RAHUI KATENE (Māori Party—Te Tai Tonga) : The Justice and Electoral Committee had the benefit of receiving guidance from Michael Rowe of the criminology department at Victoria University. Mr Rowe was able to share his experience of the British DNA database, a system that was meant to include samples of only convicted criminals but that was slowly ratcheted up to include samples of all those who had been arrested. He also noted that courts in Britain have agreed that the keeping of DNA records in databases breaches human rights legislation. This is information that the Māori Party simply could not ignore. Research from other countries, whether it relates to efficacy or matters of accuracy, indicates that such records are not a hugely useful tool.

I will go back to the topic of ethnic differences in the database. Our concern is that there is the risk of unethical use of the DNA database to conduct research and to make population statements about certain groups having a criminal gene. This was a particular concern of Dr Papaarangi Reid, the tumuaki at the faculty of health and medical sciences, Auckland University. It was her view that there was much to cause us alarm in the setting of appropriate parameters on the use of a DNA police database, which would make statements about whole populations and not just individual offenders. As we know too well, recent genetic inquiry has sought to discover genetic causes of behaviour—do members remember the warrior gene—so there is a risk that such a database could be accessed for research into a criminal gene. Such research, even though unethical, has been able to be conducted in the absence of proper ethical controls.

Dr Reid had a number of concerns that the Māori Party has taken seriously. It was her view that the positive benefits of convicting serious offenders sit alongside a host of issues of great concern. The general question of ethics and human rights suggests that DNA testing will affect Māori disproportionately, given the existing police bias and the over-scrutiny of Māori. It will create a level of truth, summed up best as “Crime will be found where it is most looked for.” Another concern is that DNA testing has implications for whānau as well as individuals, because first and second-degree relatives can be identified through genetic testing, thereby allowing the authorities to build up a family history. DNA testing would enable the police to create a DNA profile of the wider Māori population.

Finally, trust issues are involved when the police hold such information, and when we ask whether the rules about who is tested and how the information is used will change over time. As we saw with the Taser gun trial, the police function independently from parliamentary or ministerial scrutiny on operational matters, so we have considerable concern whenever discretion is to be applied. We are, as I said earlier, absolutely committed to the protection of the sacred genetic make-up inherent in whakapapa, and, as such, we cannot support this bill. There are simply other approaches that we should use, rather than tamper with DNA.

KANWALJIT SINGH BAKSHI (National) : I am pleased to take a call on the third reading of the Criminal Investigations (Bodily Samples) Amendment Bill. The first priority of this Government has been to improve law and order and public safety. The bill contributes to that goal by giving the police tools to resolve more crimes and catch more offenders. It accompanies other important law enforcement initiatives, such as the Gangs and Organised Crime Bill, the Search and Surveillance Bill, the recently passed Criminal Proceeds (Recovery) Act 2009, and many more. This bill is one of the many steps this Government has swiftly taken, following the election, to fulfil its promise to the public of New Zealand.

The Justice and Electoral Committee made a number of useful amendments to the bill, particularly around improving the process of taking DNA samples from young people. One of the changes is to limit the range of offences for which a sample can be taken from a young person to more serious relevant offences specified in the bill. That will ensure that only the most serious young offenders are subject to this law. In addition, the criteria for taking DNA samples from a young person have been significantly simplified. The Justice and Electoral Committee concluded that the criteria for taking samples from young people repeated the protection that already exists in the Children, Young Persons, and Their Families Act, specifically in section 208. As such, the bill has been amended to provide that section 208 of the Act will apply and will provide adequate protection for young people in custody.

DNA carries a unique genetic code for an individual. Current technology allows bodily samples like blood, saliva, and semen to be processed and reassembled in a form of barcode that can be matched with the other samples taken from a crime scene. This procedure is an important investigative tool, resulting in virtually conclusive proof of identity. It may be used to pinpoint an offender, as well as to clear an innocent suspect.

The bill will allow the police to collect DNA from a person whom they intend to charge with an offence, and, prior to that person’s conviction or acquittal, the police will be able to match that person’s DNA against the profile from the scene of the crime in unresolved cases. Offenders who go on to commit serious offences in the future will be identified a lot earlier, because their DNA will have been kept after they committed an offence in the very, very early stages of their criminal offending.

Over this year the Government has proudly brought before the Parliament a number of measures that impact squarely on the victims for the better. This legislation is one of them. It will save more victims than probably any other legislation that we have seen before this Parliament in a very long time. I commend this bill to the House.

METIRIA TUREI (Co-Leader—Green) : I shall take a short call on the Criminal Investigations (Bodily Samples) Amendment Bill. It is opposed by the Green Party. It has been opposed by the Green Party the whole way. The fact that this bill is contrary to the New Zealand Bill of Rights Act, and the Attorney-General’s report states that it has significant human rights abuses, is of extremely serious concern to the Greens and should be to Parliament as a whole. The forcible taking of DNA samples where the police only intend to charge a person—the person has not been convicted of any offence—is a gross assault on that person. Under any other circumstances but for it being authorised in law, that would constitute an assault against that person. The Green Party does not believe that the law should be authorising assaults against a person simply because the police say they intend to charge that person with a crime, where there is no evidence to suggest that that person will be convicted of that crime.

I would like to reiterate the point, or support the points, made by Charles Chauvel about the serious concern that there will be no judicial oversight of the forcible taking of these bodily samples from citizens of this country. He set out a very clear description of the importance of judicial oversight in this matter, the fact that the law provides for that already, and that there does not seem to be any reason why that should change; it is obviously working currently. It does raise a concern for me, too, as to why Labour is supporting this legislation, despite the very clear concerns by Labour, and by Labour members, for the breach of human rights, the lack of judicial oversight, and, in regard to young people, and to Māori, and to others of other ethnic minorities, the risk of abuse by the police against those communities. I would urge Labour members to rescind their view and to oppose this legislation for all of the good reasons that Labour itself has put out in the debate over the last day or so.

Another concern of mine is around systemic bias, racism, that exists within the legal system. At least two good studies, one produced by the Department of Corrections and the other by the Christchurch medical school, I think in 2003, clearly showed that the legal system contains bias against Māori and that that bias leads to an overrepresentation of Māori in various parts of the legal system. The Department of Corrections study looked at a number of factors. Despite all the other social indicators, it concluded that there is a degree of overrepresentation related solely to the ethnicity of Māori at key points in the legal system. Although at each of those key points the overrepresentation might be small, none the less the cumulative effect of that bias is exacerbated over time.

One of those areas is arrests. This was proven by the subsequent Christchurch study, which looked at cannabis arrests and convictions. It found that despite all other risk factors such as a person’s being known to the police, Māori men are still more likely than anyone else to be stopped, arrested, and convicted of cannabis offences. That is despite all other risk factors, including frequency of use, for example. It shows that the police are more likely to stop Māori men. It proves that. Now, with this bill, there will be no need for a conviction before a DNA sample is taken. The police have been trying to do some good work on the issue of systemic bias and to deal with it internally, but they have not fixed it. Systemic bias within the police still occurs in various parts of the legal system. With this bill, the police are able to take a DNA sample based simply on an intention to charge. Māori will be proportionally more likely to suffer from that forcible assault than others in the community.

This legislation is a form of enactment of systemic racism against Māori communities. Cam Calder can sit there and wave his hands about and think that that is perfectly fine, but what he cannot do is find the evidence to the contrary, because the evidence proves that such systemic racism and bias is in the system. It may be small, but for the individuals and whānau who suffer from it, the effects are considerable. It cannot be denied by anyone in this House that those families suffer as a result.

The changes in this bill also undermine the protections of young people, in particular. I am especially disturbed to see that the police will be able to nominate a person to come and support a young person from whom a bodily sample is to be forcibly taken. It should not be for the police to decide who a support person for a young person in that circumstance should be. It is for the young person and for his or her whānau to decide, yet the police will be given the power to make that decision in this bill.

I also highlight the other changes in the process around law enforcement that exacerbate the concerns I have about this bill. One is the concept of mobile justice units, which was proposed in September of this year, I think. Police will be able to not only arrest and charge people but also convict people on the street from the back of their cop car, and they will be able to take various pieces of evidence from people. Presumably now they will also be able to take bodily samples from people as a means of managing what is called mobile justice. This gives the police an extraordinary power. Not only do the police have the power to stop people and to arrest and charge them—and it is reasonable that enforcement agencies are able to do that kind of work—but also the police will now have a judicial role, as they will be able to decide whether to convict people and they will be able to fine them or otherwise punish them for that crime. This bill continues to increase the powers of the police by enabling them to have a mobile justice unit in the back of cop cars, and now the police can forcibly assault people and take bodily samples while only intending to charge them. The power of the police in these circumstances is enormous. It is incredible.

Last night I heard some National members going on about extreme cases, and that is fine. But we are talking here about perfectly ordinary citizens who have not committed a crime, who find themselves in a situation where the police might, for some reason or another, want to talk with them because of a concern around a crime, forcibly assault them, take bodily samples from them, and never charge them. Perfectly ordinary New Zealanders who are going about their lawful business, and who might just have been in the wrong place at the wrong time, will find themselves being assaulted by the police. That is the consequence of this legislation. There is no doubt that the taking of bodily samples, DNA, from those who have been charged—for example, where there is real concern about the possibility of their being involved in other crimes—might be the way to resolve some of those issues. There is an argument that can be made there, but not when the police are simply allowed, by this legislation, to roam around the country, finding people with whom perhaps they have a problem, or perhaps finding ordinary law-abiding citizens who have never been in trouble but have found themselves in the wrong place at the wrong time, and who are forcibly assaulted by the cops, who have no intention of charging them but who can use the measures in this bill as a way of getting through it.

Many of our police do a fine job and are working to improve the culture of the police, but it is not improved yet; it is not fixed yet. Until it is, giving the police these kinds of powers is an abuse of their power, and it is an abuse of citizens. It puts the majority of citizens at risk of the abuse of this power. This bill provides no protection for those people. It is clearly a breach of human rights, and enacts systemic racism into our system. Thank you.

KELVIN DAVIS (Labour) : Tēnā koe, Mr Speaker. Tēnā koutou katoa i tēnei rangi paki. I join with my Labour colleagues in supporting the Criminal Investigations (Bodily Samples) Amendment Bill at its third reading. I support it because hard-working New Zealanders need protection from those in our community who wish them harm, and, in particular, I speak for our women and children who need protection from those who have no respect for others. I want to play my part in making New Zealand a safer place, where those who wish harm on our women and children are identified and apprehended as quickly as possible, so that the harm those people cause is minimised.

A number of very salient points were made by colleagues last night, and I will touch on a few of them. Firstly, as was said last night, this bill creates great power. But with great power there is also great responsibility, and it is our duty to hard-working New Zealanders that we do not create injustices as we attempt to eliminate other injustices. When we hear the Attorney-General himself report that this legislation has inconsistencies with the New Zealand Bill of Rights Act, then we need to tread carefully. The Hon Chris Finlayson said that the DNA plan appears to be inconsistent with the New Zealand Bill of Rights Act, because it would give police the power to take DNA from those whom they intend to charge with an imprisonable offence without the safeguard of judicial or other independent approval. The Hon Chris Finlayson said that such safeguards were required in jurisdictions that use the comparable DNA scheme, including New South Wales, Victoria, Canada, the United States, Germany, Japan, and the Netherlands. He said that he could not see any special circumstances in New Zealand to justify not having statutory safeguards.

Charles Chauvel last night described in some detail the circuitous route that may see this legislation challenged, and New Zealand being judged to be acting contrary to the New Zealand Bill of Rights Act. So we may find ourselves here again, ironing out those inconsistencies in months to come. Charles Chauvel also proposed a Supplementary Order Paper that would have avoided this, but unfortunately it was voted down.

As my colleague Moana Mackey described in the second reading, it is incredibly important that we ensure that the process of taking a sample and putting it through a laboratory can be tested in court. People who are facing a lifetime in prison for crimes they say they did not commit must be able to challenge not just the results but the process of storage and the testing of samples. There must be effective procedures that guarantee against the contamination of samples. It is hugely important to ensure the integrity of samples, and of their transmission, storage, testing, reportage, and preservation, and that this can stand the scrutiny of independent experts. We have created the situation whereby the police can arrest and “intend to charge” someone, and take a DNA sample from a person. There are questions around what happens to DNA samples that are taken and eventually no charges are laid against the person, or when charges are laid but the person is not convicted—in other words, when the person is innocent. That raises questions about the destruction of DNA samples and profiles. How can people who have had samples taken be really sure that in the event of their being totally exonerated, all traces of their DNA samples and profiles will be destroyed? I guess they have to take the system at its word.

I was involved in a very small way in a case where an autopsy was performed on a baby’s body, and some months after the funeral very small samples of tissue were returned to the family. The family members, who believed that they had buried all of the baby at once were, understandably, very upset. It illustrates the fact that at times the system does let people down. I note the concerns that the Māori Party and the Green Party have with institutional racism. In the instance of this baby, there was no intention to let the family down, but the story illustrates how issues may arise and cause a lot of angst and grief when people have put trust in the system. I also ask: once one’s information is on the computer, how can it ever be totally deleted? We just have to put our faith in the system but, as I have said, at times the system fails.

As most people have come to accept, DNA has become the 21st century equivalent of taking fingerprints. Others disagree, and I note that the Green Party is concerned about the intrusion on people’s bodies. As a Māori, I know there is a whole cultural side to the sanctity of parts of a person’s body, although I acknowledge that the persons from whom these bodily samples are taken, as a generalisation, have probably failed to respect the sanctity of another person’s body. So I have little sympathy for those people; it is the person who has had a sample taken and is either not charged in the end or exonerated for whom I have empathy.

I have described the way in which Māori, traditionally, have jealously guarded personal possessions—not just body parts like hair and fingernails but other personal items that come into contact with a person’s body, such as clothes and hairbrushes, etc. This is because of the belief that if we physically take a part of a person, then we also capture a part of the person’s wairua, and we can then use that to cause misfortune to the person. We call it mākutu. In fact, the ultimate insult in days gone by was to consume one’s enemy after battle. We can say that Māori collected their enemy’s DNA by eating it; I have been told that the hands and feet were particularly juicy.

In no way do I want to be seen to be creating special treatment for Māori offenders. If someone has done the crime, then, as my colleague Stuart Nash said last night, they need to take responsibility for what they have done. The Labour Party believes that we all need to take personal responsibility for our actions. If we have stuffed up, there will be consequences. This goes for all New Zealanders. We just need to be cognisant of the fact that even if people are to be charged, I presume they are still innocent until proven guilty. Therefore, there needs to be a large measure of respect and sensitivity around the collection of DNA samples.

I understand that the police have developed procedures to deal with cultural issues, but that in the past when there was a higher threshold for collecting samples, the police were dealing with higher-level criminals. Because the threshold has dropped, the police may be dealing with less seasoned suspects who are unfamiliar with the system and who are not so sure about what has been asked of them. I would hate to see a relatively minor procedure escalate into something bigger, which could mean that the alleged offender was charged with other offences, such as assaulting a police officer, especially if that person was innocent of the initial offence.

I note that when taking a sample, a constable has to hand to the person a written notice containing the particulars specified, as well as inform the person, “in a manner and in a language that the person is likely to understand”, what the triggering offence is and the effect of certain sections in the Act—that the sample will be analysed, and that the DNA profile derived from the sample cannot be used as evidence in criminal proceedings, etc. On the face of it, all this seems pretty straightforward: a written explanation in plain language, and a plain language verbal explanation as to what is going to happen. This all seems well and good until we factor in the human elements. As I said last night, as a teacher I know that just because a clear explanation is given, and just because people are nodding their heads and saying yes, it does not necessarily mean they understand what is going on. That is a mistaken belief.

Labour supports this bill, and we note that it complements work the previous Labour Government did by passing the Criminal Investigations (Bodily Samples) Act. That Act significantly increased the scope for DNA testing of suspects—for example, burglary suspects could be compelled to provide a DNA sample. It provided that DNA samples could be obtained by compulsion from prison inmates convicted of serious offences before the 1995 Criminal Investigations (Blood Samples) Act, and that police no longer needed a court order to obtain a sample from a convicted person. It also brought in the use of mouth swabs, which are cheaper, less invasive, and just as accurate as blood samples, and other provisions.

In summary, I hope this legislation succeeds in making Kiwis, and in particular our women and children, safer. I hope there is sensitivity towards the cultural side of collecting DNA samples, and that we will not be sitting here again in a few months, ironing out the bill’s inconsistencies with the New Zealand Bill of Rights Act. Thank you.

DAVID GARRETT (ACT) : I rise on behalf of the ACT Party to support the Criminal Investigations (Bodily Samples) Amendment Bill, but with considerable reservations. I am glad to see the Green Party co-leader is sitting down, because I think I will probably cause her some shock later in my speech.

The ACT Party, as everyone knows, proclaims itself proudly to be the party of freedom. I notice Kelvin Davis quoted one of our founding principles, that one must take the consequences of one’s actions. That is typical of the thoughtful speeches made by that member that I have heard in the short time I have been in Parliament. There are divisions in our party because of our founding doctrine of freedom—freedom of the individual. Others in our party say that we should take a DNA sample from everyone. Everyone who is a decent citizen should volunteer and if they do not, a sample should just be taken. No one who is not criminally minded has anything to fear. That is one argument, and it has much to commend it. Others in our party say this is yet another unwarranted intrusion by the State, especially when we are talking about persons who have not even been charged, much less convicted. That causes me concern, personally, and it causes concern to many of our members.

I am personally in that uncomfortable place of straddling the fence on this one, but we cannot do that in this House. We have to make a call, and collectively ACT has made a call to support the bill. The Green Party speaker talked about systemic racism in the police. I personally do not believe that is the case. However, it is undoubtedly true, sadly, that the offence that the Americans call “driving while black”, which here is “driving while brown”, is indeed a reason, in the absence of anything else, for the police to pull Māori people over. Again, some will say that that is justified because Māori are overrepresented in the criminal population. That is simply a fact, whatever the reason for it. But to say that our police are completely colour-blind would be to deny reality.

The other day I was reviewing the case in Whakatāne where four policemen, over an extended period, pepper sprayed a Māori man who was helpless in a cell. They were charged and acquitted by a jury, which I found astounding having looked at the video tapes of what occurred. So to say that the police are entirely free of racist attitudes would be wrong, and I will not stand here and say that.

This is not an easy speech to make, because it is a very difficult question. As Kelvin Davis has touched on, I too share concerns about samples being taken where someone is intended to be charged, but no charge ever follows. I have concerns, and have had concerns. I am old enough, as probably now only a minority of members are, to remember the Arthur Alan Thomas case. I have read the 1981 royal commission report on the Thomas case, and it is a shocking read. I am prepared to bet that nobody else in this House has read it, but I can tell members that from that day on, blind trust in the police was misplaced. So I share Kelvin Davis’ concern, and I share Metiria Turei’s concern, in that regard.

But the argument is finely balanced. We have become a much more violent society than we once were; there is no doubt of that. To anyone who tends to argue otherwise, whether he or she wants to split hairs about domestic violence, or whatever, I say that that is simply a fact. At this point I will depart from the Greens, who use the usual hyperbole when talking about anything to do with law and order, on the issue of grievous assaults when taking samples. Well, I have just assaulted my colleague Rahui Katene when I touched her. I remember studying torts 20 years ago. I got a D in the mid-sessional exam but got an A in the final exam because I swotted. I can remember the exact phrase “Even the slightest touching is an assault”. So I have just assaulted Rahui Katene—although I am cheating, because she gave me her consent first. To say that taking a sample is a grievous assault is silly; it is just silly. The worst that could possibly happen to people who refuse to give a sample would be to have their head held and a swab stuck in their mouth. That cannot be called a grievous assault, or even a serious assault.

This is a finely balanced exercise. I share the concerns of other speakers about the intrusions—the human rights concerns—and I do not have blind faith in the police. However, as I said at the beginning of my speech, sitting on the fence in this House is not what we are sent here to do. The ACT Party, with some reservation, will support this bill. Thank you.

SIMON BRIDGES (National—Tauranga) : I have spoken in both the first and the second readings, so I will not take all of my allocated time. But I will talk about the—

Chris Hipkins: Oh, go on. Don’t let us down.

SIMON BRIDGES: I could, but I will not. I will talk about just three things. I will talk about the technology involved and some of the advances there. I will speak about the increase in the number of rightful convictions and the decrease in the number of wrongful ones that this bill will bring, which is something that I see as being very important. Finally, I will note something that Chester Borrows said.

I have said at every stage of this bill that the technological increases and advances in this area are quite amazing. We have gone from the days not a very long time ago when large blobs of DNA were required to get a sample to the situation where a mere trace of DNA is all that is required. Often it is something not even visible to the human eye. The power of the technology has been amazing. Moana Mackey, who knows a lot about this, may be able to correct me, but I do not believe we are yet at the stage where a mere breath is enough. We would still need physical contact.

We have not gone down a much more controversial road, either. Members will remember the Court of Appeal case regarding David Bain, where there were issues to do with whether voice recognition, and whether we could recognise what someone had said in a phone call, could be admissible. It was not admissible in the Bain case. The inquiry went to whether there were words or merely heavy breathing.

We could not say, for example, in a court case whether a person talking on the phone was David or Davina Hughes, particularly if he or she was using a wrong name, as Labour members sometimes do. We have powerful technology, but we are not yet at the point where breath can be included. Certainly, voice recognition is very controversial, so we will not be able to tell which Labour members were making certain phone calls at certain times.

Secondly, I say that the number of rightful convictions will increase as a result of this bill. I think that is absolutely correct. It will also see innocent people vindicated, as we saw with David Dougherty.

I say to the Green member that I take seriously the point she makes about Māori and the justice system. I think that the overrepresentation of Māori in our justice system is of concern, and I believe that it is also of concern to the Minister of Justice, the Hon Simon Power. But I disagree with the Green member in relation to her concerns with this bill, which I think will be a friend, not a foe. It is simply a factual position to say that DNA sampling will see people rightfully convicted or rightfully acquitted. Therefore, it is not racially biased in any way; I do not think that Māori in this country should have anything to fear.

Finally, I agree with something Chester Borrows said yesterday in a fine contribution. When we look at the whole arsenal of laws in the law and order area, this bill is one of the finest, and it is more likely to create fewer victims than any of the other bills passed to date. Thank you.

MOANA MACKEY (Labour) : I am happy to stand and take a call on the third reading of this important legislation. Labour will be supporting the Criminal Investigations (Bodily Samples) Amendment Bill. As has been said in previous readings of the bill, Labour did a lot of work in the area of DNA databases, further enabling the police and the courts to use DNA as a powerful tool when it comes to gaining convictions for serious crimes. This bill extends that work a lot further.

Although members have spoken at length about the advantages of this technology and the opportunities it will bring, I once again will talk, as I did in my other speeches, about some of the safeguards that need to be put around this legislation. I make it clear that Labour supports this legislation. I believe that this technology can be used in an appropriate and safe way. I am concerned that none of the Government speakers seem to have taken our concern on board. I spoke about it in the second reading, I spoke about it at the Committee stage, and I am about to speak about it again in the third reading. I think one final Government member—

Paul Quinn: Repetition!

MOANA MACKEY: It is because no one in Mr Quinn’s party has even addressed any of the concerns I have raised. Mr Quinn is about to stand up and give a speech on this bill. I look to the final Government speaker on this legislation to address these issues, because they have not been addressed. That is the reason why I repeat myself. Mr Bridges gave a speech where he made a joke that was not even funny—one should not make jokes if they are not funny—when he should really have been taking the bill a little bit more seriously, and addressing some of the issues I raised.

As I said in the other readings of this bill and in the Committee stage, we have to understand that DNA technology is not foolproof. It is not infallible. It is very, very powerful. The powerful aura that exists around it is one of the reasons why we need to make sure there are safeguards. If we walk in to a court and there is DNA evidence against us, then we are toast. Let us face it: we are likely to go down for that conviction. We need to ensure that juries and the people of New Zealand on whose behalf we are passing this legislation understand that it is not infallible technology. DNA sequencing for criminal purposes is not the same as full genome sequencing. We test about 0.001 percent of DNA when we do a DNA sequence for criminal purposes. Professor Ian Shaw, who runs the forensic science course at the University of Central Lancashire, and who is viewed as an expert on this matter, says that the results are never 100 percent certain. We need to be aware of this, because we have to put safeguards in place if this technology is to be used appropriately. Professor Shaw says: “The problem is that we will never really know how many people we’ve locked in prison using DNA matches are not guilty.” He said that although the chances of that happening were remote, the more samples we get—and this bill will dramatically increase the number of samples we take—the greater the chance that we find two samples that look the same but are not actually from the same person. I do not say that to undermine this technology; I say it because we need to be aware of it. It really concerns me that no Government member has got up and spoken about this issue, or has even acknowledged that there are limitations. They have all got up and told us that DNA testing will free the innocent and condemn the guilty. They have given it superhero status in crime fighting. Yes, it is very, very powerful. But with such powerful technology, safeguards become even more important, because evidence against a person will almost always result in a conviction.

One of the issues that I have been particularly concerned about is the funding of the testing. That is probably one of my biggest concerns. The Minister of Research, Science and Technology, who is responsible for Crown research institutes, was in the Chamber last night, and he refused to confirm that the Institute of Environmental Science and Research would get the funding required to implement this bill safely. He refused to confirm that. He said it was a contract. He knew how much it costs, so why would he not guarantee that the Institute of Environmental Science and Research will get the money? It is not just for the extra testing, the staff, the equipment, and all the reagents that come with it, but also for the chain of custody: for the administration, the storing, the transfer, and the reporting of the samples. If the institute does not have the money for those things, there is no point in doing it.

I refer to an incident that members may remember. Last night members were dismissing this issue as if, somehow, it would never happen. Members may remember a case in New Zealand not very long ago where, due to cross-contaminations between samples, a Christchurch assault victim spent 4 months under investigation for double murder. The only reason that he got off was that he had an airtight alibi: he was being assaulted in Christchurch at the time. His DNA was taken because he was an assault victim, and, because of cross-contamination, he spent 4 months under investigation. That is why the funding has to be there. I am not making this up to be difficult or argumentative; it is a genuine concern. I have friends who work at the Institute of Environmental Science and Research; I used to work there. Those friends have said that they are concerned. They are already under enormous pressure in terms of their DNA testing. All they want to know is that the money will be there for this bill to be implemented safely.

On top of that is the fact that this Government now requires Crown research institutes to return a 9 percent dividend to Government, so suddenly that financial pressure becomes all the more pressing. If people are working in situations where they are overworked, understaffed, and under-resourced, we get mistakes. We cannot afford mistakes in this area, because mistakes in this area send innocent people to prison. We should all regard that as completely and entirely unacceptable. All I am asking is for just one Government member to please get up and guarantee to the House that the money that the Institute of Environmental Science and Research needs for this technology and for this increase—[Interruption] Well, Jo Goodhew can sneer at me, but I am actually quite serious about this. The money must be there, otherwise we run the risk of a miscarriage of justice.

Paul Quinn: Why did you buy KiwiRail?

MOANA MACKEY: The Government’s answer to this very serious problem is: “Why did you buy KiwiRail?”. Apparently Paul Quinn is now telling us that the money for the Institute of Environmental Science and Research will not be there, because we have purchased KiwiRail. Mr Quinn might like to take this issue a little more seriously. He is the next Government speaker, and I expect him to address this issue. It is important.

I come back to my point that DNA testing is not a fingerprint, and we need to be very careful about it. A very interesting paper was given to the New South Wales Parliament when it went through a similar process. It pointed out that if all of New South Wales’ 8,000 prisoners—as there were at that time—were tested against the 15,000 profiles currently in the New South Wales police database, simple chance indicated that around 120 false positives would be found. Again, I say that we can have safeguards around it. But if we are not aware of the issue, and if the Government members regard it as just a joke because all they want to do is go out there and say they are tough on crime, without putting adequate safeguards around the technology, we need to be careful.

Labour tried to put up an amendment, which the Government voted down, requiring judicial oversight of the taking of samples. I think that issue will come back to the House, because I do not see why any Government would have a problem with judicial oversight over the taking of a sample that can convict someone. My colleague Carmel Sepuloni made a very good point when the member David Garrett was talking about the sample being taken. If a person did not commit a crime, but is suddenly dragged in to give a DNA sample, that person might get really upset, especially if it is someone who has been hassled a lot by the police and knows he or she did not do it. People do not always act rationally, particularly if they are accused of something that they did not do and they feel that they are being subjected to harassment. We need to be aware of that, and that is why the judicial oversight clause was really important. I think Labour will bring that issue back to the House.

I also want to come back briefly to the issue of funding and errors. A study was done in the United States where an external DNA proficiency test conducted by the California Association of Crime Laboratory Directors found a 1 percent error rate in DNA testing in those reviewed laboratories. We have to be very careful. That error rate is not mentioned in court. When we are given the statistical probability of someone having committed a crime, that laboratory error rate is not included, as far as I am aware, in New Zealand. I know it is not given overseas. We need to fund the Institute of Environmental Science and Research properly, because if the error rate is getting up to one in a hundred, statistical odds of one in a million suddenly do not mean a lot.

Again, I do not say that to undermine the technology. These are safeguards on the fringes. In large part this technology is very powerful and accurate, but we need to be aware of its shortcomings. We should not mystify DNA testing or put it on a pedestal and suggest it is all-seeing and all-knowing. DNA testing tells us that someone’s DNA was there. It does not necessarily tell us that that person committed a crime; it tells us that someone’s DNA was found at a scene and that it was positively identified to a certain probability. We as politicians need to be very careful about talking this technology up. My colleague Lianne Dalziel made a very good point last night. The flip side is that just because there is no DNA evidence, that does not mean that someone did not commit a crime. Programmes like CSI drive me absolutely nuts, but I will not get started on that programme, because that would be another whole speech. The fact is that police find it very difficult because juries now think that if we do not have DNA evidence, the person cannot possibly have committed the crime. That is the flip side of this argument.

PAUL QUINN (National) : As my very good friend and colleague “Rusty Robertson” might say, it is great to be up on my hind legs. I will focus on a couple of points in concluding this debate on the Criminal Investigations (Bodily Samples) Amendment Bill. I will talk about judicial oversight and a wee bit about the cultural aspects that have been raised during the course of this debate, and then I will wrap up by recommending the bill be given the Royal assent.

There has been a lot of discussion during the course of this debate about judicial oversight, the Bill of Rights Act, and so on. The fact of the matter is that this legislation will be implemented in two parts. The first part sets out that the taking of a swab on the inside of the cheek will be implemented in the first round according to new Part 3 of the schedule. Swabs will be able to be taken on that basis. Once procedures have been established that comply with the New Zealand Bill of Rights Act, we will go to a second round of implementation, which is where a swab can be taken in the case of an offence that is punishable by imprisonment. There seems to have been a lack of understanding by members opposite about how this system is supposed to work. I think it is very important that we understand the system in the first instance.

The second issue I raise is that, although I agree with members opposite that we cannot legislate against stupidity or against the situation where people want to break the law, the simple reality is that members on this side of the House believe that there are sufficient safeguards in this legislation to protect people and provide a proper mechanism for implementation.

The final point I comment on is the issue of cultural impact, to which a number of speakers have referred. I am happy to defer to my teina because of his much greater experience and understanding in these areas. But I know that I have expectorated on the rugby field any number of times, and I am sure that when any of us have been driving trucks or working in the freezing works we have done the same. I cannot understand the objection to taking a swab from the inside of a cheek to be put into storage.

With those few concluding remarks, it gives me great pleasure to recommend to the House that this legislation now proceed to the Governor-General to receive the Royal assent. Thank you.

Hon NATHAN GUY (Associate Minister of Justice) : It is great to take a call on the Gangs and Organised Crime Bill. Part 1 proposes amendments to the Crimes Act 1961 that will provide the police with more powers to investigate and disrupt organised criminal activity and assist the prosecution of those involved. Clause 4 increases the penalty for participation in an organised criminal group in section 98A of the Act from a maximum of 5 years’ imprisonment to a maximum of 10 years’ imprisonment. This better reflects a range of culpability caught by offending under section 98A and offending by those who organise serious criminal activity such as methamphetamine manufacturing but who do not themselves directly offend.

Part 1 also clarifies the evidential burden in section 98A necessary to prove participation in an organised criminal group. Section 98A contains a number of criteria including knowledge requirements that must be proved before the offence of participation in an organised criminal group is made out. The amendments in this part make interpretation of the section clearer and should improve its effectiveness as a law enforcement tool.

The Law and Order Committee proposed an amendment to section 98A to align the penalty for serious violent offences committed by organised criminal groups with the penalty threshold for such offences for the purpose of obtaining an interception warrant. This amendment will expand the range of serious violent offences that will be captured by section 98A to include perverting the course of justice with a violent component, certain firearms offences, and certain wounding and injury offences.

Part 1 also amends the sections relating to obtaining interception warrants in Part 11A of the Crimes Act 1961. It provides the police with the authority to apply for an interception warrant to investigate those who participate in an organised criminal group. It also amends the definition of a “specified offence” for which police may apply for interception warrants, expanding it to “an offence punishable by a period of imprisonment for a term of 7 years or more:” rather than “10 years or more:”.

The select committee proposed additional amendments to this part by requiring that there be reasonable grounds to believe that a person has committed or is committing an offence under section 98A(1) in order for an interception warrant to be obtained. That amendment reflects more accurately the actual circumstances that may lead to the police applying for a warrant to intercept private communications.

Hon CLAYTON COSGROVE (Labour—Waimakariri) : As we have said throughout the previous stages of the Gangs and Organised Crime Bill, Labour will be supporting this legislation. It builds on a large amount of work that Labour did when in Government. In supporting Part 1, I will raise a couple of issues with the Minister in the chair, the Hon Nathan Guy. I agree with the powers being given to the police in respect of attempts to disrupt crime and to disrupt those who participate in organised criminal groups, especially gangs.

The issue I raise, which I have raised in respect of a number of other law enforcement bills that this Government has put up, concerns resources for enforcement. I think the powers that are put forward here in terms of interception are appropriate. I think the recommendations that the select committee made in respect of reasonableness are appropriate, as are the amendments to the definitions in section 98A of the Crimes Act on offences that are committed by participating in an organised criminal group. But I raise the following point with the Minister. Again, as with other legislation the Government has proposed in order to empower police, the measures are only as good as the resources that are provided to police to implement that legislation.

Today we saw an interesting announcement by the New Zealand Police in my home town of Christchurch. Following the loss, as the district commander himself has advised me, of 32 police vehicles—and a number of those vehicles were from the front line, when we were told they would not be—today there was an announcement, which I have some support for, that the police had gained four bicycles. So there was an announcement today that we will have police on four bicycles running around the four avenues in Christchurch. I have to say, in all seriousness, that in itself that is not a bad thing. A police press statement, which rattled off the objective of this measure, noted that the police laughed heartily at some particular issue. It was an interesting press release.

We want police in our communities, we want police within our suburbs, and we want them visible. That is all true. But I just wonder whether it is a net gain for Cantabrians when they have lost 32 police vehicles—

Paul Quinn: And the Ranfurly Shield!

Hon CLAYTON COSGROVE: —and they have gained four bikes. Mr Quinn makes another so-called useful contribution.

The point I make to the Minister is that criminals, as we know, do not adhere to the ethical rules of law enforcement. For instance, criminals will not say that because the cops are on bicycles, they will not use cars but bikes. What is next? Horses? Donkeys, possibly—and there are one or two donkeys opposite. Criminals do not adhere to the ethical rules of cricket. Just because the law enforcement men and women in blue are on a bicycle, criminals will not decide to rob the bank or department store, or shoplift or carry out an assault, and then get away on a bike. They tend to use whatever means they can to circumvent the law and the law enforcement agencies.

I say to the Minister that we are supportive of this bill. But, again, it comes down to the credibility of the resource packages through the Budget that are put up to implement these measures. We know, for instance, that 340 police vehicles have been taken from the police fleet. We know, because the Minister Judith Collins is fond of telling us, that she gave Counties-Manukau 43 new vehicles in the Budget. Yet, as we look at Part 1 and the resourcing issues around it, we see that we have to ask why the Minister of Police took 340 vehicles away from the police fleet. We know that $21 million has been required to be taken out of the police budget. Part of that budget related to dealing with organised crime, and part of it was to deal with implementing this legislation.

In all seriousness I make the point, as I think I did with the Minister’s colleague, that we are supportive of this legislation, because gang and organised crime activity is insidious—and it is tragic. Some very interesting but tragic points were made on a show that I could watch when it aired last night on TV about the spouses of those in prison, and about gangs and organised crime and their impact on families in our community. But this piece of paper is only as good as the resources that are given to the men and women in the blue and black uniforms to actually make it work. So I simply ask the Minister in the chair, the Hon Nathan Guy, whether he will consider giving us some reassurances around the resource implications of the bill.

CARMEL SEPULONI (Labour) : Labour will be supporting the Gangs and Organised Crime Bill. We on this side of the Chamber agree with the Government that some of the most insidious crime in our society is perpetrated by gangs and organised crime. Some of us in this Committee have had family members who have been traumatised by gangs or lured into involvement in gangs. The more we can do to take away the power of gangs and other organised crime units the better, as far as we on this side of the Chamber are concerned.

It is important to mention that the previous Labour Government had legislation similar to this bill before the Law and Order Committee when the National Government came into power. Had the National Government genuinely wanted to expedite this measure at a faster pace, perhaps even within its first 100 days of action, all the Minister of Justice needed to do was to support, and possibly amend, the bill that Labour had before the committee. Despite the fact that this Government decided to ignore that bill and start from scratch for the simple sake of political point-scoring, Labour supports this bill and the intention behind it.

Part 1 amends the Crimes Act 1961. It makes it easier for people to be charged with involvement in a gang. Its provisions cover the nature of participation in an organised crime gang, and involvement in a crime where three or more people share one objective, even if the person in question does not share this objective but merely knows that the three people do. It also broadens the scope of offences that are punishable and changes some penalties from 10 or more years’ imprisonment to 7 or more years’ imprisonment. The legislation also changes provisions on warrants. If a person is believed to be in a gang, authorisation to intercept a private communication will be easier for the police to obtain.

The Minister of Justice was right when he said that some concern about the bill was expressed to the Law and Order Committee. Some of the 11 submissions that were put forward were opposed to the bill because submitters were concerned that the proposals would impinge on the right to freedom of association, freedom of expression, or freedom from discrimination. Other submitters were concerned that it would infringe the rule against double jeopardy. Some submitters conveyed support for this bill while suggesting further proposals. Labour did not believe that those concerns were sufficient to propel us to oppose the bill; therefore, we support it.

Although we support this bill, it is important to point out a slight contradiction or irony. It would be fair to say that the Ministry of Justice cannot work in isolation from some of the other Government departments. In fact, it needs to work coherently alongside other departments like the New Zealand Police. Unfortunately, the reality is that as we move to put this bill into place the police budget has been cut. That is something that Mr Cosgrove talked about earlier, and it is concerning.

It is concerning that, as the Law and Order Committee is aware, as we are putting through this legislation there has been a 10 percent cut in police vehicles, a cut in police firearms training, and a $21 million cut in the police budget. All of these things will limit the ability of the police to do their job well. We as New Zealanders know that if we intend to do something better, as this bill purports to do, and if we are asked to increase the workload, our chances of being able to do so are minimal when funding is cut, and when the expectation is that more can be achieved on a much smaller budget with much tighter resourcing levels. The Government cannot say it is backing the police to deal with issues like organised crime while it pulls away the resources that are necessary for police to do their job.

Labour supports this bill because we are committed to removing criminal gangs from our society. We are prepared to work in a bipartisan way to tackle the scourge of gang crime and drug trafficking in our communities. We on this side of the Chamber recognise crime as a serious and growing problem. We also recognise the complexities that are involved in crime, particularly, and this is something that has not been raised often, in respect of low socio-economic circumstances and high levels of unemployment, and the impact that those two factors have on levels of crime. Those are two factors that the Government must address if it is serious about cutting crime levels. It is estimated that up to 30 percent of prisoners currently identify as gang members or affiliates, and that figure paints a thousand words.

SANDRA GOUDIE (National—Coromandel) : I am delighted to rise to speak to the Gangs and Organised Crime Bill. This bill is another great step forward by National in dealing with the law and order issues of New Zealand, and making sure that people are safe in their homes and on the streets.

I take up a couple of comments made by the previous speaker, Carmel Sepuloni, talking about the rights and freedoms of people who are involved in criminal activity and associated with gangs. Quite frankly, when we think about their record of violence, intimidation, and theft perpetrated, and the increase in the use of P, why should anybody think that gang members have any rights and freedoms? We are not interested in their rights and freedoms. If they have done the crime, they need to do the time. We will also make sure they pay for it. With the Criminal Proceeds (Recovery) Act they will pay for it. We will strip them of their assets and proceeds of crime.

This bill, including Part 1, “Amendments to the Crimes Act 1961”, is just a series of tools we will give the police in dealing with gangs and organised crimes. Gangs have infiltrated our communities in such a way that they are now virtually indistinguishable from other community groups, and purport to do community work with the community’s interest at heart. Gangs infiltrate our communities to give them a sense of reasonableness to the community, when, in actual fact, their primary occupation is the perpetration of violence, intimidation, theft, and the use of methamphetamine, or P, in our communities. These sorts of actions should have been taken long before now, and I am delighted that we are doing this now. National is making a difference on the law and order front, and this is just another step in making that difference.

Hon SHANE JONES (Labour) : Kia ora, Mr Chairperson. Without a sliver of doubt, I will enjoy supporting the Gangs and Organised Crime Bill. Unfortunately, it is said too rarely that some of the greatest victims of gangs in my part of the world are the very people who are related to members of gangs.

Although we have to be mindful that the police have to respect the bounds of the law—we have to have confidence, for example, in the ability of a judge to ascertain that the information being put before him or her is satisfactory—we should be under no illusion: when looking at gangs we see the worst of human nature. They are hugely well resourced and well organised. To those people who suffer some anxiety from time to time as to whether, in our pursuit of gang criminality, we are turning parts of our system into something that is aping a police State, I say that if they were to fall into the clutches of a gang, they would find that it made the police State look like a kindergarten. Gangs know no bounds. If people move into their business and threaten their existence, then not only will they menace and threaten them and their children but also they will kill them. If members have any doubts, then they should talk to the grieving families in Murupara.

Let us take the gloves off here. This measure is the way that the deep, menacing forces behind the dunderheads who run around wearing jackets and blazers with “Black Power” and other filth written on their backs can be dealt to. Interception warrants, which at the end of the day presumably have to pass muster with a judge who is seized of all the information, are not a bad thing. It is unfortunate that Dr Sharples is not here, because when we deal with crimes associated with gangs, we are dealing with organisations. We are not dealing with random events. We are not dealing with people who have had a wee bit too much to drink or who have been smoking dope or popping pills. We are dealing with well-oiled, highly armed organisations. They have not one iota of respect for Parliament. They giggle, mock, and laugh if one ever asks them to contribute something to honour the legacy of the men and women who are memorialised in this Chamber.

We need to get with the game plan. Gang members do not want to be a part of civil society. That is why I have not a sliver of doubt about the wisdom of supporting legislation that gives better powers and forces to those whom we trust to keep us safe, because, rest assured, gangs do not want people to be safe. Gangs want people to be scared, they want them to be fearful, they want them to be constantly coughing up dough through their kids being addicted, and they want their women to be afraid. People become so indifferent to life that they start slowly but surely to give up, until such time when they are forced to begin to arm themselves to make themselves feel safe. That is the reality in large parts of the north, which is where I come from.

That is why I am sad that Dr Sharples is not here today. For those of us who are of Māori descent, this bill is important. Not all gangs are Māori, but they are disproportionately full of our young people, and some of our people who are old, fat, and corpulent, but still very violent. Dr Sharples has to stop believing that simply by holding wānanga and hui we will get those people to change their lifestyles. Those leopards have deep-etched spots that ain’t going to change. The only way that those people will change is when they putrefy in the earth. Let us hope that not too many victims go through that process before we put the gang members where they belong: out of our sight and out of our lives.

If this expansion of powers causes that to come to pass, a poll taken tomorrow would show that a vast number of New Zealanders would be happy about it—although they might not feel proud that it is a feature of our modern society. People in gangs are driven by forces that are well fuelled and well funded. They do not want to join with the rest of us in terms of looking for markets, jobs, and new growth opportunities. They want to get rich on Easy Street, and they want to come north, and they do. That is why Part 1—and I acknowledge the sensibilities of some members of the Committee in relation to expansion of the State’s powers—needs to be supported.

CHRIS HIPKINS (Labour—Rimutaka) : I am happy to take a call on the Gangs and Organised Crime Bill. Much like Mr Jones, the previous speaker, I have come across a number of gang members in my electorate, and I am very familiar with the impact that some of their activities have on communities, on the people who live in those communities, and on many innocent victims, including the families of the gang members concerned. Gangs are repugnant. Their activities are repugnant. The negative impact that they have on families, young people, and innocent members of the community absolutely must be dealt with.

The Labour Party will support this bill to go through the Committee stage. We want to provide the police, in particular, who have to deal with gangs and organised crime, with all of the resources that we possibly can, so that they can do that effectively. If this bill contributes, and adds a little bit more, to their arsenal, then that has to be a good thing.

These are weighty issues and there are no easy solutions to them. They need to be dealt with properly. That is one of the reasons why at the last election the Labour Party pledged to establish a commission of inquiry into organised criminal gangs. It was part of our manifesto at the last election. We need to draw on evidence and research not only from within New Zealand but also internationally. Although I would like to stand here and say that I think this bill will be the silver bullet to magically cure all of the problems relating to gangs, I am realistic enough to know that it will not be. In fact, a whole heap of issues this bill does not address need to be dealt with. They need to be aired and we have to draw on evidence to be able to do that. I know that that is something that the National Government—

Sandra Goudie: Ha, ha!

CHRIS HIPKINS: Sandra Goudie in particular gets very bored when evidence is involved, because it involves a bit of reading, a bit of listening, and a bit of thinking. I do not think that she is really engaged in that level of detail. I understand that she finds evidence-based policy and decision making quite frustrating—

Hon Clayton Cosgrove: She can’t spell it.

CHRIS HIPKINS: —because she cannot spell it, but it does work and it is worth thinking about.

I will talk about a couple of things related to the things that drive gangs. I will go back to one of the pieces of legislation related to this one, which we discussed earlier in the term of this Parliament, and which was about choking off the supply of money to gangs—the criminal proceeds—and giving the police much greater powers in that respect. If we really want to go after gangs, I think we have to go after two things. We have to go after the money, and we have to go after the supply of recruits to the gangs.

The supply of recruits for gangs is something we need to think quite carefully about. If we go to the prisons, for example, where 30 percent of prisoners currently identify as gang members and affiliates, we will find a couple of common characteristics amongst the prison population—illiteracy and innumeracy being two of the key ones. Coming from a lower socio-economic area is another characteristic of prisoners, as is being victims themselves of child abuse or family violence at some point, quite often in their childhood, and being totally disconnected from society. The reason those prisoners relate to gangs is that they are the people gangs prey on in order to gain gang membership. Gangs prey on the same people, who end up in prisons, and that is how they draw their members. If we really want to go after gangs, we will go after the gang recruits. We would choke off the supply of recruits by dealing with those issues—by dealing with illiteracy and innumeracy, and by dealing with the massive socio-economic gap that exists in our society, which gets bigger every year.

We would also deal with domestic abuse, child abuse, and domestic violence. People who have been victims are much more likely to end up being offenders themselves. It is absolutely true. Those are the sorts of things that could be canvassed if we had a commission of inquiry into organised criminal gangs. But unfortunately this Government has not picked up a proposal put forward by the previous Labour Government, and I think that is a bit of a shame.

Finally, I want to pick up a theme from my colleague Clayton Cosgrove, which is that all of the things in this bill may be worthy, but if the police are not adequately resourced to use the powers they are being granted in this bill, then it all amounts to very little. In my own area, the police have had to give back the police cars they previously had access to; they have had to give them back. There are significantly fewer police cars on the streets in the Hutt Valley today than there were before the election.

MOANA MACKEY (Labour) : I am happy to stand and take a call in the Committee stage of the Gangs and Organised Crime Bill. I endorse the comments made by my colleagues earlier. Labour takes this issue very seriously. We believe that we need to listen—

Sandra Goudie: How come they did nothing about it for 9 long years?

MOANA MACKEY: Sandra Goudie should get up and make another speech.

Hon Members: No, no.

MOANA MACKEY: I know that it may pain us, but I think the public need to see the depth of talent on the Government benches. I think they need to see the extent of its thinking about this important legislation.

Sandra Goudie: Marvellous, marvellous!

MOANA MACKEY: The member says: “Marvellous, marvellous”. I think the public needs to see the future front-bencher and future Minister of Finance, Sandra Goudie, and get to know her before her promotion comes.

This is a very important bill. It extends work that Labour did when in Government to try to give police the tools to be able to deal with organised crime effectively. This is not an easy area of legislation. Parliamentarians constantly walk a fine line between ensuring that the rights of innocent citizens are protected and ensuring that our police are able to use whatever powers we can give them to bring criminals to justice. We need to do whatever we can to break down the organised crime that exists in New Zealand. This issue is not peculiar to New Zealand. Many countries grapple with how to deal with organised crime; New Zealand is not alone in that regard.

The bill increases the penalty for participating in an organised criminal group from 5 years’ imprisonment to a maximum of 10 years’ imprisonment, and it clarifies the evidential requirements under section 98A of the Crimes Act, which will help to improve the rate of successful prosecutions. If the police are not able to get successful prosecutions, then it will all come to nothing. The bill requires the sentencing judge to take into account any offending that is committed due to involvement with an organised criminal group as a specific aggravating factor. That is also another important aspect of this legislation.

I endorse what my colleague Chris Hipkins said, on two fronts. The first relates to resourcing, which is an issue that I raised in the debate on the previous bill. If we do not resource this issue properly, then all the legislation in the world will not mean a thing. I really endorse what Chris Hipkins said about evidence-based policy-making. It is crucially important, especially in the area of law and order, that we, as parliamentarians, are able to challenge our very strongly held views on law and order, and stack them up against the evidence. When it comes down to a choice between doing what is popular and what works, we should do what works, every single time. We need to be prepared to challenge ourselves to say that something that we—

Sandra Goudie: Ha, ha!

MOANA MACKEY: Sandra Goudie thinks that is a joke. She does not think we should do what works. Sandra Goudie might want to look at the evidence about boot camps. I think that a reason why this Government does not want to go down an evidence-based approach, which is very relevant to this bill before me, is that if we look across the law and order spectrum, we see that sometimes what we believe might not actually be what will work and help us to reduce organised crime in this country.

One of the strongest pieces of evidence about what works in terms of reducing crime and organised crime is visible policing. It is having the police properly resourced to be out there—not to have cars taken away from them, as we have heard is happening in Rimutaka and in Christchurch, but to be out there. If we do not resource our police properly, this bill will not do anything.

Sandra Goudie: Try telling us about the bill. Have you even read it?

MOANA MACKEY: Yes, I have read it, I say to Mrs Goudie; I have read it. If the member had been listening to me, she would know that I told her what it was for. The bill will increase the maximum sentence from 5 years to 10 years. It will require the sentencing judge to take into consideration involvement in a criminal organisation as an aggravating factor at sentencing. Does the member want me to go on? I know what the bill does. What I am saying is that it means nothing if our police are not resourced. All the nice words in the world do not put a police car on the road. Money puts a police car on the road. This Government has been cutting funding to the police. Labour’s point is that this legislation does not matter. We can keep passing law and order bills under urgency, but they will not work if we are not adequately resourcing the police. That goes for the previous bill, which was on DNA testing, as well.

The other point my colleague Chris Hipkins made—and it concerns the evidence-based approach to crime, as well—is that we need a commission of inquiry into organised crime. I do not think that any one member of this House truly understands the range of organised crime that exists in New Zealand and how to deal with it. Do we know why people enter gangs? Do we know what stops them leaving gangs, which is a very important point? Do we know the range of activities they are involved in? If we do not know the enemy, how will we combat it? I say that we do not fully understand the extent of organised crime in New Zealand. I urge the Government, as well as passing legislation like this, to pick up that suggestion and say that we will go out there and find those things out. It might be scary for us to do that, it might be intimidating, and I guarantee that we will not like what we find, but if we do not know what we are dealing with, how can we as parliamentarians comes up with the adequate legislative tools to combat it? How can we give the police the tools they need if we do not know what we are dealing with? If we are serious about an evidence-based approach to policy in this area—and I know that Sandra Goudie is not; she has made that quite clear—then we need to be prepared to go out and find the evidence. We have very, very good professionals and experts in New Zealand who can do this and who would be very happy to be funded to do this properly, alongside the Government, and I know that Labour would—

Sandra Goudie: The evidence is that she’s being specious with the facts and specious with what’s been said in the House.

MOANA MACKEY: I have been what? I have been “specious with the facts”? I do not even know what that means, but that is all right. The other thing that this legislation does is expand the ability of the police to undertake surveillance—

Sandra Goudie: There’s a dictionary in the foyer.

MOANA MACKEY: Thank you very much. I do not need the dictionary; that is fine.

This bill expands the ability of the police to undertake surveillance of gangs by allowing the offence of participation in a criminal organisation to be used as a basis for an interception warrant. I know there are people who are concerned about the extension of powers in this area in particular. I come back to the point I made earlier, which is that, as parliamentarians, we walk a fine line all the time. We want to be able to give the police tools, and we know that this is an area in which they can reap great results when it comes to dealing with organised crime. I say again that we need to make sure that our police are resourced properly, so that they are trained properly to know when it is appropriate to use this power and when it is not. We have a lot of trust in our police, and they do a great job, but there is potential for great abuse if this legislation does not have the proper safeguards put around it and it is not funded properly.

Sandra Goudie: If she can’t understand the word “specious”, how would she understand evidence?

MOANA MACKEY: I tell Sandra Goudie that I know what evidence is. Seriously, oh my God—

Chris Hipkins: There’s plenty of evidence on you, Sandra!

MOANA MACKEY: I know. Sandra Goudie might actually want to listen, because, although she seems to think that this is some kind of big joke, the fact is that we are greatly extending the powers of surveillance that the police are allowed to use when they are dealing with people who are involved in a criminal organisation. There are people in this country who want to know that parliamentarians take this seriously, that this is not just something they do so that they can go out and say: “Rah, rah! We’re really tough on law and order.”, whilst at the same time putting into place a lot of policies that will undermine law and order in this country, and that do not do anything about helping people into jobs and lifting children out of poverty. They want to know we are dealing with the causes of crime, which is just as important as dealing with people once they are criminals—in fact, it is more important. I think that people would prefer that we did not have criminals in this country rather than just having tougher laws to deal with the ones we already have. I urge the Government to take that part of the equation seriously, as well.

I reiterate, because I do not think that the Government is listening—I know that the chairperson of the Law and Order Committee has made it clear that she thinks this is funny and a bit of a joke—that the public of New Zealand wants to know that these decisions and policies are being based on evidence internationally and domestically, and that they will work. We believe that we are giving the police some useful tools here, but we say to the Government—

Sandra Goudie: Oh, she does!

MOANA MACKEY: I said that earlier, if Mrs Goudie was listening. I know that she cannot listen and talk at the same time, so why does she not try listening for a bit instead of talking?

Sandra Goudie: You’re so contradictory in your comments.

MOANA MACKEY: So contradictory? We are not allowed to talk about the safeguards that need to be put around these extensions of power. We are not allowed to say that the Government needs to fund our police properly, and that we support giving extra powers to the police, but when our police are undermined by their police cars being taken away, by their funding being cut—

Sandra Goudie: The only people undermining the police are her and her colleagues.

MOANA MACKEY: I am undermining the police by saying that they need to be resourced properly?

Sandra Goudie: Absolutely, when she’s being specious with the facts.

MOANA MACKEY: I am being “specious with the facts” and undermining the police by saying that I think they should be resourced properly! I think that sums up that member.

Hon CLAYTON COSGROVE (Labour—Waimakariri) : I have to say that the exchange between my colleague Moana Mackey and Sandra Goudie was interesting. For those who do not know, Sandra Goudie is actually the chairperson of the Law and Order Committee, and was charged with shepherding the Gangs and Organised Crime Bill through the process of reporting back to this House. I say to Ms Goudie that this is actually very serious legislation. That is the last time I will bother addressing that member in a speech, because it is a waste of time.

I want to raise a very serious issue. In terms of the resourcing issues that other colleagues have talked about, an issue that I think is of great concern, certainly to the Police Association, and that will go to the heart of how this bill is implemented, is how the police protect themselves in respect of dealing with gang members and organised crime. The evidence that Ms Mackey and others speak of, and that some on the other side of the Chamber might want to look at, is very, very clear in terms of the violence that is put upon our communities, family members, and others, especially by gangs and organised crime. Yet for the first time in history, to my knowledge, firearms training for the police force is being rationed. An allegation was put up by the Minister of Police that the police have always reviewed firearms training, and that reviews occurred under our Government, or whatever. That is true, because the police are independent and they are charged with reviewing their own operational requirements. But in 9 years of a Labour Government, no requirement was put on the police to ration firearms training.

We are not talking about some sort of gung-ho attitude here; we are talking about incidents such as the tragedy in Napier, when Senior Constable Len Snee was killed and two other officers were critically wounded. The first responder was not the armed offenders squad; it was a Youth Aid officer. In that case—and it is very germane to this bill—it was not organised crime, although there were organised crime connections. We now know a lot of drug cultivation and drug selling was going on, but there was no intelligence that that day would be a problem for the police. There was no intelligence inside the police. That is not a comment on them; it simply was not anticipated. No one knew. There was no evidence. There was no one from the public to say that something strange was going on at this person’s residence. There was no evidence in respect of firearms use. It was a routine drug warrant. The first responder was a Youth Aid officer, and then we had a tragedy. So when it comes to resourcing, if the Minister of Police, Judith Collins, wanted to, she could communicate very, very clearly to the Commissioner of Police that the pressure is off in terms of resources. She could communicate that he is not required to cut cars, to ration firearms training, or to find $21 million in the Police vote because this Government says it is committed to implementing this and other law enforcement legislation. The Minister of Police and the Minister of Justice could pick up the phone and say to Commissioner Broad that it is OK and that he is exempt from the razor gang requirements that are going through Government agencies, because they believe that if they require him to protect our community there is a requirement on them to allow police officers to have the tools to protect themselves.

There is a lot of hot air about this bill. We support the bill, but I am concerned about the man or woman in the blue uniform. We know from our communities that there is an expectation from people wearing the blue uniform. It does not matter if that person is a police educator, driving a desk, a front-line police officer, a Youth Aid officer, or whatever. When it hits the fan, our communities assume that if a police officer is wearing the blue uniform he or she will have the skills to intervene at any time and at any level, at least as first responders until specialists like the armed offenders squad and others can come to finish the job, as it were. The problem we will have implementing this legislation is that there will be police officers—people in the Criminal Investigation Branch (CIB) and all sorts of folk—who will have their firearms training rationed, or who will not get firearms training at all, and will not renew their skills every year, or every second year, as they are required to. My challenge to the Minister of Justice is to guarantee that when a man or a woman in a police uniform is going around dealing with people who are involved in organised crime and gang violence, they will not be required to use firearms, because they will not have the training to execute that job.

JONATHAN YOUNG (National—New Plymouth) : I move, That the question be now put.

• Motion agreed to.

• Part 1 agreed to.

Hon NATHAN GUY (Associate Minister of Justice) : This is a very short part of the Gangs and Organised Crime Bill and it amends the Local Government Act 2002. Section 216(a) of the Local Government Act 2002 currently provides that a District Court may grant a removal order if the court is satisfied that the property is occupied or regularly used by known or probable offenders. Section 216(b) provides that a District Court may grant a removal order if a fence, structure, or vegetation is either facilitating or contributing to the concealment, avoidance, or commission of crime, or is intended to injure a person. Part 2 proposes that an additional ground for the District Court to make a removal order is if it is satisfied that a fence, structure, or vegetation may reasonably be regarded as intimidating. This proposal will provide the police with an additional tool to have fortifications pulled down on properties used by known or probable offenders, but it also acknowledges the impact of gang forts on their direct neighbourhood.

Hon SHANE JONES (Labour) : Anything that causes local government to act expeditiously and aid the cause of the local community wanting to rid its neighbourhoods and suburbs of this walking, criminalised cancer known as gangs ought to be supported. I am no fan of much of what local government has done in relation to the Building Act—an area that I have some experience in. I found local government to be sluggish. The place was riddled with building inspectors who found things to justify their jobs but little to justify delivering the service. This is why, when I had the brief opportunity to promote a bill as a part of former Prime Minister Helen Clark’s team, it was rapidly embraced by members on the opposite side of the Chamber. I filled a void. Those members came with great promise but precious little results. But that matter is for another time. It is for the historians to write up the great things that the Helen Clark Government did, which will grow in stature as time moves on. The gangs, unfortunately, grow while we are distracted.

When New Zealanders move into a suburb or a neighbourhood, they create a home for their kiddies. They start to invest time and energy in schools and they look to beautify the localities where they live. Then all of a sudden a plague of locusts—or, as the Māori say, a tātarakihi—descends upon the area, and just as in biblical times the locusts sucked out the livelihood of the people by destroying the crops, these people begin to crop. They move into an area and choose dwellings or neighbourhoods where the trees, fences, or other accoutrements give them the privacy to carry on their criminality. Ordinary Kiwis do not know much about gangs, but they know when they are working in “Strugglers’ Gully”. When their TV, car, kid’s bike, or other taongas that they have amassed over a bit of time from dough that has been saved to actually afford those things start to get ripped off, they want those people out of their faces. That sort of behaviour not only lessens the value and the safety of their property but, most important, it lessens the security of where they live. So if the Gangs and Organised Crime Bill is to empower local government by allowing the court to remove gang fortifications, then we should all support it.

Of course, this is an obligation on the courts. We can imagine that District Court judges, not unlike their senior colleagues in the High Court, will be preyed upon by a different form of locust, known as the legal profession. Legal professionals go out of their way—unwisely, in my view—to represent many of these gang characters. They try to allow them to escape the full reach of the law when they have been peddling drugs and ruining the lives of young people. To illustrate my point, in Kaitāia the gangs that I am predominantly concerned about hurt their own the most. I read the local newspaper and gagged through an article to do with my senior National Party colleague John Carter, but that is another story. Then I found that the Tribesmen gang—if ever there was destruction of a proud word and the notion of a tribe, there it is—are now using dope, marijuana, cannabis to reward juvenile criminality. Boys aged 10, 11, 12, and 13—around that tender age—are running away from the whānau, etc. and being rewarded with marijuana if they go out and steal things. The people providing it belong to the gang. So when the parents go and find out who the hell is giving their young fella dope, they are confronted by a fortification. They are confronted by the intimidating presence of that gang culture. It could be someone who is ripe for a heart attack. In fact, I hope that everyone who is involved in Tribesmen criminality has heart attacks by the end of this week. They will get not one sliver of sympathy from me. They are taking young, dislocated boys and giving them dope so they will go around Kaitāia and other parts of the north and tāhae—rip things off. That is the role model that they are growing into. It will give my neighbour Wayne Brown something more useful to do: after he has stopped irking most of the local ratepayers, he can start assaulting, with the full force of the law, the gangs. He is likely to grow in our Māori estimation. Kia ora tātou.

Hon CLAYTON COSGROVE (Labour—Waimakariri) : Part 2 is a practical measure. Labour supports it. I know that my colleague Clare Curran, a Dunedin member of Parliament, recently has had representations from a local school, I believe, where down the road, quite literally, there is a gang headquarters. I have not seen it myself, but I am told that it is relatively fortified—or, if it is not, that it will be. These structures put a level of intimidation upon communities.

There are those in this place who say that gangs form part of the culture and fabric of our country. I think Dr Sharples has been heard to say that from time to time. I tend to disagree, respectfully, with him. I think there are basic community norms. We are not talking about the height of pot plants, what colour we can paint our house, whether we can wash our car out the front, or have a barbeque, or park. We are talking about a high degree of intimidation. Gangs set up in communities, and often, as in the Dunedin example, not far from schools. As my colleague Shane Jones has said, they set up there for quite deliberate, nefarious reasons—so that they can prey on communities, particularly the young, and entice them, as he said, with dope and other things.

So suddenly a quiet community, which is law abiding and includes a local school, has some sort of great edifice that has been fortified far in excess of what we would expect for a bank, police station, or, in some respects, an army base. Those fortifications are generally ugly—ugly in an aesthetic way, and ugly in terms of what goes on inside and around them. They become magnets for other activity, sometimes from rival gangs, as we know, because we saw a year or so ago in Wanganui what can happen, and it happens in other places. Reprisals and turf wars take place. Who is sitting nearby, next door or three doors down, a block away or three blocks away? It is communities and often local schools.

We think Part 2 is a very practical measure. Their eminences in the court, the judges, as Shane Jones said, will have all sorts of interesting arguments presented to them to err on the side of being conservative and not to provide the means with which we can rip, tear, and destroy these fortifications. I think part of destroying them is exposing what is going on inside and around those headquarters. Indeed, that may provide some motivation for the gangs to move on. Sadly, it will be to another community, but if this measure goes through—and I assume it will—there will be universal pressure to deal with gang headquarters. We support the part.

• Part 2 agreed to.

Hon NATHAN GUY (Associate Minister of Justice) : Part 3 creates a new aggravating factor for consideration at sentencing. The Gangs and Organised Crime Bill originally proposed that the courts take into account that the offender committed the offence wholly or partly because of his or her participation in an organised criminal group, or involvement in any form of organised criminal association, as an aggravating factor at sentencing. That was amended by the Justice and Electoral Committee so that the court can take into account the nature and extent of any connection between the offending and the offender’s participation in an organised criminal group, or involvement in any other form of organised criminal association, as an aggravating factor at sentencing. This amendment removes the potentially onerous requirement on the prosecution to prove the motivations of an offender. Although Section 9(4)(a) of the Sentencing Act allows any aggravating or mitigating factor not specified in the Act to be taken into account, it is appropriate that gang and organised criminal connections be made a statutory factor to ensure that these are taken into account in all relevant cases.

Hon SHANE JONES (Labour) : I thought I would make another very moderate contribution on the scourge known as gang criminal culture in my part of Aotearoa, known as Tai Tokerau. Of course I can see, unfortunately, the burden upon the judge when this new provision in the Gangs and Organised Crime Bill finally washes up and laps at his or her magisterial feet. Lawyers, unfortunately, are no doubt going to test these notions of both association and connection. It is unavoidable, unfortunately, that when we do change law, it takes a while for jurisprudence to emerge. But if we strip away all the verbiage, we see that at the guts of the issue is the question of whether this is a way of testing people’s motives and getting them to justify how they have acquired their lucre, or why they are doing what they are doing in association with obvious gang offenders, etc.

If the provision actually simplifies the task of the police, and of those of us who are other civic leaders, in being able to amplify the dangers of being indifferent to, or indulgent about, gang culture, then it will be a very useful provision. Admittedly, a test will be required for judging at what point a person is fatally involved in a criminal organisation. I see no other way, unfortunately, for the various lawyers to say that, no doubt at great cost, although Dame Margaret Bazley has a great deal to say about that. She, fortunately, is going to focus on the lawyers, some but not all of whom are ill-equipped to stand before the bench, unlike the majority of we parliamentarians as we stand before Mr Chairperson, but that is another matter. So I think that this is a small provision that is very useful.

But, as I said, let us not get away from the underlying problem. We must seize every device and seize every opportunity to prevent the normalisation of gang culture and of gang membership, so that more New Zealanders shun those families and those people who want to maintain that culture. If, God forbid, there was an element that came to Aotearoa with that Middle Eastern style of deep animus that shows itself in wanton violence, etc., we would shun that as a part of our tolerant society. But it is sad that, growing year by year, there is a hardened element. I fear over a longer period of time the attitudes of Kiwis towards this gang thing—given that we have been through indulgence, we have been through indifference, we have been through aspiration, we have been through anger, and we are going now in some cases into fury. What will happen in areas such as where I come from is that people slowly but surely will continue to take the law into their own hands, because they are genuinely frightened and scared of those people. I already said earlier that that fright is a massive weapon in the hands of gang criminals; having people frightened is at least 80 percent of the way. It might be said, as it often is by Dr Sharples and his colleagues, that this is hyperbole and rhetoric that does not actually advance the cause of understanding the underlying reasons for gang criminality and helping people move on. The only place I want them to move on to is a new wing at Ngāwha prison.

I am not interested one iota in normalising or enabling people to think—under the cloak of Māori culture and by using a few Māori words—that somehow we are going to weaken our resolve to marginalise those people and to have them face the full cost of their criminality. It is a very divisive issue. For those of us who are in the Māori world, it takes up a large part of our time. In Parliament we do not stay just in any world. We do not necessarily stay in a Pākehā world or a Māori world; we are there for all New Zealanders. But the place I come from in the North is a hugely strong Māori area, and it has a different culture. It has a different political culture. But, as lonely as it is, and although this approach of supporting legislation like this bill and supporting the ability of the police to be more penetrative and perhaps even more unforgiving, does cause us to be assailed in the Māori world as being anti-Māori, I think this provision is very important.

Hon CLAYTON COSGROVE (Labour—Waimakariri) : Labour supports this provision. I think the Minister made a good point when he noted that it changes the burden on the prosecution to prove motivation in respect of an offender. We know from current jurisprudence that from time to time that has been a very onerous requirement on the prosecution. Of course, as Mr Jones has said, the people involved in those sorts of offences and their legal counsellors will find very interesting and sophisticated ways to try to circumvent the court processes and try to prove that their motivation is other than how a prosecutor would argue it.

Not being a lawyer myself I will not go from there into the intricacies of that argument. Suffice to say, as other colleagues have, that if there are other devices like this that can be used to get to, and deal with, organised crimes and criminal gangs, then they should be supported and implemented. Again, I simply raise the question of resourcing, not so much in respect of the police in this issue but more in respect of the Crown prosecutors and the justice budget—those who are charged with resourcing the prosecutors to implement this bill. Again, we would like some reassurance that resources will be available to implement what I think is a positive provision within this bill.

CARMEL SEPULONI (Labour) : I refer to Part 3 of the Gangs and Organised Crime Bill, which amends the Sentencing Act 2002. I will continue on from some of the things that Mr Jones said. Largely, the focus of this bill, in respect of gangs and organised crime, has been on the larger gangs, like Black Power and other such gangs. One factor that has not really been taken into consideration is what we call, in Auckland at least, the “ABC” gangs, which are many of our youth gangs. They often name themselves after the street they live on. Say they live on Smith Drive; they would then call themselves the Smith Drive Boys, or whatever.

One thing we appreciate about this bill is the fact that, as Mr Jones said, it prevents the normalisation of gang culture. Many of the “ABC” youth gangs initially do not have the same intentions as some of the larger, more established gangs, but the issue with those smaller “ABC” gangs is that they often base their structure and what they intend to do on American gang culture. They are enticed by it and see it as something they can identify with, and then they go ahead and set up their own gangs. The other issue that comes into play with the “ABC” gangs is that they are often preyed on by much larger gangs, and by much older gang members and people in general, who use those youth who are just setting out in the gang lifestyle to do a lot of the groundwork in respect of selling their drugs and committing what can start as small crimes but can end up as something quite serious.

Labour supports this legislation. We support preventing the normalisation of gang culture. The more that we can do to take power away from gangs, the better it is for our youth. We need to take any opportunity possible to ensure that the gang culture does not become an avenue for our youth to go down, that it does not become attractive to them, and that it is no longer a possibility that they can get involved. I think it is very important to mention this issue relating to youth gangs—perhaps not in relation to the larger, more institutionalised gangs that we know of, which have been around for many years—that continue to emerge and plague the communities in which they are set. Thank you.

TE URUROA FLAVELL (Māori Party—Waiariki) : Tēnā koe, Mr Chairperson. Kia ora tātou i tēnei rā. I am aware that time is moving on and I will take only a brief call. I find myself stuck with the Gangs and Organised Crime Bill. I tend to agree with many of the statements made by my colleague Shane Jones, because of the loss of two lives in Murupara, in my electorate. A young boy, Jordan Herewini, from Te Kura Kaupapa Motuhake o Tāwhiuau, was killed earlier this year. Another young man, Kaine Lewis, was killed about 5 or 6 weeks ago. Again, he was involved in a gang confrontation in Murupara. These deaths resulted in a hīkoi through the town.

If members do not know Murupara, it is a rural community way out in the middle of the bush. Once upon a time it was a thriving community. The vast majority of the people who live there are Māori. At this point in time many of them are unemployed. Basically, two gangs are involved in that town right now. The first is the Tribesmen, which has become established there. For all intents and purposes, that gang is made up of many people from the iwi of Ngāti Manawa and Ngāti Whare. The Mongrel Mob has also moved into town. The two altercations that resulted in the deaths of those two boys came out of gang confrontations and the use of colours, which is being discussed today. Having been associated with the young boy Jordan—we had travelled together on various trips—his death really hit home to me, and it certainly made me feel really angry in respect of the way that gang culture has developed in Aotearoa.

In reflecting on this bill, I wonder whether we will ever get rid of the whole notion of gangs in Aotearoa, but I tend to believe that we will not, because overseas experience overseas tells us so. No matter what strategies have been employed thus far throughout the world, it seems that there still remains a culture of “ganghood”, if you like, and that is the difficulty. No matter what we try to do with gang members—lock them up and throw away the key, or work with them—there still remains the whole notion of gang culture. Yet there have been some examples where working with them has produced positive results. Not that I am the expert on gangs, but I think back to the work that Sir Robert Muldoon sort of started and that others have picked up in terms of moving towards employment schemes and so on.

The strange thing about this experience is that in Murupara the people decided to take the bull by the horns and come back to our own tikanga. I am talking only about this particular situation, not other gangs. I am talking only about these two gangs, which we might call Māori gangs. They have basically called a rāhui, which is a prohibition on violence in their town. It seems to be taking off and working. It means that there is a lot of dialogue and a lot of talk between the people involved.

The Māori Party has been talking a lot about this issue. In particular we have been saying that we have to do something, but we ask what the something is that would produce the best results against the context of the fact that gangs will stay with us. Sure, some measures might happen to be on the side, but one of the things we are absolutely confident about is the need for us to empower communities to allow them to get on and deal with the issues within their own environment.

Since the time that the rāhui has been imposed, it has even got to the point that Ngāti Manawa have basically banned patches from their marae. I am not exactly sure of all the circumstances, but the following example could be a real situation. Imagine that a gang member has died in Wellington, and his family say that they want his body to go back to Murupara for burial, but the people back in Murupara say no. They say that he cannot come back. They say that if he chose that life, then he should stay down in Wellington. He cannot go back and be buried amongst his people in Murupara. The Murupara community will not even allow him to go to their marae. If his body was to go back to Murupara, first, the family needs to find a place for him to lie, and, second, the family need to have the people there agree that he can lie in the same urupā, the same cemetery, as all the ancestors. That is happening right now, today. If it is not today, then it was yesterday; I have spoken to the people about it. That situation is the sort of thing that can happen.

I am caught with the whole notion of having to do something, but, at the end, having discussed the issue in our caucus, we struggle with the notion of simply keeping on locking those people up. It might satisfy our minds right now, but we are looking for some other solutions on top of that. There is no doubt that those who commit those crimes should serve the time; I have no problem with that. But we have to do something about rehabilitation to try to get these people back into society. If it comes at a hard cost, like not being allowed to go back to be buried amongst one’s people, then that is a big call.

Mr Jones will know that not being allowed to be buried amongst one’s own people is a very, very big call. In fact, not even being allowed to go on to one’s marae to grieve over one’s relations is a big call. Just 2 weeks ago, there was a tangi in Murupara for a kuia who was about 90 years old. Her children are teachers. As soon as the rāhui came in and Ngāti Manawa banned the patches, the Tribesmen could not go on to their marae. It got a little bit dicey there, I am told, but in the end the gang members respected it. Further, they tried to go down to the urupā to bury her, and women stood on the road. Kuia and koroua stood on the road and said that they were to get the patches off or else they would not be going in there. They could choose one or the other and take their leave.

Serious efforts are being made on the part of our communities to take back our communities, and I use Murupara as just one example. The hope would be that the notion of using our own tikanga spreads. I do not know whether it would work in Kaitāia, Kaikohe, or elsewhere, but I am confident, based on what has happened in Murupara, that we can change the mindset.

While this bill is before us, I want the House to understand that our vote is about looking at other solutions. Although we do not support this particular bill as such, we understand the reasons for it, but we also want to look at the bigger picture. The solution might come not just from the law and order field or the justice field; it might come from the bigger picture. I wanted to raise those points, just in case other speakers from the Māori Party have not yet put that view. It will be a part of the picture painted with our vote later on in the other stages.

DAVID GARRETT (ACT) : I feel privileged—and I say this without a trace of sarcasm or insincerity—to have just heard that speech by Te Ururoa Flavell. It was a fantastic speech. I am aware of the case that occurred a couple of weeks ago, but I was not aware of yesterday’s case that he referred to. I say at the outset that I do not claim to be an expert on Māoritanga; it would be absolutely arrogant and ignorant of me to do so. But I know a little bit about it. What struck me about the case 2 weeks ago—and I am very sorry to have to point this out to my colleague—was that on the previous day it was revealed that his co-leader Dr Pita Sharples had met with gang leaders, in part to find out whether they were getting enough entitlements from the social welfare system. The next day the kuia whom Te Ururoa just referred to stood up and said that if gang members were going to dress like that, they should go away. I imagine the words might have been a bit stronger than that. Ordinary Māori people recognise those scum for what they are: scum and criminals. I think that speech was fantastic, and obviously that attitude towards gang members is a part of the solution to this problem.

It has been said by Te Ururoa and others that gangs will always be with us, and we just have to give up and accept that in some way. Not so! Not so! Dr Jennifer Walsh, a criminologist, was here to give evidence on the Sentencing and Parole Reform Bill earlier this year. I rang her the other day; we stayed in close contact. I just happened to say we do not hear as much as we used to about drive-by gang shootings in South Los Angeles, and she said they almost never happen now. I asked why that was, and she said it was because the gang leaders were all in jail—they were locked up. So the issue of gangs can be tackled. Yes, a multidisciplinary and multifaceted approach is needed, but the first step is to take the brave step that those kuia did on that marae in the Bay of Plenty two weeks ago, and to have a clear understanding that the gangs are criminal organisations that will not be tolerated.

Hon SHANE JONES (Labour) : Thank you, Mr Chairperson, for providing me with the opportunity to make a short contribution on the Gangs and Organised Crime Bill. I really enjoyed hearing my colleague Te Ururoa Flavell speak about the Murupara experience, but for me it reveals a deep ambiguity about where those Māori politicians in this Chamber stand in relation to gangs.

I agree with a community that binds together and seeks to censure or exclude criminals—because that is what the gangs are. Members should stop calling them “our people”. They are not our people. Our people do not go to jail for killing teenage boys. Our people do not go to jail for raping and for selling P, and celebrating that as a mark of distinction and success. They are not our people. In fact, they are not people. We have a word for that kind of thing in Māori. It is “taurekareka”. They are the slaves that, before Christianity, would have been dispatched without a sliver of a doubt—because that is how they are treating those teenagers in Murupara.

If communities believe that by relying exclusively on those proud, noble traditions that define us as Māori, such as rāhui, we will penetrate that fog of criminality, I have news for them. Those people will understand only one thing: ringa kaha, the full force of the law. It will offend a number of us in this Chamber to think that we as New Zealanders will have to embrace that level of harshness, but if we do not, those of us who are condemned to live with those taurekarekas have to worry when our daughters, our sons, our mokos, and our families go about their lawful duties and activities. Will they fall prey to those locusts?

So yes, there is a small glimmer of hope in Murupara. I was at a tangi where I heard a Mr Goldsmith of Murupara, an elder who lived and worked with my Ngāpuhi relations in South Auckland. He explained very vividly the dilemma. How can they continue to live in Murupara without full access or recourse to the police? They do not want to take the law into their own hands. He gave a very good account.

I say to every marae and every Māori community that if they are not prepared to shun those people, they will infiltrate their communities and ruin their lives. It may not happen in the more leafy suburbs of Auckland, although Paul Holmes can give an account that would suggest something slightly different. Those of us who live in the provinces and see how those people live on a regular basis should mark my words. We need to take a very staunch approach to them and stop regarding them as our people. To me, that not only corrupts the notion that we as Māori want to celebrate kinship but it provides them with a new level of cover and camouflage.

Members of the Māori Party must step away from the moral ambiguity they have over this. They will not support this bill. I say: “Shame on them!” They should not come to this Chamber and give us lectures about how kaumātua and kuia are showing courage in the face of killers—because within those gangs are the killers of those teenage children—when they do not have the boldness or courage to support this bill. That is why I hope that the moral ambiguity the Māori Party has is fatal in a political sense. Kia ora tātau.

The CHAIRPERSON (Eric Roy): Before I call the Hon Clayton Cosgrove, I say that these are fine speeches, but I am trying to connect them to Part 3 of the Gangs and Organised Crime Bill.

Hon Shane Jones: It’s gangs.

The CHAIRPERSON (Eric Roy): I know that. I have shown a great degree of tolerance and leniency in every part of the bill, but I ask members to address Part 3 at this stage in the debate.

Hon CLAYTON COSGROVE (Labour—Waimakariri) : I commend you, Mr Chairperson, on your tolerance, and on the way in which I think you have let this debate flow somewhat more widely than being simply on Part 3, which deals with aggravating factors at sentencing. Items have of course been brought to the debate that I think require answers. Mr Jones, Mr Flavell, and Mr Garrett, I think, have made points that are relevant, as we deal holistically with the insidious nature of gangs.

I am taking a short call to address, as my colleague Mr Jones did, Mr Flavell’s speech. It was full of emotion, and quite rightly so. Although he talked about the aggravating factors that had occurred in Murupara, where communities had been put upon, and where fatalities had occurred, I must say, in addressing what he said, that he told the Chamber that he would not be supporting this bill—and, I assume, this part, Part 3, which deals with aggravating factors. Mr Flavell is essentially saying that it is OK for those on the marae to lead the charge, as he rightly pointed out. But he is also saying, I think, and as Mr Garrett alluded to, that it is OK for his leader to meet with gangs and somehow put gang leaders on a platform. There has been a lot of debate about that, of course, in the community: is it a good thing or is it a bad thing to see them eye to eye and to spend $6,500 of taxpayers’ money doing it? It is OK, of course, to have gangs expunged from the marae and shunned from it, and to have those good people in our communities take that fight to the gangs, but the Māori Party is not prepared to support this legislation, and Part 3 particularly, and in supporting this legislation to support their own communities—the kaumātua, the kuia, and the others who are out there on the front line, as Mr Flavell quite rightly points out, doing their bit. They do not have to spend $6,500 of taxpayers’ money doing it, but they are telling people to get off the marae. My colleague Shane Jones leant across and said to me that in terms of expunging gangs from the marae, up in his part of the world that was tried 20 years ago, yet we are no further ahead.

I say to the Māori Party that I would like a reason why it will not support this bill, why it will not support Part 3, and why that party thinks it is appropriate to posture here in the Chamber and leave the fight back home out there. This issue is cross-cultural. This is not just a Māori problem; there are predominantly white gangs. We can have a look at the Christchurch Press this morning and read about them in the Dominion Post. This is not about culture. Like Mr Jones, whether they be brown, white, or any other colour or creed, I do not consider members of gangs “our people”, our citizenry, or part of our community. They are thugs, murderers, and rapists; they are those who do immense harm to our community. So I would be grateful if, at least for the Māori Party’s own constituency, Mr Flavell could get up and tell us why the kuia, the kaumātua, and our communities are left to take the battle against the gangs back in the home patch and on the marae, and why, hang on, the Māori Party, which purports to represent all Māori—I think wrongly, because that is ridiculous—will not stand up and support a bill that I think has most, if not all, parties’ support to crack down on the insidious nature of gang activity.

I mean, how many young people have to be killed, young women raped, or young people put into a life of crime and enticed by drugs, alcohol, and the other things that are peddled by these gangs? What will it take for the Māori Party to get the message right and consistent, instead of giving the strong message in here but the weak message out there? That Māori Party leader cannot meet with gangs, have lunch with them, spend six and a half grand on them, and then go around telling everyone that it was a great cultural experience and part of giving the message to gangs. That happened in June, and Mr Garrett and other members have spoken of the fatalities that have happened since then. The gang activity has rolled on.

I believe we should not give gangs a platform of equal status to anyone—not just to politicians but to anyone in our community—because in doing so it is recognised that somehow and in some way gangs are legitimate. Whether gangs be white, Māori, Pacific Island, Asian, or whatever, their activities are insidious, they are not part of our culture or community, and they should never be recognised. I invite the Māori Party to respond.

Dr CAM CALDER (National) : I move, That the question be now put.

• Motion agreed to.

• Part 3 agreed to.

Hon NATHAN GUY (Associate Minister of Justice) : It is great to take a call on the title of the Gangs and Organised Crime Bill. I understand that there was some debate on the title when the bill was before the Law and Order Committee. There was some confusion amongst certain members of the committee about the fact that although gangs that offend are one type of organised criminal group, as the term is used in section 98A of the Crimes Act 1961, organised crime is, indeed, a wider concept.

The bill has application to organised criminal groups, including gangs, but the legislation is drafted with sufficient breadth to capture white-collar corporate fraudsters, and, indeed, any group of three or more people with a specified common unlawful criminal objective. Any person who participates in or with such a group will be criminally liable and will face a term of imprisonment of up to 10 years.

The title of the bill also recognises the strong link between gangs and organised crime in this country. For example, just under 75 percent of the clandestine drug laboratories discovered by police in 2007 were identified as being linked to recognised criminal gangs.

This bill was part of the Government’s first 100 days, and this has been a very busy Government under the leadership of Prime Minister John Key. It is my desire that this bill be brought into force this year in order to provide police with greater tools to combat gangs and organised crime in New Zealand.

Hon CLAYTON COSGROVE (Labour—Waimakariri) : I will not take too much of the Committee’s time over what is a pretty simple debate on the title clause of the Gangs and Organised Crime Bill. I think the title is germane. The only question I would raise with the Minister in the chair, the Associate Minister of Justice, Nathan Guy, who has failed throughout the Committee stage to address this question at all, is one of resources. I ask whether this legislation should be called the “Gangs and Organised Crime (But Do the Police Have the Resources to Do It?) Bill”. Equally, one could ask the Māori Party whether it has dropped the ball on this legislation. As I said in my speech a few moments ago, I fail to see how anyone can preach in this place about “taking the fight” out to the communities, then sell out the communities by saying it is up to them to get the gangs off the marae and out of the square, and to take the patches off the gangs, without backing the communities through legislation. The question before the Māori Party is why it is voting against this legislation.

The Associate Minister makes a good point in that the debate has centred around gangs. They are the most visible, if you will, element of organised crime in our communities. They wear the patches and are pretty naked in terms of their criminal ambition, but we know that there are criminals who wear expensive suits. There are criminals who shun any disinfectant in terms of the light of the law that might be put upon them. They do not want the profile; they want to get on with their activities. In fact, I am told by some law enforcement officers that those criminals deal to anybody who might go off in a maverick way and commit violence. They deal to them quite heavily because they do not want the profile. They do not want the police taking any notice of them. They want to appear to be low profile and unthreatening. They do not have the huge gang fortifications. In some places, I am told, they live in some of the most posh suburbs of New Zealand. They do not want law enforcement having its eyes on them. There are tools within this legislation that will give the police and law enforcement eyes or ears on those criminals in terms of surveillance.

It is worth noting, as others have, that organised crime is not confined just to what we might see when Television New Zealand does the “smash, bash, and crash” exposé, as it does from time to time when something tragic happens, because it is gang stuff. What we do not hear about, because it does not have the graphic violence that can be splashed on the 6 o’clock news, is the gang member or organised criminal in the suit who works behind the scenes but who is equally insidious because he or she is peddling drugs in a more sophisticated way. Those criminals do not have barbed wire up on the front fence. They may live in the leafy suburbs and we may not know exactly who they are, but they are as insidious and despicable as anyone who wears a physical patch and tattoos, whether they be white, brown, or any other colour or creed, and who goes around in a physically menacing way and is visible around our communities. So we support this title. We hope the bill will be backed up by appropriate resources.

We again ask why the Māori Party waves the white flag of surrender in here, leaving it up to the folks back home to lead the charge against organised crime, and does not support a bill that gives those communities the tools, through law enforcement, they need to back the kaumātua, kuia, and the organisations that are standing up and saying “Taihoa. We do not want these individuals here.” The question is why it is a case of lion in here and lamb out there. Why will the Māori Party not stand up and support this bill? Is it because the Māori Party has some sort of bizarre view, as Mr Flavell has said and Mr Jones pointed out, that these gang members and organised criminals are somehow “our people.”? Like hell they are. They are not our people, and they should be run out of town. They should be run out of town by the Parliament. We should not leave it to the kaumatua, kuia, and others to do our bidding for us.

The CHAIRPERSON (Eric Roy): I just make a comment here. I have been extremely tolerant. This is the debate on the title and commencement. The member went well beyond that, and, in a way, he has incited responses. But this is the title and commencement debate.

TE URUROA FLAVELL (Māori Party—Waiariki) : I raise a point of order, Mr Chairperson. I do not want to debate the title and commencement. I had two shots and I have had two responses from two Labour members who have asked for a response. I want to make some comments in respect of the terminology—I definitely want to do that—but I want the chance to respond, if I could, and I will leave it at that.

The CHAIRPERSON (Eric Roy): I gave some tolerance to members on the Labour side of Chamber; I have no option but to give the member some tolerance. But I will conclude the debate on those matters, and any subsequent efforts will be on title and commencement.

TE URUROA FLAVELL (Māori Party—Waiariki) : Kei te pai. Thank you very much, Mr Chair. Firstly, I will speak with regard to the terminology. If we ask most New Zealanders about the word “gang”, the notion that would come to the mind of most New Zealanders would be that of Black Power, the Mongrel Mob, maybe some bikie gangs, people on motorcycles, and that is about it. Carmel Sepuloni raised the issue of colours, and after talking with some people in this particular area I say that those people do not seem to be classed as gangs, in a sense. So I want to check with the Minister in the chair, the Hon Nathan Guy, about what he said a little bit earlier, by raising the point about the definition of gangs, how far and how wide that particular definition goes. Mr Cosgrove has raised the point of whether white collar crime fits into the notion of gangs, and there might be some catches. It might fit under the other part of the title of the bill—“organised crime”, and so be it. But I make the point that the connotation of “gangs” is around the notion of Māori gangs or those that, let us say, affiliate to those Māori gangs. That is the first point.

Mr Cosgrove raised the notion of the cost in finding solutions. I raise the point again that I had talked about at least one community taking an opportunity and that I supported them on that particular notion. That is what the Māori Party says.

Hon Clayton Cosgrove: Six and a half thousand bucks!

TE URUROA FLAVELL: I will come to the $6,500 shortly. If there was support to allow those communities to get on with those solutions, then we would be happy because that at least is dealing with the problem and will get away from going to the next part, which is the $6,500. Mr Cosgrove talks about the cost to the taxpayer, yet the end result of this bill will be to lock up more people, no doubt; therefore, there is a contradiction in what he is talking about in that regard.

The third point I would make is that already now in law there are opportunities for the police to move in on gangs. We know that, because that is exactly what happened in a number of scenarios that people will be well aware of. Sure, this bill might harden up the legislation and, sure, it extends certain terms, but the law as it stands at the moment is able to deal with those issues. I respond by saying that that is one line. The law is already there that can take care of those issues, so what do we do to deal with the situation afterwards? We are just breeding more and more and more of it.

The Māori Party approach is that we need to look at alternatives. That is not to say that we should not throw them into jail; I told the Chamber before that those who do the crime should do the time. There is no doubt about that. We do not have a problem with that. But we are saying that we should look at other solutions. At least one community has put its hands up over the issue and we hope that that spreads. It is not to say that Murupara has all the answers. It does not, but at least it is right for people there. Other places will have different solutions. The point about back-up, too, is exactly right. We hope that rather than put $6,000, or whatever, into sending a person to jail, we put $6,000 on issues of rehabilitation. That would be helpful; that would be really helpful.

Hon Shane Jones: Mr Chair.

The CHAIRPERSON (Eric Roy): Just before I call the member I say to members that my tolerance has been—

Hon Member: Exhausted.

The CHAIRPERSON (Eric Roy): —exhausted and I will terminate the speech of any member not speaking now on the title and commencement. I say to members who want to continue this debate that this is a fine debate. The third reading is forthwith. I ask members to bear that in mind. If Mr Jones wants to make a contribution it must be on title and commencement.

CHRIS HIPKINS (Labour—Rimutaka) : I raise a point of order, Mr Chairperson. I draw your attention to Speaker’s ruling 110/7, which states “When debating the preliminary clauses at the end, members should have some latitude to summarise, and make concluding remarks about, the issues they have raised during the committee’s consideration of the bill.” I do not want to challenge your ruling, because I think you have done very well in providing some latitude for members in the debate. I just want to ensure that members are actually given the opportunity in this to summarise comments and to respond to comments that have been made through the debate.

The CHAIRPERSON (Eric Roy): The member is actually challenging me, but in a gentle way, and I am going to stand firm on what I have said. It is title and commencement from now on. I think we have got to the stage where both sides have been put, and we are having a third reading forthwith.

Hon SHANE JONES (Labour) : Thank you, Mr Chairperson, for observing some latitude; it was an impassioned issue. I would also like to acknowledge Te Ururoa Flavell. Both he and I are entitled to have our views recorded in the Chamber, and I respect the direction that he is coming from. I want that to be known because those of us who share common roots need to be of a common mind.

This is the Gangs and Organised Crime Bill, but I cannot resist the option of leaving the member with the feeling that the bill ought to be renamed. It ought to be renamed the “Māori Party Talks the Politics but Does Not Walk the Politics Bill”. The title reveals that the bill is not just about an ethnic problem; the problem, as we are warned, is how we respond as a legislature to organisations. The title of the bill contains the word “organised”; that requires a sophisticated response. We are also required to deal with the word “gangs”. Gang members want to have rights but not obligations, and that is probably where we differ from them. Unfortunately, I am unlikely to persuade a suitable number of people in the Chamber that the bill should have a new title. Therefore, as Labour is supporting the bill, we will tolerate the bill going forward with its current name, although we know that probably it could have been given a far more fitting moniker, given the contributions of some members of the Chamber.

• Clause 1 agreed to.

• Clause 2 agreed to.

• The Committee divided the bill into the Crimes Amendment Bill, the Local Government Amendment Bill, and the Sentencing Amendment Bill (No 3), pursuant to Supplementary Order Paper51.

• Bill reported without amendment.

• Report adopted.

Hon GERRY BROWNLEE (Leader of the House) : I seek leave for this bill to have its Committee of the whole House stage heard as one debate across all parts of the bill, with one question at the conclusion of this stage.

The ASSISTANT SPEAKER (Eric Roy): Leave is sought for that purpose. Is there any objection to that course of action? There appears to be none.

Hon GERRY BROWNLEE (Acting Minister of Agriculture): I move, That the Dairy Industry Restructuring (Raw Milk Pricing Methods) Bill be now read a first time. At the appropriate time I intend to move that the Dairy Industry Restructuring (Raw Milk Pricing Methods) Bill be considered by the Primary Production Committee, that the committee present its final report on or before 2 March 2010, and that the committee have the authority to meet at any time while the House is sitting, except during oral questions and during any evening on a day on which there has been a sitting of the House, and on a Friday in a week in which there has been a sitting of the House, despite Standing Orders 187 and 190(1)(b) and (c).

This Government is committed to delivering growth in order to ensure prosperity for all New Zealanders. Part of delivering on this commitment is ensuring a fair and competitive business environment. To this end, the Minister of Agriculture, the Hon David Carter, announced in September the Government’s decision to introduce a bill to amend the Dairy Industry Restructuring Act 2001 in order to replace the current regulated price formula for raw milk. The Dairy Industry Restructuring Act provided the authorisation that permitted the merger of the New Zealand Dairy Board, Kiwi Co-operative Dairies Ltd, and the New Zealand Dairy Group, to form the Fonterra Cooperative Group Ltd.

The Act promotes the efficient operation of dairy markets in New Zealand, and it does that by regulating the activities of Fonterra, thereby ensuring that the market for dairy goods and services is contestable. The contestability is achieved by a suite of pro-competitive measures, which include permitting the Minister of Agriculture to make regulations that compel Fonterra to supply up to 5 percent of its raw milk to independent processors at a regulated price. Raw milk is the milk collected from the farms before it undergoes any processing. The Minister may also specify the price, the method for determining the price, and other items and conditions.

The Act is also the empowering legislation for the Dairy Industry Restructuring (Raw Milk) Regulations, which we seek to amend with this new bill. The review of the raw milk regulations in 2008 identified that Fonterra was forced to sell the raw milk at a price much less than what it paid farmers for the supply of the raw milk, due to the formula being used. That was never the intent of the regulations. This bill proposes to replace the current regulated price formula for raw milk with the Fonterra farm-gate milk price, plus 10c per kilogram of milksolids, for the 2010-11 dairy season. The Fonterra farm-gate price is the milk component of the Fonterra payout, and represents the average price Fonterra pays its farmers for raw milk across the season. The 10c margin addresses the fact that independent processors can access a square or uniform milk supply, rather than a seasonal supply—a much more desirable result for all parties. Given that the uniform supply is considerably more valuable to processors than a seasonal one, the Government considers it fair that the regulations permit a margin to reflect just that.

The price change addresses the immediate underpricing of raw milk. The change is needed to ensure that independent dairy processors that buy raw milk under the regulations pay the same price for raw milk that Fonterra pays its farmers for the supply of that raw milk. The price change also provides independent dairy processors with the right economic incentives to source raw milk directly from farmers where practicable, rather than under the regulations. This better promotes the objective of the Dairy Industry Restructuring Act—that is, to create a contestable market for farmers’ raw milk and to ensure that the market operates efficiently and fairly.

To achieve this price change, the Act must be amended to allow the Fonterra farm-gate price to be incorporated in regulations through reference to an external document. In this case, it is the report of Fonterra’s annual accounts, as contained in its annual report for the respective season. The bill introduces a provision to allow external documents to be incorporated by reference in any regulations made under the Dairy Industry Restructuring Act. An option would provide for a more efficient method of pricing and allocation of raw milk amongst competing processors’ demands, and is one possible long-term solution to a regulated milk price. The bill permits the introduction of an option for the raw milk by regulation, and includes provisions for the Minister of Agriculture to specify the details of how such an option might function. The amendment future-proofs the Act by allowing the Minister of Agriculture to introduce an option in the future for amending regulations rather than further amending the Act. Since the Minister of Agriculture announced his intention to introduce this bill, he has received strong support for it from the primary sector, at both the processor and farmer level; no one should be surprised by that.

The Minister of Agriculture has asked me to inform the House that the review of the raw milk regulations in 2008 also identified considerable industry uncertainty regarding the end of Fonterra’s regulatory obligations to supply raw milk to independent processors. Currently, the relevant regulations will expire once a certain amount of competition for farmers’ raw milk has been reached in each of the North and South Islands. However, there is no mechanism available to industry participants for assessing when this obligation might cease, and no provisions for a phase-down or phase-out period. The Minister of Agriculture has announced his intention to conduct a consultation process on this issue to commence in this calendar year.

On behalf of the Minister of Agriculture, the Hon David Carter, I commend this bill to the House, but I add that it is very much a progressive bill and part of the Government’s overall programme to lift the economic performance of this country. There is no doubt that dairying is a significant contributor to the country’s export receipts, and people can rest assured that the opportunity to encourage growth in this industry at any level lies behind this particular bill.

I know that the Labour Opposition is likely to oppose this legislation, because it will lead to a lot more competition for the milk that is produced at the farm gate. Ultimately, I think that will lead to better prices for farmers. It will lead to the sort of investment that we have seen from the Open Country Cheese Co., and from Synlait, and that we know is planned by others around the country. It will facilitate the sort of stand-alone opportunities taken by farmers who supported their own cooperative on the West Coast, where they have had good prices for their product over a period of years.

In the end, New Zealand needs to be able to sell more produce overseas if we are to start getting the lift in export performance that we want. This enabling legislation will mean that there can be more creative thinking about the sorts of products that may be derived from raw milk. As many people in the House will know, a raft of things can be developed, further manufactured, or enhanced from raw milk.

Hon Parekura Horomia: What’s this joker talking about?

Hon GERRY BROWNLEE: The member opposite asks whether I know what I am talking about. I tell him that I do know what I am talking about. The quality of New Zealand milk is served a great testament by one look at him! He once described sheep as “nothing more than smelly sods.” I will not refer to him in such a way, but I will say that the fleece on his head looks as if it could contribute to New Zealand’s export receipts in a way that would be quite substantial.

With those comments I conclude my remarks. This is a very good bill, it is a progressive bill, and it is the sort of bill that people can expect to see more of from the National Government as we free up the economy, and as we free up those entrepreneurs in it who are committed to making our targets of better incomes for New Zealanders a reality.

Hon DAMIEN O’CONNOR (Labour) : I will not take too long to speak on the Dairy Industry Restructuring (Raw Milk Pricing Methods) Bill, other than to say that Labour will support it. This is an evolution of the Dairy Industry Restructuring Act that was passed under a Labour Government, and it is a natural evolution following a review that was carried out by the previous Labour Government to move forward on some of the problems identified in the supply of milk into the domestic market.

One thing I will say is that this bill should have been in the House some time ago. The National Government has seen fit to privatise the prison system and to do many other things before it moved on this vital area of economic growth for the country. The Government let the dairy industry remain in a period of uncertainty until it finally introduced this bill. I say shame on the Government and on the Minister of Agriculture for not having this bill in the House within the first 100 days. None the less, Labour will support the legislation.

Mr Brownlee has outlined what the bill does. It makes some technical changes to the Dairy Industry Restructuring Act. It allows, ultimately, for an auction system to be put in place. The previous Minister of Agriculture, Jim Anderton, had conducted the review and put to Cabinet a recommendation for an auction system. That would have proceeded, but the National Government, of course, sat on its hands and discovered in June of this year that there was insufficient time to put such a system in place. So the Government has had to introduce this new legislation into the House.

I think the bill is fair. It addresses the concerns that farmers have had for some time in the industry that independent processors were getting cheap milk—that is, milk that was collected by Fonterra tankers and delivered to independent processors at a cost less than the cost of the production, transporting, and coordination. At the same time, Fonterra had to build, I guess, for the possibility of taking all that milk, processing it, and turning it into something. So there was a potential cost there that was not taken into account in the original formula for working out the cost of milk. I think officials should take note that in the original Act they miscalculated a number of things. Their thoughts that there would be no major processors in this country competing with Fonterra have been proved wrong. There are now a number of potential processors, such as Russian companies, Synlait—and no doubt Ruth Richardson will sell that off to the Singaporeans or to anyone who will pay her a price—and other processors, as well.

I ask, however, what bill will be before this House next, and that is a very important question. This legislation is a natural development of the Dairy Industry Restructuring Act; the next bill about capital restructuring, dare I suggest, will be far more important. I hope that the National Government will pay more attention to that next bill than it has done to this one, because this issue should have been addressed back in January. The uncertainty has meant that an auction system cannot be put in place, and an auction system is the only fair way of long-term price establishment for raw milk. In the interim, the raw milk price, which is the price that farmers receive up and down the country for their raw milk less the value-added component that will be paid through their milk cheque payment, is that price plus 10c per kilogram of milksolids. That is a small premium to allow for the uncertainty that Fonterra faces as it has to collect the milk and manage its distribution through the independent processors.

There were some genuine concerns from businesses, like Cadbury’s and other high-value dairy industry processors, that were seeing the potential competition—competition that would mean they would not be able to access the volumes of milk they required for the certainty of their businesses. But we have now moved to a situation where up to 600 million litres of milk can be collected by Fonterra tankers and delivered to independent processors. That is a privilege, I suggest, for those independent processors in both setting up and running their businesses, but they will pay 10c over and above the raw milk price.

Labour will support the legislation, but we issue a warning to the Government that it should show more respect for the dairy industry, and process legislation in a more timely fashion. It will also have to pay careful attention to the next bill that no doubt will be before this House on the issue of capital restructuring. Thank you.

SHANE ARDERN (National—Taranaki - King Country) : I rise in support of the Dairy Industry (Restructuring Raw Milk Pricing Methods) Amendment Bill. But before I speak, in accordance with the Standing Orders, I need to declare that I am a supplying shareholder of Fonterra, the largest company that this legislation affects.

I will give a little history to the background of this bill, as did the Hon Gerry Brownlee, the Acting Minister of Agriculture, in his opening comments. This regulation came about as a result of much concern about the merger of the New Zealand Dairy Board, Kiwi Cooperative Dairies Ltd, and the New Zealand Dairy Group, which brought together one entity that was going to control at that time about 96 percent of all milk production in New Zealand. The Commerce Commission had major concerns about what would happen if small competitors in the industry tried to set up and Fonterra used its size to price milk in such a way that those competing interests would not get access to milk. That is basically the background to why the regulation was put in place in the first place.

What does this legislation do? It requires Fonterra to make available 600 million litres of its milk—of the milk of the shareholders of Fonterra, who now number about 10,000 farmers up and down New Zealand—to its competitors, the small companies that compete with it, at the price that is regulated. That, on the surface, sounds pretty heavy-handed, but the genesis of the idea was to allow for those small competing companies to get started. Over time, small companies have started up—a number of them have been mentioned—and there are now a large number of small companies in New Zealand. Some of them that compete with Fonterra are not so small, and they have been able to get access to prescribed litreages of that total of 600 million litres of raw milk. Also over time it has been discovered that the price the regulated framework prescribed was less than what Fonterra was having to pay its farmer-shareholders at the farm gate. So the proposal—the compromise, if you like—that has been reached is a sound step forward.

The farm-gate price plus 10c takes into account recognition of the fact that milk is not produced for 365 days a year in a uniform way; in fact, production is very seasonal. If we look at grass growth graphs, we can see that grass grows at a much higher rate in November than it does in July. In fact, in Taranaki in September we were growing 100 kilograms of dry matter per hectare a day, which is a record growth rate, I understand, for the area. Grass does not grow evenly, therefore milk cannot be produced evenly. There are the so-called shoulders, which are the periods in the season when milk production is less than it is at other times in the season. For that reason, the processing side of the industry invests a lot of money in stainless steel—in plants, separators, cheese-processing facilities, tankers, and that type of stuff—to cater for peak milk. There is a lot more capital required for peak milk times than there is for the shoulder parts of the season or the lower producing times of the season.

The 10c premium is in recognition of the fact that not all prices are even and not all production is even. I think it is a reasonable stab; I suspect it is still on the low side but I think it is a reasonable compromise. Fonterra is happy with that. Competing companies are grizzling about the fact that they have to pay a bit more but, by and large, to my understanding they are reasonably comfortable with it. It does reflect the investment that Fonterra has made in the substantial capital required there.

There is a larger issue coming, and the Acting Minister touched on it—that is, when is a small, competing, start-up company no longer a small, competing, start-up company? Some of these companies have been operating now for some time; in fact, some were operating before Fonterra was. So at what point should they no longer have access to milk that is arguably still subsidised by the large company Fonterra? The philosophical debate will go on for ever, and members are well aware of it, about whether one company in New Zealand should be the dominant force, and what percentage of the industry should belong to other companies. That debate, in my view, has been totally debunked over the time that I have been in this Parliament, in the sense that if we talk to any of the other primary industries, or to any other export and manufacturing industries, the one thing they all say to us is that having a dominant or large presence in the markets where we compete is the No. 1 driving factor to price, back in New Zealand. Because of Fonterra’s single focus on international markets and the structure that has allowed that to happen, we are very competitive internationally in the dairy industry—hence, the growth in the dairy industry.

I have listened recently to commentators talk about how Fonterra has been a poor performer, but a 5.8 percent growth year on year since the company was formed makes it difficult for me to understand what they mean by that, especially when I compare Fonterra with other companies, such as Carter Holt Harvey, for example, or any type of company members want to mention in New Zealand that is dealing primarily in the export of products that have to be developed from raw commodities that have a perishable life. We can take any companies—we can go through all the rest of the primary industries—and we can name the lot, but none of them competes with that level of growth. Those who suggest that Fonterra or the dairy industry should emulate the structures that some of those other companies employ need to look at what has actually been the end result of Fonterra and its single marketing structure, which has allowed that company to export to 150 countries around the world, and to have, as I said, those kinds of growth rates.

This legislation about the restructuring of raw milk pricing methods is fundamental to that concept, because if we decide that the company should be broken up, that the industry should fragment, or that we should have 15, 20, 40, or even 50 percent of whatever figure we pick of the total amount of milk produced in New Zealand go to companies other than Fonterra, then we are actually suggesting that that single focus on international markets is not the endgame. That is the ultimate thing. Of course all of these debates come about when we start talking about the further capital required for developing markets such as China, where there is huge opportunity, with which New Zealand has a free-trade agreement, and where the dairy industry has a strong presence and will continue to have a strong and growing presence.

So there is a debate, and there must be a balance in what will be the best in terms of how the industry can develop going forward, where it will secure its capital, and how many competing small companies there are in New Zealand. Surely it is healthy to have some small competing companies in New Zealand; I agree with that concept. Certainly some of the innovation that comes out of our small companies is healthy. But to suggest that Fonterra should be broken up or in some way fragmented, or that its dominance in the market place is unhealthy, is very much a bury-the-head-in-the sand approach that does not look at the history of the other organisations and companies, primary producers, or exporters that have adopted that approach. In fact, all of the other industries that I am aware of are trying to emulate a more focused market structure internationally. Obviously there is a lot of debate about size in the meat industry, and about how that industry and various other industries can achieve Fonterra’s kind of single-focus marketing. You know, they are looking to Fonterra for leadership.

I am happy to support this bill. I know it is a step forward. I look forward with some enthusiasm to the next round of debate. Certainly, this is a good move for the Government and for New Zealand today. Thank you.

DAVID SHEARER (Labour—Mt Albert) : I rise to speak in support of the Dairy Industry Restructuring (Raw Milk Pricing Methods) Amendment Bill. As my colleague Damien O’Conner mentioned, this bill came about through a review of the dairy industry. That review was conducted under a Labour Government and it identified three key issues that needed to be addressed. Firstly, the current wholesale price of the regulated pricing formula systematically underpriced regulated raw milk to independent processors. Secondly, there was no system for managing the excess demand for regulated raw milk by independent processors. Thirdly, there was unmanaged transition risk associated with the ending of the statutory obligation on Fonterra to supply regulated raw milk. There needed to be an addressing of these issues.

One of the ways in which that was proposed was to introduce an auction process for raw milk in the 2010-2011 season. Unfortunately, although this review was done in 2008, the bill has not entered the House until the end of 2009. That means that the auction process will not be ready for the season as envisaged. The interim solution being proposed in this bill is to amend the regulated price to the Fonterra farm-gate milk price and add a price adjustment of 10c a kilogram to the price of milksolids. That seems a reasonable suggestion, given that the auction process will not be in place in time. That will remove the irritant to farmers of underpricing milk to independent milk processors in the time it takes for the auction price to come into being. The principle underlying this bill is also to ensure that adequate competition is maintained without favouring one group over another. I think it is very important that we acknowledge that independent processors can take New Zealand milk and turn it into high-value products. This part of the scheme should be maintained and we need to acknowledge the value that these independent processors are able to bring.

Applying science and innovation to our primary product is where New Zealand’s real benefit comes from. Of course, we can continue to ship large amounts of raw milksolids abroad, as we do, and it is the major component of our exports and our income in our dairy industry. Over time, I suggest that countries like Chile and China may well be big markets for our products, but they will also be major producers of such products. Indeed, we are sending our scientists over to Chile and China to help them develop their dairy industries. They will become not only consumers but also competitive producers of dairy products. Our ability to stay ahead is, therefore, very much dependent on how we use our brains, our science, and our innovation in the production of our dairy industry. As Rutherford once stated: “We haven’t got the money, so we’ve got to think!”. He was dead right. We are rich in natural resources, but we need to apply our brains to keep us ahead. That will enable us to remain economically viable.

The importance of small processing companies is in contrast to Fonterra itself. Although I do not disagree with my colleague across the House Shane Ardern about Fonterra and the need to ensure that it maintains its market place, we have to note that Fonterra receives 92 percent of New Zealand’s milk. However, its investment to add value has not been particularly successful in Fonterra’s case. Last year its bumper price was a $7.90 per kilogram payout, but only 31c of that was value-added. Fonterra is a great exporter of ingredients that go overseas. These then get turned into products that are sold at higher value by other companies abroad. That needs to change. As the New Zealand Herald noted: “The need to lift Fonterra’s products beyond bulk cheese blocks and milk powder has never been more urgent. Last year, the company cited opportunities in medical nutrition, cheese slices for McDonald’s worldwide, pizza toppings in 30 countries and pharmaceutical grade protein, among others. Eight years ago when Fonterra was founded, these were the sort of sophisticated products envisaged. The medical and pharmaceutical uses chimed well with the Labour Government’s “knowledge wave” of its early days. Now they are close to the heart of a new Prime Minister with ambitions to lift the country’s economy to a higher level of value.” These were the promises that we wanted from Fonterra, but we are not yet getting there.

I argue that our ability to add real value to New Zealand is also our ability to ask Fonterra to consider not just what it gets over the farm gate—and this comes back to the question of its shareholders—but also what real value it can add to the New Zealand economy. It is for that reason that I find the Government’s decision to ditch the Fast Forward scheme so reprehensible. Putting up, as the Labour Government did, $700 million for research and development funding seemed a pretty good deal, and that was going to be matched with private funding that would enable certainty in innovation and in the abilities of our scientists to know where they were going. It would have built partnerships between the private sector and public sector—as we have seen in the case of Fonterra, so desperately needed—and encouraged innovation. Unfortunately, it was ditched. In its place, the Government’s Primary Growth Partnership is a rather cheap and nasty alternative. It offers only a fraction of the advantages that the Fast Forward scheme did. It shows that this Government knows the price of everything but the value of nothing.

Interestingly enough, just to add to that general theme, we recently had a situation where the chief executive officer of AgResearch in Hamilton, Andrew West, was bemoaning that he had to send his scientists to places like Chile to help those countries with their farming industries in order to generate the 9 percent return that this Government insists on. I have absolutely no problems with a Crown research institute being able to wash its own face to, in a sense, not cost the taxpayer money. Under the previous Labour Government, although we set the figure at 9 percent, anything that was produced by the Crown research institutes was turned back and put into research, not, as this Government is doing, put into the deep, dark recesses of the consolidated account. I believe that this Government does not understand that every $1 invested in a Crown research institute could lead to $10 or $100 return by our New Zealand farmers. Instead, it is focusing on the 9 percent return that the Crown research institutes are producing—a rather short-sighted policy.

In conclusion, we support this bill in its first reading. We believe that it addresses some of the anomalies and the difficulties that are apparent and were highlighted in the review that the Labour Government conducted in 2008, and for that reason we support this bill in its first reading. Thank you.

Dr RUSSEL NORMAN (Co-Leader—Green) : The Green Party will be supporting the referral of the Dairy Industry Restructuring (Raw Milk Pricing Methods) Bill through to the select committee, and there we will have a bit more of a look at it. The Green Party, I think, has an interesting relationship with Fonterra. On the one hand, the Greens have been extremely critical of Fonterra’s performance in terms of its environmental impacts. Although some of the programmes that Fonterra has been running have been good, overall we know that the intensification of agriculture has been driving the deterioration in water quality in our lowland rivers, and now in our groundwater. That intensification is a major problem. On the other hand, the Green Party also has tremendous sympathy for the cooperative structure of Fonterra. The Green Party is a big supporter of cooperative structures. We think that a producer cooperative is actually a very good model, and it is most extraordinary that the largest enterprise in the New Zealand economy is, in fact, a producer cooperative. That is completely at odds with the laissez faire ideology that has dominated New Zealand since the mid-1980s. Fonterra has proven that the laissez faire, neo-liberal ideology is wrong, time and time again.

It has been interesting for us to watch as National has attacked Fonterra time and again. Currently, we see the attack on Fonterra from Open Country Cheese. That company threatens the New Zealand ownership of the dairy industry. The idea of Open Country Cheese, and of a series of other companies like it, is to break into the New Zealand dairy production sector and break up Fonterra. The reason that the Greens have a problem with this is that aside from the fact that Open Country Cheese is basically the “National Party Inc.”—Wyatt Creech and John Luxton were involved in setting up the company—we think that it undermines the cooperative structure whereby the producers own the industry. We are big supporters of the producers owning the industry in the dairy sector; that is tremendously important. Open Country Cheese also threatens the New Zealand ownership of the dairy sector. The cooperative structure of Fonterra means that it is very difficult for foreigners to take advantage of our almost non-existent foreign ownership laws in order to get control of one of our most important sectors. The Greens support the role of Fonterra in protecting a critical part of the New Zealand economy.

So although we have some disagreements with Fonterra, particularly around water-quality issues and agricultural intensification, we are interested to make sure that this bill, and other bills like it, do not fundamentally threaten the cooperative structure of our dairy industry. That is why we will follow the submissions to the select committee. The cooperative structure of the industry is one of the key ways to protect New Zealand ownership. It has also been one of the key ways that we have built the dairy sector into such a productive sector of our economy. If we had not continued to support the cooperative structure, and if we had just allowed a laissez faire approach to be taken, which has been the ideology of both National and Labour Governments for much of the last couple of decades, then we simply would not have a cooperative like Fonterra today. We would have a bunch of competing, foreign-owned corporations that would not be adding much to the New Zealand economy, whatsoever. The Wyatt Creech model, which the National Government supports—Open Country Cheese—has been in conflict with Fonterra. It has been interesting to watch that, and particularly to watch the latest labour relations episode up north. Of course, lots of the local farmers had tremendous sympathy with the workers at Open Country Cheese. Local farmers have no sympathy for the Open Country Cheese corporation, because it fundamentally threatens the cooperative structure of the industry. Most dairy farmers who are part of the cooperative understand that Open Country Cheese is part of the problem, and have no sympathy for it whatsoever, even though the National Party is in donkey deep with Open Country Cheese.

One of the other things that I think has been quite interesting about Fonterra has been the growth of the organic milk sector. Some players that are independent of Fonterra have played an interesting role, but we have also seen Fonterra play an important role in the development of the organic milk sector, and in the increase in production out of organic milk. There is still a really long way to go, and we certainly do not want this bill to threaten that, but so far Fonterra has played a significant role in the emergence of the organic milk sector. We think that it could play a much bigger role than it does currently, and we look forward to seeing Fonterra embrace the organic sector even more, but none the less it has played a really important role.

For those reasons, and with those brief introductory comments, I will leave it there. The only other thing I would say, as the bill touches on the issue of water quality and Fonterra’s role in the agricultural sector, is that it has been quite worrying to watch the Government going after water conservation orders, attacking Fish and Game New Zealand, and now attacking Environment Canterbury as an attempt to protect dirty dairying. The Government is basically acting in the best interests of the big irrigators, rather than standing alongside the other parts of the industry. Lots of farmers inside Fonterra care deeply about water quality and are trying to do something about it, to improve it, whereas the Government is purely on the side of the irrigators and is trying to break water conservation orders, trying to break Fish and Game New Zealand, and now trying to break Environment Canterbury because it dares to stand up against the irrigators and dirty dairying.

I think that most of the shareholders of Fonterra would like the Government to actually protect our clean, green reputation, which, in the long run, will be one of the key ways that we add value to dairy produce. By having a brand of integrity, a brand that respects animal welfare, and a brand that respects environmental performance as well as labour standards, in the long run the value added by the dairy sector will be much higher than if New Zealand milk products are not seen as a brand of integrity. We will not have a brand of integrity if the Government of the day backs dirty dairying instead of clean dairying, which is, of course, the policy of the current Government. In the long run that will undermine New Zealand’s image of being “100% pure and clean and green”. To me it seems quite important to support those elements in Fonterra who have a genuine interest in cleaning up the dairy sector and making sure that, in the long run, we have a brand of integrity, with clean and green milk products coming out of New Zealand. Fonterra can play a key role in that. So the Greens will be looking at the submissions on this bill as they come into the select committee, and we will be watching the issue closely. We will support the referral of the bill to the select committee.

DAVID GARRETT (ACT) : I rise very briefly on behalf of the ACT Party to support the Dairy Industry Restructuring (Raw Milk Pricing Methods) Amendment Bill.

When I arrived in this place I was told many things, as new MPs are. One of those things was in relation to the Greens—that with Dr Norman it all comes back to water and with the other one it all comes back to trees. We have just seen a wonderful example of that. I despair for the radio audience at home, and I see in relation to the live audience that most of them have more sense than to be in here on such a nice day listening to us rabbit on at length about something that needs very little said.

The bill promotes competition and gives farmers a choice about whom to sell their milk to. That is a very good idea, and we support it, and I do not intend to take up any more of the House’s time.

TE URUROA FLAVELL (Māori Party—Waiariki) : Tēnā koe, Mr Deputy Speaker. Kia ora anō tātou katoa. Over the course of this urgency we have dealt with issues relating to DNA and identity, the impact of gangs and organised crime, and, most recently, the Whakarewarewa and Roto-a-Tamaheke Vesting Bill. I want to say that those are very important issues for the Māori Party. They are issues that obviously strike at our heart as a people. In the space of one brief morning we have traversed issues relating to our whenua, to the exercise of kaitiakitanga, the relationships experienced by mana whenua, the protection of whakapapa, and the pursuit of whānau ora. In the context of these hefty matters of State it is somewhat humbling to now rise to make a contribution to this debate about the price of raw milk!

The bill sets in place, as I understand it, a process to make new regulations for the auctioning of raw milk at a regulated price to independent processors. The thinking behind the legislation is to ensure that excess demand for regulated raw milk is managed efficiently. There will be a fair and efficient price, and industry uncertainty will be removed.

So what relevance does that have to the Māori Party and, even more so, to the constituents of Waiariki? Well, we know that Māori are the largest natural grouping of pastoral farmers in Aotearoa. We farm an area of some 720,000 hectares, worth an estimated $7.5 billion. If that is not compelling enough, Māori dairy owners own an estimated 100 million shares in Fonterra, so roughly one in 12 Fonterra shares is sourced to Māori. The level of complexity and sophistication of the Māori farming business sector is such that some 19 of the 23 corporations in the Waiariki Māori Land Court district—that is 83 percent—have engaged a consultant. Further research found that every member of the Te Arawa Dairy Group, a collection of Māori dairy incorporations and trusts, employed a farm management consultant or other technical adviser. So what are we doing here today? We hope we will make those farmers’ jobs easier by introducing some consistency to the regulations around raw milk prices.

There is much more than just putting up the price of milk at stake here. Looking at the 2006 census, we see there were some 1,323 Māori—

Hon Darren Hughes: Speak from the heart, man.

TE URUROA FLAVELL: —I am trying—dairy cattle farmers and another 372 Māori dairy cattle farm workers. I pulled these statistics out particularly for Mr Darren Hughes. In essence, the bill permits the current regulated wholesale milk price to be replaced with the Fonterra farm-gate milk price. On top of that, a price adjustment of 10c per kilogram of milk solids will be introduced from the 2010-11 dairy season, and I am sure that will rock the socks off Mr Hughes again. Up to this point, the wholesale raw milk price has underpriced regulated raw milk, I tell Mr Hughes, by between 10 and 35 cents per kilogram of milk solids.

Hon Darren Hughes: That’s not right.

TE URUROA FLAVELL: OK. If that does not sound like much, it adds up to a difference in price of between $5 million and $17 million per year.

Hon Darren Hughes: Auē!

TE URUROA FLAVELL: Ai, taukiri e. Consultation was undertaken throughout the industry over the last 2 years, and apparently there was widespread concern about Fonterra’s ability to manipulate the price of regulated milk. I am told that more consultation over the future of the regulated milk supply is planned by the end of next year.

At this point, the Māori Party is happy to let this bill go on to the select committee, and mooove on—

Hon Member: That was an ad lib.

TE URUROA FLAVELL: Just let it mooove on—

Iain Lees-Galloway: Don’t milk it.

TE URUROA FLAVELL: —I never would—particularly so that people can have a say, and not bleat on too much, as it moves through the House and share their knowledge and wisdom about this particular bill, which we hope will be able to progress rather rapidly. Kia ora tātou.

COLIN KING (National—Kaikōura) : It is a pleasure to rise and speak on the first reading of the Dairy Industry Restructuring (Raw Milk Pricing Methods) Bill. I think it is worth acknowledging some of the other speakers who have spoken before us and addressed some of these statements. This bill is hugely important to the nation’s economy and needs to be seen in the light that it deserves to be seen in.

It is interesting to go back to the first Labour speaker, Damien O’Connor, who accused the Government of sitting on its hands. I would accuse the previous Labour Government of disregarding farmers, because that member came into the House only due to the retirement of another member. That is where farming is measured, in the minds of the Labour Party. Farmers are so far down the party list that they do not make it into the House unless somebody retires. From that point of view, I think it is a bit lame and limp to accuse the Government of sitting on its hands when Labour did nothing to promote farming in its 9 long years in Government.

Another point that is worth making is that Fonterra has been wearing this inequity for 7 years, and the best that Labour could do when in Government was to just do a report. It has effectively been left up to a John Key - National-led Government to do something about it. Those are two points that I would like to make and put back to Labour—that it has sold farmers down the drain.

With regard to the second speaker, who spoke about primary growth partnerships, we are very positive about that initiative. It will put $140 million per year into research and development, and I am sure that it will satisfy the thirst of Andy West, if Andy would only stay on the same verandah for more than 5 minutes.

I turn to the comments from the Greens. They were advocating support for the cooperative model one minute, then bashing up farming for every other reason in the next. I point out that it was Fonterra that initiated the Dairying and Clean Streams Accord. It has been hugely successful and is something that we want to celebrate. At this time I also take the opportunity to acknowledge Barbara Stuart on the release of her book My Valley, My River: The Rai Area and the efforts of Landcare Trust, especially in my own electorate of Kaikōura, and in the Rai Valley where it has done tremendous work in making sure that it develops best practice and improves on it.

I will touch on the cooperative model for a moment. Having come from the meat industry, I look at it with a high level of admiration. I have given it a lot of thought, and, in my mind, the single answer for why there is a high level of cooperation within the dairy industry is that it is dealing with such a perishable product. If the industry did not cooperate, within 4 days the product would be history. If we stop and think about the meat and wool industries, we see that the meat industry shipped its first shipment of frozen meat from Port Chalmers in 1882 and it took months to get to its market, and then it was sold. Meat is not as perishable as milk. When we look at wool, we see that it is not uncommon for farmers to sit on their wool when prices are low. Today we are seeing a brave attempt by the Minister of Agriculture to work towards a position where we can lock in some gains for producers so that they do cooperate.

I will now move on to the bill because it is very important. To give some context, Fonterra is 90 percent of the industry, but that is 90 percent with conditions. I sometimes lament the watchful eye of the Commerce Commission when it tries to make sure that all the competition rules are in place. When Fonterra was formed, it had to pick up all the milk supplies. That meant that it had to pick up the milk supplies over in Tākaka, way out there in Golden Bay. It had to pick up milk in places where it was not economically viable.

Shane Ardern: And paid the same price.

COLIN KING: As my learned friend Shane Ardern mentions, Fonterra had to pay the same price. There is no level playing field for Fonterra.

When we look at it in the context of competition, we can see competition sprouting up in the areas where there is low apple production and fewer opportunities. The second Labour speaker also mentioned that we are not seeing innovation. I say to that member, and to the rest of the Opposition, that we are certainly not seeing innovation from the competition. In actual fact, if you look at the commercial disciplines around being successful, you produce the cheapest, simplest product—

Grant Robertson: I’m sure the Speaker doesn’t.

COLIN KING:—and I was not referring to you, Mr Speaker. I apologise. We go about making a product as efficiently and as cheaply as possible, and we do not take risks in adding value. If we look at where the value is being added, we see the innovative way that Fonterra has been able to market its products into 140 to 150 other countries, overcoming trade tariffs, and overcoming tariff barriers of up to 70 percent. I think it is cruel to an extreme to point the finger at Fonterra and say it is not innovative. If there is one fault with Fonterra, it is that it has become too good too soon. As my friend Shane Ardern mentioned, it has had year-on-year growth of 5.8 percent. If our economy had risen to that level we would be back to where we should be aiming—in the top half of the OECD.

We have 600 million litres of milk available. That is quite interesting because the way the restructuring Act of 2001 was worded, the Minister of Agriculture may require a new cooperative, which was Fonterra, to supply up to 5 percent of its New Zealand milk supply to independent processors at a regulated price. So that is what we are actually talking about. It is all very good, but we are right on that threshold already.

This bill will be referred to the Primary Production Committee, which we will be ably chaired by my learned friend Shane Ardern from Taranaki - King Country, and it will be dealt with in a very professional manner. We will deal with it in such a way that there is the best outcome possible for Fonterra, because we are very, very proud of Fonterra. It has the critical mass, it has an international brand, and on that basis we can celebrate it internationally. It is the only international company, in this land mass of some 4.5 million people, and is a shining light of direction to many of our much older pastoral sector industries, such as the meat industry and the dairy industry.

It gives me great pleasure to commend this bill to the House, and I look forward to the opportunity of casting our eye over it at the select committee. Thank you very much.

SANDRA GOUDIE (National—Coromandel) : I am delighted to speak to the Dairy Industry Restructuring (Raw Milk Pricing Methods) Bill. Agriculture is the life blood of this country and should never be forgotten. Whenever agriculture takes a setback the effect is felt right throughout the rest of New Zealand over a period of time. The cities feel the very negative effect of the setbacks that happen in agriculture. I do not think people in our cities understand enough the importance of agriculture to our economy.

In agriculture, dairy has its rightful place. Fonterra is an outstanding example of an industry that has taken itself to the international stage and has been one of the leading performers. The dairy farmers of Fonterra work pretty hard. It is a hard life, but it is a good life. They are prepared to do the hard yards, and if people understood what they actually did on the farm they would probably have a much greater appreciation of the time and effort that goes into our milk industry. Why should the dairy farmers of Fonterra put all that effort in just for the results of that hard work to go into somebody else’s pocket? It is great to see the Dairy Industry Restructuring (Raw Milk Pricing Methods) Bill going through this process to make sure it is much fairer and more equitable for the farmers who are doing the hard graft to produce that milk, and that they can do so with the least interference. There should be as minimal interference as possible in the industry, while also making sure that it is fair and equitable.

It came to my attention that Mr Anderton did not consider the arrangements that were in place as a subsidy. That clearly shows that he does not fully understand the issues. On the flip side, the Greens considered that it was a subsidy, and liked it because it was. That is typical of the Greens. They want what others have got, or they expect others to pay for what they want. That is the typical Greens scenario. I also point out that Fonterra supplies organic milk. In actual fact, Fonterra is the biggest supplier of organic milk. So instead of bagging it all the time, maybe it is about time the Greens gave it some bouquets and told it what a great job it is doing in terms of organic milk. Fonterra is actually calling for more suppliers of organic milk. However, it is up to farmers to choose whether they want to take up the opportunity to provide organic milk or continue with the standard milk supply. Over time, the market demand might change, which might change the minds of farmers. It is quite clear that in the United States the market demand for organics is on the increase. There are ever-growing market opportunities for organic products.

One of the continuing problems for the agricultural sector is the on-farm costs. They are the costs that keep building year on year. The worst of those on-farm costs is rates—council rates. Everybody thinks they can clip the ticket whenever a farmer purchases something or has to pay for something. Everybody has the till out and they are clipping the ticket for as much as they can get out of the farming sector. At some point that has to change.

Mr DEPUTY SPEAKER: Sorry to interrupt the member. The noise level is too loud. I am having difficulty hearing the member.

SANDRA GOUDIE: At least in the Dairy Industry Restructuring (Raw Milk Pricing Methods) Bill we are getting somewhere and stepping in the right direction. I am delighted that National is taking this initiative.

CHRIS AUCHINVOLE (National—West Coast - Tasman) : I would like to acknowledge some of the speakers who have gone before. I could not quite follow the logic of the Green Party speaker and his assertions—[Interruption] Well, I was keen to try—over the cooperative model.

Just for the record, the export dairy industry was initially founded in the 1800s by an immigrant to Taranaki from China, a Mr Chew Chong. He bought fungus from Taranaki farmers, which was sent overseas for bird’s nest soup and that sort of thing. On occasions he also bought dairy products, and, in particular, salted butter. He was a speculative individual and an enterprising person. He sent a barrel of salted butter to the UK and had it immediately sent back again to New Zealand to check the quality. It returned in perfect condition, and that started the beginning of export products to the UK from the dairy industry. However, unfortunately for Mr Chong, as his business grew—I think he was at Eltham—the industry developed into some proprietary production companies and some cooperatives, a referendum was held, and the industry determined to establish itself as a cooperative industry. That has been repeated, I think twice, since then. It is not an accident that dairy farmers work in a cooperative. It was a deliberate, considered intention.

Also, price management is not new to the dairy industry. Indeed, when I was involved in that particular industry, I well recall there were limits. I think my colleagues here will be able to help me out. I think any price for a new season could be only 10 percent above the price of the previous season, and it could be only 5 percent below the price of the previous season. [Interruption] An equalisator was not necessarily, in economic terms, the best way to run an industry, because what happened, I think it was in the 1980s, was that the Dairy Board carried a full year’s value of cash equivalent so that it could pay farmers out on that basis. But I would have thought Labour would be singing more joyfully about the whole thing, even though it has been very good in supporting it, because Labour Governments of the past have certainly been fundamental to the development and growth of the dairy industry, and Labour should be able to share in the parliamentary pride. I think it was 1936 when the Labour Government responded to industry calls for assistance, and introduced a minimum price for milkfat of—I do not know, someone might be able to help me again—I think it was a shilling a pound. Again, it provided stability. It provided certainty. The Dairy Industry Restructuring (Raw Milk Pricing Methods) Amendment Bill does the same thing. We are enacting procedures that have a historical part to play in the industry. The dairy industry is a very, very strong part of the New Zealand economy.

Jo Goodhew: Say it again.

CHRIS AUCHINVOLE: I certainly will say it again. The dairy industry is a very, very strong part of the New Zealand economy.

Shane Ardern: How strong?

CHRIS AUCHINVOLE: It is extraordinarily strong.

The National-led Government is committed to delivering growth to ensure prosperity for all New Zealanders. Part of this commitment is ensuring a fair and competitive business environment. The bill provides that for the farming and dairy sectors. The interesting thing is—and I am sure my colleagues on the other side of the House will forgive me and indulge me—

Hon Darren Hughes: We’re always forgiving the member!

CHRIS AUCHINVOLE: I am sure they will indulge me if I point out that I have not heard any comments from that side of the House on the real value of independent cooperatives operating within New Zealand. The second-largest dairy company in New Zealand is the Westland Cooperative Dairy Co. It declined to join with Fonterra and it has had a very successful time since the amalgamation, and it will continue to do so. It works in harmony with the rest of the industry.

Shane Ardern: Plus the local member.

CHRIS AUCHINVOLE: Thank you. It would be wrong of me, as the local member, not to mention the excellent efforts made by Westland, and by Tatua Co-operative Dairy Co., which I think would be the third-largest company in New Zealand. It has been known for a very, very long time for the way in which it has developed. I think it started with frozen creams and aerosol creams. There is certainly no lack of initiative, no lack of enterprise, and no lack of good management within the New Zealand dairy industry.

I will just finish by acknowledging the contribution that you, Mr Deputy Speaker, have made to the dairy industry in a previous career. It was a time that I shared with you at the Dairy Board, and I would like to acknowledge the time we had together. [Interruption] No, it was not a load of bull. I was involved not only in artificial breeding but also in dairy products themselves. Thank you.

• Bill read a first time.

Hon NATHAN GUY (Minister of Internal Affairs) on behalf of the Minister of Agriculture: I move, That the Primary Production Committee consider the Dairy Industry Restructuring (Raw Milk Pricing Methods) Bill, that the committee report finally to the House on or before 2 March 2010, and that the committee have authority to meet at any time while the House is sitting (except during questions for oral answer), and during an 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 NATHAN GUY (Minister of Internal Affairs) on behalf of the Minister of Commerce: I move, That the Settlement Systems, Futures, and Emissions Units Bill be now read a second time. The Settlement Systems, Futures, and Emissions Units Bill proposes three main amendments. The first is to allow for trade in securities and other products to be cleared and settled through designated systems that meet the expectations of international and domestic participants in New Zealand’s financial sector. The second is to align the regulation and exchanges seeking to operate in both securities and futures markets, and to provide that a person approved by the operator of an authorised futures exchange is an authorised futures dealer. The third is to clarify the regulatory treatment of emissions units.

The Commerce Committee made a number of useful changes to ensure that the legislation better achieves those objectives. The definition of “insolvency” was deleted and replaced with a new definition relating to when a participant becomes subject to an insolvency event, on the date and time when an insolvency officer is appointed in respect of the participant. It is critical that the moment at which a participant becomes subject to an insolvency event is clear, since new section 156S removes the finality protection in respect of a participant’s settlements 24 hours after the participant becomes subject to a specified insolvency event.

Several amendments were also made to avoid potential problems in the event that a participant in a settlement transaction was declared insolvent while the settlement was only partly completed. The bill provides that the finality protection extends for 24 hours after the commencement of an insolvency, to complete any settlement that was already in progress. In addition, a further amendment means that an insolvent participant could regain finality protection if his or her transactions were duly authorised by the relevant insolvency officer appointed upon insolvency. Additional changes of a technical nature were made to ensure effective alignment between the bill and other relevant legislation, including the Companies Act 1993, the Insolvency Act 2006, and the Insolvency (Cross-border) Act 2006. For example, the amendments clarify which legislation applies to netting under the rules of a designated system, and to netted balances, as defined by the Companies Act and the Insolvency Act. This means that for any transactions subject to netting under the rules of a designated settlement system, the general setting-off provisions in section 310 of the Companies Act, or section 254 of the Insolvency Act, would apply to the resulting balance and any transactions between the parties that were not netted.

The intention of the bill is that those provisions prevail over the Insolvency (Cross-border) Act in regard to settlements made in accordance with the rules of a designated settlement system. The bill as it stands maintains various penalties for offences relating to a designated settlement system, ranging from fines and imprisonment to revocation of designation. One change was made to bring the maximum fine for a body corporate into line with other jurisdictions. A number of changes were also made to the matters to be considered by regulators. New sections were inserted to expressly include the adequacy of a settlement system. Financial resources are among the factors that may be considered by the regulators in deciding whether to grant, vary, or revoke a designation. In the light of recent financial market failures, this addition is a worthwhile precaution, in conjunction with the existing general reference to considering the capability and capacity of the system operators. Another factor that regulators may consider in decisions regarding a designation is the impact on participant creditors of specifying that a settlement systems operator’s interest in property transferred to the operator by a participant, or in which the participant has granted a security interest to the operator, has priority over security interests in the property under new section 103A of the Personal Property Securities Act 1999.

The final change I note is the change to the period within which the joint regulators, the Reserve Bank and the Securities Commission, could disallow a proposed amendment to the rules of a designated settlement system, which is to be reduced from 40 working days to 20 working days. Should the regulators not disallow an amendment, a provision was also made to enable them to notify the contact person of the designated settlement system, and to allow the amendment to come into effect earlier than the end of the 20 working days.

I want to record my appreciation of the participation of many members of the financial sector through the select committee process, along with the work of the officials, and, indeed, the Commerce Committee itself. It did some fantastic work. I appreciate that other parties in the House are keen to see this bill progress as part of an overarching commitment to building a sound and effective regulatory environment. I commend the bill to the House.

• Debate interrupted.

CHARLES CHAUVEL (Labour) : The Settlement Systems, Futures, and Emissions Units Bill is designed to help facilitate trading in emissions units through the development of carbon markets. It will apply regardless of whether the units are issued by the New Zealand Government, via international protocols, or by other Governments. The bill allows for a broadening of how an emissions unit is defined—this is very important given that carbon trading is still in its infancy, particularly in this part of the world. The bill also provides a basis for establishing the legal title to emissions units, much like the title surrounding, for example, tradable shares. Participants in the carbon trading system—which is voluntary—who wish to become designated and then maintain that status must ensure that their operating rules meet certain standards, including international standards and those of the joint regulators, the Reserve Bank and the Securities Commission. This provision concerning joint regulation is the result of a change recommended by the Commerce Committee.

This bill would help—but is no means vital—to set up and implement the emissions trading scheme. The bill was before the House last year, because it was introduced by the previous Labour Government in September 2008, but since then we have had a change of Government and seen a drastic shift in policy surrounding climate change and emissions trading. It has not been a shift to the country’s benefit. Because of this Government’s lack of direction on climate change, we have missed out on—but could have had—a world-leading carbon market. That could have placed us at the forefront of environmental and climate change policy and reinforced our place as a role model in the international community. However, the Government’s lack of direction on climate change has limited the possibility of our making any gains on the environmental and emissions trading front. We have seen dithering from this Government in the areas of climate change policy and emissions trading.

To begin with, the Government’s delaying of the emissions trading scheme has already caused our emerging carbon markets to grind to a halt. The forestry sector has suffered hugely from this, due to a documented lack of international investment. Foresters remain unsure of whether to sell their credits, trade them, or just sit on them—assuming they took an allocation of credits when the allocation became available. The dithering over forestry, combined with the repeal of the preference for renewable electricity generation, the removal of the biofuels obligation, the replacement of the New Zealand Energy Efficiency and Conservation Strategy—for which there is still no alternative—and the confusion in generation policy, caused by the confusion evinced by the Minister of Energy and Resources, Gerry Brownlee, over the existence, or not, of the 90 percent renewables target, has left New Zealand well down the order when it comes to climate change initiatives. So this bill is important and needs to be brought forward quickly in order to allow us to salvage what we can out of the carbon trading space. It is a real shame that it was not brought forward much more quickly. This is just another example of how this Government is mucking around in the important area of climate change.

Katrina Shanks: Nine long years.

CHARLES CHAUVEL: I welcome Ms Shanks back from Europe. I am sure she would have heard much criticism of New Zealand’s backsliding when she was there. This bill provides us with yet more evidence of that backsliding. I do not know what the Government thinks that it will get by way of a welcome at Copenhagen—[Interruption]—apart from the “Fossil of the Year” award, perhaps, as my colleague Moana Mackey just said. It certainly will not be a warm welcome, and it certainly will not accord with the Government’s wish to get policy concessions in important areas like forestry and land use. That is certain, given the reputation we seem to have garnered in the last year of not taking this area seriously.

The other disappointment is that this bill has not been given higher priority on the Order Paper—even though the House, I might add, has been under urgency for the last 6 parliamentary weeks. This is a concern, because the bill should have been treated with more urgency. It is one of the few in the urgency motion that actually merits its place. The Government is intending to ram through an undermined emissions trading scheme, yet it is dragging its feet on implementing the necessary regulatory framework to create a sound environment for the emissions trading scheme to operate in—namely, this bill. If the Government’s attitude to consultation over the emissions trading scheme—which has been to avoid consultation and democracy, as we have seen over the last couple of weeks in the select committee—is carried over to bills such as this one, which supports an emissions trading scheme, then we should be seriously worried that, in setting up such a framework, stakeholders may not be able to have as much input as would be desirable and beneficial.

We are fortunate that the financial sector has been helpful in making submissions on this legislation to the Commerce Committee, which is so ably chaired by my friend and colleague Lianne Dalziel. I hope that it will continue to make that sort of constructive input, because the Government’s attitude to input so far really does not offer much encouragement. If the passing of this bill had been expedited and there had not been the dilly-dallying over climate change policy that we have seen over the last year, New Zealand would by now have a leading carbon registry. National could have taken up the previous Labour Government’s initiative on the emissions trading scheme and pushed through supporting legislation such as this.

Let us look at what this has cost us, apart from the forestry example I gave earlier. TZ1 could have been the prototype of an international carbon registry. It could have given us a huge competitive advantage, given where we were moving in climate change policy and our geographical advantage. Mr Lotu-Iiga knows about this, because he has experience in this sector. Given our time zone, it could have been of great advantage to us to have a leading international carbon registry. But now that has been sold to overseas interests. Perhaps the outcome reflects the Government’s lack of confidence in managing things, or perhaps it reveals, more worryingly, the fact that it really does not care about implementing sound climate change policy. The tragic truth is that it is probably a bit of both.

Labour will continue to support the progress of this bill through the House, but with reservations in regard to the Government’s treatment of it and the issues that surround it. We reflect with regret on the consequences I have outlined—the loss of a chance to be an outstanding and forward-thinking international citizen and the loss of the opportunity, through TZ1, to be a global leader in carbon registries. It is important to record, here and now, that the blame for those two issues lies fairly and squarely at the feet of the National Government, supported on this shameful occasion by the Māori Party.

PESETA SAM LOTU-IIGA (National—Maungakiekie) : I am pleased to take a call in the second reading of the Settlement Systems, Futures, and Emissions Units Bill. I acknowledge the sponsor of the bill, the Minister of Commerce, the Hon Simon Power, and also the chair of the Commerce Committee and the previous Minister of Commerce, the Hon Lianne Dalziel, who introduced this bill in September 2008. The Commerce Committee, of which I am a member, received and considered 12 submissions, and reported on 22 June this year on the bill.

The bill is designed to align New Zealand’s clearing and settlement system with international best practice. It is also designed to facilitate trading in futures and emissions units. Firstly, it provides that trades in securities and other products can be cleared and settled through designated systems that meet the expectations of international and domestic participants in New Zealand’s financial markets. Secondly, it aligns the regulatory environment for exchanges seeking to operate in both the securities and futures markets. Thirdly, it allows market participants who are approved by an authorised futures exchange to be deemed to be authorised to deal in futures contracts. Finally, it clarifies the regulatory treatment of emissions units, to support the development of the market for emissions units.

The bill provides settlement systems operating in New Zealand with the option of applying for designation. Designation provides additional legal protections to support the integrity of the system in the case of a participant’s insolvency or default. Specifically, it provides the operators of a designated settlement system with priority under the Personal Property Securities Act 1999. At present New Zealand’s legislation provides for the designation of payment systems under Part VC of the Reserve Bank of New Zealand Act 1989. As has been stated by the two previous speakers, the bill aligns the regulation of exchanges that are seeking to operate in both the securities and futures markets. The Securities Markets Act 1988 currently provides one process for registering a securities exchange, and a separate process for authorising a futures exchange. The bill amends the Securities Markets Act so that an exchange registered under Part 2B of that Act may be registered either in respect of securities markets or futures markets only, or in respect of both securities markets and futures markets. The choice is open to those who are seeking such registration.

The bill also provides that market participants who have been approved by an authorised futures exchange under its operating rules are authorised to deal in futures contracts on any futures markets operated by the authorised futures exchange. That does not affect the ability of the Securities Commission to authorise futures dealers more generally, but codifies the existing class authorisations granted by the Securities Commission and makes them available to any authorised futures exchange.

The previous speaker touched on emissions units, and I want to comment briefly on them. The Finance and Expenditure Committee is doing good work on the Climate Change Response (Moderated Emissions Trading) Amendment Bill. But this bill clarifies the regulatory treatment of emissions units, to support the development of the market for emissions units. This applies, as Mr Chauvel has stated, to both units issued as part of a statutory scheme and units issued in the voluntary market. It does take into account the Kyoto Protocol. It gives effect to the policy through technical amendments to existing legislation. For example, the bill clarifies that emissions units will be treated like other forms of property under the Securities Act 1978. As a result, trading in emissions units will not need to meet the requirements of the regulatory regime for offers of securities or the relevant provisions of the Securities Markets Act until they are part of an investment scheme.

I was a member of the Commerce Committee, which sat and listened to submissions on the bill. The key recommendation from the committee to replace the definition of insolvency with a new definition of “becomes subject to an insolvency event”. This is critical because it is the moment at which a participant becomes subject to an insolvency event, and it is much clearer. The committee proposed several amendments, to avoid potential problems in the event that a participant in a settlement transaction became subject to an insolvency event while the settlement was only partly completed. Although such a situation is unlikely, it is wise to close any gap in the difference in timing between those two events, especially in the current global financial climate. The bill as introduced provides that the finality protection extends until the earlier of 24 hours after the commencement of the insolvency, or the time when the designated settlement systems contact person has notice, or ought to have notice, of the insolvency. The committee’s recommendation that finality protection would extend for 24 hours after the commencement of insolvency is regardless of when the contact person has such notice. This would remove any uncertainty over the receipt of notice, while maintaining a 24-hour window after the commencement of an insolvency in which to complete any settlements that were already in progress.

I will now touch on penalties. The bill proposes various penalties for offences relating to designated settlement systems, ranging from fines and imprisonment to the revocation of designation. It was submitted that the revocation of designation was the only necessary and effective penalty. But the committee concluded that a range of penalties is more appropriate, as revocation is an extreme measure under any circumstance. Without lesser penalties, minor or even moderate offences that did not warrant revocation might go unpunished, and that would inevitably undermine the system. There is also a need for penalties against individuals, as the committee believes the possibility of employees being held personally accountable would greatly increase the incentive to comply. After comparing those penalties with penalties in other jurisdictions, the committee proposed one change to the level of penalty for corporate bodies. It recommended that the maximum fine for a body corporate should be reduced from $1 million to $750,000, bringing it into line with fines in other jurisdictions.

I have given a summary of the key issues that were involved within the committee in bringing this bill to its second reading, and I commend the bill to the House. Thank you.

MOANA MACKEY (Labour) : I am very pleased to be able to stand and take a call on the second reading of the Settlement Systems, Futures, and Emissions Units Bill. I acknowledge the work that was done by the Commerce Committee on this bill.

Todd McClay: A very orange speech.

MOANA MACKEY: I thank Mr McClay. I also acknowledge the work of the Hon Lianne Dalziel, who was the Minister who brought this legislation into Parliament. As my colleague Charles Chauvel has said, this bill has a very complicated title and is technical in its substance, but it is very important. It helps us to facilitate trading in emissions units, through the development of carbon markets. As has been said, it does so regardless of whether those units are issued by the New Zealand Government or issued internationally.

I am also pleased to see the broadening of the definition of “emissions units”, which allows for the innovation and development of what will inevitably happen in a carbon-trading market that is in its infancy. The bill provides the basis for establishing a legal title for emissions units, which will be important as we move forward and as carbon markets become far more important, both domestically and around the world. The system is voluntary, and those who want to become part of it become designated, and to maintain that status must ensure that they meet certain rules and standards. Although this bill is obviously very important to the emissions trading scheme, that scheme does not rely on it for its implementation.

I come back to some comments that were made by my colleague Charles Chauvel. This bill was introduced into the House last year. It was reported back from the Commerce Committee in June and has languished on the Order Paper while other legislation, which in all honesty would be deemed to be far less important, was progressed through the House. The fact that the Government has allowed this bill to languish is an indication of how seriously it takes emissions trading schemes. This is a very important bill for our international credibility, and I think the Government did this while being well aware that it was going to dither and faff around on emissions trading, so there really was no reason—

Aaron Gilmore: How do you spell that?

MOANA MACKEY: It is f-a-f-f. It is a technical term. It is a word Mr Gilmore did not invent, which is hard to believe! I come back to the bill. I endorse the comments my colleague Charles Chauvel made. I am currently a member of the Finance and Expenditure Committee, which is looking at the legislation to amend Labour’s emissions trading scheme. That legislation is being pushed through with unnecessary haste, after no action since this Government came into power.

The committee members are in the position that we do not have time to do the work that we are meant to do as a service to this House and as elected members of Parliament. We do not have time to consider departmental reports and revision-tracked legislation. I have never been on a select committee that has been under such ridiculous time pressure—ridiculous. When that committee reports back and members of the public can see what went on at that committee, and see what members may or may not have done to try to get more time, I think it will be quite clear that this Government does not take emissions trading seriously at all. I say that with great regret, because there are missed opportunities as a result of this legislation and the emissions trading scheme being delayed.

One missed opportunity was the chance to have a world-leading carbon registry based here in New Zealand. It was from an organisation that wanted to look for a country that was in the time zone New Zealand is in. It wanted a country on the opposite side of the world, so that when people in that organisation were asleep, New Zealand was awake. It would have been a 24-hour service. That organisation looked and it found a country that was not the first in the world to have an emissions trading scheme, but it was certainly taking it seriously and putting in place a scheme that had environmental and economic credibility. It was a country that would have been perfect for establishing a carbon—[Interruption] I tell Dr Mapp to wake up. OK, clearly my speech is as enthralling as that. His colleague might like to wake him up.

We had the opportunity to have a carbon registry in New Zealand that would be world leading. It would have provided jobs and wealth to New Zealand, and we lost it. We lost it, because of this Government’s actions on the emissions trading scheme. The Government should be ashamed of that. Labour supports this legislation. We brought this legislation into the House. We brought it in at the time when we had a functioning emissions trading scheme and the possibility of having an active carbon market in New Zealand. That has been shot to bits by this Government. People in the forestry sector do not know where they are. They do not know whether to get the credits, and they do not know whether they can sell them or sit on them. They do not know what to do, because no one knows. We do not have any certainty around this emissions trading scheme.

The only certainty we have is that generations of New Zealand taxpayers will be paying billions of dollars—billions of dollars—to prop up the heaviest emitters in New Zealand. That is not fair, and it should not be happening.

Hon David Parker: What’s the subsidy per employee?

MOANA MACKEY: The subsidy per employee at Rio Tinto, interestingly enough, is about $200,000 a year. It is $200,000 per employee per year, and subsidies are going to Rio Tinto. It might have been cheaper if that employer had—

Aaron Gilmore: The member needs to get a calculator and learn some literacy and numeracy lessons, so she can actually count.

MOANA MACKEY: That employer would probably just want the $200,000, because I bet that the employees are not being paid $200,000. Mr Gilmore is going very red in the face at the moment now. I realise that he was instrumental in setting up the Kyoto Protocol, and we need to show him respect for doing that. In fact, I think he defined the terms “global warming” and “climate change”, and I bow before his greater knowledge. I look forward to his speech, when he will regale us with the way that he has worked largely in this area and has developed a system around the world.

But the fact is that the scheme we have now has no economic credibility and no environmental credibility. We are setting up a carbon registry system that we will not even be able to use properly, because we have legislation that will not work.

KEVIN HAGUE (Green) : I will take just a short call to outline a few points behind the Green Party’s decision to support the Settlement Systems, Futures, and Emissions Units Bill at its second reading, as we did at its first reading.

First of all I state that the Green Party shares absolutely Labour’s critique of the Government’s climate change policies, but we note that the regulatory framework that this bill sets up will be necessary for the development of a viable emissions trading scheme and carbon trading market in the future. Who knows? Possibly even the groundswell of public opinion and, indeed, the international opprobrium that the Government will encounter in Copenhagen may be sufficient to change this Government’s policies on climate change, and we may find the regulatory framework to be of use sooner than we thought.

In general I will make about four points. The first is that it is important that New Zealand’s regulation of settlements is brought up to date and is in line with world best practice. The Green Party supports the bill from that perspective. Secondly, the bill goes a long way towards clarifying how settlements are made and the mechanisms for resolving issues when disputes arise. That is very important in order to avoid unnecessary litigation, and it will give participants a lot more certainty on how they manage their risk. Thirdly, clarifying who carries the risk at what stage of a transaction is vital if our stock market is to function competitively. We support the bill for that reason also. There is inherent risk in the Reserve Bank being both a regulator and a participant. The Commerce Committee has made some adjustments, and it has retained the Commerce Commission as a co-regulator. That may well address the issue adequately, but we must remain vigilant and monitor that particular aspect.

In finishing—I did say that this would be a short call—I am struck by the contrast between the debate we are having on this bill and the speech the House heard from my friend and colleague Sue Bradford immediately prior to the dinner break. I remind the House that Sue spoke about the warning we have been given over, I guess, the last 18 months of a collapse in the global economy that is inherent in the way it is structured. That economy has acted as a huge imposition on the real economy. When we examine the factors that have been implicated in the warning that we have been given by the crisis that we have faced over the last 18 months, we see that the speculative economy has played a very great role. It is clear from most of the world’s Governments and international organisations that part of the formula for remedying that problem is to have greater regulation of the speculative economy. Members of this House would be familiar with the Green Party’s policy of trying to redirect investment away from the speculative economy and into the real economy, and aware of our proposals for various measures to achieve that: transaction taxes, a capital gains tax, and limitations on losses that could be attributed to loss attributing qualifying companies. All of those measures will be important. Fundamental regulatory change to the way that we handle the speculative economy will be necessary.

In some ways, the adjustments that we are making to the regulatory framework today seem like tidying up rather than rearranging the deckchairs on the Titanic. A much greater reform of that framework will be required, and the Green Party remains committed to holding the House to that obligation. But, that said, the changes the bill makes to the regulatory framework are necessary, and the Green Party will continue to support this bill.

KATRINA SHANKS (National) : It is my pleasure to take a call and speak in favour of the Settlement Systems, Futures, and Emissions Units Bill this evening. This bill was first brought into Parliament in September last year by Lianne Dalziel, who was then the Minister of Commerce. The current Minister of Commerce, the Hon Simon Power, is now in charge of it for its second reading and its Committee of the whole House stage.

This bill addresses three areas. The first is to do with settlement systems. The Reserve Bank of New Zealand Act 1989 is amended to provide for the designation of systems that clear and settle products, not just payments. The second area is futures. The Securities Markets Act 1988 is amended to align the regulatory environment for exchanges seeking to operate in both securities and futures markets, and to provide that market participants approved by an authorised futures exchange are deemed to be authorised to deal in future contracts. The third area is emissions units. The Securities Act 1978, the Securities Markets Act 1988, and the Personal Property Securities Act 1999 are amended in order to clarify the legal treatment of emissions units.

This bill had some quite complex issues attached to it, so I take this opportunity to thank the officials. They gave us some fantastic advice and kept on simplifying these complex issues so that we understood them properly and understood the impact that this legislation will have on the sector. I also thank the submitters, who made some very complex, detailed submissions to the Commerce Committee. I acknowledge the NZX for its submission; it was very detailed and very informative for the committee. Our officials used that submission a lot when we were formulating decisions as to what changes we would make to this bill before it was brought back to the House. So I take this opportunity to thank officials for their work.

In 2007 the New Zealand Exchange requested that the Government urgently provide legislation to support an upgrade of its existing clearing and settlement system, and the expansion of its exchange-traded products to include futures and emissions units. In response, Cabinet approved the introduction of this bill, which we saw at the end of last year. A robust market mechanism is necessary to facilitate improved risk management and functioning of New Zealand’s capital markets, to develop the products that exist in the market, including preserving the ability for businesses, and to develop carbon and other derivatives and over-the-counter markets that offer a regulated and authorised clearance of settlements function. If we are serious about getting our economy going, we must be serious about the capital markets as well.

I would like to talk particularly to the emissions units part of the bill. The bill clarifies the regulatory treatment of emissions units to support the development of the market for emission units. This applies both to units issued as part of a statutory scheme, such as the Kyoto Protocol, and to units issued in the voluntary market. It gives effect to this policy through technical amendments to existing legislation. For example, the bill clarifies that the emissions units are to be treated like other forms of property in the Securities Act 1978. As a result, trading in emissions units will not need to meet the requirements of the regulatory regime for offers of securities or the relevant provisions of the Securities Markets Act unless they are part of an investment scheme. The bill also amends the Personal Property Securities Act 1999 to enable persons to take possession of, and security interests over, both statutory and voluntary emissions units.

The select committee made some recommendations in relation to the definition of “emissions units”. It recommended that clauses 27, 33, and 36—covering the definition of “emissions units” to be inserted into the Securities Act, the Securities Markets Act, and the Personal Properties Act—be amended to include units in accordance with any enactment of a jurisdiction within another country, or any international treaty or protocol. That is very important. These clauses should also be amended to include the storage of greenhouse gases in the definition. The carbon market is still quite new, so the definition of “emissions units” should be broadened to allow for the evolution of this market, and the changes that we will see in the future. This might involve technological developments in the way carbon is managed and stored, and developments in the sources of carbon credits. Regarding sources, for example, the committee noted that “increasingly carbon credits are being issued by state or local governments, under international treaties and protocols, and through legal or contractual arrangements, in addition to being issued by central governments.” The definition specified in the bill needs to be wide enough to cover all potential sources of credits so that this bill stays relevant for a period of time.

The bill is designed to align New Zealand’s clearing and settlement system with international best practice and to facilitate trading in futures and emissions units. It provides that trades in securities and other products can be cleared and settled through designated systems that meet the expectations of international and domestic participants in New Zealand’s financial sector. It aligns the regulatory environment for exchanges seeking to operate in both securities and futures markets, and provides that market participants in approved and authorised futures exchange are deemed to be authorised to deal in all these future contracts. This bill clarifies the regulatory treatment of the emissions units to support the development of the market for emissions units. That is just one part of the changes that we made in this bill. I will leave my colleagues to expand on the other two parts. It is my pleasure to support this bill tonight. Thank you.

Hon DAVID PARKER (Labour) : I thank the previous speaker on the Settlement Systems, Futures, and Emissions Units Bill, Katrina Shanks. I thought her contribution was thoughtful and useful in terms of the way in which carbon markets could evolve. I agreed with the comments she made.

I think it is probably timely to reflect on why we are creating carbon units in New Zealand. The world has to reduce carbon emissions if we are to avoid some of the catastrophic changes that are predicted by many scientists to occur if carbon dioxide and other greenhouse gases continue to build up in the atmosphere. We have changes in temperature, rising sea levels, changes in patterns of food production, acidification of oceans, loss of reefs, and loss of species in the sea that produce calcium for shells—they will not be able to produce that calcium because of higher levels of acidity in the ocean. These are very serious matters. The theory that lies between the creation of carbon rights and emissions pricing is that we need to create an economic incentive for the businesses that produce the goods we all consume, so that businesses are encouraged to produce goods and services for us to buy that do not cause carbon emissions, and to make it more profitable for them to produce a different product where those carbon emissions are absent.

We do that by charging emitters for the cost of their emissions. We put a price on carbon dioxide, methane, and other greenhouse gas emissions, and that price is avoided by those who produce goods and services in a way that does not produce carbon dioxide and other emissions. So those emitters that are going down the clean route have a price advantage, compared with those that are producing carbon emissions and then suffering a price disadvantage. In that way we bring forward renewable electricity instead of coal-fired electricity. We change lots of little decisions in society. It becomes cheaper to run a light car, so an aluminium car becomes more viable compared with a heavier steel car, because the aluminium car uses less fossil fuel and therefore has lower carbon emissions. All of these complex pricing decisions, which we will never notice, happen because we price emissions. This bill sets up some of the regulatory framework to make sure that those carbon obligations can be dealt with in commerce in the way that other securities can, so this bill is worthy.

The bill was introduced by the previous Government over a year ago, and it has taken a year for this Government to get it back from the Commerce Committee, which is a bit long. Why did the New Zealand Exchange, as the previous speaker said, come to the Government with a sense of urgency a year and a half ago to get this legislation progressed? The answer to that is that at that time there was an opportunity for New Zealand to lead in this way, given that emissions pricing was clearly on the way in New Zealand and around the world. Given that that was going to happen, our stock exchange figured that it might as well take advantage of the commercial opportunities that arose in any way that it could. It spent quite a bit of money on developing a business plan to take advantage of the fact that New Zealand was leading in this arena, so that it could take advantage of the service industry opportunities that would arise from New Zealand being at the forefront of developing this new market.

That did not mean that New Zealand was going to slay the economic interests of emitters. We were not going to cause aluminium smelters to shut down or farming to go broke. We were not going to cause the steel mill to go broke, or anything like that. But we were going to start pricing emissions, because since the start of 2008 New Zealand has already had to face the cost for increasing emissions. It was important that that reality was reflected in the economy, and that we sent the signal to emitters in New Zealand to stop producing increases in emissions at a cost to the country. We do that by making them pay for some of their emissions.

Unfortunately, in the last year since we have had a change in Government the impetus has been lost. Nowhere is this clearer than in respect of what has happened with the New Zealand Exchange. It has now effectively abandoned its efforts to be a leader in this field. It has given up on the business opportunity that had arisen as a consequence of the previous Government’s actions. That has had a real economic effect on New Zealand: instead of New Zealand having an additional profit centre as a consequence of our leadership in this area, New Zealand has a Government saying that somehow we should not lead in this area, despite the enormity of the environmental challenge. It says that we should just sit back and be a follower of the rest of the world. One of the prices of being a follower, rather than a leader, is that we cede the economic opportunities of being the advanced guard in running the related service industries for other jurisdictions. Instead of New Zealand having that economic opportunity, it is falling instead to other countries around the world, including Australia. It is with sadness that I reflect on the fact that although this bill is still necessary, it does not provide the point of advantage it would have had for the New Zealand Exchange and the service industry, because New Zealand has lost both its moral authority in this area and the business advantage it accrued from the fact that the previous Government was treating these issues responsibly.

I do not think there is much more to say than that. Fewer units will be traded than would have been the case, because of course the softening of the emissions trading scheme on major emitters is such that billions of dollars of units will now be paid for by taxpayers over the years rather than by emitters. They will have to buy fewer emissions units in the market, therefore, there is less of a need for this bill than would otherwise have been the case. That is another reason why the business opportunity will not be as great for the service industry. With those comments, I say that the Labour Party is happy to support the bill, but I feel that it is sad that the business opportunities that surrounded the service industry have been lost to New Zealand because of the short-sighted measures the National Government has taken. Thank you.

JONATHAN YOUNG (National—New Plymouth) : It is my pleasure to stand and speak in support of the Settlement Systems, Futures, and Emissions Units Bill. I believe that our Government has brought changes to the emissions trading scheme because we are seeking to bring a better balance between our economic opportunities and our environmental responsibilities. We felt that the advantages that the previous speaker, the Hon David Parker, spoke of would bring very strong disadvantages to other sectors of our community, so we believe that our more measured approach is far more sustainable.

This bill, which was introduced by the Hon Lianne Dalziel towards the end of last year, was reinstated in the 49th Parliament in December because it is essential legislation, particularly with regard to emissions trading in the global sense. Putting regulation in place for that to happen is very important. The member in charge of this bill is the Hon Simon Power, the Minister of Commerce. It returned from the Commerce Committee in June this year.

There are a number of issues that this bill addresses. It is a very complex bill. Most New Zealanders probably will not understand it, but people in the foreign exchange, securities, and futures area of work and interest will be very interested in this bill. One of the areas that was discussed in the select committee was the choice of a regulator for designated settlement systems. Several submissions questioned the efficiency of appointing joint regulators for the designation of settlement systems. However, we recommend the joint regulator model be retained because it is effective, without compromising administrative efficiency.

We considered these two potential models of regulator: the Reserve Bank of New Zealand as a sole regulator with a duty to consult with the Securities Commission, and the Securities Commission and the Reserve Bank as joint regulators. It has been suggested that the oversight of settlement systems is primarily a matter of prudential regulation, and, as such, the Reserve Bank is best placed to perform that role. However, the settlement of transactions per se is primarily a regulatory matter for the Securities Commission. Thus, both the Securities Commission and the Reserve Bank have a legitimate interest in the operation of settlement systems in the financial sector. To provide for a sole regulator with a duty to consult, the bill would need to be amended to provide protocols around the duty to consult the other party, its role in the process, and the extent to which the views of the other party need to be taken into account. That would be less flexible than providing for joint regulators that may coordinate internally and more seamlessly.

The assessment of an application for designation is a complex task. The work of preparing guidelines in assessing an application is split between two regulators under the joint regulator model. Such work can be allocated according to the expertise of the agency and its particular interest in settlement systems. In this regard, the joint regulator model is underpinned by provisions in the bill that allow the joint regulators to share