Hon DAVID CARTER (National) : As the debate around the Electoral Finance Bill enters its final stages in the Committee the arguments still remain the same. This bill has been cobbled together by the Labour Government and supported by New Zealand First and the Greens, and the only purpose behind the bill is to rig the electoral system in order to give the gasping, dying Labour Government another chance. That is the only thing behind this bill, and Winston Peters knows it well. That is what is behind this bill.

The bill is fundamentally flawed—fundamentally flawed. There has been a convention around electoral finance legislation in the past whereby legislation like this bill is developed on a consensus basis.

Rt Hon Winston Peters: Rubbish!

Hon DAVID CARTER: It is developed on a consensus basis, and Winston Peters knows that. He knows that very, very well.

But on this occasion Jill Pettis said it all. She said that there are people around New Zealand today who want to write cheques for the National Party because they want to see the end of the corruption that exists at the moment within the current Government. That is what is going on with this legislation. Winston Peters knows it, but I would tell—

Rt Hon Winston Peters: I raise a point of order, Madam Chairperson. If Mr Carter wants to talk about corruption, then I am sure he is looking in the mirror, but he will not make that allegation about any member of this Government or, for that matter, a Minister. He has just mentioned my name. If he wants a rundown on corruption, then he should tell members what is going on in the Rakaia selection process right now, where there were five candidates and now there is only one, or he can give any other example. But he cannot make that accusation. It is outside the Standing Orders.

The CHAIRPERSON (Ann Hartley): I would just like to draw members’ attention to the fact that the member was on a point of order. There should have been silence, and there was a lot of talking. It was actually quite hard to follow. [Interruption] I am ruling on a point of order. Members know that that is a term that is not to be used against a member or against a party, as per Speakers’ rulings, so I just caution the member.

Hon DAVID CARTER: If Helen Clark thinks that this bill will save her Government, then she has another think coming, because the public of New Zealand know what is going on with this legislation. Winston Peters knows what is going on with this legislation, Helen Clark knows, Doug Woolerton knows—they all know. This legislation is about screwing the scrum. It is about making sure the Government gets an advantage in putting its message out, using taxpayers’ money, after it got caught last year taking $850,000 off the taxpayer. After Winston Peters’ party got caught taking $50,000 off the taxpayer, Winston Peters said he would pay it back, and the cheque was in the mail—yeah, right! That money has never been paid back. That is what this legislation is about; it is about any mechanism the dying parties of New Zealand First and Labour can find to screw the scrum, take money off the taxpayers to sell their message, and in the meantime attempt to slow down the National Party in getting its message out to the public.

DAVID BENSON-POPE (Labour—Dunedin South) : I would like the opportunity for a brief call; I will be more expansive later on in the debate.

I think it is important that we consider these matters in the wider context. Most people in this country know that we are here because of what the National Party—not the Exclusive Brethren, not the racing industry, but the National Party—got up to in 2005. I think it is important in the wider Australasian context that we think about the wider social context. We live in a time of substantial proliferation of the so-called independent thinktanks. We are only too aware of the extent of the covert flow of funds in our communities.

We have, in terms of the media reporting, a lack of objectivity about this issue. There was the extraordinary position recently of so-called independent commentators such as David Farrar, a National Party staffer, and ACT bagman Mr Boscawen being characterised as having some degree of independence and objectivity. That is clearly not the case.

But there are some glimmers of hope—more in the Australian media, I must say, than here. I refer members to the excellent ABC documentary The Brethren Express, which contains fascinating New Zealand material. It is yet to be shown on our television. One can assume that the decision to show it here will be made shortly, but it is available to members and to listeners by way of the ABC website.

There are also some other local resources about the Australasian socio-political scene that are extremely informative and useful as a resource to our whole community. The first one I refer to is some wonderful work by an academic called Marion Maddox, an Australian who is now in the department of religious studies at Victoria University in this very city. Marion Maddox is the author of the book God Under Howard, and her exposé of the marginalisation by the former Australian Prime Minister of the traditional churches and his encouragement of the fringe churches is an extraordinary read. When I have finished these comments in a few moments I will ask leave to table her Ferguson Lecture, given in New Zealand in 2006, which makes extraordinary reading.

I close by referring also to another most important resource; namely, the evidence given to the select committee by Nicky Hager, which is not contained in his book and is quite new material. I refer members to that document—in particular, pages 2 to 7 of the transcript of his evidence—and I would like to make one direct quote. Mr Hager stated on page 4 of the transcript: “I suspect that the National Party helped to draft the Exclusive Brethren ads, but I don’t have proof of that. What I am absolutely sure of, what I have absolutely confident knowledge of, is that the people who the Exclusive Brethren liaised with and informed of their plans completely were the leader, Don Brash, the finance spokesperson, John Key, and the campaign manager, Steven Joyce, and that a very short period after that, the whole campaign team—people like McCully and Brownlee—also knew. The subsequent denials were not correct. They were untrue.”

Thank you Madam Chair. I seek leave of the House to table the 2006 Ferguson Lecture God and New Zealand Public Life.

The CHAIRPERSON (Ann Hartley): Leave is sought to table that. Is there any objection? There is an objection.

Dr PAUL HUTCHISON (National—Port Waikato) : I am grateful for the opportunity to speak on this perfidious Electoral Finance Bill, and I say “perfidious” in the true sense of the word, because it is a breach of faith by this Labour Government to the people of New Zealand and it is treacherous because indeed it is totally in the self-interest of this Labour Government.

When we talk about the title of this bill, we can think of it as the “Labour Government Suppression of Democracy and Human Rights Bill” because Helen Clark, on Labour’s now infamous 1999 pledge card, said: “Labour will build a future in which everyone has a stake and a chance.” Here we are, 8 years later, and the New Zealand Herald’s front page said it all: “Democracy under attack” and “a dramatic assault on human rights.” I could hardly believe that the Human Rights Commissioner felt so strongly that she would describe the chilling effect that this bill caused, regarding the regulated periods.

Even further to that, if one looks at the footnote regarding the chilling effects, this is what the Human Rights Commissioner said: “ ‘Chilling effects’ refers to the stifling effect that vague or over-broad laws may have on legitimate speech and activity.” That is the indictment on this Labour Government and that is the indictment on that interjector over there. She goes on to say: “This term has been used in the United States for several years when William J Brennan, the first Postmaster General, referred to the chilling effect on the exercise of First Amendment rights.” This is, indeed, a great indictment on this Government.

But another title suggested to me by the Hon Georgina te Heuheu was the “Labour Government’s Sticky Pink Hands in Ordinary New Zealanders’ Pockets Bill”, because here again is this socialist Government that just cannot help itself in controlling the rights and freedoms of ordinary New Zealanders. This week the House will debate the third reading of the Education (Tertiary Reforms) Amendment Bill, and there again, the Government is attempting to trample over universities’ freedom of expression and autonomy. Again, there is a chilling connection between that and, of course, the very same bill that we are speaking about.

There is no doubt that Bill English’s amendment should be taken up by this Government so that at least the regulated period does not cover a full third of the electoral cycle, but instead goes from April onwards.

R Doug Woolerton: This member is degenerating at an alarming rate.

Dr PAUL HUTCHISON: I suggest to that interjector over there, who is so keen on suppressing fundamental human rights, that he listen to this very, very sensible suggestion that extends from April and on to the election. Even yesterday, when I attended a bus protest at Maramarua, one of the ordinary parents of these children whose lives the Labour Government is putting at risk said to me: “Will I be able to protest next year, under this Labour Government?”. Ordinary people do not understand what this Government is placing on them.

Finally, a third fitting title for the bill might be the “Helen Clark Legacy to Suppression of Free Speech Bill”. She is the lady who said, back in 1999, that everyone would have a stake and a chance. I can tell Ms Clark that on the streets of Pukekohe and on the farms of Port Waikato, people are saying that this time her arrogance has gone just too far. The Law Society has it absolutely right in the conclusion of its submission when it states: “Rather, the bill in its current form is a flawed attempt to achieve a legitimate social objective.” It should be thrown out.

Rt Hon WINSTON PETERS (Leader—NZ First) : I will tell the good doctor what perfidy is: it is deceit—saying one thing whilst acting the very reverse in terms of one’s behaviour. That is what perfidy is. To get up and talk about this side of the Chamber being responsible for it is really a disgrace. The National Party now gets over $7 million from the New Zealand taxpayer every year. Next year it will get $7 million more, plus it wants the $2.2 million cap. That is over $9.2 million dollars, all in the one year, and National members have the effrontery to argue—and be supported by the New Zealand Herald and other commentators—that this system is somehow unfair. That is disgraceful.

How much money does the National Party need? It now gets $7 million from the taxpayer every year. It will get that amount in 2008, and it will have a cap of $2.2 million as well. That is almost $9.5 million for the 2008 election year. The National Party is running around with the mealy-mouthed New Zealand Herald correspondents, saying that somehow it is being unfairly treated. That is disgraceful.

I will tell members what is unfair about politics. What is going on in the Rakaia electorate right now is apposite to this debate. National had five candidates, many of them dominion councillors and long-serving members of the party. One was a nephew of Don McKinnon.

R Doug Woolerton: Where did he go?

Rt Hon WINSTON PETERS: He was told by National Party headquarters that he should not stand and that he should pull his name out, because David Carter is the preferred candidate—David Carter, who could not win any seat ever, and is now carpetbagging, not in Lyttelton but in Rākaia. With all his money, he got told by the hierarchy that that was the choice and other worthy souls were told “No.” This is how the National Party organises elections.

R Doug Woolerton: Outrageous!

Rt Hon WINSTON PETERS: It is outrageous. I challenge anyone who wants to persist with this silly, scurrilous argument to explain this: do members recall the Campaign for Better Government in 1993, with one Mr Peter Shirtcliffe and his family members? It was a thoroughly stuffed-shirt affair, as the English would say. He claimed to have thousands of members, but they turned out be his wife and his daughter—that was it. And who was it that paid all their money? A foreign-owned company called Telecom. It had the effrontery to come into the New Zealand system and seek to organise the shape, character, and form of New Zealand’s democracy. How outrageous! Did members see “Granny Herald” writing editorials about this affront? Did members see any New Zealand newspaper prepared to say that it is outrageous that a foreign-owned company now thinks it can organise New Zealand’s democracy? There was not a syllable, not a sound, and not a word. Nothing whatsoever came from these horribly concerned lips in 2003. That is the National Party’s record when it comes to democracy. It knew what Fay Richwhite were doing in the New Zealand market place. Did National members ever criticise Fay Richwhite? No. They spent hundreds of thousands of dollars on criticising an MP who was taking on this activity. That is National’s record. All of a sudden, National members are out there, saying that this legislation is heinous.

They should tell me this: which businessman will be disallowed, excluded, disbarred, or ruled out of taking part in the 2008 campaign? They should name one. They should name one business interest who will be denied being included or involved in any way he or she may wish to be—legally, of course—in the 2008 campaign. National Party members should tell me now. They have been telling everybody else around the country and boring Rotary Club members silly with this argument, but they cannot tell Parliament. They save up all these arguments for the local RSA meetings, I suppose, as though its members are concerned to hear that sort of deceit. But National members cannot name one business interest who is ruled out, cannot participate, or is not able to be involved in the 2008 campaign. They cannot name one.

Then again, some of the members of that party know nothing about what fair democratic traditions are about. Unlike people like Holyoake, this is a new breed who think that just getting money is all they have to do. It shows in their behaviour—the Ryalls, the rat pack, the brat pack. They are so powerful that even though they have a new leader called Key, they can get Carter—who is a hopeless member of Parliament and was a hopeless Minister—a nomination in a blue-rinse seat, not by way of debate, challenge, and vote, but by being the one candidate in Rākaia, of all places. Now, ain’t that the truth!

LINDSAY TISCH (National—Piako) : In 1943 Winston Churchill said in the House of Commons: “Everyone is in favour of free speech. Hardly a day passes without its being extolled. But some people’s idea of it is that they are free to say what they like, but if anyone says something back, that is an outrage.” That is what the Electoral Finance Bill is about. It is a self-serving bill. It is a bill about keeping a Labour Government in power. It is a bill designed to give the incumbents a gravy train of funding and limit everyone else’s rights of expression.

This is a Government that purports to support human rights in Zimbabwe and Fiji, yet at the same time wants to limit Kiwis in having their say. Last night I attended a citizenship ceremony in Te Aroha. It was a citizenship ceremony in which some folk from Zimbabwe and from Fiji wanted to become Kiwis. They had earned that right to become Kiwis. They came here because of our values, our opportunities, our free speech, and our free expression. I wonder what they will say when this bill comes in on 1 January and denies them and limits those opportunities.

This is Draconian legislation. We have seen dictators in the past. I tell members that those who interfere with their constitutions will rue that day. At the end of it, they all fail. This Government is going down the road. This Government is failing New Zealanders and New Zealand as a whole. This Labour Government has become obsessed with power. It is arrogant. It will not listen. It knows best. Everything we see today is designed around keeping this party and this Government in power.

The editorials, television, media, and marches are all coming out against the bill. We saw that the Law Society has very strong comments about how abusive this legislation is. The Human Rights Commission described the bill as “a dramatic assault on the freedom of expression”. It does not come much stronger than that. The commission said the bill was “a dramatic assault on the freedom of expression”. New Zealanders are incensed with this Government, which wants to run their lives. This Government will rue the day it decided to push ahead with this self-serving legislation.

The Government recently passed the Appropriation (Continuation of Interim Meaning of Funding for Parliamentary Purposes) Bill. That bill legitimises the illegal spending from the last election. The Auditor-General made the rules very plain, and Labour had to pay back $800,000-odd. That is why New Zealand First has a bill—because of its illegal spending. So what does this Government do? It changes the law. It comes out and legitimises that illegal spending.

Now we have parties and candidates within Parliament being able to use taxpayer money to pay for their campaign. Of course, that should be considered election advertising. Election ads could be run during the election campaign, and the costs of those ads will not count towards the party’s and the candidate’s election expense cap.

That is what is so wrong; there will be one rule for the incumbents, one rule for MPs, but other parties will be locked out. This is de facto State funding of political parties. That is what it is. It is de facto funding of these operations. It gives a huge advantage to the parties already in Parliament and a huge advantage to the candidates already here, but everyone else is locked out.

This bill makes a mockery of free expression of speech and it makes a mockery of the whole funding regime. MPs should be subject to the same definition of electioneering as other people, or third parties, as they have been described. Otherwise, it is manifestly unfair and undemocratic. I subscribe to what Voltaire said—or what is attributed to him: “I disapprove of what you say, but I will defend to the death your right to say it.” That is National’s position.

Hon ANNETTE KING (Minister of Justice) : Seldom has so much cant been heard from a political party than that which has dribbled out of both sides of National’s mouth in the debate on this bill. We have heard nothing but mock outrage from speaker after speaker. Those members do not believe what they say, but they are saying it for political purposes, and that is the cynicism of this National Party. Its members have constantly misquoted the Human Rights Commission.

When the bill was introduced to the House and was referred to the Justice and Electoral Committee, the Human Rights Commission made some very important points about the bill as introduced. The commission worked closely with the select committee. It gave advice, it worked alongside the committee, and it ensured, along with the committee, that changes were made to the original bill. The bill as reported back to this Parliament and the amendments made in my name, which have improved on even what the committee did, have led to the Human Rights Commission saying that it is largely happy with this bill, and I will stake my reputation on that comment.

The National Party is constantly saying that the Human Rights Commission is still very concerned. That is not true. It is time that was put on the record, because one would think that those National members live in a time warp and that absolutely nothing has ever changed. You see, they really believe that there is not a place for a select committee and that there is not a place for a debate like this in this Parliament. That is what they truly believe. We believe that this is the place to debate the issues. This is the place to put amendments on the Table—

Christopher Finlayson: Yes, and we were shut down prematurely!

Hon ANNETTE KING: I am sorry that Chris Finlayson is interjecting, because I was going to say that at least he has attempted to put forward amendments that could improve this bill, unlike his leader and unlike his deputy leader, who, I believe, have done nothing but stand up in this Chamber and address it in a verbally abusive manner—a manner that I have not seen for many, many years. I believe Bill English’s contribution to this debate on Thursday—when he stood up and abused me in a way that has led to people phoning my office to say that that was absolutely disgusting—is the mark of the man. This is a debate of ideas, this is a place where we can have robust debate, and I believe in robust debate. When a person has to get down to personally denigrating people, when a person has to call them every name found in one’s small brain, then I believe that that person is not prepared to debate the issues, and that he or she wants only to make a political point.

Mr Carter said that the ordinary people do not understand. I can tell this Committee that the ordinary people understand only too well. They understand that at the last election National Party members tried to buy an election. They were doing it secretly, they were doing it in an underhand manner, and it was only because the Green Party caught them out that what they were doing was exposed. It would not have been known if that detective work had not been done by the Green Party. We may have had a different result. They were not prepared to own up. In fact, Mr Brash could not remember meeting the Exclusive Brethren. John Key still does not remember receiving the email about the money that was being spent. Is it not amazing that he cannot remember it, but he can remember not receiving it? That must be amazing—being able to remember not receiving an email.

I say to the members opposite that this bill sets out to make it fair for all New Zealanders; that we cannot buy an election in a democracy; and that there is nothing wrong with being honest and transparent about what money we have and where that money comes from. I think Winston Peters raised a very good question indeed. He said “Name one business,”—and I would say one person—“one organisation, that will not be able to participate in next year’s election process.” National members could not name one, because people and organisations are able to participate, they just have to be transparent about it.

RODNEY HIDE (Leader—ACT) : We are debating the title and the commencement date of the Electoral Finance Bill. We are discussing two big principles here today with this bill, and I think we are confusing them and doing rather a poor job of it. The two big principles are democracy and freedom of speech. In this debate this Committee and, I am afraid, this Government are confusing two quite different things. Freedom of speech is the ability to speak our minds. It is the ability to state our opinions, whether they are right or wrong and whether or not people find them offensive. Of course, there are limits on freedom of speech. We cannot defame someone, we cannot be offensive, and we cannot cause distress in the public theatre by calling out “Fire!” when there is no fire. But we are very careful about limiting freedom of speech.

We have a view that we can express any idea on politics that we care to. We particularly guard those people who want to speak out and whom we oppose, because that is the test of freedom of speech. That is why I have always stood up and said that the Exclusive Brethren should be free to express their political views. The issue is not whether I agree with them; the issue is whether they are free to express it without Government regulation or Government sanction. If we have to get Government recognition or sanction in order to express our political opinion, it is not free speech. That is the point. We should not have to go to the Government and sign up and register with the Government to express our point of view.

The second great principle that we are discussing here is democracy. Somehow, the two have become confused; in order to have a functioning democracy, we have to hobble people’s ability to spend their own money, to express their views, and how they might go about it. We do not. The way we have a democracy is we have one person, one vote, and everyone’s vote counts. The people can vote and change the Government. That is what the definition of a democracy is—a functioning democracy. We do not achieve a democracy by saying: “Oh, those people over there are too smart. We need to somehow reduce their IQ.”, or “These people over here are too fit and they could knock on too many doors. We need to somehow slow them down.”, or “This party over here has too many members. We have to restrict it.”, or “This party over there has too much money.”, or “This church group is too organised and is putting out too many pamphlets. Therefore we have to restrict it to somehow level the playing field to achieve a democracy.” No. We achieve a democracy by having each person with one vote, and we achieve freedom of speech by allowing people to express their political views freely.

I say that it is a shame that we have conflated those views. It is a shame that this bill has been developed in the most partisan manner possible, with abuse being hurled from one side to the other. I think it is a great shame that the Government and the supporters of this bill have launched into personal attacks on those people who oppose the bill, whether they be individuals, organisations, or, indeed, the news media. We do not normally see that from the Minister Annette King.

Hon Annette King: You haven’t seen it now.

RODNEY HIDE: I hope that Annette King will stick to the policies. No, I say to the Minister. I heard her attack John Boscawen.

Hon Annette King: I didn’t mention him.

RODNEY HIDE: I absolutely heard the Minister attack John Boscawen, and I say to her that this is what chills New Zealanders. Citizens should be able to express their view. Newspapers should be able to editorialise, and if we disagree with them, I say to the Minister—and I say to this Government—let us have the debate, not the abuse.

METIRIA TUREI (Green) : I appreciate the passion in Rodney Hide’s speech, but I think it is important to note that the Electoral Finance Bill is not about stopping people from talking. This bill is about applying the same principle—that there should be limits as to how much is spent in a campaign. There are currently limits on political parties and on candidates. The royal commission, 11 years ago, said there should be limits on others, as well, and we are simply enacting that recommendation. This bill is not a breach of freedom of speech. It does not prevent people from being engaged. It makes sure that the rules are sound and apply equitably across all the players in the campaign.

This afternoon I want to specifically mention the amendment in the name of Christopher Finlayson of the National Party to change the date on which this bill comes into force, from “the day after the date on which it receives the Royal assent.” to 1 April 2008. The Greens have never been 100 percent committed to a start date of 1 January. We understand why it is necessary to extend the regulated period, and we need only look at the “Iwi/Kiwi” billboard campaign—the racist campaign of the National Party—to realise how early political parties will begin their election campaign and how easily they can avoid their spending caps by campaigning early. So we do believe there should be an extension of the regulated period.

Our preference would be for around, say, 1 March. We investigated what it would take in this part of the debate to make that change so that the bill would not apply until 1 March and the regulated period would not apply until 1 March. We found that if a provision such as that written by Chris Finlayson was put forward and passed, it would undermine every aspect of the bill, and this is for quite technical and legal reasons. The amendment would mean that the bill would not come into force until—in National’s amendment—1 April. But that would not stop the regulated period. It makes no difference to the regulated period. What it does do is make the bill inherently inconsistent in its provisions. Then the only option is for the law courts to determine whether a regulated period of 1 January applies, whether a regulated period applies retrospectively, whether a regulated period applies only from the date that the bill comes into force—which would be 1 April—or whether, in fact, the regulated period would apply at all because of that inherent inconsistency.

If passed, Chris Finlayson’s amendment would mean that there may not be a regulated period at all. That would mean that the caps would not apply for third parties, for candidates, or for political parties. The National Party would be able to spend anything it liked, because no regulated period would exist if this provision put forward by Chris Finlayson was passed and the law courts found the bill was so inherently inconsistent that they could not apply the regulated period.

It does beg the question: if I got that advice and I found that out, with relatively junior experience as a lawyer, then what advice did Chris Finlayson receive? He must have received the same advice. I talked to the Office of the Clerk. I got independent advice about this issue. Chris Finlayson is a much more experienced lawyer than I am and he is much older than I am. He must have got the same advice—that if his provision passed into law, the regulated period as a whole would be at risk and there may not be a regulated period at all, and that would allow the National Party, and indeed any political party, to spend any money it wanted over the whole period right up until the day of the election.

That is certainly not a risk that the Green Party would ever be prepared to take. We believe that the reasons behind the regulated period are to help maintain a level playing field and to help ensure an equitable spending regime for political parties, candidates, and third parties, and that that is an important thing to do. We do not believe in eliminating the regulated period.

It concerns me a great deal that this might be the covert purpose behind Chris Finlayson’s amendment to shift the date on which the bill comes into force to 1 April. I would be very interested to hear what his advice was and whether he got the same advice that I did, from a variety of sources, that this could indeed be the impact. Perhaps he does not know. Perhaps it was not the advice he got. Perhaps his intention is perfectly innocent. That may well be the case. Certainly there is no way, surely, that the National Party could possibly support eliminating the regulated period so that it could spend whatever it liked.

PANSY WONG (National) : At least the Green Party member is prepared to reveal some of her real intentions about supporting the bill. Somehow this bill is all about not allowing the National Party to do x, y, and z. It is very strange to pass legislation that targets one political party and say one wants a level playing field. But at least the member is trying to tell us some of the real intentions in ramming through this legislation. The Minister in the chair, the Hon Annette King, has been talking about our deputy leader, Bill English, who happens to be accepted in the public and in the media as being about the only person who really understands the Electoral Finance Bill, and all he did was ask some questions about the meaning of—

Hon Judith Tizard: I raise a point of order, Madam Chairperson. I am terribly sorry to interrupt the member, but the sound is so loud that it is actually hurting my ears. Could we have it turned down?

PANSY WONG: That is a compliment, coming from the Hon Judith Tizard.

The CHAIRPERSON (Ann Hartley): There is not a lot I can do. It is the system.

PANSY WONG: What a way to complain! Certainly, some of us have voices that can be heard, and that is some consolation to me. I hope the Minister will hear this properly.

At least we can tell that there is some consistency among the Labour Government. When the Hon Annette King, the Minister in the chair, cannot answer the questions she blames and attacks the Hon Bill English. All he did was ask some questions about the interpretation of the legislation. The consistency from the Hon Annette King is the same as that from the Prime Minister, Miss Helen Clark. She hit out at the New Zealand Herald when that paper dared to run an editorial asking questions as to why the Labour Government is trying to rush through the legislation. She criticised it as being shallow, error-prone media. She went on to lament that journalists in New Zealand are not taking more interest in the effect of international foreign affairs on New Zealand, and the only reason is that the media outlet did not send enough journalists to cover her photo-opportunity overseas trip.

In fact, I did question why, right now, this House is debating the Electoral Finance Bill, when we take into the wider context today’s Dominion Post headline “5000 children ‘slip through the cracks’ ” of not enrolling in any school. In the House today all the Minister of Education could do was ask “How accurate is 5,000?”. Well, whether it is 4,000 or 5,000 children, the public should be very concerned about that. Also in today’s Dominion Post was a statement: “Courageous neighbours are being praised for saving the life of a mother who was being stabbed repeatedly in the middle of the night.” I would suggest that the wider context out in the public is about law and order, education, and the health system falling apart because of too much bureaucracy and not much attention paid to the real issues. Here we are with the Labour Government continuing to engage in pushing through legislation, with the help of the New Zealand First doormats, that the public does not want passed. Ten thousand people marched in the street, and the Labour Government will simply not take notice. Well, actually I can see why MPs like Doug Woolerton from New Zealand First want to rush through this legislation. I understand he wants to support this legislation because the existing MPs and political parties in the Parliament actually have the right advantage in passing this legislation. Candidates who are not in the Parliament from 1 January would have only $20,000 to spend until whenever election day is, but MPs and elected political parties right now in Parliament can spend whatever they like. Why do we have this benefit and privilege? It is because the Labour Government rushed through legislation to do that.

JACQUI DEAN (National—Otago) : As David Benson-Pope noted earlier this afternoon, it is important to look at the Electoral Finance Bill in its wider context. This is the second time in this term of Parliament that we on this side of the Committee have listened to the Labour-led Government defending the indefensible, and the public know it. The public can see right through what is going on in this Committee. At about this time last year the Government introduced the Appropriation (Parliamentary Expenditure Validation) Bill.

R Doug Woolerton: Was that a year ago?

JACQUI DEAN: It was a year ago, and the appropriation legislation was updated earlier this month as well. The Appropriation (Parliamentary Expenditure Validation) Bill was, of course, to retrospectively make legal that which was illegal. I never thought I would see the day when I would sit in the House of Parliament debating a bill that had as its core purpose to make legal that which was illegal. My forebears will be spinning in their graves. This Labour-led coalition Government passed legislation at about this time last year to cover its butt after spending $800,000 of taxpayers’ money—not party money, not money it had raised itself, but taxpayers’ money, our money, our taxation money—on its air-brushed pledge card.

The Auditor-General, Kevin Brady, wrote a report about the time of that bill and he made several points in it. The first thing that the Auditor-General noted was: “I thought there was little doubt that it was not permissible to use public money from the Party and Member Support appropriations for electioneering. I expected MPs and parliamentary parties to be especially careful in that area.” But not the Labour Party, which is why about this time last year we had the Appropriation (Parliamentary Expenditure Validation) Bill to make it legal. I say that is shameful in this House of Parliament. So what do we have now? The Labour Party was shamed—some parties in this House have not been—into eventually paying that taxpayer funding back, and now it is broke. The Labour Party is broke and that is the truth about what is behind this current bill in front of us. The Labour Government is broke, and so it wants once again to screw the scrum with the Electoral Finance Bill. This bill—the second piece of reprehensible legislation we are debating today—is all about Government funding by stealth by a broke Government.

This bill is purely about screwing the scrum in favour of the Government. This bill is not about providing a fair playing field—those claims are nonsense. This bill is openly about Labour trying to win another election. Well, how noble is that? I would suggest to members that this is the second shameful piece of legislation brought to this Committee by this current Labour-led coalition Government. Every mention we hear in this Committee of this bill nobbling National’s rich mates reeks of tall poppy envy. Well, guess what? This Parliament should be better than that. We should be passing law in this Parliament better than that. The Minister Rick Barker in his speech openly acknowledged that this bill is about nobbling National’s supporters while protecting those who support this bereft Government.

PETER BROWN (Deputy Leader—NZ First) : I was not going to take a call until the member alluded to the Appropriation (Parliamentary Expenditure Validation) Bill that we passed last year in this Parliament. I know that we are debating the Electoral Finance Bill, but I want to clarify a few things that went on with regard to the other bill. The member alluded to documents like the pledge card that are meant to be illegal, such as this National Party pledge card, which was put through the letterboxes of just about everybody in the country in 2002. The rules did not change between 2002 and 2005, and I cannot see for the life of me any difference between this card and the Labour Party’s pledge card. But I can see a lot of difference between both of those cards and this. This is a policy document that outlines New Zealand First’s policies, and the Auditor-General would ping us for $159,000, in large measure, over it.

I just happened to meet the Auditor-General on the plane last week. He came up to me and we had quite a cordial discussion, which in some way surprised me.

Phil Heatley: Did he know who you were?

PETER BROWN: Yes, he did. He knew exactly who I was. I asked him one or two questions. He said that he is very, very pleased that Parliament has passed the Appropriation (Continuation of Interim Meaning of Funding for Parliamentary Purposes) Bill. The Auditor-General told me personally that he is very pleased that we passed that bill, because it sets down in law what we have been doing under Speakers’ directions for many a year. That party over there, the National Party, has taken more advantage of the rules and regulations in this place than any other political party has, by a country mile.

We need the Electoral Finance Bill. New Zealand First will support this bill because we are well on record as saying that we want politicians to be honest. We are honest, and we want to keep politicians honest. That used to be our campaign slogan. This bill makes the process honest, and we are going to support it. I know what is upsetting the National members: they cannot get their mates, as they did in 2005, to invest in brochures in a de facto way. There was $1.2 million spent on producing brochures in support of the National Party.

Chester Borrows: Is that OK?

PETER BROWN: It is not OK, and the member knows that. It is a long way from being OK.

New Zealand First has no opposition at all to third parties—people who do not want to be part of a political party—getting involved in the process. It has no objection to that at all. But we want there to be controls. There are caps on individuals. There is an election campaign cap of $20,000 per candidate and of $1 million for a party. It is only right and proper that other parties—not political parties, but other outside organisations—that want to play a part in the election process should be financially capped, as well. The debate should have been about whether that limit is adequate, too much, too little, or what have you. I think that the amount was $60,000 in the original version of the bill, and it was doubled when the bill came back from the Justice and Electoral Committee. The National members should have argued about whether that was enough or not enough. I could see some merit in doing that, but I cannot see merit in saying we are going to have an uncapped system and let an outside organisation put as much money as it wants into influencing the way that New Zealanders vote. That is why New Zealand First is supporting this bill.

I have said before in this Chamber that that issue was recognised by the Royal Commission on the Electoral System, which stated: “It is illogical to limit spending by parties if other interests are not also controlled. Supporters or opponents of a party or candidate should not be able to promote their views without restriction merely by forming campaign organisations ‘unaffiliated’ to any party. … Nor should powerful or wealthy interest groups be able to spend without restriction during an election campaign while [the parties] are restricted.” That was stated by the Royal Commission on the Electoral System. Members opposite may not like MMP, but we have got it. The public voted for it, we have got it, and it will be honest.

PHIL HEATLEY (National—Whangarei) : I would like to challenge the statement made by Annette King earlier, which came as quite a shock to this side of the Chamber, and certainly it would have come as a shock to those listening. She said there is not a third party across New Zealand—any lobby group, or one of those groups interested in the political environment or in laws passing through Parliament—that is in any way stopped or prevented from freely expressing its view in election year. If she is saying that such third parties are not impeded in any way, that tells us in the National Party that Annette King and the Labour Government just do not get it. There used to be a time when Plunket, Women’s Refuge, the Royal Forest and Bird Protection Society, or any one of a myriad of organisations in New Zealand could just put ads in the paper, or could picket, or pick up a megaphone, or send out pamphlets and freely criticise what any political party was saying in election year. Members of those organisations could just get up in the morning and go out and protest, or they could run an ad in the New Zealand Herald. Members of the Littlies Lobby, Plunket, Women’s Refuge, or the Royal Forest and Bird Protection Society could get up in the morning and deliver pamphlets.

That is what they used to be able to do, before this legislation. Now those organisations or any other organisation have to fill in forms and go through some sort of bureaucracy. They have to send those forms into the Electoral Commission saying everything they want to do and what ads they will run—whatever. That is the first thing. They have to go through all this bureaucracy just to have a view. Secondly, they have to employ a financial officer to oversee what little money they have to spend in an election year putting forward their view.

So, first, they have to go through all this bureaucracy; secondly, they have to start employing administrators in order to submit their spending returns, their advertising, and their pamphlets. So what we have is these organisations across New Zealand, which by far in the majority are voluntary, and which struggle to raise funds for women’s refuges, for the Royal Forest and Bird Protection Society, for Plunket, or for whatever it might be, having to spend time, money, and resources on bureaucracy on the one hand, and on administrators on the other hand, just to have their say as Kiwis, as New Zealanders.

New Zealand First does not care about that, for two reasons. One is that there is no private citizen in New Zealand who wants to give it any money any more to help its campaign. New Zealand First is bleeding votes and no one wants to send it a cheque. Secondly, it does not care whether the Royal Forest and Bird Protection Society, Plunket, Women’s Refuge, or any other organisation in this country wants to have its say, because those organisations speak against New Zealand First. New Zealand First is against freedom of speech and, of course, those organisations want freedom of speech. That is why New Zealand First opposes that, and it is why Winston Peters is now sniffing out Tauranga again. It is because the vote for New Zealand First is way down at 2 percent, and for the Labour Party the vote is way down at about 30 percent.

Here is how absurd this legislation is. The Minister who promoted this legislation did not realise that it does not relate just to cash given to political parties. It could be timber for signage. It could be crayfish for some sort of fund-raiser. When that was pointed out to her by the Electoral Commission itself she was shocked to find that a lot of people give donations in kind, not just cash, to political parties. She had arranged that all those donations, whether they were cash, signage, crayfish, or whatever, would have to be sent to Wellington and put through the system.

Hon ANNETTE KING (Minister of Justice) : I want to correct one thing that Phil Heatley said. Although he said many things that were total garbage, there is one thing that I want to correct. He constantly used the Royal Forest and Bird Protection Society as his evidence against the Electoral Finance Bill. I assure the member that all the concerns raised in the society’s submission have been addressed and met and the society is happy.

KEITH LOCKE (Green) : I thought I would take a short call on behalf of the Green Party to talk a little bit about the free speech issue from another direction. I think the Electoral Finance Bill will improve the free speech of people like my colleague Chris Finlayson and others who I know have an independent mind. I would not like them to have to suffer the restrictions on their free speech that come with big bucks being poured into political campaigns.

I sympathise with the right to free speech of the National Party and the ACT party, etc., because I do not want us to go down the track the United States has clearly gone down. If one reads the lead-up to the nominating conventions of the Democratic and Republican parties one sees that the discussion in relation to the contest between Hillary Clinton and BarackObama is all about who has the most money—who has the most millions of dollars. That is the key thing in the campaign. People know that the result of the Democratic nomination will be decided largely by who has the big bucks, who can put the adverts on television, and who can swamp the places where the primary elections are held. That is what it is all about.

There are articles all over the American press on this issue. Take, for example, Hillary Clinton, who, even though she has personal views that are quite liberal—a bit like Chris Finlayson in our Parliament—has been pushed towards what is called the centre, or we could call it the right, because that is where the interests of big money are. That is a pattern across America. We need only look at the senators and Congress people. The senator from Washington state is often called the “Senator for Boeing”, because Boeing is the big company in that state. Boeing gives money and it determines who gets the senatorial position in Washington state. So although the “Senator for Boeing” might have different views from Boeing, he or she has to suppress those views. That is the way American democracy works.

Even with the little bit of gifting we get in this Parliament today we have to be careful—and it is happening as we move towards Christmas; I think all MPs have received a half-dozen pack of beer from Lion Breweries recently. We in the Green Party have to work out some way of shifting that on without being bought off by it. But, psychologically, all those gifts have an impact. We do not want to offend people who are friendly towards us and who might give us things, when it is only on a minor scale. But if this bill is not passed and the funding of political parties goes really out of control, then we will move more and more down the track of the American situation.

I would not like people like Chris Finlayson to be under that pressure of big money too much. I have found I have quite a lot of common ground with Chris Finlayson on issues of democratic rights and things like that. I am trying to save him by opposing National’s amendments and the direction the National Party is taking on this bill.

The Electoral Finance Bill is not a perfect bill. Everyone knows that, and that is why the Green Party is putting forward the idea of a Citizens’ Assembly, assisted by experts, to have a look at this whole question, and to a large extent to take out of the hands of politicians the control of how election financing is determined. We do have self-interests, and I think it would be good if the public could play a greater role in determining the restrictions on election funding—how they take place, and how they take place in the best way to enable free speech. That is my view. We have a model in the United States of what happens without that. Thank you.

CHESTER BORROWS (National—Whanganui) : Thank you for the opportunity to take a call on clauses 1 and 2. I suggest that maybe the title of the bill should be “We Lost and We Just Can’t Accept It Bill”, because in our area most of the noise has come from Labour MPs who lost their seats to National Party people—now members of Parliament. They cannot accept that they lost because they did not do the work. They want to believe—and they truly believe in their illusion—that their seats were stolen from them by the Exclusive Brethren. Well, if we look at the pamphlet put out by the Exclusive Brethren, we see that the one naive mistake they made that separates what they did from whatever the unions did was to put a false address on it. They thought they were so smart that they could get away with putting a false address—or an empty section, should I say—on the form authorising the pamphlet. But the guts of the pamphlet was exactly the same as what the unions had put out. So we have the naive Exclusive Brethren and we have the unions.

It is really interesting to consider exactly how the unions go about raising their funds. I have a mate in the Dairy Workers Union, who, prior to the election, went along to a meeting where somebody stood up and moved that the union give $10,000 to the Labour Party. With his best mate standing for National in the electorate, my mate said: “Only if we give $10,000 to the National Party.” What happened? Two bloody great big union delegates got out of their seats up the front, and came and sat down one on either side of him—tipping out the people who had been sitting there—and put their hands on his knees. It was not that they were snuggling up to him; it was to make sure he would not get up and say anything else. What that says to me is that the Labour Party is quite happy to accept extorted money. It is quite happy to accept money that is extorted, but it is unhappy when, in an election campaign, other people accept support that is freely given—or so we were told in a television documentary that was done soon after.

To have the address of an empty section on a pamphlet is naive, but it reminded me very much of a couple of things the Labour Party did—

Hon Annette King: It was deceit.

CHESTER BORROWS: Deceiving? Deceiving, like what? Well, it was deceiving, for instance, to have certain dead people vote in the Wairarapa election in 1987. Labour was caned for that. Another little deception was the misuse of the Privacy Act whereby in the last election campaign Labour got the names and addresses of State house tenants from Government records, wrote to every one of them, and put out its propaganda. No Labour Party members have ever stood to justify that action of Labour as part of its strategy for that campaign. It just goes to show that their morals are lopsided.

Then they talk about anonymous donations. They cane the National Party for apparently receiving anonymous donations, without their ever accepting or explaining that in 1999 they accepted $800,000 worth of anonymous donations. And what do you know? They did it again! In 2002 they accepted $350,000 worth of anonymous donations. But, hey, that is OK! And what do you know? They did it again! In 2005 they got just about $300,000 in anonymous donations—and that was OK! The only thing that really winds them up is that they did not get as much as National. Well, what do you know! The reason for that is the tide is going out; the tide is going out for Labour. Its members understand that.

Another thing they have never explained is the $800,000 worth of taxpayers’ money they took from their leader’s office budget to use for their pledge card and for other parts of the campaign—$400,000 for that. Did they explain that? No, they did not, nor will they. They accept that they were wrong. They have even paid it back. Well, that is not so bad. Maybe New Zealand First could take a leaf out of their book. So they have paid the $800,000 back, but have they moved, through this legislation, to make sure that that cannot be done again? No, they have not. Why not? Apparently, they are as pure as the driven snow; they are the only ones on the right side of anything.

They cannot accept that they lost those seats because they did not do the work or were seen as useless. They never showed up. Throughout the 7-month campaign run in Whanganui, I twice saw one of the most vociferous critics of the Exclusive Brethren. She did not have it in her!

JO GOODHEW (National—Aoraki) : It would be really easy to stand up here in the Chamber this afternoon during the debate on the title and commencement clauses of this bill and suggest a few alternative titles. But the first thing I want to do is to assure the Minister that on this side of the Chamber she is not seeing mock outrage, at all. There is no mockery in what we are debating here today. I can assure her that we are responding to the many, many New Zealanders who have told us how much they dislike this bill and who have said they do not want their freedom of speech shut down. I have replied to them that I will be vigorously opposing this bill—and I have done so—and that I will be doing it with the support of my colleagues.

This bill could well be relabelled the “Bill of Wrongs”, and if we did relabel it with that title, we would need to attribute that good idea to the Listener, which is widely thought of as a left-leaning publication. But back in August they already knew at the Listener that the assertion of former Minister Mark Burton that the Government was “seeking to encourage full and open expression from a diverse range of interests in the run-up to a general election” was bogus. As a Listener editorial said, this bill could hardly be less likely to achieve that.

Peter Brown told us that New Zealand First wants controls, and that it wants this bill to supply the controls, on the way that election campaigning is undertaken. That would be absolutely fine if we had cross-party support, and if in fact it did not result in a lessening of the freedom of speech—a lessening of the democracy that we have come to rely on in this country. Similarly, the bill could be retitled the “Shut Down the Voice of New Zealanders Bill”. This bill seeks to dissuade New Zealanders from making comments, during the course of the election period, through registration processes. The bill could be labelled the “Last Gasp for Labour’s Future Bill”. Unashamedly, this Government is using the bill to shut down debate, to shut down criticism, and to make it very difficult for anyone to participate in debates.

But—and this is a very big, capital-letters, in-bold “but”—at the same time, this Government will authorise millions of taxpayer-funded advertisements to promote its policies, in order to flood the minds and consciousness of the public as it makes decisions about New Zealand’s future. The description in the Dominion Post last month of this attitude by the Labour Government—one of attempting to elevate ambition over ethics—is very apt.

Hon Annette King: Gosh, you’re great at mock outrage.

JO GOODHEW: And this is not mock outrage; I am outraged, and I can tell the Minister that I have waited a long time to stand and represent the outrage of the people of Aoraki, as well. Next year the courts will determine how this bill is interpreted. Lawyers will grapple with this ill-conceived, ill-drafted, shambolic bill, and New Zealanders will further develop their unease. That unease is currently showing in polling. This is an unprincipled, desperate, unethical, abysmal apology for legislation. It is a disgrace to this Parliament.

The commencement date of this bill is a sham. The legislation seeks to control debate for a period unprecedented in New Zealand's history—11 months. There is no need to wonder why; this desperate Government is clinging on to power and seems oblivious to the scraping of its fingernails on the blackboard of power. New Zealanders are cringing as they hear that sound. They are recognising the antics that smack of an anti-democratic process. Thousands have marched in the streets to protest the rigmarole they will be put through to participate in the democratic process. Many of those people have never participated, or openly criticised the Government or any other political party, in the past, but they are affronted by this apparent attempt to stifle the freedom of speech in next year’s election.

But, worse still, this Government is not just desperate. It is not even dateless. Unfortunately, on its date it is carrying with it New Zealand First, the Progressive party, United Future, and the Green Party. No, it is not dateless, but certainly on this occasion the minor parties are not discerning in their choice of a date. They, too, are being recognised by the public of New Zealand for their partnership in this sorry saga. A healthy democracy should not tolerate this attempt to rort the democratic process. The Law Society has trumpeted the failure of this bill, and the Human Rights Commission has added a strangely cautionary note, given that this is a Labour Government bill.

R DOUG WOOLERTON (NZ First) : I did not actually intend to speak on this part, but I feel I have to. I have to tell people who are listening about all of these people in New Zealand who are rising up against this bill. I will talk about something I read in the newspaper. I am not slagging off John Boscawen or anything like that, but to get the 5,000 people to the march in Auckland that the whole of New Zealand was worried about, he had to enlist the services of a secretary. Then he had to enlist the services of telephone survey people—from a foreign telemarketing organisation—and have them ring 82,000 Aucklanders to get 5,000 to a march. That is what he had to do.

Let me tell members what the National Party had to do in order to get even a modicum of dissent over this bill. Through its membership it had to put out an email campaign, the likes of which we have never seen before. It put out, through an email campaign to all its members, a directive telling every member to go to another member, etc.—like a pyramid-selling scheme—in order to bring awareness of this bill to the forefront. This was to raise National members’ anger against this bill.

But do members here know what? It has not done that. Outside the National Party and outside the 5,000 people who went to John Boscawen’s meeting, after 82,000 phone calls, numerous ads in the newspaper, and numerous radio ads the public of New Zealand is actually reasonably relaxed about this bill. I have had people say to me—National Party people mainly, because I still know a lot of them from the old days—“Doug, you’ll rue the day that you voted for this bill.” Well, I can tell members that we do not give a damn that those National Party people have been rarked up. National Party people do not vote for us. A few might after this election, I might add, but, by and large, National Party people do not vote for us.

So National members have been rarking up their own people, and John Boscawen has been working diligently to get 5,000 people to a march. This has all been organised to a degree that the New Zealand union movement could only envy. The union movement would envy the organisation, the money, and the friends enlisted to get this level of concern in New Zealand about this bill.

I tell members that average New Zealanders are not concerned about this bill. They do not want their elections bought, and they do not want their elections corrupted by people who have a really strange view of the world—people who are mainly intent on pushing their own views.

I can tell members that John Boscawen came to see me; I invited him to come to have a chat. I will not quote what he said to me but it is suffice for the Committee to know that he really means what he says and that he does not understand the electoral system completely. So intent is he on spending in excess of the limits prescribed by this bill that he said he would set up his own political party in order to achieve that. I said: “Great! That is precisely what the bill intends. If people want to participate as citizens, they spend so much—no problem. If they want to spend more than that, they register as a third party. If they want to extend all those limits, they list as a political party.” That is what the bill intended, yet so intent is he that he sees it as his cunning little plan—he says so in the newspaper.

The bill allows what John Boscawen intends. The bill understands that people will want to spend different amounts of money. But in the future such people will be known; they will not be able to run some sort of subversive campaign to help another political party break its spending limits.

Dr JACKIE BLUE (National) : I am proud—absolutely proud—to oppose this Draconian Electoral Finance Bill. This is a dark day for democracy; it is a black day. I attended those marches, the two in Auckland and the one in Wellington, and I can assure the Committee that the people in the marches were very concerned about the implications of this bill. There were many banners. There was a big banner saying “Democracy under threat”. Other banners said things like “I live in New Zealand, not Zimbabwe”, “New Zealanders should not be gagged”, and “Labour—thieves of democracy”. Banners were held by war veterans that said “Our soldiers did not die for this”.

I read the Hansard record where the Rt Hon Winston Peters had made belittling remarks about members who stood up and affirmed those banners that said “Our soldiers did not die for this”. He has no regard for our soldiers and what they fought for. I say he insults their memory, quite frankly. I am wearing my father’s medals from World War II, during which he fought in the Middle East. I am really proud to wear them today. He was the first person to sign up in the South Island town he grew up in. He did not hesitate to fight for his country and for human rights. He would be insulted by and appalled at this bill if he were alive today.

The Prime Minister and the small parties who support this bill have badly underestimated the depth of feeling out there in New Zealand. I say to those parties they have got it wrong—they have read the people wrongly. They have been blind, and they cannot see how the bill has impacted on people. This bill has gone beyond the Wellington beltway; it is an issue all over New Zealand. With regard to the first march in Auckland, when there were 2,000 people, the Prime Minister said that they were just ACT and National supporters. Two weeks later there was a march of 5,000 people. What did the Prime Minister say about that? She said it was a relatively small number of troops. That was a patronising, arrogant comment from the Prime Minister. Those 5,000 people were not dragged out of their homes to come to the march. They were not coerced in any way; they got there under their own steam. There were children, mums, and dads. There were ordinary New Zealanders from all walks of life. Those people had never marched before. At the end of the protest involving 5,000 people, the marchers were asked to put up their hands if they had never protested before. Members should have seen the hands go up; they shot up in the air. Those people were not protesters; they were ordinary New Zealanders.

This Government has been arrogant and dismissive of ordinary New Zealanders, and it will pay the price for that at the election in 2008, mark my words. I say shame on Helen Clark and this arrogant Government, which is so desperate to get a fourth term that it has come to this. The Government has spurned the advice of such organisations as the Law Society and the Human Rights Commission. It is ignoring the sentiment, feeling, and passion of New Zealanders. It is arrogant and dismissive of the depth of feeling against this bill. I will give Government members one piece of advice: this issue is registering way beyond the beltway. Those members will get the message loud and clear come election day in 2008.

This is an anti-democratic bill. In a democracy people should be free to voice their opinions. They should be free to criticise the Government, they should be free to criticise the Opposition, and they should be free to put their point of view—that is a sign of a healthy democracy. This legislation will not allow them to do that. The media, which is the traditional watchdog of public opinion, distilling information and reporting it, has come out in an unprecedented move. Editorials up and down the country are slamming this bill for what it is. If that does not give members on the other side a clear message, I do not know what will. The people, the press—everyone is against this bill. And all that the Prime Minister can do is to criticise the media—as she did recently at a journalism conference. There was a particular editorial in the New Zealand Herald that said that if this bill is passed, it will become Labour’s epitaph. That is true; come 2008 that will be the epitaph on Labour’s coffin. The Government will be out on its ear. The people will vote—they will vote with their feet, their minds, and their hearts, and the Labour Government will be out.

It is crazy that nobody understands this bill. Even the Minister of Justice does not understand it. She says the law of common sense will prevail.

Jacqui Dean: What?

Dr JACKIE BLUE: The law of common sense. We are told we need to talk to lawyers, but I tell members that the only winners will be the lawyers. The loser will be democracy in New Zealand, which will die. National has had very grave concerns right from day one about the process.

ERIC ROY (National—Invercargill) : I am compelled to take a call in what will be the final debate in the Committee stage on the Electoral Finance Bill, on its title and commencement. I wish to make some comments on both. In regard to whether the title is appropriate, my suggestion to the Committee would be that the title of the bill would more appropriately be the “We Will Find Another Way Bill”.

The Labour members of this House—and to some extent the New Zealand First members—have been standing up and saying this is a principled argument, and that they do not believe in having, for example, anonymous donations. But as one of my colleagues—I think it was Chester Borrows—pointed out, significant amounts of anonymous donations were going into the Labour coffers, going back over the various elections as far as we can see. Government members think the issue is not that we have anonymous donations; it is that National got more than they got. So therefore they said we needed to move to a State-funding model. Having not been able to get agreement to a State-funding model, they then changed the rules so that Government expenditure kind of counts in an indirect way.

A example from a little story may illustrate the point. You see, George Bernard Shaw, the playwright of Irish descent, was dining with a notable lady of his time. During the course of the meal he said to her: “Will you sleep with me for ₤10,000?”. The lady thought for some time and then said: “Yes.” Later on during the course of the evening, he said to her: “Will you sleep with me for ₤5?”. Her response was: “Goodness me! What do you think I am?”. He said: “We’ve already established what you are, and we are now bargaining.”

I say there is a parallel, exactly, with what Labour has done here. It does not believe in anonymous donations, but it has found another way and it will use the Parliamentary Service money to endorse its members as candidates. I say there is no principle in that for which those members can hold up their hands. Labour at the last election—and we have had plenty of examples of this—broke the rules, and it continued to break the rules even after the Auditor-General warned it that what was happening was indeed outside the spectrum of what was allowed. What did we get after that? We got some kind of retrospective fix-it-up. So, again, we have the “We Will Find Another Way Bill”. If Labour could not change the rules retrospectively, it is to change them right now so that Government members can find another way to use resources in order to endorse themselves.

I now make a comment about the commencement date. A number of submitters have said that this bill is not easily understood and that they do not know what its implications are. If we move on from the Committee stage without changing that commencement date and pass this bill, we are locking ourselves into a starting date after the bill gets the Royal assent, and that will be pretty close to immediately in the new year—maybe on 1 January. If we do that, we will be starting with a set of rules at a time when Parliament is not sitting, and when it is impossible to discern exactly what some of the provisions actually mean. We have given examples of those provisions, asking what this clause or that clause means, and we still do not know what those clauses mean. Yet we will be starting to work with legislation that is seriously flawed in interpretation and flawed in clarifying exactly what the rules are.

So there needs to be a shift in terms of the commencement date. If we do nothing else, we need to set the date back, so that we have time to get some discernment and clarification. It is all very fine for the Minister to say we will come up with an explanation later, determine matters later, or do whatever else he may say. But we are actually entering an election year, and we need to know whether our behaviour, our expenditure, and the way that we conduct ourselves are captured—we need to know what is inside or outside the rules. To start the commencement of this bill immediately on 1 January 2008, because that is an election year, would bring a great deal of litigation, I suggest, throughout the whole process of the election. It can have no other outcome, because there is such a lack of understanding of this legislation. Parts of it are completely incomprehensible.

ALLAN PEACHEY (National—Tamaki) : I was particularly anxious, after days of trying, to get a call on the Committee stage of the Electoral Finance Bill, because I want it recorded for all time in the annals of this House that I am one of those members who spoke against and voted against this attack on the democratic tradition of this country—and that is what this bill is. I ask the members opposite—the Labour members and the members of Labour’s coalition partners—to lift up their heads and listen to what is being said in this House and in this country.

I will focus just for a moment on the commencement date of the bill. What is the rush? No sound democracy rushes this sort of change through its legislative process. If the Government is determined to pass this bill, then what does it matter if it is delayed a little while, in order to give New Zealanders a little bit more time to pause and reflect on it?

Goodness, gracious me! The United States Constitution—that brilliant document of democracy—was not rushed through almost in the quiet of the night by a desperate Government and its coalition partners. I have a message for those coalition partners. I say to those members of New Zealand First, the Greens, and United Future that they should understand very, very clearly. This bill is progressing through this Parliament only because those members are voting for it. If it were not for the minor parties voting for this legislation, then it would not be passing through this Committee at the moment.

We know that it is part of the New Zealand tradition that on major matters of such significance the big parties talk and thrash it out. The reason the Government is not being required to thrash it out with the National Party is that the Government is calling on the votes of minor parties—[Interruption] There he goes: the list member from New Zealand First. What is his name? Mr Woolerton is screeching and shouting, and screeching and shouting, instead of just stepping back and thinking about the harm he is doing to the electoral future of his party by supporting this socialist Government on legislation that undermines the democratic traditions of this country.

In rushing the commencement date of this legislation, what does the Labour Government, and the screeching member from New Zealand First, not understand? Let me tell members what Government members’ problem is. Their problem is that they are control freaks. They want to get control of every aspect of New Zealand life, and they could never do that more effectively than by taking control of a nation’s democratic processes and using them in a way that brings them absolutely no credit at all. It brings no credit at all to the Government, no credit at all to New Zealand First, and no credit at all to the Green Party. It staggers me that representatives of small parties have been prepared to stand up in this Chamber and advance arguments that do no credit to them at all.

New Zealand is paying a high price for the Labour Government’s need to control and dominate every aspect of New Zealand life. When will Labour members understand that just because things in a democratic process do not go their way, and just because New Zealanders stand up and demand to be heard, it need not be the case that it somehow becomes legitimate in their minds for them to use their majority—slim as it is—in this Chamber to undermine the democratic traditions of this country?

R Doug Woolerton: What a load of hokum!

ALLAN PEACHEY: Oh, there he goes again—the boring member from New Zealand First.

CHRIS AUCHINVOLE (National) : What we have here is desperate attempt to litigate the last election, not the next election. It is a desperate attempt to re-litigate the last election, in 2005. We could almost call this the “Look Back in Anger Bill”, because that is what Labour is doing. Those members are looking back in anger. Let us see the constructs of this bill. What was it that inspired it? Well, there were technicalities that needed correction. I do not think that anybody has disputed that. Doing that is a good idea. It is a good idea, but there is a mind in Labour—and I do not think that mind is present in the House—that thought: “Let us use this to some advantage. Let us leverage on it.” What was it that really hurt those members in the last election? Let us think about that. It was the early demonstration of National’s hoardings. “We are not having those again.”, said the mind. “How can we stop it?”, asked the others. The mind said: “Bring the date forward. They have that in England. Bring it to the beginning of the year. That will stop National’s hoardings, which did us so much harm.” So we have an early programme and an early date. It is borrowed legislation. The trouble with borrowed legislation is that it fits only where it hits.

If we look at the English situation, with due respect to Labour, it does not seem to be working over there because, I believe, there have been fingers in the till in spite of that Government’s having policy that Labour thinks is so suitable for us. I would suggest that it was not the genesis of the parliamentary wing of Labour that developed this.

R Doug Woolerton: Who did it?

CHRIS AUCHINVOLE: Well, the mind is somewhere in there, but also it started to get clever. Again, we look at the constructs. The mind said: “Let us ask the Greens to help us. If we have enough of a majority, then we do not have to involve bipartisan discussion.” What position were the Greens in after the last election? Someone, a dogma-driven, idealist-structured, and single-minded group of people, had produced a pamphlet—a pamphlet; how dreadful! So that must be stopped and these groups must be stopped. The Greens were happy fodder for the clever, clever constructs. One could say that they were sucked in. What inspired them to do that? I guess it is a case of recognising in others that which one sees in oneself, because if we were to ask which party in Parliament was principally dogma-driven, idealist-structured, and single-minded, then I think the Green Party would qualify for those meritorious points. Those members saw in others that which must be stopped, because they know it works against them.

New Zealand First, with its vociferous spokesman on this issue—

Hon Member: Squawking.

CHRIS AUCHINVOLE: No, I would not call him squawking; he is vociferous. I am put in mind of some of those geographic films on television about the animals, where the main contestants are fighting away and there is always someone lurking around the edges, waiting for some advantage. That is what I am reminded of with New Zealand First members. And United Future members will simply wait and see, although I understand they said that they would not support this legislation in the event of urgency being used.

Let us spend a minute looking at the process. I sat through, I think, the majority of the Justice and Electoral Committee meetings and I would suggest the process could be described as a shameful sham. Lynne Pillay, who is in every other respect a pleasant person, was the same every day—she had nothing intelligent or constructive to say. She used to say: “It has been decided. The Greens have agreed.”, and when we considered discussion, she said we had no need. I have heard her say in this Chamber in response to one of the remarks made by my colleague Mr Finlayson that there was very little considered discussion on this bill. She said that Labour had the majority—in other words, ipso facto, there was no need for discussion. I thought this was supposed to be a Parliament. That is what I came here for: a discussion for consideration.

CHRISTOPHER FINLAYSON (National) : I want to speak to clause 1, “Title”, and I suggest that a better name for the Electoral Finance Bill would be the “Let’s Shoot Ourselves in the Foot Bill”. I was talking to a lefty friend of mine—not being tribal like members of the Labour Party, I have lots of lefty friends; poor, misguided souls that they are—and this person was telling me about all the campaigns in which he was involved in past years. He was involved in Save Manapōuri. He was involved in anti - Viet Nam War campaigns. He was involved in anti - Springbok Tour campaigns. He was involved in antinuclear campaigns.

Chris Auchinvole: He was a serial protester.

CHRISTOPHER FINLAYSON: He was a good friend of Mr Hughes. The point made by him, and I think a very good point, was that this could not happen in 2008—a person could not run a campaign like Save Manapōuri in 2008.

I ask Mr Duynhoven to take a good look at clause 5(1)(a)(ii), because it does not talk explicitly about political parties but it talks about “a type of party or … type of candidate that is described or indicated by reference to views, positions, or policies that are or are not held, … (whether or not the name of a party or the name of a candidate is stated);”. This is one of the big misconceptions on the part of the Labour Party and its support parties when dealing with this legislation. Indeed, there was a very interesting answer given by Mr Dunne, the member for Ohariu-Belmont, to a person who posted something on a United Future website a few days ago. This person said: “If the opinion can be seen as encouraging or persuading people to support or not support a party or candidate or class of party or candidate it will be limited. If you want to run a campaign which says ‘Support parties which support Kyoto’ then that is captured.” Mr Dunne responded by saying that was wrong. He said to this fellow, who was called Dave: “To be caught, a group has to be spending more than $120,000 in support of a particular party,”. Mr Dunne, like the Labour Party members, and like Mr Woolerton, has not taken a good, close look at clause 5(1)(a)(ii). If those people had, they would have seen that my lefty friend was right and that it would not be possible to run a “Save Manapōuri” or anti - Viet Nam War campaign in 2008 under the Electoral Finance Act 2007 because it will prevent that kind of argument.

The second point I make is a very interesting point, which has been raised by MetiriaTurei—and I think she is too concerned and I do not think it is a problem—relating to the amendment to clause 2, which states that the Act shall come into force on 1 April. I listened very carefully to what that member said, because obviously there are implications for the definition of “regulated period”—and I particularly refer to subparagraph (a)(i) of that term in clause 4 because there are a number of periods that are specified in that clause. It seems to me that if the Act comes into force on 1 April, there are a number of options. Either the regulated period is going to be the period that commences 3 months before polling day and ends with the close of polling day—a proposition that would not please MetiriaTurei one little bit—or one would give a purposive interpretation to subparagraph (a)(i) and say that if the Act comes into force on 1 April, in order to make sense of the definition of “regulated period” the regulated period shall be the longer of the following periods: either the period that commences on 1 April or the 3-month period. The other option, if one wanted to be clear beyond peradventure, would be to seek leave so that the House could debate the definition of “regulated period” again. But I do not believe that any judge would have a problem with that particular definition and I think MetiriaTurei makes a mountain out of a molehill.

Finally, let me say I am delighted that Mr Hughes is so strongly in favour of some controls on anonymity, because I have just checked the amount of anonymous donations he received in the 2005 general election.

Chris Auchinvole: How much?

CHRISTOPHER FINLAYSON: $13,821.78.

CHARLES CHAUVEL (Labour) : I move, That the question be now put.

NATHAN GUY (Junior Whip—National) : I raise a point of order, Mr Chairperson.

The CHAIRPERSON (H V Ross Robertson): I am prepared to take a point of order only if it is to do with the reason why the motion should not be put.

NATHAN GUY: I was calling just before you put the vote. We are talking specifically about the title and we have members here who have been seeking a call over the last week. I ask you to consider Standing Order 137(3) on whether you consider it reasonable for the closure motion to be put. This is an important bill. We know it is very contentious and members on this side of the Chamber wish to raise some very important points around the specifics of the title.

The CHAIRPERSON (H V Ross Robertson): I thank the honourable member for the contribution that he has made. I have listened considerably to this debate. I suggest that the member look at Speakers’ rulings 73/1-3, and Speaker’s ruling 73/3, by the Hon Doug Kidd in 1998, in particular. I therefore put the question.

Hon ANNETTE KING (Minister of Justice) : I move, That the Committee divide the bill into the Electoral Finance Bill, the Broadcasting Amendment Bill (No 3), and the Electoral Amendment Bill, divided into Electoral Finance Bill, Broadcasting Amendment Bill, Electoral Amendment Bill, pursuant to Supplementary Order Paper 164.

Hon MARYAN STREET (Associate Minister for Tertiary Education) on behalf of the Minister for Tertiary Education: I move, That the Education (Tertiary Reforms) Amendment Bill be now read a third time. This bill gives legal effect to the Government’s reform of the system for planning, funding, and monitoring tertiary education. The objectives of the reforms are to support the Government’s focus on quality, relevance, and value for money in the tertiary education system in order to ensure that the system contributes to the country’s social, economic, and environmental needs.

The bill aims to streamline the system for funding tertiary education by providing a set of key planning instruments for steering the tertiary education system. The set of instruments includes, first, a single tertiary education strategy, setting out the long-term strategy and current to medium term priorities for tertiary education, which replaces the tertiary education strategy and the statement of tertiary education priorities; second, investment guidance published by the Tertiary Education Commission, which replaces charters and profiles; and, third, a 3-year plan prepared by tertiary education organisations in consultation with their stakeholders, which is aligned with national and regional priorities and will form the basis of funding decisions made by the Tertiary Education Commission. The new process will lead to reduced compliance costs for tertiary education organisations.

The Tertiary Education Commission will play a key role in ensuring the success of the reforms. The commission will work with tertiary education organisations to develop plans and ensure that the qualifications that are funded are relevant to students and stakeholders. Investing in a plan will ensure that the tertiary education system delivers the skilled graduates we need to secure a prosperous economic future for New Zealand.

The tertiary education sector has acknowledged that change is needed. This came through in the consultation process and in submissions to the Education and Science Committee. It is clear that the system of demand-driven funding, although contributing to increases in participation in tertiary education, is not the most appropriate way of supporting tertiary education’s contribution to national goals. Taking a strategic approach to the funding of tertiary education by funding quality over quantity will support the Government’s objectives for a broad and inclusive tertiary education system, while at the same time ensuring that the long-term needs of stakeholders are met.

The new investment system will also safeguard taxpayers’ contribution to tertiary education. This is because instead of funding tertiary education organisations simply on the basis of enrolments, the Government will be making wiser and more considered decisions on how taxpayers’ money is invested. The changes introduced by the bill will therefore lead to greater returns on the Government’s investment in tertiary education and will increase public confidence in the tertiary education system.

The investment system emphasises collaboration rather than competition through a differentiated but complementary network of provision. This means that instead of competing for enrolments, organisations will be collaborating and building on each other’s strengths as they work towards meeting national goals. They will also work in concert with industry to ensure that the needs to stakeholders are met. It is expected that taking a collaborative approach will contribute to greater outcomes from the Government’s investment in tertiary education.

Through better, more strategic, longer term, and collaborative planning involving organisations, stakeholders, and the Tertiary Education Commission this bill will be a boon to everyone involved in the tertiary education sector. The flow-on benefits of this new planning, funding, and monitoring regime will be widely felt. It will bring certainty to everyone with a stake in our tertiary education system—certainty to students about their course of study, certainty to organisations about security of funding, certainty for the public about the coherence and quality of our tertiary system, and certainty for Government in its funding and monitoring roles.

As we near the final stages of the passage of this bill, I take this opportunity to again express my own and the Minister for Tertiary Education’s appreciation to the members of the Education and Science Committee for their role in this process. I look forward to the bill passing into law to enable the reforms to be introduced on 1 January 2008. I commend the bill to the House.

Dr PAUL HUTCHISON (National—Port Waikato) : I am grateful for the opportunity to speak on the third reading of the very important Education (Tertiary Reforms) Amendment Bill. The bill is very important, because there is no doubt that tertiary education is pivotal to the future of New Zealand. It is pivotal to driving economic growth and to improving our productivity, which is something that has been absolutely stalled under this Labour Government over the last 8 years.

It is interesting that this Government has said that this bill is about achieving high trust, low compliance, relevance, quality, and value for money. Nobody would disagree with those sentiments, but we have seen, even before this bill has been implemented, the very opposite. We have seen a model that has demonstrated an ever-growing, creeping bureaucracy and jackboot-like central control. That is exactly what has been going on.

Twenty-three submissions were received on this bill, and the major issues arising were those of academic freedom, institutional autonomy, and the removal of charters and profiles—something the Hon Steve Maharey said in 2002 would be the ultimate achievement of tertiary reforms. How wrong that has proven to be, because he is doing away with them and instead bringing in these so-called investment plans.

The other important issues were procedural fairness—something that is clearly somewhat foreign to this Labour Government—the treatment of sensitive information, and adult community education issues. I want to give just two examples of when this Labour Government has shown low trust and poor management and has rewarded failure and punished success.

There could be many, many more examples than the two I am going to give, but I want to start firstly with the headline from the Independent Financial Review, “Foul-up costs unis millions”. The article states: “Tertiary institutes face paying millions in top-up fees next year because of an ill-timed government policy which caps funds and threatens penalties on those that grow.” So much for high trust! The article continues: “Auckland University’s vice-chancellor Stuart McCutcheon says it will have a short-fall of millions because of funding cuts, an increase in the student achievement component and a cap on fees.” It goes on to state “the timing of TEC’s investment plan meant it came too late to limit student numbers for next year.” So much for good management! In fact, this is abysmally poor management.

Here in Wellington at Victoria University, Chief Financial Officer Wayne Morgan said: “There have been threats of financial penalties from TEC if student numbers exceed the new quota.” There we see bullying and poor management.

The second example is that of the Southern Institute of Technology, which is an institute that has done remarkably well in showing lateral thinking, innovation, quality, relevance, and value for money. It is the only tertiary institution in this country that, by stint of innovation and hard work, provides a policy of having no student fees. But that is at risk. Why? Because the Tertiary Education Commission plans to take $8 million from this good-performing institution and with this money prop up institutions that are failing. That might help pay for the $2,000 a day that is going to the Crown controller at the Western Institute of Technology, or the $2,600 a day going to one of the accountants who is helping there. So there is another example of where this Labour Government is punishing success and rewarding those who do not do well.

It is almost unbelievable the way this central-control model is behaving. First of all, the Government has started on the polytechs; next, will it go to the universities? Who knows! Will the new Vice-Chancellor of Massey University, Steve Maharey, be told that the Government does not believe in regionalism and that it will remove Massey University from the North Shore of Auckland, so the university will have to retreat to Palmerston North? Is that the sort of headache the Government is going to put on Steve Maharey? Let us wait and see.

We know that the Government just does not understand the concept that quality and value for money should underlie an efficient, effective system—no matter who the provider is. Even though I was prepared to help this Government and provide it with a well-thought-out Supplementary Order Paper, it ignored those constructive suggestions. That makes me wonder why the new Minister for Tertiary Education, the Hon Peter Hodgson, failed to be present at the second reading stage of this bill, a bill that he claimed in this House was critical for tertiary education. He just did not turn up.

Hon Maryan Street: The Assistant Minister was there.

Dr PAUL HUTCHISON: The only person who turned up was the Hon Maryan Street, and I must admit she made a valuable contribution. But no one else from the Labour-led Government made any contribution whatsoever.

Hon Marian Hobbs: Excuse me! I was on the select committee the entire time.

Dr PAUL HUTCHISON: Maybe, apart from a minor contribution from Marian Hobbs, Labour just wanted to get on with it and ram through this bill. The succession planning to carry this bill through has been abysmal and appalling. Firstly, we had the resignation of the Chair of the Tertiary Education Commission, Russell Marshall; secondly, the Chief Executive Officer of the Tertiary Education Commission, Janice Shiner, is off to the UK next year; and, thirdly, there is the reshuffling of the deckchairs by Helen Clark. Steve Maharey’s huge mistakes had to be fixed up, so she wheeled in Dr Michael Cullen, and now we have the Hon Pete Hodgson, the man who presided over the $5 billion increases in funding for the health system, even though we saw no increase in surgery whatsoever.

In this third reading debate, it is important to emphasise again just how arrogant and out of touch this Labour Government has become. It was the New Zealand vice-chancellors who said that in no other Western democracy has the State sought this degree of control over a university’s teaching and research. The vice-chancellors would not have made those statements without a great deal of thought. It was Dr Cullen who belittled their submission and said: “No. Universities have, for at least 40 years in my personal experience, been complaining that academic freedom is under threat and that they are losing autonomy.”

So it has been with considerable relief that, finally, the Labour Government was shamed—absolutely shamed—into changing this bill so that academic freedom and autonomy would remain. It gives us a great degree of satisfaction, because, undoubtedly, this shows—

Colin King: It came at the eleventh hour.

Dr PAUL HUTCHISON: It did come at the eleventh hour. It was a victory for the select committee process. It was a victory for the submitters. It was a victory for the National Party. And it was an absolute indictment on this tawdry Labour Government, which has become so out of touch, tired, and worn out.

The tertiary education system needs stabilising and simplifying, but Labour has provided the very opposite. As Professor McCutcheon said, we have moved quickly from an open system to a closed system. There is no doubt that, up until now, the new Minister for Tertiary Education, Pete Hodgson, has been too afraid to show himself. The task of the next National Government will be to sort out the mess the Labour Government has left behind.

Hon MARIAN HOBBS (Labour—Wellington Central) : Sometimes when I hear the member Paul Hutchison—who has just resumed his seat—speak on tertiary education, I have the feeling that he is interested only in personalities, whether it be the chair of the Tertiary Education Commission or the wonderful Janice Shiner, who has spent 4 very productive years in New Zealand. He does not talk about policy, nor does he talk about the system, which this bill will ensure is improved and lasts regardless of the personalities of Ministers, heads of departments, or heads of commissions.

The other fallacy that that man always brings up is the fallacy around academic freedom. Academic freedom was never challenged in this legislation, for the reason that this bill is an amendment bill. It amends the Education Act 1989 and academic freedom is spelt out in a section of the Education Act. People got so nervous about this issue that we restated the definition of academic freedom in this amendment bill. It is rather tautologous; it is in the amendment bill and it is in the Act that this bill amends. It is in there twice.

I rise to support the third reading of the Education (Tertiary Reforms) Amendment Bill. Earlier speeches on the bill have outlined many of the improvements to the tertiary education sector that will be enacted through the legislation. In particular, we have heard that the bill initiates a set of more streamlined steering instruments than previously existed, to assist the Tertiary Education Commission to invest specifically in the Government’s and the country’s priorities, and to respond to key stakeholder interests.

Do we need more engineers? Are we short of scientists? Do we need to invest there or do we need to keep on producing lawyers for the National Party?

Sue Moroney: Not just for the National Party.

Hon MARIAN HOBBS: I have just realised that, I say to my colleague. I am very, very sorry. I just skipped blissfully over that. There are certain lawyers who are absolutely wonderful; there are others whom we have an abundance of.

This approach will assist tertiary education organisations to realise Government expectations for the funding they receive, while also allowing greater certainty for those organisations, due to the Government’s commitment to finding its priorities over a longer term. I will say that again. For too long, tertiary organisations have had a 1-year funding window. This bill gives 3 years. In short, the funding for, and the outcomes sought from, tertiary education will be more firmly geared towards achieving strategic benefit for all New Zealanders. As the Minister for Tertiary Education has expressed in his speech, this new approach towards investing in tertiary education provision will enable a high-performing tertiary education sector, one that is vital for our country.

In the joined-up tertiary education system we have in this country, a high-performing sector is one that meets the needs of all New Zealanders regardless of the type of education they engage in. I would suggest that the joined-up nature of the tertiary education sector is one of the sector’s major strengths. Rather than elevating particular levels or forms of study above others, we have a system that encompasses industry training, post-graduate university study, adult and community education—which is often the way people re-enter training—and other areas of study. All these areas of provision provide benefits for this country and its people, and they will be enhanced by the bill providing for more considered planning across the tertiary sector. I give members an example. I often hear people complain about how our workforce is not able to be as productive as one would like it to be. One of the reasons for that is the high level of inability in reading and in mathematics—literacy and numeracy. This factor is as much a part of this tertiary planning as the need for scientists or accountants is.

The bill will facilitate the distinctive contribution of all areas of tertiary education provisions, partly by requiring that tertiary education organisations work closely with stakeholders to ascertain their needs, and to respond to those needs through the plans proposed to, and approved by, the commission. The collaborative aspect—not a competitive one, for a change—put in place by this change will lead to a step change in the responsiveness of organisations, to those with the most interest in the kinds of teaching and research available. It is exciting to know that the link between investment plans, Government long-term strategy, and medium-term tertiary priorities will mean that each part of the tertiary sector can be confident of the role it has to play in achieving those priorities.

The move towards an outcome-focused system will also enhance the confidence of sub-sectors such as the polytechs, which play an extraordinary part and role here. They are not something to be run down and neglected, as is portrayed. They are vital. They found the demand-driven system problematic, with the competitiveness and uncertainty that came with it, which had polytechs trying to poach from other polytechs up and down the country. Instead, they are, for example, able to serve the needs of the energy industry in New Plymouth, and do not have to make up strange courses in order to get the numbers. That was a system that was put in place by the National Party. It was “bums on seats”.

Dr Paul Hutchison: It was Maharey.

Hon MARIAN HOBBS: No, I am sorry. It was absolutely “bums on seats”, and it was particularly led by Lockwood Smith. I remember it very clearly, as a member of the education movement.

A statement of the Government’s long-term strategy and medium-term priorities will be essential in helping the sector plan for the future. It provides a transparency and a clarity that will let tertiary organisations see what the system as a whole needs to provide, and what role they play in the fulfilment of that whole. I am also confident that the changes proposed by the bill around quality assurance of adult and community education will solidify a far better approach to approving the course offered by these providers. I would find it very strange if the Opposition disagreed with that, given the noise it created on these issues some years ago. These changes recognise that many of these providers do not have the critical mass of established tertiary education institutions to deal with undue levels of scrutiny and compliance.

This bill is a comprehensive bill that does not improve planning just for universities, or wānanga, or industry training; it is a bill that works to improve planning across the whole tertiary education sector. It means that individual tertiary organisations can plan better, but it also means that we can plan better across the whole tertiary education sector. It is not about just making sure that Victoria University or the Southern Institute of Technology continues to meet society’s needs; it is about the whole sector. It is not about competition; it is about collaboration. In that way, it is efficient; it saves us money and resources that otherwise could be spent in a most frivolous way.

Finally, I would like to emphasise that this bill will act as a significant enabler of stakeholder-driven change, which in itself will lead to better investment of Government funding. This approach is not top-down. [Interruption] This approach is very much—as that member would know if he knew anything about the adult and community education sector—from the bottom up.

Furthermore, the explicit connection between investment and meeting Government priorities through plans reinforces the particular relevance of each sub-sector of the tertiary education system, so that all students—wherever they are—can be confident that they are entering study that is worthwhile for themselves and for New Zealand, and that they will have jobs.

ALLAN PEACHEY (National—Tamaki) : I appreciate the opportunity to express the opposition of the National Party to the passage of the Education (Tertiary Reforms) Amendment Bill. I have been sitting here thinking about what sort of contextual framework this bill needs to be put in. It has not been lost on me that just half an hour ago I was speaking against the Electoral Finance Bill and talking about the defence of democracy in New Zealand. Now, just half an hour or so later, speaking on this bill, something is right at the forefront of my mind and it is this. Just as a socialist Government is seeking to control the democratic processes of this country and is using its numbers in this House to drive through legislation, so we have this same Government that clearly understands one thing. One of the features of all socialist society is that control of the vitally important educational establishment is paramount. This bit of legislation seeks to extend that control—Government control—over the lives of New Zealanders and our institutions.

It should not be lost on New Zealanders listening to the debate this afternoon and watching it on television that when the Associate Minister got up and spoke, the words that rolled off her tongue were “plan” and “monitor”. It took me back to the Committee stage when the Associate Minister—new as she was to her role then—was in the chair, and every second word was “plan”, “plan”. Then the word “commissariat” was thrown into the conversation. What great socialist terms they are: “commissariat”, and “control”. When those members have their private meetings and caucuses and they are talking about this sort of stuff, I wonder whether they call each other comrade and refer to themselves as the commissariat of New Zealand—not the Labour Party but the commissariat of New Zealand.

We need to reflect very, very carefully about what some of the most intelligent, well-educated people in New Zealand—the vice-chancellors of the universities—had to say to the Education and Science Committee about this proposed legislation. The Minister in her speech made a lot of the role of the Tertiary Education Commission. It seems to me that where the Government wants control, plan, control, and plan, we should really be trying to create the environment in which the tertiary education sector—in particular, the universities—can actually achieve the best for New Zealand. When I look at this legislation—

Hon Maryan Street: Ah!

ALLAN PEACHEY: Oh, the Associate Minister can sigh, but National knows that in 12 months’ time we are going to be cleaning this mess up. When one thinks about the message that the vice-chancellors gave us about academic freedom and about the autonomy of their institutions, one needs to ask oneself a couple of questions. Whatever happened to the days when tertiary education in this country was run by half a dozen men and women meeting occasionally around the table in Wellington? Now we have multimillion dollar bureaucracies. How does this legislation, this massive expansion of bureaucracy and the environment of control, plans, commissars, and commissariats, produce the world-class universities that New Zealand will need if it is to survive as a prosperous, modern, market economy in the world? How will this bureaucracy and these plans produce that? It will not. The reason it will not is that the Government is so obsessed with control that it does not understand how one creates environments to get the best out of people.

The other question I have is how this massive expansion of bureaucracy and control will produce the higher quality research-led teaching that our students need if they are going to be competitive in the world. It seems to me that they should be the two significant objectives of any legislation on tertiary education in this country. Not about control—[Interruption] Can I just say to those members opposite that if the Leader of the House wanted to come in and hear what I had to say, he would have been here to hear it. He actually does not need that member to give him a garbled version, so I suggest that member just reflect and think about some of the things I am saying. The great challenge in tertiary education in New Zealand is not how it is controlled—not which Government can create the biggest bureaucracy, expand the Tertiary Education Commission the most, and cut back on the ability of universities and polytechs to make good decisions—it is the interface between the economic development of this country, the quality of its social fabric, research and development, and learning. I do not see anything in this legislation that pulls all those things together and in any way lets us see ahead.

What I see in this legislation is an attempt by a Minister to clean up a mess foisted on this country by a previous Minister. It has to be of concern to New Zealanders that twice in 8 years this House is debating and passing this sort of legislation. This Government did not get it right the first time. If New Zealanders reflect back to the environment of 2000-01 when the Government thought it knew everything, and off it went and rushed into it, they will see we now have to clean it up. The tragedy is that this is not a clean-up; this is an extension of Government control where Government control is not needed, because nothing in this legislation strengthens the autonomy of our universities. Nothing in this legislation protects and extends academic freedom. It is about plan and control. It does not address the issues of the interface between research-led teaching and the economic development of this country.

Like so much socialist legislation that has been passed in this country, this bill, when it is passed, will have an unintended consequence. Universities, beginning with Auckland, are saying that as a result of this legislation open entry will come to an end. Now, I am one of those people who happens to believe that New Zealand needs an outstanding, restricted entry, world-class university that attracts the best intellectuals in the world to this country. I do not think it was the Government’s intention to create an environment in which entry to university will be closed off. It is interesting, is it not, that those Government members opposite may be responsible for creating an environment in which New Zealanders lose free entry to university. That stigma will stay with the Government for a long time.

KATHERINE RICH (National) : I too am glad to speak in this third reading debate on the Education (Tertiary Reforms) Amendment Bill. It was very interesting to hear some of the speeches on this subject from members opposite, because many of them fell into the same kind of pattern—the same kind of jargon—and they basically went along the lines of “Blah, blah, stakeholder engagement. Blah, blah, transparency.” Marian Hobbs was a fine one. She talked about stakeholder-driven change and she said that this was not top down but bottom up. I sat there and thought that if anybody criticises the education sector for its own jargon and meaningless bumf, he or she should have listened to that speech, because it had all the categories and all the words but it did not actually mean anything.

One of the things we find with the whole tertiary reform debate is that there is a lot of high-level discussion, but if we distil it down, it does not make a lot of common sense. That was certainly something that Paul Hutchison and I found as we were part of a presentation about what the changes might be. After about an hour and a half of worthy and earnest questions on our part we were struggling to understand exactly what the impact would be for certain tertiary organisations. Finally my colleague Paul Hutchison said: “Look, just give us one example. What difference will this bill make to Auckland University?”. After some “ums” and “ahs” the officials with whom we were discussing this said: “Oh, actually it is not going to make terribly much difference to Auckland University.” So, after all this, there is no difference. How can that be when we saw on television last night that Auckland University is now moving away from open entry with some of its courses?

Hon Dr Michael Cullen: They have been planning this for about 5 years!

KATHERINE RICH: Dr Cullen is exercised by my bringing this up. The Labour Party, which purports to be the party of the workers, is now being accused of shutting out students from disadvantaged backgrounds and creating an elitist institution. This is one of the examples that we will see more and more of whereby some institutions say they will limit the number of people coming into their courses because they will not offer spaces for students for whom they receive no funding. These institutions will, understandably, offer courses if they are funded for them, but, if they are not, why would they bother? Why would they offer spaces for the benefit of the community if they are not funded to offer them?

Sue Moroney: What’s National’s policy?

KATHERINE RICH: As usual, Sue Moroney is chipping in with her inane little utterances. She does not have a blind clue what difference this will make to tertiary reform, but she will focus her mind when the likes of her local university says: “We’re cutting this course, that course, and we’re not going to offer spaces for courses that young people want.”

It is the same for certain sectors. We spend a lot of time talking about other aspects of education. At the moment the early childhood sector is crying out for trained early childhood teachers. This is another area where the Tertiary Education Commission will ensure that there are fewer spaces than there have been in the past.

One of the other points made by the Hon Marian Hobbs was that this legislation will move tertiary providers away from competition. Competition is not actually a bad thing. If members opposite think that students do not understand what competition is, then they do not understand the students they are hoping to improve the tertiary sector for. Students know exactly which courses are quality courses. Students will often travel to work or study with someone with a particular area of expertise, or with someone who has a PhD or has carried out research in a certain area.

Sue Moroney: And then be disappointed.

KATHERINE RICH: Sue Moroney says that students will be very disappointed if they travel to work with specific people. What kind of comment is that to make? How would it be for our hard-working professors, researchers, and people who are internationally renowned to know that some little minion on that side of the House thinks that their skills, training, and research amount to nothing and that they are interchangeable, like cans of baked beans, because they are all the same?

On this side of the House we believe that the tertiary sector is about quality. It is about having skills in a certain area, and it is about an understanding of that quality and competition. People will travel to study in certain areas, and that is one way of ensuring that we have an excellent offering in our polytechs and tertiary providers.

The Hon Marian Hobbs also said that we are moving away from a “bums on seats” mentality. I find that interesting. Which Government was it that put all the bums on the seats for the radio sing-along courses, or the bums on the seats for the pendulum swinging for beginners classes? Pendulum swinging for beginners may have been big in Sue Moroney’s area, but I would like to hear her take a call and explain how that particular course contributed to the Government’s overall goal of economic transformation, because on this side of the House we cannot see how that kind of course contributed to that goal. Neither can we see how twilight golf or some of those other shonky courses, which apparently were moving away from a “bums on seats” mentality to some other method of applying funds, contributed to that goal.

The big buzz word is, of course, “transparency”. As Dr Cullen knows, our universities in particular have a long history of transparency and quality and they do not need this particular bill to be able to offer that. Certainly when it comes to introducing a streamlined approach and less bureaucracy, I think that those who are involved in the sector will be desperately disappointed. One of the things that this bill introduces is more bureaucracy. There is a requirement to do more planning, to put together more documents, and to undertake more stakeholder engagement, whatever that means. From listening to members opposite, stakeholder engagement seems to involve hanging out with anybody, talking about anything—preferably if there is food there. But in terms of the enhancement of the process, we cannot see how that will have an impact on tertiary provision in this country.

National is looking at how we get better results out of the investment we make as a country. We still have to allow students to make the decisions they need to make to invest in themselves and to do courses that reflect their interests. We are concerned about some of the impacts of this bill and about what will change within some regional areas. We have already seen some discussions come to the surface in Southland—certainly in Otago—and last night in Auckland. We will see more of those stories. There will be more students who are not able to do the courses they want to as the rubber hits the road with this kind of reform.

Here we are 8 years down the track and the reforms are being put in place now. Eight years down the track! The Government has spent over $400 million to get this far and it has very little to show for it apart from a big stack of glossy brochures about so high, a big bill as a result of stakeholder engagement, and a number of offices that have been opened and closed as the Tertiary Education Commission decides what is fit for purpose and what kind of organisation it will be. We have certainly seen a large number of bureaucrats added to the public purse. We have gone from an organisation that had no staff to one that has well over 300, and certainly most of us are trying to work out exactly what value they add to this process.

In terms of reforms, the jury is out about whether it will make a positive difference. National thinks it will make a negative difference, as a lot of this rhetoric does not transfer into change that is good for students.

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

KEITH LOCKE (Green) : The Green Party supports this bill. We are very strongly in favour of good tertiary education. I think it is useful to point out, though, that we are very concerned about what is being done up at Auckland University, which seems to be spreading a little bit throughout the country—that is, restricting the entry of students to tertiary institutions. That is a dramatic change for New Zealand, where we have had open entry for so many years, making us a more egalitarian society. In more recent years open entry has enabled people in all age ranges to go to university, perhaps more so than in the past. People who missed going to university the first time around, for whatever reason—not having enough money, not being born of the right parents, not getting the initial encouragement they perhaps should have, or going into other jobs—have been able to go on to university. We are a bit concerned—very concerned, in fact—and we support the criticisms of various members of the community, including university staff, who said that this restriction of entry should not be allowed to happen. So with those few words, the Green Party supports this bill.

Dr PITA SHARPLES (Co-Leader—Māori Party) :Tēnā koe, Mr Assistant Speaker. It is timely indeed to be thinking of tertiary reforms, the day after the University of Auckland confirmed its decision to eliminate open entry into the university from 2009. From the communication we have had with tangata whenua associated with the university, consultation has been at a bare minimum, if at all. We learnt from the University Students Association that the proposal was rammed through in 3 short weeks without due regard either for the consultative process or for consideration of the possible impacts such a decision might have. So the decision of that university to restrict entry to core disciplines leads us to ask how, in this bill, the Government, through the Tertiary Education Commission, actively recognises its obligations under the Treaty of Waitangi to protect Māori language, ways of being, and traditional and contemporary knowledge.

What mechanisms are in place in this bill to give honour to a central premise of the Treaty of Waitangi that Māori could continue to live as Māori? In Ka Hikitia, the draft Māori education strategy, Wally Penetito gives life to this aspiration, eloquently stating: “If there is an emerging educational vision among Māori, it is the desire for an education that enhances what it means to be Māori: so simple and yet so profound.”

The Māori Party brings to the Education (Tertiary Reforms) Amendment Bill a knowledge of the simple and profound, and an understanding of the aspirations and concepts that establish a very clear foundation for both ensuring Māori student engagement and enabling Māori student success. The ultimate question, however, is whether there is sufficient provision in this bill to ensure that both the Crown and the institutions uphold the principles of the Treaty of Waitangi through the planning, the funding, and the monitoring functions of the tertiary education system. Our analysis of the bill found it seriously lacking on two fronts. One related to the consultation and the other to the guidance for the Tertiary Education Commission.

What we learnt from the select committee process was absolutely fundamental to our concerns around Treaty justice in this bill. The Association of University Staff of New Zealand advised us that the Government had received over 400 submissions relating to the omission of the Treaty from the tertiary education strategy and the statement of tertiary education priorities. We learnt from reading over 23 submissions received on this bill that numerous concerns were raised around consultation. Specifically, there is no requirement for the Minister, the Tertiary Education Commission, or the tertiary education organisations to consult with Māori in the development and monitoring of a proposed new institutional plan document. One has to wonder, then, whether there should be any surprise about the fact that Auckland University chose the lighter end of the consultation continuum.

As a party always willing to put forward new ideas and solutions, we in the Māori Party came to the Committee stage of the bill with two useful recommendations. We as Māori Party MPs are not limited by the constraints of abiding by the party line or being subdued into silence when we identify an issue of Treaty injustice. We are proud to be a strong and independent Māori voice and to be able to raise our concerns without fear or favour. We bring the House back to section 181 of the Education Act 1989, in which institutional councils are required to acknowledge the principles of the Treaty of Waitangi in the performance of their functions and exercise of their powers. Councils are therefore required to acknowledge the principles of the Treaty of Waitangi.

How is that done? Well, it is not as difficult as some of our parliamentary colleagues think it is. The system needs to support Māori aspirations and achievements, including the revitalisation of te reo Māori, ngā tikanga, and Māori knowledge. The education system needs to work in partnership with whānau, hapū, iwi, and Māori communities. The education system needs to provide opportunities for educational success, which will enable Māori to live as Māori, to have the authority over Māori knowledge, and to validate Māori ways of being and seeing the world—indeed, to enhance what it means to be Māori. So simple, yet so profound.

Yet what does this amended bill say? It states that the mandate for the Minister of Education to address the development aspirations of Māori is tied neither to the Treaty relationship nor to a requirement to consult. It is for this reason that at the Committee stage of this bill my colleague Te Ururoa Flavell introduced two amendments to sort this out once and for all. The first amendment specified consultation with local hapū, iwi, Māori staff, and students by tertiary institutions in the preparation of proposed plans. Under the bill’s current provisions an organisation can choose not to consult with Māori in the preparation of a proposed plan. We in the Māori Party therefore proposed an amendment to specify that in the preparation of a proposed plan, tertiary education organisations would be required to consult with Māori.

The other amendment sought to insert the phrase “acknowledge the principles of the Treaty of Waitangi” into section 159G of the Education Act, which determines the principles guiding how the Tertiary Education Commission operates. The Education Act 1989 requires in section 181(b) that a council of a tertiary education institution acknowledges the principles of the Treaty of Waitangi in the performance of its function and in the exercise of its powers. However, there is no corresponding requirement on the Tertiary Education Commission to also acknowledge the principles of the Treaty of Waitangi in the performance of its functions. Our amendment required the commission to do so. It is all very straightforward—indeed, so simple, yet so profound.

A significant number of submissions to the select committee told us that for a Treaty relationship to be meaningful it needs to be at all levels of the tertiary education system. Our two amendments were exactly that, proposing ways of making the Treaty and the Treaty relationship visible. Instead, Labour, along with National, New Zealand First, United Future, and the Independents, chose to act in ways that clearly reflect the lack of value they place in Te Tiriti o Waitangi as the foundation document for Aotearoa.

Seventy-five years ago the very first successful Rātana candidate, ErueraTirikātene, tabled a petition here in Parliament known simply as the Rātana petition. It was a very weighty petition, literally so; it contained some 45,000 signatures and weighed 16 pounds, which is 7.25 kilograms. The petition requested that the Treaty of Waitangi be entered into the statute book in an effort to “preserve the ties of brotherhood between Māori and Pākehā for all time”.

Twenty years ago, in 1987, the Court of Appeal described the Treaty as “part of the fabric of New Zealand society”, and as “the country’s founding constitutional instrument”. This is our history: Māori and Pākehā, tangata whenua and tangata Te Tiriti, peoples united in the promise of partnership. At its very heart the Treaty is an exchange of promises between sovereign peoples, giving rise to obligations for each party. As with any partnership, the Treaty partnership is forever evolving. This bill, the Education (Tertiary Reforms) Amendment Bill, provided us with an excellent opportunity to honour those aspirations of our ancestors throughout our history. It offered up a chance to make right the expectations of TahupōtikiWīremuRātana, ErueraTirakātene, Matiu Rata, the New Zealand Māori Council, the Court of Appeal, and the more than 500 rangatira who signed Te Tiriti o Waitangi back in 1840.

It provided a means by which Māori could continue to exercise rangatiratanga over ngā taonga, which, in the context of education, may include te reo Māori, tikanga Māori, and Māori knowledge. It gave us all a moment in time in which legislation could be consistent with the statutory requirement of institutions to acknowledge the principles of the Treaty of Waitangi, by which the Treaty could truly flourish.

For some unknown reason, the members of this House, other than those in the Green and Māori Parties, chose not to have the courage to let the Treaty talk. They chose not to support our amendments and, in doing so, chose to deny, shut down, and limit any practical ways of actually letting the Treaty guide this nation forward in a meaningful direction.

We in the Māori Party are profoundly disappointed that such a golden opportunity for Treaty justice was overlooked, and that the bill will proceed without allowing our practical, pragmatic proposals to be considered of value. Our vote against this bill is therefore a vote that registers our consistent opposition to any bill that fails to acknowledge and recognise the impact of the Treaty in its deliberations. Tēnā koe, Mr Assistant Speaker.

JUDY TURNER (Deputy Leader—United Future) : I stand on behalf of United Future to speak in support of the third reading of the Education (Tertiary Reforms) Amendment Bill. When this bill was reported back, the first thing I did was to go to the commentary provided by the Education and Science Committee to read the minority view of the National Party, because I remembered very clearly, particularly in the last Parliament, that that party, especially during question time, railed against the Minister for Tertiary Education. That party highlighted courses like the twilight golf course and sing-along courses, and it was particularly scathing about, and mocking of, Te Wānanga o Aotearoa and some of the other tertiary providers that were really making a genuine effort and doing some very creative things to attract back into tertiary education adults who had given up on their education and their futures. But the National Party did raise the issue of quality, and it became blatantly apparent—whether the courses that National chose to highlight were flawed has never been determined—that we were lacking quality assurance in the tertiary sector, and that the “bums on seats” policy had created some perverse outcomes.

This bill is an attempt to rectify that situation. So I was really keen to see why the National Party, having done all that, would be so concerned about the intentions of this bill and the provisions within it that that would cause it to oppose something that those in the sector—from the reading that I have done in educational publications—have been warmly supportive of. I have come to the conclusion that the National Party’s minority view reflects some of the concerns that submitters had but that it does not reflect the work that the committee then did to rectify those concerns. They were not big concerns; they were small concerns.

The first concern was around the issue of commercially sensitive information. Under this bill, of course, the Tertiary Education Commission and education providers will work more collaboratively together, and that is a great thing. They are also required to have long-term, 3-year plans, which I know the sector is thrilled about. It was sick of existing year by year, and it likes the opportunity now to develop 3-year plans. Those plans are allowed to be amended and adjusted as the situation demands. The bill also requires the commission to work in a mutually collaborative way with education providers right from the word go, as they develop their courses and the potential of their facilities. But there was some concern that during that process, commercially sensitive information would be required to be disclosed. The committee was right to look into that, but it discovered, however, that currently tertiary education institutions and the commission are obliged under the Official Information Act of 1982 to respond to any queries. So the need to disclose information is already built into the system and is an issue that providers have been addressing for some time.

The second concern was around procedural fairness. There was concern that there was a lack of procedural safeguards to protect providers from a misuse of power by the commission in regard to its new statutory powers. There was also concern that there was no right of appeal for providers, should they not agree with a ruling of the commission. I suspect we need to keep an eye on that matter. But it was made clear that providers are allowed to take a complaint to the Ombudsman or to seek a judicial review if the process that is being undertaken is unsatisfactory.

The third concern—and I think that this was the most important concern raised by submitters—was that this legislation would restrict academic freedoms and institutional autonomy. I think there was a submission from some fairly significant academics, who talked about the fact that institutions, particularly universities, have always been allowed to have an autonomous status in developing the content of courses and pursuing academic freedoms. There were some real concerns about that. However, the committee then recommended an amendment to clause 3, to make it explicit that the new functions conferred on the responsible Minister and the commission are to be exercised in accordance with the principal Act. And the principal Act makes provision for the preservation of academic freedom and institutional autonomy. Problem solved. So therein lies the problem. Those were the main concerns raised; those are the only things outlined in the National Party minority view.

I was reminiscing about the fact that some years ago I had read an interesting article—I am pretty sure it was about Singapore; I stand to be corrected if I have the wrong country—about a country that had taken some really strong steps to align both secondary and tertiary education more closely to economic development and the goals of economic development within that country.

Ron Mark: It was Singapore.

JUDY TURNER: Mr Mark has assured me that I have the right country. And there were some fantastic outcomes from that. The alignment of those two sectors meant that young people with a tertiary education were pretty much assured that they would come out into real jobs that would really advance the direction that Singapore was focused on. That is what I believe this bill is trying to do here; it is trying to make sure that any lack of quality that may have been present under the “bums on seats” policy is addressed, and that the commission starts to be much more consultative and much more collaborative with those who work in the sector.

I have had a lot of contact with private providers of tertiary education, and one of their great frustrations has been that they were constantly second-guessing the commission, and hoping that when they put in their charters for reapproval and applied for funding for the next year, somehow that would match up with standards that they were never very clear about. This bill—and this is why we welcome it—does away with all that uncertainty and makes provision for everybody involved in the tertiary education sector to talk together, to have long-term plans that are collaborative, and to be able to adjust those plans whenever that is needed and the circumstances demand it. For that reason, United Future is very happy to support the third reading of the bill.

COLIN KING (National—Kaikoura) : In speaking on the Education (Tertiary Reforms) Amendment Bill I would like to address just a couple of comments the previous speaker made—that is, that, effectively, private training establishments are not protected by the Official Information Act, and that they are exposed by the request for information. It is worth my noting, at the commencement of my speech on this third reading, that the concern is with how that is perceived on the outside, as far as the declaring of sensitive information about whether research relationships will be entered into. We know that confidentiality is a very sensitive matter where there is alignment between universities and research institutions.

I will address the issues that the bill presents from the point of view that at this time, while we listen to the rhetoric of this Government, which assures us that everything will sail off swimmingly into the sunset and that we will not have any more problems with tertiary education, I can inform Government members that they are dreaming.

We have a situation whereby one of our polytechs is already unsure of its future. The Open Polytechnic has a lot to contribute, in my view, and it has a lot to contribute from the point of view of the Industry Training Federation. Yet The Open Polytechnic will have to again re-establish its quality and relevance. Most of my qualifications were done around that organisation, and, from my point of view as a member, I found its quality and relevance to be outstanding. I would be horrified if the implementation of this bill was in fact the death knell of that institution—The Open Polytechnic—which has some 32,000 people enlisted and undertaking education of a high quality, of whom two-thirds are in employment.

It is a bit rich when this Labour Government talks about itself as though it is as white as the driven snow, because we can see that it was presiding over the tertiary education sector while we witnessed the most outrageous rorts ever brought upon the sector. Come the eleventh hour of this Government, in its state of paranoia, it brings in this centralised-management, overly prescriptive model of micro-management. But when we look at it from the point of view of other areas—say, the industry training area—we find that the Government turns a blind eye.

The Government is still loading up the Modern Apprenticeships programme with no sense of discipline and no sense of management. We are finding that with this so-called flagship policy of the Labour Government now in total disarray, it is an absolute shambles. Yet the Government is still talking about increasing the funding to 14,000 places by December 2008. We see situations where Modern Apprenticeships coordinators are not being held to account. They are costing the taxpayer hundreds of thousands of dollars with just one completion, or millions of dollars with a handful of completions. So I would lay the claim back at the feet of the Government. When will it rein in this outrageous behaviour around the Modern Apprenticeships programme?

On a basis of consistency, it should be holding those people to account. In fact, a number of Ministers for Tertiary Education have said that in the near future they would change and strengthen the policy, and hold those Modern Apprenticeships coordinators to account. But we do not see any result of that.

Can this Government be trusted? I do not think so. We can look back on another incident, which I will take the opportunity to have recorded in Hansard during this third reading of the Education (Tertiary Reforms) Amendment Bill. It is related to the commencement of a good policy in 2002 through to 2004-05—that is, the programme for enrolled nurses. But the Government butchered that as well. There were 240 students who undertook that training. They were the very best in the aged-care sector, and they took on the training to reach the qualification of enrolled nurse. However, when that last class sat their qualifications and graduated, their qualifications were taken away the day after.

It is under that sort of climate and environment that this side of the House is extremely sceptical of the Government’s way of managing the tertiary education sector. The sector has been seriously rorted all the way through. It is far too much about institutions and not enough about quality and relevance. It is an absolute shame.

We see in front of us further complexity. We have not seen any reduction in the number of staff of the Tertiary Education Commission—in actual fact, we find that it is now increasing. We are seriously concerned about the complexities that are emanating from this bill. The Tertiary Education Commission has presumptuously rolled ahead and is using the bill as if it is now law. As my colleagues on this side of the House have explained, we are already seeing the unintended consequences of the issues.

There is a lot of work to be done in the industry training situation. We still have issues around the overlapping provision—that is, where the polytechnics mimic the behaviour and training of the industry training organisations and are able to access equivalent full-time student funding. When a question of that nature was directed to the previous Minister for Tertiary Education, Michael Cullen, he said honestly—I must give him that—that the Government had not thought that one through and did not have an answer.

We are still living in a very fluid situation, which this bill does not address. When we stop to think about the situation those enrolled nurses encountered we find that it does nothing to give the public confidence that the Government will back people up on what they go into institutions to receive. For the Modern Apprenticeships programme and for those enrolled nurses, this Government should hang its head in shame. Those are just two examples of some very, very poor management of the tertiary education sector over the last 7 years.

Turning to the situation of this bill coming into law, I say that we have so much more work to do. When we look at section 195 of the Education Act, which was reviewed this year and which empowers the Tertiary Advisory Monitoring Unit to look at the financial basis of tertiary educations—basically, the institutes of technology and polytechnics section—we see that only three were on their knees at this time. However, it is a very volatile situation. The institutes of technology and polytechnics effectively have got themselves into a problem whereby they are coming to Wellington about every month, begging for money. Yet the problem at the other end is that there is no quality. The report on section 195 stated that in future we should look at the quality coming out of the institutes of technology and polytechnics section, because that, along with financial viability, is hugely important to this country.

In conclusion, I would like to give an award to the Labour Government. I believe that in the last 7 years you—

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

COLIN KING: —have qualified in butchery. It gives me great pleasure to award the Labour Government a Modern Apprenticeship in butchery, level 4. I award this certificate to those members on the other side—

Nathan Guy: What does it say?

COLIN KING: It states: “The Labour Government. Modern Apprenticeship in Butchery, Level 4. This is to certify that for 7 years the Labour Government has butchered the tertiary education sector. Awarded on 4 December 2007.” Thank you, Mr Assistant Speaker.

The ASSISTANT SPEAKER (H V Ross Robertson): Just by way of explanation, every time the member uses the word “you” he is referring to the Chair. In future, the member must refer to a Minister or another member as “the Minister” or “that member’’—that is, in the third person.

RODNEY HIDE (Leader—ACT) : I rise to say that the ACT Party will be opposing this bill, and to explain why. This bill means more interference with the people who are actually doing the work. It means more State direction of how our universities should function, and it means less diversity. It means more bureaucrats, and it means more taxpayers’ money being spent on collaboration, talkfests, and planning, but not on education. That is why we are opposing it.

MOANA MACKEY (Labour) : I am very happy to take a call on the third reading of the Education (Tertiary Reforms) Amendment Bill. I say to the National Party that it cannot have it both ways. I say to the member Colin King that the certificate he held up can stay firmly where it currently is, which is with the National Party. National uncapped the numbers and left us with the mess that we are now having to clean up.

I say to National members that, year after year, Labour members have been criticised by them in question time in this House for the kinds of courses being provided by an unregulated tertiary sector with a “bums on seats” model that did not work and that promoted low-quality, low-cost courses. They said that the people who went on those courses assumed they were going on quality courses, but they were not. Now we have this complete about-face from National members, who are apparently saying they did not mean any of that, that they quite like the old system, and that they oppose this one because it means more State control.

I ask National members whether they will repeal this legislation if they become the Government. There is silence. I ask whether they have any policy in this area. No.

Christopher Finlayson: You’re speaking.

MOANA MACKEY: They say that it is my turn to speak now. Well, I say to them that they have made a number of speeches tonight, and Colin King, for example, did not mention it at all. Again, I say to National members that it is very, very easy to criticise. It is far easier to do that than to come up with a plan for the tertiary education sector that ensures that the institutions have more secure funding, that they can plan for the longer term, and that they can react far more quickly to the needs of their community and the needs of the regional, local, and national economies. This bill does that.

I was a member of the Education and Science Committee that heard the submissions. I ask National members where all the outraged opposition to this bill was when it came to the submissions. Where was it? It was not there. A number of very good points were raised during the submission process, particularly by the universities, and we took them on board and we made amendments to the bill. Certainly, most of the submissions were on the issue of academic freedom, and the select committee took them very seriously. But this bill had a surprisingly small number of submissions on it, given the incredible scope of what it is doing and how significant it is, and I believe that that was because the sector it wants more long-term security. It was ironic that, for all that the universities were going on about not wanting the Minister to be involved, a number of the universities that came along to the committee said that they wanted to keep the charters, which are signed off by the Minister. They did not want to get rid of them—and, of course, they can keep them if they want. But they wanted to put in the bill that all the tertiary institutions should have to have these charters.

Just before I sit down I want to raise one other point, which is the issue that many members have talked about tonight—that is, the decision made by Auckland University to restrict entry to its courses. Going by some of the speeches I have heard tonight, it would seem that there are no restricted courses in New Zealand at all. I would love it if anyone who wanted to go to university to become a doctor, and who could pass all the relevant standards in order to become a doctor, was able to do so, but, as we know, our universities that provide medical schools work within a budget, and what this Government will be saying is that here is the budget. Let us be clear: since 2006 we have not been restricting numbers. There has been a 19 percent increase since 2006—$1.2 billion—in the money going into this sector.

John Hayes: Foreign students.

MOANA MACKEY: Mr Hayes, who is sitting way up the back of the Chamber—he is not sitting down here with all his colleagues—says it is all going on students. Well, students are actually a very important part of the tertiary education sector. That reminds me of another point I wanted to make, which is that not only has the Labour-led Government invested in the tertiary sector, from industry training—which Mr Colin King was talking about—through to universities, but also it has made university more affordable for students, made paying off student loans more affordable, and at the same time it has increased access to student allowances. This Government cannot be accused of restricting access to universities.

I say to the provincial tertiary institutions and to our private training establishments around the country that they should step up to the challenge that Auckland University has put out there. It has said that it may not want to provide certain courses any more. Well, we have some very good tertiary institutions around the country that could step up and provide those courses to students, and those students would not have to move away from home, which they always have had to do in the past. I think one of the worst things about our tertiary sector was that 10 years ago university was considered to be the only area worth going to. If one wanted any sort of future, one went to university, even if university was not necessarily the best provider of what one wanted to study.

This bill also says that we value our polytechnics, we value our institutes of technology, and we value our private training establishments. We are saying that where there is a need that should be delivered within the tertiary sector, then it should be delivered. Again, I say to the provincial polytechnics and the private training establishments that they should step up. Auckland University has said that it may be at near capacity, and it may not want to have unrestricted access to all its courses any more. Well, that is an opportunity for other tertiary institutions to step up and say that they are willing to offer those courses, and maybe students and their families would be saved a little money because the students would not have to move to Auckland, Wellington, Christchurch, or Dunedin in order to study those courses.

I believe that this bill is a very good bill. I am disappointed that the National Party is not supporting it, given how much those members have gone on about the unregulated access to money in the tertiary sector over the last 5 or 6 years.

Hon BILL ENGLISH (Deputy Leader—National) : I would be very happy to explain to that member why National opposes this legislation, but let me say first that when it comes to tertiary education reform, never have so many people who thought they were so smart been so wrong for so long with so much of a waste of taxpayers’ money as the Labour Government in its 8 years of tertiary education reform. This Education (Tertiary Reforms) Amendment Bill is what the Labour Government said it would do in the year 2000. Here we are, in the year 2007, before this Government has got around to getting the bill in—

Nathan Guy: Under urgency.

Hon BILL ENGLISH: —under urgency, at the end of the year to apply in 2008. We did some rough calculations on what this reform has cost: $400 million. The Labour Government has spent $400 million thinking about tertiary education reform. There have been a few fundamental flaws in that thinking. One has become apparent today, and I would have expected the Government to explain its policy. Here is a simple question: does Labour believe in restricted entry to university?

Hon Marian Hobbs: To medical schools, to architecture schools, to law schools?

Hon BILL ENGLISH: No, I ask whether Labour believes in restricted entry to all university courses, as Auckland University is proposing. Well, those members are caught on the horns of a dilemma, because the direct implication of its funding system is that all universities will restrict entry to their courses.

Hon Marian Hobbs: It’s a shame you just thought of it, Bill.

Hon BILL ENGLISH: But, of course, the Government’s supporters are against that, which is why that member is so concerned. What will Labour members say to the Māori and Pacific Island communities in Auckland? I ask how they will explain to those communities, which have the same aspirations as everyone else in New Zealand for a high level of education for their children, that entry to Auckland University courses across the board is now restricted. The big question is how it will be restricted. Well, it will be restricted according to secondary school qualifications. That is obvious.

Hon Marian Hobbs: Is it?

Hon BILL ENGLISH: It is, because how else could one do it? What it means is that if one did not do too well at National Certificate of Educational Achievement (NCEA) at secondary school, which a lot of Māori and Pacific Island students do not, then one will never get to go to university. That is determined by the time one is 15. If there was any more of a fundamental breach of Labour’s apparent crocodile tears about equity, then that breaches it.

Hon Marian Hobbs: You got it wrong again.

Hon BILL ENGLISH: Where does the member think all the new university students have come from over the last 15 years? They did not come out of a huge increase in the number of secondary school students; they came out of an increase in the number of mature students. There are more secondary school students than there were, but by far the biggest increase has been in the number of mature students. If we stand at the enrolment line at Auckland University with the mature students and ask them what they got for NCEA level 3, they will ask: “What is NCEA? I did School Certificate, and I failed it. Here I am, aged 30, realising that there is a second chance, and I am going to university.”, and many of those people succeed very well.

Labour members have found that after 8 years of tertiary education reform, $400 million worth of thinking about it, and endless damage—particularly to the polytechnic sector—they have achieved one thing. It is the one thing that most of them do not want; that is, restricted entry to university. We could argue for and against the merits of it, and we will have that discussion. But the question is whether this is what Labour wanted, and the answer is no.

I will just take members through some of the history, and my colleague Dr Lockwood Smith will agree with this. The “bums on seats” system that Labour members so roundly condemned was never as open-ended as they say it was. It had a series of controls under National. Half a dozen people sat around the desk with the Minister and they gave the institutions the opportunity to grow. But they had some fiscal control, and they certainly had plenty of flexibility. They did not have a long, complicated bill like this one that dictated all the processes. They did not have 400 bureaucrats—they had about six. Then what happened was that Steve Maharey got in. Well, what a disaster that was. He took his eye off the ball, and the tertiary institutions went crazy because while Labour was busy constructing this complex and elegant sociological model of tertiary education, the institutions were flat-out breaking all the rules, exploiting the loopholes, and running up hundreds of millions of dollars of wasted taxpayers’ money. Not all of them did that, but quite a few of them did that while Labour members faced the other way. Their whole theory about tertiary education was something they were in love with, and they had no idea what was going on in the real world.

I was pleased to be a spokesman who helped embarrass them about that: about the fact that they spent a billion dollars over 4 years on diploma-level courses that no student finished. It was the biggest single waste of public money ever that I have come across, apart from, maybe, Think Big. A billion dollars was spent on diploma courses that no student finished, and the Government did not know anything about it. So then the Government cracked down because it was such a political embarrassment. But when it cracked down, it cracked down with the most complicated system one could ever come up with: there were charters, profiles, investment managers, and 400 bureaucrats. I can recall reading a stack of documents; there used to be about a dozen different versions. I would read a stack of documents about the Government’s plans for tertiary education, and do members know the one thing it left out in all those documents?

Hon Member: Students.

Hon BILL ENGLISH: Students never got mentioned. This was office-tower, middle-class, well-paid, secure, risk-averse New Zealand telling our 19 and 20-year-olds what their future was going to be. I conducted a few informal student surveys—

Hon Marian Hobbs: You really cared about students!

Hon BILL ENGLISH: The member should listen to this. I conducted a few informal surveys of students and I said to some students: “Have you read the statement of tertiary education priorities, and do you know the eight principles of relevance, equity, blah-blah-blah, and all that sort of rubbish, and the strategic outlook”—

Hon member: And they all said “Yes”.

Hon BILL ENGLISH: They all said: “Yes”. And then they all used four-letter words that indicated that they did not feel that the views taken by a bunch of middle-aged bureaucrats sitting in an office tower were very relevant to their decisions.

Hon Marian Hobbs: They also used the same four-letter words about student fees.

Hon BILL ENGLISH: Well, this is the point. Who takes the risks about making a decision for tertiary education? I will tell members who takes the risks. One example is a 19-year-old student who does not really know what he wants to do, who sees some programmes on TV that makes some occupations look attractive, and who listens to his parents who make other occupations look attractive. His friends are all going in one direction, his girlfriend is at the other end of the country, and he has to make up his mind. He does, and he manages to do it without Dr Cullen or the vet who thinks he can run the place.

Another example of someone who takes the risks is the 34-year old woman with a husband in a low-paying job, who has a couple of kids, who has capabilities that she has never really explored, and who decides she really wants to be back in the workforce. She is willing to live hard, to work hard, to look after her kids, and to do her study to get a tertiary education. In this new world that Labour has planned, she does not fit, because she will not meet the criteria for restricted entry to university. The plan that was cooked up between some 27-year-old PhD graduate and a general manager at the polytech to try to get their negotiation sorted so they could get their cash happens to stop her course from running.

So a group of people who have no idea about the real world are trying to write plans for the knowledge economy, and I just say to the House that it will not work. It is too complicated, it is too refined, it is called “strategy” but it has none of the content of strategy, and in the end it treats young New Zealanders as if they were mindless automatons willing to go shape their lives on the musings of people like those members opposite. Who would make life-changing decisions on the basis of what that rag-tag front bench says is important for New Zealand? Nobody! And that is why National is voting against his legislation.

Dr the Hon LOCKWOOD SMITH (National—Rodney) : This bill will be debated in four parts: the three parts of the bill, plus the title. Part 1, which we debate now, contains a number of key issues that National wishes to draw to the attention of the Committee of the whole House. The first issue relates to the setting of the annual tax rates. Some of my colleagues will focus on that issue, because there is, in fact, a golden opportunity tonight for the Government to prove that it cares about the income tax rates. There is the opportunity tonight, if the Government believes in reducing the tax rates, to do so right now with this legislation, because it sets the rates for this year. So, if the Government is serious about reducing personal income tax rates, it has the chance to do that right now.

But I want to draw to the attention of members of the Committee the other issues that we will focus on in respect of Part 1, which contains a number of serious issues. The Government is about to introduce Supplementary Order Paper 167 in the name of the Hon Peter Dunne, which will introduce new arrangements for the taxation of redundancy payments. Now that is a new proposal, and it has not been to the Finance and Expenditure Committee. If it had been to the select committee, there would have been submissions around such matters as why redundancy payments had been chosen and why lump-sum payments for accident compensation had not been included, even though a person may receive a lump-sum payment for loss of income that covers more than 1 tax year, just as is the case with redundancy payments. There is an even stronger argument for accident compensation lump-sum payments that cover more than 1 tax year to have tax relief in the same nature as that being given to redundancy payments. But, no, a Supplementary Order Paper was marched in at the last minute. We saw it only today. It has not been anywhere near a select committee. All of the issues that should have been covered before a Supplementary Order Paper comes to this Committee will not have been covered. Again, colleagues of mine will discuss that issue.

Supplementary Order Paper 167 also covers the vexed issue of finance leases. The Government sneaked into the select committee a while back Supplementary Order Paper 119 in the name of the Hon Peter Dunne. Government members did not even tell us it was retrospective and to do with finance leases versus operating leases; they tried to be all quiet about that. The Supplementary Order Paper caused a hell of an uproar, because it would have put a whole lot of existing finance leases out of business and caused major problems for certain businesses in New Zealand. After the select committee heard submissions on Supplementary Order Paper 119, the Government withdrew it. What happened then? Government members marched into the Chamber today, bringing Supplementary Order Paper 167 in amongst all the other papers.

Supplementary Order Paper 167 sets out a new attempt to handle those leases. When I talked to the businesses involved, I was advised that there are still major problems. There has not been adequate consultation. The provisions in Supplementary Order Paper 167 are a compromise, I know, but there is no need for that compromise. The Government could close the loophole going forward and not put existing deals out of business. But there is no doubt that if the proposals in Supplementary Order Paper 167 to do with finance leases go through tonight, there will be business deals that are put out as a consequence of that. It is bad lawmaking when through retrospective legislation we interfere with deals that have been done in good faith under existing law. That is another issue we intend to debate in relation to Part 1.

Then we get on to all sorts of other issues in Part 1. The issue of the research and development tax credits is covered in Part 1, and we will be making some comment about that. There is the issue of raising the threshold limit for charitable donations. We support that proposal; it was National Party policy. We will be covering that. There are also the issues about the change of name for Working for Families tax credits, and, of course, the new KiwiSaver provisions for setting up the tax credit provisions for employers.

We wish to cover in some detail all of those specific issues in Part 1 tonight. In fact, we will be moving amendments on some of them tonight because they are so outrageous. The provision to change the taxation treatment of redundancy payments in isolation and in an ad hoc fashion has had no consideration by the select committee. It is just absurd to bring in a provision like that. The industry out there today is gobsmacked that there has been no chance to make submissions on that. Other issues could have been covered much more sensibly with a generic provision such as that. As I mentioned a moment ago, my advice on new clause 78BB and the provisions on finance leases on Supplementary Order Paper 167 is that they will actually kill existing deals. There will be litigation. The Government should not be doing this. When the select committee looked at that issue in relation to Supplementary Order Paper 119, the Government withdrew that Supplementary Order Paper because it saw that it was a poorly thought through provision with far greater implications than the Government had assumed. As a consequence, the Government withdrew that Supplementary Order Paper.

It is not good enough to now march Supplementary Order Paper 167 into this Committee without scrutiny. The provisions on that Supplementary Order Paper will cause existing deals to be destroyed, and for that to happen without the chance for scrutiny by the select committee is not good enough. That is what the provisions on Supplementary Order Paper 167 will do. I want to draw the attention of the Committee in particular to the new clause 78BB, which is the bit that handles the finance leases; to new clause 85B, which is the bit that handles the redundancy payments; and to new clause 155B, which includes the tax administration amendments in respect of those redundancy payment provisions. None of those measures have been to the select committee, and no submissions have been heard on them. They will have a major impact on New Zealanders, businesses and ordinary taxpayers alike. There has been no chance for people to make submissions on that Supplementary Order Paper.

This is no way to implement tax law. It actually undermines the good work I acknowledge that the Minister has done. The Hon Peter Dunne has put out a discussion document and gone through a reasonable process, then undermined it at the last minute with Supplementary Order Papers containing provisions that were not adequately consulted on and that no submissions have been heard on. I appeal to the Minister. We will be proposing a number of amendments tonight, one of which will be in relation to the redundancy payment provisions on Supplementary Order Paper 167. I would like the Minister to seriously reflect on the fact that there has been no chance for submissions to be heard on them. Thorough consideration should be given to them tonight.

CHARLES CHAUVEL (Labour) : I would like to speak briefly on new clause 85B, which Dr Smith has just mentioned. New clause 85B appears in the Minister’s Supplementary Order Paper 167. It is the provision that will give tax relief for redundancy payments. I am sad to hear that the National Party will vote against another tax cut that this Government is bringing before the House. But there it is.

Let us just have a look at the scheme of this tax relief measure, which will be introduced for employees who are in a difficult situation and who deserve some sort of relief. The legislation that is set out in Supplementary Order Paper 167 will make the taxation of redundancy payments fairer to low and middle income New Zealanders. Clearly, redundancy payments are employment income, so it is fair that they are taxed. Some members who have practised in the employment field will remember that in the 1980s and prior, redundancy payments were subject to a specialist and favourable tax regime whereby they were taxed at a very low rate. Under the current law, which has remained—as far as I can recall—since the early 1990s, low and middle income people can be pushed into a higher tax bracket if they receive redundancy pay. If that happened, it would come at a very difficult time for most people. Clearly, it would be a terrible thing for someone to have to contemplate, on top of losing his or her job.

The Supplementary Order Paper will introduce a simple tax rebate to apply to redundancy payments received on or after 1 December 2006. This rebate will allow low and middle income New Zealanders to retain more of their redundancy pay and will keep complexity and compliance costs to a minimum. The rebate will be based on the flat rate of 6c per dollar, up to $60,000 per redundancy. Let us think of an example. It means that somebody who receives a redundancy payment of, say, $20,000 will be able to claim a tax rebate of $1,200. Someone who receives a $60,000 redundancy payout will be able to claim a rebate of $3,600. There is a maximum redundancy payout provided for in the Supplementary Order Paper. The maximum payout that qualifies for a rebate is $60,000, so the rebate itself would be capped at $3,600.

I am sad to hear members opposite announce the intention to vote against this tax relief measure for low and middle income New Zealanders. These changes will make the taxation of redundancy payments fairer and give certainty and more security to an issue that has been of concern to workers and unions for some time. I am very pleased to support the measure.

CHRIS TREMAIN (National—Napier) : I rise tonight to speak on various parts of the Taxation (Annual Rates, Business Taxation, KiwiSaver, and Remedial Matters) Bill, but for starters I will focus on Part 1. As my colleague Lockwood Smith said, we will be canvassing various clauses of the bill, clause by clause, and taking it issue by issue as it comes along. In particular, I will focus tonight on three areas. Firstly, I will deal with clause 3 and the rates of income tax for 2007-08. Later on tonight I will have a look at the changes to the charities legislation in clauses 27 and 85. Clause 85 deals in particular with rebate in respect of gifts of money. Later on, I will look at the new sections KJ 6 through KJ 12, which introduce changes to the KiwiSaver employer tax credits. So there is a fair bit to cover. I know that other colleagues will deal with the various issues tonight.

In rebuttal of the chairman of the committee in regard to Supplementary Order Paper 167, the issue here is a matter of process. This particular issue did not come before the committee, but has ended up in a Supplementary Order Paper before us in the Chamber tonight without a wider consideration of other matters such as accident compensation payments, which my colleague pointed out could have been brought into consideration along the way. Once again, a Supplementary Order Paper has been thrown on the Table without due consideration and without coming before the select committee, and in our opinion that is not good enough.

I focus on clause 3, “Rates of income tax for 2007-08 tax year”. Taxation rates in this country have been far too high for far too long. Under this Labour Government we have seen tax rates climb, not fall. Since 2000 the number of people in the 39c tax rate has increased, and as a result of that we have seen taxation collected in this country like never before. For the year ended 30 June 2007, $56.5 billion in tax was collected from this country. If we take a step back to the year 2000, $34.4 billion was collected in taxation. That is a total increase of $22.1 billion over 7 short years—$22.1 billion. That is a whopping 5,525 additional tax dollars per every man, woman, and child. It is a 64 percent increase in direct taxation on the basis that this Government knows best how to spend taxpayers’ money—not its own money, but the taxpayers’ money.

How have we ended up in this position? There has been absolutely no movement in tax rates over the course of this Government, except in this latest bill that we see before us. I call it the “Too Little, Too Late Bill”. There are some tax deductions now but we have not seen that over the course of this Government, until this stage. What have we seen? Taxes are up, the thresholds have been unchanged, and we saw the “chewing gum tax cut” threshold proposed and then taken out by this Government. We have seen tax bracket creep as people have moved into higher tax brackets. When we started out, there was the proposal by the Government that no more that 5 percent of the country would be above a 39 percent tax bracket. Now we see nurses, policemen, tradesmen, and wharfies all creeping up into that 39 percent tax bracket through bracket creep. They are paying more and more tax. We now see 12 to15 percent of taxpayers in that higher tax bracket.

One has to ask whether we are going to see personal tax cuts over the next year? We have seen Dr Cullen out there proposing it, having his arm twisted by the Prime Minister. I come back to a Cabinet paper signed by Michael Cullen in 19 April 2007. There will be Ministers on the other side of the House, for example Mr Shane Jones, who were not present when this paper was signed off. What it shows is the determination of this Government to keep tax rates high. Clause 23 states the commitment from Dr Cullen: “To maintain our commitment to the long term fiscal objectives”—that is Cullen-speak for building the kitty—“I may need to make some adjustments to future Budgets. These are likely to be that we do not adjust tax thresholds in the medium term, thereby retaining fiscal drag and potentially allowing tax to GDP ratios to rise slightly. Accordingly, this paper seeks Cabinet agreement to rescind our previous decision to adjust income tax thresholds.”

There we go. It is a paper no doubt signed off by the Minister sitting in the chair tonight, Peter Dunne. It is a paper that is going to rescind on any future tax increases. It goes on to say: “Within the projection period, i.e from 2011-2012, we will adjust tax thresholds for inflation.”

TIM GROSER (National) : I address clause 3 in Part 1, and I will read it out in a slightly reconstructed way. What it says is that the income tax imposed by section BB 1 of the Income Tax Act 2004 will once again apply in the 2007-08 tax year. If we actually sit down and interpret what that means in more technical language used by economists, we see it means that once more we are doing absolutely nothing about bracket creep—absolutely nothing. This is the meat and potatoes of the Taxation (Annual Rates, Business Taxation, KiwiSaver, and Remedial Matters) Bill. We have here a huge bill of great complexity—it is 409 pages, not counting the other Supplementary Order Papers—and there are various parts of it that move the game forward in the right direction. For example, if we look at business taxation, we see that the cut in the corporate tax rate is something that makes some sense. But, on the other hand, what we see even in that area is the lack of a coherent overall strategy to drive business taxation down to where New Zealand actually needs it. In New Zealand there were 44,000 partnerships as at February 2006. There are 74,388—let us round that up to 75,000—individual proprietorships. None of these will benefit from that cut, even though the cut itself makes a contribution in that general area.

This is the heart of the matter. We have been looking for 7 or 8 years to this Government to come forward with a coherent strategy. This was its opportunity, and what do we see? We see that it just wants to deal with it by repeating the rates set out in the schedule of the Income Tax Act 2004. This is against the background of some central statistics that are absolutely crucial to the political debate between the two major parties. These will form the basis of a vigorous contest between the two parties, and will explain why, in the minority report of this vast bill, the minority view of the National Party simply stated: “The National Party recognises that the company tax rates will be dropping to 30 percent, but we believe that personal income tax rates should also be lowered.” We cannot have a clearer statement of intent on a central issue than that.

As recently as 2 years ago we looked at the statistics, and we saw that $20 billion more in tax had been accumulated by Dr Cullen since he took over as the Minister of Finance in 2000. That figure will be well in excess of $20 billion today. The OECD revenue statistics recently quoted a very interesting comparative study of Australian and New Zealand economic performance. The total percentage of revenue collected at all levels in Australia, namely provincial, state, and federal levels, was 30.9 percent in 2005—say, 31 percent. In New Zealand it is six points higher than that. That is one of the margins that explain why New Zealand has fallen so rapidly in the last 7 years behind the comparative economic performance of Australia. The punitive rate of 39 cents in the dollar, when it was introduced for reasons that made no sense at all—we all understood what it was about when it was introduced; it was the politics of envy—was explained away at the time as attracting only 5 percent of taxpayers. But because of the bracket-creep phenomenon and because there has been no systematic attempt to address the issue of comprehensive income tax reform, we now find 14 percent of New Zealand taxpayers are paying that rate. This includes basic professions. It includes schoolteachers, nurses, and junior accountants. No wonder we are seeing the exit of 75,000 New Zealanders across the Tasman or to other parts of the world—80 percent of whom are under the age of 40. We are losing our best, youngest, most innovative New Zealanders, and part of the reason, but not the whole reason, is this almost unbelievable unwillingness to use the massive accumulative surpluses to actually deal with the problem.

GORDON COPELAND (Independent) : I am delighted to take a call on Part 1 of the Taxation (Annual Rates, Business Taxation, KiwiSaver, and Remedial Matters) Bill, because 17 December 2007, just 6 days away, is the 20th anniversary of the start of my long campaign to advocate for a far fairer and more generous tax rebate scheme in respect of gifts made to charities and churches in this country. Over those 20 years I have been involved in advocating this to every single, successive Minister of Finance. Oddly enough, the only one I missed out was the Hon Peter Dunne, who is the Minister in the chair tonight.

I think this is a day not only for me to celebrate this achievement but also, more important, for churches and charities to come to grips with the reality that the rebate that until now has been only $630 per annum following a gift of the massive sum of $1,890 maximum will now be entirely uncapped for both individuals and companies. Now even a $1 million gift made by an individual will receive a full 33.33 percent rebate, or, in that case, $333,333.33. Companies will go from just 5 percent of net income to, potentially, 100 percent of net income, and that is something that, as I say, is to be celebrated.

I am also delighted that the business tax reduction from 33c to 30c, which is reflected in Part 1 only because of the consequential amendments that follow from it, is occurring. I remember taking part in the debate in the 2005 election—when, of course, I was a member of the United Future party—among all the financial spokespersons of all the parties. There were only two spokespersons in that debate who were advocating for a reduction in the business tax rate: myself and Rodney Hide. No one else was. No other party in this House had that as its policy, and I say that because the commentary always refers to this legislation as a confidence and supply win for both United Future and New Zealand First. Well, if New Zealand First was in favour of business tax cuts at that stage, it certainly kept it a very well-kept secret from the rest of us.

I also applaud the KiwiSaver changes that are made in Part 1. I have long been an advocate for tax credits, which this bill now provides for both employees and employers to encourage savings. It always seemed to me to be an anachronism that whereas such incentives to encourage savings apply in virtually every other Western jurisdiction that I know of, in the late 1980s and the early 1990s we became purer than pure in attempting to have a system that was supposed to encourage savings by having absolutely no tax breaks whatsoever. I think that was a ridiculous step, and I am very glad to see it is now being changed.

So far I have been praising Part 1, but I want to say, as the Southern Man said, it is a hard job to find the perfect income tax bill. There is a great failure in this particular bill, and that is that of the Hon Michael Cullen, who, contrary to the undertaking he gave in Budget 2005, did not adjust personal income tax rates for fiscal drag. Even the very small movement, which Michael Cullen promised in Budget 2005 and reneged on in Budget 2007, was in itself, in any event, totally inadequate. If we adjust for inflation from the year 2000, the 33c tax bracket should now move from $38,000—which is now well below the average full-time wage income of about $44,000—to $46,000, which indeed would be above the average income figure. That means a great deal for hundreds of thousands of middle-income New Zealanders. Likewise, the 33c bracket should have moved in this bill from $60,000 to $73,000.

I say tonight that in respect of my new party, Future New Zealand, we are committed to regularly adjusting personal income tax rates in this country to reflect inflation. It is unconscionable to do otherwise. For many, many years not just Michael Cullen but other Ministers of Finance have allowed fiscal drag deliberately to work in favour of the Crown and against the taxpayers of New Zealand, and that is unacceptable. The taxpayers of New Zealand should come first.

PANSY WONG (National) : It is actually quite coincidental that my call is following that of Gordon Copeland, who is one of the three members, including myself and Katrina Shanks, who are members of the Institute of Chartered Accountants. I am sure that the three of us are delighted to see the media release put out by the very sensible members of the institute, which said the Government’s latest move to introduce this special provision for tax relief on redundancy payments does nothing to fix the more fundamental problem of New Zealand’s progressive tax rate structure. This Labour Government complicated the tax structure even more by introducing the 39c rate, so I am quite sure that at the last minute there was a backroom deal somewhere whereby the Government brought in a flat rate of tax rebate for redundancy payments. I heard the compassionate speeches made by the Labour member, who said how wonderful it was and how considerate it was that that move was made for the lower and middle income workers of New Zealand.

I thought that while we are in a compassionate mood I would put forward a Supplementary Order Paper and invite the Minister in the chair, the Hon Peter Dunne, to comment on whether he sees fit to support it. Personally, like members on this side, I cannot see why, on the one hand, we gave special consideration to redundancy payments but, on the other hand, we exclude people who receive lump sum compensation payments for permanent impairment. So if the Minister sees fit to give relief to workers who face the unfortunate situation of redundancy and to give a rebate on their lump sum payment, I really think that the Minister needs to take a stand as to why individuals who are unfortunate—usually in circumstances not of their own making—suffer permanent impairment, and receive lump sum compensation should not be entitled to have the same relief as is offered in the late Supplementary Order Paper put forward by the Labour Government. I say to the Minister that many individuals who are injured, whether they incur injury at work or outside the workplace, would be of working age, and that permanent impairment would lead to hardship that, I would say, in comparison with the situation with redundancy payments, is of a more extensive and permanent nature. Why should those individuals be punished on top of their physical injury? The fact is that they suffer from permanent impairment, so why, financially, can they not get the same relief? I am sure that the Hon Peter Dunne will be looking very hard at this very sensible amendment I have put forward.

My colleague, the very hard-working Dr Wayne Mapp, is less positive. He has cast doubt on the compassionate nature of the Minister of Revenue, the Hon Peter Dunne, but at this stage I have not decided to concede that. I hope that the Minister will in the next while start to look at my amendment. I think he will owe the public an explanation if he turns down this very sensible amendment.

The other provision I will comment on—and it is one I actually support because it is basically National Party policy—is in terms of the tax rebate and removing the cap for deduction for contribution donations made to charity. I just want to say that it takes the National Party to really get Labour and United Future into the modern day, after all, where donors should be rewarded and charitable organisations should be recognised for the good work they do. I think this is a great initiative.

Hon PAUL SWAIN (Labour—Rimutaka) : I am totally bemused by what I am hearing from the National Party. You see, the National Party has said, for example, that, as far as the totality of the Taxation (Annual Rates, Business Taxation, KiwiSaver, and Remedial Matters) Bill is concerned, it supports cuts to the business tax rate. It supports, for example, the new research and development provisions. National has always said that. Then I heard Pansy Wong say that she has long campaigned for and supported the provisions that allow tax incentives for people and companies to make charitable donations. She said all that. If one listened to such speeches, one would not believe that National is going to vote against the bill.

Hon Mark Burton: What are they voting against?

Hon PAUL SWAIN: I am not sure. What I think would be a useful thing for National members to do—

Hon Mark Burton: They always just vote against it.

Hon PAUL SWAIN: Well, they do; they just oppose, oppose, oppose.

What National members could do is say: “We don’t like Labour’s tax policy generally. We don’t like the differentials in the tax rate even though the Government has indicated there might be some changes coming in, but we think this is generally a good move and we should vote for it.” That would be a sensible thing for National to do, and it could campaign on the bits that it does not like. But, no, National is going to vote against the bill. It is completely and utterly bemusing, and I simply do not understand it. Pansy Wong said she strongly supports tax incentives for people and companies to make charitable donations, and Gordon Copeland said he has campaigned on this issue for a long time. Everybody thinks it is a good idea, so why does the National Party not vote for it? It is a very, very simple matter.

I want to talk about the redundancy provision. Once again this is taxpayer-friendly—

Craig Foss: Declare your interest!

Hon PAUL SWAIN: Well, no, this does not apply to the fact that redundancy provisions are not in our particular contract—more is the pity, I say. The truth is that this will have a positive impact on low and middle income earners.

Pansy Wong: What about accident compensation sufferers?

Hon PAUL SWAIN: I am interested to know from Pansy Wong whether this is taxpayer-friendly.

Pansy Wong: What about accident compensation lump-sum payments?

Hon PAUL SWAIN: Yes, but is this particular issue taxpayer-friendly? One has to say that it is. Therefore, I ask why the National Party is voting against it. What has National got against helping out people who through no fault of their own get redundancy payments and getting better tax treatment for them?

I want to speak now on behalf of the workers of South Pacific Tyres. Fortunately, this legislation is effective from 1 December 2006, so it will be able to take into account redundancy payments that were made to those workers. What happens now is that people will be entitled to a rebate, which will be based on a flat rate of 6c per dollar up to $60,000 in redundancy. That means, for example, that if a worker gets a $60,000 redundancy payout—and some people who have worked for 17 or 18 years in a particular place might be entitled to something like that—that worker is entitled to a tax rebate of $3,600, which he or she applies for. If, for example, a worker is entitled to a $20,000 redundancy payout, then he or she is entitled to a flat-rate rebate of 6c, which comes out at a $1,200 rebate. This is money going back into the hands of those workers. I say to the National Party that this is a good thing.

In the old days, up until 1992, the tax rate on redundancy was 5 percent. Then the National Party changed that and introduced a system whereby people got taxed on their normal rate. The problem now is that workers can be earning during the year, then get laid off and receive their redundancy payment, and that takes them into the highest bracket, because the total income is assessed for tax purposes in that tax year. What we are trying to do is say that, in fact, the redundancy payment is different from so many other things. It is compensation for loss of earnings, and it will enable workers to try to put a bit away when they are out of a job, until they get a new one. In this situation we should tax people more fairly, and I say that is a good thing. People should be able to get some tax relief when they have lost their jobs through no fault of their own.

I come back to my fundamental question. If the basic argument is to help these people out a bit, because it is no fault of their own, why is the National Party opposing this? It just does not seem—

Pansy Wong: What about accident compensation?

Hon PAUL SWAIN: Members are saying: “What about this? What about that?”. Why do they not support this legislation?

CRAIG FOSS (National—Tukituki) : I think it is polite first of all, before we enter the Committee stage, to thank those who have been involved in the formulation of this bill, those who sat around the Finance and Expenditure Committee table, and the officials who helped us wade through it. I have a problem, though, in that since the bill first arrived at the select committee there has been a change in the chair of the committee; also, the bill has changed radically from the one the select committee first considered. We had submissions on it and changes from officials, etc., but the bill that has arrived here today has parts to it that are substantially different from the bill that the select committee spent probably over 6 months on in consideration, deliberation, and taking submissions. That is totally unacceptable.

I could talk about clause 3 of Part 1, which is the bit that deals with income tax rates and addresses the $20 billion extra per annum in personal tax that has been taken by the Government every year since 1999—$55 billion - odd. Over $1 billion a week now is taken in personal tax. I could compare the tax rates in New Zealand with the Australian tax rates and their thresholds that have been changed to the benefit of the taxpayer every year for last 5 years. I could talk about the 14 percent of taxpayers who are now in the 39c tax rate bracket rather than the 33c tax rate bracket—the 5 percent that Labour said would be on the high rate in 1999. I could talk about all those who have been dragged up through fiscal drag—the pumping of inflation from this current Government to drag them into higher tax brackets. I could talk about all those things, but I will not; I will leave that to colleagues.

What I would like to do is particularly look at the amendments to Part 1 on Supplementary Order Paper 167, which deal with amendments to the Income Tax Act 2004. Supplementary Order Paper 167 in the name of the Minister, the Hon Peter Dunne, is interesting in that we have 22 pages of last-minute amendments that arrived at lunchtime today. That replaces three pages of amendments on Supplementary Order Paper 119, dated earlier this year, dealing with finance leases. Supplementary Order Paper 119 had a kick-off date of 20 June 2007. We note here that the dates affecting finance leases on the new Supplementary Order Paper are backdated to, and include, 20 June 2007. That is actually significant. Many submitters—many learned professionals—submitted on Supplementary Order Paper 119. The Finance and Expenditure Committee had many discussions, and was very concerned about the retrospective nature, the catch-all drift nature, of the original Supplementary Order Paper, to the point where the Minister agreed and pulled the Supplementary Order Paper.

I point out that in the commentary on the bill one entire page is given to the select committee’s reasons on why the finance lease rules in the original Supplementary Order Paper were pulled. Then, just a few hours ago, this new Supplementary Order Paper 167 was launched on members of the House. That is absolutely outrageous. There has been no consultation, no discussion, and no discussion paper. All and sundry believed there was further work to be done around finance leases. I just do not understand quite why this Government is trying to bulldoze through legislation such as this, which confronts Sir Ivor Richardson’s taxation accord process of 1992 where there was open consultation and open discussion, and where we get buy-in from those who participate in and need to enforce taxation law.

My colleague Dr the Hon Lockwood Smith referred to new section 78BB. In my second reading speech I also raised issues about this part in relation to Supplementary Order Paper 119. It is a drift-net, because it seems to be law written for discovery. Many questions were asked of officials and advisers. We asked what the problem was, who the problem was, what the quantum was, and what the risk was. Basically, those questions were met with blank stares. We constantly asked for further quantifiable information, but very little was forthcoming. Thus the original Supplementary Order Paper was pulled in order to discover more information. I do appreciate that discussions were made outside of the select committee between various officials from the Inland Revenue Department, Treasury, and so on, but the Finance and Expenditure Committee was totally blind to the changes that were made.

Some of the original problems with Supplementary Order Paper 119 and Supplementary Order Paper 167 were their retrospective nature. The public relations from the Minister responsible for Treasury and the Minister of Revenue today started to push away that this measure is still retrospective in its nature. It will still be subject to litigation. At the end of the day, the parties caught in the crossfire, as I read this, will actually be New Zealand entities—New Zealand financial institutions—which will be sued at both ends from an offshore party and an onshore party because the terms of the original leases have changed.

I have a few questions to ask of the Minister in the chair, the Hon Peter Dunne, that I will go through over the night, but one question I would like to ask him is what the fiscal risk is here. It was explained to us that the future value of all lease payments is unchanged. It is only the present value that is at risk here. It is the time value of money. I recall that someone mentioned that about $200 million was at risk, but we were not told whether it was per annum, over 5 years, or over 10 years. If it is over 5 years, that is about a $3 billion notional problem. What is it? How can we be putting it into legislation of a retrospective nature like this when the quantums are not given?

I would argue that Supplementary Order Paper 167 is actually punishing those New Zealand companies that are trying to minimise the impact to New Zealand of the high interest rates that are a result of this current Government. These are mostly capital-intensive, large notional infrastructure projects, I believe, but, again, we were never told. I look forward to the Minister describing some of the leases if he could. Under the Fiscal Responsibility Act, I presume—and I am open to be corrected—there should be some costings around the Supplementary Order Paper. What are the costs? What are the benefits? Under this new Supplementary Order Paper the parties involved have to pay back one-sixth, or, read another way, 16.666 percent—call it 17 percent—of the depreciation claimed over the life of the asset. So why should these companies in New Zealand be singled out like that? There are some assets at 48c depreciation. Essentially the depreciation for them is now 31c in the dollar. I ask the Minister to clarify that point further.

The Finance and Expenditure Committee spent much time, and expressed much concern, particularly about the retrospective nature of this legislation. I am sure that we have not heard the end of it. Quite frankly I am sick and tired of the fact that every time I get up to talk about a KiwiSaver bill, or a bill in relation to these taxation issues, we have yet another Supplementary Order Paper thrown at us at the last minute. I find that embarrassing for this House and I think a lot of explaining needs to be done. Thank you, Madam Chairperson.

Hon PETER DUNNE (Minister of Revenue) : I want to respond to a number of the points that have been raised so far by members who have taken part in this debate. I will start by talking about the issue of finance leases. I note, incidentally, that the report of the Finance and Expenditure Committee stated: “The majority of us accept that a change was necessary because a small number of cross-border leases have been classified as operating leases for tax purposes even though they are financial transactions and treated as such in the financial accounts of the taxpayers.” And further on, the committee stated: “We asked officials to consider further the application of the legislation to existing arrangements. We understand that officials have since been working on alternative transitional options for existing leases,” etc. That is precisely what has been happening since the decision was taken to withdraw Supplementary Order Paper 119. The amendment on Supplementary Order Paper 167 in my name reflects the work that has been done and the solutions that have been reached.

I ask members to let me go through precisely what Supplementary Order Paper 167 says, then I will come to some of the questions that Mr Foss has raised. Under the proposal on Supplementary Order Paper 167, the leases to be affected by those rules are those that were entered into after 20 May 1999 and in which the lease asset is used mainly overseas and a person other than the lessor is earning income that is not subject to New Zealand income tax from the use of that asset, and a person other than the lessor has substantially all the risks and rewards incidental to ownership of the asset. Leases that do not satisfy those requirements, which in effect are most leases, will be unaffected by the amendments that I have tabled as part of this bill. If the lease is affected, the consequences depend upon the date that the lease was entered into. For leases that were entered into prior to 20 June 2007, the lessor will have to pay back one-sixth of the depreciation previously claimed and to reduce future depreciation deductions by one-sixth. That treatment is a pragmatic compromise that deters aggressive tax minimisation schemes and recovers some lost revenue, while limiting the negative effects on existing commercial arrangements. For all other leases, the taxpayer will be required to reclassify the lease as a finance lease and to recognise additional income or expenditure in the year when the lease becomes a finance lease.

Mr Foss asked some questions relating to the likely cost of the proposal. The advice I have is that from known leases the likely cost is around $92 million, and that the cost as a result of these amendments will reduce by $16 million. I need to advise the Committee that there is some sensitivity around this point. It is a net present value calculation. We are aware of only two leases at the moment that come within this broad contention. Therefore, it is not appropriate for me to discuss taxpayer affairs further. But I can say to the Committee that in developing the solution set out on Supplementary Order Paper 167, there have been consultations with affected parties and others, and the solution that has been arrived at is one that seeks to deal with the particular problem. It is a much narrower solution than was proposed on the original Supplementary Order Paper.

If I can turn to some of the other issues that members have raised, I think it was Mr Groser and one or two other speakers who made reference to clause 3, which relates to the personal income tax rates issue. I am someone who has been on record for a very long time as being a strong advocate for personal income tax reductions. I think I have that reputation. I note that this year—

Dr Wayne Mapp: Prove it!

Hon PETER DUNNE: The last time we had personal tax reductions in this country I was also in the position that I am in now. My record speaks for itself; it is not just words. The reality is that in this term we have done significant taxation reform. The business tax reform package was a United Future initiative as part of our confidence and supply agreement. It was the first business tax reduction in this country in 20 years. I am committed to seeing personal tax reductions. I know that the Minister of Finance is, as well, and I can assure the Committee that we are working on those reductions at this moment. Members will just have to wait and see what transpires from that.

One of the previous speakers referred to the charitable donations regime. That again arose, contrary to what Ms Wong said, from the confidence and supply agreement with United Future that was signed in October 2005—long before the National Party released its policy. I welcome National’s support for the policy we set out to achieve from October 2005. I think it is a good policy, and I am glad National agrees with it.

I also want to say some words about Ms Wong’s proposed amendment with regard to the redundancy provision, in so far as it affects accident compensation payments. There are some problems with the amendment she proposed, and I need to advise the Committee of those. The amendment proposed by the member actually amends the 2004 Income Tax Act. The difficulty with that is that that Act has been repealed with effect from 1 April 2008 under the rewrite bill, which brought in the new Income Tax Act 2007. So the member seeks to amend legislation that does not exist. But, beyond that, her amendment does not have any impact beyond 1 April 2008. It would apply to accident compensation payments for the period from December 2006—so presumably from the commencement of the 2007 calendar year—through that little window that ends in April 2008. So in that sense the amendment is unworkable. I understand the sentiment behind the amendment, but I say it is unworkable.

I think those are the major points that members have raised to date, and I have sought to comment on them. If other matters are raised, I will comment on them as the evening progresses.

KATRINA SHANKS (National) : It is my pleasure to take this call to speak to the Taxation (Annual Rates, Business Taxation, KiwiSaver, and Remedial Matters) Bill tonight. The area I would like to speak on tonight is research and development tax credits. Research and development is fundamentally important to New Zealand if we want to progress our country, increase our productivity, and be at the cutting edge of what we do. New Zealand is a small country and is quite boutiquey in what it produces, so it is important that we invest, and encourage investment, in our research and development so that we stay at the cutting edge, so that we can produce things in the global market that other countries cannot produce, and so that we can demand premium prices for those products. When we do that, we will find that our productivity will increase and that we will become wealthier, and, because our companies are doing so much better, our country as a whole will become wealthier.

The question really is how to encourage companies to do research and development, to take their products to the next level by investing in their technologies, and to be at the cutting edge in their industries. How do we actually encourage our companies to do this? It is quite a commitment, especially as companies are struggling as it is to get ahead, to pay employees, and to go out to global markets, because it is a big step to go from a domestic market to a global market. So how do we encourage our companies to reinvest back into themselves through research and development?

It is really important, when we look at these tax credits, to go very slowly and look very carefully, because there can be a downside to producing research and development tax credits in our country. It has been shown overseas that there have been major pitfalls when research and development credits have been put in place. The vehicle by which this bill is looking to increase the productivity of our businesses, and to encourage our companies to invest in themselves, is this research and development tax credit.

I was not on the Finance and Expenditure Committee that considered this bill. Shane Jones, the previous chair of the committee, was in the Chamber but has lost interest and wandered off, but I see that Charles Chauvel is here tonight. He is the present chair of the committee. He is sitting across the Chamber and has taken one call tonight, I do believe.

How do we know this is actually the correct vehicle to use in research and development? Officials from the Inland Revenue Department, I believe, came and briefed the select committee. As this policy is based essentially on the Australian tax credit policy in relation to that country’s Inland Revenue Department, Shane Jones, the chair of the committee at the time, asked our Inland Revenue Department officials who came in to brief the committee on this part of the legislation whether there was any evidence that the research and development credits in Australia were making a difference and actually working. The officials said that they did not know whether they were making a difference. I do believe, reading through the minutes, that Shane Jones asked that question of the officials more than once, and each time they came back and could not say that these research and development credits were actually making a difference. Yet we have still gone down this path, which is really interesting.

We are all keen to get research and development moving along in New Zealand, and we are all keen to invest in research and development, but it is actually about finding the correct vehicle. It is about ensuring that we have enough submissions in, that enough research has been done, and that the officials have the answers to the questions we ask when putting this type of legislation together. This is what we need in order to put together the right type of legislation with the right vehicle in it for our companies and for New Zealand so that we do this very precious research and development. That is what this is actually about. We have to remember that in New Zealand research and development is currently 100 percent deductible for tax purposes, so already companies are getting 100 percent back. This legislation basically gives a credit at 15 percent tax rebate on top of the 100 percent deductibility already.

Dr the Hon LOCKWOOD SMITH (National—Rodney) : I appreciate the Minister taking a call a moment ago, and I would like to follow up with him on a couple of the issues he responded to. The first is the issue of the proposed new tax treatment for redundancy payments contained on Supplementary Order Paper 167. The Minister ruled out Pansy Wong’s amendment on technical grounds, saying that it covered only a certain time period. I put to the Minister in the chair, and to the Government, that what they are trying to do here with redundancy payments has some logic to it, because a redundancy payment is a lump sum paid in recognition of a number of years’ work. Therefore, it covers more than 1 tax year. I can see that the Government’s argument is that it is unfair that it should be taxed at the additional marginal rate of the year in which the payment is made, because it puts the person up into a higher tax bracket, when, if it was spread over all the years of employment involved, it may not put the person into the higher tax bracket. But the issue of compensation for injury, where a person gets a lump-sum payment because he or she has been injured at work and can no longer be involved in full-time work, is a similar issue.

The lump-sum payment can cover more than 1 year’s work. All we are asking the Government and the Minister in the chair to do is to be rational. If they are going to make this provision for redundancy payments, there is an even more powerful argument to make it for compensation payments, because the poor person receiving the compensation payment may never be able to work again. Such people have been injured at work, they get a lump sum covering more than 1 year’s payment, they are put into a higher tax bracket, and exactly the same arguments apply. It should not be beyond the wit of the officials in the Chamber tonight to change the provision on Supplementary Order Paper 167 to also include accident compensation lump-sum payments that cover more than 1 income tax year. I would really appreciate the Minister’s advice as to why that obvious anomaly is being ignored.

Secondly, I would like to raise with the Minister the matter of finance leases, also covered on Supplementary Order Paper 167. The Minister told the Committee that the cost of these operational leases, which are really finance leases, is roughly $92 million—I think that is what he is saying—and the provision on Supplementary Order Paper 167 reduces that cost to the Crown down to $16 million.

Hon Peter Dunne: By $16 million.

Dr the Hon LOCKWOOD SMITH: It reduces it by $16 million; I had misheard. The Minister says that the department is consulted. I have talked directly today to some of the key players involved in these transactions, because, of course, they made submissions to the select committee. I wanted to check whether the Government had reached agreement with them on this new provision. In fact, it turns out that it has not. What I want the Minister to respond to is this. The margins involved in these kinds of transactions are obviously not great. If the Government is taking away $16 million in only two deals—the Minister acknowledges that it is only two deals—that predate 20 June 2007, there is no issue about closing this loophole going forward. There is no issue about that at all; the issue relates to the deals already done under existing law pre - 20 June 2007. If the Minister is recovering $16 million from those two deals, there is no question that those deals will be marginal if not put under. Is it right—[Interruption] Dr Cullen shakes his head. He talked to the players involved. They will probably put the deals under. The language they shared with me today was that it will sink the issue. What was the language used? Here it is: I wrote down that this will “put this deal under water and as a consequence there will be litigation.” I ask the Minister on what basis was this—true depreciation loss is divided by six—arrived at, because some of the players say it will put them under?

My third question for the Minister relates not to Supplementary Order Paper 167 but to clause 64 in Part 1. There has been no discussion of this tonight. That is the amendment to the fair dividend rate in respect of offshore portfolio investment holdings. This is my question to the Minister. New clause 64, the new majority provision put in by the select committee, has provisions for the commissioner to determine, under subclause (3) the attributing interest for which the fair dividend rate may apply, and under subclause (4) the attributing interest of a person for which the fair dividend rate may not be used. There is a lot of concern about this, and controversy around the fair dividend rate. This is changing the provision somewhat, so my question asks how taxpayers will know specifically what the commissioner declares will be allowed for, as attributing interest for the fair dividend rate provisions, and what will not be allowed for by the commissioner.

If the commissioner does not allow certain attributing interests, and the person is a provisional taxpayer, I ask whether people will be caught under the penalty provisions—use of money, interest provisions—through not getting provisional tax payments correct, if they cannot foresee what the commissioner will declare is allowed for the 5 percent fair dividend rate, or is not allowed for the 5 percent fair dividend rate. The provisions here, as I understand them, will allow a higher tax assessment than the 5 percent fair dividend rate. If people, as provisional taxpayers, have based their provisional tax payments on a 5 percent fair dividend rate, and the commissioner says: “Oh no, this attributing interest will not be allowed for under the 5 percent fair dividend rate; another method has to be used here under the new clause 64(4).”, what happens if that is a higher tax assessment, and people, being significant taxpayers, have paid their provisional tax incorrectly because they could not foresee what the commissioner was going to declare there?

All I am asking is for the Minister to satisfy us that that is not possible, and he could tell us, I guess, that the commissioner will make clear at least a year in advance what payments can be covered by the fair dividend rate and what he will not allow under that rate. As long as that determination is made sufficiently far in advance, I can see that my concerns will not in fact come to bear. But I would appreciate the Minister advising on that, because there is some concern around the industry in this general area. So with those three issues aired, I will let other colleagues follow on.

RODNEY HIDE (Leader—ACT) : The ACT party rises to oppose the Taxation (Annual Rates, Business Taxation, KiwiSaver, and Remedial Matters) Bill in its entirety.

I will make some overview points, and I ask first why we are confirming these annual rates. It is clear to everyone in New Zealand, and to the majority of parties in this House, that New Zealanders are overtaxed. It appears to the majority of New Zealanders that this Government has taxed New Zealanders poor and made itself rich.

It is clear to the overwhelming majority of New Zealanders that they should keep some of their hard-earned tax money, and that they should spend it themselves, rather than allow the Government to accumulate it—particularly heading into an election year, where the Government will spend money, not for a good purpose and not for general welfare, but to secure the extra votes it needs. And why are we confirming the 39c rate? Dr Cullen marched into office in 1999 saying “Oh well, we will just tax the rich. We will just tax the 5 percent who are earning too much, and we need the extra estimated $400 million to fund what the Labour Party has planned.”

Hon Rick Barker: Superannuation cuts.

RODNEY HIDE: Well, I tell Mr Barker that the economy was growing so strongly and tax revenues were so good that that member cannot point to any one year when that extra $400 million was actually needed. He cannot, and he has just admitted that he cannot. That tax was nothing but a “spite tax”. That is what it was. The money was not needed by the Government, and of course now we find that 12 percent or 13 percent of taxpayers are paying this new “spite tax”—a tax that was never needed other than to penalise those who earned more than others, those who worked harder than others, and those who had been more successful.

Although we might agree that it is reasonable for people who have earned twice as much as other people to pay twice as much tax, it is hard to see it as reasonable that they should pay three times as much tax, four times as much tax, five times as much tax, or six times as much tax as their neighbour, as readily happens nowadays. More particularly, those taxpayers are the ones who do not put out their hands for help from the State. They are taking out health insurance, they are taking responsibility for their children; and they are working. But I tell the Minister in the chair, Peter Dunne, that they are the ones whom he represents, who do all the work.

We find, with a bill like this—and this is something that has been consistent for years and years in New Zealand—that a great swathe of New Zealand has been overtaxed and overlooked. So I do not understand—at all—why we are confirming these tax rates. They are too high. New Zealanders do not want to hear the Hon Michael Cullen talk about tax cuts; they want to see him actually deliver them. Tonight is the night. Thank you, Madam Chair.

Hon PETER DUNNE (Minister of Revenue) : I will respond to some of the points that have been made. I go first to the comments made by Katrina Shanks about research and development.

I think it is worth rehearsing where the research and development changes arose. When the Business Tax Review discussion paper was released in 2006 and put out for consultation, a range of options were identified, other than changing the tax rates, in terms of providing assistance to business. Changes to the research and development regime, or a more aggressively attractive research and development regime, came in as the top priority from that consultation process, and that was introduced in this year’s Budget. We have made the point that we are acting cautiously. We are deliberately following some of the lessons learnt from Australia. We are not going to have the pitfalls that they have in some areas, but we are going to be guided by their experience. I take this opportunity of commending to Ms Shanks a speech made by her deputy leader during the second reading of this bill on the issue of research and development that I thought was a remarkably constructive contribution.

As far as the issue of finance leases is concerned, let me go back to what I said in response to the original questions. The exposure, potentially, at the moment is around $92 million. That will be reduced by some $16 million as a result of the measure contained on the Supplementary Order Paper. I indicated earlier that we get into difficult territory here, because there are two individual cases we know of—I underline “that we know of”, and I do not want to start being too taxpayer-specific, because I cannot be. However, it is fair to say that since the original Supplementary Order Paper was tabled, officials have consulted all of the affected parties. Consultation does not mean an agreed solution, necessarily, but it does mean that the sentiments that are expressed on the Supplementary Order Paper are seen as a reasonable solution to the difficulty we face. Obviously, others will make a judgment in reaction to those, but it is our responsibility to secure the New Zealand tax base, and also to ensure that we have a robust regime moving forward. I think the changes that are contained on the Supplementary Order Paper, which I can assure Dr Smith have been the subject of wide discussion, provide that pragmatic balance.

I cannot remember whether it was that member or Pansy Wong—I think it may have been Dr Smith—who raised the issue of accident compensation in the context of the redundancy changes. We can make an argument that accident compensation payments deserve a similar form of treatment, but we could make the same argument in respect of a number of other areas of social policy assistance. The redundancy changes arose as a result of a particular problem. The member’s analysis of the difficulties we face at the moment in terms of redundancy payments earned in a particular year, even though they might be compensation for many years’ work, is entirely accurate. What this bill seeks to do is correct that anomaly. I indicated before that the amendment that his colleague had moved had some technical difficulties; it amended legislation that actually no longer exists. At this stage, we are focusing only on the redundancy change. I think that other issues will have to be considered at another time.

Finally, I will make a comment about the changes the member commented on in respect of the fair dividend regime. This is an area of huge technicality, and I will not profess to be sufficiently expert to give him a comprehensive ruling on it. But I will make this point, which I think goes to the heart of the point that he was raising. These changes are intended to be applied prospectively rather than retrospectively. So the issue he was expressing concern about—a square-up being applied by the Commissioner of Inland Revenue in an instance where the taxpayer may have made a wrong call—should not apply. This is a prospective consideration rather than a retrospective one.

I also observe, with regard to the fair dividend regime, that only just over a year ago we had a very intense debate in this Chamber about the entire approach to the taxation of offshore investments. All sorts of dire predictions were made as to what would happen on 1 April. I can recall—and I am sure that my colleague the Minister of Finance can recall—the representations we received from a range of investors and investment institutions that the end of the world was nigh. It is interesting that a lot of the prospectuses and correspondence now laud the portfolio investment entity regime that we introduced as being very positive. We are seeing adaptations of those regimes being introduced all the time by various savings entities that are good and positive, and that are benefited by some of the changes that were announced in this year’s Budget.

R DOUG WOOLERTON (NZ First) : I think it is good that I follow the Minister, because, regarding the fair dividend tax situation, I was concerned that our tax adviser Robin would be really worried that some form of policy that he had put up had been very handsomely and widely embraced by the financial community. I was wondering whether Robin would want to revisit that matter, with the idea of somehow bringing down a harsher regime because he had been too kind to those people all over the place.

I will talk briefly in general terms about a statement that Rodney Hide made versus statements I have read. Whether it is Time magazine, the Bulletin, or whatever the financial literature is that one picks up, it will tell one that around the Western World in the last 10 years the top 5 percent of wealth has never ever in the history of humankind grown at such a rate—never ever. The growth in wealth of the top 5 percent of people in the Western World is absolutely unprecedented. Yet we have National and ACT coming in here and saying that in fact we are taxing those people out of existence—that we are taking away all of the incentives that drive them on to greater productivity.

That is nothing less than absolute bunkum. Those people have never done as well in the history of humankind as they are doing today. They have never done as well as they are now doing.

Dr Wayne Mapp: In 1999 it was 5 percent; today it’s 20 percent.

R DOUG WOOLERTON: I hope that the people who are listening to this debate can hear that member raving on. He never makes any sensible contributions. He is voting against tax cuts, which National has done consistently since 1960, and he sits there bellyaching on about the difference between 5 percent and 20 percent.

Dr Wayne Mapp: How about fiscal drag?

R DOUG WOOLERTON: Oh, the fiscal drag! That is a Muldoon term, if ever there was one. Do members remember how Muldoon used to bellyache about fiscal drag? There was a man who did not understand economics, if ever there was one. Contrary to what Rodney Hide was saying, I say the top 5 percent of wealth creators in the Western World have never had it so good in the history of humankind.

We in New Zealand First support the Taxation (Annual Rates, Business Taxation, KiwiSaver, and Remedial Matters) Bill, and we support the tax reductions encompassed within it. We support the KiwiSaver scheme, obviously, because we need to save more in this country—and New Zealand First has said that right the way through for many years. And we support what we see as a return—or a slight dipping of the toe in the water, as Dr Cullen explained it as being—to incentivising the taxation system around research and development. Unlike Katrina Shanks, whom I admire and whose expertise I respect, we in New Zealand First believe that it does make a difference when one gives a tax incentive. It helps when we give a message, in the only meaningful way that matters, that we want people to enhance their businesses and to enhance our industry by adopting better machinery and providing more productive workplace opportunities. The only way to tell them, show them, and encourage them to do that is to give them a tax incentive.

I turn to the minority view of the National Party, which is essentially about a philosophical belief it has that personal tax cuts across the board will do something magical to our economy. Personal tax cuts did not do that in America and they have not done it anywhere else where they have been applied, but all of a sudden National believes that they will do wondrous things for New Zealand. That, of course, will be what the debate at the next election is all about. It will be about personal tax cuts versus personal services delivered by the Government, be it in health, in education, or in all the other sorts of things.

John Hayes: So you’re a socialist at heart.

R DOUG WOOLERTON: It is not a matter of being a socialist. This legislation is actually a very, very mainstream measure, and only a party that has moved to the extreme right, like the National Party, would suggest that these were left-leaning policies.

We in New Zealand First have said unashamedly that we do not favour across-the-board tax cuts. We support tax cuts that incentivise businesses that export and encourage exports, and we encourage tax cuts like the Working for Families package, which gives money to those who need it and does not reward those who do not need it. That is why we support this bill. That is why we have supported the Labour Government and its support partners through this entire enterprise. We believe it is heading in the right direction, and we are encouraged by that.

CHRIS TREMAIN (National—Napier) : That was Doug Woolerton from New Zealand First, who brought to us his perception of wealth creation among the top 5 percent of wealthy people in the world.

But I think we need to be clear about what the debate has been around, I say to Mr Woolerton. It has been around the number of people in New Zealand who have moved into the top tax bracket and who now pay 39 percent. It is no longer just the 5 percent of New Zealanders who were originally there; we have got to the point where 12 to 15 percent of New Zealanders are in that top tax bracket. People in my own electorate and other members’ electorates—teachers and policemen—have moved into that top tax bracket. I ask Mr Woolerton whether they are rich, and whether nurses are rich.

R Doug Woolerton: No.

CHRIS TREMAIN: They are not. Are policemen rich? I believe that they are in the wrong tax bracket. That is what the debate has been about tonight, and that is one of the key reasons that members on this side of the Chamber are not supporting the legislation.

The second point I want to make is to refer to the Minister in the chair, Peter Dunne, who put on record tonight his reputation around tax cuts. I ask that Minister whether he was in Cabinet on 19 April, when Dr Cullen put up a paper. Clause 23 stated: “To maintain our commitment to the long term fiscal objectives, I may need to make some adjustments to future budgets. These are likely to be that we do not adjust tax thresholds in the medium term”—meaning in 3, 4, 5 years—“thereby retaining fiscal drag and potentially allowing tax to GDP ratios to rise slightly… Accordingly this paper seeks Cabinet’s agreement to rescind our previous decision to adjust income tax thresholds. Within the projection period (ie from 2011/12 onwards)”—so we are looking out a fair way, ladies and gentlemen—“we will adjust tax thresholds for inflation, but some portion of fiscal drag might need to be retained to finance our decisions.”

The Minister in the chair put on record his position on tax. I would suggest that he was part of Cabinet on the day that it signed that particular minute, and I believe that that does not accord with his record on taxation.

I will finish by making a comment on Dr Paul Swain—

Hon Dr Michael Cullen: Dr Paul Swain?

CHRIS TREMAIN: —well, he is a learned member—and some of the comments that he has made tonight. The member wanted to know why National was not supporting the wider taxation provisions, even though parts of the legislation may have some merit. Well, we do not like Labour’s tax policy. We do not like it specifically or generally. We do not like where the economic direction of the country has gone under this Government, and that is why we are not supporting the legislation. If National supported this legislation, it would be the equivalent of our standing up here and supporting the general direction of the Labour Government. We do not buy into Labour’s vision, and on that basis we do not support this legislation. That is the answer the member is looking for.

We have learnt something tonight, though, with regard to Supplementary Order Paper 167, which Mr Swain is very keen on. It brings about some redundancy payment advantages. I have not looked at the fine print of that Supplementary Order Paper, but I wonder whether there are any lower tax rates for silver platters given as redundancy payments. Mr Swain, who is very learned and has had a long career in Parliament, is moving on to better things.

Hon Dr Michael Cullen: In that case you get 3 months’ severance pay when you lose.

CHRIS TREMAIN: I thank the member; I will be looking forward to that.

Christopher Finlayson: Is he standing against you in Napier?

CHRIS TREMAIN: He is not standing against me in Napier. We put that challenge out there, but Dr Cullen would not take it up. He was quoted in the newspaper as saying that Labour would be choosing an excellent candidate in the seat of Napier, that that candidate would have his 100 percent support, and that that candidate would win Napier in the next election. It will be interesting to see whether the candidate who was chosen was the candidate whom Dr Cullen was actually thinking about at the time. Never mind; that remains to be seen. But I am not being arrogant about it; it will be a hard campaign in Napier, and I am looking forward to it.

Hon MARK BURTON (Labour—Taupo) : I move, That the question be now put.

The CHAIRPERSON (Ann Hartley): The amendment in the name of Pansy Wong to insert new clause 85C is out of order as it was lodged with fewer than 24 hours’ notice and may have an impact on the Government’s fiscal aggregates.

• The question was put that the amendments set out on Supplementary Order Papers 167 and 168 in the name of the Hon Peter Dunne to Part 1 be agreed to.

Dr the Hon LOCKWOOD SMITH (National—Rodney) : Part 2 of the Taxation (Annual Rates, Business Taxation, KiwiSaver, and Remedial Matters) Bill refers to amendments to the Tax Administration Act 1994. Before I get into the detail, I have to say that I hope the Government has a serious look at the Tax Administration Act 1994. It is a shambles. It is an absolute shambles.

Hon Dr Michael Cullen: It’s a National Party Act.

Dr the Hon LOCKWOOD SMITH: It is not a shambles because of the provisions of 1994; the problem is that the Act has been amended so many times since that time that any practitioner would require a PhD to find his or her way around it.

Hon Dr Michael Cullen: Well, you’ve got a PhD—no problem.

Dr the Hon LOCKWOOD SMITH: I tell the Minister he should try to find his way around that particular Act. It is just a shambles.

What this bill does, though, is deal with some of the compliance and penalties provisions in that Tax Administration Act. There are three particular issues that the Opposition wants to focus on. One relates to the issues around unacceptable tax positions. They start with clause 184. Then there is an issue around voluntary disclosure provisions. They are particularly relevant to clause 188. Then there is an issue in relation to simple mistakes or errors made in the filing of tax returns. The clause that most closely relates to that is clause 191.

I will start with the unacceptable tax position provisions. If we look at the commentary made by the Finance and Expenditure Committee, we see that what the select committee has to say is quite revealing. The select committee heard a number of submissions on this issue. Before I go on to discuss what the select committee said, let me make very clear what the provisions in this bill do in respect of unacceptable tax positions. The unacceptable tax position provisions have caused a real problem for taxpayers. Back in 2006 an attempt was made to remedy that problem, to give the Commissioner of Inland Revenue discretion to not apply tax penalties when certain unacceptable tax positions were taken, because it would simply be unfair to do so. But the problem was not fixed. The effort in 2006 to fix the problem did not fix it.

What this bill is doing—and I move specifically to the provision—in clause 184 is clarifying the position in respect of unacceptable tax positions. It makes it clear that where the new international financial reporting standards lead to someone developing an unacceptable tax position, that person will not be penalised for that, which is quite proper. Most particularly, clause 184(2) makes very clear that, from now on, unacceptable tax positions can apply only to income tax and the tax shortfall arising from the taxpayer’s position, and it sets out the thresholds. What that subclause is doing is making it very clear that the unacceptable tax position provisions can no longer apply to GST or to withholding tax payments. What is interesting about this is that the Government has recognised that the attempts to fix up the unacceptable tax position provisions in 2006 did not work adequately. I believe that that is why the Government is now making it very clear that, in fact, GST filings and withholding tax filings are no longer covered by the unacceptable tax position provisions.

If we go from there to the select committee’s report, we see that the issue now becomes the date on which this new clarification applies. The select committee commentary states that the majority believe: “The amendments to the unacceptable tax position penalty in the bill have not been made retrospective because the discretion enacted in 2006 (and repealed in this bill) was backdated to 1 April 2003. The majority of us consider that this dealt with the cases where the imposition of that penalty may have been unfair.” What is inconsistent about that comment made by the majority of the select committee is that if the changes made in 2006 had fixed the problem, we would not need the amendment now being made to clause 184. We would not need further clarification that GST and withholding tax payments are no longer covered by the unacceptable tax provision penalties. If, in fact, we need clause 184(2) to make clear that those unacceptable tax position provisions will not apply to GST and withholding tax, why can we not, in the interests of fairness, backdate it? The majority of the select committee said that backdating should be unnecessary because the issue had been fixed in 2006, and there was discretion for the commissioner to deal with the issue back to 2003. If that were correct, we would not need this subclause. The fact that we have got this subclause shows that the issue was not fixed in 2006, and therefore this subclause should be backdated to avoid any doubt that issues to do with GST and withholding tax payments are not covered.

I have put an amendment before the Committee to amend clause 184(3). It backdates it to at least 2006. I accept that maybe the fiscal consequences of backdating it to 2003 could be significant, but there should be some backdating to at least recognise that the 2006 effort to fix this issue failed. If it did not fail, we would not be doing this provision now. That effort did not produce the outcome expected by this Parliament; therefore, it should be reasonable to backdate this remedial legislation to at least the time that we tried to fix it, and that was 2006. That is why I have laid an amendment on the Table to backdate this provision—to have it apply from 1 April 2006 instead of from 1 April 2008. It does not take it right back to 2003; it takes it back to when this Parliament tried to fix it up but failed to do so. That is why it is being fixed up now—because last time round the House did not achieve the outcomes.

What the practitioners, the professionals, tell us is this: although the Inland Revenue Department policy people were supportive of the change, although the policy people advised that the changes made in 2006 would pick it up, Inland Revenue Department operations did not deliver what this Parliament had expected to be delivered by those 2006 amendments. That is why clause 184(2) is required, and it should be backdated to 2006 to make sure that what this Parliament intended in 2006 is now delivered.

That is the first issue in respect of Part 2 that the Opposition wants to cover. There will be other issues, but that is the particular provision in respect of the unacceptable tax position. I want to make clear—and I am sure this speech will be called to an end very soon—that the other key issues relate to clause 188. That clause is in respect of voluntary disclosure of tax shortfalls. Again, we previously tried to fix that up. Everyone in Parliament agrees that it is really important to encourage voluntary disclosure, because in that way we collect more revenue. I want to come back to that clause, because I think that, with its current wording, we are not going to get voluntary disclosure to the extent that we should. The Opposition wants to put forward further debate on that.

The other part in Part 2 that I give notice we want to focus on is clause 191, which repeals section 141KB. Section 141KB deals with only section 141B of the principal Act. Section 141A deals with simple mistakes made by people filing tax returns. I want to come back to the issue, which I think is very real, that where people make simple mistakes they should not be penalised. There are issues around clause 191. There is a classic example, which I should mention, where a person filed a tax return, used the wrong return to file it, paid the right money, and was penalised.

• Debate interrupted.