STUART NASH (Labour) : It is a little bit difficult when one finishes at 10 o’clock at night and then starts again at 9 o’clock the next morning. However, what I was saying at 10 o’clock last night is that I am very supportive of the Financial Service Providers (Pre-Implementation Adjustments) Bill. In fact, I think it is very necessary, because what we have seen, with the collapse of the finance companies, is that many, many ordinary New Zealanders have been ripped off and basically taken to the cleaners by a whole raft of people masquerading as financial advisers. I was talking about brands like Colin Meads and Richard Long, who were out there touting for these services. They were iconic brands and very good at what they did, but they knew absolutely nothing about finances. I was speaking to someone last night, after 10 o’clock, who said to me that she invested in Hanover Finance because of Richard Long. Here was a man who stood for integrity and trust, and who was in our living rooms nearly every single night. So if Richard Long said it was good, therefore it must be good!

Hone Harawira: It must be good!

STUART NASH: It must be good! What happened, of course, was that it was not good, at all. Richard Long was a very good newsreader, but he knew nothing about financial advice or financial investment. I hope, with this sort of financial crisis, that iconic New Zealand brands will think very carefully before they start endorsing products that they know nothing about.

I was also talking about Mark Hotchin’s $30 million house, which was built on a graveyard of the shattered dreams and broken promises of thousands of New Zealanders. If that man has any sense, he will not return to this country. It is obscene that we see him at the moment holidaying in Hawaii, off the money of thousands of New Zealanders who are now broke. I cannot imagine, having worked all my life, reaching the age of 65 or 70 and waking up one morning to find that all my savings had just disappeared. How heartbreaking would that be? In fact, there is evidence out there that ordinary New Zealanders have committed suicide over this. They have got to the stage where there is nothing worth living for. All their savings have gone, not only for their own retirement and their grandkids’ education but also to allow them to live and retire with dignity. They have to sell their houses, they have to sell all their assets, and they find themselves with nothing. This is why the legislation that this bill amends is so good. The original legislation was introduced by the Hon Lianne Dalziel, and no doubt she will talk about that a little bit in the future.

This bill will not stop the sort of obscenity that is Hotchin’s extravagance, or stop Colin Meads saying that an investment is as “safe as houses”. However, it might mean that the type of person who was promoting Hanover Finance as a safe investment would disappear. Real financial advisers will be able to scrutinise investment prospectuses with more rigour and in more detail, as is required, I would have thought, by such a profession. The reason I say this is that the intent of this bill is to provide for responsible regulation of the financial services sector and robust consumer protection, in order to restore confidence and trust in the financial services sector. I do not think there would be a person in this House, or anyone watching around this country, who would not agree that this is necessary.

Kiwis need to know that when they take their hard-earned money to a financial adviser they will get independent, competent advice from a person who will walk them through the alternatives and know what they are talking about. When we go to a lawyer, we expect legal advice. When we go to an accountant, we expect that person to be qualified and to give us good accounting advice. When we go to a financial adviser we expect that person to be versed in the ways of financial advice and to give us good advice around that area. The past of the Wild West, a city full of cowboys, was not a good place for the vast majority of Kiwis, and I hope those days are now gone.

As a collective, we need to encourage people to invest in a diversified portfolio, into the productive economy. We need financial advisers to be well versed in the various options. I would say there is a long way to go before the industry has the full confidence of the investing and saving public again. But this bill, along with Lianne Dalziel’s two Acts, is a start at least. I hope when this legislation is passed, in line with the other two Acts I have talked about, that at least we will begin to see confidence and rebuilding begin, with New Zealanders once again able to begin to invest with confidence. That is why I am fully supportive of this bill, and I commend it to the House.

DAVID CLENDON (Green) : Ata mārie. The Greens are pleased to support the Financial Service Providers (Pre-Implementation Adjustments) Bill through a further stage. We do so with some regret. We regret the necessity for such a bill. One would have thought and hoped that, in an ideal world, amendments of this nature would be unnecessary, that people in the financial industry giving advice to often ill-informed laypeople would have a moral compass, and that their own integrity would determine that they actually gave good, honest advice and protected the investments and assets of normal New Zealanders. But, clearly, that is not the case.

I doubt whether anyone in the House does not have someone in his or her close circle of friends or family who has suffered some loss as a result of what has been quite well described as a Wild West, cowboy approach to financial investment, which we have seen far too much of over the last couple of years. I myself and my extended family know of a young couple who had accumulated a small nest egg that would have been a deposit for their first home. That is gone. The reason it is gone is that they quite wisely invested in two companies—companies that apparently were very sound, and whose advertisements on television were fronted by well-known figures. That money is now gone. Basically, they discovered they had invested in a daisy chain of debt speculation and overstated values that were not really there. Essentially, their investments were simply taken away by people too greedy and too venal to be honest and up front about what was going on.

It is really critical that we restore people’s confidence and trust in the notion of investment. People need to know that investing is reasonably secure, notwithstanding that there will always be some risk. That confidence has been comprehensively lost as a result of the rorts, the dishonesty, the greed, and the misrepresentation that we have seen far too much of for far too long. Restoring confidence is critical not least to the business sector. It is important that New Zealand business has access to capital, and small to medium sized enterprise in particular are identifying that as one of the issues confronting them. Access to capital is an issue. We need to encourage people with capital to think that it is a safe bet to invest, and to have a reasonable expectation that that money will be secure.

I have to say that the select committee process, for me as a relatively new member, was a very positive process. That quite contentious and complex technical issues can be resolved to the satisfaction of people with quite different ideological positions demonstrated the power of select committees. I acknowledge the chair of the Commerce Committee, Lianne Dalziel, who had a very useful focusing mechanism. She kept using a phrase along the lines of “What is the harm we are trying to remedy?”, which was actually quite a good strategy to keep bringing us back to the point of asking what the problem was, what we were trying to resolve, whom we wanted to capture, and whom we did not want to include in the provisions of this bill. As a result of that, organisations like credit unions—which are very robust, reliable, and straight-dealing organisations—are not unwittingly caught up within this legislation. We are not imposing compliance costs on organisations or, indeed, individuals who were not targeted because they have not displayed the sort of bad behaviour we are endeavouring to overcome here.

Organisations like the Citizens Advice Bureaux made very good submissions, identifying one or two instances where potentially they could have been captured by the provisions of this bill. Clearly, not-for-profits like the bureaux were not the target; if they give incidental advice in the course of assisting people in the community, that is well and good; the exemption of not-for-profits is a very sensible and strengthening provision of this bill.

There was discussion, for example, about what constitutes a sophisticated investor, recognising that we do not need to put many protections around people who are perfectly able to look after their own interests. Some useful and informed commentary—and, indeed, submissions—from individuals and organisations helped us define whom we were trying to protect, and who can actually look after their own interests and be left to get on with it.

That is probably as much as I want to say at this stage, except to reiterate that the Greens support this bill and its intention, and we look forward to seeing it progressing, and to securing and protecting the investments of people who can expect much better and more reliable advice as a result of this legislation. Kia ora.

Hon LIANNE DALZIEL (Labour—Christchurch East) : I am pleased to be able to speak to the report back and second reading of the Financial Service Providers (Pre-Implementation Adjustments) Bill. When the bill was first introduced, I said I was pleased that the Minister had indicated his determination to stick to the time frame that he had announced for implementation. As a result of listening to submissions, we have accepted the Minister’s decision to extend the time frame, not so much for the registration as for the implementation in its fullest sense, post - 1 December right the way through to the end of June next year. I also felt that the proposed changes, when they were introduced, were in line with the principles and the intention of the legislation, which I oversaw as the then Minister of Commerce. It was not until I actually started the somewhat arduous task of reading the submissions that we had received—and we received a significant number of very, very detailed submissions—that I realised there were flaws in the original framework that I had introduced that I had not been aware of as the then Minister, and that clearly the present Minister had not been aware of, either.

Just to put what the Commerce Committee has done with regard to this bill—because it is virtually a re-write of the bill that was introduced, and we need to offer an explanation for that—I want to go back for a moment to the pre-2008 election period. In so doing, I confess to the House something that I have confessed to my colleagues—that is, I know more about the intricate detail and the potential application of this bill now, as chair of the committee, than I did when introducing the original legislation as the then responsible Minister. I think there is a reason for that, which I think should be addressed, and I will come to my suggestion about that later on. What I will propose, though, in this space is possible only when a non-partisan approach is able to be achieved. I think that the present Government when in Opposition, and now the reverse—the present Opposition when in Government—proved that a collaborative approach is what is required and produces the best results. I think this bill and the work that we have done on the select committee demonstrates that, and I pay tribute to all of the committee members for what we have been able to achieve on a collaborative basis.

Returning to the pre-2008 period, I know that as the then Minister I put pressure on Charles Chauvel, who, at the time, was the chair of the Finance and Expenditure Committee. I put pressure on him because I wanted those bills back in the House in time to be passed before the 2008 general election. There were two bills that I wanted back, in particular. They were the bills in my name, but also the bill to provide proper prudential supervision for the non-bank deposit-taking sector, which, of course, had transferred to the name of the then Minister of Finance, the Hon Dr Michael Cullen. In many respects, I did not mind if the legislation was not perfect, and I kept saying that to Charles Chauvel at the time. That was because there was time post-election to undertake any remedial work that needed to be done, while getting on with the job of establishing the regulatory frameworks for the new supervisory and dispute resolution regimes to cover what was an under-regulated sector.

I just want to use the word “under-regulated” again. This was not a totally non-regulated sector, but it was under-regulated, and I think that was the critical problem. I know that a lot of people have wanted to put blame on those who were responsible for the regulatory frameworks over probably a couple of decades since the stock market crashed in 1987, if we really want to go back to when we were first alerted to the problems that we have to confront today. But the problem was that there were regulatory provisions in place, and they offered insufficient protection. I think that our committee has been quite good at getting to the bottom of some of the things that we have not been able to get to the bottom of before. We have an inquiry under way that will continue to work to find those essential gaps in our system, and hopefully it will make recommendations to resolve them.

That was why I wanted the legislation passed before the election. I wanted the work to continue in the period when we went off to do our job applications for our triennial job interview, which is, I guess, what a general election is. I wanted to make sure that the bills were not left at the select committee or remained on the Order Paper past the House’s rising for the election period, because nothing would have happened for a very long time if that had been the case.

If there is a criticism that I have of the current Government, and there is one, it is that—

Hone Harawira: Just one?

Hon LIANNE DALZIEL: —no—this bill should have been introduced last year. That is the only criticism I will make. If it had been introduced last year, we would have had much more time to spend on the detailed analysis that we have had to undertake. I know that members of the committee, our advisers, our clerks, the officials, and the Parliamentary Counsel Office were all under pressure. But the pressure that we were under pales into insignificance in comparison with the impact that the time frame had on the finance sector, and the finance sector is critical to getting this legislation right. So I pay tribute to the extraordinary efforts that the major stakeholders went to in order to meet the extremely tight deadlines that we imposed on them. We know that people worked over weekends and that people worked overnight, in some cases, in order to meet these time frames and to deliver what I believe is now much more like the framework that I envisaged 3 years ago, when I announced the decisions made by Cabinet back in 2007. Less than a month before Bridgecorp failed, I made those announcements, and then the domino effect started again. We had had the three failures in 2006. Bridgecorp was really the tipping point, as we saw finance companies fall over one after the other. That was what the committee returned to in the end. I acknowledge my colleague David Clendon from the Greens for commenting on that.

The committee came back to a very fundamental question: what were we trying to do? We brought that perspective to what we were doing. We asked what the risk was that we were trying to mitigate, what the mischief was that this bill was trying to remedy, and whether the regulatory response was proportionate. We came up with a mixed set of answers, depending on whom we were talking about. The legislation is fundamentally about protecting unsophisticated investors. I know that among some of the mum and dad investors, as they are called—or, probably more aptly in some cases, nana and grandad investors—there was a kind of resentment that the language used implied that they were unsophisticated or naive, but I reject the view that these were greedy investors, as some have said. I want to place on record my abhorrence of the practice of deliberately hiding the level of risk behind a lower interest rate than was required to reflect the actual risk that they were taking with their hard-earned money. People lost their life savings in circumstances where they did not realise the level of risk that they were taking. There was a lack of knowledge and a reliance on financial advisers.

Our driver as a committee became a single-minded focus on the mischief that we were seeking to remedy. That is why we divided category 1 and category 2 products more appropriately, defined financial advice more clearly, incorporated the concept of personalised financial advice, and tied financial planning to the risk related to investment. We carved out the wholesale clients, who can look after themselves, and we tidied up the qualifying financial entity provisions. All the committee members worked hard on this bill, and I thank them for that work. In the same way that I have acknowledged the stakeholders, I also acknowledge our committee clerks, our advisers, the departmental officials, parliamentary counsel, and the Minister of Commerce and his staff—his private secretary and his adviser. Finally, I acknowledge this House for allowing us to do things differently from usual, such as granting us leave to provide the departmental report to stakeholders during the time before we had reported back.

This has been a very good process. It has been a hard process, but it has been made very clear to me that we do need to take up the option of exposure draft bills accompanying discussion documents at a much earlier stage, so that the people who work at the coalface are able to give us very direct advice about how legislation will be implemented. In fact, they have made it clear to us that they could not have known these things in advance. We have, I think, made this bill much better, and I commend its passage through the House.

MELISSA LEE (National) : It is a pleasure to rise to speak on the second reading of the Financial Service Providers (Pre-Implementation Adjustments) Bill. Thousands of Kiwis have been affected by about 30 finance company failures in the past 4 years. That led to a loss of confidence in the financial services sector, and this bill seeks to amend the Financial Advisers Act 2008 and the Financial Services Providers (Registration and Dispute Resolution) Act 2008 in order to give back the confidence to consumers so that they can once again feel secure and place their trust in the financial services sector. This sector is vital in raising capital for businesses. Getting ahead as a nation economically could well mean our having to get the confidence of the mum and dad investors back on dry ground once again.

It is not often that I agree with the Opposition, but it was a pleasure listening to the chair of the Commerce Committee, Lianne Dalziel, speak earlier, and I agree with her that a lot of hard work was put into this bill by the select committee. I would like to acknowledge the chair, Lianne Dalziel, who just spoke, and the deputy chair, Sam Peseta Lotu-Iiga, who made an amazing contribution during this process. For someone like me who does not come from the finance sector, and often even the acronyms meant nothing to me, it was bloody hard work—sorry; my apologies. It was amazing learning from them, and even Lianne Dalziel admitted that she found out more about this bill, and the processes, and the sector, as the chair of the Commerce Committee than she ever did as the Minister of Commerce. I would like to acknowledge the Minister for having the foresight to bring this bill to the House to see it through its passage, and also, like Lianne Dalziel, I acknowledge all the officials, because they have put in amazing work. As she said, we have demanded so much from them, with sometimes overnight report-back time frames, which has been quite tough on them, I am sure. I acknowledge all the clerks, the Parliamentary Counsel Office, and everyone who has helped us through the process.

During the select committee process we had some major discussions about the shape this bill needed to take, but the thing we always came back to and focused on was to always remember that this bill was designed to protect the unsophisticated investors, the mums and dads, and the retired grandmother who wants to invest so she has a little something to leave as a legacy for her grandchildren. Often they really have no idea where to start when it comes to investments. These are the people who lost money as the result of finance company failures—quite a lot of money. They could have really used some sound financial advice, and this bill addresses that issue.

As a committee we considered a large volume of things in this bill, but one of the things I found very interesting—and I am sure we will discuss it further when we go into other stages of this bill—was the definition of financial advice. We were looking to protect unsophisticated investors, so we initially got to a point where we wanted to make sure that everything was captured. It got to a point that even a discussion in a taxi on my way to the airport, or headed to Parliament, about thoughts on whether to invest in or out of the housing market, could have been construed as financial advice. A group of friends sitting around a dinner table discussing the merits of a financial institution could also have been deemed to be financial advice.

The focus of the select committee was to protect the unsophisticated investors, but at the same time to provide clarity to the definition so that there was no question as to what financial advice is, and who is providing the service. So it was very pleasing, and I am sure there would have been a lot of people who were concerned they would be captured by this legislation who made amazing, very technical, and very detailed submissions to the select committee. Only those people who provide financial adviser services in the ordinary course of their business, and those who provide advice in the course of another financial service, are captured by this. This means that advice provided incidental to other services, as with the taxi driver I mentioned before, are excluded. Also excluded is advice on the procedures for the acquiring and disposing of financial products. Also, budgeting services are often called financial planning services. So to make sure there is no confusion, we have changed the wording in the bill to “investment planning service”.

The other issue I found very interesting was the need for authorisation. However, if we authorise everyone, the compliance costs and the stress on the sector would be quite phenomenal. As a select committee, we considered that there was no real need for advisers who work only with category 2 products, like mortgages and insurances, who work for a qualified financial entity—a QFE. They can do this job without the need to be authorised. They can still become authorised financial advisers should they so wish.

The best thing about this bill is we are giving more power to the Securities Commission. The commission will now be able to ban people for up to 10 years by way of an application to the courts. They have the power to declare that a product of a qualified financial entity must be sold only through individually authorised financial advisers. Before an entity is provided with a qualified financial entity status, it must demonstrate the capacity to comply with the regime. This means that the commission does not have to vet every single product a qualified financial entity sells, but will allow the commission to step in under exceptional circumstances when there is trouble.

The expanded powers given to the Securities Commission will go a long way to enhancing consumer confidence, which has taken a major setback. It will promote more professionalism from the sector, and the serious deficiencies we have seen in the financial advisers industry in terms of disclosure, competence, and independence will surely improve. I commend this bill; it is a great bill.

CLARE CURRAN (Labour—Dunedin South) : The Financial Service Providers (Pre-Implementation Adjustments) Bill is a very important bill, and it is a very good example of how well parliamentarians can work together swiftly to address a critical issue. The issue is to protect ordinary investors—mums and dads—from shonky and irresponsible financial advice, to provide responsible regulation, and to restore confidence in the financial sector. I am very proud of the work that was done by the Commerce Committee and all of the officials involved. I acknowledge up front the incredible amount of work that was done by the members of the committee, particularly the chair, the Hon Lianne Dalziel, the deputy chair, Sam Lotu-Iiga, Katrina Shanks, and my colleague Charles Chauvel, and I thank them for their hard work on this bill. I also acknowledge the long-suffering officials, the clerks, parliamentary counsel, and the work done by the Minister to move this bill ahead.

Over the past 4 years millions of dollars have been lost as a result of about 30 financial company collapses, and www.interest.co.nz estimates that up to 200,000 depositors have been affected. Although this may include double-counting—some of those people may have invested in more than one company—even if it is 100,000 people, that is an awful lot of people who have been affected. Many of those investors made their decisions based on faulty advice from financial advisers. This bill will not stop all of those obscenities, such as Colin Meads saying that Hanover Finance was “safe as houses”, when clearly it was not, but it might mean that the types of people who were marketing and promoting Hanover Finance as a safe investment will disappear. The issue of truth in advertising kept coming up over and over again when submitters came to the select committee. We heard that the advertising was clearly opposite to the reality. Real financial advisers will now be able to scrutinise investment prospectuses with more rigour and more detail, as is required, I would have thought, by such a profession.

The intent of this bill is to provide for responsible regulation of the financial services sector and robust consumer protection in order to preserve confidence and trust in our financial services sector. I do not think anybody in this House or anyone who is watching would not agree that that was necessary. I will mention one particular recent case study. Jailed Timaru investment adviser Neville Cant was banned from operating as an adviser or investment broker for 5 years. The ban under the Securities Market Act was the automatic result of Cant’s conviction for theft of $100,000 by a person in a special relationship, theft from clients, and two charges of forgery. Cant was sentenced on those charges and Securities Act charges in early June. He received a 14-month prison sentence on the theft charge and was ordered to pay reparation of $100,000, and a concurrent 10-month sentence on the two forgery charges. He was also fined $136,000 on six charges laid under the Securities Act in relation to charges of offering and allotting securities to members of the public without a prospectus or an offerer’s statement. Securities Commission spokesperson Roger Marwick was quoted in the Timaru Herald as saying that the commission had received a number of complaints regarding investment schemes established by Cant, who was now banned from acting as an employee or agent of an investment adviser or broker in any way that would allow him to give investment advice or receive investment money or investment property from a member of the public. He was also not allowed to direct, promote, or manage any investment adviser or broker company for 5 years. The aim of the Financial Service Providers (Pre-Implementation Adjustments) Bill is to ensure that incidents like this are eradicated from our financial services sector.

Members have heard that the previous Labour Government passed the initial two bills in 2008, in the knowledge that further tidy-up legislation would be required, so that work could proceed on the implementation of the financial service advisers regime as quickly as possible. The Government was slow to introduce this bill, and we heard my colleague the Hon Lianne Dalziel refer to that earlier. Really, that has been our only criticism of this bill, as it prolonged uncertainty for the financial services sector. The bill as introduced did not address all the issues identified by the stakeholders, and, as a result, the Commerce Committee virtually had to rewrite it. An enormous amount of good, productive work has gone into that.

There is a fundamental difference between the groups of people who have lost money that they invested. There are savers and there are investors. Investors are those who have, or should have, knowledge of risk, and who seek advice from different sources and make decisions after weighing up the odds. What they did not assess as a risk was the negligent behaviour of people who had no knowledge except that the more they sold, the better-off they were, which was conflicted in the extreme. Savers, however, are the ones who put their hard-earned dollars into the hands of the people whom this bill is hoping to regulate, to get the rotten eggs out of the sector. With their savings went their dreams of a retirement with dignity, a retirement spent enjoying the fruits of their labour, only to see that reality cruelly taken away. Savers do not necessarily price-risk as investors do. They pay others to assess the risk and expect competence, diligence, and honesty. As members have heard this morning, we expect that from an accountant, a lawyer—

Hon Clayton Cosgrove: What?

CLARE CURRAN: —mostly we expect it from those people—and a doctor and a dentist. Why should we not expect it from a financial adviser? It is not too much to expect, and hopefully this bill will go some way to addressing that situation.

Investors understand that risk equals return, whereas savers—the mums and dads, many of whom lost all their money in the financial sector—were not pricing risk. They were putting their money away for their retirement, their children’s education, or their grandchildren’s education. This travesty has resulted in the increase in ill health and decrease in well-being of a huge cohort of New Zealanders. Labour did something about the problem. We passed the Financial Advisers Act and the Financial Service Providers (Registration and Dispute Resolution) Act. This bill makes adjustments that are machinery in nature, and there are an awful lot of them, but that does not make it any less important in protecting the most vulnerable in our society, so it is an extremely important bill.

The bill is important for other reasons, as well. One of the problems in this country is the do-it-yourself mentality to investment and savings. Many people think they know best about how to make an optimal return on their savings, without seeking advice from those who are expected to know the markets and the different investment options. It is a double bind in many ways, because I guess if we just did it ourselves then we would be taking the risk ourselves. But if we ask for financial advice from somebody whom we think is reputable and then do not get it, it is no wonder there is no confidence in the financial sector. Of course, it is not that all financial advisers have acted in an unscrupulous manner, and not all of those who were operating in an unscrupulous manner were operating out of the back of a tin shed. There were many financial advisers in glass towers whose advice was as devious and self-serving as the advice of financial advisers operating anywhere else.

This bill, I hope, will be another step in the process of rebuilding the confidence of ordinary New Zealanders in the investment advice sector, because it is what is needed. It is absolutely necessary, because it starts to rebuild the confidence of ordinary Kiwis in the financial advisory market. They need to know that when they take their hard-earned money to a financial adviser, they will get independent, competent advice from a person who will walk them through all the risks and benefits in a transparent and meaningful way. Once again, I thank the Commerce Committee members and all of the officials for the hard work they have done on this bill.

JONATHAN YOUNG (National—New Plymouth) : I am very pleased to be able to stand and support the Financial Service Providers (Pre-Implementation Adjustments) Bill. I congratulate the Minister of Commerce on the hard work that he and his office have put in, and as well I acknowledge the tremendous work that the Commerce Committee has put in. The bill is very complex, and the Commerce Committee does handle a lot of complexity. I think back to the Patents Bill and all of the discussions that we went through—and are still going through—regarding that bill. It is important that we collaborate and work together to find solutions that will work, particularly in this case for the investment sector of our society.

Professor David Mayes, the new chair of finance at the Auckland University business school, has said that New Zealanders are average when it comes to financial literacy. We know that we are above average in many, many areas, but this is one particular area in which, it has been noted, we are lacking. But he went on to say this problem is not unique to this country. A lot of finance company collapses occurred before the effects of the global financial crisis were felt here in New Zealand, which puts us ahead of the curve on this one. We discovered that people need to have financial literacy, and that education in our society in particular has come up as an obvious area where improvement is needed, after the series of finance company collapses, which has seen, as the previous speaker said, 200,000 people lose money. I heard one report that said that $6 billion of those people’s savings have been lost. The tragedy is that many of the people who lost their funds are in their retirement, so they do not have the opportunity to recover. They have no opportunity to go out and work, and to find other alternatives or options to raise an income for their retirement.

This bill seeks to amend the Financial Advisers Act 2008 and the Financial Service Providers (Registration and Dispute Resolution) Act 2008. The intent is to ensure that these Acts provide for the responsible regulation of the financial services sector, and bring robust consumer protection in order to restore confidence and trust in the financial services sector. Many of the people who lost their savings in investments did not appreciate the risks that they were taking, and would have benefited from receiving knowledgable, robust, and independent financial advice. Throughout the process of preparing this legislation we continually were aware that there are different types of investors, but I will speak on that point later.

This legislation has been well looked forward to. I think it will bring robustness to the industry and to the sector. It will be good for investors and savers, and it will also be very good for the industry. It will bring confidence gradually back—it may not rush in—to this area. That will, in turn, release capital for businesses, including small to medium sized enterprises, and bring opportunities for businesses in this country to get ahead. Thank you.

• Bill read a second time.

Hon PANSY WONG (Minister for Ethnic Affairs) on behalf of the Minister of Commerce: I move, That the Financial Advisers Amendment Bill (No 2) and the Financial Service Providers (Registration and Dispute Resolution) Amendment Bill be now read a third time. I acknowledge the cooperation of all parties in the House. We all want to ensure that confidence is restored in our financial market, and this is a step towards that. This legislation makes a number of amendments to the Financial Advisers Act and the Financial Service Providers (Registration and Dispute Resolution) Act, which were passed in 2008 by the previous Government to increase confidence in New Zealand’s financial system. Under the regime, financial advisers have to meet minimum standards of professionalism and have to make informative disclosure to clients while being subject to Securities Commission oversight. Furthermore, all financial service providers, including financial advisers, are required to belong to an approved dispute resolution scheme if they offer services to the public.

The legislation maintains the fundamental framework of registered advisers, authorised advisers, and qualifying financial entities established by the two primary Acts. However, these amendment bills reduce compliance costs and focus the regime on the core area of concern: personalised financial advice to retail clients. Compliance costs are reduced under these bills by clarifying key terms and requirements. Exemption and regulation-making powers are expanded, and the qualifying financial entity model is amended to account for the realities of business operations. The Financial Advisers Act is also amended to establish a practical regime for the regulation of money handling by financial brokers.

These changes respond to concerns raised in the past 2 years about the practicalities of making the regime work as we approach full implementation. Regulatory efficiency is vitally important, but as I have consistently stated, this regime is about restoring investor and consumer confidence. To this end, the bill expands the powers of the Securities Commission so that it can more effectively perform its duties in the specific ambit of personalised services to retail clients.

I thank the Commerce Committee, officials, and the wider industry for engaging so conscientiously on this legislation. The next step is implementation, and I expect the industry to engage constructively with regulators to ensure that the regime is fully in place on time. I also expect officials to complete the regulations needed to finalise the remaining details in a timely fashion.

As previously announced, financial service providers will need to be registered under the Financial Service Providers Act and become a member of an approved dispute resolution scheme by 1 December of this year. Financial advisers, however, have until 31 March next year to be registered, allowing those seeking approval from the Securities Commission for authorisation status to obtain the necessary approval by 1 July next year. The Government recognises that it needs to rebuild mum and dad investors’ trust in capital markets, which has been severely dented by the global recession and finance company collapses. We want everyday investors to feel more confident about putting their savings into capital markets, through understanding the basics of investment, getting advice they can trust, and making informed choices. This regime is an important part of the wide-ranging reform agenda for financial sector regulation, which is crucial to economic growth and the well-being of New Zealanders. I commend this bill to the House.

Hon LIANNE DALZIEL (Labour—Christchurch East) : I am very pleased to follow the Minister and offer our continuing support for the passage of the Financial Advisers Amendment Bill (No 2) and the Financial Service Providers (Registration and Dispute Resolution) Amendment Bill. I am very pleased to have been able to play a role as the chair of the Commerce Committee. I am pleased to have worked very closely with members of the Government and with the Minister and the staff of his office, and also with the officials, parliamentary counsel, and, of course, those all-important stakeholders who make up our crucial financial sector, which is so important to our economic recovery and also to our future.

I have already said in my second reading speech, so I probably do not need to repeat—but I will—that I think people worked together in a very positive and constructive way and it would be wrong not to mention it again. I pay tribute to the House for being prepared to set aside, essentially, a Standing Order to allow for the officials’ documentation to go to stakeholders so that they could remain engaged in the process of deliberating with the select committee in many respects, ensuring that we had the best-quality advice on how this legislation would work on the ground. The House gave our committee a fantastic signal of trust, but I would like us to consider whether we need to rethink some of our Standing Orders and whether we have too much of a closed environment once legislation goes to a select committee.

I reflect often on the United States of America, where one sees the head of BP before a Senate committee and the person gets grilled. I would like to do that with some of these finance company directors. It would be so neat to be able to hold them to account in our Parliament. Maybe we need a slightly more open process in our select committees, and perhaps the media need to take a little bit more interest in the work that we are doing. I have always described our select committees as the engine room of Parliament. They are not the engine room of Government; Cabinet is. Select committees are the engine room of Parliament, and I think the work that they do is important. These bills stand tribute to the efforts of our team that supported us, and our select committee clerks, and I would like the Office of the Clerk to take that comment back to them. We really were incredibly well supported. We worked to impossible deadlines, and they really delivered for us, so we are very grateful to them for that. We are also grateful to the officials, as I have mentioned before, and to the wider stakeholders.

I have already had my little confessional moment, my mea culpa, where I have confessed that as the previous Minister of Commerce I did not have my head around the technical detail of how the legislation that I was responsible for would work on the ground as well as I do now as the select committee chair. Select committee members are in a privileged position, in that they have a higher level of input into the development of that technical detail, and, of course, they have that wider support from stakeholders. I do not know that this is a failing in the system, because certainly the feedback from people whom I spoke to was that we really could not tell how it would work in practice until we started implementing the legislation. It was during that phase that people started to say that the legislation introduced by the Government does not actually go far enough and does not address many of the concerns that they had and the difficulties they were coming up against in terms of its implementation.

Of course, the other group is lawyers. I know that I should not be saying this, as I am standing next to my very good colleague Charles Chauvel, but lawyers—and I confess to being one of those as well—have a habit of looking for problems. That is how they get paid: they get paid to solve problems, but they have to find them first. Unfortunately, I think that some of the advice given to those in the sector raised concerns that were not really valid, in my view. But the fact that lawyers were raising those concerns with those particular companies and individuals meant that they had to take action; they had to prepare themselves for that to be the interpretation, just in case. So it was right and proper that they brought those concerns to the select committee in the submissions process. We listened to those concerns and, as a result, we have better legislation.

There are not many opportunities in this House for a previous Minister to also have the privilege, in a different role as the chair of the select committee, of seeing through changes to the original legislation that one has brought in. I make no secret of the fact that I would rather be the Minister, but I am not. But, in playing that particular role, I was very, very grateful to be able to make a contribution, and I think we did.

I said in my second reading speech that an exposure draft bill accompanying discussion documents at an early stage of the process, in the way that experts in the field are consulted on tax bills, would improve the process. I know that some people would be concerned that some of the interests in the financial sector would be self-serving, but in the entire time that I was Minister, not once did any stakeholders say to me that they did not want regulation. They all wanted regulation in this field. Why? It is because the sector requires confidence. It does not operate without confidence. People do not invest unless they know they can do so with confidence. The sector knows that it needs that confidence restored if it wants our financial markets to flourish.

The last thing I want to comment on is the people who have lost money. I will never ever in my life forget the meetings that I had with people, from one end of this country to the other, who had lost money. I do not know how many meetings I had with people who had lost money in finance companies—for instance, who lost money in Blue Chip, which fell outside the system. We now have a law that will capture the Blue Chips of the future, and if the law is not tight enough—there are people out there who are looking to avoid the application of the law; that is their job, and they do it every second of every hour of every day—we now have provisions in place that will enable the Securities Commission to haul them into the frame. That will ensure there are better protections in place for the future.

But I give a warning to people who want to invest, and that is to take good-quality advice. People can ask questions of their advisers, and ask who is paying the way for them. Issues relating to commissions still need to be addressed, but I will never forget meeting those people who lost money. At a time when we want to encourage people to save, we are not necessarily providing all the best options for people to consider doing that. The people who lost money were variously described by various media as being greedy, as being out for a higher interest rate, and as knowing very well the risks that they were taking. I cannot say honestly to this House that I met anyone whom I would describe as greedy. I met people who had been conned. I met people who had been duped. I met people who had no idea of the level of risk that they were taking with their hard-earned money. I met people who were so embarrassed at what they had done that they did not tell their adult sons and daughters what they had done with their inheritance. Essentially, the money was all gone, and they were embarrassed that they had fallen for it.

These people require some protection, but at the end of the day, where there is risk and the rate of return is proportionate, it is balanced against that risk, the Government cannot make the risk go away because then there would be no financial sector. At the end of the day, people need to understand what those risks are and they need to take good-quality advice. This legislation means that they can rely on this sector again, and I am very pleased to have played a role in achieving that.

PESETA SAM LOTU-IIGA (National—Maungakiekie) : It is a privilege to speak to the third readings of the legislation arising from the Financial Service Providers (Pre-Implementation Adjustments) Bill. Much has been said this morning and last night on this legislation. I do not want to regurgitate what has already been said over and over again, except to say that it was a pleasure to work on this legislation, personally speaking. It was a pleasure because members of the Commerce Committee were working effectively as a team. Putting political differences aside, we worked together as a team with the clerks, the Parliamentary Counsel Office, and the industry stakeholders who came and presented submissions, and there were many of them. There were also those who contacted us personally through emails and calls. People care about this sector, and that is why there was such huge interest in this legislation.

This legislation is not just a collaboration between the lawmakers, the officials, and the stakeholders. It is a collaboration with the practitioners. This legislation is designed to provide a degree of certainty and confidence in capital markets, because, at the end of the day, capital markets provide the basis on which businesses thrive, through access to capital. Obviously, that leads to jobs and opportunities, and the prosperity of this country depends very much on our having confident and robust capital markets.

We had to balance out the competing interests, and they were quite clear. There was an interest in protecting investors who were investors of all different classes. They were wealthy investors, not-so-wealthy investors, elderly investors, and investors whom some might call unsophisticated or vulnerable. We sought to protect in this legislation a number of types of investor by regulating the affairs of intermediaries and financial advisers. We were careful not to over-regulate to the extent that some would feel the need not to be part of this industry. So those were the basic competing interests.

As I said earlier on in the debate, I believe that the regulator—or super-regulator, as it is about to become—must be well resourced in its role of monitoring the advisers in the industry. It must enforce, because enforcement is the key to deterring those who think they can get away with the types of acts that have been talked about during this debate. Enforcement and the imposition of appropriate sentencing and penalties are important.

This legislation will not solve all the problems in the financial industry; I think we have been clear about that. But, certainly, this legislation has put together enough submissions, ideas, and principles of the industry for us to be confident the industry will go forth with some trust and a degree of integrity. I support this legislation. Thank you.

CHARLES CHAUVEL (Labour) : I welcome the third readings of the Financial Advisers Amendment Bill (No 2) and the Financial Service Providers (Registration and Dispute Resolution) Amendment Bill. I echo the comments that my colleagues have made to thank officials and stakeholders for the work that they have put into making the legislation, hopefully, a success.

It is true that the members of the Commerce Committee worked hard, under the whip of their very diligent chairperson, the Hon Lianne Dalziel. The work put in, in terms of the number of hours spent sitting beyond normal sitting times, reflects the desire to get the legislation as right as is humanly possible so that investors are never again disadvantaged in our financial services market as they have been over the last few years. It is terrible that people have lost their savings as a result of the lack of proper regulation in those markets. Parliament should have regulated the sector earlier. It is good that we are finally doing so, and it is to be hoped that the legislation will serve its purpose.

I pick up on a comment that Lianne Dalziel made about the attempts the committee made to ensure that its process was inclusive. We had a suggested series of amendments from the Government, which came to us quite late in the piece. We wanted to make sure that people knew about those suggested amendments, so, as Lianne Dalziel has indicated, we agreed as a committee to try to open up the process more than the Standing Orders would normally allow. We got the House to authorise a process whereby folk who were interested could essentially stay in the loop with regard to the work of the committee and the advice that we were receiving from officials. That is a good process. Sometimes I think we pat ourselves on the back as a Parliament a little too much about being open to public submissions, because, sure, we are open in that way on a comparative basis but we could always be looking to improve those processes. This process certainly provided for a greater public input and a greater interested-person input than would otherwise have been the case if the Standing Orders had been applied strictly.

I want to say something about the Supplementary Order Papers that were tabled at a very late stage in the piece. We always knew that technical amendments would be coming from the Minister of Commerce to the Committee of the whole House. But I have had texts and emails today saying that there is a problem with the parliamentary website on the Internet. People have not been able to access the texts of the Supplementary Order Papers. They have not been able to make their views known at this late stage, as they tend to do via email to members directly when a late Government Supplementary Order Paper comes forward. That also, obviously, has ramifications for MPs themselves who are relying on remote access and want to see a proposed amendment at a late stage. If we want to be an open legislature, we need to use new technologies to make sure that we are accessible to the public. We need to make sure that the technologies are actually working. I see that the Clerk at the Table is making a phone call now, and hopefully that will do something to remedy the situation. But unfortunately, given that we are now in the third reading debate, it is too late.

I also point to the indisputable fact that there is no justification for legislating under urgency, in respect of this bill. The example that I have just used is probably a very good illustration of why we should not be doing this under the extraordinary procedures that the Standing Orders allow to the Government if it has a majority on an urgency motion. If we had had a bit more time, so that those Supplementary Order Papers could have been properly considered, could have been read by the public, and could have had some time for input, then we might have been able to make sure and to satisfy ourselves that we were not legislating inadvertently. I do not think any members could put their hand on their heart and say that they have read thoroughly the Supplementary Order Papers that have come in at the last moment. I certainly have not had a chance to. There might be one member, who is sitting next to me, who claims she can, and I would not doubt her word. But, generally speaking, the Supplementary Order Papers are not accessible in the way they should have been, and they certainly have not been accessible to the public. Urgency for this legislation makes it worse.

I will say a word in defence of lawyers, because they have been sorely defamed by my colleague in this process. Of course, what participants in the financial services industry have had to do when faced with significant new pieces of legislation from Parliament, such as the Financial Advisers Act, the Financial Service Providers (Registration and Dispute Resolution) Act, and now the pre-implementation legislation, is go to their lawyers and ask what the ramifications are for this new set of rules that Parliament is visiting on them. It has to be said that we have a very sophisticated profession in this country, particularly when it comes to financial services. We are lucky still to have that level of sophistication. It is something that will hopefully stand us in good stead going forward if the Government’s stated aims to have a financial services hub or industry in this country ever come to anything. I do not see a lot of activity or action in moving that aspiration forward. It would no doubt be a good thing, but if we are to have it, it will be in part because we have those sophisticated transactional lawyers available to advise such parts of the financial services industry that are still based in New Zealand.

In that regard I will say a word about the approach that has been adopted by the House in this particular legislation. It was an approach that was taken by the previous Labour Government; this is a conversation I had with the previous Minister of Commerce when I was chairing the Commerce Committee in the last Parliament that heard submissions on the providers and advisers bills. Many of the financial institutions that operate in New Zealand also operate in Australia. Many of them are branch offices of larger entities that have headquarters across the ditch. Why do we not simply adopt a similar, or virtually the same, regulatory regime that the Australians operate in this area? Why do we not negotiate to have a joint regulatory approach with joint regulators? I understand that there is some proposal that we might take this approach in competition regulation, with the chairman of our Commerce Commission being dual-warranted in respect of the Australian Competition and Consumer Commission. That is a very good approach; it is very sensible. It will keep costs down for these businesses because they will have to have just one compliance approach trans-Tasman, rather than have one set of rules that they comply with in Australia and another set of rules they have to comply with in New Zealand.

If we take the single economic market seriously and if we want to give meaning to the idea of Prime Minister Rudd’s visit next week, then this is the sort of approach we should be trying to negotiate with the Australians across the board. This should be instead of having things like separate competition authorities, separate financial regulators, and now, for goodness’ sake, a separate productivity commission, which is a bureaucracy to be created, we are told, by this Government to perform exactly the same role as its counterpart across the Tasman. Instead, we should be cooperating much more and seeking negotiated solutions that do not expose businesses to double sets of compliance across the two jurisdictions.

That is the not the path that has been chosen by Parliament. The path is the one that we are debating today. I wish the regime well and I hope it makes a difference to vulnerable financial services provider consumers. I hope we will see an end to the ripping off of mum and dad investors. Let us hope it is a step on the way. Let us hope that in a couple of weeks’ time, on the next members’ day, we will also see the Government taking a consistent approach to financial services regulation and agreeing to support my colleague Carol Beaumont’s bill to regulate the loan shark sector, because that is another sector where people are vulnerable and require protection. There is no reason why we should not provide it in one part of the industry as we are today. To deny it to the most vulnerable, as it appears the Government intends to in a couple of weeks, would be a real shame. It would be a failure on the part of this Parliament to provide the protection that New Zealand consumers deserve. I hope that the National and ACT Party members will rethink their stated approach on that issue.

RAHUI KATENE (Māori Party—Te Tai Tonga) : E te Rangatū pai mua o te Reo o te Whare, tēnā koe. We all agree that things must change in terms of creating an environment where integrity, accountability, and transparency actually count for something. One of the clearest indications that things are changing is that we are able to link to the Ministry of Economic Development website—I pick up on what Charles Chauvel said: the site is down at the moment, but normally we can do that—and have immediate access to the papers that are on there. I refer in particular to the Cabinet paper that proposed the Financial Service Providers (Pre-Implementation) Adjustments Bill a mere 6 weeks ago. There is no need to apply for material under the Official Information Act or to make panicked calls to the Minister and the Minister’s officials for a briefing; it is all there on the website as clear as day.

I like the sound of the proposals in the paper, dated 3 May 2010. They tell me that under the Financial Advisers Act advisers will now have to register, obtain authorisation, comply with the competency and conduct obligations, and make a full disclosure before providing advice to a client. The paper goes further and promotes the establishment of a regulatory framework that is designed to encourage public confidence in the integrity and professionalism of financial advisers.

As every member of this House knows, the issues of integrity and accountability in the finance sector are absolutely pivotal. Given this fact, I was somewhat surprised that out of the 93 submissions received on this bill, only one submission came from Māori. Mind you, the Māori submission was fairly substantial and came from the Māori Trustee. The Māori Trustee wanted amendments to the bill to clarify and limit the scope of an estate or interest in land and to provide an express exclusion for the Māori Trustee in respect of the Māori Trustee’s core statutory functions. It recommended that in order to limit the uncertainty in respect of an estate and interest in land—and subsequently to lessen the impact this uncertainty has in respect of leases, licences, and mortgages—section 5 of the Financial Advisors Act should be amended. That amendment would insert a definition for “estate” and “interest in land” that provides that an estate or interest in land does not include advice, guidance, or recommendations relating to the granting of any leasehold interest or licence right or any form of easement or mortgage in respect of land. That all sounds pretty technical to me but I have it on pretty strong authority—the authority of the Māori Trustee—that such a definition would be a key way of protecting the interest of Māori landowners in respect of estates and interest in land, and we therefore want to promote it.

The other key amendment put forward by the Māori Trustee is to exempt the Māori Trustee in line with its previously accepted statutory functions. These include obligations under the Maori Trustee Act 1953 and Te Ture Whenua Maori Act 1993 in respect of interests in Māori land and the holding and investing of money on behalf of the beneficial owners of such land. The reason put forward by the Māori Trustee is that there is already significant transparency, control, and oversight of the operations of the Māori Trustee. This is by virtue of the Māori Trustee being a Crown entity for the purposes of reporting. It is also demonstrated through the Māori Land Court’s oversight role in respect of the various trusts for which the Māori Trustee is responsible. Another means of ensuring that there is sufficient transparency, control, and oversight is through the funding arrangements and reporting requirements with the Crown. I am not an expert on the Māori Trustee by any means, but I believe that the issues raised in these submissions are worthy of further consideration by the House.

Finally, I note the concerns that have been raised about some of the changes in the legislation in terms of the impact they will have on consumer protection. Some key stakeholders have been concerned about the flexibility that has crept in through the exemption of financial advice. This would have the effect of excluding a large number of organisations in which financial advice can be justified as incidental rather than core to their business; this could mean anything from a car rental company to a retail firm discussing hire purchase requirements. I think the hub of their concerns rest around what the term “incidental” means and how it is interpreted. In a worst-case scenario, that might mean that people can have a tutu with financial advice and get away with shoddy advice on the flawed basis that it is not a central component of their business, meaning they do not have to comply with the registration or authorisation process. The last thing we want to see is the very people we are seeking to protect unwittingly being exposed to yet another level of risk, without the protection we envisaged would be possible in the legislation.

Finally, I remind the House that Māori-generated economic development will play a significant role in the future of our nation. The last thing any Māori shareholder or businessperson wants to see is another Blue Chip disaster blighting our financial horizons. The Māori Party supports this bill, and encourages further debate on, and consideration of, the range of issues that clearly still require further thought.

DAVID CLENDON (Green) : Kia ora koutou. Comments have already been made this morning that these bills indicate the value of regulation, and there was reference made to the fact that the financial advice sector is an industry that was under-regulated. Unfortunately, we cannot rely on the goodwill or integrity of a minority of those within the industry, and it is necessary to apply some regulation. The market, left to its own devices, clearly will not protect the well-being or serve the interests of all players in that market; it never has, and a completely unregulated market never will. There is simply too much at stake here. We are talking about people who may well be investing all of their life savings or the assets they have managed to accumulate over many years of work and effort, and we have a responsibility as legislators to ensure we put the best possible policy settings in place to ensure those people some reasonable protection—again, notwithstanding the fact that investment always carries a measure of risk. In order to asses risk intelligently and accurately, one needs access to information, honest and open disclosure, and a high level of transparency about exactly what it is one is investing in. Clearly, that was not the case with many of the companies that have now failed and that have left a great deal of not only financial or economic loss but also significant human cost in their wake. That includes ill health, the break-up of relationships, and even, at the extreme end, the suicides of people who have lost everything they had and could not see any way forward other than that very unfortunate and tragic end.

It is appropriate and a good thing that these bills have come to the House and are passing through it. I think it is important to acknowledge that this legislation on its own will not solve all of the problems that can be associated with the industry. There are other issues. One of those is that we—like many on the committee and outside it—have not found it entirely straightforward to penetrate some of the language that is commonplace to the financial sector. It is important that we continue the constant drive to get plain English documents. When people are confronted with legalese or jargon, they are at a disadvantage. There was mention this morning of an asymmetry of information, understanding, and knowledge. Clear, plain English documents would be a significant step towards ensuring that people are well informed and that they can make reasonable assessments of the risk of the investment they are proposing to make.

There was some significant discussion through the select committee process about the value or the integrity of self-certification programmes. I think there is certainly a place for that, for people who might otherwise be in a grey area, when it is not clear whether they could be reasonably expected to take care of themselves in that place. On the flip side of that, international experience shows that some self-certification programmes have been abused and misused, and have left people vulnerable. The resolution of that debate was to put a significant onus of responsibility on whoever accepts a statement of certification. If I make a claim that I am able to look after myself, then the person accepting that claim needs to have reasonable cause to make a fair and reasoned judgment that I am in that position. I think that was a good example of a negotiated outcome for some of what could have been sticking points within this quite substantive and complex legislation.

It is interesting to see that just a day or so ago, Mark Weldon, the chair of NZX, made a call for local initiative, local institutions, and local policies that will reduce this country’s reliance on foreign capital. Indeed, putting this bill in place and giving people more confidence that they will receive fair, honest, and open advice is one step, albeit a small step, towards us becoming somewhat more self-sufficient in capital. It gives people confidence to invest their hard-earned money. It will also have a positive spin-off, as I mentioned earlier, in potentially making more capital available to business people and innovators who want to build and develop a local industry in whatever the context might be.

I think there is more work to be done around financial investment more generally. We need to create policy settings that encourage and improve the landscape for so-called angel investors, those people who have funds and are willing to put them into sometimes unproven investments—people who offer venture capital on reasonable terms. Clearly, in the New Zealand market place that is a gap that needs filling. We have too little access for many in our creative design sector, our innovators, who can actually build a sustainable economy in New Zealand. By facilitating the entry into the market of angel investors, we would go a long way to resolving that.

We in the Greens believe there is a significant opening to create policy settings for ethical investment companies, the likes of Prometheus Finance, which is probably the best known in New Zealand. Those are companies that will guarantee and undertake to their investors that they will invest only in products and services that are deemed ethical. There are obvious things like tobacco, arms, and various forms of nuclear energy, but they actively pursue ethical, sustainable investment. Having evened the playing field a bit, which we have done with this bill, the next steps might be towards facilitating the growth and expansion of that ethical investment community. The Government investing more and putting some of its own funds into these programmes, and actively pursuing and supporting these programmes, would send a very good signal to the market that this is the way forward. Investing in ethical companies, investing in sustainable development, and investing in local industry innovation initiatives is definitely the way to forward for this country, its economy, and, indeed, the people living within it.

Finally, I simply reiterate what has been said. This has been a very positive process in negotiating a good outcome for these bills, despite some initial differences based on ideology or experience or whatever it might be. It has been a very positive process, and it has taken us a step closer to assuring New Zealand investors that they can have a degree of confidence and safety in their investments. Kia ora koutou.

JONATHAN YOUNG (National—New Plymouth) : I am very pleased to stand to speak in the third readings of the bills arising from the Financial Service Providers (Pre-Implementation Adjustments) Bill. It is critical that we get our regulatory framework right, and this has been quite a process. It is a very complex bill, and we have appreciated the input from many quarters—particularly from the stakeholders, who have been very much part of this whole process of developing the legislation. I think that today there will be people out there in the market place celebrating the passing of this bill.

One of the balances we had to find was where to regulate and where not to. Whenever we create regulations to protect consumers, the consequence is that we constrain providers. We have worked hard, listening to consumers and financial service providers to get the balance right between consumer protection and professional efficiency. However, it needs to be said that the confidence this legislation will bring to consumers is important. Many, many submitters welcomed the compliance this legislation will bring, because it will attest to, and support their aspiration of, professional soundness as an industry.

In respect of finding this balance between flexibility and constraint, we know that both the Financial Advisers Act and the Financial Service Providers (Registration and Dispute Resolution) Act have been made more flexible by adding a number of regulation-making powers. That sounds slightly oxymoronic, does it not? The Securities Commission can now provide limited exemptions from financial adviser obligations. The commission is not expected to consider exemptions for every individual adviser who does not consider him or herself to be the true target of the regime. The commission is expected to focus on exemptions for classes of persons for whom the cost of compliance with certain obligations would be unreasonable or unjustified. Those mechanisms are important to ensure that the regime can adapt with the market and impose obligations that are proportionate to the risk created by different services.

Mr Chauvel talked about the single economic market, and as I close I say that a lot of work is being done by our Minister of Commerce, Simon Power, with his Australian counterparts to make progress on 27 regulatory outcomes identified by the two leaders, Prime Minister John Key and Prime Minister Kevin Rudd, in a joint statement in August last year. The Trans-Tasman Outcomes Implementation Group, co-chaired by a senior official in the Australian Treasury and our Ministry of Economic Development, has been working to advance the outcomes identified by the two Prime Ministers.

I believe this is good watershed legislation, which will make a difference to the financial adviser sector and a huge difference to confidence among investors and savers in our country. It is a pleasure to be able to support this bill. Thank you.

CLARE CURRAN (Labour—Dunedin South) : I rise to speak in the third readings of the Financial Advisers Amendment Bill and the Registration and Dispute Resolution Bill. As members know, Labour supports this legislation. It will simplify the implementation of the Financial Advisers Act and reduce costs, while encouraging public confidence in the industry. The amendments discussed this morning will strengthen the Financial Advisers Act 2008 and the Financial Service Providers (Registration and Dispute Resolution) Act 2008, both of which were brought in by the previous Labour Government, and ensure those Acts serve their purposes. Public confidence in this industry, and robust consumer protection, are vital today, and we must restore confidence and trust in the financial services sector.

I will comment on a couple of things that have been brought up this morning, by me and others, and underline their importance. The first is to do with promoting standards and accountability in the profession. A number of other professions have been mentioned in the House this morning, such as the legal and medical professions, accountancy, and the police. Essentially those are the professions we expect, when we go to them to seek advice and information, to know that we will get quality, and that some sort of standard will be attached. Financial advice should be in that league, and hopefully with the passing of this legislation it will have that standing.

The other thing I would like to mention is the importance of financial literacy, which has been talked about as well. Unfortunately it has been talked about in terms of it being a problem, rather than our having solutions to that problem. As a country we owe it to the people of New Zealand to really grapple with this issue seriously and work out how people can become more financially literate, and what is needed to make them so.

While that discussion was happening this morning, I thought about the medical profession and the increasing trend for people to self-diagnose by accessing the internet and googling their symptoms and coming up with their own diagnoses. I am not being overly critical of people who do that, because in many cases it does produce some results and interesting discussions with general practitioners and other specialists. But the issue of people who think they know best on financial matters, the range of products out there, and how their investment will turn into a bigger investment is a big one because financial literacy is not something that people generally learn at school. Perhaps it should be learnt more at school. There are some serious issues about where we should intervene in society to enable people to have more information about how to best use their money. I certainly think that financial literacy is a major issue in our society right now, and we need to grapple with it.

The third issue is about the vulnerability of investors, particularly the people we have been talking about, who have been most affected by this issue. They are the mum and dad investors, the people who do not have a lot of money, and often it is their life-savings we are talking about. I want to draw attention, as a number of my colleagues have, to the member’s bill of my colleague Carol Beaumont, Labour’s spokesperson on consumer affairs, the Credit Reform (Responsible Lending) Bill, which is really addressing this issue and taking it a step further in relation to how to protect people from loan sharks. There is an extraordinary amount of ripping off by moneylenders going on in our society at the moment of the people who are being most affected but who can least afford to be affected.

When we take into account the extraordinary amount of cooperation and collaboration that has occurred with this legislation in the Commerce Committee and across this House, it would be a show of goodwill if the Government actually showed that it had some responsibility about this issue, and showed that it was prepared to consider the importance of the issue and take it a step further—and it would be good to note that some members across the House were actually listening to what I am saying, right now.

The Commerce Committee has focused on protecting retail consumers and on enhancing confidence. The select committee has done an extraordinary amount of work in that area, and I pay tribute to the committee and all the officials, as has been done a number of times in the House today. But it is really important to do that, and particularly to praise the chair, the Hon Lianne Dalziel. As I said, we were focused on protecting retail consumers and on enhancing confidence, and on encouraging participation in capital markets. We were conscious throughout the select committee process of remaining mindful of the harm that the legislation is intended to address, and the need for a regulatory response to be proportionate to that risk. I believe that that has been achieved, and been achieved after a lot of hard work by all involved.

So this legislation will ensure that the public are protected from people like Neville Cant, a Timaru investment adviser mentioned earlier, who just last week was jailed, and banned from being an investment broker, after offering and allotting securities to members of the public without a prospectus or an offer statement. Worst of all, he was convicted for stealing about $100,000 from clients.

As members have also heard, this legislation is about protecting ordinary investors like Tom and Ann Cawood, aged 78 and 75, who were forced to walk away from their home after losing everything in Blue Chip investments. This couple, as has been reported in the New Zealand Herald, like so many were not foolish with their money but, rather, received misguided financial advice. Similarly, Colin and Bev Mossop, after the Blue Chip failure, found they were devastated after many years of hard, honest work, and said that their hopes for their future financial stability and enjoyment of life had been shattered. When Blue Chip collapsed in 2008 it was outside our regulatory system, and more than 2,000 investors were owed more than $84 million. Founder Mark Bryers has been sentenced on 34 charges, most of them relating to inadequate financial reporting such as failing to complete or sign off company accounts. His case has been well documented. He has been banned from being a director or manager of a company for 5 years, which is the longest period possible, and he is ineligible to run a company until May 2015.

As Lianne Dalziel has said, this law will capture the Blue Chips of the future. This legislation will allow the Securities Commission to bring such companies into the system, and I hope that the legislation will today send a real message to financial advisers and the financial sector so that we can truly restore confidence in that sector. That plays an important role for businesses in raising capital, and this legislation is about protecting ordinary investors. The sector is supportive of the legislation today. It was apparent from the submissions heard before the select committee that the sector itself wants reform, and understands its importance.

Finally, I again thank Commerce Committee members for their hard work, particularly the chair. The select committee process was inclusive, and such an open and transparent process with stakeholders and officials makes this legislation what it is today. It will not solve all the problems in the financial sector, but it promises to make a difference. I want this legislation in order to protect people from the Blue Chips of the future, and to reinforce public confidence in the industry with robust consumer protection. We must restore confidence and trust to the financial services sector. I commend this legislation to the House.

MELISSA LEE (National) : It is a pleasure to rise for the third readings of the financial services legislation. We have had quite a robust debate in the House, and it has been a tremendous pleasure for me to watch the whole House and to see all the different parties in agreement that we must protect ma and pa investors, who have had a bad time and have lost a lot of money. This bill is here to protect the consumers out there.

I begin by paying tribute to the House for allowing the Commerce Committee to pass official documents to stakeholders in order for them to make comments before we presented this bill. I think it was Lianne Dalziel who said that our select committee was the engine room of Parliament. I would like to add that we were really cooking with gas in that select committee. We were firing on all cylinders. Our deputy chair, Sam Lotu-Iiga, had a lot to contribute. In fact, all the members who participated in that select committee made valuable contributions.

I must say, as someone who did not really know much about the financial sector, that I have learnt a tremendous amount from the process. Recognising that we need to return confidence to the finance sector is important and it was one of the issues we worked on. We know it as members of Parliament working on this bill, and it seems that the financial sector, the people who are in the business of financial advice, also knew that they had to work on it. They were not being protectionist when we were talking about wanting them to make submissions. It was not a case of them saying that they do not want regulation. It was about people in the industry and members of Parliament working together to find a balance whereby we can provide protection for consumers, yet allow business to get ahead.

Probably all of us in this House personally know someone who has suffered as a consequence of some 30 finance company failures in the last 4 years. I personally know of someone who has worked as a doctor and helped a lot of people in the community by voluntary work. Her entire retirement savings were lost as a result of a finance company failure. Earlier, one member said that some of these people who had lost their entire life-savings were so ashamed of the bad advice they had received, or the bad choices they had made, that they were too afraid to tell their families. This is what has actually happened.

One of the major important things that we must achieve is the financial literacy of the people, the public, so that we all know what we are going into. This Parliament cannot protect everyone. If there is a higher interest rate on an investment, then everyone must recognise that there is a higher risk and that the Government cannot protect that investment. This is great legislation, and it has been a pleasure to work through the select committee process. It is my pleasure to commend the legislation to the House.

STUART NASH (Labour) : I stand to support the third reading of this legislation. I have given speeches on the first reading, second reading, and Committee stage of the Financial Service Providers (Pre-Implementation Adjustments) Bill, so there is not much that is new that I want to say. But I will sum up the points I have made because I think they are all very important.

I come back to something that Melissa Lee said; her colleague Sam Lotu-Iiga mentioned it as well. I fundamentally disagree with their point. They talked about the inability to legislate for risk. I do not agree with that. I think that this legislation is legislating for risk. I have talked about the fact that there is something called the risk-free rate of return. It is usually understood to mean US Treasury bills, because there is nothing safer to invest in than US Treasury bills. Anything with an interest rate that is higher than that carries an element of risk. But one risk that investors should not have to take into account is the risk of negligence, incompetence, or very poor form on behalf of financial advisers. When Melissa Lee said that people have to account for risk, she was right. But I say that savers, the people who go to financial advisers, expect advice on different risk types. They do not know how to assess risk properly, so they go to financial advisers to ask how to properly assess their risk and have a balanced portfolio. That is the role of the financial adviser. I talked about how the understanding of risk and the assessing of risk is one of the fundamental developments of the global economy.

This legislation is supported by the industry, and there are reasons for that. One of the fundamental reasons is that the reputation and good name of a lot of very good financial advisers have come under attack in the last few years because of the unscrupulous people operating in this industry carrying the name of financial adviser. We encourage the good people to remain in this industry. We want people to enter this industry, but only in the knowledge that they will be trained, and that they need to be registered. They need to have the education and the skills to be able to offer advice to people who want to invest—to tell them how to do it. People go to financial advisers for advice.

I remember hearing a case where someone talked about a balanced portfolio being investment in five different finance companies. That is not a balanced portfolio; that is the sort of advice that was given out by those fly-by-night characters who had no education, no grounding, and no experience in this game whatsoever. It was an absolute travesty for the good people of New Zealand that we allowed those people into the sector. Now with this legislation and the previous two bills that were put up by the Hon Lianne Dalziel, those sorts of people will no longer be able to operate in this industry.

We talked about financial literacy as well, and it is a very important point; it transcends way beyond the boundaries of this bill. It is incredibly important. Again I come back to something that Sam Lotu-Iiga mentioned. He said that a friend of his with financial qualifications finds it difficult to wade through a 75-page prospectus. I find that astounding and incredibly worrying. My point is that if someone with financial training has great difficulty wading through a 75-page prospectus, how is someone without any financial training supposed to understand the requirements? It is law to put out a prospectus. It must be done if one is offering securities to the public. The inclusion of everything in that prospectus has been deemed by Parliament to be absolutely necessary in order to make a sound financial decision. If people cannot understand a prospectus, they go to a financial adviser. A financial adviser is supposed to have read and understood the conditions within a prospectus, and therefore be able to offer advice around different risk profiles in different forms of investment. Sam’s point was very clear: friends of his with a legal or financial background have great difficulty understanding a prospectus. So how can ordinary New Zealanders understand? They simply cannot. That is why the financial services sector is a very important part of the New Zealand economy and it is why we need people who are suitably qualified to be operating in this sector. We have now got rid of people who have no qualifications and who have no intention of getting qualifications.

Financial literacy is a problem. My personal view, which is not Labour’s view necessarily, is that some form of economics and finance should be compulsory up to the fifth form. New Zealanders need to leave school understanding the basics of economics, accounting, and finance. It is not difficult, but it needs to be part of the prospectus. I wonder what Allan Peachey’s view on that is; I suspect he probably feels the same way. Coming out of school and not understanding a thing about economics or finance is a huge barrier to this country going forward, and that needs to be addressed. But, like I mentioned, it is outside the ambit of this bill. The parties will have to work through it.

Another point is that New Zealand quite simply cannot afford to have the millions of dollars disappear that have been shed from the balance sheets. Raising capital is vital to the depth and the breadth of business in New Zealand, and we absolutely must have a financial services sector that people can operate in, can invest in, and can raise money from with certainty and with confidence. It is very, very important. Our capital markets have taken a huge hit as a result of 30-plus finance companies going under, firstly, because people now have an inherent distrust of the capital markets, and, secondly, because people are going back to investing in houses. We understand that that is a major problem. It is not part of the productive economy. But New Zealanders have had money gouged out of their accounts by finance companies, so where do they turn? A lot of conservative Kiwis will go back to the housing sector. That is not something that we really want to encourage. We really need to encourage an environment in which people believe they can invest. They can assess the risk and can invest in that environment with a level of certainty that the advice they have been given is not negligent or incompetent.

Finally, this legislation is about ordinary New Zealanders. I talked about Mark Hotchin’s $30 million mansion. I will give members a quote from the New Zealand Herald: “A half-finished $30 million mansion … is big enough to contain 13 average houses just on its floor space. … It will contain seven bedrooms, a 25m swimming pool and a garage for 12 cars. Its study, games room and home theatre alone are as big as the typical house—without counting any of its living spaces, including seven bedrooms.” That house was built on a graveyard of the broken promises and shattered dreams of ordinary New Zealanders. Thousands of New Zealanders out there have lost everything, and Mark Hotchin’s mansion on Paritai Drive stands as a symbol of greed and all that was wrong with the finance company sector.

As I also mentioned, I am hoping that New Zealand icons like Colin Meads and Richard Long—their brands are irrevocably damaged at the moment—and other New Zealand icons will think twice before they lend their names to areas that they have no competence in.

This travesty of the finance companies has resulted in increased ill health and a decrease in the well-being of a huge cohort of New Zealanders. Last year I spoke about two people I know about—and no doubt there are a hell of a lot more—who committed suicide as a result of losing all their money in these schemes. That is why this bill is so important.

We must remember that not all who acted in an unscrupulous manner were operating out of the back of a tin shed. We need to pass this bill. I commend it to the House. The days of the Wild West are gone. This bill closes a lot of these loopholes. It is a fantastic bill, supported by both sides of the House, and certainly supported by me. Thank you.

• Bills read a third time.

Hon NATHAN GUY (Associate Minister of Transport) on behalf of the Minister of Transport: I move, That the Civil Aviation (Cape Town Convention and Other Matters) Amendment Bill be now read a first time. On 24 March 2010 the Minister of Transport, Steven Joyce, announced that the Government had decided to accede to the Convention on International Interests in Mobile Equipment, commonly known as the Cape Town Convention, and to the Protocol to the Convention on International Interests in Mobile Equipment on Matters Specific to Aircraft Equipment, commonly called the Aircraft Protocol.

By taking this treaty action New Zealand will become part of an international system to protect commercial security interests in mobile aircraft equipment. Because mobile equipment such as aircraft move from one country to another, international investors in, or lessors of, such equipment have historically had to rely on different national laws to protect their investments. Consequently, financiers seek a premium on their lending as a hedge against the legal risks involved.

The convention creates a set of international rules governing security interests in mobile equipment, including an international securities register. The Aircraft Protocol modifies and supplements the convention to meet the particular needs of those involved in cross-border transactions applying to “aircraft objects”, which include airframes, aircraft engines, and helicopters. The protocol provides the creditor with additional remedies, including the deregistration and export of an aircraft. It also establishes a special insolvency regime in relation to aircraft objects to strengthen the creditor’s position against the debtor or the insolvency administrator. It is estimated that the financial savings over the next six years to the aviation industry, including Air New Zealand, could range from $18 million for savings in export credit guarantees to as much as a whopping $325 million in reduced finance charges. And, of course, the benefits will continue into the foreseeable future.

Amendments to domestic legislation are necessary to ensure that it aligns with the Cape Town Convention and Aircraft Protocol when they come into force in New Zealand. The bill amends the Civil Aviation Act 1990 to give the convention and the protocol the force of law in New Zealand, to ensure that these instruments prevail over inconsistent domestic law, and to require the Director of Civil Aviation to deregister an aircraft when required to do so by a creditor, in accordance with the new processes set out in the Aircraft Protocol. The bill also amends several other Acts.

• Debate interrupted.

• Sitting suspended from 1 p.m. to 2 p.m.

Hon NATHAN GUY (Associate Minister of Transport) : As I was saying before the lunch break, the bill also amends several other Acts to ensure that the special insolvency regime provided for in the Aircraft Protocol prevails over any inconsistent domestic processes.

The bill also makes changes to the Civil Aviation Act to streamline the civil aviation rule-making process. Transport legislation, including the Act, contains provisions authorising the Minister of Transport to make ordinary transport rules. These include requirements relating to public notification of, and consultation on, intended rules, and a mandatory 28-day rule between the gazetting of a rule and when it comes into force. These, together with the subsequent addition of a Cabinet process, have resulted in a complex and lengthier rule-making process.

In 2008 the previous Government decided that the rules system should remain, but should be more flexible. This Government agrees with that approach and has moved more aggressively to streamline the rule-making process and reduce overall costs. This bill therefore amends the Civil Aviation Act of 1990 to enable civil aviation rules to be made by Order in Council, to repeal mandatory notification requirements and replace them with a requirement for notification as considered appropriate by the Minister of Transport, and to repeal the mandatory 28-day rule. It will also align the Act with the Land Transport Act of 1998 in relation to incorporation by reference of standards into rules, and the power of the director to determine—

Hon Steve Chadwick: I raise a point of order, Mr Speaker. With respect to the Minister—oh, the microphones have come on. We could not hear the Minister because of the noise in the House.

The ASSISTANT SPEAKER (Hon Rick Barker): The member is quite right. There was noise on both sides of the House, and I was waving and gesticulating to people for them to calm down, rather than interrupt the Minister’s speech—and now we have interrupted it. Could I just make the point that there is a lot of extraneous noise in the Chamber, and could people give the appropriate courtesy to Nathan Guy.

Hon NATHAN GUY: I thank the member for that. As I was saying, it will also align the Act with the Land Transport Act of 1998 in relation to incorporation by reference of standards into rules, and the power of the director to determine technical matters under these rules.

The Government would like the potential financial savings to our aviation industry to become quickly available this year. A 3-month time lag before accession to the convention and protocols is effective means that for accession to be in force by 1 October this year the bill would need to progress through all stages by 24 June. Subject to Royal assent occurring by 29 June, the instruments of accession could then be lodged by 30 June, and accession be in force for New Zealand 3 months later. I commend this bill to the House.

Hon DARREN HUGHES (Labour) : I rise to speak in support of the Civil Aviation (Cape Town Convention and Other Matters) Amendment Bill. I congratulate my local MP, Nathan Guy, on how well his reading is coming on. He read that speech beautifully. Maybe the national standards will help some people, after all. In that respect, he brought energy to legislation that the House finds itself in urgency to consider today.

Hon Member: Where did you get your suit?

Hon DARREN HUGHES: The question is where he got his suit from. I bet it is a foreign suit. I bet it is an import. I can guarantee that it will not have been made locally.

This bill, as the Associate Minister of Transport explained, is highly technical in nature; I think his speech made that pretty clear. It brings New Zealand into line with one convention that presumably, we hope, will have quite a practical impact for a number of countries, including New Zealand, in respect of the way in which international financing is handled for assets such as aircraft and aircraft engines.

Labour will be supporting this bill. It is unusual for Labour to support legislation that is introduced under urgency, not referred to a select committee for public consideration, and not given the chance for reflection, but I am aware that the Transport and Industrial Relations Committee has conducted quite an extensive and, I am advised, exciting inquiry into the Cape Town convention. The committee has left no stone unturned when it comes to the various clauses that make up that convention. Therefore, the legislation that flows from the inquiry that the committee has undertaken will probably on this occasion suffice as enough for the ratification of that convention by Parliament, through the legislation.

I want to speak about only a couple of issues at the first reading. I know that my colleagues who have sat through the inquiry will want to make more fulsome comments on some of the other matters. I know that my colleague Darien Fenton will have some issues around civil aviation safety, which I know she is keen to explore with the House as this bill goes through.

It seems to me that one of the best things about this convention is that it takes an activity that is, by definition, multinational, although there are strong domestic aviation markets. When we think of long-distance air travel, it occurs between countries. Therefore, it involves many, many Governments in many, many jurisdictions and different environments where alternative legal operations take place. In an industry where the capital costs of these assets, like aircraft and aircraft engines, are so significant and, therefore, the leasing of them is not a cheap action, the way these arrangements are arrived at becomes critical for a competitive aviation market, for the ability of air travel to take place without the steep costs of compliance because of the concern of creditors for the location of their assets.

One of the things the convention is doing that is very good is it is recognising the whole point of air travel, which is contact. We have economic contact through trade. New Zealand is a small country that exports significantly some our freshest products, which need to arrive at market in a fresh condition, and of course air freight is very important. There is also people to people contact, as people travel as passengers in civil aviation.

The convention will allow creditors to file directly with an international registry by computer. They will be able to do that electronically, thereby cutting enormously the amount of time it would take if this had to be done by another form of civil aviation, such as pigeon post or carrier mail. They will be able to do that from wherever they are in the world. Wherever there may be a dispute or a concern about an asset, that action will be able to take place.

I notice that the Irish Government has volunteered to host matters where there is litigation or where there is the requirement of the intervention of a court. From what I have read, that seems to have been welcomed by most of the players who take an interest in this area as a way of Ireland’s efficient legal system effectively exporting its skills, and the location of Dublin is where any disputes will take place. This will reduce risk and uncertainty, and of course that has to be good for New Zealand.

But this is an international convention, and we should not focus only on the benefits for this country. By signing this convention, it is hoped that developing countries will be able to take advantage of the lower costs to them by having such a regime take place. Often in those countries, where there are fledging markets, those costs can be very high barriers for people wanting to enter into international aviation. So our hope would be that not only is this measure good for New Zealand, because of our geography, isolation, and strong dependence on exporting, but also it will bring some assistance to other countries around the world—particularly the developing countries, where achieving these sorts of arrangements in civil aviation could make quite a difference to those countries.

Despite its complexity, I do not think that the bill will find itself the subject of huge attention this afternoon. Its moment in the spotlight might be more brief than the work that has been done to bring it to this point, but that should in no way take away from the fact that it is quite a practical resolution of an issue that every year different companies and countries find themselves dealing with. The Labour Opposition is very pleased to support the first reading of the Civil Aviation (Cape Town Convention and Other Matters) Amendment Bill, and we will be supporting it as it passes through the House this afternoon. Thank you for the opportunity.

DAVID BENNETT (National—Hamilton East) : In following on from previous speakers in respect of the Civil Aviation (Cape Town Convention and Other Matters) Amendment Bill, I say that everybody will be pretty much in unanimous agreement that when it comes to our transport sector—especially aviation, which is such an international part of the transport sector—we want to have uniform rules that are consistent with other countries, so that those who provide those services know they have some security. This bill will give security to those who hold financial security interests in the cross-border transactions involving planes and suchlike. It is an important thing for our international competitiveness, for our international connections, and for our international transport linkages.

The fine Transport and Industrial Relations Committee, with members from both sides of the House, will take an active interest in this bill and make sure that everything is well advanced through this House. We want this process to be successful for all parties involved and for the country so we get those transport issues sorted in order to give security to everybody who will be needing it in the future for their investments. Thank you.

DARIEN FENTON (Labour) : It is an absolute privilege to take a call on the Civil Aviation (Cape Town Convention and Other Matters) Amendment Bill 2010. I have been waiting with bated breath and great anticipation to take a call on this bill, because it is such a riveting and exciting bill! But, you know, I do not want to belittle the bill, because I know it is important. As other members have said, the Transport and Industrial Relations Committee examined the treaty and reported back to the House 4 or 5 weeks ago. I want to thank very much the officials who took us through this convention. It was a very interesting experience, and I think the officials did their very, very best to try to make it interesting for the members of the committee, and I genuinely thank them for that.

The national interest analysis that is attached to the report from the Transport and Industrial Relations Committee on the treaty examination is very, very thorough, and perhaps, if I have the chance later on in the Committee stage, I may talk about some of the advantages. But there are also some disadvantages, as explained to us by the officials, that I think are worth considering.

Labour is supporting the bill, because it is pretty uncontroversial. It amends domestic legislation so that New Zealand can be party to an international convention on aircraft ownership. I cannot help myself with this legislation, because here we are with a convention. I am aware that New Zealand tries to be a good global citizen by participating in global agreements and playing a leadership role in that. So the question comes up again for me as to why we support this convention but not one on fundamental rights for domestic workers, which our Government voted against at the International Labour Organization 2 weeks ago. It voted alongside countries like Bahrain, Saudi Arabia, Iran, and Kuwait, to prevent an international standard that would provide protection to domestic workers throughout the world but also in New Zealand. We have not received an explanation for why our country voted in opposition to countries like the USA, Australia, the UK, and the Philippines, and I think it is very damaging to our reputation.

As I said, although I am pleased that we are supporting this bill across the House, I am still very, very concerned about our position, especially as a former National Party MP, Marilyn Waring, has offered an apology to the women of the Commonwealth for New Zealand’s vote against the proposed ILO convention. She said that New Zealanders are “ashamed, saddened and outraged that the principles which we hold dear, and try to live by, have been abrogated by the government of New Zealand.” Despite what the Minister says, this is a convention that would have affected New Zealand workers. There are around 20,000 home-based care workers in New Zealand, and thousands more throughout the world. So we talk in this debate about developing countries and how this convention will help them, but we do not care about the thousands of domestic workers throughout the world who have no rights. The overwhelming majority of New Zealand domestic workers are very poorly paid, and they are excluded from the discrimination provisions of the Human Rights Act.

Although we support this convention, the following question came to my attention when I was thinking about this: how can we agree on this across the House, when we have this situation at the ILO? New Zealand has had a good reputation, particularly under the previous Government, and that is slowly being eroded.

As other members have mentioned, this bill also contains amendments to the Civil Aviation Act. The amendments are designed to introduce more flexibility into civil aviation rule-making. I want to make a couple of comments about air safety. The Minister is not here, but perhaps later I can ask him some questions. The Civil Aviation Authority does a good job, given its paucity of funding and the challenges of regulating aircraft operation in New Zealand, commercial and recreational, which is a very wide-ranging operation. An issue that came up recently concerned Queenstown Airport. We wrote to the Civil Aviation Authority asking about safety issues at Queenstown Airport. It is a difficult airport and there have been media reports about a lack of experience in the control tower and an increasing number of safety incidents. The Associate Minister of Transport, Nathan Guy, will be pleased to know that Airways Corporation of New Zealand wrote back to us on behalf of the Civil Aviation Authority with assurances that staffing and training levels are more than adequate for this particular airport.

That is all well and good, but what happened last week? Two pilots apparently used their airside security passes to sneak on to the Queenstown Airport runway in the middle of the night to race a car. The boy-racer legislation did not apply to them, obviously. Needless to say, those pilots put the lives of others at risk, and they ended up being banned from all airport land for 2 years. OK, that is the right outcome. So the authority that Mr Guy is responsible for has provided us with perfectly reasonable answers to our valid concerns, but I have to say that these perfectly reasonable answers have not prevented a couple of cowboy pilots from drag racing on the airstrip at Queenstown. I encourage the Minister to be more vigilant about these sorts of things. We cannot have these sorts of security concerns happening at our airports.

I want to raise another issue in respect of civil aviation. The Associate Minister recently made an announcement about the monitoring of commercial pilots for drug and alcohol issues. There are two things. The Civil Aviation Authority will work with the Ministry of Justice to introduce random checks on commercial pilots for any criminal convictions that have not been declared, and, secondly, it will introduce an electronic database that will enable them to more effectively gather information and monitor any trends. Labour supports these initiatives, and I really want to say that Labour members do not believe there is any room for drug and alcohol use among pilots. I do have to reflect, though, that Air New Zealand has had monitoring systems in place for many years, and it was quite aggrieved at the suggestion that it had not. In actual fact, the problem is with small aircraft and small commercial airlines.

It seemed as though Mr Guy was being pretty proactive in terms of his press release of 1 April. But what it did not say was that the Civil Aviation Authority had repeatedly been asking for more powers to identify pilots with drinking problems, but unfortunately the Minister had been sitting on his hands. The Christchurch Press obtained a briefing to the Minister under the Official Information Act. It was written just a month earlier and states that the existing system is heavily dependent on individuals acting responsibly and self disclosing information relating to their drug and alcohol use. But it also shows that the Civil Aviation Authority had proposed a series of measures, including limits for drug and alcohol use, but that nothing had been done.

As members will see, although Labour supports this convention there are some concerns. If I had more time I would mention many more, but perhaps I will get to those during the second and the third readings. We have many concerns around civil aviation, the things we need to be doing in New Zealand to ensure the safety of people who fly in New Zealand, and, of course, meeting our international obligations, thereby making it easier for our airline industry to operate internationally and to meet our obligations to other countries. Thank you.

GARETH HUGHES (Green) : Kia ora, Mr Assistant Speaker. Ngā mihi nui ki a koutou. Kia ora. It is a great honour to be here today to talk about the Civil Aviation (Cape Town Convention and Other Matters) Amendment Bill. We could hear the passion in the Minister’s voice when he was talking before. As I have been tweeting over the last couple of days about the House being in urgency, I have been asked by lots of people in tweets, blogs, and Facebook messages why the House is in urgency. They are asking about the most important thing that we will be debating and which regional council we are sacking this time. I have been telling them what I will be debating, which is the Civil Aviation (Cape Town Convention and Other Matters) Amendment Bill. This is an important bill. The Green Party will be supporting it, given that we have 4,431 aircraft, including microlights and balloons, in New Zealand, and they flew 214 million kilometres in the last year. It is an important bill, and the Green Party will be supporting it. But I want to outline a few parts of the bill and a few of our concerns as we go into this debate.

The bill, the convention, and the protocol are private legal agreements that will significantly improve the financial security for investors in cross-border trades of things like aircraft, railway rolling stock, and other large and expensive equipment. The convention enables creditors to access a registry. I wonder whether the status quo actually works all right. We have a register in New Zealand for our aircraft companies. It will be considerably more expensive to register through the new Irish registry under this bill. But I guess the airline companies and other parties who will be using the provisions of this legislation will point to the fact that it will help them with finance when they are purchasing new heavy equipment such as aircraft, and that some of the financial benefits could be in the order of $18 million to $325 million.

We have to question whether we even need this treaty. It is interesting that the House is in urgency to look at this bill. Perhaps we needed urgency to get this done, when we consider that the treaty was signed in Cape Town in 2001 and came into force in 2006, that the Ministry of Transport began looking at it in 2004, and that the previous Government agreed in principle to support it in 2005. We are 9 years on from the signing of the treaty, so I guess we needed urgency in order to give it a push along.

My final point, and something that I look forward to picking up in my second reading speech, is that on the one hand this bill is not controversial. It is logical to establish an international rule-based framework to look at the issue of default. We support having greater international cooperation and reducing the risks for Kiwi and foreign corporates. But on the other hand do we actually want to see a growth in airline emissions? In my second reading speech I will look at some of the environmental and climatic impacts of the worldwide aviation industry, and I think an important question is whether we in New Zealand want to support and subsidise the pollution from our aircraft industry, when we know that the world is burning and we do not have a “Planet B”. I look forward to addressing that issue in my second reading speech, but I say the Green Party will be supporting this bill.

ALLAN PEACHEY (National—Tāmaki) : I am pleased to support the Civil Aviation (Cape Town Convention and Other Matters) Amendment Bill, and I will begin with a couple of remarks.

Firstly, I welcome the support that the Opposition parties are giving to this bill in the House, and I express my regret that the Opposition does not find its way clear to support other significant bills that this Government has brought to the House. In particular, the significant tax cuts that this Government is to deliver to New Zealanders on 1 October this year come to mind.

The second observation I make is that the Transport and Industrial Relations Committee was well briefed by officials on the significance of this bill. If memory serves me right, I think that I was—

Hon Darren Hughes: It doesn’t.

ALLAN PEACHEY: My memory serves me very, very well—I am sorry, I have forgotten the member’s name.

Chris Tremain: It’s Hughes.

ALLAN PEACHEY: I apologise to Mr Hughes. My memory serves me very, very well sometimes. However, I am not very good on the names of Labour Party politicians. As I was saying, from my recollection I was the only member of the select committee who asked the officials for explanations. I was particularly interested—[Interruption] I ask the chair of the committee whether I am wrong.

David Bennett: No, I don’t think so.

ALLAN PEACHEY: Indeed, I think I am right. I was particularly interested in knowing whether this bill, when it becomes law, will reduce the need for lawyers to become involved in this sort of thing and for litigation to occur. I am pleased to report to the House that I was assured that there would be considerably less need for lawyers and less need for litigation. That was a good enough reason for me to support this bill.

Charles Chauvel: You don’t hear me bashing teachers!

ALLAN PEACHEY: From listening to the interjections that are coming from a corner opposite, I am almost inclined to take the view that we could do with having fewer lawyers in this House, as well. After all, our job is to make the law, not pontificate about it, and there is a big difference between the two in relation to the member.

This convention is about the financing of mobile equipment, and by “mobile equipment” we mean things like aircraft, railway rolling stock, and even space assets. That is what the bill is all about. The bill is designed to make raising and repaying the finance needed in order to purchase mobile equipment like aircraft much easier. At the moment, if there is a dispute over, for example, payment for release, it can involve more than one jurisdiction, a whole pile of other laws, and far too many lawyers. This bill is designed to simplify the process and to give much greater certainty around it, not just to those who lend the money but also to those who borrow it. There will be greater certainty. The ultimate objective, of course, is to ensure that those who lend the money no longer require a premium charge, to account for the risk that they have to take. By reducing the risk, the raising of funding to finance the purchase of mobile equipment like aircraft should become simpler, and it should be cheaper. Of course, for a country like New Zealand, which depends on aircraft more than many other countries do, anything that makes that dependence cheaper is to be applauded. I commend the bill to the House.

CAROL BEAUMONT (Labour) : It is with great pleasure that I too rise to discuss the Civil Aviation (Cape Town Convention and Other Matters) Amendment Bill. I too am a member of the Transport and Industrial Relations Committee and have been briefed on this convention. Labour supports this bill, as others have said. It is uncontroversial. It has a couple of purposes, one of which is to amend the domestic legislation, including both the Civil Aviation Act 1990 and the Personal Property Securities Act 1999, so that New Zealand can become a party to the Convention on International Interests in Mobile Equipment, which Mr Peachey just described to us. I will not go into a lot of detail about that, but I will reinforce the key points. This convention will standardise transactions involving movable property, particularly aircraft and aircraft engines, and will set down international standards for the registration of ownership. The second part, which I will come back to, clarifies some rather convoluted legalese in the Civil Aviation Act relating to the making of rules and who can apply them.

The Cape Town Convention and its associated Aircraft Protocol were originally negotiated under the auspices of a United Nations agency. I concur with the comments made by my colleague Darien Fenton about the importance of international conventions and of New Zealand playing a lead role in them and making sure that we are at the forefront of compliance with international best practice in every regard, including in employment-related matters and transport-related matters, which we are currently discussing. Essentially, this convention aims to establish a balance between enhancing creditor rights, which will, as Mr Peachey said, help to reduce aircraft financing costs, while also improving debtor protections. It is designed to be flexible, and it can be applied to any type of high-value mobile equipment.

The Aircraft Protocol that I mentioned earlier, the Protocol to the Convention on International Interests in Mobile Equipment on Matters Specific to Aircraft Equipment, applies to aircraft, airframes, aircraft engines, and helicopters above a minimum size or threshold. I thought that the House might be interested in getting a little more detail on that, because it is fascinating. Let me tell members that it applies to aircraft that can carry at least eight people or 2,750 kilograms of cargo, aircraft engines with a thrust exceeding 1,750 pounds of force or 550 horsepower, and helicopters that can carry five or more passengers.

As the name of the treaty probably gives away, the treaty resulted from a diplomatic conference held in Cape Town, South Africa in 2001. I am sure that members really want to know about the mechanics of the convention! The mechanics of the convention centre on the recognition of international interests in mobile equipment and the creation of an international registry in which creditors will file these interests. As has already been mentioned, that registry will be maintained in Ireland. The international interests are secured interests in a uniquely identifiable object. Once those international interests have been filed by a creditor, they become searchable in the international registry held in Ireland. The creditor’s interest will have priority over all subsequent registered interests and unregistered interests. The underlying premise is simple: if we can reduce some of the risk to financiers in extending credit, we can reduce the financing costs for the debtor and to the industry as a whole.

Currently the problem is that financiers have to rely on differing national laws to protect their interests. Clearly, those laws would be quite variable around the globe. In many countries the risk factors are significant, because the local laws are not very useful in protecting lenders in the event of default or bankruptcy, or because they are highly unpredictable. Of course, as we would expect with regard to aircraft, this uncertainty is compounded by the fact that aircraft can move readily between countries. It can be very difficult for a financier to know where an aircraft will be on the date of default or bankruptcy. That uncertainty drives up the cost of aircraft financing, which is then reflected in the interest rates that the financier charges the debtor. As I have said, the convention will reduce that uncertainty and will provide financiers with a number of key rights in respect of any aircraft. Those rights are, should there be a default, to deregister the aircraft and procure its export, to take possession or control of the aircraft, to sell or grant a lease for the aircraft, and to collect or receive income or profits arising from the management or use of the aircraft.

The extent to which the rights that I have just outlined will be a function of the declaration that we in New Zealand make will be seen at the time that we formally ratify this convention. Obviously the international registry based in Ireland, as we can expect in the modern age, will be able to be directly accessed by computer from anywhere in the world. That will be very useful.

I will go on to talk about a couple of other matters. The first of these concerns the flexibility of civil aviation rule-making, which is the other major part of this bill. The present provisions relating to the making of ordinary rules are not very straightforwardly expressed. The bill specifies that an ordinary rule allows a matter to be determined by the authority, the director, or other persons. It empowers the authority, the director, or any other person to impose requirements or conditions. There are consultation requirements there, which I am very pleased to see; I am a great believer in consultation. During my short time in Parliament so far I have been disappointed by a number of the consultation provisions that we have seen, and particularly the consultation regarding the Auckland super-city. That has been a sham. The legislation that has reduced local democracy and corporatised local government in Auckland has been rammed through by the Government with a mere nod in the general direction of consultation. So I can only hope that in relation to the important matter of the civil aviation rules, the consultation requirement will be more robust.

The second issue that I will also talk to members about relates to helicopters, because helicopters are covered by this convention. Those that are certified to transport at least five persons, including the crew, are included in the Cape Town Convention. A situation has arisen in New Zealand regarding helicopters, and it is important to talk about it. A requirement by the Civil Aviation Authority is causing some concern in relation to the work of rescue helicopters. They now apparently have to be twin engined, because we cannot afford to take the risk of a machine crashing into a hospital. I note that no rescue helicopter has yet crashed into a hospital in New Zealand. But just to be certain that it will not happen, that requirement is apparently now being put in place. The effect of that requirement can be quite troublesome for all of the fine people involved in operating rescue helicopters in New Zealand—something that we are all proud of, and reliant upon.

The upshot is that in quite a few instances single-engine machines now have to operate away from their dedicated helipads. That will require patients to be potentially carried by stretchers, for example, or ferried by an ambulance at a critical time. We all know about the golden hour—I hope we all do. I hope we have all had our first-aid training and that we understand the importance of the first critical hour after an accident, and the need to get medical attention. Any barriers to helicopters getting patients to hospitals are very worrying given that golden hour, which is essential in saving the lives of critically injured people. So we are concerned about the directive relating to helicopters, helipads, and hospitals. We do not think that it is a necessary requirement in terms of safety. We are certainly worried about the implications for a patient’s health. There are, of course, also implications for all of the good people who raise funds from the community to get the machines that the rescue trusts operate, which are so important to us in a country that is not highly populated and where people can be a long way from the nearest hospital. So we question why the Minister, Steven Joyce, or his Associate Minister, Nathan Guy, did not step in to show some leadership over this issue of helicopters. These are our rescue helicopters, as I have been saying. Perhaps somebody would like to deal with that question in the course of this debate.

I will leave the bill at this point for now. I do have a couple more speeches, members will be pleased to know, to give on this matter.

HONE HARAWIRA (Māori Party—Te Tai Tokerau) : Tēnā koe, Mr Assistant Speaker. Kia ora tātou katoa e te Whare. Apparently, this bill, the Civil Aviation (Cape Town Convention and Other Matters) Amendment Bill, is about establishing procedures to protect investments in aviation and to cover the financing, purchasing, and leasing of aircraft, but it also gives the Minister of Transport extra powers in the making of civil aviation rules. That raises a couple of points that I would like to speak to.

The first is the Manukau claim. When the Waitangi Tribunal first heard this claim in the 1980s, it brought to the table the Auckland Regional Authority and the civil aviation division of the Ministry of Transport in order to question them about the site that they had chosen and the site that they used. It was noted back then that when Cabinet made the land available in 1955, there had been no acknowledgment of either Māori land title or the need to protect Māori land interests. Auckland Airport sits on 1,300 hectares, including reclaimed land that had once been a local iwi fishing bank and that was the basis of the Manukau claim. Expanding airport operations have led to even greater restrictions on other fishing banks and creeks traditionally fished by local Māori, and they have also led to the release of excessive levels of pollution from stormwater discharge, aviation fuel spills, and industrial chemicals and fluids.

In summing up the Manukau claim, the Waitangi Tribunal had some harsh words for the Crown regarding the pollution of the harbour and the loss of tangata whenua lands: “… underlying this claim is an enormous sense of grievance, injustice and outrage that continues to haunt the Manukau Maori and bedevil the prospect of harmony in greater Auckland.” Yet for all the laying down of rules of engagement between Māori and the Crown in that case, the exact same problem occurred when a local marae raised its own longstanding claim to land and airspace around Rotorua airport. Back in the 1960s, local authorities in Rotorua had decided to bulldoze the whare tūpuna of the Ngāti Uenukukōpako people, because it was in the flight path. The iwi, of course, refused. Fifty years on, the airport authority builds a new $24 million extension to the runway, and, again, nobody is surprised that there is no regard whatsoever for the impact on the marae, the kōhanga reo, or the iwi itself.

The Māori Party will be supporting all stages of this bill, but the examples I have cited here raise the question again as to when it is appropriate to amend legislation to take into account the circumstances of iwi. It gives us the opportunity to remind the House again of the importance of recognising Māori interests in policy planning and legislation. Kia ora tātou.

• Bill read a first time.

Hon JUDITH COLLINS (Minister of Police) : I move, That the Policing (Involvement in Local Authority Elections) Amendment Bill be now read a first time. Nearly 2 years ago when the Policing Act 2008 was passed, there were some provisions within that legislation that set some police staff apart from their fellow State servants. Under section 99 of the Policing Act, all constables, authorised officers, and supervisors without any constabulary powers must be placed on leave if they want to stand as a candidate in a local authority election, and if they are elected they must resign from the police.

Under section 115 of the Act there is an exception for police who were sitting members of local authorities at the time the Policing Act came into force on 1 October 2008, but only for as long as they are re-elected. For other State servants, however, there is no law that stops them from standing or serving on a local authority. They are simply required to remain politically neutral in what they do and follow any departmental rules that are in place. Any conflicts of interest must be declared, but it is up to the individual and the department to manage them. This Government sees no reason why police should be treated any differently, and that is what this bill aims to achieve.

If this bill is passed, then police will have in place rules and policies along the lines of those of other Government departments, which have to manage any actual or perceived conflicts of interest that may arise. Many members of the police already have strong relationships with their communities. It is common to have area commanders, community constables, and other police working together with local councils to make their local community safer. Making it easier for police staff to serve on local councils will help strengthen that relationship. This Government is keen to ensure that when it comes to standing for public office, all police employees enjoy the same democratic rights as any other State servant. On that basis I commend this bill to the House.

Hon CLAYTON COSGROVE (Labour—Waimakariri) : Let me say from the outset that the Labour Opposition will support this bill. As the explanatory note of the bill states, in the original policing Act, the Police Act 1958, there was a framework for prohibiting police from standing in local authority elections, but, as the bill states, the additional step required—naming the relevant local authorities in regulations—was never taken. It is a fact that in 2008 the Labour coalition Government at the time, with New Zealand First, passed the Policing Act of 2008, which, as the Minister said, put the prohibitions in place. Let me say that one of the primary reasons for that at that time was a political reality—which I am sure all members of the House are aware of—in the form of coalition partners. One has coalition partners, and one has demands from coalition partners, as this Government has had from its coalition partners. A demand was made by New Zealand First, and I think Ron Mark led the charge at the time or was particularly passionate about it for a variety of reasons, and it was agreed to. I join with the Minister—I know this is a rare occasion—in expressing—

Grant Robertson: It is noted.

Hon CLAYTON COSGROVE: My colleagues have noted it—another black mark against my name! I join with the Minister in expressing the view that the previous legislation affected about five serving police staff. One of them actually resides in my electorate and is very good—and my view is that all the councillors are very good in the Waimakariri district. He is Constable Robbie Brine. There is the need to manage conflicts of interest around issues of, say, implementing by-laws that the constable may be voting on as a councillor in a council capacity, with the epaulettes off, and then having to implement those by-laws, as a policeman, with the epaulettes and the hat on. I know that Councillor Brine and the other police officers who serve as elected officials manage those conflicts of interest pretty admirably. I am sure, though, that there will be those in the community who will have a view to the contrary, but when I speak for my patch I can say that the police constable who is a councillor manages those roles professionally, and does an admirable job, as all my councillors do.

I would say in passing that it is a pity that this bill could not go before a select committee, although I acknowledge that local body elections are relatively close. But our side of the House would still argue that there was time, and I know we would have cooperated on this issue in respect of, if you like, a turbo-boosted select committee process to at least examine the issues and perhaps give organisations like the Police Association and others a chance to express a view on this.

I want to again join with the Minister and say that our police who act as leaders on local authorities within our communities do a pretty superb job. In fact, one could argue that the nature of police work means one would bring about a safer community. Certainly, if I use the Waimakariri District Council case I can say we have a safer community council, as many other districts and cities do. I think it adds to the expertise of a local authority to have a law enforcement officer not only as part of the discussion but as an elected official who can bring his or her—in this case, his—expertise to the table, especially in smaller towns like, in this case, Rangiora, or Kaiapoi, or Oxford, in my area, where police are community leaders. Whether or not they are elected officials, they are treated like elected officials, especially in towns like Oxford, and they are probably treated with a heck of a lot more respect. But they are on call 24 hours a day, and whether they are in the blue uniform or in plain clothes as a councillor, people know them because they have a high profile as police officers. As I said, they are on call, as elected officials are, when they wear the blue uniform 24/7 and when they do not.

I think this bill is a good bill. As I said, I would have preferred it to be referred to a select committee for an expedited examination, through the select committee process, of the issues pertaining to it. I say that for two reasons: firstly, it is always appropriate to health-check legislation and make sure we have it right; and, secondly, it might have demystified some of the criticism from some in the community in cases where police have that dual role. I think it would have given a chance for, if not the policemen who are councillors themselves, then certainly the Police Association and others to highlight the appropriateness with which those five serving staff act as elected officials, and perhaps also highlight some of the advantages in the additional skills that law enforcement officers can bring around the council, community board, or local authority table. Certainly I do not think it is a disadvantage to have a constabulary staff member on a local authority. I think that it can only add value, because local authorities today delve deeper and deeper into social issues, especially when it comes to community safety. I have talked about safer community councils.

When it comes to combating youth crime, many of our councils—and again I go back to my own council, the Waimakariri District Council—are taking greater and greater responsibility for looking after their own patch, assisting the police in law enforcement, and engaging in programmes, especially around youth crime. They want to take greater responsibility for those issues. To have a police officer who not only assists with advice in that capacity but is also an elected official, I think provides some additional mana and a higher level of expertise as one who can stand around the council table and, although being careful not to speak as a sworn police officer, can speak bluntly as a person who has experience. Treading that fine line can only enhance debate, skills, and knowledge in local authorities.

I know there are some who, as I said at the start, say: “Hey, isn’t there a difficulty constitutionally?”. For instance, if we take the boy-racer issue, councils are implementing by-laws. It may be the case that a police officer is called to vote and speak on a by-law about boy-racing in restricted areas, and then to put on the blue uniform on Friday night and go and implement those by-laws. There are those who may say: “Hey, isn’t there a conflict of interest in respect of that?”. To my knowledge I do not think there has been a time when those potential conflicts of interest have not been able to be managed either by the local authority itself or the constable who is the elected person.

I think that common sense prevails. Like any issue where there is a conflict of interest, there is the ability to declare it and to walk away from the table, to walk out of the room, and say: “Hey, it is too close to my professional occupation as a police officer.”, or any other profession or occupation, such as, a lawyer, a doctor, or whatever. Those people can say: “I will walk out of the room and leave those issues in abeyance for the council to decide.” I certainly have not seen examples—although maybe others have—where those issues have not been appropriately managed. Of course, if they are not appropriately managed, the officers are responsible to their hierarchy. We have had issues of conflict of interest in regional councils—even in my own patch—where the Auditor-General has come in and made judgments about that. I think there are basic and common-sense mechanisms in place whereby if people are concerned about a conflict of interest they can be managed by the common sense of the officer/councillor, by the powers under the local government legislation and through the Auditor-General, and, equally, through the authorities, disciplinary processes, and common sense of the police hierarchy—superintendents, district commanders, and the like.

In essence, Labour supports this legislation. We believe that it is appropriate. I suppose we would have liked to see it go through the quality-control process of a select committee, but we support the legislation.

SANDRA GOUDIE (National—Coromandel) : I am delighted to speak on the Policing (Involvement in Local Authority Elections) Amendment Bill. The objective of this bill is to remove the restrictions in the Policing Act to enable all police employees to stand for local council elections without being placed on leave. If elected, they would not need to vacate their position as a police employee. This bill will ensure that police employees are not treated any differently from other State servants, who are not prevented by legislation from standing for election and serving on local authorities.

In response to some of the comments that have been made, regardless of whether someone is a police officer, a shopkeeper, or a Government employee in another capacity, if that person is not doing a good job as an elected representative of his or her community, then the community will not elect that person next time. That is the discipline for anybody standing for council, and it is no less so for someone who is employed as a police officer who stands for council. If the community feels that that person is just not working, then that person will not be re-elected to the council but will be left in the police employee position. That is the way of elections for local authorities. It is that simple, and I do not think it needs expedited examination, as the previous speaker, Clayton Cosgrove, suggested. I think the legislation is too simple to waste the time of the House on, when it can go through the House simply and easily. The bill just corrects one of those anomalies that we often come across in the course of looking at legislation.

I am delighted to commend this bill to the House and to watch it proceed through its stages.

Hon GEORGE HAWKINS (Labour—Manurewa) : The Labour Party supports this bill and I thank the Minister of Police for bringing it to the House. I will wait for just a second as I thought a bolt of lightning would hit me for saying that, but nevertheless it has not. I think this legislation is very important because it will clear up many uncertainties. With the Auckland legislation having gone through the House, people who are police officers have been wondering whether they can stand for election and whether the grandfathering rights they had will still prevail. I have talked to people in the House about this and I must say that I am pleased that this has happened.

We have people in Manukau who serve the council who also serve the community as police officers. Councillor Alf Filipaina is a councillor for Manukau in the Māngere ward, and he does great work with young people especially. Being a police officer does not restrict him in his council work. Very sensibly he has the ability to not involve himself in voting on certain by-laws and things like that, but also he is a person who does very important crime prevention work. The Counties-Manukau Police District is not the easiest area to police. It needs people who know their community, and I think that Alf Filipaina does. It may sound a wee bit like a party political speech to sing his praises, but he is a person whom I think the whole of Māngere is proud of. I imagine that when the super-council is selected he will be one of its members, and I think that is very important.

Alf Filipaina gets out in his community, but sometimes he goes across the border. He may go away from the Māngere ward and out to Manurewa, Papatoetoe, Ōtara, or Pakuranga and he joins in things with a spirit that I think should be duplicated by many others. He is the sort of person we call a “decent bloke” and I think it is very important that we allow people like that to be elected.

The chairman of the Manurewa Community Board is a guy called Mike Bailey who works for the police. He is a police officer. Not only is he the chair of the community board but also he marries people and he dispatches people. He is another person who is totally involved in his community. We have people like Angela Cunningham-Marino on the community board who is also a police officer. She works to help people in the community in many ways. It is these community-spirited people who are working to help people who are suffering from heart disease, and helping people who need guidance and strength. Having police officers like that on community boards and on councils is very important.

Labour, as I said, will support this bill. I would have liked it to go to a select committee. I know that time is short, but I thought a 1-day hearing would not be bad. We could have had the Police Association along and the Police Officers Guild, if we had had this bill before a select committee for a day. But that is not to be. I am sure—in fact, I am positive—that it will not stop the Police Association from having its say, one way or the other. It will do it very publicly. Greg O’Connor is not slow in saying what he thinks on issues that affect his officers.

It is interesting to have a look at the people who want to serve their community in a way that encourages the community, rather than discouraging people. In the Counties-Manukau area we have many, many young people who have lost their way. It is the police that we look to to help those people. Yes, we know that Child, Youth and Family Services do a good job in many cases, and we know that there are other agencies, but to have people who work for the New Zealand Police and who in their own time get out and support those young people is truly important. They are the heroes of the local community. Whenever I see Alf, I see that there is a guy with a big smiley face and a warm handshake. He always greets everyone in the same way.

Simon Bridges: Sounds like me.

Hon GEORGE HAWKINS: No, he does not sound like the member for Tauranga, who used to try to get people put in jail all the time—in the end, I think that people got off because of his skills. When we have people like Alf doing the sort of work he does, it is good. We should not be putting obstacles in the way of these people wanting to stand for council. If we put obstacles in their way, then of course we lose a lot of talent and a lot of ability.

When a similar bill that led to this one came before the House, it was because Ron Mark, the New Zealand First Party member—members will probably remember Winston Peters and one or two others.

Hon Judith Collins: No.

Hon GEORGE HAWKINS: Oh, no, some people cannot remember Winston Peters. Well, I think he is busy working away. For ages and ages Ron Mark wanted no police to be on council. Even when I was Minister of Police he was trying to make sure that police officers could not work as councillors in their community. When one has—

Dr Cam Calder: What was he?

Hon GEORGE HAWKINS: There is the member from the North Shore or somewhere—Cam Calder, I think it is. He has woken up. I see the ornament of the National Government is smiling in the back row as well. However, in the end, we should have people who can be a bit bigger-minded than Ron Mark was. I think Ron Mark took a very narrow view.

One of the problems when we have coalitions is that sometimes deals are done. It looked as though a deal was done with the Tūhoe people, but then all of a sudden it was pulled away. That is the nature of coalition Governments. Coalition Governments make deals and they break deals. People are promised that there will not be any increase in GST, and then there is. I am not blaming just the Māori Party or ACT for that; they are all guilty, the whole lot. I think that Ron Mark went too far. He went to the stage where he personally disliked a police officer and then came up with the legislation that put on restrictions.

I am pleased that the Minister has this bill in the House today. The Labour Party will support it. I hope that many people vote for Alf and his team when they stand at the council elections this year.

METIRIA TUREI (Co-Leader—Green) : The Green Party is not supporting the Policing (Involvement in Local Authority Elections) Amendment Bill. We supported the Policing Bill of 2008, which had this change—[Interruption] The Minister of Police can cackle all she likes over there, but it is important to have a chance to explain why we have decided that we will not be supporting this bill.

At the time that the original legislation went through in 2008 we agreed, unusually, with New Zealand First that this issue was about the separation of powers between those who make the law and those who enforce the law, and that there was a compelling case to say that those who are responsible for enforcing the law should not be part of the process of making it. There are serious conflict of interest issues. There are issues for constituents, who may well need to have a person, like a councillor, representing them on a matter that deals with a law that that councillor may or may not have made but who is responsible for enforcing.

There are many areas of our law where we are clear on the separation of powers between those who make the law and those who enforce the law. This seems like an appropriate time to make that similar distinction. Since the time we supported the provision the last time it was put forward by the Labour-New Zealand First Government, we have had no evidence or compelling case made to us as to why we should change our position.

Of course, the difficulty is that because this Government is so obsessed with the excessive use of urgency, once again the community will not have an opportunity to explore this issue in full. This is the very important issue of the separation of powers. We would have been very prepared to consider the evidence that would have come to a select committee, in order to see what the circumstances were and to hear arguments as to whether we should continue to support this legislation. We have maintained an open mind on that basis. But because there will be no select committee process, because this Government is pushing through this legislation for no good reason, then neither we nor the rest of the community will be able to explore those issues in full. Because we supported the provision constraining police from acting as councillors or local body authorities, we can have no other position than to continue to support that.

Again, it is very difficult when legislators such as ourselves, and the community, are unable to explore important constitutional issues, such as the separation of powers and the question of whether those who enforce the law should also be responsible for making it, because of this Government’s misuse of urgency and its failure to uphold the democratic right of our community to have a say. We will not be supporting this bill.

RAHUI KATENE (Māori Party—Te Tai Tonga) : At first glance, this bill, the Policing (Involvement in Local Authority Elections) Amendment Bill, seemed to be one that, all things being equal, should have been quite straightforward. The bill amends the Policing Act 2008, the purpose being to remove the current restriction in the 2008 Act that does not allow police employees to stand in local body elections. If successful, the bill will enable all police employees to stand in local body elections without being placed on leave, and if they are elected, they will not have to resign from their jobs as police employees.

When the Māori Party initially read this bill, we thought that it was fair enough that the police should be treated like any other employees and should qualify for the opportunity to stand in local body elections. But then two central concepts came into view: the current context and public perception. Today is hardly the best day to be considering the issue of public confidence in the New Zealand Police. Let me count the ways.

The first count is DNA samples. Firstly, in the heat of the debate generated by my colleague Hone Harawira’s claims about the undue pressure brought to bear upon Māori youths to submit DNA samples to the police, criminal lawyer Graeme Newell also spoke up about these concerns, which he shares. Mr Harawira has supported a number of youths and their families to take the appropriate action by referring their complaints to the Independent Police Conduct Authority. The basis of the complaints is that those rangatahi, who are under the age of 17, have been persuaded by the police to submit DNA samples on the pretence that it might help to identify their relatives or would be stored on the off chance that they would be killed and would need to be identified. Mr Newell then came forward, saying that he knew of a case where a police officer had offered a boy a cigarette in return for a DNA sample.

The second count is police pursuits. The second issue to take the headlines in the last 24 hours was a meeting that the Minister of Police, Judith Collins, had with the Commissioner of Police, Howard Broad, to discuss police recommendations for vehicle pursuits after two separate reviews. The urgency of investigating the proper procedures around police pursuits came tragically into view through the death of Troy MacKay, a Christchurch man who died on Sunday when his car hit a tree after he was pursued by the police. New Zealand now has the unfortunate record of having lost seven lives—people whose lives have gone through the course of their being pursued by the police.

Of course, one can never ignore the need for the police to intervene when it is evident that offending is taking place, whether that be on the road or in leaving a criminal scene. But when we are talking about a Government agency, we must be painstakingly clear that the protocols and policies that form the operational procedures are adhered to, rule by rule.

We understand that two separate reviews have been undertaken into the situation. One is being undertaken by the Independent Police Conduct Authority and the other is an independent review conducted by the New Zealand Police. The reports have invited further questions about whether it is appropriate for the police to initiate high-speed chases for minor offences, such as speeding and property theft, or for the suspicion of criminal activity. We need to have that debate as we consider the right balance between the preservation of justice and the preservation of life. The nation has lost seven young men in as many months, of whom the youngest was 22 and the eldest was 38. Let not their lives be in vain.

The third count is sexual misconduct. The final piece of evidence stacking the odds was yesterday’s release by the Controller and Auditor-General of its second monitoring report on the recommendations made by the 2007 Commission of Inquiry into Police Conduct. The letter from Phillippa Smith, the Deputy Controller and Auditor-General, spelt out clearly why the police force must work hard to implement the cultural changes it suggests are critical after an inquiry was held into allegations of sexual misconduct by the police. The inquiry, we recall, was established after several allegations of sexual misconduct against police officers were made. The Auditor-General’s report recommended that there be an extensive cultural change in the force. Ms Smith stated: “The benefits of change include the public having confidence in the integrity and conduct of the Police. Public confidence is essential for effective policing.” But another worrying line in the release from the Auditor-General’s office was the revelation that progress would stall unless a more concerted effort was put into making the recommendations work.

One of the key recommendations from the report is that the police must, as an organisation, value and use external views on police culture and behaviour. This could be done, for example, by obtaining more feedback on police officers’ behaviour and service delivery through community engagement, and by learning more from complaints information.

I believe that all those three areas of current controversy—DNA samples, police pursuits, and sexual misconduct—cannot be ignored when we come to this bill. But there is the broader context too of the longstanding history of police responsiveness to Māori. I acknowledge the absolute commitment that I know the police are making to improve their performance in this regard. We recognise the valuable role that almost 50 iwi, Pacific, and ethnic liaison officers in the police force play in helping to create purposeful relationship-building with iwi and Māori social service providers. We also acknowledge the quality of the police projects involving partnership with iwi and community agencies that are intended to specifically address Māori offending and victimisation.

Although the gap between the perception and the reality has been reduced, we cannot forget that trust and confidence in the police is lower among Māori than it is among the general population. Countless reports have demonstrated that Māori feel alienated from the police and from criminal justice agencies. The research frequently concludes that a key reason for this lack of responsiveness is that often there is a perception that individuals within the police force lack knowledge of, and sensitivity to, Māori values, culture, history, and beliefs. I stress that we often talk about perception, but, as all politicians know only too well, perception is everything. When we come to this policing bill, we must be mindful of the impact of perception.

The Māori Party has thought long and hard about this issue, and we have greatly appreciated the way in which the Minister of Police has responded to all of our queries about the effect of this bill. We fully understand that any police employees who decide to stand for local authority elections and those who are subsequently elected will still need to abide by any internal policies that the police may have in place. We also accept that such employees must abide by the code of conduct, which sets out that where employees participate in political matters in a personal capacity, they must not bring themselves into conflict with their primary role as police employees. That is all well and good on paper, but, when it comes down to the wire, we return to the impact of the current context and of public perception. Quite frankly, when we talk to our constituency, no matter how wonderful the local community cop may be, the perception of the police in general is adversely affected by longstanding views about the reputation of the police. Those views are not helped in any way by the events that I mentioned earlier on.

Finally, we were prepared as a party to support this bill’s referral to a select committee, but because of the decision to take this bill through urgency, we will have to oppose the bill at every reading. We remain convinced that the issues of perception inherent in this bill must be put to the test of public opinion through the select committee process. Thank you.

MELISSA LEE (National) : It is a pleasure to rise to speak to the Policing (Involvement in Local Authority Elections) Amendment Bill. I will begin by declaring a certain fact: I like the police. I tremendously respect our men and women in blue for three reasons. Firstly, I was involved with the Asian advisory to the Auckland police. Secondly, I was a victim of a crime, and the police came to the aid of me and my family. Thirdly, I love the Minister of Police, and she does a tremendous job.

But aside from those reasons, one needs certain standards to be a police officer —there are standards. One needs to be a good citizen, over 18 years of age upon graduation from the police college, community-minded, fit, healthy, and bright enough to pass a range of assessments. I suppose police officers also need to be patient, because they are involved in highly charged, emotionally charged situations when they are arresting people. They must have excellent communication skills, and they have to be loyal, committed, and have high levels of integrity. In their role, they influence the lives of many people. So being able to make tough judgment calls as well as establishing strong personal relationships with the community networks that they have and confidence in the wider community is integral to the job they do. As well as responding to crime, police officers have to look at the bigger picture. Solving crime is about not just answering the question as to who did it but also why. This requires an ability to understand the community that they serve and, more important, the ability to identify and examine the problem that leads to crime.

Surely the skills that police officers possess are excellent skills for someone standing for a local authority. It seems ridiculous to me that at the moment police officers are unable to stand. Removing these restrictions can lead only to a better partnership between the police and local authorities. Furthermore, a more ridiculous thing is that some police officers are able to do it, yet some are not, depending on when they became local authority members. I support this bill and I commend it to the House.

CARMEL SEPULONI (Labour) : I will take a moment to acknowledge our police force and the wonderful work that it does. Often it is a thankless job, and the manner in which policemen and policewomen undertake their work is admirable. Members on this side, and, I think, across the House would say that we all have respect for the police force. I will not go as far as the previous speaker, Melissa Lee, did in acknowledging the Minister of Police; I will leave it there.

Currently, under the Policing Act 2008, if one is employed by the Police as a constable, authorised officer, or supervisor, one must take leave of absence if one intends to stand for election to a local authority or council. If successful, that person has to resign from the Police. The provisions of the 2008 Act clarify provisions in the previous Police Act that also prevented police officers from standing in local body elections, but that were never fully enacted. The reasoning behind the provisions was that it was perceived to be wrong to have the same people making and enforcing regional by-laws. The Policing (Involvement in Local Authority Elections) Amendment Bill, which we are currently debating, will remove that restriction. Policewomen and policemen will be able to stand for election to local authorities without taking a leave of absence, and, if successful, they will not have to resign from their police duties. That will put the police in the same position as other public servants.

I think we need a little bit of background to the legislation that Labour put in place in 2008. Labour passed the Policing Act in 2008, and the restriction on police officers standing as councillors was subject to a lot of debate at that time. We believed then, and we still believe now, in having a full and transparent democratic process, so it is a little concerning that we are ramming this bill through the House under urgency with no select committee consideration. None the less, we will be supporting this bill. When we put through the 2008 legislation, we ensured that all the provisions would stop conflicts of interest from occurring. Police officers were not discriminated against; they could still be involved in local body politics, but at the time that meant standing for election only to a community board, because a police officer did not have the same perceived risk of a conflict of interest by sitting on a community board as by being a councillor. It was a difficult decision to make at the time, and there was a lot of discussion and debate. In the end, Labour decided to enact what the Police Act 1958 had originally intended.

This Government must ensure that the perception of conflict of interest is safeguarded against. A councillor helping to pass a by-law and then enforcing that by-law in his or her role as a police officer will raise conflict of interest issues. However, that can be avoided relatively easily by having the councillor in question declaring his or her conflict of interest when the by-law is being debated in council. We have seen that occur with the five police officers who were councillors at the time that the 2008 legislation was passed. They were allowed to continue in that role, and, from what we have heard, there have been no complaints with regard to those five particular councillors.

This issue does not affect many people. At the time that the Policing Act 2008 came into force, as I said, only five police officers were serving as councillors across the whole country. Labour was careful to ensure that those five councillors were able to continue fulfilling both roles for as long as they were elected representatives. I acknowledge the work of those five councillors. Again I say that at no point have there been questions of undisclosed conflicts of interest with regard to those councillors. They have carried out their duties, as both police officers and councillors are expected to do, and they have done so admirably. My colleague George Hawkins was talking earlier about the example of one of those five councillors, Alf Filipaina, a Manukau City councillor. Clayton Cosgrove had another example from his area. I have to agree with both of those members, and especially with George Hawkins with regard to Alf Filipaina. He has always conducted himself with integrity. Without being politically biased, I say that he has fantastic politics, and he is a respected member of the community not only as a police officer but also as a councillor. I think that we need those types of people in both those roles, so we would not want to take that opportunity away from them. In so many ways, they are good examples of why we should support this legislation and of why we are supporting it.

I spoke to Alf Filipaina about this particular bill, and discussed with him whether he has ever been accused of not declaring a conflict of interest, and he said: “Not at all. That has never arisen.” Although he was the chair of the transport committee, and issues could have arisen there, he was very careful to ensure that, whenever there was anything to do with by-laws and enforcement, he declared that conflict of interest and stepped back. There was transparency, and no one could question his integrity with regard to any involvement that he might have as the chair of the transport committee for the Manukau City Council. That seems to be the case across the board for the five councillors who are currently police officers as well as serving as councillors in their areas.

Labour would have liked to see this bill go to a select committee, because we would have liked to hear the opinions of the public and of police officers. I know that this is a big concern for the Green Party, which is part of the reason why those members will not be supporting this legislation. It is also our concern that we will not get that opportunity because this bill is being passed under urgency. That is disappointing, but we recognise that the New Zealand Police Association and the New Zealand Police Managers Guild have been consulted in the development of this bill. As police officers seem to be largely in favour of removing the restrictions on becoming councillors, Labour will be supporting this bill based on that support.

As I said before, police officers regularly demonstrate their commitment to local communities. It is only fair that they get the opportunity, as all other public servants do, to further demonstrate that commitment by standing for election and by serving on local authorities. Most people who are in the position of being a councillor or a local body representative have other jobs, so many of them have declared interests, as well. Given that that is the case, and that a strong case has been put forward by the police with regard to why they should be allowed to do that, we think it is important to support the bill. There is no argument against this Government bill from this side of the House, for once, which is a very rare thing. We support this bill. Thank you.

CHESTER BORROWS (National—Whanganui) : I am very pleased to see that the Labour Party has been a little circumspect on the decision that it made some time ago and is now listening to Councillor Filipaina and the submissions that he has made. It is a shame that, despite his politics in the past, those members were not listening quite as well as they could have been and they did not take the opportunity to vote for a sterling amendment—that being the submitted Supplementary Order Paper 213, which would have allowed police officers to continue in that role at the time. However, it is great that those members have now come to that position.

It is interesting to note around the House the number of members who, just from my knowledge, have connections with the police. Of course, we have the Minister of Police here, who is the wife of a former policeman. We have the daughter of a policeman sitting over there—Jacinda Ardern—and a former Minister of Police, the Hon George Hawkins, also sitting there. We have the sister of two policemen sitting over here—Rahui Katene from the Māori Party.

I think it is great to be able to acknowledge that people within the police bring a lot to the table, just as each of us individually as members of Parliament brings something of our experience to the table in this House, which contributes to a discussion and brings a different take on life. This is also the case in respect of the council table. The policemen who serve on local authorities around the country are up and about at 2 o’clock in the morning, and they see the responsibilities of local people and the issues that they have to discuss around that council table. They have a different view from other people who, quite rightly, bring other experience to that table.

I am pleased to see that we pretty much have across-the-board support for the Policing (Involvement in Local Authority Elections) Amendment Bill. I have never ever in my short time in Parliament seen the Greens support one pro-police bit of legislation in this House, and I am sure as hell not surprised that they are not supporting this bill. But I am pleased that the rest of us are. Thank you.

JACINDA ARDERN (Labour) : I am pleased to rise to take a call on the Policing (Involvement in Local Authority Elections) Amendment Bill. Obviously I was not a member of this House at the time that the Policing Act was passed, but I do remember the work that went into that piece of legislation, because for a time I worked in the United Kingdom on a review of the way the police worked over there. There was a lot of interest in the collaborative and comprehensive way in which the Policing Act 2008 was drawn up. So I congratulate those who worked on that original legislation on the work that went into it. It was noticed internationally.

I think it might be useful to provide a little more context on the original decision not to allow police officers to stand as councillors and on the position that the Labour Party took at that time. I think that looking at some of the statements that were made at that time demonstrates that the decision was very difficult to make, and that there were very strong arguments on both sides of the case. I think one of my colleagues has already mentioned that the New Zealand First MP Ron Mark took a very strong view on this issue and was quite a vocal campaigner for restrictions being put in place. Initially Labour disagreed with the position that he, in particular, had made, but later in the piece, in the Committee stage, we made the change via Supplementary Order Paper.

I want to reflect on the statement that was made by Annette King at the time in August 2008. She said: “When I introduced a policing bill in my name I raised this as an issue that was worthy of debate. The bill as introduced retained the status quo, but I did set out that it was an issue on which we would like to have some debate and some comment in terms of submissions. My understanding is that the Law and Order Committee heard a number of submissions—in fact, there was quite a large number of submissions—on this part. In terms of where we should sit in relation to this matter, it was the Labour caucus view that the status quo would remain. However, on looking further at the issue and on taking consideration of the advice of the Legislation Advisory Committee, which was asked by the invitation of the select committee to present to the select committee on this issue, the caucus was considerably swayed by its view that we ought not to muddy the waters of political neutrality in our police service.” She went on to say that it had been a hard issue for the caucus to decide on, and she knew that other parties in this Chamber looked long and hard at it. I think her comments demonstrate that the decision was very difficult to make. They demonstrate the fact that it was midway through that process that Labour made this amendment originally and that it was made on the advice of the Legislation Advisory Committee—a committee of the House. I think it is fair to say that it was a line call.

After not only the benefit of hindsight but also taking a further look at the fact that there are already police officers who serve as counsellors, we had evidence to suggest that currently it has not proved to be a problem, and that, perhaps, we should reverse the decision that was made in 2008. But I do think that we should always be mindful of the original reasons that it was first put in place.

I know one of the most important principles of policing and community policing in particular—which is something I am very interested in—is not only the principle of constabulary independence but also that the police really earn their right to police from their communities and with the trust and confidence of their communities. It is up to us in central government to ensure that we create the foundations and the framework for that to happen. At the second tier, it is up to the police to make sure that on the front line that trust and confidence is earned and maintained. So I do think central government has a key role to play in that regard. I think that probably the best interest of the police was top in Labour’s mind when it made this decision, but on balance we are comfortable with the notion of moving back to the status quo. That is why we are supporting this bill.

It is always pleasing from time to time to have the opportunity to support a bill that is put up by the Government, and to demonstrate that there is support. We get criticism that sometimes we do not agree with the Government. I always point out that it is because the Government gives us so little opportunity to agree. For an example of that, I need only look back to the last bill that came through on law and order, the “three strikes and you’re out” legislation, which was one of the most awful pieces of legislation I have had the unfortunate chance to observe in this House. That was the last piece of legislation put forward by the Law and Order Committee, but, of course, we were not going to agree on it. [Interruption] I hear considerable disappointment from the Government benches that I have swayed away from my conciliatory statements.

I will dwell a little further on the fact that I think it was Clayton Cosgrove who pointed out the interesting history behind that legislation—

David Garrett: It paid for that suit he’s wearing.

JACINDA ARDERN: Clayton Cosgrove pointed out—I think there was a comment made on his suit—the fact that the Police Act of 1958 originally mooted this change and that it was not fully enacted. So in actually enacting it, Labour in 2008 put in place something that was considered 50 years prior, which I think is an interesting point. Also, when this restriction was put in place, Labour put in an exemption providing that the police could still sit on community boards. I think that is quite an interesting point because it demonstrates the perception that community boards have a different standing than a local council, and that important difference is based on the fact that community boards do not have powers to make by-laws.

When I read that, it triggered my thoughts back to the local boards that the Government has put in place through the super-city legislation. Local boards have no powers to make by-laws either, even though they will probably be the most important element of the super-city legislation, because that is where local people will have their say. So technically we would not have to make this change for Auckland. Police would be able to stand under this legislation and the exemption for a local board under the super-city legislation, because the local boards have no powers to make by-laws. I thought it was an interesting point that was worth raising. Perhaps as a side point it demonstrates again how toothless those local boards are. But, by the by, I will not dwell on that.

One of the other issues that has been raised—

Sandra Goudie: Go on, don’t disappoint us.

JACINDA ARDERN: If Sandra Goudie would like me to expand on the point further, I am most happy to. I am very disappointed that, as chair of the Law and Order Committee, she will not have the opportunity to look deeper into this legislation. I know she would have provided considerable insight into what we are discussing here.

One further and final issue I raise, which I think is a valid point, is that it is important to make sure that police officers who are councillors are protected from conflicts of interest. For instance, there may be issues where they have powers to make by-laws that they may have some future enforcement over. That is a point to carefully consider. We have made it work today, and I believe we can make it work in the future. But one area that may lend itself to further thought is the proposals that have been put up by Lianne Dalziel on the Sale of Liquor Act, which includes the ability for local boards to make by-laws to restrict alcohol sale.

• Sitting suspended from 6 p.m. to 7 p.m.

Dr CAM CALDER (National) : It is a pleasure to rise and speak on the Policing (Involvement in Local Authority Elections) Amendment Bill. Prior to the last election, National promised to remove restrictions on police officers standing as candidates in local authority elections and serving as members. We have a proud record of keeping our promises, and this is yet another promise kept. The New Zealand Police Association and the New Zealand Police Managers Guild support the removal of restrictions, as does Local Government New Zealand.

We have heard Opposition members talk at some length about how sad they were that this bill did not go through the select committee process. I understand that in 2008 when the Policing Bill was considered there were only two submissions against this course of action. Police are respected members of our communities. They are doing a sterling job throughout all New Zealand, particularly in Manurewa where I am privileged to be based. This Government has backed the police with a quiver of new tools to help them in keeping our communities secure and has added to their numbers. We promised 300 more police in Counties-Manukau by the end of this year, and already 240 more uniformed officers have been deployed in that area.

As respected members of our communities, it is only fair and right that police officers be allowed to serve in local government, should they so wish. I am thinking now of police sergeant Mike Bailey, whom I met in the watchtower in Counties-Manukau at about 3 o’clock in the morning, when I went out with an incident car overnight in that area. It became clear to me shortly afterwards that he was not only a hard-working police sergeant but also the chairman of the Manurewa Community Board. It is totally appropriate that men and women of such skill, application, and passion be able to contribute further to the safety and well-being of our communities by building on the existing strong relationships between the police, their organisation, and many community groups.

It is pleasing to note that this bill is now enjoying wide support across the House. It is reasonable at this stage to ask how useful the previous legislation was. Well, thinking of the Football World Cup in South Africa, it was as useful as a vuvuzela to a Trappist monk, or as useful as a dead monkey to an organ-grinder. This legislation was of no use, and it is wonderful to see that across the House this has been realised by all parties. With the singular exception of the Greens—who I understand have yet to support any motion concerned with law and order—we have unanimous support for this bill in the House. This bill removes an injustice to serving police officers, and allows our communities to benefit from their passion and expertise—the passion and expertise of a highly trained group of men and women. I commend this bill to the House.

Hon PANSY WONG (Minister for Ethnic Affairs) on behalf of the Minister of Justice: I move, That the Prisoners’ and Victims’ Claims (Expiry and Application Dates) Amendment Bill be now read a second time. In effect, this bill extends the Prisoners’ and Victims’ Claims Act 2005 for 2 more years, following the current expiration date of 30 June 2010. The bill ensures that the current restrictions on prisoners’ claims are retained, and that prisoners are awarded compensation only if no other remedy is appropriate. It also ensures that the victims of those prisoners awarded compensation continue to have priority to claim against that compensation. In addition, the bill clarifies a potential ambiguity in one of the Act’s provisions. The bill makes it absolutely clear that the victims’ claims process applies to compensation payable for claims made by prisoners before 1 July 2012.

I thank the Justice and Electoral Committee for its consideration of the bill in the short amount of time available. The committee received six submissions on the bill and has recommended that it proceed without amendment. That is not surprising, as this bill simply maintains the status quo for a further 2 years and ensures that the application of the victims’ claim process is clear. The effect is a transition period that gives prisoners, particularly those with historic grievances, 2 more years to make their claims before a second bill, which the Minister of Justice intends to introduce before the end of this year, takes effect. That legislation will mean that if compensation is awarded to a prisoner, then anything remaining after the prisoner’s victims have sought redress will be redirected to the broader victims’ services appropriation. The victims’ services appropriation is currently holding the revenue generated by the Government’s offender levy initiative and the funding from the disestablished Criminal Justice Advisory Board and the Sentencing Council. That money is already being put to good use by funding five new or enhanced entitlements for victims of serious crime.

From 1 July 2010 three more initiatives will be rolled out. A new court support service for victims of sexual violence will be introduced, as well as an enhanced homicide support service. More comprehensive information resources for victims of crime will also be available from July. This will provide a guide to the criminal justice system and explain the support that victims and their families can get.

The bill before us and the new legislation to come will not prevent prisoners from seeking to uphold their rights through the courts; nor should it. Agencies responsible for wrongdoing will still be held to account and required to pay compensation where a sufficiently serious breach of a prisoner’s rights has occurred. That is appropriate, because prisoner mistreatment should not be tolerated. However, I make no apology for ensuring that where compensation is necessary, victims of that prisoner have every opportunity to benefit from that compensation and seek redress for the harms committed against them. I commend this bill to the House.

Hon CLAYTON COSGROVE (Labour—Waimakariri) : The Labour Opposition will be supporting the extension set out in the Prisoners’ and Victims’ Claims (Expiry and Application Dates) Amendment Bill. It is a technical amendment. Why are we supporting it? Quite clearly, we are supporting it because we in 2005 put in place the Prisoners’ and Victims’ Claims Act whilst in Government. This is Labour Government legislation that the current Government is seeking to extend for 2 years, from 1 July until 30 June 2012. So on the basis of an extension of the legislation that the previous Labour Government passed, of course we would support this legislation.

This bill is designed to assist victims. The aim, of course, is to extend those restrictions in awarding compensation to prisoners for a further 2 years, as I have said, so that the victims’ claims process also applies to compensation awarded in, or to be paid pursuant to, an out-of-court final settlement in respect of a prisoner’s claim made on or after 1 July 2010 but before 1 July 2012. So, in essence, this amending legislation bridges a gap. Labour agrees with this. We wrote this legislation—that is, the primary Act—and we agree with its extension, but I would make a couple of points in passing.

This Government has made many lofty claims in respect of assisting victims. I suspect that we, putting aside our political prejudices, all support that ethos of supporting victims who have been subject to either heinous crime at the horrific, tragic end of the scale or even so-called minor crime, smaller incidences, at the other end of the scale. But I make this point. If this Government was serious about assisting victims, this legislation would be followed by legislation that does away with what is happening with accident compensation whereby sexual abuse victims are no longer able to get the support they need thanks to the changes made to our accident compensation system by this National Government. This issue is germane to this legislation, because we are talking about victims of crime. That member over there might have a bit of a peck, as she is wont to do, but this is the truth, and I challenge this Government. If this Government is serious about assisting victims, I ask every member of the Government about the men and women who have been subjected to horrific crime, through sexual abuse and other sexual crime, and who formerly, under the previous Government, could get the assistance they needed. There is no dispute, in my view, about the crimes committed against those people. They will live with the horrific nature of those crimes for the rest of their lives. They need counselling, perhaps psychological assistance, perhaps medical assistance, and other support.

We know that under the previous Government those victims of sexual abuse and sexual crime were getting the assistance they need. Under this Government many of them, most of them, are not getting that. I challenge the ACT Party, because we know of the affiliation between the ACT Party and the Sensible Sentencing Trust through Mr Garrett. He was intimately involved with the Sensible Sentencing Trust. I challenge the ACT Party. I ask Mr Boscawen to get up in this debate and challenge the Government that he and his colleagues prop up every day. If that party is serious about assisting and supporting all victims of crime, I ask Mr Boscawen, through you, Mr Assistant Speaker Barker, whether he will get up and challenge this Government and demand that it change its policy so that victims of heinous sexual crime can get the assistance they need through accident compensation.

Hon Dr Wayne Mapp: Leave it to you.

Hon CLAYTON COSGROVE: What? Oh, the shell of the defence Minister has been burst.

So I challenge the ACT Party member to get up and challenge his own side in the debate. I challenge the Sensible Sentencing Trust, which has not at any time—and I could be wrong; I stand to be corrected—put out a statement decrying this Government for the changes to accident compensation policy and for the lack of support that victims of sexual abuse and sexual crime receive, thanks to this Government. Most of them are not receiving that help, and I challenge Mr McVicar, who has very strong views on the rights of victims, many of which I agree with, to perhaps put out a statement and decry this Government for the withdrawal of services to victims of sexual abuse. When we talk about victims at the top of the scale in terms of the offending they suffered—whether it be the tragic circumstances of murder, rape, or sexual abuse—I do not think we do think of sexual abuse victims as second class to any others.

Although Labour supports this legislation, there is a wider issue. In the crime of sexual abuse, those crimes have been dealt with and there is a guilty party. A jury has rendered a verdict and somebody is in the clink or paying the price for abusing and violating a member of the community. So there is no dispute that the crime happened. Then the question is what we as a Parliament, a people, and a community do about it. How responsible do we feel for aiding and assisting those victims of sexual crime? I know that a speech was made by Chester Borrows, I think—if I am wrong, I apologise—in which he asked whether it was appropriate that victims of sexual crime get help from the Accident Compensation Corporation (ACC). I will say what is appropriate. What is appropriate is that they get help—full stop. The bickering over the pot it comes out of has to stop. If the Government feels that ACC is not the appropriate place to assist victims of heinous sexual abuse, then I ask those members and I ask Mr Borrows where the replacement funding comes from. Where does the funding for those victims come from? Is it from the Ministry of Health or another Government department or agency? Let us stop the bickering about whether the money should come from the ACC pot or another pot, and whether sexual abuse is deemed to be an accident under the definitional rules of ACC. If it is the Government’s judgment that ACC is not the appropriate place to help the victims of tragic and heinous sexual crime, then I challenge those members to tell us what they are doing about it, what they are replacing it with, and where the money is to help these people.

The Minister for ACC has been derelict in his duty. He has been deficient in his job. He has not, as a member of our Parliament and as a member of our community, stepped forward and made a case in Cabinet. If he does not want these compensatory benefits to come out of Vote ACC, then he has a duty, as does every member of Cabinet and the National caucus who bleats on, those organisations and support parties such as ACT, and those organisations outside this place like the Sensible Sentencing Trust and others that purport to stand by victims—and I take them at their word, and I respect them for those views—to hold this Government and Cabinet to account and to demand that the resource is provided from some vote, from some agency, from some department, to assist those men and women who live with the crime of sexual abuse for the rest of their lives. I am told that many of them are not with us in our community any more. They have passed on, by their own hand, through suicide because they could not get the assistance they need. The acid test in this debate, the acid test of this Parliament’s and this Government’s commitment to assisting victims, is not in this bill.

We support this bill, we wrote the Act, we came up with the idea, and this Government—and fair enough—is extending it. I commend it for that. But the acid test as to whether we are truly in support of victims and are committed to that is what we do to assist the most vulnerable. I would argue that children, young men and women, and old men and women who are victims of sexual abuse and sexual crime, who under the last Government received the assistance they need but who were denied that assistance under this Government for petty bureaucratic reasons or cost cutting, are some of the most vulnerable of our citizenry. Although we have had days, weeks, months, and now years of this issue not being addressed by members opposite, the acid test for this Government is what it does and what it proposes to do to assist those victims, and whether its support parties stand up tonight, if they truly believe in victims’ rights, and hold the Government to account, along with others outside this place like the Sensible Sentencing Trust, which in my view have been somewhat quiet on this issue. We support this bill. We wrote this bill. We support the extension to it, but I am serious when I invite members opposite to tell the victims of sexual crime how they will assist them as a Government.

Mr DEPUTY SPEAKER: I am sorry to interrupt the honourable member but his time has expired. New Zealand Māori are 17; Wales are 13.

CHESTER BORROWS (National—Whanganui) : It is always gratifying to hear one’s words come back to one. I believe that I was the person in the first reading of this debate who told my friend who has just resumed his seat that, yes, the victims of sexual abuse and child abuse need to be supported and it has to come out of the taxpayers’ pocket. We do not care what bucket it comes from. That is a firm priority.

But the point I want to make in respect of this bill is that it seeks to put victims at the heart of the justice system. I believe that victims are at the heart of the justice system, but what we need to recognise as a community and as a civilised society is that some of the victims at the centre of the justice system are there as complainants, as victims of crime, and as witnesses, and other victims of crime are in the court system as offenders. When we talk about abuse, and when we talk particularly about sexual abuse and violence, those victims can go on to become offenders. It is very, very easy for some of our lobbying groups within this country to regard everyone as a victim, up to a certain stage, and as soon as their victimisation is shown in their own offending behaviour, automatically all sympathy is chopped off. They become labelled as offenders, and that is it. They are due absolutely no regard whatsoever, and that is wrong. It is uncivilised to treat people in that way.

This bill recognises that if people who are in prison and who have grievances against the prison system—whereas those grievances may well be upheld and may be compensated in some way—owe outstanding debt to society or to their own victims directly as the result of their own behaviour, then they will not be able to access any financial compensation, but they will still get regard in other ways in terms of redressing the wrongs that have been made against them.

I am pleased to see that we have support from the other side of the House. I acknowledge that it was Labour when in Government that started the work on this bill. We look forward to the upcoming legislation that will replace it. But before I sit down I reiterate that if we are going to call ourselves a civilised society, we need to recognise that the vast majority of people in our prison cells at the moment have been offended against in heinous ways, and their resulting behaviour is to be expected. We need to show some understanding of that and treat them accordingly, in the way they deserve to be treated.

Hon NANAIA MAHUTA (Labour—Hauraki-Waikato) : I am pleased to follow the erudite challenge set out by the Hon Clayton Cosgrove. His challenge puts the responsibility of victims’ rights squarely in the hands of the Government, which does need to do more.

Labour’s record of standing up for victims’ rights is clearly set out by our commitment and by our actions in the past to address the interests of victims. I will outline that for the record. We introduced and passed the Sentencing Act in 2002, which introduced a presumption in favour of reparation and resulted in that sentence being used more frequently. The same Act also recognised the potential of restorative justice processes to make offenders more accountable to victims. It enabled courts to take both financial and non-financial offers of amends by an offender into account.

Labour introduced and passed the Victims’ Rights Act in 2002, which extended a number of rights to victims, such as the right to information and the ability to have an input into sentencing decisions through victim impact statements. That in itself had a transformative effect on addressing the rights of victims. In terms of the practical examples that have come through my office, I have seen that it has made a big difference.

In 2003 the Ministry of Justice launched a campaign to trace those owed money. It introduced an 0800 number, and it also established new collection centres to further bolster the collection and disbursement of reparations. In 2005 we passed the Prisoners’ and Victims’ Claims Act, as Clayton Cosgrove has mentioned. It ensured that the victims of inmates who were awarded compensation could claim against the inmates’ compensation.

Labour introduced the Pay or Stay initiative in September 2006. It enabled the Ministry of Justice to stop those people who had unpaid fines or reparations from travelling overseas if they attempted to leave New Zealand.

The changes we introduced in the Evidence Act in 2006 provided for the needs of vulnerable witnesses and victims by making provision for witnesses to give evidence in alternative ways, such as giving evidence from behind a screen via closed-circuit TV or pre-recorded video. Victims of sexual offences, for example, have utilised this particular mechanism.

When we amended the Children, Young Persons, and Their Families Act, we included a provision to ensure that victims of youth crime could attend Youth Court hearings. We also put in place provisions to ensure that these victims were kept informed of proceedings. In 2008 a Victims Charter was developed to build awareness of the standards of service that victims could expect from Government departments. We know that the Accident Compensation Corporation, in particular, was one Government department where a number of concerns were raised with regard to the handling of sensitive cases. An 0800 victim helpline was also introduced in that same year, as was a website for victims and a boost in funding for Victim Support, which offers much-needed services in many communities. All these types of initiatives built a profile of ensuring that the rights of victims continued to be addressed.

We also announced that we would provide additional services in 2008 through the Family Court, such as the introduction of an independent victim advocate or support person to provide support and assistance to victims of domestic violence. I know that in many of the communities I support, this important service is heavily utilised to ensure that those suffering from domestic violence are supported.

Labour also asked the Law Commission to look at how to set up proper victim compensation schemes. I understand that that work is still continuing.

We know that this particular bill is an extension of the gains that Labour made, and we are happy to support it. It is considering a minor technical change.

We want to ensure that the big picture in terms of how National addresses victims’ rights will have to supersede the record that has already been established by Labour. It is just not good enough, in terms of the accident compensation issues raised by Clayton Cosgrove, not to provide an avenue for those who have suffered sexual abuse, and for them not to have a remedy for reparation or to have their needs addressed. I know from the particular cases I have dealt with that the ongoing support provided by mental health and counselling services are very much needed services. It is absolutely reprehensible that this type of support might not continue to be available.

I did not intend to take a long call on this reading of the bill. As we have said, this is a minor technical change, but let the case state that Labour’s record of advocating for victims’ rights stands in its own right.

DAVID CLENDON (Green) : Kia ora koutou. When the Prisoners’ and Victims’ Claims Bill was first proposed prior to 2005, the Greens opposed it, essentially on the basis of its effect on human rights—that is, its reduction of human rights—because it was likely to be ineffectual, as has now proven to be the case, and because most of the effects would be negative. It had very few positive elements or redeeming features. We were, at the time, persuaded to support the bill through its final stages, on the understanding that it would be quickly followed by a major reassessment and a major overhaul, with significant attention being paid to the whole issue of victims’ rights. Clearly, everybody in this House is supportive of finding ways and means of compensating the victims of crime—of getting redress for them—as well as punishing and rehabilitating those people who cause problems and who create victims. However, we cannot, in all conscience, support this bill, the Prisoners’ and Victims’ Claims (Expiry and Application Dates) Amendment Bill, at its second reading, which would mean the continuation of what is essentially a flawed, and indeed, a failed Prisoners’ and Victims’ Claims Act.

The Act has two features. It intends to restrict the circumstances in which courts can award compensation to persons under the control of the State, whether in prison or through some other means, and it intends to provide a simplified process for allowing victims to make claims on compensation awarded to prisoners. In fact, that has been more symbolic than real: there have been remarkably few successful instances where victims have had any benefit from this legislation in the 5 or more years since it has been enacted.

The Act denies prisoners the possibility of redress for wrongs done by the State. Why would one continue with legislation that has failed? The victims, in this case, can benefit only if a prisoner or an inmate—somebody under the control of the State—has a windfall, or if the State abuses the human rights of that prisoner. That is about the only mechanism through which a victim can get any redress. Is it not perverse to create a situation where imposing on the human rights of one person is the avenue to rewarding another for wrong done to that other person? It is simply a peculiar and perverse model, and it would be better to simply remove it from the books and go looking for a proper solution. Part of the solution could be to establish a fully independent prison complaints authority. Such authorities are known to work successfully and are quite commonplace in other jurisdictions and in other countries. Absent such an authority, we need to be very sure that there is a very robust set of circumstances where prisoners can rightfully be awarded some compensation if their human rights are abused while they are in the control of the State in prison. If there are no checks on abuses in prisons, then inevitably prisons become more dangerous places—they become more dehumanising environments. The flow-on effect of this is that prisoners become more brutalised, more dehumanised, and therefore more dangerous to society when they are released. It increases the likelihood of recidivism.

There is no value in the Act. It has not worked for victims, and it has certainly not worked for prisoners; it can work only through a very perverse link of abuse, recompense, and secondary recompense to victims. The recent move to such unhelpful strategies as double-bunking to deal with the increased prison numbers is increasing tension in prisons. It is increasing the likelihood of tension and stress, and the violence that inevitable follows from that in our prisons. We know that there are better ways to deal with crime. We can reduce recidivism. We know that there are strategies that work, strategies such as the faith unit at Rimutaka Prison, which has had an extraordinarily good success rate at reducing recidivism. The rate of recidivism is down to perhaps less than 10 percent for inmates who have been through that programme, compared with something like 50 percent otherwise. We know that mechanisms are available to us today that could be applied within existing budgets by moving budgets away from concrete, steel, and wire towards serving the needs of the community by reducing the likelihood of recidivism and by healing prisoners. They are damaged people in the same way that their victims are damaged. We know that there are better strategies than continuing the failed strategies of the past.

If the Government wants to get serious about crime, about reducing the prison population, and about reducing the knock-on and flow-on effects and the social, environmental, and economic costs of crime, then we know there are strategies and mechanisms available to us. Inhumane treatment of prisoners is effectively protected under this bill, because it takes away the likelihood of prisoners claiming compensation or objecting to the fact that their human rights have been taken away from them. We will continue to oppose the Act. It does not work; it was flawed at its enactment. It has proven itself ineffectual, and it would be a much better situation simply to start with a clean slate and look for a set of solutions that will deliver good outcomes. Kia ora.

Hon TARIANA TURIA (Co-Leader—Māori Party) : Tēnā koe, Mr Deputy Speaker. Tēnā tatou katoa. I start off by stating up front that I am opposed to the victimisation of any people, whether they are inside or outside of prison.

On the global website called Restorative Justice Onlinethere is an article that is entitled “Can prisoners also be victims? Promoting injustice through legislation.” The article is written by Kim Workman, the very person who began the faith-based units in prisons that we have just heard spoken about by the Green Party. He was the head of prisons at the time of the Mangaroa assaults, a period of time that Workman described as one of the most shameful incidents in the history of New Zealand’s prison system. He proceeds to discuss the situation that unfolded at Mangaroa Prison in January 1993, when three young inmates were systematically beaten and tortured by prison officers. The article is gruelling in its detail, recalling the way in which the officers held the young men naked in outside exercise yards and used hit squads to repeatedly beat them over a 3-day period. We need to be thankful that none of those three were one of our own sons. The prisoners were initially denied access to health professionals for the injuries that they had sustained, including bruising and cracked bones. Those 3 days from hell might have ended there. Fortunately, they did not. An inquiry was initiated, and it led to the dismissal of 12 prison staff, but it was a long time coming.

Over a decade later the 2004 United Nations Committee Against Torture reported the significant level of concern it had about the findings of the Ombudsman regarding investigations of alleged assaults on inmates, the reluctance to confront such allegations promptly, and the quality, impartiality, and credibility of investigations. Now, 17 years later, with the Prisoners’ and Victims’ Claims (Expiry and Application Dates) Amendment Bill we are still dealing with the after-effects of that initial assault at Mangaroa Prison and the subsequent introduction of the Prisoners’ and Victims’ Act 2005, which we heard the Hon Nanaia Mahuta speak about.

Let us go back to those three young men in 1993. Those men continued to wait for an appropriate response to such a vicious assault for 7 long years. During that time, some of the prison officers who had committed the criminal acts were re-employed within the prison system. Eventually, the Crown accepted liability and paid compensation to those inmates for the injuries that they had suffered. The public reaction was intense, intimidating, and aggressive. The Minister of Justice at that time, the Hon Phil Goff, cast aspersions on the original incident by referring to it as an alleged assault, and to the victims as a pack of scumbags. Suddenly the gates of hatred were unleashed. There were calls for the maximum use of custody and the maximum deprivation of liberty. The three prisoners who had been victims of the assault were described only in terms of their own offences. Members of the public claimed that because of their classification as offenders, prisoners were no longer entitled to be treated with respect or decency. Letters to the editor urged the Government to make sure that prisoners not have the same rights as any other citizens who are victims of State brutality and violence. In essence, there are two categories of New Zealanders: prisoners and everyone else. The overriding philosophy of that era was that prisoners should not have the same human rights as others in this country. They should certainly not be compensated, because in many respects, so the public record went, they should be considered less than human.

Like Mr Workman, I consider the Mangaroa incident and the horrific backlash that followed when due compensation was awarded as one of the most shameful incidents in the history of New Zealand prisons. The 2005 Act further entrenched that shame, this bill prolongs it, and all the indications are that a further, even more punitive bill is waiting in the wings.

But there is still one fundamental question waiting to be addressed: what are we doing to address the abusive nature of a system that is supposedly meant to demonstrate justice? In responding to this bill, the New Zealand Law Society endorsed the views of the Ministry of Justice that the best way of preventing future claims arising from breaches of prisoners’ human rights is to ensure that incidents leading to such claims are kept to an absolute minimum. I could not agree more. Justice is not about handing out punishments and inflicting numerous abuses upon a perpetrator for the rest of their living days. I am becoming increasingly worried about the relentless hostility of the public and political attitudes towards those who inhabit our prisons. Caritas Aotearoa - New Zealand told the Justice and Electoral Committee that “Denial of basic human dignity and revenge does not make for good legislation.” This view was endorsed by the Human Rights Commission, who warned the select committee that “concern about the victims of crime should not override the importance of ensuring that prison conditions respect minimum human rights standards.”

The United Nations Special Rapporteur on Torture in 2010 urged States to respect the right of victims to an effective remedy and reparation. The report recommended that each State party should ensure that the victim of an act of torture must be able to obtain redress and have an enforceable right to fair and adequate compensation, including the means for as full rehabilitation as possible. The special rapporteur did not take the step of making an exception for those who are in prison to render them ineligible.

What is the reason that we are taking such a harsh line here in Aotearoa? One of the signs of a mature and inclusive society would be the adoption of a less punitive criminal justice system. But if we were to read between the lines of this bill and all the discourse around it, we would pick up a message that going to prison is no longer sufficient punishment on its own. Clearly, a climate is developing amongst some parties in this House in favour of shifting the emphasis away from rehabilitation and humane treatment of prisoners to a lifelong sentence in which State brutality is permissible.

There are victims beyond the victims, who deserve to have a voice. There are always the children and family members waiting on the outside. They also suffer if their loved ones are subjected to any cruel, inhuman, or degrading treatment.

Mr DEPUTY SPEAKER: I am sorry to interrupt the member. The levels of discussions that are going on are such that I am having difficulty hearing the Minister. We have lobbies if people want to go out and confer. I ask members to keep the noise level down, because I think it is very unfair to the member speaking.

Hon TARIANA TURIA: Our greatest fear is that this legislation will influence the prison environment to such an extent that inmates will be less likely to complain, jails will become increasingly dangerous, and that danger will go unchecked. The system must be refocused to consider the needs of families and communities and to abide by the common law standard. It would ensure that inmates are treated with some dignity.

We are aware that Tony Ellis, barrister, has decided to make direct communication to the United Nations Committee Against Torture, to Amnesty International, and to the Association for the Prevention of Torture for injustices that were formalised in the Prisoners’ and Victims’ Claims Act 2005. He has also drawn attention to the fact that the Committee Against Torture recommended an inquiry in 2004 in respect of the claims laid by Chris Taunoa and others.

We have a chance tonight to put things right and stop this ongoing abuse of power by the State. The Māori Party will not be supporting this bill. We believe that the bill does not work in the best interests of prisoners, victims, nor the common good. Tēnā koutou.

SIMON BRIDGES (National—Tauranga) : If we are upfront as members, as I am sure we all are, we can accept that all political parties from time to time are somewhat simplistic and reductive in the way they deal with crime, from, really, all manner of viewpoints and persuasions. We can sometimes take the view that all prisoners are bad, and all serious punishment is good. Members on the other side can sometimes say that any more punishment is bad and that we should not be doing anything. I think we have to guard against that. The sad reality is that no party in this House and no set of laws—even the best set of laws—will see a New Zealand without victims and without crime. There will always be serious harm caused to victims and suffering for years and years to come, whatever the Government response. That is the reality of crime, and it goes back, effectively, to Adam and Eve.

I have to say that I think, nevertheless, this is a very good bill. We are doing a strong thing, and I will come to that later. I will also say, with reference to thoughtful speeches by David Clendon and the Hon Tariana Turia, that I accept that prisoners can be victims, and I accept that certainly in serious abusive cases there is a need for the vindication of their rights, sometimes with significant compensation. But I also say that it is my understanding of this bill—which was introduced by Labour, and is now supported by the Government, which wants to extend it—that it does not take away prisoners’ human rights. If I can put it crassly—at a basic moral level, I think this is right—the legislation creates a debt collection mechanism for victims, who have been knowingly wronged, often grievously so, by offenders who were later imprisoned, to receive compensation from their offenders. The bill in no way, shape, or from states that prisoners should not have their rights vindicated nor receive compensation. But where victims of their crimes have been put to cost, and they have not received what is their due from prisoners, the original 2005 Act, the Prisoners’ and Victims’ Claims Act, goes some way at least to righting that wrong.

Effectively, what we are doing tonight is extending the expiry date in the Act out to 2012. We are allowing the restrictions on the circumstances in which courts can award compensation to prisoners to continue, and we are providing a simplified process for victims of prisoners to make claims against prisoners’ compensation before the prisoners fritter it away, to put it frankly. I am pleased to say that we are going further than that with another bill later this year.

I do not think that the members in this House can do everything required to right all wrongs, to ensure that there are no victims, or to ensure that victims never suffer, but I think that through this bill and quite a number of other bills that Parliament has passed this term, we are certainly going a good way towards getting better justice for victims in this country.

CARMEL SEPULONI (Labour) : The Prisoners’ and Victims’ Claims (Expiry and Application Dates) Amendment Bill extends the restrictions on the awarding of compensation brought in by the Prisoners’ and Victims’ Claims Act 2005 for a further 2 years, from 1 July 2010 to 30 June 2012. Labour’s position is that, basically, we passed the Act that this bill is seeking to extend, and as this bill is only making a technical change to the date of the Act as an interim measure then of course we will be supporting this bill. This bill will ensure that victims will continue to get access to prisoners’ compensation. This temporary measure is to make sure that victims’ access to prisoners’ compensation does not lapse between the expiry of the Act and the commencement of the new bill that the Government intends to introduce later this year—so we hear. The aim of this bill is to amend the Prisoners’ and Victims’ Claims Act, and, because it is just a minor and technical change, we support it. The current Act states that the awarding of compensation to victims expires on 1 July, and that the victims’ claims process applies only to compensation in respect of claims made before that date. This bill will extend that application to June 2012.

An interesting thing that has come up about this relates to the protection of victims’ rights. I will touch on some of the things that Labour did whilst in Government to ensure that victims’ rights were protected. We took that matter seriously, and I think that is proven by our track record with regard to the legislation put into place by the previous Labour Government. We introduced and passed the Sentencing Act in 2002, which introduced a presumption in favour of reparation and resulted in this sentence being used more frequently. The Sentencing Act also recognised the potential of restorative justice processes to make offenders more accountable to victims, and it enabled courts to take both financial and non-financial offers of amends by an offender into account. Labour introduced and passed the Victims’ Rights Act in 2002, which extended a number of rights to victims, such as rights to information and the ability to have input into sentencing decisions through victim impact statements. In 2003 the Ministry of Justice launched a campaign to trace those who were owed money, and it spent $385,000 on advertising an 0800 number for people to call. The establishment of new collection centres further bolstered the collection and disbursement of reparation. In the 2003 Budget, $9 million was allocated for that purpose. Labour passed the Prisoners’ and Victims’ Claims Act in 2005, which ensured that the victims of inmates who had been awarded compensation could claim against that compensation. The previous Labour Government has a proven track record with regard to taking the rights of victims seriously.

I will now touch on the lofty promises made by the National Government post the 2008 election with regard to the rhetoric that it has put out about the protection of victims’ rights—because it has been rhetoric. The Government has had a whole line on being tough on crime and protecting the rights of victims. It has purported to represent victims at some sort of level that has never been reached before, but unfortunately I think that its track record over the last 18 months shows that that is not the case. We need to look not only at what that Government has done in law and order but also at what it has done across the board. One area where it has failed to protect the rights of victims and failed to provide the necessary services required by victims to help them move on and progress in their lives is accident compensation. I think that this is relevant, because when we hear the rhetoric going around about protecting victims and then we see that this other stuff is happening in relation to accident compensation, we have to question whether that Government is fulfilling its promises to the New Zealand public. I am talking about sexual abuse victims who are no longer able to get the support that they need under the accident compensation scheme, thanks to the changes that National has made. That is something that all of us on this side of the House have seen with regard to the constituents whom we are out there supporting, advocating for, and representing in this House. We have seen how the changes in policy that that Government has put into place with regard to accident compensation have failed those particular victims.

I can think of one story I heard when I was in Waitakere recently—maybe a month ago—when I was meeting with different groups that provide counselling services for sexual abuse victims. This case was brought to my attention when I was meeting with those counsellors. It was in respect of a woman who had been sexually assaulted. It was a while ago, but she was still suffering from that sexual assault. She had been receiving counselling that had been funded by the Accident Compensation Corporation, and the counsellors were concerned that she would lose that funding. This particular victim and her family was very aware of this. The counsellor told me on that day that the woman’s son even rang the counsellor and said that she could not stop providing those counselling services to his mother. He did not think that his mother could do it without the counselling, and he thought that she was at risk of committing suicide if she did not receive the service.

On the same day that the counsellor was telling me the story, someone else walked into the room and let her know that the corporation had declined to fund that woman’s counselling. We sat there and I asked the counsellor what she would do. She said that her group would continue to provide the service without the funding. There would be no support from the Government and no support from the Accident Compensation Corporation. The counsellors would keep giving the woman the counselling, but they could not sustain that for a long period of time. That is only one example of a person who is a victim and who has been affected by the changes in accident compensation that that Government has put into place. Her right to counselling, to recover, to move on, and to get the care that she needs, has been taken away by a change in policy from members on that side of the House. Going back to what I was saying before, we are concerned that what that Government says is purely rhetoric about the protection of the rights of victims.

In that instance, it was definitely not something that that Government saw as being a priority. Instead, it has left that woman at risk, having to look after herself, and in potential danger. Talking about that issue a little more, over the last couple of years the number of approved claims for counselling were between 200 and 300 each month. The number of approved claims for the whole of New Zealand in January this year was 11 and there were only six in February. So members on that side of the House cannot say that the policy changes they have put into place with regard to accident compensation have not had an effect at all. It is obvious that the care provided to these victims has shrunk to almost nothing. That is only one example of where that Government has failed to protect the rights of victims.

There are many others. We could talk about the “three strikes” bill and about how some of the submitters on that bill told us very clearly that it would only see victims re-victimised. They would be at risk of having to go through longer court proceedings because of appeals and other things. Those were the things that came through very strongly in the submissions. The last thing that I will touch on is preventing more victims of crime. That is something that this Government over there has failed to do also. The latest crime statistics showed that the number of crime victims are growing, not decreasing, under National. As the Government’s response, the Minister of Police has cut police numbers in a number of areas. We have seen in Waitakere that crime has gone up and violence has gone up, yet recent information shows that the Waitematā district will lose 10 police officers. So that will not help with regards to the number of victims we see. We support this bill, but we question the Government with regards to its ability and its track record to protect the rights of victims. Thank you.

KANWALJIT SINGH BAKSHI (National) : I am privileged to participate in the second reading of the Prisoners’ and Victims’ Claims (Expiry and Application Dates) Amendment Bill. The bill extends the restriction on the awarding of compensation for a further 2 years, starting from 1 July 2010 and going to 30 June 2012. The second amendment is that the victims’ claims process applies to compensation awarded, or to be paid pursuant to an out-of-court final settlement, in relation to a prisoner’s claim made on or after 1 July 2010 but before 1 July 2012. The Government wants to eliminate the all-too-frequent horror stories where victims are forced to relive traumatic events simply because the system has been deficient or has let them down. Invariably, the offenders are getting a better deal than their victims. Since this Government took office it has been working hard to improve the law and order situation in New Zealand. It has also given victims’ rights top priority. I commend the bill to the House.

Hon MARYAN STREET (Labour) : The Tariff (New Zealand-Hong Kong, China Closer Economic Partnership) Amendment Bill provides the legislative framework for what is essentially a free-trade agreement with Hong Kong, but it also rationalises the approach between Hong Kong and China.

The New Zealand - Hong Kong, China Closer Economic Partnership Agreement will allow businesses from New Zealand and those New Zealand businesses that are currently in Hong Kong to move freely and without any impediment by regulation or legislation between Hong Kong and China and between Hong Kong and New Zealand. In other words, this agreement provides part of what will be a seamless network, I think, of free-trade apparatus that allows New Zealand business interests to springboard out of Hong Kong and into China, because the conditions surrounding that export trade have been rationalised and evened out.

This is a significant move not only in the export of goods but also particularly in the export of services. In this respect, some high-tech industries already have a foothold in Hong Kong. These industries are New Zealand - owned and operated and are being run out of Hong Kong, and I think particularly of some high-tech industries that are based in Tauranga.

JOHN HAYES (National—Wairarapa) : I thought that I might quickly traverse for the benefit of “Dr No Man” some of the issues relating to the importance of China. In 15 years’ time—

Hon Darren Hughes: I raise a point of order, Mr Speaker. The member Mr Hayes referred to the leader of another party by a name that is not that member’s name. He made a comment about another member and pronounced his name in a way that was clearly intended to deride that member.

The ASSISTANT SPEAKER (Hon Rick Barker): I recall the name, but I did not quite get the significance of whom Mr Hayes was referring to. I was confused about that, myself. If Mr Hayes made reference with an inappropriate name to a person then I ask the member to withdraw and apologise. If he did not, I accept his word.

JOHN HAYES: I did not notice myself doing it, but I will withdraw and apologise to remove any doubt.

In 15 years’ time, in 2025, with 1.5 billion people China will be the world’s second-ranking economic power. At its present growth rate its GDP will outstrip that of Japan in 5 years’ time, in 2015. It will outstrip that of America in 30 years’ time, in 2040. Its share of world GDP, currently 4.5 percent, will rise to 7 percent in 2015 and will be close to 15 percent in 15 years’ time, in 2025. China’s average standard of living should be, by 2050, half that of America’s standard of living, and even if China’s average growth rate is half that of today, it will have a per capita income of US$6,000. Hundreds of millions of Chinese will, by then, belong to the middle class, and tens of millions will belong to its upper class.

We can expect China to continue to finance US deficit for some years to come. We can expect China to become the leading investor in Asia, ahead of Japan and the United States. Despite the efforts of the Communist Party of China, it will eventually have to pass power to elected officials. Unless there are reforms China will have to face many difficulties. Ninety percent of Chinese people have no retirement plan or health insurance. Half the urban people and fourth-fifths of rural people have no access to health care. Half of China’s 500 biggest cities lack drinkable water and sewerage systems. China will have to build urban infrastructure, fight corruption and put a stop to corruption in public finance areas, find work for hundreds of millions of people flowing into towns, improve education, reduce income gaps, train managers, reform an obsolete public sector, and establish judicial systems capable of protecting private and intellectual property. By 2025 the Communist Party of China will have been in power for 76 years. No other political party in the world has lasted in power for more than 70 years. We can expect it to fade in importance.

To the west, India has 1.4 billion people. It should be the most populous nation on the earth by 2025 and the third-ranking economic power after America and China. I was at the launch of the Wellington chapter of the India New Zealand Business Council earlier this week. The Indian High Commissioner at the meeting talked about India having 9 percent compound GDP growth for the next 20 years. India’s democracy will have to meet and deal with very similar challenges to those facing China. These developments will result in a doubling of urban populations within 10 years—that is, 2025—and a doubling of the demand for raw materials.

Against this global background, we must position New Zealand to place our trading relationships on an open and secure footing. New Zealand companies will want to market produce and also services into China. We must ensure certain access to the Chinese markets and to the Hong Kong markets to allow the export of services, because our companies can benefit from liberalisation of both the Hong Kong and the Chinese markets. These are the key reasons behind New Zealand entering into the New Zealand - Hong Kong, China Closer Economic Partnership Agreement. We want secure, more certain access to the Hong Kong services market, and we want to ensure that New Zealand service providers benefit from future liberalisation by Hong Kong in particular sectors. We want to enable traders to benefit from trade-facilitating rules of origin, accompanied by robust verification systems. We want to provide a framework for regulatory cooperation and consultation, and we want to allow for more effective discussion and cooperation on labour and environmental matters in line with New Zealand’s sustainable development and economic growth objectives.

With those few words, I commend the Tariff (New Zealand-Hong Kong, China Closer Economic Partnership Agreement) Amendment Bill to the House.

STUART NASH (Labour) : I stand to speak in support of the Tariff (New Zealand-Hong Kong, China Closer Economic Partnership Agreement) Amendment Bill—quite a long name. The reason I support the bill is it will, hopefully, lead to increased opportunities for New Zealand exporters in the Hong Kong market as well strengthening our relationships in the Asian region in general. Closer economic partnerships, or CEPs—trade is full of these acronyms—are a vital part of New Zealand’s economic development policy as they work to break down tariff, quota, and customs duties, which restrict access and profitability for New Zealand exporters and importers. They tend to lead to increased exports and imports and have the potential to add wealth to both countries.

New Zealand signed a closer economic partnership with Hong Kong on 29 March 2010. This bill implements that agreement. The closer economic partnership agreement had its roots in the work of a former Minister of Trade, Jim Sutton, and the next elected Prime Minister of New Zealand, the Hon Phil Goff, during his tenure as Minister of Trade. Whilst we tip our hats to Mr Groser for getting this bill across the finishing line, I think that even he would admit that it is a result of the work of his predecessors, and we must recognise the efforts of those who worked on this issue in the past to get it to this point. Trade is one of those wonderful areas where we all work together when it comes to securing the national interest. How to grow trade is the real challenge, which the National Government does not seem to get, as is evidenced by the latest Budget. However, that is a story for another day.

So what are we talking about when we debate the closer economic partnership with Hong Kong? Well, Hong Kong is currently our ninth-largest export destination, accounting for $823 million last year. New Zealand imported $199 million of merchandise goods from Hong Kong last year, making it the 31st-largest source of imported goods. However, to put it into perspective, Hong Kong counts for only 1.9 percent of New Zealand’s total exported goods and 0.04 percent of our total imported goods. Herein lies the challenge for this economy going forward. Our ninth-largest export destination accounts for only 1.9 percent of New Zealand’s total exported goods. If there is ever a case for global diversification then those figures are it. There is a very strong argument for this type of free-trade agreement. It puts potential trading partners on the map and on the radar of New Zealand Trade and Enterprise as well as potential exporters. Despite Hong Kong’s small size it is a market that is already rapidly expanding, with last year’s total exports increasing by 33.6 percent compared with 2008. However, total imported goods declined by 2.5 percent last year compared with 2008.

What sort of things do we export to Hong Kong? We export about $200 million worth of crustaceans to Hong Kong. The area of largest growth is apples, which is good for the people of Hawke’s Bay, considering that it is the fruit bowl of this country. Other things that increased were milk powder and venison. Frozen meat and frozen beef were second and third in terms of export value. Milk powder exports had dropped, which I was interested to see, and cheese had dropped. But some interesting products are exported there, and we are doing quite well. In terms of imports, the largest area of imports is machinery parts, which accounted for about $16 million, but it dropped by 15 percent. The area that increased by 217 percent was printing machinery.

Hon Darren Hughes: Yeah?

STUART NASH: Yes. I suspect there were one or two capital purchases but I am not too sure. Insecticide imports were worth $4 million. They increased by about 400 percent. Believe it or not, spectacle imports increased by 118 percent. Some of the guys on the benches opposite need some spectacles from Hong Kong, because they see the world through rose-coloured spectacles and do not understand reality.

Hon Darren Hughes: They need rear-vision mirrors.

STUART NASH: Absolutely. But Hong Kong not only is an important market in its own right, as outlined a couple of minutes ago, but provides a vital foothold for New Zealand businesses wanting to expand into the much larger Chinese market. Building closer economic relationships with Asia is vital to New Zealand’s future economic prosperity, because it is the major market of the future. This closer economic partnership is another step in that direction. So hats off to Jim Sutton and Phil Goff.

Although free-trade agreements and closer economic partnerships come with undoubted benefits, we must not ignore that for some businesses and sectors they can potentially cause harm. This closer economic partnership has been evaluated as having a low negative impact on New Zealand business, largely because Hong Kong specialises in services rather than cheap manufactured goods that could undercut local businesses. New Zealand manufacturers of footwear, textiles, etc. are most at risk from free-trade agreements and closer economic partnerships, and this closer economic partnership has given those sectors the longest phase-out period of tariffs to allow them time to adjust.

We also need to be aware that fiscal costs are associated with this sort of agreement, and they need to be fully understood to ensure that they are outweighed by the benefits. As with any free-trade agreement that results in a reduction in tariffs, there will be lost tariff revenue. In 2008-09 the estimated tariff revenue collected on imports from Hong Kong was around $4 million. This will be phased out by 2016; no revenue will be collected from Hong Kong imports.

I would like to outline some of the advantages of the closer economic partnership agreement. Although Hong Kong already offers duty-free imports for all countries, the closer economic partnership will ensure New Zealand’s existing duty-free access is locked in for New Zealand exports, giving New Zealand exporters added certainty that competitors other than Mainland China do not enjoy. The phase-out of certain remaining domestic duties may also reduce some costs for New Zealand producers who use imported Hong Kong components or capital equipment—for instance, components or equipment relating to electrical transformers, whiteware, and steel products. It is interesting to note that one of our largest exports is recycled plastic. Obviously, Hong Kong turns it into added-value products and brings them back here; it is a pity we cannot do it here.

The closer economic partnership provides New Zealand with the early harvest of most of Hong Kong’s Doha service commitments—that is, Hong Kong is offering New Zealand through the closer economic partnership most of what it is offering the World Trade Organization membership in the yet to be concluded Doha negotiations. The commitments that Hong Kong makes to New Zealand in the closer economic partnership address service sectors of key export interest to New Zealand, including education, business, environmental, and logistic services. New Zealand service exporters have also secured strong future-proofing of their position in the Hong Kong market through the most favoured nation treatment and a ratchet clause. Most favoured nation treatment means that New Zealand exports will automatically benefit from any preferential treatment that Hong Kong provides to future free-trade agreement partners, subject to certain reservations and exceptions. The ratchet clause means that any future unilateral liberalisation undertaken by Hong Kong in certain sectors will be bound and committed to New Zealand. We do not lose; we cannot lose. New Zealand will be using the tariff reduction schedule in the New Zealand - China free-trade agreement—which was also negotiated by the Hon Phil Goff—for imported products from Hong Kong. As I already mentioned, the longest tariff phase-out periods will apply to industry sectors in New Zealand that are particularly sensitive to potential imports from Hong Kong, such as textiles, clothing, and footwear. Delayed tariff phase-outs will apply to other products such as steel, furniture, plastics, and rubber products.

I will very quickly go through some of New Zealand’s legal obligations under the closer economic partnership. These include tariff reduction phasing-out identical to that provided to China; market access and national treatment commitments to Hong Kong service providers similar to those provided in the P4 agreement—which is an agreement between New Zealand, Brunei, Chile, and Singapore—along with some elements provided in other recent free-trade agreements and a few commitments drawn down from New Zealand’s Doha offer, all within domestic policy settings, of course; a reciprocal commitment to extend most favoured nation treatment to Hong Kong in relation to services, subject to specified reservations; doubling the overseas screening regime threshold from existing World Trade Organization levels of $10 million to $20 million; a commitment not to take trade remedy actions in an arbitrary or protectionist manner, and to carry out trade remedy actions in a transparent manner; specific rules of origin to accommodate part-processing of certain clothing products in Mainland China, with robust verification procedures to mitigate any risks from this approach; and commitments on temporary entry of Hong Kong business visitors that go beyond New Zealand’s existing World Trade Organization commitments.

This is a good bill. It is a cross-party bill; we will all support it. I think it will benefit New Zealand, and for that reason I commend it to the House.

Dr KENNEDY GRAHAM (Green) : With respect to the previous speaker, Stuart Nash—and I do have respect—I say that he is incorrect. This party will not be supporting the proposed Tariff (New Zealand-Hong Kong, China Closer Economic Partnership Agreement) Amendment Bill. On 30 March the Minister of Trade, Tim Groser, signed the New Zealand - Hong Kong, China Closer Economic Partnership Agreement. He said at the time that it was “a significant achievement that further strengthens the economic links between New Zealand and the Asia-Pacific region.” He said that it complements the existing free-trade agreement with China. Given Hong Kong’s position as a regional trading and investment hub, he said that it would support business engagement with Asia and the Pacific. He recalled the 43 percent increase in exports to China in the last 12 months, which brought in an extra $1 billion worth of export income, and he said that the agreement would add “to a growing collection of high quality and comprehensive FTAs in the region.”

We know all about high-quality, comprehensive free-trade agreements. A veritable raft of free-trade agreements have come down the track over the last 2 or 3 years, as a syndrome of a failed global World Trade Organization agreement that is better known as the “spaghetti bowl” or, to give it an Asian flavour, “noodle soup”. We have free-trade agreements with Thailand, Singapore, ASEAN, China, Malaysia, and now Hong Kong. We shall have the Trans-Pacific Strategic Economic Partnership—the TPP—and we will have Korea, India, and the Gulf States.

I have scrutinised the national interest analysis of each one of these six Asian free-trade agreements. Essentially, they amount to a template. The wording is essentially the same. The reasoning is the same. The underlying beliefs are the same. All that has been changed by officials is simply the names of the countries, pretty much, and little more. That is not, I think, a genuine analysis. Analysis requires objectivity; it requires intellectual rigour. There is none of that in these documents. These documents are more of a credo—let us call it the “Free Traders’ Creed”.

Let us look at the template. There are essentially 10 sections or so. Let us look at the first two sections. The first is the reasons for becoming a party; the second is the advantages and disadvantages of free-trade agreements.

Let us explore the advantages. Almost without exception there are generally about 10 bullet points lined up, and usually nine or 10 out of the 10 pertain to export interests. Let us look at the disadvantages. The disadvantage will even take the form of a lament that the other side was too timid with our exports. I quote the ASEAN agreement national interest analysis: “A more ambitious outcome on the elimination of tariffs was preferred, but was simply was not possible.”

Occasionally—just occasionally—there is an opaque reference to imports, and to the effect of imports on New Zealand. The phraseology used is “negative adjustment effects”, which, basically, is a euphemism for company collapse and job loss. I will quote from a few.

This is from the ASEAN analysis: “The removal of tariffs on products imported into New Zealand can result in negative adjustment effects for import-competing sectors. AANZFTA does, however, attempt to mitigate these impacts by delaying tariff elimination on imports of acute sensitivity to particular New Zealand industries.”

This is from the analysis of the agreement with China: “The removal of New Zealand’s tariffs on imported Chinese products can create adjustment effects for import competing sectors. The FTA attempts to mitigate these effects with various protections,”.

The analysis of the agreement with Malaysia states: “Any trade agreement involving reciprocal tariff removal may have implications for domestic producers as a result of increased exposure to foreign suppliers. In order to mitigate the potential for any negative adjustment effects in New Zealand, the [agreement] includes longer phase-out periods for imports in sensitive sectors in New Zealand relative to other sectors of the economy.”

The analysis in the Hong Kong agreement states: “Any trade agreement involving reciprocal tariff removal while providing better access for exporters, can create adjustment costs for domestic producers.” These are euphemisms, used in the national interest analysis, for company failure and job losses.

Let me give this challenge to this Government, as we prepare for an analysis of the Hong Kong agreement and further readings of the bill in this House. I challenge the Government in the Hong Kong agreement, if not the previous agreements, and if not the Malaysian agreement, all future free-trade agreements, to name the New Zealand companies that will face negative adjustment effects, to estimate the loss of income they will suffer, to estimate the loss of jobs that this will incur for New Zealanders, to be a little more intellectually honest in the national interest analysis, to show a little more moral integrity, and to show a little more political courage.

RAHUI KATENE (Māori Party—Te Tai Tonga) : This is probably not the best time to be considering a bilateral trade agreement between New Zealand and Hong Kong. If we were to ask Hong Kong - based Natural Dairy (NZ) Holdings about its perspectives on the viability of the New Zealand - Hong Kong, China Closer Economic Partnership Agreement, it would probably raise the context of the $100 million deal it was attempting to seal with the bid to purchase the 16 New Zealand farms formerly owned by the Crafar family. The receivers handling the sale of the farms had already signed a sale agreement with Natural Dairy (NZ) Holdings, conditional on our Overseas Investment Office approving their application. Suddenly, out of the blue, Landcorp chairman Jim Sutton suggested it might put in a tender, because of the reputational risks to the New Zealand dairy industry and New Zealand Inc. He referred also to concerns in the wider community about the sale. We in the Māori Party have raised particular concerns around one of the Crafar farms, which is part of the Maraeroa A and B blocks over which Ngāti Rereahu has a settlement interest. The 16 farms are located in the Waikato, the King Country, the Bay of Plenty, Whanganui, Taranaki, and Rangitīkei. Other iwi with significant interests yet to be settled may well be watching the events unfold with great interest.

The next turn of events for the Hong Kong - based company was that the Minister of Agriculture, David Carter, stepped into the ring, saying that a sale to that company was unlikely to go through. The Prime Minister publicly censured his freethinking Minister, but the damage had been done. I remind the House that this company had already signed a conditional purchase contract for the farms. It is no wonder that Natural Dairy (NZ) Holdings now says Landcorp’s interests look like the result of political interference.

I thought that the Crafar farms context would be a very relevant setting in which to consider the environment for a free-trade agreement with Hong Kong. It underlines the range of interests that the Government must consider when we look at the prospect of trade with overseas jurisdictions. The Hong Kong - based company Natural Dairy (NZ) Holdings was also involved in the separate purchase of farms in February this year at Norsewood in southern Hawke’s Bay, Waitōtara in South Taranaki, and the Manawatū. That purchase is now under investigation by the Overseas Investment Office, which is questioning whether the required consents were in place. This action led company director May Wang to retort: “The plain fact is if New Zealand does not welcome the investment it is inevitable the company will take its $1.5 billion to another dairying nation that does want it.”

None of this is the greatest public relations for the Tariff (New Zealand-Hong Kong, China Closer Economic Partnership Agreement) Amendment Bill, which we are debating tonight, but it provides us with an opportunity to address some of the longstanding concerns that the Māori Party has raised in the past about the nature of free-trade agreements in general. We have raised concerns that although free-trade agreements are established to protect investors and their investments, they have the potential to threaten our own domestic programme, raising concerns for Treaty settlements between Māori and the Crown. In the case of the 16 farms formerly owned by the Crafar family, it should be noted that they employed nearly 200 staff on 8,000 hectares. Our concern, then, with free-trade agreements is to always consider how such relationships impact on the long-term prosperity of workers here in our land. We hope that if such an arrangement was to take place with a Hong Kong company following the passing of this bill, the local mana whenua would be approached with a view to working together collaboratively on employment opportunities that might arise.

The Crafar farms issue has raised some concerns around this agreement, but also I bring to the House the very real value that Māori businesses have talked to us about of having the opportunity to go out and explore international economies. There has been a growing interest from Māori businesses and from iwi leaders in being able to have access to the international market. I was interested to read some of the comments from Te Hōripo Karaitiana, who is chair of the Awatoru Māori economic transformation initiative and a director of a successful Māori agribusiness, with activities in Aotearoa and overseas. Te Hōripo recently participated in the Food and Agribusiness Market Experience programme, studying global food value chains, and has shared his enthusiasm for working to expand opportunities from the China closer economic partnership agreement. If we consider that the majority of the Māori asset base is in the primary industries—seafood, forestry, and farming—we see that they all have major implications for how we operate in the international arena. It is Te Hōripo’s experience that Māori involved in the primary industries should look upon trade with the Asian economy as an opportunity to participate in the value chain, rather than remaining at the production or farm-gate end.

A classic example is that provided by Patrick Wātene of Ngāti Tamaterā Hauraki, who is the founder and executive director of Global Horticulture (Xi’an) Ltd, which specialises in horticultural consultancy and bare-land orchard development. Based in China, GlobalHort provides expertise in value-adding through an integrated value chain from orchard to market. It was because of the example provided by the range of Māori businesses already developed in the Asian economy that in this year’s Budget the Minister of Māori Affairs announced investment in developing a Brand Māori to gain premium prices for Māori-produced goods exported to niche markets.

There was also investment in a delegation of Māori business leaders heading over to the World Expo in Shanghai in September. The key purpose of the delegation will be to help Māori businesses enter growth industries to increase Māori exports and to increase the profile of Māori tourism experiences with overseas providers and visitors. This is really important not just for relationships with China and Hong Kong but for the wider growth of the Māori economy. Māori economic development is important not only for Māori but for New Zealand’s overall economic performance. Māori can represent a considerable source of future growth and, if they do, it is our view that Māori must take a lead role in determining their economic development aspirations and fostering development that works for them. Trade is all about building and sustaining relationships. Māori businesses have been telling us that they believe that the culture of Te Ao Māori connects and resonates particularly with places like Hong Kong, Shanghai, and Greater China.

The Māori Party does not want to close the door on those opportunities. Although we acknowledge that there are a range of strongly held views that we ourselves have put forward about free-trade agreements in general, the reality is that Māori are already confidently and enthusiastically conducting business throughout the world. Māori businesses and all those who invest in them also deserve our support to benefit and develop the unique indigenous point of difference they contribute to business activities.

These are the two views that the Māori Party brings to this bill: fair trade and protection of our domestic programme, particularly the Treaty relationship, or encouragement of the development of a trading partnership based on dialogue, transparency, and respect—a partnership that tangata whenua will also be able to benefit from. We look forward to hearing what the public has to say about this bill.

JACQUI DEAN (National—Waitaki) : I rise to speak to the Tariff (New Zealand-Hong Kong, China Closer Economic Partnership Agreement) Amendment Bill. I note that Hong Kong is New Zealand’s ninth-largest export destination and that New Zealand’s trade with Hong Kong is currently worth $823 million a year. The first reading of this bill is indeed exciting for New Zealand.

I want to comment on the contribution of the previous speaker, Rahui Katene. I note that nothing in this free-trade agreement supersedes the provisions of the Overseas Investment Office, so the issue of the purchase of New Zealand dairy farms by Chinese companies is completely unrelated to the contents of this free-trade agreement.

New Zealand farmers depend on trade, particularly sheep and beef farmers. For example, 90 percent of the Alliance Group’s product coming out of freezing works up and down the South Island is exported, and a lot of it goes to Hong Kong and China. So this free-trade agreement is pretty crucial to the health of the New Zealand sheep and beef industry—not to neglect our dairy industry, as well.

This free-trade agreement is all about boosting innovation in New Zealand and improving export access to world markets, which is one of the Government’s key policy drivers for New Zealand’s export performance. This closer economic partnership is Hong Kong’s first free-trade agreement, aside from its closer economic partnership agreement with Mainland China, and that is pretty significant. The closer economic partnership also complements New Zealand’s free-trade agreement with China, and enhances the potential for Hong Kong to be used as a platform for trade with Mainland China—a point not lost on a speaker from across the House. That makes Hong Kong a strategically important trading partner for New Zealand—as if we did not know that already. This deal will help New Zealand businesses boost trade with Hong Kong and take further advantage of growing opportunities for New Zealand in the region.

I briefly note that the closer economic partnership will ensure that New Zealand’s existing duty-free access is locked in by binding in place duty-free access for all New Zealand exports. The tariff reductions that New Zealand has provided Hong Kong with are the same tariff reductions in the New Zealand - China free-trade agreement. Tariffs are eliminated on 54 percent of exports upon the agreement’s entry into force, and the remaining 46 percent will progressively become duty-free by 2016, which in export terms is not very long in the future. Longer tariff phase-out periods will apply for import-sensitive sectors such as textiles, clothing, and footwear, and also on products such as steel and furniture. It is also worth noting that the closer economic partnership provides for 48-hour customs clearance of New Zealand exports. An easing of those provisions will make trade more possible and more timely with both Hong Kong and Mainland China.

With those few comments, I commend the bill to the House.

SU’A WILLIAM SIO (Labour—Māngere) : Mr Deputy Speaker, may I greet you by saying “Ni hao ma.” I think it is important on this occasion to greet you. I am laughing because my colleagues are making fun of my Chinese when I am trying to get into the mood of the occasion. I have never been to China, but I know many, many wonderful people out in Manukau who are of Chinese heritage and who give and contribute significantly to the local community in Manukau, and, no doubt, throughout this country. In fact, I have met a couple of mayors of Chinese heritage—one in the area of Gisborne, who speaks Māori fluently, and the other in the South Island, who is from Dunedin or Christchurch?

Hon Maryan Street: Dunedin—Peter Chin.

SU’A WILLIAM SIO: Dunedin. They are wonderful people and wonderful friends. Peter Chin showed me the Chinese garden in Dunedin.

We are debating the Tariff (New Zealand-Hong Kong, China Closer Economic Partnership Agreement) Amendment Bill, which is a mouthful. I know I have relatives who are of Chinese heritage. In fact, more recently there was the addition to our family, some years ago, of my sister-in-law—although originally from China, she comes from Malaysia, and we will be talking about the Tariff (Malaysia Free Trade Agreement) Amendment Bill later on.

In the past 6 or 7 months, my office has been assisting a young man from Manukau who has a girlfriend living in Hong Kong and who has been attempting to bring her over here. For some reason, it has taken close to 7 months before agreement by our immigration authorities for her to receive a visa to be able to visit this young man in Manukau. I thought I would say those things by way of preface, as we debate this bill. As a young man I always wanted to go to China, and I wanted to be around Hong Kong. In fact, when Bruce Lee came out we all thought he was a relative. Nevertheless, I know that some members of this House are planning to go to China later on this year, or next month, particularly to the Shanghai Expo, which I understand is an expo that will probably be receiving many heads of State from throughout the world.

This is a Government bill that has been introduced by the Hon Tim Groser, the Minister of Trade, and it is about a closer economic partnership agreement. Closer economic partnerships are a vital part of New Zealand’s economic development policy. We in Labour are supporting this closer economic partnership because we believe it will provide increased opportunities and certainty for New Zealand exports to an important market. It is a market that will be very critical for the rest of the world simply because of the sheer size of its population, and with that population will come significant demands for goods—food, in particular. It is also a market that is of concern in terms of other aspects, and I will get into that at a later stage.

Closer economic partnerships lead to increased exports and imports, and the potential for added wealth to both countries. I understand that New Zealand signed this closer economic partnership with Hong Kong on 29 March, so this bill now implements that agreement. The bill amends the Tariff Act. That is part of the implementation of the Tariff (New Zealand-Hong Kong, China Closer Economic Partnership Agreement) Amendment Bill. The amendments will enable the application of preferential tariff rates under the closer economic partnership. Not only is Hong Kong an important market in its own right, our ninth-largest export destination in 2009, but also it provides a vital foothold for New Zealand businesses expanding into the much larger Chinese market. With the number of New Zealand citizens of Chinese heritage living in this country, I think it bodes well that we are developing relationships not only on the human level but also on the business level and the cultural level. As I have always maintained, New Zealand is a much richer country by accepting that it is not just about business but about building on and developing people and relationships.

No doubt, these things, as I understand them, take time. The closer economic partnership agreement had its roots in the work of former trade Minister Jim Sutton, and it was reinvigorated by the Hon Phil Goff during his tenure as trade Minister. I think it is important that we recognise the efforts of those who have worked on this in the past to get us to this point. I suspect that we will see in the future the fruits of the work that Mr Tim Groser is doing as Minister of Trade—or maybe we will see no fruit, whatever the case may be. The point I am making is that often working towards signing these trade agreements takes some time. It takes some work on people relationships, because if we are not able to build trust, how can we trade?

From Labour’s perspective, we welcome this bill and the closer economic partnership, as it further develops our already close relationship with the people and Government of Hong Kong. It is important from our perspective that we build closer economic relationships with Asia, as that is a vital market for New Zealand’s future economic prosperity, and will be a major market in the future, as I have said. This closer economic partnership is another step in that direction.

I listened to the Green members, and they raised some concerns that I think are fair enough. Although free-trade agreements and closer economic partnerships come with undoubted benefits, we cannot ignore the fact that for some businesses and sectors, free-trade agreements and closer economic partnerships can cause harm. This closer economic partnership has been evaluated as having a low negative impact on New Zealand businesses, largely because Hong Kong specialises in services rather than cheap manufactured goods, which could undercut some of our local businesses. New Zealand manufacturers of footwear, textiles, etc. are most at risk from free-trade agreements. This closer economic partnership has given those sectors the longest tariff phase-out period in order to allow them time to adjust.

Labour rights and environmental sustainability are core New Zealand values, which should not be sacrificed for the sake of increased trade, so when we are undertaking negotiations they need to be high on the agenda. I understand that we are supporting this closer economic partnership because it enhances labour rights and environmental sustainability. The closer economic partnership contains an environment agreement, with shared objectives between New Zealand and Hong Kong aimed at improving the environment and enhancing the capacity and capability of each country’s Government agencies, research organisations, academic institutions, and businesses to address trade and environmental matters.

Finally, the national interest analysis states that the closer economic partnership is “not expected to have any negative effects on the environment in New Zealand that cannot be managed using existing policy frameworks. Its provisions may encourage improved productivity in the use of natural resources.” The concern that I raise initially really has to do with our customs portfolio. Our country has been working quite strongly to ensure that we detect illegal drugs crossing our borders, and I think there will be others who have some concern about that. When we enter into these relationships, I think it is to the benefit of our country that we develop them slowly and that we ensure that laws are in place to implement and enhance them, but I think we also need to be letting the rest of the world, particularly our partners, know that we have certain core values here that we respect.

TODD McCLAY (National—Rotorua) : It gives me pleasure to rise to speak on the Tariff (New Zealand-Hong Kong, China Closer Economic Partnership Agreement) Amendment Bill. Trade agreements are very much about building relationships, and I was thinking a moment ago that it is a good thing for our country that this is an economic partnership with Hong Kong and not England. I congratulate the New Zealand Māori on beating England tonight. The score was 35-28, which was a great victory.

Hon Nathan Guy: Were you there in Rotorua?

TODD McCLAY: I was in Rotorua last week, when they beat the Welsh, but, no, I was here in Parliament working hard on behalf of my constituents when they won this evening. It is a great victory for them. Therefore, it is a good thing that we are not debating an agreement with England, because that good relationship has been ruined for another week.

I will touch on a couple of points that are important, but first I will recognise what S’ua William Sio said earlier on the importance of China as a nation with a large number of consumers who are increasing their income. Mr Sio said that when he was younger, he thought that Bruce Lee was a cousin or a relation. I am reliably informed that Bruce Lee also thought that Mr Sio was a relation, although one who had done a little less exercise than he had. But I agree with everything Mr Sio said.

This agreement, as with the other trade agreements that have been brought before this House since we came into Government, is about boosting innovation and improving export access to world markets. It is one of the National Government’s six policy drivers for a step change in New Zealand’s economic performance. This agreement with Hong Kong is an important part of National’s focus on free trade and on improving access for our exporters to world markets, which is a priority included in the Prime Minister’s statement to Parliament in February of this year.

In my electorate of Rotorua a number of producers, primarily in the primary sector, will benefit from this agreement when it enters into force. There are some opportunities in forestry, but certainly there are opportunities in the production of kiwifruit, agricultural products, dairy products, sheep and beef, and so on. Currently, we have $823 million worth of trade a year between New Zealand and Hong Kong, and we can expect that amount of trade to increase when this agreement enters into force. It will increase to the betterment of our producers, which will be a very good thing.

The bill enhances our economic integration with the Asian region, and it follows from a great number of other free-trade agreements that have been put into place since we have come into Government: agreements with Thailand, Singapore, and China have come into force, there is an agreement with the ASEAN countries, and agreements with Malaysia and Brunei as well. That is very good for New Zealand producers, and I know that everybody but a few in this House support those fully.

Hon Maryan Street: All your own work. Come on—a little bit of graciousness across the House.

TODD McCLAY: I do recognise, as graciously as I can, that members opposite played a small part in this work, and we thank them for that.

I will also touch on a point made by Rahui Katene about the involvement that this agreement might have in the future with Chinese companies and others that will want to come and invest in New Zealand. The closer economic partnership does not provide Hong Kong investors with preferential access to the New Zealand investment screening regime. As with any other company or person in the world wanting to invest in New Zealand, very strict and stringent procedures are in place, and they will apply under this agreement as they do to others. I think it is important that we recognise that.

This bill is a very good piece of work. I look forward to its referral to the select committee tomorrow morning, and I look forward to supporting it further. Thank you.

Hon Dr JONATHAN COLEMAN (Minister of Immigration) on behalf of the Minister of Trade: I move, That the Foreign Affairs, Defence and Trade Committee consider the Tariff (New Zealand-Hong Kong, China Closer Economic Partnership Agreement) Amendment Bill, that the committee report finally to the House on or before 29 July 2010, and that the committee have authority to meet at any time while the House is sitting (except during oral questions), during any evening on a day on which there has been a sitting of the House, and on a Friday in a week in which there has been a sitting of the House, despite Standing Orders 187 and 190(1)(b) and (c).

• Motion agreed to.

Hon Dr JONATHAN COLEMAN (Minister of Immigration) on behalf of the Minister of Trade: I move, That the Tariff (Malaysia Free Trade Agreement) Amendment Bill be now read a second time.

Hon Darren Hughes: “I would like to thank the Foreign Affairs, Defence and Trade Committee.”

Hon Dr JONATHAN COLEMAN: The member has been listening! I thank the Foreign Affairs, Defence and Trade Committee for its consideration of the bill, and for reporting the bill back to the House. The committee’s recommendation is that the bill be passed with no amendments. As the committee noted in its report, the Malaysia - New Zealand Free Trade Agreement will serve to benefit New Zealand merchandise exporters that target Malaysia, as well as provide new opportunities for service providers, particularly in the areas of educational, environmental, and engineering services.

Malaysia is already our tenth-largest trading partner. Two-way trade between our countries is now approaching $2 billion, and the trajectories are all in the right direction. Over the last 4 years goods exports to Malaysia have grown by over 50 percent. This free-trade agreement therefore comes at just the right time to give our exporters a chance to consolidate their positions within a priority market.

On day one of this agreement entering into force, approximately 95 percent of New Zealand’s merchandise exports to Malaysia will immediately be duty-free. This is a terrific head start for our companies competing in Malaysia against firms from Europe, the United States, Latin America, and even Australia. And it will get better for New Zealand companies; by 2016, 99.5 percent of our exports will be duty-free, which will be 5 years earlier than the time secured under the free-trade agreement concluded by Australia and New Zealand with the 10 economies of the Association of South-east Asian Nations, or ASEAN. That free-trade agreement is already a high-quality and comprehensive free-trade agreement. It placed New Zealand and Australia ahead of the queue of ASEAN’s other free-trade agreement partners, including Japan, Korea, China, and India, let alone those who have yet to negotiate a free-trade agreement, like the European Union and the United States.

The elimination of tariffs is just one part of the story. The enhanced rules of origin negotiated in the Malaysia free-trade agreement will encourage Malaysian producers to make greater use of New Zealand products for imports and manufacturing. This will benefit a whole range of small and medium sized enterprises producing what are known as intermediate goods. Recent OECD research has shown that 56 percent of overall goods trade flows are in intermediate products. This is the way that modern trade is done. That is recognised in the rules of origin provisions in modern free-trade agreements, including the one we are considering today.

This free-trade agreement is not just about eliminating barriers to the export of New Zealand products. Trade in services is an increasingly important element of New Zealand’s trade profile, particularly in the case of Malaysia, where areas such as information and computer technology and engineering are expected to grow over time. Education in particular is an area of growth potential, with growth of over 70 percent in fee-paying Malaysian students studying in New Zealand between 2003 and 2008. New Zealand delivers high-quality education services, including training, literacy programmes for schoolchildren, and so on, across the Internet and in-country in Malaysia. This free-trade agreement ensures that this trade is now protected and secure from Government intervention, which might have wanted to limit or prevent that access.

Better still, and in addition to all these upfront benefits for New Zealand, this agreement has been future-proofed. Specifically, most favoured nation treatment in key sectors of commercial interest has been secured for New Zealand service suppliers. This means that if any future free-trade agreement partner with Malaysia is able to negotiate benefits that improve on what New Zealand has gained in a range of services, sectors, and investment, we will automatically get the same benefits. If we combine that with our first-mover advantage of having preferential access for our exporters immediately, members can see that this agreement is a very strong outcome for New Zealand business that sets us up well for the future in Malaysia.

As with previous free-trade agreements that New Zealand has entered into, the Malaysia free-trade agreement protects New Zealand’s most import-sensitive industries. New Zealand has left the elimination of existing tariff protection for its most import-sensitive industries to the end of the tariff phase-out, in 2016. That is exactly the same date at which Malaysia will eliminate its tariffs on New Zealand products.

The minority view in the Foreign Affairs, Defence and Trade Committee report questions the effects of the investment provisions of free-trade agreements on the New Zealand economy. Increasingly, New Zealand investors are looking to countries like Malaysia to enhance their global competitiveness. It is not surprising, therefore, that between 2003 and 2008 New Zealand’s total stock of investment in Malaysia increased by 77 percent. Our investors need to be sure that their investments will be satisfactorily protected. This free-trade agreement delivers that by offering additional and improved protections for New Zealand investors and their investments in Malaysia. In this way, the agreement protects a New Zealand company’s ability to transfer its profits, protect itself from expropriation, and be assured of fair and equitable treatment—all of which are supported by a robust, effective, and legally binding dispute settlement mechanism. For its part, New Zealand in respect of inwards investment from Malaysia has retained the flexibility to continue to apply the existing Overseas Investment Act and regulations, regardless of the origin of any prospective investor. In other words, the current investment screening regime in New Zealand continues to apply to prospective investors from Malaysia. This free-trade agreement has not changed the Overseas Investment Act in any way.

The Malaysia free-trade agreement is expected to have a positive effect on exports, gross domestic product, and employment in New Zealand, including in the manufacturing sector. The reality is that improving market access for New Zealand firms through a progressive trade agenda that includes free-trade agreements like this agreement ensures that we continue to stimulate economic growth, and helps to safeguard the jobs of the many thousands of New Zealanders who work in or support export-oriented industries.

The bill amends New Zealand’s domestic legislation so that the Malaysia free-trade agreement can be brought into force. The bill amends the Tariff Act 1988 in order to implement preferential tariff rates on imported goods from Malaysia, and to enable transitional safeguard measures to be applied in appropriate circumstances on such imports. The Government would like to see the bill enacted on 24 June 2010, so that New Zealand can be ready to bring the Malaysia free-trade agreement into force on 1 August 2010. This will ensure that New Zealand business can benefit as soon as possible from this new addition to our free-trade agreement stable. I commend this bill to the House.

Hon MARYAN STREET (Labour) : I rise to speak to the Tariff (Malaysia Free Trade Agreement) Amendment Bill. I have prepared a substantial speech about the detail of the agreement, but I will pick up a couple of comments made by previous speakers on the Tariff (New Zealand-Hong Kong, China Closer Economic Partnership Agreement) Amendment Bill. They are apposite to any free-trade agreement. In fact, the Green Party member Kennedy Graham made a point of referring to a template for free-trade agreements. He said that the language was the same, the structure was the same, and the underlying premises were the same, and, therefore, the Green Party had the same criticisms of each one of these bills. In fact, there is a Green Party minority report in the select committee report back to the House.

I will pick up on some good points Kennedy Graham made in respect of those matters. It may be to do with the lateness of the hour—I am not sure—but in departing from what I had prepared to say, I commend him for bringing those issues to the House. Similarly, I commend the Māori Party member who spoke, Rahui Katene, for reminding us of other issues that impact on our free-trade agreements.

Life is complex, and we try to pursue our way in the world, achieving the best we can for New Zealand’s interests, but not at the expense of others and not at the expense of any of our own. There are often issues that conflict and that people consider to be mutually exclusive propositions, like free trade and human rights, or free trade and indigenous industry. We in the Labour Party have promoted free trade for a long time, but not at all costs. The gradual movement over time to include, for example, labour and environment side clauses, as we see in the Malaysian free-trade agreement, are important, and they will improve over time.

I acknowledge the concerns that Kennedy Graham raised about the national interest analysis apropos of the New Zealand - Hong Kong, China Closer Economic Partnership Agreement, and I relate them to the Malaysia - New Zealand Free Trade Agreement. I think there is a point to be made about the need for an honest appraisal in the national interest analysis of any negatives to New Zealand. I for one would be keen to see more open processes around our trade negotiations so that there might be some robust and public consideration, even more robust and public than we have at the moment. That process surrounds this House. The free-trade agreement should be referred to the select committee because it needs to be ratified in law, and the public would then have a chance to speak on it and to contribute to the discussion about it. Yet usually only a very few people are interested and wish to participate. I wonder whether making that process broader would get more input, closer analysis, greater justification, and perhaps even more care about indigenous or New Zealand industries and the impact of free-trade agreements on them. That is all for the future, but it is something I think we need to take care of; I acknowledge the points that the Green Party made in that respect.

It still remains that this is a high-quality free-trade agreement. If one compares it with the ASEAN-Australia-New Zealand Free Trade Agreement, one sees very clearly that it moves further and faster than that agreement. For example, under the Malaysia - New Zealand Free Trade Agreement this year, at the point of implementation, 95.1 percent of tariffs on New Zealand exports will be eliminated. Under the ASEAN-Australia-New Zealand Free Trade Agreement that figure is 94.8, which is close but not quite as good. I could track the years of the Malaysian free-trade agreement, compare it with the ASEAN free-trade agreement, and demonstrate that it goes further faster so that by 2016, 99.5 percent of New Zealand exports to Malaysia will be tariff free. All tariffs will be eliminated. By that time only 98 percent of tariffs under the ASEAN free-trade agreement will have been eliminated. The remaining 0.5 percent under the Malaysian free-trade agreement is, in fact, wine and pork products, which have some religious and cultural prohibitions around them.

What do we export to Malaysia that will be so generously and helpfully affected? Well, 54 percent of what we export to Malaysia is dairy products. Another 10 percent is petroleum products, which is interesting because we import slightly more than that from Malaysia. In addition to that we export cereals, minerals, metals, wood, pulp, paper, furniture, meat, fruit, vegetables, and a few other things besides. How will each of these different sectors be affected? First, let us go to the immediate winner in this agreement. As soon as this legislation passes—and it coincides with the passing of the same legislation in Malaysia—the kiwifruit industry will experience a huge gain. Currently there is a 15 percent tariff on kiwifruit imports. Despite that tariff, I have to say, New Zealand exports of kiwifruit to Malaysia have grown by 123 percent in the last couple of years. But at the moment that this agreement comes into force, that 15 percent tariff drops to zero, and that means that a lot more earnings are retained in New Zealand. In 2010 other key export products are liberalised in addition to kiwifruit. These are butter, cheese, milk-powder, honey, wool, apples, and some manufactured products.

Let us look at some of these products. In respect of meat, wool, dairy, fish, and forestry we find that the Malaysian free-trade agreement confirms the outcome that is also arrived at in the ASEAN free-trade agreement, which is the interesting one of binding in existing duty-free access for New Zealand meat, wool, dairy, fish, and forestry product exports. This particular provision means that Malaysia cannot legally change this duty-free level of access for New Zealand exporters, although it can change it for others. That simply means that our exporters have a greater degree of certainty around their exports.

Coming from Nelson, where all those primary products are in abundance—whether we are talking about kiwifruit, meat, dairy products, fish, or forestry—I know that this free-trade agreement will have a direct and immediate beneficial impact on those New Zealand industries. I commend the bill to the House.

JOHN HAYES (National—Wairarapa) : I am pleased to have the opportunity to speak in the second reading debate on the Tariff (Malaysia Free Trade Agreement) Amendment Bill. I will begin by thanking colleagues on the Foreign Affairs, Defence and Trade Committee for the good work they do in a very collegial way. I refer particularly to Maryan Street, Pete Hodgson, and Keith Locke, and to my National colleagues, some of whom are in the House tonight. I also congratulate our Ministers Phil Goff and Tim Groser on leading the work that has been done, and while I am in a thank-you mode I also thank Vangelis Vitalis from the Ministry of Foreign Affairs and Trade, who was the lead negotiator and who did an excellent job.

When I listened to the last speaker, Maryan Street, and my Green colleague speaking on the previous China free-trade agreement, I think the one thing that really demonstrates above all else that these agreements are worthwhile is the fact that in the year ended April 2010—that is, 2 or 3 months ago—the value of our export trade with China has increased by $860 million over that 12-month period. That is about the value of our total exports to Indonesia. So the free-trade agreement with China gave us, effectively, another market the size of Indonesia in 12 months.

We will not get that with this Malaysian agreement, but that is because we are operating on a different scale. Malaysia has a slightly bigger land area than we do. We have similarities, as we were both British colonies. Malaysia has a population of about 28 million, whereas our population, of about 4.2 million, is probably smaller than that of greater Kuala Lumpur. Eighty-seven percent of the people in New Zealand live in urban communities, and the drift from rural areas to urban areas is growing at a rate of about 1 percent a year. In Malaysia about 70 percent of people live in towns and that rate of drift is about 3 percent a year. Important for the business community is the fact that both of us have legal systems based on English common law. There is quite a big difference in GDP per capita. New Zealand is sitting on around $28,000 per capita, growing at around 2 percent; Malaysia is sitting on $15,400 per capita, growing at about 4.6 percent.

There is another very interesting statistic, which is in relation to Internet users. Of Malaysia’s population of 26 million people, 17 million are using the Internet. We have a rather smaller proportion of our population using the Internet—3 million people are using it. So the Malaysians are ranked for Internet usage at 22nd in the world; we are at 58th.

I think that this legislation puts both economies in much more balance, but still we have one-sixth of Malaysia’s population. When we considered this bill at the Foreign Affairs, Defence and Trade Committee we came to the conclusion collectively that one of the reasons for signing this agreement was that all of us in this Parliament wanted to see a boosting of innovation and improved export access to world markets. It is those two things that will give us a step change in our own economic performance, and everybody will benefit from that. This agreement with Malaysia is a very important part of National’s focus on free trade and improvement in access for our exporters to world markets. It was a priority included in the Prime Minister’s statement to Parliament in February this year. Only by lifting economic performance can we create jobs, boost incomes, improve living standards, and provide world-class public services that our New Zealand families need.

We heard about our trade figures from the previous speaker, and I reiterate that over the past 4 years the quantity of New Zealand goods exported to Malaysia has grown by more than 50 percent, making Malaysia New Zealand’s tenth-largest trading partner. I think that those things will bode well for the future, but the real driver will hit the pockets of kiwifruit farmers. At the moment we are paying a 15 percent tariff on every kiwifruit exported into Malaysia; in 2012 that trade will become duty-free. Based on the most recent trade figures, our kiwifruit exports to Malaysia have grown by 173 percent since 2007. As my colleague Maryan Street said, meat, wool, dairy—excluding liquid milk—fish, and forestry products are bound in, so Malaysia cannot reapply tariffs on New Zealand’s agricultural exports; that is very important to my electorate. Liquid milk has a significant improvement on in-quota duties, which will be eliminated, and in-quota volumes, which will increase by up to 5 percent a year.

The Malaysian free-trade agreement includes an agreement to establish mechanisms that allow for the recognition of the equivalency of each other’s qualifications. That will improve New Zealand’s professional service suppliers’ ability to deliver services in Malaysia—that is, people like architects and insurance companies. New Zealand provides access duty-free for about 72 percent of imports from Malaysia, and under the free-trade agreement this will increase to 90.8 percent this year, graduating to 100 percent by 2016.

Only one area of the agreement, I felt, could have been more rigorously negotiated, and that was the area of company ownership. Any Malaysian company is allowed to buy 100 percent of a New Zealand company—and Opus construction would be a very good example of that—but the Malaysians have given us the capacity to buy only 70 percent of a Malaysian company. I think that as we look into the future and at other free-trade agreements, we could think about a greater principle of reciprocity, and that was something acknowledged by the committee.

With those few words, I tell members that it is very pleasing to bring this legislation back to the House without any amendment; I commend it to the House for passing. Thank you.

STUART NASH (Labour) : Am I wrong? Have we just heard from the chair of the Foreign Affairs, Defence and Trade Committee? I know it is late and he is probably tired. It is probably past his bedtime, but, goodness me, that was the most lacklustre speech I have heard in this House for a long, long time. Jonathan Coleman is very lucky, because we thought his speech was bad, but then John Hayes stood up and Jonathan Coleman’s speech looked fantastic. His speech was a piece of oratorical art, compared with that member. It was outstanding. John Hayes stood there; it was a long, low, cold, boring, quiet monologue about nothing. We try to listen to some of these speeches because some of these things are quite interesting. They are in the national interest. The Tariff (Malaysia Free Trade Agreement) Amendment Bill is good for New Zealand; it is great for New Zealand. It is not like some of the other bills. They are important, but this is good for New Zealand. It is good for trade and it is good for the economy. The chair of the select committee—I think he was standing; it was hard to tell—spoke in a low, quiet monotone. It was painful. Thank God that is over! Thank God we are almost at the end of the night. It was like pulling nails.

I do stand in support of the Tariff (Malaysia Free Trade Agreement) Amendment Bill in its second reading. This is the fourth bill that I have spoken on today that is Labour legislation. This is something that Phil Goff did. This is Jim Sutton’s work. This is, in fact, the third bill in a row that Labour has done all the work for. It is unbelievable. We are in urgency 18 months later on Labour bills. Where is the innovation? National members have the nerve to say that Labour did nothing in Government, yet we are on the third bill in a row that was a Labour bill.

This bill amends the Tariff Act 1988—

John Hayes: He’s worse than his Uncle Walter.

STUART NASH: The member has come to life! It is about time. Why did he not do that 5 minutes ago? As I was saying, this bill amends the Tariff Act 1988 in order to implement the Malaysia - New Zealand Free Trade Agreement signed in Kuala Lumpur last October. The bill’s amendment will allow for transitional safeguard measures to be applied in appropriate circumstances to imports from Malaysia. [Interruption] The member has no right to criticise anyone’s speech, yet he is sitting there doing so. It is unbelievable. Someone should send him the YouTube clip or wherever the debate is shown and show him how bad his speech was. I think he needs a few lessons.

Malaysia has a large and growing population of more than 28 million people and it presents ample opportunities for additional trade, investment, and other economic linkages. We all know that if New Zealand is to develop sustainable economic growth, then it must follow a policy of export-led growth like that promoted with this agreement. It must work to foster an economic environment whereby key competencies around export strategy are encouraged in any way, shape, or form. Mr English has stated that it is his Government’s goal to drive an export-led recovery, and I quote: “We’re looking for how to make sure we get a sustainable, export-led recovery.” In my view, three things are holding back New Zealand companies from optimising their export growth in countries we have free-trade agreements with like Malaysia, which this bill fosters. The Government’s actions are increasingly suboptimising any chance New Zealand has of increasing its economic growth through further development of the export sector into countries like Malaysia, which this free-trade agreement is about. There are three things holding back New Zealand: one, a lack of affordable capital; two, a lack of true export competency; and, three, an outdated monetary policy.

Let me expand on these a little more. The first is a lack of affordable capital.

John Hayes: No, no, don’t bother.

STUART NASH: Mr Hayes may learn something. He may have been in foreign affairs for a long time but he did absolutely nothing. It took a Labour Government to negotiate all the free-trade agreements that have been passed since National has been in office. Every single free-trade agreement that has been passed under the National Government is as a result of the work that Phil Goff and Jim Sutton did. How dare the member sit there like a big oaf, going on about how Labour does nothing. They were all done by Labour, and Mr Hayes knows that.

I turn to the lack of affordable capital. Only 10 percent of all business loans are unsecured in this country. That means that 90 percent of all loans are secured against the assets of the owner of the company, often being the family home. This attitude and access to capital will never allow the country to address the issue of the fact that we overvalue capital and undervalue labour in this country. Basically that means that we prefer to employ cheap labour rather than spend money on capital in order to improve productivity. My question is how New Zealand companies wanting to expand and to take advantage of the Malaysia - New Zealand Free Trade Agreement can access affordable capital. Investment in capital does not lead to fewer jobs but, rather, to greater efficiencies, more jobs as companies grow, and, more important, a greater propensity to scale up for export growth into countries like Malaysia, which is what we are talking about at the moment. That is fundamental if the vast majority of companies are to take advantage of this Malaysia - New Zealand Free Trade Agreement.

The second thing the Government has suggested it will do is sell Kiwibank. This is the Government-owned bank set up by the last Labour-led Government that by its own admission in the banking inquiry has saved New Zealanders about $1 billion in interest—about $1 billion due to competition—and this Government wants to sell it. Selling Kiwibank will be a huge disservice to the people of New Zealand and to companies in the export business hoping to establish a beachhead in Kuala Lumpur.

John Hayes: I raise a point of order, Mr Speaker. Selling Kiwibank has got nothing to do with the Malaysia - New Zealand Free Trade Agreement.

Mr DEPUTY SPEAKER: Thank you for that. I did indicate to the member to bring it in. The member John Hayes is exactly right, so come back to the subject.

STUART NASH: Thank you, Mr Deputy Speaker. I am talking about the free-trade agreement between New Zealand and Malaysia. I think it is a very important agreement. I think it has the opportunity to really grow our economy. But I see that, in terms of optimising this agreement and allowing New Zealand companies to grow, there are three barriers to real market optimisation. They really need to be addressed or this free-trade agreement will really not benefit the vast majority of New Zealand companies that could be in line to do so well out of this agreement.

As I was saying, 97 percent of New Zealand businesses are classed as small to medium enterprises. That means they have 19 staff members or fewer. Very few of these companies can afford to employ full-time international marketing or marketing development managers, let alone open an office in Malaysia, a country with a different language, legal system, and business culture. So we need an agency that is our eyes and ears in the global markets. I ask members to tell me whether this Government is taking any action to help New Zealand businesses make the most of this opportunity in Malaysia. No, it is not. However, let me tell members that Labour understands the value of assisting exporters to get into markets like Malaysia and optimise their ability to take advantage of this free-trade agreement. In its last term, the Labour Government increased New Zealand Trade and Enterprise’s funding for market development assistance from $6 million to $54 million. Now there is only just under $10 million available in the International Growth Fund. About 6 months ago I asked the retiring chief executive officer of New Zealand Trade and Enterprise whether his organisation was New Zealand’s international marketing and market development organisation. His response was: “If only.”

The third point holding back New Zealand’s economic and export market development into Malaysia is our current monetary policy. Can anyone in this House tell me how a company can effectively forecast and business-plan when it does not know whether the exchange rate will be at 0.55, 0.65, or 0.75?

John Hayes: Have you heard of forward cover?

STUART NASH: They cannot, and if Mr Hayes thinks they can, he should take his head out of the sand. No wonder we had such poor performance when that man was in the Ministry of Foreign Affairs and Trade. Goodness me, that is a bloody disgrace! The Labour Party has made a commitment to business to review current monetary policy legislation because we believe that it is not beneficial to New Zealand’s economic growth, it will not allow companies to take advantage of this free-trade agreement, and it is not relevant to New Zealand’s economic future.

The time is now right for change. Business understands that. Labour understands it. The only people in this country who do not understand it are the members on that side of the House. I ask the House who really is the true party of business. Who is the true party of trade? As I mentioned, the work for every single free-trade agreement that has been passed while that party has been in Government was done by Jim Sutton and the Hon Phil Goff, the next Prime Minister of New Zealand and the only future Prime Minister who knows anything about international relations. He has been at the coalface negotiating contracts on behalf of this country.

I support this bill for a variety of reasons, but I ask members to please not confuse my support for free-trade agreements with support for that Government, which lacks any discernable policy that would allow this country to optimise its economic advantage. I commend this bill to the House.

RAHUI KATENE (Māori Party—Te Tai Tonga) : E te rangatū pou mua o te reo o te Whare, tēnā koe. In November 2006 a group of Malaysian non-governmental organisations came across to Aotearoa with the explicit purpose of being able “to learn how the Maori people of New Zealand have brought their culture back from the brink of extinction”. The delegation represented several ethnic minority groups, including four tribal members from the United Saba Bajau Organisation—I apologise if I have the pronunciation wrong. The Bajau people are one of the most well-known populations in what we might describe as the endangered ethnic groups of Malaysia. The Bajau are traditionally seafaring people, and possess an incredible range of skills in the construction of fishing canoes and vehicles. They came here to learn together, and to consolidate and develop a partnership between indigenous peoples.

I raise this experience today because it would appear to me that international exchanges, such as the one with the Bajau community, might be the type of relationship we might expect to see as a benefit of a relationship with Malaysia. The Tariff (Malaysia Free Trade Agreement) Amendment Bill amends the Tariff Act 1998 to implement the Malaysia - New Zealand Free Trade Agreement, which was agreed to in Kuala Lumpur on 26 October 2009. It enables the application of preferential tariff rates for imports originating from Malaysia. The bill also amends the Customs and Excise Regulations 1996 to give effect to rules of origin applicable to imports originating from Malaysia. Finally, the amendments will enable transitional safeguard measures to be applied in appropriate circumstances to imports originating from Malaysia.

I will place this free-trade agreement in some context for the benefit of the House. The Māori Party has previously voted against all free-trade agreements. Our rationale for doing so is that we believe the economic benefits of international trade agreements need to be balanced with consideration of our own local, regional, and national social progress and environmental enhancement. Our key position has been that we support fair-trade agreements as opposed to free-trade agreements. We want to use the opportunity of any trade relationships to advocate also for the support and implementation of indigenous international agreements, such as the Declaration on the Rights of Indigenous Peoples, International Labour Organization Convention 169, the Mātaatua declaration, the declarations of the United League of Indigenous Nations, and suchlike. We also seek to establish trade relationships with other First Nations peoples.

We have been approached by Māori businesses in the past that have shared with us their genuine enthusiasm for any opportunity to take advantage of international markets. I think this is where the rubber hits the road for a party like ours, because although some people have contacted us with their deeply held concerns about the impact of free-trade agreements, others also see great potential in arrangements such as this. We speak for those innovative Māori businesses who want to seek new international challenges and develop a position as a significant player in our export growth, but we speak also about our fundamental right to determine our own sovereignty, rather than to surrender it to the march of overseas investors. We stand for the incredible diversity that characterises Māori economic activity, from Māori individuals in the labour market to self-employed people running their own Māori businesses, to tribal and pan-tribal Māori commercial entities.

But we are concerned also about the loss of jobs. We also acknowledge that one of the consequences of the global market is that businesses and workers, including Māori—

Mr DEPUTY SPEAKER: I am sorry to interrupt the honourable member, but the time has come for me to leave the Chair.

• Debate interrupted.