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Crown Pastoral Land (Rent for Pastoral Leases) Amendment Bill — Third Reading

[Sitting date: 02 May 2012. Volume:679;Page:1907. Text is incorporated into the Bound Volume.]

Crown Pastoral Land (Rent for Pastoral Leases) Amendment Bill

Third Reading

  • Debate resumed from 1 May.

RAYMOND HUO (Labour) : It is a pleasure to take a call at the third reading of the Crown Pastoral Land (Rent for Pastoral Leases) Amendment Bill. It is particularly so following the member for Waitaki, Miss Jacqui Dean, although she decided not to continue. Listening to the contributions from the Minister for Primary Industries and some of the National backbenchers, it is fair for me to suggest that Miss Dean’s speech was one of the best, because apart from the usual anger and accusations she gave at least some reasons why she believes that it is important for her to pass this bill into law. I like the way she said she had been approached by her constituents, because Labour supports the high country farmers, and Labour supports farmers at large.

But I come back to this bill. As the Hon Damien O’Connor said, the National Government solution is to offer those farmers lollipops, but when they run out of sugar everything will be back to square one. So that is not the real solution.

The Government has the numbers to pass this bill into law, so there is no need, and it is totally unnecessary, for those members to resort to personal attacks. They attacked Helen Clark, David Parker, Damien O’Connor, and me, although I am not that important—not important at all. They will do the National Government a great favour if they focus just a little bit on the rationale behind the bill rather than resorting to personal attacks. While the bill has been progressed, the attacks from some of the National backbenchers have escalated from accusing Labour or anyone who is opposed to this bill of being anti-farmers or using the politics of envy to now labelling Labour as farmer haters. Following that logic, the Greens, New Zealand First, and even Mr Peter Dunne’s United Future party are all anti-farmers or farmer haters.

One National backbencher confirmed that the Royal Forest and Bird Protection Society of New Zealand is anti-farmers too, because of its review on lower rentals as provided under this bill. The society has supported a number of initiatives under this bill, but it does have a problem with lower rentals due to tenure review negotiations and the missed opportunity to put in place economic pricing instruments that could benefit conservation values.

Following that logic, the Parliamentary Commissioner for the Environment would also be anti-farmers, because her 2009 report entitled Change in the high country: Environmental stewardship and tenure review questioned the methodology of the current tenure review process and made a number of recommendations. The report also proposed the setting up of a high country commission to provide more oversight of the high country. Of course, neither of those recommendations have been taken up by the Government.

The bill seeks to change the rules for setting rents for Crown pastoral leases from the land valuation basis to stock-carrying capacity or income-related basis. So it basically means that properties in Remuera and properties in Papatoetoe should be treated equally. I use that analogy because the National Government’s policy in that regard is consistent. For instance, its policy to sell our assets to pay the debt is pretty much like selling its house in order to pay the mortgage, and then renting it for a higher price. It does not make any economic sense.

But it does make some sense if National MPs focus on the reasons behind this bill, because I, together with many others, have remained unconvinced, and will unless they give me some reasons. Firstly, the Clayton report. The Clayton report, produced in the 1980s, found that if one gives a discount to lessees of below the market rent, they capitalise an increase in value to the lessee’s side of the ledger, so that the relative division of value between lessor and lessee becomes even more weighted towards the lessee. That means that this small number of farmers will be in a better position to freehold the properties. They are in a better position to onsell a part or all of the farmland and make windfall profits.

Secondly, I come to the Maori Reserved Land Amendment Act 1997. The previous National Government amended the legislation, and good on it, in order to address the injustices for Māori. As owners of the land, Māori were, until that amendment was made, forced to accept lower than market rents for the land through leases based on unimproved land value, with similar perpetual rights of tenure for lessees as exist for pastoral leases. So this bill is actually challenging that legal precedent and compromising the basic property rights of the Crown and New Zealand taxpayers. Therefore, Labour cannot support inconsistencies in law.

Further, there is tenure review. Much has been said about tenure review and I do not intend to repeat it here, but I do want to repeat one comment made by experts, scholars, and concerned parties, and that is that increasingly these Crown-owned properties are being purchased not for their pastoral values but for their non-pastoral values, which relate to exclusive occupation of land. As pointed out by the Hon David Parker, not all lessees are enthusiastic about tenure review. They want to enforce their contractual rights under the leases, and they want to commit to the dairy business. In the Labour Party all we did was to enforce the legal terms of the lease. The rent of 2 percent of land value excluding improvements is affordable by some but not all tenants. We accept that some lessees—and Mr Shane Ardern made this point very clearly in his contribution in the bill’s second reading—are long-term holders. They do not want to sell. They only want to extract pastoral values from the land. They have not purchased it for tens of millions of dollars and they cannot afford the rent that is based on what they might sell it for. They need a rent that is lower than that. The law already allows for that. We do not need this change in the law to achieve that outcome.

These decreases in rent are unprincipled. Bear in mind that this is a Government that is running a $12 billion deficit. According to the information released by Statistics New Zealand on 21 March 2012, net international liabilities were $147 billion or 71.9 percent of GDP as at 31 December 2011.

Parliament has the role of passing legislation that is fair. We do not want to see people speculate and make windfall profits at the cost of New Zealand taxpayers. The genuine farming families have not been easy with that process at all, because they want to remain on the land, farm it properly, and protect the environmental values. We absolutely respect their management practices and what they have done over many years. We should provide the right incentives for farmers who are managing the land properly and ensure that they have affordable rents. But the establishment of the base value of the land and the base rental has to be consistent with most other commercial entities across the country.

Labour supports our farmers and it supports our farming sector at large. Thank you.

IAN McKELVIE (National—Rangitīkei) : It gives me a bit of pleasure to get up and speak to the third reading of the Crown Pastoral Land (Rent for Pastoral Leases) Amendment Bill. I certainly support the bill. I am not one to, as the previous speaker said, attack the Opposition, but I find it difficult to believe that they will be milking cows on these pastoral leases, which I am pretty sure I heard the member say. So I think that will be very difficult. But I want to talk briefly about the bill and the potential for this bill to, I guess, rectify what I would see as some wrongs that have occurred over the last few years.

Certainly the tenure review system was not working in New Zealand. It had passed its use-by date. I think it had been abused to some extent, and it certainly was causing some grief for the high country of the South Island in that there were some, I think, 112 contested rental situations or reviews currently. It was quite a problem for both the Government and the farmers, and there is significant expense involved in that type of a review. So the challenge for the Parliament is to get a system in place that works for the high country of the South Island, that avoids the need for us to buy expensive tracts of land off these farmers or rentals off these farmers and take it over, as we have done in the past.

I heard one of our speakers last night speaking on this bill talking about the millionaires in that area. The only millionaires that I know of in the high country of the South Island are the ones whom the previous Government bought out. In fact, I have got a very good friend who has got a brand new D6 tractor as a result of that purchase, and he is pretty happy. He sits on it every day. I think that is the problem that we face with this bill, and I am sure that that will be resolved as a result of the decision to proceed with this bill tonight.

I want to talk briefly about the high country farmers of the South Island, and also last night we heard the Greens talk about the ecological assessments that would be preferable to be carried out to understand the stocking rates required in this country. I would like to point out to the Greens that just about all farmers who farm with any kind of responsibility in New Zealand probably do ecological assessments on a daily basis. I guess that involves measuring grass and things like that, which clearly enables them to understand what is happening with their land and what is happening with their livestock. I think these high country farmers of the South Island do a wonderful job of the ecological management of that country. I think almost without exception historically they have done a great job of that, and I am sure that will continue in the future.

I want to briefly comment on a couple of other things that I have found a little extraordinary about the discussion we have had recently. In fact, on page 3 of the commentary on the initial draft of this bill, where we talk about the Labour Party’s minority view, it talks about the bill allowing the Government to charge rent on the productive capacity, but excluding rental for the right to exclusive occupation, which the lessees also enjoy. It seems to me it is very difficult to see any difference in that system from what we see in our current Government housing regime throughout the country, where there are clearly State houses that attract the same rental wherever they are located.

Hon Trevor Mallard: But these farmers are State tenants! These farmers are State tenants!

IAN McKELVIE: Absolutely they are. As you well know, they have been for a hundred and something years, and so are those people who live wherever they might live in a Government-owned house. We do not charge them for the view. I think that argument really buys itself.

I have got no problem supporting the movement of this bill through the House, and with a bit of luck it will get out of here fairly soon. I just want to congratulate those who were on the Primary Production Committee at the time this was heard—and I certainly was not—on the work they did; also, the Ministers who have put this through; and Jacqui Dean, whom I have heard speak, I think, three times on this bill since I have been a member of this House, certainly with a significant amount of enthusiasm for the bill. I have much pleasure in supporting this bill and hope that it proceeds with speed.

Mr DEPUTY SPEAKER: I understand this is a split call. There will be a warning bell with 1 minute to go.

Hon TREVOR MALLARD (Labour—Hutt South) : Yes, I understand that the Greens are going to take 5 minutes, and I will take a 4-minute bell, thank you, if I get that far.

This is an issue that I think has been fraught. There has been a disproportionate amount of time spent on this legislation and on Crown pastoral rents over the period of the last 10 years or so, at least. Certainly, in the time that I was in Cabinet there was far more time spent on it, and trying to get this one sorted was one of those Solomon-type issues. But my view is that the Government has now come down with the wrong decision. Currently, the rent for the properties is set at a relatively low 2 percent, excluding improvements. The Government is proposing to cut this further and thereby transfer the value to the lessees, making it easier for them to freehold the properties and to onsell, if they so wish, part or all of the farm, and make some windfall profits. I think the Primary Production Committee has seen the evidence of that. Of the 77 runs that completed tenure review, at least 28 of the new landholders have onsold 176 parcels of the newly freeholded land. These 28 new owners paid the Crown $6.9 million to freehold, and they have realised $134 million through selling only 44 percent of the freeholded land.

What is clear is that there is a reduction in income, at a time when the Government is telling us it is short of cash—and I agree that it is short of cash. Giving rent reductions to farmers below a 2 percent level, I think, is a waste, or revenue forgone that could be better used. But also there is a wealth transfer without a proper capital gains tax arrangement, unless these gains can be absolutely proven to be trading gains, and I think you would probably have trouble proving that some farmers have been involved—their families—in farming for 100 years. I think any trading tax we would have trouble applying under current law, although, hopefully, at some stage in the future we will be able to get this sorted.

What we are doing here is sacrificing the right of the Crown to extract fair value from the property. What that does is short-change the New Zealand taxpayer. It is something that we should not be doing. I will go back to where I started and say that the issue is not a simple one. Getting it right, getting it fair, and making sure that we do the best we can to maintain the values, as we do, of many of these properties is something that is hard. What we do know is that when they are freeholded, or even the properties that are close by are, because of their exceptional views, because they are very special places—I note that Nick Smith is in the House. I know he knows the St James Station well. He has cycled through there, I think, on at least a couple of occasions. He had a press conference, I think, halfway through one. [Interruption] Oh, he did not have it. He finished the ride an hour behind me without having a press conference, on that particular occasion. I think it was when I weighed about 20 kilograms—I did not quite weigh what you weigh, Mr Deputy Speaker—more than I do and more than Nick Smith. But I think Nick Smith would agree that these places are very special and we have got to handle them carefully. It is my view that this approach to their privatisation is one that is wrong, and therefore Labour is going to oppose it.

STEFFAN BROWNING (Green) : I heard from the Government side a concern that the Greens might have been overstating the need for ecological assessments, and a suggestion that all farmers are probably doing an ecological assessment each day. That level of ecological assessment, unfortunately, is too often too shallow.

I think there is some fantastic stuff that has happened in the high country in terms of high country farmers—family farmers—but there is a need to ensure that the best practices happen, or that biodiversity protection is happening all the time. That 2 percent of unimproved land value for something like 50 years—decades—was super cheap, cheap, cheap, and there is no real justification for that. There is no justification for keeping it unreasonably low. However, we believe that these farms should be kept for New Zealand farming families or for biodiversity and environmental protection.

Income-related rents have merit when strong environmental protections are assured and biodiversity gains are measurable, when stocking and pest intensity does not degrade further than natural erosion that has been exacerbated by early clearance and overgrazing. There were some shocking practices in the high country in years gone by. Income-related rentals can be appropriate if they are not turned into cheapo privatisation that later becomes a goldmine for property developers—a windfall, not protection nor production by the family farmers we want to respect. Protection for biodiversity, ecological features, landscape, and family farming can be achieved by this bill, but there are weaknesses that should have been amended. My regular experiences in the Marlborough high country reinforced my desire that the high country is given more respect than this bill may allow in the hands of the National Government.

I recall another pleasant experience in the high country near where I was born in Central Otago—Jacqui Dean is not the only one who has roots or a connection down there. It was when Prince Charles visited New Zealand last. I met him at the luncheon provided near Alexandra where he was touring over a property to see sustainability improvements. I was a little ashamed of what he was being shown at the time, to be honest, but that is what he was being shown and toured over. I believe that property had a way to go. I was there, privileged in my previous role with the Soil and Health Association, to gift to Prince Charles an organic Bio-Gro certified merino shawl, directly ahead of his forthcoming nuptials with Camilla Parker Bowles.

Certified organic production is one way to ensure a higher level of environmental stewardship than sometimes occurs with less progressive operators. This Government has dropped the ball on organics in New Zealand, treating it like some sector that has no real vision about genuine sustainability in the sectors that do not have that vision genuinely. National expects that organics, which is contributing plenty through good practice in most cases, should also fund the next tranche of conversions to sustainable development. National does not actually understand that the pioneers in organics are the ones who have done a whole lot of work and should have no real personal reason why they should be funding the next tranche.

One thing that Prince Charles also said to me at that luncheon was that New Zealand would be absolutely nuts to be going down the genetic engineering path. Yet National again is going down that path and putting money into pasture grass that is genetically engineered and may end up in the high country. That must stop and, as we say with this bill, there is some real possibility that, if the science behind the ecological assessment is valid, the bill may go some way to ensuring the high country has a good future. Thank you.

LOUISE UPSTON (National—Taupō) : I am pleased to take the final call in the third reading of the Crown Pastoral Land (Rent for Pastoral Leases) Amendment Bill, and I support it wholeheartedly.

A party vote was called for on the question, That the Crown Pastoral Land (Rent for Pastoral Leases) Amendment Bill be now read a third time.

Ayes 63 New Zealand National 59; Māori Party 3; ACT New Zealand 1.
Noes 57 New Zealand Labour 34; Green Party 13; New Zealand First 8; Mana 1; United Future 1.
Bill read a third time.