolitical issues will become salient as the forces of nationalism begin to rear their ugly heads. In New Zealand the last great recession was expertly managed by a Minister of Finance, who was, I am proud to say, a giant when compared with the member who is currently occupying that portfolio. With those words, I support the bill’s passage through the House. We will be voting for it.

DAVID BENNETT (National—Hamilton East) : How the Labour Party’s spots have changed. This is a Labour Party that now says it is there for small business. Nobody in his or her right mind would believe that. People know that the Labour Party is not there for small business; the Labour Party is there only for itself. All those Labour members want is to get back into power. All those members were doing before the election was trying to get back into power. That is all the Labour Party has ever thought about. Those members do not think about their supporters, the workers of New Zealand. They do not think about small business. They do not do that. The Labour Party has one goal, and that is self preservation and power. That is the Labour Party’s mantra.

I say to the new member Stuart Nash, so bright-eyed, innocent, and fresh, who came into this House and said that the Labour Party is all about small business: “Take a history lesson.” Let us look through the history of the Labour Party. What did the Labour Government do for small business in the last 9 years? Year after year after year it kicked small business in the guts. At the Finance and Expenditure Committee, David Cunliffe made it quite clear that his whole line of questioning was about Labour Party policy. For everything that comes out of the select committee now, Labour members have to say: “This is what Labour thought of many years ago.” It is all right to say that Labour members thought about it, but why did they not actually do it? Why cannot Labour do something for small business? Why do Labour members just think about doing something for small business, instead of actually doing something for small business?

The reality is that those members do not care about small business. At this point in time, the Labour Party is trying to backtrack—big time. Labour members are trying to go back through any little document from the last 10 years and say that it was their idea, when it was not their idea. The reality is that the ideas being passed here are National ideas, because the National Government is passing them. If they were Labour ideas, they would have been passed by the Labour Party during its 9 years in Government. It did not pass those ideas. It is pretty rich of Labour members to come into this House and say that they are their ideas, that they have ownership of them, and that they should take credit for them. The reality is that they do not have ownership of them, they cannot take the credit for them, and the public and especially the small-business community of New Zealand know that. They are very sure that the Labour Party is not there for small business.

Stuart Nash: There was no recession during that time.

DAVID BENNETT: The new member is telling us how great the Labour Party is for small business and how great it is for the economy. Let us look at what the Labour Government left for the New Zealand economy before the world recession. What did Labour leave for New Zealand, before a world recession? It left it as the only Western country in recession. It made New Zealand a recessionary country, before the rest of the world.

Hon Darren Hughes: Wrong—the United States. Don’t you count America?

DAVID BENNETT: The member who lost his seat in Levin is telling us that the United States was in recession before us. That is not true. New Zealand was in recession before the United States, but the member would not know that, because Labour members do not know anything about business. Those members have never had to run a business. In fact, all they do is stand in the House and try to spend business people’s money. That is all they want to do. They just want to keep it churning around, and say that they are the great people who look after everyone. That is not the reality.

The reality is that small business needs help. The National Government gives help to small business, and the National Government is here for the New Zealand economy. The Labour Party is here only for itself, it always has been here only for itself, and it only ever will be in this House for itself. That is why Labour did not win the last election, and why its members cannot go around saying that they are there for small business or that they have the best interests of New Zealand at heart.

When we look at all these measures, we see that they are not rocket science. We are not saying that these measures are rocket science, but they have been sitting there and they could have been carried out by the Labour Party. All that was missing was the will to do them. The will was not there, amongst those members. They did not want to do them. They can come around now and say that they are supporting these measures, but how can they change their spots at this late stage just because they know that public opinion is against them? They needed a general election to tell them where to go with small business. They did not need to hear it from small-business owners. Labour members would not go around small-business owners and listen to what they said they wanted, and then actually do it. They waited until the general election told them what small-business owners wanted, and now Labour members are trying to take the credit for something that Labour did not do. That is not the New Zealand way.

In New Zealand, we do not take credit for things we do not do. That is the Labour Party way. That is the general equality of their world—that everybody is the same, and nobody can make a decision to do the right thing for this country. But that is not the way the National Government views it. National members say that they will go out there, they will listen, they will take the concerns of their people, they will make constructive decisions, and the National Government will pass legislation that will give the results the community deserves. That is what this bill is about. It is basically the National Party listening and delivering. It is action. That is the way the National Party is different from the Labour Party. National is a party of action. It is delivering, and it is taking constructive action to deliver solutions at a time when New Zealand needs them the most. National is a party of action; it is not a party of ideas that never come to fruition. National is not a party whose members come back 6 months later and say “We could have done it, but we never actually did.” National is a party that does it. National has the support of this House, because the House knows that these are the best measures that can be passed at this point in time.

I think we also need to have a look at what happened today when the Reserve Bank governor came and talked about the growth that could potentially come to the New Zealand economy if we come out of this downside equation more quickly than the rest of the world. I think it offers opportunities for New Zealand, and I think New Zealand businesses and individuals are looking at a John Key - led Government and seeing that opportunity. They see a man of action. They see a Government that is actually making the right decisions and is providing the stimulus for New Zealand. This Government is looking forward and making simple but effective decisions. Its members are not out there, trying to tell the world how to live its own life, and we are not out there trying to change the way that people have to live their social lives. We are out there building a stronger economy so that New Zealanders can deliver a prosperous future for their children. That is what the National Party is doing. We have it right, the public knows we have it right, and it is not for the Labour Party to now change its spots and for its members to come into this House and say that they support this bill and that it was their idea. It was not their idea.

I say to the public of New Zealand that we are not standing for the Labour Party trying to take over these ideas and say that they are theirs, when they are not. These ideas are the National Party’s ideas because the National Government is passing them. Labour members had their chance when in Government, but they did not pass them, so they cannot now say that they are their ideas. There is a whole raft of reforms in the Taxation (Business Tax Measures) Bill that are very important for small business. The reforms of GST, fringe benefit tax, and PAYE are all measures that small-business owners have been looking for, and they will get them in a timely way.

The National Government is different from the previous Labour Government, in that it will not wait until year 3 to deliver these reforms. It will implement these reforms as soon as it can. If the Labour Party had its way, it would wait until year 3, just before an election, and then try to put these reforms on a pledge card, which the people of New Zealand would have paid for. Labour members would not go out and try to make constructive decisions at an early point in the electoral process, because they are not like that. Labour members cannot think of things. When they do think of things, they have to save them up so that they still have them at the end of the election cycle, and they can then say they actually did something. But Labour members could not think of anything they had done during the last 3 years, so they went into the last election not knowing what they had done, and that showed in the election results.

Hon David Carter: They hadn’t done very much.

DAVID BENNETT: No, they had not done anything. There are some home truths that the New Zealand public needs to know. The first is that the National Government is there, taking constructive actions and making decisions for the New Zealand public. That is the first point New Zealanders need to know. The second point is that these are not Labour Party ideas. They are National Party ideas, because the National Government is passing them. The third point the public needs to know is that the National Party has a vision. It has a dream for this country that will take us beyond the mediocrity that the Labour Party tries to incite amongst New Zealanders.

BRENDON BURNS (Labour—Christchurch Central) : I am very pleased to speak on the Taxation (Business Tax Measures) Bill, and to follow the preceding speaker, David Bennett, whose rather screwball analysis suggested that National supports small business. Actually, National was the party that voted against business tax cuts and axed the research and development tax cut, which would have been very helpful to businesses, particularly small and medium-scale ones.

The Labour Opposition supports this bill. Indeed, despite the previous speaker’s claims, most of the measures contained within it were proposed by Labour. The bill eases tax pressures and compliance costs on business. Although we are supportive of this bill and what it does to assist business, particularly small to medium sized enterprises, it is simply not enough. That applies most especially at this time. I have to say, as a new member of the Finance and Expenditure Committee, that I was surprised and concerned that this is, in fact, the first bill that the committee has reported back to the House. Given the scope and scale of the world recession, I had imagined that we would deal with some legislation and Government actions that were representative of big and bold ideas—a mini-Budget or a pre-Christmas economic summit and the major ideas and stimulus packages flowing from it. Instead we are at the second reading of a technical and modest bill that, although we welcome it and acknowledge that it will be helpful to business, is hardly a new deal.

The adhockery of the Government is illustrated by this bill, and it is also illustrated by some of the Government members’ responses—such as they have made. I note, for instance, in housing that the first commentary was that there would be no new State houses. That changed overnight after a TVNZ report showed people in South Auckland living in garages. Suddenly we were going to get new State houses. Then we learnt that the total number of new State houses was 69. On that basis, I will be lucky to see one new State house in my electorate of Christchurch Central.

So, really, this bill, and the Government’s response in toto, indicates that it is business as usual despite the world’s worst economic forecast in our lifetimes—in just about anybody’s lifetime. We are seeing another missed opportunity at a time when this country needs real leadership and a real response. What we are getting is a rolling maul, and contained within it are Labour’s ideas repackaged and re-presented to the New Zealand public as a stimulus plan. The relief for small to medium sized enterprises is ours, the tax cuts are ours, and the proposals for infrastructure are a rehash of our proposals. There is, regrettably, no broad-based plan that gives New Zealand’s public confidence that this Government understands—really understands—the scale of the crisis, and that it is taking the action that is truly necessary, particularly to help vulnerable New Zealanders, and also to reposition New Zealand so we are ready to take advantage of the upturn, whenever it comes.

Today the Governor of the Reserve Bank appeared before the Finance and Expenditure Committee. He recognises the scale of the issues that he faces. He today reduced the official cash rate to 3 percent. None of us in this House can remember when the official cash rate was last at that level. He recognises the scale of the issues. He also recognises that inflation is no longer public enemy No. 1 as far as the economy is concerned. Yet, at the same time as the Governor of the Reserve Bank is saying that to the Reserve Bank and to the nation through the Monetary Policy Statement, we learn that the Prime Minister is telling the Wall Street Journal that his biggest fear is rising inflation on the back of rising money supplies. That fear is not shared by the Governor of the Reserve Bank, nor by anybody else. The expectation in today’s Monetary Policy Statement is that inflation through to 2010 and beyond will be well contained within the targets as outlined by the Governor of the Reserve Bank.

So we come back to the question of where the plan is. What stimulus from this Government can New Zealanders look towards? We look, by way of contrast, to the United States, which has a NZ$1.5 trillion stimulus package. I look across the Tasman to our friends in Australia, who have a NZ$67 billion stimulus package. Those responses are taking place because the Australians and the Americans acknowledge and recognise that we are facing the most severe financial crisis since the Great Depression. The International Monetary Fund chief economist is advising Governments around the world to commit to taking whatever steps they can to avoid a depression. The advice is to be bold and decisive; we are ignoring it. Today US President Barack Obama called for other nations to enact stimulus packages such as the one the United States has enacted. He obviously wants to see the world attempt to deal with these issues. We are an interdependent world yet New Zealand stands aside, as indicated by the interview the Prime Minister gave this week to the Wall Street Journal.

What is the National Government’s plan? Well, it goes back to such things as scrapping the research and development tax credit, to gutting KiwiSaver, and to trashing the Fast Forward Fund, which would have created $2 billion of expenditure for our primary sector, as has now been represented by the Minister of Agriculture. We are seeing cuts to the contribution to the Superannuation Fund that will endanger future superannuation entitlements. We are seeing a crisis manufactured around the Accident Compensation Corporation so that a board can be sacked, other people can be lined up, and New Zealanders can be told that they can no longer have the accident compensation entitlements that they once relied on. In the area of broadcasting, for which I have Opposition responsibilities, the Minister of Broadcasting is demanding a dividend from Television New Zealand (TVNZ) at the very time that TVNZ is saying that it may need to shed as many as 150 staff. Within 1 week of the Job Summit, TVNZ is being told to go ahead and cut the staff, and to pay the dividend.

Then we have a tax cut programme that simply will not deliver as it should to those most in need—to those who would have spent every last cent of their tax cuts if they had been implemented as they were to have been under Labour’s programme. We urge the Government to retarget those tax cuts. They are essential for New Zealand. We need to make sure tax cuts are focused on those who need them and that discretionary spenders get them. It is not just Labour that is advocating that; Air New Zealand’s chief executive, Rob Fyfe, got it right when he said that this crisis is so big that “all the bets are off … We need to stimulate this economy and there are more effective ways than broad-brushed tax cuts.” That is the big picture; that is the kind of approach we need. I say good on Rob Fyfe for those comments.

Labour has been very clear to the select committee and to this Government that we are quite prepared to support this bill. It will provide some small measure of assistance to business. It will be supported by this Opposition party, but we want to make sure that some changes are made, and we will be recommending some amendments as the bill proceeds. The report from the select committee acknowledges that, as a result of earlier initiatives, some changes were taking place in the Inland Revenue Department that will assist. We will be proposing some technical amendments, which my colleagues have already outlined in part.

One thing I will touch on is the whole issue of tax deductibility of patent costs. A submission was made to the select committee by the Manufacturers and Exporters Association. At the moment New Zealand takes 20 years to wipe out the costs incurred in building a patent to protect intellectual property against world challenge. We would like to see that moved back to the world average of 10 years. It makes much more sense.

In conclusion, Labour will support the Taxation (Business Tax Measures) Bill. It was largely a Labour bill that was inherited by the new Government; it is not a key measure in National’s package. It is a modest technical bill that will take some of the pressure off businesses, particularly small to medium sized enterprises. However, as recently as this afternoon the Governor of the Reserve Bank appeared and it was clear that he was outlining at least a tough year ahead for this nation. His forecast for the period beyond next year was an optimistic one. He suggests that we could be out of the decline by about this time next year. We in Labour hope that Dr Bollard is right; we note that there are some gloomier prognoses. Dr Bollard correctly notes that stimulating the economy is the key factor in the United States, Europe, and New Zealand. I think that he is as mystified as anybody else as to why the Prime Minister continues to identify inflation as being of major concern. He should tell that to the thousands of New Zealanders a week who are losing their jobs, because inflation is not an issue for them. Holding on to their jobs is what is important. They need a stimulus package. This bill is a very small step, but it ain’t a stimulus package in any sense, at all. Thank you.

HEKIA PARATA (National) :Tēnā koe e te Mana Whakahaere huri noa i tō tātou Whare tēnā koutou katoa.

[Greetings to you, Mr Deputy Speaker, and to you throughout our House, greetings to you all.]

I am pleased to stand in support of this Taxation (Business Tax Measures) Bill. I am delighted that it has cross-party support, despite the Opposition damning it with faint praise. That seems to suggest little understanding of how meaningful, how practical, and how responsive this suite of measures is to people who are engaged in small to medium sized enterprises. Nevertheless, I am pleased to know that the bill enjoys cross-party support, because the sooner that we can get it passed and apply it, the sooner that small to medium sized enterprises will be able to experience the relief intended by this legislation.

The bill has specific measures to assist small to medium sized enterprises, which are the bulk of business participants across the New Zealand economy. These people invest their own money, their own time, and their own creativity into making a success of their particular enterprise. These people lie awake at night and decide whether they can afford to upgrade their information and communications technology. These people have to decide whether they can continue to employ the people they have on their payroll. These people have to decide whether they need to downgrade the amount of space of the business area they occupy. These people have to make courageous decisions every day about whether to continue to invest for their future. These are the people for whom this technical, albeit modest, suite of measures will go a significant way towards lifting the burden of compliance, and allowing a greater cash flow to remain within their businesses. Having been a small-business owner myself, and having wrestled with these very issues, I stand in support of this bill so that others who are engaged in this type of business can feel this relief.

The bill contributes to National’s overall jobs and growth plan. It is not to be read in isolation, although, as I have said, within and of itself it offers significant assistance to small and medium sized businesses. It is but one part of an overall, comprehensive approach that this National-led Government is taking to the challenges that face us. In meeting these challenges we have two main objectives. The first is to soften the edges of the recession, and the way that New Zealanders are experiencing it, and the second is to prepare our economy for recovery. Although we have inherited the legacy of being the first in the developed world to go into a recession, we would like to work very hard to be the first in the Western World to go into a recovery. This bill is part of the measures that we think will assist, across the economy, to restore confidence, to give greater certainty, and to assist small to medium sized business owners to continue with their plans confidently, to retain their employees, and to continue with their everyday operational realities.

This bill is about achieving balance, as is so much of what this National-led Government is focused on. It is about achieving balance between leaving as much cash flow as possible in businesses, and simplifying the compliance regime they must attend to, while at the same time maintaining the tax base that we rely on to continue to offer the services that this National-led Government is committed to offering.

So what are these measures? I do not propose to rehearse all of them, but I do wish to speak about one in particular, which, as a previous small-business owner, I was constantly alert to providing for—that is, the 5 percent uplift rate that businesses pay on provisional tax instalments. As we all know, in a successive year business people base their tax provisions on what they paid the previous year, and add 5 percent. The supposition, of course, is that they are improving their business growth each year. But we are in a recession. We know that there are many challenges to our economy, and we know that it is very unlikely that many businesses will be looking forward to a 5 percent increase on what they earned in the previous year. So the bill provides the ability to remove that provision for the 2008-2009 and the 2009-2010 tax years, which means that there will be better tax cash flows for the next 2 years for small to medium sized enterprises.

We also see within this bill the provision that business-related legal expenditure of $10,000 or less will be able to be fully deducted. That is a very great leap forward for a number of small businesses, because when they retain legal advice they fully understand that those giving the legal advice are also in business and need to meet their expenses. But legal expenditure has been a particularly onerous expense for small to medium sized enterprises, and the opportunity for it to be deductible will be greeted with great relief by many small businesses around the country. Similarly, the PAYE requirements—whereby payments will be filed once a month instead of twice a month, and the payment threshold will move from $100,000 to $500,000—will allow more employers to file fewer PAYE returns. Again, these requirements have been very onerous but necessary for small to medium sized enterprises, and the changes are ones that will be, and are being, greeted by many businesses around the country with great relief.

National is committed to making it easier for small and medium sized companies to operate their businesses effectively; this package of relief measures is aimed at doing that. It recognises that there are no silver bullets to all the challenges that face us in this time of economic recession, but that it is one way of contributing to those businesses that form the bulk of the New Zealand economy, in order to simplify their tax compliance regimes while also leaving cash flow within their businesses. I have had significant feedback from business people around the country who do not minimise the contributions that these measures will make to their businesses. The Opposition has described the measures as modest and technical, but it has nevertheless said that it will support them. However, others around the country who are engaged every day in these businesses, see these measures as opportunities to get their heads above water, to conduct their business in a much more simplified way, and to have that cash flow available to them so that with greater confidence and certainty they can continue to operate those businesses.

This package of measures is what the National-led Government is committed to; it is part of an overall jobs and growth plan. It meets our dual objectives of softening the hard edges of the recession while also contributing to preparing our economy for recovery. I am delighted to support this bill, and I commend it to the House.

Heoi anō rā e te Mana Whakahaere o tēnei Whare tēnā koe, otirā, ki a tātou katoa, ngā mihi nui.

[So greetings to you once again, Mr Deputy Speaker of this House, and much greeting to us all.]

• Bill read a second time.

Hon SIMON POWER (Minister of Commerce) : I move, That the Insolvency Amendment Bill be now read a first time. At the appropriate time, I intend to move that the Insolvency Amendment Bill be referred to the Commerce Committee for consideration, that the committee report finally to the House on or before 12 May 2009, and that the committee have the authority to meet at any time while the House is sitting, except during oral questions, during any evening on a day on which there has been a sitting of the House, and on a Friday in a week in which there has been a sitting of the House, despite Standing Orders 187 and 190(1)(b) and (c).

This bill amends the Insolvency Act 2006 in order to address a small number of significant issues that have arisen since it came into effect in December 2007. Unfortunately—and hence the shortened time frame for the select committee to consider this matter—these changes have become even more pressing in the light of the expected impact of the current economic downturn on rates of insolvency. Having said that, by introducing changes designed to preserve the integrity of the personal insolvency processes—namely, the new no-asset procedure and bankruptcy—this bill is also timely because it aims to provide more protection for creditors and potential creditors.

The no-asset procedure, or “NAP”, was introduced as an alternative to bankruptcy in December 2007, as part of the new Insolvency Act. Debtors may be eligible for a no-asset procedure if they have no realisable assets that can be sold to pay their creditors, they have not entered into a no-asset procedure or a bankruptcy process before, and they have debts of between $1,000 and $40,000 with no other means to repay them.

By enabling individual debts of up to $40,000 to be written off, the intention of the no-asset procedure was to grant financially distressed people relief from liabilities that were incurred contractually. However, the Act does not explicitly exclude the discharge of fraudulent debts, leaving open the possibility that debts such as fraudulent social welfare payments could be wiped under this regime. Rewarding dishonesty was never the intention of the Act, and clearly contravenes the fundamental policy objectives that underpin insolvency laws. The changes proposed in this bill stop fraudulent debts from being written off, and will apply retrospectively to debtors who were in the no-asset procedure process when this bill was tabled in the House 3 days ago—a slightly unusual step, but a necessary one—and to those who have entered no-asset procedures since them.

To further protect the integrity of the no-asset procedure, the bill also proposes to empower the official assignee to extend the period of discharge under a no-asset procedure by a maximum of 25 working days. This allows more time for the official assignee to investigate any new information or creditors’ objections that are received at the eleventh hour in relation to a person’s eligibility for the no-asset procedure. When the no-asset procedure allows someone to forgo up to $40,000 in debts, it is essential that any new information that may relate to concealed assets or debts can be brought to the attention of the official assignee right up to the day that person is discharged—hence the change. Such information could lead to the no-asset procedure process being terminated if an entrant is found to be concealing assets or debts from the official assignee.

The bill also proposes to restore the official assignee’s ability to recover gifts made by a bankrupt prior to his or her bankruptcy. The insolvent gift provisions in the Act were inadvertently weakened in the 2006 insolvency law reform, making it difficult for the official assignee to deal with gifts made to a third party in the period leading up to a person’s bankruptcy. The changes proposed in this bill will ultimately ensure that creditors are not out of pocket as a result of those gifts being made. The bill will allow contingent liabilities to be included in the assessment of the bankrupt’s insolvency at the time of making the gift, and will cancel any gifts that are made in the 2-year period prior to a person’s bankruptcy. This 2-year time frame is consistent with the longstanding presumption that an individual is technically insolvent for a period of time before he or she files for formal bankruptcy proceedings. It is often within this period that those individuals shift assets, set up trusts, etc., to avoid paying creditors. The bill shifts to the recipients of gifts the onus of proof of a debtor’s solvency for the purpose of gifts made in the 2 to 5-year period before he or she was adjudicated bankrupt by the official assignee.

Finally, the bill proposes to increase the length of time a debtor’s information is kept on the no-asset procedure public register. Currently, someone under the no-asset procedure regime remains on the register only for as long as the no-asset procedure lasts, which is 1 year. The bill increases the time period on the register to 5 years from the date of entry. I will be interested in the select committee’s views on that matter. Furthermore, where a person has been through multiple insolvencies, it is proposed that his or her information will be permanently retained on the register. This information will be publicly available, enabling credit-rating agencies and providers of credit access to make informed decisions about doing business with these individuals.

Costs incurred by businesses that transact with bad debtors become a drain on the economy, particularly as these costs are eventually passed on to everybody else. The changes proposed in the bill will strengthen New Zealand’s personal insolvency laws. I commend this bill to the House.

Hon LIANNE DALZIEL (Labour—Christchurch East) : I am happy to follow the Minister in speaking on the Insolvency Amendment Bill and to confirm to him that the Opposition will be supporting the referral of this bill to a select committee. But I cannot give an assurance beyond the referral to the select committee. This is not because of the first three items that the Minister identified in respect of this bill, but because of the fourth. I will run through them. I downloaded the Cabinet paper off the Internet before I came to the House, just to make sure that I had got it right in terms of the nature of these amendments in the bill.

The first amendment is the provisions that were identified in the Cabinet paper as preventing the discharge of fraudulent debts under the no-asset procedure, and we are very happy to see that addressed in the bill. The second amendment is to allow the official assignee to extend the no-asset procedure period when an objection is received just prior to a debtor’s expected date of discharge from the no-asset procedure. There is no problem with that. It is a very good strengthening of the existing law. The third amendment protects the interests of creditors of bankrupts by strengthening the ability of the official assignee to void gifts made by a debtor in the 5 years leading up to his or her bankruptcy. Again, I am very happy with this.

It is a strengthening of the provisions in the legislation. These all obviously have come from the Ministry of Economic Development. The ministry obviously has provided advice to the Minister stating that these matters need to be addressed. I can see that the first provision needs to be addressed as a matter of urgency, which is why the Government has taken the position that it will apply from the day that the bill was introduced to the House, which was, as I understand it, on Monday or Tuesday of this week. In that way, it will stop fraudulent debts from being discharged from this day forward.

But what I am concerned about, though, is the fourth provision. It is described in the Cabinet paper in a positive way, without highlighting the negative potential of it, and that is what disturbs me. The fourth provision is to provide improved access to the public register on the no-asset procedure and bankruptcy, in order to enable informed lending decisions to be made. That provision cannot have been generated off the concern that the ministry had in relation to the implementation of the legislation, because this issue was debated at some length when we introduced the Insolvency Act. The no-asset procedure was probably the most debated part of the legislation, being a very new procedure. The issue was whether we should have a strong separation between the bankruptcy provisions and the no-asset procedure to make it very clear that the no-asset procedure was a one-off, once-in-a-lifetime opportunity for somebody who had otherwise acted in good faith, had come across a very poor set of circumstances and hardship in his or her life, and was able to get a fresh start. That fresh start included the ability to carry on a business and the ability to travel overseas, which are prohibited under the bankruptcy provisions.

The third amendment was not to have this on the record, as it were, for any longer than the no-asset procedure. The public register’s relation to bankruptcy has been 7 years for many years now, and that was not adjusted when we looked at the Insolvency Law Reform Bill. So the 7 years remains for bankruptcy. But the suggestion that we now increase the time for having the no-asset procedure on the record, not for the 1 year that the no-asset procedure is in place, but for 5 years, creates a real concern. I am deeply concerned about the way that it has been publicly released by the Government. It is almost as if this has been added as an extra measure to a technical bill that Labour would have supported completely—100 percent. For the first three items alone we would have said there was no problem. We could whisk the legislation through the committee—it is a very good committee—and get the legislation back to the House well within the time frame as proposed by the Minister. But this inclusion of another item that is clearly coming from the credit agencies, not from the Ministry of Economic Development, worries me. Nowhere in the entire Cabinet paper could I find out where anyone in the credit industry had been consulted, yet the suggestion has obviously come from there. The fact that the credit industry had been consulted was not mentioned.

The other people who had not been consulted were those in the budget advisory services. I have seen Raewyn Fox’s comments in the media in response to this bill, saying there are concerns about people coming into budget advice services and asking for assistance to fill out the forms for a no-asset procedure. That is not what budget advisers do. Budget advisers do not help people just to fill out forms for a no-asset procedure. On the ground, they have been using the fact that there is a no-asset procedure to approach the creditors of people in dire straits, and working through arrangements that are outside the summary instalment order regime and outside the no-asset procedure, so some commitment is made to repaying what is owed under the circumstances. I think the no-asset procedure has ended up being quite a useful tool. It is one that did not exist before, in terms of providing a realistic bargaining tool with a number of creditors in order for them to accept less than the full 100 percent return.

When we change the provisions around the no-asset procedure, it will change the number of people who want to contemplate that as an option. Will that change then weaken its ability to be used by budget advisers as a negotiating tool? I think it could, and that is the sort of thing I want to spend some time on at the select committee. Quite frankly, if we do not get the opportunity to seriously consider this issue, then I think the bill itself will become an abuse of process. I would much rather carve out this provision if we are not able to deal with it within the time frame. As a responsible chair, I will do what I can, but I also want very much to have on the record our concern about the way this has been included in the bill, which will mean that we have to take some serious consideration over it. In many respects it is a bit unfortunate, because if this provision had not been included in the bill, we could have made an absolute assurance about getting the bill back to the House in the time frame concerned.

The regulatory impact analysis is perfectly legitimate under the circumstances, because secrecy had to be afforded to one of the provisions in the legislation, and that is preventing the discharge of fraudulent debts under the no-asset procedure. I quote from the Cabinet paper where it says: “Any publicity at this stage would unnecessarily draw attention to the loophole that allows fraudulent debts to be cancelled under the NAP process, which has the possibility to reward individuals for their dishonesty. This may encourage such dishonesty, therefore I am proposing that no publicity be given to this matter until a bill is introduced to Parliament.” That is perfectly appropriate for that provision, but not for the fourth one. The fourth one needs to be properly consulted. The Privacy Commissioner has raised serious concerns about the inclusion of this provision in the bill. I think we are going to have to talk to the commissioner and get a very clear steer on a matter that I know she is currently undertaking a review of. I have a real concern about that fourth element being included, but I am confident that we are able to address all of the other matters that are contained within the bill.

I will close by expressing my disappointment at the inclusion of that element, which clearly was not driven by a Ministry of Economic Development expectation but by the interests of those in the credit lending business.

PESETA SAM LOTU-IIGA (National—Maungakiekie) : I rise to speak in favour of the Insolvency Amendment Bill. This bill amends the Insolvency Act 2006, as has been said earlier, to address a small number of significant issues that have arisen since that legislation was passed. The bill, as has been stated, preserves the integrity of the no-asset procedure, by preventing the discharge of fraudulent debts and of bankruptcy by restoring the official assignee’s ability to recover those gifts made by a person prior to bankruptcy. The bill also amends public register provisions to better enable creditors to make informed lending decisions, by ensuring a public record of people who have been discharged from the no-asset procedure is available for an appropriate period of time.

That period is yet to be finalised. It also provides for permanent public records where the offender has had multiple insolvency events.

The bill makes two amendments to the existing no-asset procedure and one amendment to the current bankruptcy process. The fourth amendment is the one that may be contentious.

The no-asset procedure has been described as the soft bankruptcy procedure. It applies to debtors who have not previously gone through the no-asset procedure or been declared bankrupt, and it remains in place for only 12 months. After 12 months the debtor is discharged from the debts that were owed at the start of the period. We know that the debts are between $1 and $40,000, and that entry into the no-asset procedure can be refused only by the official assignee. The procedure provides a one-off opportunity for financially distressed individuals to avoid the stigma of bankruptcy and to rebuild their financial lives, as well as their personal lives.

The changes to the no-asset procedure are significant, in that they close a current loophole around fraudulent debt. We seem to have cross-party support for closing that loophole. The changes also allow for further investigation of a person who is undergoing the no-asset procedure.

I will turn to the four amendments to the Act. The current Act does not explicitly exclude fraudulent debt under the no-asset procedure as it does for bankruptcy. An example is where someone racks up a fraudulent debt where maybe a benefit has been obtained under false pretences from a Government department. The changes stated will prevent fraudulent debtors from avoiding their legal obligations to repay a debt. That is a good thing. It is about personal responsibility, accounting for one’s mistakes, and putting right what has been done wrong.

The second change I refer to is a reversion to the provisions in the Insolvency Act 1967 around gifts made in the 5 years prior to someone becoming a bankrupt. Those provisions put the onus of proving that the debtor was solvent at the time of the gift on the recipient, rather than on the official assignee. This is in line with the longstanding presumption that debtors are technically insolvent for a period of time before they file for formal insolvency and that gifts during that time are given for the purpose of avoiding payments to creditors. For example, if a husband is insolvent and gifts a number of items to his spouse or children, then that is deemed to be captured by the legislation. In my view, this not only reduces the workload of the official assignee but also clearly puts the onus on the debtor to discharge that duty before he or she is absolved of that debt.

The third amendment allows the official assignee to extend the period of time a debtor is under the no-asset procedure by a maximum of 25 working days. This allows for the investigation of any late objections or information received about the termination of a debtor’s entry to the no-asset procedure. In my view it is a common-sense provision. It allows the official assignee the requisite time and eases the workload so that the right decision is made in the right circumstances.

The fourth amendment—probably the most contentious point that the former Minister of Commerce and the current chair of the Commerce Committee, Lianne Dalziel, pointed out in her representations before me—is around extending the period of time a debtor’s name remains on the no-asset procedure and bankruptcy public registers. Currently, a debtor’s name remains on the no-asset procedure register only until the debtor is discharged from the no-asset procedure process, which is up to 12 months. This prevents future investors, lenders, and credit-rating agencies from accessing that information once the debtor has been discharged. That information, once that time period has expired, cannot be accessed by lenders, credit agencies, and future investors. That is a very important and crucial point.

Hon Lianne Dalziel: It’s a decision we made 2 years ago.

PESETA SAM LOTU-IIGA: It is a decision that the former Minister made 2 years ago, but that we are about to—

Hon Lianne Dalziel: No, Parliament.

PESETA SAM LOTU-IIGA: It is a decision that we are about to debate at future select committee meetings.

A bankrupt debtor remains on the public register for a minimum of 7 years. After a bankrupt debtor is discharged, investors, lenders, and credit agencies cannot access that bankruptcy information. So there is a discrepancy there.

There is a difference between bankruptcy and the no-asset procedure, which we will investigate. Under the current legislation an accurate credit history cannot be compiled. As the Minister of Commerce alluded to earlier, that presents, in itself, an increased business risk. Although I accept the argument made by the Hon Lianne Dalziel that we may have a person who acts in good faith and who becomes bankrupt during the normal course of his or her business career, we also have to balance that consideration with the needs and desires of investors, lenders, and credit agencies. They require up-to-date and accurate information as to a person’s financial risk.

This is a critical point and it is one we will get into serious discussions over. As the deputy chairperson of the Commerce Committee, I would be happy to hear representations and to listen to the submissions of the Privacy Commissioner and other parties from the business area and from across the board, even from those who may have been made bankrupt under the no-asset procedure and have experienced a revival in their fortunes. I think it is important to hear submissions from across the board.

This bill is about delivering for businesses. It is about delivering for individuals who have made errors, but it is also about delivering on the rule of law. The rule of law states that one should not profit from one’s own dishonesty, fraudulent behaviour, or other lack of probity in one’s business transactions.

The amendments are required to maintain the integrity of the personal insolvency processes. They also promote confidence in the official assignee’s ability to administer these processes effectively. As I said earlier, these changes will prevent fraudulent debtors from avoiding their legal obligations to repay debt. The bill also removes the potential for a dishonest person to be rewarded. In my view it is consistent with the overriding policy objectives of the personal insolvency legislation. I reiterate that I support this bill. I look forward to the vibrant discussions during the select committee process. That is my submission.

CHARLES CHAUVEL (Labour) : I would like to make a brief contribution to the debate in the time that remains this evening. As has been said, the legislation makes a number of changes to insolvency law.

First, in relation to insolvent gifts, the rules have changed. There are four sets of rules that entitle the official assignee to cancel certain things done by a debtor before bankruptcy that reduce the assets available to creditors—for example, giving money to a spouse or a family trust. This is what we might refer to, these days, as the Madoff exception.

The Insolvency Act 1967 stated that gifts given within 2 years before the adjudication of bankruptcy were voidable—as was said in those days—against the official assignee. This meant that the assignee could cancel the debts if the assignee wished to do so without having to prove whether the debtor could pay them at the time. And gifts within 2 to 5 years before the adjudication were voidable, unless the party claiming under the gift proved that the donor was able to pay all his or her debts without the aid of the property comprised in the gift. This meant that the onus of proving that the debtor was solvent when he or she made the gift fell on the recipient of the gift.

Now, the law in section 204 of the Insolvency Act passed in 2006 is that the gift by a bankrupt to another person may be cancelled by the assignee if the bankrupt made the gift within 5 years immediately before adjudication, and the bankrupt was unable to pay his or her due debts immediately after making the gift. But the effect of section 205 is that the onus of proving that the debtor was solvent when the gift was made falls on the recipient of the gift if the gift was made within 2 years of the adjudication, and on the assignee if the gift was made between 2 and 5 years before it.

This Insolvency Amendment Bill provides a new set of rules, so that gifts made within 2 years of the adjudication may, again, be cancelled entirely at the assignee’s discretion. For gifts made between 2 and 5 years before adjudication, the onus of proof will no longer lie with the assignee; it will shift to the recipient of the gift. The time at which the debtor must be proven to be able to satisfy the solvency test will shift. Instead of being immediately after making the gift, it becomes either then or at any time up to the adjudication. For example, if the debtor wins Lotto between making an insolvent gift and becoming bankrupt, the debtor may be able to avoid the gift being cancelled—and that is obviously a sensible provision.

When proving solvency, account is to be taken, again, of debts that have not yet fallen due—for example, contingent liabilities. The 2006 Act would have provided, on that point, that the solvency test would look only at due debts. So, as Lianne Dalziel said, the first part of the legislation—as far as changing the insolvent gifting regime—makes a lot of sense, as do most of the changes mooted to the no-asset procedure, which speakers, including the previous speaker, have detailed and which I will not repeat.

Clearly, we are in a position in our history where insolvencies are on the rise. I refer to an article that appeared in the New Zealand Herald in November last year, in which comparison was made between the 3,938 insolvencies in the 10 months to October that year and the 2,963 insolvencies in the same period the year before. So, we saw a 33 percent rise in insolvencies, and in the 4 months prior to that article there had been a 46 percent rise.

Clearly, as we head into more difficult times we will be facing further insolvencies. Anything this Parliament does to strengthen the alternatives—like the no-asset procedure, so that it is a proper avenue for people who really need that relief—is a good thing. As Lianne Dalziel said, we will support that.

We have a real concern, however, about the provisions relating to the retention of information on the register. We need to take proper account of what the Privacy Commissioner said about this area. In fact, the whole area of information around insolvencies needs a proper look. Veda Advantage wrote to me some time ago and made the point that at the moment it is very easy to obtain someone’s negative credit-rating in New Zealand, but it is an expensive and cumbersome process to get information on whether that person has a positive credit-rating.

I urge the Commerce Committee, when it looks at the information provisions in this legislation, to take a proper look, in the round, at those requirements, to look at the Privacy Commissioner’s concerns about the 4-year requirement in this particular case, and to also look at the wider issues about whether, for example, it would be a good thing to be able to get positive credit-ratings on people rather than just the negative ones that exist at the moment.

So with those words, I repeat that Labour supports the bill’s going to a select committee, but in respect of the information provisions, we have serious reservations and would like to see a proper consideration of them.

JOHN BOSCAWEN (ACT) : It is 1 minute to 6pm, but let me very briefly say that the Minister of Commerce, Hon Simon Power, gave a very detailed summary of the Insolvency Amendment Bill’s provisions. He was followed by the Hon Lianne Dalziel giving her very detailed knowledge of the circumstances that gave rise to the original Insolvency Bill being passed just 2 years ago.

This is a bill that the ACT Party will be supporting for referral to the Commerce Committee. I do not propose to go into the details of the bill. But I would like to talk about the issues of insolvency and saving, because insolvency is an issue that I personally know something about.

• Debate interrupted.