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Airports (Cost Recovery for Processing of International Travellers) Bill — First Reading

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Airports (Cost Recovery for Processing of International Travellers) Bill

First Reading

Hon DAVID CARTER (Minister for Biosecurity) : I move, That the Airports (Cost Recovery for Processing of International Travellers) Bill be now read a first time. At the appropriate time I intend to move that the Airports (Cost Recovery for Processing of International Travellers) Bill be considered by the Primary Production Committee, that the committee present its final report on or before 15 November 2010, and that the committee have authority to meet at any time while the House is sitting except during oral questions, and during any evening on a day on which there has been a sitting of the House, and on a Friday in a week in which there has been a sitting of the House, despite Standing Orders 187 and 190(1)(b) and (c).

I am pleased to bring this bill to the House for its first reading. The bill will enable the Ministry of Agriculture and Forestry, the Aviation Security Service, and the New Zealand Customs Service to recover the costs associated with providing passenger processing services at new and restarting international airports. The purpose of the bill is to address a problem that arises when airport companies enter, or exit and then re-enter, the market for scheduled international passenger flights to and from New Zealand. New and restarting international airports have no incentive to factor into their business decisions the Government’s cost of providing international passenger processing services. This means that the Government is exposed to an unpredictable and uncertain cost for providing aviation security, biosecurity, and customs passenger processing services. Under the current funding model, the commencement of a new international airport creates a funding shortfall for the Government’s border agencies. This places pressure on the delivery of existing services until appropriations can be adjusted. The object of this bill is therefore to reduce the Government’s exposure to an unpredictable fiscal liability. The cost recovery introduced by the bill will ensure that international airports or requesters of non-routine services factor the border agencies’ costs into their business decisions.

Before I discuss the key provisions of this bill, I would like to briefly explain the background to it. The bill completes the funding arrangements agreed to with the aviation industry back in 2004. In 2004 a ministerial committee examined the funding of passenger clearance services in New Zealand and developed a set of proposals on how passenger processing services at international airports could be funded and implemented. The proposals formed the basis of a consultation document published in May 2004, which looked at the overall financial costs and benefits of passenger processing services, and at how these should be shared between the Crown and the industry. As a result of the extensive industry consultation that occurred at that time, the previous Government agreed that the costs of aviation security services would be met by the airline industry, and the costs of biosecurity and customs passenger clearance processing services would be met by the Crown at established international airports. This funding approach has been in place since 2004.

But, significantly, it was also agreed in 2004 that aviation security, biosecurity, and customs services at new international airports and low-volume international airports should be funded by cost recovery, and that any variation to the standard passenger processing service should be funded by the person who requested the non-routine service. Now, in 2010, the Government is introducing the primary legislation required to enable these cost recovery components to be implemented. This bill covers passenger processing services provided by the Ministry of Agriculture and Forestry, the New Zealand Customs Service, and the Aviation Security Service. For cost recovery at new and restarting international airports, the bill provides that regulations need to be made before charging can begin. Regulations will not be made without the agencies consulting with the directly affected parties. The costs that may be recovered are costs associated with establishing and operating passenger processing services. These costs will be recovered from the airport operator.

The idea from 2004 of the cost recovery that applies to international airports being based on passenger volumes, although sound in economic theory, was not a pragmatic funding approach. A simple fixed-time period for cost recovery is a more practical approach. The bill sets a maximum cost recovery period of 3 years and allows a shorter period to be prescribed in regulations. The Government favours setting the cost recovery period at 2 years, so as to provide enough time for a new or restarting airport to demonstrate that it has a viable business model before it becomes eligible for Crown funding. The Government is keen to hear the industry’s views on the proposal that the cost recovery period be set at 2 years, and I trust that the select committee will invite the industry to make submissions on this issue during the select committee process.

The original 2004 policy did not address the situation that arises when an international airport stops having regular scheduled international flights for a period of time, but then restarts scheduled international flights. In 2008, following consultation with the industry, the previous Government agreed that a restarting international airport should be funded in the same manner as a new international airport. However, the industry asked for there to be a reasonable grace period when scheduled flights cease, so that an established airport company can find a replacement airline without triggering cost recovery. The idea of a grace period has a strong ring of pragmatism and fairness about it. A grace period is a desirable position for all concerned parties. It is simple and transparent. It encourages the Government to hold passenger processing services in place and rewards airport companies for establishing viable long-term operations. This Government has agreed to a maximum grace period of 6 months, and that is written into the bill.

The bill also provides the ability for agencies to cost recover for non-routine passenger clearance services provided at any airport. Costs will be invoiced on an actual and reasonable basis. An example of a non-routine service would be when a VIP clearance service is requested for an international celebrity traveller.

In conclusion, this bill completes the funding arrangements agreed to with the aviation industry back in 2004. It builds on the original policy to provide a simple, clear, and efficient cost recovery system. The cost recovery introduced by this legislation will ensure that international airports or requesters of non-routine services factor the border agencies’ costs into their business decisions. That in turn will ensure that the Government is not exposed to an unpredictable and unlimited fiscal liability for providing passenger processing services. I commend this bill to the House.

Hon DAMIEN O’CONNOR (Labour) : My, my, my—even National can learn. The Minister for Biosecurity, David Carter, said he would be very keen to hear industry views. Do members know when the Airports (Cost Recovery for Processing of International Travellers) Bill started? It was not back in 2004. It was back in 1997-98, if I recall matters correctly, that the then National Government in its wisdom thought it should impose border cost recovery on the tourism industry, so that everyone would pay when they came into this country. Mr Carter remembers that, and so does Mr Williamson. Do members know what happened? In its usual arrogant way that Government introduced a bill, like the current Government is doing now, and thought it could ram it through. Do members know what happened? The industry took out an injunction. It took out an injunction and it won. The tourism industry beat the National Government then, because its proposals to introduce border cost recovery were unconstitutional. There had been no consultation. That Government was simply going to—as National does so often—impose a tax on tourists who were coming into this country.

Well, time moved on. We said to the tourism industry prior to the 1999 election that that was a stupid move by the National Government, and indeed it was. We accepted that there should be cost sharing. We then committed to go through a proper process of consultation—[Interruption]—Mr Williamson knows this is true—and we did. We arrived at a deal whereby the Crown would cover the costs of biosecurity and customs, and the industry would cover other costs of customer clearance, which was a fair deal. There was an issue about how that should be applied to new airports. Since that time Rotorua Regional Airport and Invercargill Airport have been opened up to international flights, and they will not be covered by this bill, as Mr Williamson says. I guess the question is how many airports this legislation may apply to. I think most sensible people would say—and I have been an advocate for a long time of the tourism industry—we probably do not need to have any more international airports, because we are starting to spread out a bit. Even at Rotorua—my good colleague Steve Chadwick and I have advocated for Rotorua because it is a key tourism destination—there are issues about the level of biosecurity protection and a whole lot of other things. We do not need to have a proliferation of international airports.

National finally figured out that it has to talk to the industry if it is to impose a tax on the industry; otherwise it will be taken to the cleaners, taken to the court, and the tax will be thrown out. The question I have is, why is the National Government, having learnt that lesson, demanding that this bill be rammed through the select committee? The previous National Government did not learn the lesson about ramming a bill through Parliament and getting stopped. This Government now wants to ram this bill through a select committee. It has taken 10 years to get the bill here.

  • Debate interrupted.