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House of Representatives
11 December 2007
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Volume 644, Week 64 - Tuesday, 11 December 2007(continued on Wednesday, 12 December 2007)


Tuesday, 11 December 2007

(continued on Wednesday, 12 December 2007)

Taxation (Annual Rates, Business Taxation, KiwiSaver, and Remedial Matters) Bill

In Committee

  • Debate resumed.
Part 2 Amendments to Tax Administration Act 1994 (continued)

Dr the Hon LOCKWOOD SMITH (National—Rodney) : Part 2, as I mentioned when we were heading towards closure last night, covers the amendments to the Tax Administration Act 1994. The main set of issues in Part 2 in respect of that Act relates to compliance, and this is obviously very important, because New Zealand’s tax system relies on voluntary compliance. We do not have a huge army of inspectors out there going around inspecting all employers to see that they are complying with our income tax requirements in relation to PAYE, or to our GST requirements. As a PAYE taxpayer and a GST taxpayer, I do my own returns. One does get checked from time to time, but the system essentially relies on voluntary compliance and therefore on a certain amount of goodwill, because it is impossible to check every taxpayer. That is where the provisions in Part 2 are so important.

There are three clauses in Part 2 that in particular cause concern. The first of them I mentioned last night—and I will not go over it in full detail again this morning—is clause 184, “Unacceptable tax position”. I mentioned last night that in 2006 Parliament tried to fix this problem. Parliament accepted that the way in which the unacceptable tax position provisions were applied was unreasonable, unfair, and in fact did not lead to sensible voluntary compliance with our law. So in 2006 Parliament amended the law to try to give the commissioner the opportunity not to impose unacceptable tax position penalties on people where it was unreasonable. The net outcome of that was unsatisfactory. We did not succeed in 2006 in fixing up the unacceptable tax position provisions. So subsection (2) in clause 184(2) makes it very clear that GST and withholding tax payments will henceforth be excluded from unacceptable tax position provisions, leaving only income tax in there, and the thresholds are changed for income tax to try to make that a little more fair, as well.

But the key issue I was referring to last night is that clause 184(3) makes these new provisions come in from 1 April 2008. National is arguing that this is unreasonable. They should be backdated to when Parliament tried to fix the problem before. If we believe that in fact our effort to fix it in 2006 did not work, we should fix it now and backdate it to when Parliament wanted the change. Parliament wanted the change in 2006, so the amendment I have tabled amends clause 184(3) to replace 1 April 2008 with 1 April 2006 to make this clarifying provision come in from when Parliament intended it should.

I covered that in detail last night, so I will go on to the next issue, which relates to clause 188, “Reduction in penalty for voluntary disclosure of tax shortfall”. Again, this is very important, because, as I said, our system relies on voluntary compliance. Therefore, it is really important that taxpayers, when they realise they have done something wrong, actually tell the Inland Revenue Department that they got it wrong, that they disclose to the department they made a mistake, and that they pay the additional tax required. That way we collect more revenue. It is really important that when people make these voluntary disclosures they do not get penalised for it, because if they get excessively penalised for it, they will not do it; they will try to cover up their mistakes and get away without paying the extra tax.

The issue here is that clause 188 reduces the penalties for voluntary disclosure, and that is good; we all agree with that. But again the provision is coming in from 17 May 2007, and all the professionals feel that, again, because we tried to deal with this unsatisfactorily in 2006, it should be backdated to when Parliament tried to fix this problem and failed.

So there are two key clauses in relation to which Parliament tried to fix the problem last year and it is accepted that we failed because the legislation is back in the House now. We are actually trying to fix up what we tried to fix last year, because when we tried to fix it last year it did not work. In the meantime, people have been caught through the commissioner not applying the law in the way Parliament expected that the commissioner would. We expected the commissioner to do certain things, but it did not happen. Hence, I have put forward these two amendments to backdate these provisions to when Parliament intended that the change should happen.

Hon PETER DUNNE (Minister of Revenue) : I will take a brief call to respond to the points that have just been made, because I think the spin that has been placed on the events of the last couple of years by Dr Smith does not accurately reflect the position. Let me rehearse the situation as it occurred, and I speak with some long-term interest in this, having been the Minister of Revenue at the time the original voluntary disclosure, disputes, and penalties regime was put in place, over a decade ago. When I returned to this portfolio after the last election, the issue of the way in which the voluntary disclosure rules and unacceptable position rules were working was raised with me. The upshot was that in a similar piece of legislation to this last year, I introduced what I said at the time was an interim measure—that we would work on a detailed solution, which is the solution contained in this bill.

So I do not accept the proposition that what we did then we are now correcting because it had not worked. What we did then was put in place an interim solution, recognising all the way through that a more detailed solution would emerge, and that solution is contained in this bill. The consequence of that in terms of the commencement dates, aside from any administrative complexity that going back to 2006 might give rise to, is that the dates more appropriately take effect from the time of the passage of this legislation, or, in relation to the provisions of clause 188, from the time of the Budget announcement in May this year.

I acknowledge that Dr Smith has put forward his amendments, and I acknowledge the fact that he had the courtesy to come and discuss those with me sometime yesterday. I appreciate that. I had officials consider those amendments and give me some advice about them, and we are satisfied that a couple of issues arise. Firstly, there are practical difficulties with the timing change; there are revenue implications that are potentially significant. The second issue is that we are not persuaded that the situations he sets out, in particular with regard to clause 188, are in fact desirably changed by legislation or not even provided for in the current provisions. So we are not disposed to support those amendments, but I acknowledge the way in which he brought them forward and I appreciate the fact that he had the courtesy to alert me to them in advance and enable us to give some consideration to them. But I put on record that the genesis of this is not a recognition that what we did last year failed; the genesis of this is that what we did last year was to say that there was an interim regime pending the development of more final rules, which are given effect to in this bill.

CHRIS TREMAIN (National—Napier) : I take the opportunity in this urgency debate to speak to Part 2. This part specifically deals with amendments to the Tax Administration Act 1994. I want to use my 5 minutes to ask the Minister in the chair, the Hon Peter Dunne, about the way in which this policy will be introduced, particularly in respect of clause 175, with the insertion of section 139AAA and the new proposals around the late filing penalty for GST returns. I know that it is a matter of some interest, or more than some interest, for many constituents around the nation. I know that Parekura Horomia’s constituents throughout his electorate will be interested in this particular issue, and I look forward to the Minister taking a call about the late filing penalty for GST returns. Māori businesses and Pākehā businesses will be impacted by this, will they not, Mr Parekura?

Hon Darren Hughes: Mr Parekura!

CHRIS TREMAIN: Mr Horomia. They will be impacted by it. Many small businesses around this country deal with taxation and the taxman. They know that dealing with taxation—the filing of GST returns, fringe benefit tax returns, PAYE returns, resident withholding tax, and provisional tax—creates large compliance costs for them in terms of getting their returns done. The key issue is whether we are creating a regime that will enhance the provision of these returns or will exacerbate the provision of these returns. That is the point I am making. Although we write into legislation the particular penalties that may accrue here, we are actually changing the system quite dramatically from what it was.

In clause 175, which inserts section 139AAA into the Tax Administration Act, we are changing the system so that a business that is working on an invoice basis will be charged $250 if it has a late return. If it is working on a payments basis, or on more of a cash basis, then it will be charged $50 for the late filing of a return. This is particularly in relation to GST. That changes the system somewhat from what it is currently. Those late filing charges have not been placed on taxpayers when they put in their returns, but there has been an assessment of the revenue that would be taken. In that regard the Inland Revenue Department has not been lenient—“lenient” would probably not be the correct term—but it has been helpful. I know of certain situations where businesses—for example, my own business—have put in tax returns and for one reason or another they may have been late. Often in small businesses that happens accidentally, not because there is any purpose to try to defraud the department. I remember one time when on holiday, I asked someone else to do a particular return for me and it was just never done. In those situations the department has been lenient and has come back and allowed us to put in the return, as long as it was within a particular time. With these fines, we will see a fine of $250 or $150—whack! This will happen as soon as a business is late in putting in a return.

I just want to know from a policy point of view how the department will deal with those late returns. I know that small businesses around the nation will be interested in this matter. Minister Horomia’s constituents will be interested in it as well, so I ask the Minister in the chair, Peter Dunne, to take a call on that.

I guess the key point I am making is that although we may relax penalty regimes or change them to encourage compliance and try to decrease compliance costs, it will do nothing if the Inland Revenue Department is pernicious in throwing these fines into place and starts getting small businesses’ backs up. These people pay most of the tax in this country. Not only do they pay provisional tax, fringe benefit tax, and GST but also they employ the majority of people in this country. Those employees pay a significant proportion of tax in this country, and on that basis it is very important that the Inland Revenue Department stays onside with small businesses. They are a key part of our nation, and that is why I am asking how the department will deal with the situation where a return is late. Will it be Draconian in the implementation of the $250 fee for a person working on an invoice basis, and will it be hard on a taxpayer on the $50 basis?

KATRINA SHANKS (National) : It is my pleasure once again to speak on Part 2 of the Taxation (Annual Rates, Business Taxation, KiwiSaver, and Remedial Matters) Bill. When looking at this bill, we see it is a very, very comprehensive bill. The thing we have to think about when putting together legislation like this is that we should be putting together legislation that is streamlined, that is in accordance with all the other tax legislation, and that flows nicely, instead of putting together piecemeal legislation that will then create complexities for the people who use it. Although the Inland Revenue Department gives out booklets to guide business people and anybody else who has to use this type of legislation, at the end of the day there has been a history of those booklets having errors in them.

The electoral funding legislation is an example of a situation where the Electoral Commission put out booklets telling people about its summary of that legislation and how it would impact on their lives and their returns, only to find its interpretation was different from the law. The commissioner’s interpretation was different from the law itself. The onus is on the person concerned to go back and understand the law and not to rely on those booklets, which are guideline booklets for people.

My concern is that this tax legislation is very, very complex, and we cannot really expect Joe Bloggs on the street, the dairy owner, the owner of the chemist shop, or the person who owns the garden centre, people who are really busy in their businesses, to go ahead and read this legislation because they cannot rely on the guidance provided by the Inland Revenue Department in the booklets that it gives out. At the end of the day, the onus is on people who are filling out returns to get things right themselves and to understand the legislation. So it is very important that we try to keep the tax legislation as streamlined as we can, because it does impact on most New Zealanders. It is important that it is not complex.

I become concerned when I see big bits of legislation—and the legislation before us is massive—and also big Supplementary Order Papers around the legislation. That means that maybe the legislation has not had as much discussion as it should have had, if there are such big Supplementary Order Papers supporting it. I would like to think that discussion is available. For example, there was obviously not enough discussion around the finance lease provisions of this legislation when it was put out. I am hoping that the Government has a good strategic view on that issue, and that we have a vision for where we want to be with regard to taxes in the future and a view on whether this legislation is a good vehicle to take us to where we want to be.

I would like to talk specifically to one measure in Part 2 of this legislation today: new section 34B inserted by clause 153, which is about tax agents. Tax agents play an extremely important role in terms of getting people’s tax returns right to begin with, and also in ensuring that if they get them right, then the Government and the Inland Revenue Department are maximising their net revenue because they know they are capturing all the revenue they should get. As time has gone on, tax agents have become more and more important in our society, as the tax legislation has become more and more complex. Now, the onus is on those accountants—it is normally chartered accountants who are tax agents; that is not always the case, but quite commonly they are chartered accountants—to have a good understanding of this legislation. Also, they are now accountable for the returns that they put in. If people represent themselves as tax agents and as professionals, they are liable, I do believe, for any errors in those tax returns.

So when we are talking about penalties, I say it is important that this legislation gets the provisions on tax agents and the listing of tax agents absolutely right. The legislation states in new section 34B(2), inserted by clause 153, who can be a tax agent. It can be a person who “(a) prepares the returns of income required to be furnished for 10 or more taxpayers; and … a practitioner carrying on a professional public practice”. A person providing that information also has to update the commissioner about the changes around him or herself. The Law Society has brought out a really good submission on clause 153, where it talked about its issues in relation to that. When it talked about new sections 34B(2)(b) and 43B(12)(c), it talked about the Tax Administration Act and how it should apply to the size of an organisation, so that the obligation to provide an updated list of partners or members is relaxed in the case of organisations over a particular size.

In big organisations where a tax lawyer or a tax accountant does the returns for that big organisation, or in a chartered accountancy practice where returns are being done for many, many organisations, there can be a very high turnover in staff in the organisations themselves where those people work. Part of the requirement here is for the tax agent to provide details of shareholders of closely held companies, partners in partnerships, and members of unincorporated entities. It may not be appropriate in all cases to go back to the commissioner and keep on telling the commissioner about the changes in those organisations. In some instances, changes could be occurring nearly weekly. That is a massive administration nightmare for some of the big organisations. It is also another form of cost for the people who use those organisations, because every time the organisation fills out a new form more time is spent on doing administration, the cost of which is then passed on to the clients. That is particularly the case in large partnerships, where partner turnover is such that lists of partners would be required to be updated several times a year.

The submission from the Law Society pointed out that maybe we should include a size threshold in new section 34B(12), or enable the commissioner to dispense with those requirements in certain cases, having regard to the size of the organisation. When looking at tax agents, I think it is important to see the whole range that is offered there. We need to have provisions in this legislation that do not make it more onerous on those tax agents, moving forward.

The other area that the Law Society talked about was the type of foreign investment fund and the determination on the type of interest in foreign investment funds and the use of the fair dividend rate model. That is in clause 165 of the bill, which seeks to repeal sections 91AAO(2) and 91AAO(3) of the Tax Administration Act 1994 and to repeal their effect on a retrospective basis. In this clause we are talking about a retrospective basis going back to 2006. That is a long way to go back in legislation, considering we are coming into 2008. Section 91AAO(2) provides the principles by which the commissioner would be guided when issuing determinations as to the availability of the fair dividend rate model. The society disagreed with the proposal to repeal that provision, though it did accept that there might be an alternative form to amend it.

The repeal of that provision would allow the commissioner to determine whether the fair dividend rate method applied to an investment, without giving taxpayers any basis for reviewing that decision. The commissioner would not be required to follow the published criteria. If criteria were published, there would be an amendment as the commissioner saw fit. If the fair dividend rate method has any validity, then the principles as to when it does and does not apply must be capable of expression. Those principles should be expressed in section 91AAO(2) of the Tax Administration Act, so that the commissioner is not left to make and change the law in that area at his or her own discretion and without principled guidance.

I think it is also important to look at the penalties around people when they are doing their voluntary tax, because tax is voluntary. As my good friend beside me Chris Tremain from Napier said, many, many people do make stupid mistakes, and normally they are just stupid mistakes—they are an error. It is really important to allow the Inland Revenue Department to keep having some discretion, so it can go in and say someone is a good taxpayer, and it knows he or she has made a mistake. The inputs may have been put in the outputs and the outputs in the inputs by mistake, because the schedule was accidentally upside down in the spreadsheet when the taxpayer was compiling it. Many people do that. Many people do not have accounting systems in their small businesses, and they run things off spreadsheets all the time. It is easy to look at a revenue line and an expenditure line, and to put inputs and outputs in the wrong way around. It is actually really, really simple to do that in a small business.

CRAIG FOSS (National—Tukituki) : I welcome the welcome from those members on the other side, and I would like to note that we are under urgency at the moment. The only good thing about urgency is it gets the members on the other side of the Chamber to work before lunchtime. I say good morning to Mr Swain, in particular, and I am sure my fellow Finance and Expenditure Committee members will comment on that one later.

Part 2 deals with the nuts and bolts of this legislation, although as I noted last night it is a moving feast. I presume it will not change much from the version for which we have had notice in total of not even 12 hours yet, which, as I have noted, quite frankly I find a disgrace and not a good look for Parliament at all.

Part 2 talks about tax credits, tax rebates, etc., and I think it is important to note two things. The attraction of a tax credit, a tax rebate, be it a research and development credit or be it a rebate, as mentioned in Parts 1 and 3 and on Supplementary Order Paper 167, is that the higher the tax burden the more attractive are rebates and credits, and special favours. As previous speakers have noted around various bills covering KiwiSaver, taxation, etc., many submitters to the Finance and Expenditure Committee are now saying essentially “me too” because they would like a share.

I think it is important also to note that the Inland Revenue Department has had a lot to do with the formulation of this bill, and it will be administering it, and the Minister of Revenue is in the Chamber, and to note two of the key points of the “desired future” of the department. The second major point—and there are five of them—is that the Inland Revenue Department’s desired future is: “We make it easy for customers to get it right and hard to get it wrong.” Well, after I do not know how many pages of a bill, plus the Supplementary Order Papers, I think that is around the wrong way at the moment. The redundancy rebate was announced yesterday—in fact, the Minister himself talked about a simpler, less complex regime. Essentially he argued for a flat tax on redundancy payments, but we will talk more about that in Part 3.

I also note that Dr Lockwood Smith’s Supplementary Order Papers tried to address issues where that regime is not made easy. Also, the fifth point in the “desired future” of the Inland Revenue Department states: “We are professional, approachable, effective and efficient.”

I have talked about a few of the clauses in Part 2, particularly clause 147, which is about the keeping of business records. The majority voted for a change to the heading to section 22 in the principal Act, from “business records” to “business and other records”. On a first look, that is fair enough. Perhaps it is a modernisation. It is a different way of keeping records, or is it spreading the tax matrix even wider and higher and longer and deeper? In fact, what are “other records”? To me, that reads as: “Just hand over any, all, and total information about your relationship.”, particularly as it concerns superannuation contribution resident withholding tax rules.

We have had a recent example of the Inland Revenue Department putting the onus on and increasing the cost structure—and the Minister touched on it before—around the fair dividend rate changes of last year. He mentioned that there were worries at the time, that the earth was going to freeze over, etc. Actually, the costs have gone up because the onus there was that the record keeping had to go back to the year dot in order to claim the $50,000 de minimis for the various fair dividend rate issues in the earlier taxation bills.

Clause 147C, which inserts a new section 28B into the principal Act, again puts the onus further down the track, where the investor again changes to the portfolio investment entity regime: “Investor to advise portfolio tax rate entity of investor’s tax file number”. Again, on the face of it, most people accept that. I think it is on our bank statements now. But, actually, must we do that? There are already provisions. There is a 45c tax rate to be charged if people do not do that—it is the non-declared tax rate and tax code. I do not quite understand why that might be there. Perhaps there is a simple answer and the Minister could address it.

Hon PETER DUNNE (Minister of Revenue) : I will respond briefly to a couple of the questions that have been raised. I want to go back to Dr Smith’s comments earlier. I have now received some information about the interim measures that were put in place over the last year, which he may be interested in. I am advised that since the legislation was passed last year, the commissioner has received some 604 applications not to apply penalties, and of those 604 applications 393 have been agreed to. That is about two-thirds in the year to June 2007. It is clear, contrary to the assertion that has been made, that the interim measures actually have worked out extremely well. If two-thirds of the applications for relief have been agreed to, then I think that is a pretty high hit rate. I think it sets a good platform for the changes that are contained in the current bill.

Mr Tremain asked some interesting and valuable questions about the new GST filing rules. Just to refresh the point on this, I note that we are moving from a system where at the moment effectively a penalty is applied to the principal outstanding to one where in certain circumstances a fee of either $50 or $250 becomes payable. The concern he was raising was related to how arbitrary the application of those fees would be. In other words, could we have a situation where at the moment, under the current regime, that amount might be added to principal and take some time to be resolved but a flat regime of specified amounts could apply immediately?

I want to assure the member of a couple of things. Firstly, the way this regime will work in practice is that where a taxpayer clearly is in error through the employer monthly schedule, then the Inland Revenue Department will advise that person that the GST payment is late and that subsequent breaches will be penalised. The late filing penalty will be imposed on any returns that are filed late in the 12 months following that first breach. So if all the returns are on time, then the process kicks off next time around. So I want to assure him that the concern he expressed, as I understood it, related to whether the removal of the current regime and its replacement with a flat fee would mean that people would simply be stung like an instant traffic fine. The answer is no. They will receive a warning, and if there is a breach for the second time within that 12-month period, then those fees will apply.

I again want to make the point that this change is really designed to simplify the process, to make it easier for people to comply, and to get away from a situation where the way in which the current rules apply often means that the debt imposed is much greater than simply having a fee regime. But we are not going to turn the Inland Revenue Department in this instance into a set of GST traffic cops who go around stinging those who fail to meet that first date. There will be that warning period, then the follow-up if the breach is repeated within the 12-month period.

Dr the Hon LOCKWOOD SMITH (National—Rodney) : I appreciate the advice the Minister has just given us about the situation in respect of unacceptable tax positions and shortfall penalties. But I might say to this Committee that the concern about backdating the provisions in this bill is not just something that the Opposition has dreamt up. There are many in the profession who believe it should be backdated to 2003, and National has simply said that that is unreasonable and that we should go back to when we tried to fix it up. I accept what the Minister has said—that the effort to fix it up last year has improved the position for many taxpayers. But this is a balance of the Government’s desire to keep maximum revenue and its responsibility to be fair to taxpayers. The changes that are made in this bill are designed to try to make the system more fair to taxpayers, and it therefore should be accepted that what will be left now from 2003 on—but we suggest backdating it to only 2006—is that there will be some taxpayers left who will be treated unfairly by the way this Parliament sees this situation today. That is not right.

I want to go on because we are running out of time, I sense. My most important amendment is in fact to clause 191. If we look at clause 191 we see it looks very simple. It is simply headed: “Section 141KB repealed”. So it is important that members understand what section 141KB is in the existing Act. What section 141KB is all about is that it gives the commissioner discretion to cancel some shortfall penalties. That was the provision we brought in to try to deal with some of these problems. But what section 141KB gave the commission to do was to deal with issues covered by section 141B. Now, section 141B is the section that deals with unacceptable tax positions. So what is being repealed here is section 141KB, which gave the commissioner discretion to deal with what were considered to be unacceptable tax positions.

The amendment I want to make is this: none of the provisions in this bill deal with simple mistakes. It is what my good colleague Katrina Shanks was talking about. She is an experienced person in this area, and she knows that people filing tax returns can make simple mistakes. Let me give the Committee an example of what I mean. Some taxpayers pay the correct amount of tax, but file the wrong tax return. They have made a mistake. According to the tax returns filed they have not paid the correct tax, because according to the return they were meant to have filed they have paid no tax. Those taxpayers have paid all the tax they should have paid but filed the wrong return, so that cannot be recognised as the correct tax paid. What happens? The taxpayer gets penalised for making a mistake—in fact, the correct terminology is “not taking reasonable care”—which is covered in section 141A.

My amendment to clause 191 simply retains the title of section 141KB—“Discretion to cancel some shortfall penalties”, and would enable the commissioner to deal with unfairness in both unacceptable tax positions and not taking reasonable care—in other words, deal with issues that arise under sections 141B and 141A of the existing Act. My amendment would enable the commissioner to use the discretion when faced with a clear mistake—when someone has paid the full amount of tax owing, yet has done something wrong technically. The officials look a bit puzzled. The Institute of Chartered Accountants of New Zealand is deeply concerned about this, not just Lockwood Smith. The institute is concerned, because it sees this happening amongst its members all the time. People make these simple mistakes, and although they have paid the correct amount of tax, they are penalised. Is that fair?

I really put it to the Minister, and urge the Committee, to give full consideration to the amendment that I have placed on the Table. All it would do is give the commissioner the discretion to not impose shortfall penalties where it is obvious that a mistake has been made. The Government has all its revenue. If the Committee says that it will not accept my amendment because it would have fiscal implications and that it was lodged with less than 24 hours’ notice, I would argue that that decision was not valid because the amendment just gives the commissioner the right to exercise discretion. The Government is not going to lose any revenue. A technical mistake might have been made, but at the moment the commissioner cannot deal with that issue in a fair manner. I urge that my amendment be given consideration.

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

CRAIG FOSS (National—Tukituki) : I would like to speak to two other clauses in Part 2—first to clause 173 and then to clause 184, which talks about the International Financial Reporting Standards. Clause 173 deals with provisional tax and rules on the use of money interest. There is always discussion about this, but in particular this provision looks at the rules around the use of money interest—that is, when there are excess funds at the Inland Revenue Department, the department has use of funds. At the moment it pays a credit rate of, I think, 6.5 percent, or, if the taxpayer supposedly has moneys due, he or she has use of the funds owed and is charged something like 13 or 14 percent—about a 7 percent spread. So that is a 7 percent spread between the money that is owed to a taxpayer and stays at the Inland Revenue Department and the money that it is essentially lending to the taxpayer. Any bank or financial institution would give its right arm, its left arm, and probably both its legs to have an interest rate spread between deposits and loans of over 7 percent. That is absolutely outrageous. I think the term there is “usury”.

There has been much commentary, even from members on the other side and from the smaller parties, on the unfairness of charging interest rates like that and actually driving people into further debt, borrowing to pay the borrowings to pay the borrowings. The amendments proposed by my colleague Dr the Hon Lockwood Smith try to address some of the issues that bring people into that position. Again I will quote from the Inland Revenue Department’s desired future details: “Society has confidence that appropriate action will be taken against customers who do not apply.” That also implies that those customers who are doing the right thing and pay the right money at the right time, but perhaps tick the wrong box in the form they send in, also need to know there is good faith on the part of the Inland Revenue Department. I would be interested to hear the comments of the Minister in the chair, the Hon Peter Dunne, on the good-faith ambitions of the Inland Revenue Department and whether it will be addressing the difference between its borrowing rate and its lending rate.

Clause 184, as Dr Lockwood Smith touched on earlier, talks about the unacceptable tax position. Towards the end of clause 184 is an explanation of what does and does not put someone in an unacceptable tax position. Interestingly, it talks about the International Financial Reporting Standards, which have been recently adopted. I believe that there is such a thing as the New Zealand version of the International Financial Reporting Standards. Is that deliberate or is it just to internationalise it? We have asked Treasury about this quite a few times at the Finance and Expenditure Committee, and even the Government accounts have been reproduced under the New Zealand Financial Reporting Standards as opposed to the International Financial Reporting Standards. I apologise to the many listeners out there who think that this may sound like gobbledygook, but, sadly, this is taxation law. Even Landcorp in its annual report suggested that the International Financial Reporting Standards made a mockery of its reporting, etc. So Landcorp cannot understand it.

I believe that in a recent paper Treasury said it was looking to readdress the necessity of the New Zealand Financial Reporting Standards, or at least how it was created and measured against the International Financial Reporting Standards and whether it was having a desired outcome for New Zealand. In many instances the fluctuations in their profit and loss accounting, and, therefore, their tax obligations, were flying around all over the place and not giving a solid and transparent report to whomever their agents might be.

There is one other clause in here that we discussed at the select committee—and I apologise for not finding it right at the moment—but the Minister or the officials may remember it. It addresses KiwiSaver and refers to KiwiSaver members being able to forgo interest in relation to funds at the Inland Revenue Department or, I believe, at some entity.

DAVE HEREORA (Labour) : I move, That the question be now put.

DAVID BENNETT (National—Hamilton East) : I rise to take a call on this bill because when we talk about the implication of putting penalties on people who do not file GST or other returns, simply for the sake of having a mandatory penalty, it smacks of a Labour - United Future - Progressive Government that has no comprehension of what it is actually like to be in business. These people have never been in business. They have probably never filed a GST return—apart from for a union. For them to now put in a mandatory penalty just for the sake of it shows their comprehension of what it is like for the people who actually earn the money that pays the wages of those members, who sit on that side of the Chamber and tell them what to do through tax bills such as this.

The Minister has come back and made a valid point that there will be some discretion within the 12-month period, and that people’s history in relation to the filing of returns will be looked at. That is fair enough. That is what happens now. The Inland Revenue Department looks at people’s history of filing returns. If they have a history of being a good filer of tax returns, then it will sometimes waive the penalty, let them get away with it, and say they made a mistake. That would be the appropriate approach, and the department does that now. It looks back over the past year at one’s filing history.

What is the purpose of putting on a $50 mandatory filing fee? Why put on a $50 or $250 mandatory fee for people who fail to file on time? The only purpose can be that the Government wants to sting hard-working employers in this country. It wants to hold business back and it wants to increase compliance costs—to be the bane of hard-working New Zealand business people, basically. The Labour Government wants to restrict and compromise the ability of those people to carry on their own approach in their businesses. There is no need for an extra filing fee for late filing. The Inland Revenue Department still can use discretion, and that should be sufficient. There is no need at all for these fees. The Government should take a call on this issue and explain why it wants to introduce these fees. There is no good rationale to do so. It is merely another attempt to put more compliance costs on to small business, and it shows that the Government lacks any comprehension of what it is like to have a small business and have to file GST and other returns on a compulsory basis over a number of months in a year.

I encourage the Minister to take a call and explain the rationale for introducing these fees.

The CHAIRPERSON (Hon Clem Simich): The amendments in the name of Dr the Hon Lockwood Smith to clauses 184, 188, and 191 are out of order because there may be an impact on the fiscal aggregates, and they were lodged with less than 24 hours’ notice.

  • The question was put that the following amendment in the name of the Hon Peter Dunne to the proposed amendment to clause 151(4) set out on Supplementary Order Paper 168 in his name be agreed to:

to number the paragraph being inserted after section 33A(2)(d) as “(db)”.

A party vote was called for on the question, That the amendment to the amendment be agreed to.

Ayes 65 New Zealand Labour 49; New Zealand First 7; Māori Party 4; United Future 2; Progressive 1; Independents: Copeland, Field.
Noes 48 New Zealand National 48.
Amendment to the amendment agreed to.
  • The question was put that the amendments as amended set out on Supplementary Order Papers 167 and 168 in the name of the Hon Peter Dunne to Part 2 be agreed to.

A party vote was called for on the question, That the amendments as amended be agreed to.

Ayes 65 New Zealand Labour 49; New Zealand First 7; Māori Party 4; United Future 2; Progressive 1; Independents: Copeland, Field.
Noes 48 New Zealand National 48.
Amendments as amended agreed to.

A party vote was called for on the question, That Part 2 as amended be agreed to.

Ayes 65 New Zealand Labour 49; New Zealand First 7; Māori Party 4; United Future 2; Progressive 1; Independents: Copeland, Field.
Noes 48 New Zealand National 48.
Part 2 as amended agreed to.
Part 3 Amendments to other Acts and Regulations

The CHAIRPERSON (Hon Clem Simich): We now come to Part 3, clauses 200 to 275, with new clauses 276 to 545 therein, on Supplementary Order Paper 168. The debate on this part includes schedules 1 and 2 and new schedules 3 to 5, also set out on Supplementary Order Paper 168.

Dr the Hon LOCKWOOD SMITH (National—Rodney) : Part 1 of the Taxation (Annual Rates, Business Taxation, KiwiSaver, and Remedial Matters) Bill, which we debated earlier, covers amendments to the Income Tax Act. Part 2 covers amendments to the Tax Administration Act. Part 3, which we are debating now, covers amendments to other Acts and regulations. The principal set of amendments that National will be focusing on in this debate is the set of amendments to the KiwiSaver Act 2006.

They are very significant amendments. What these amendments do, and what Part 3 does, is introduce the whole compulsory employer contribution regime for the KiwiSaver system here in New Zealand. These are the provisions that caused Business New Zealand to come to the Finance and Expenditure Committee and say that New Zealand businesses had been ambushed by the Government, and that the Government proposed these measures in the Budget without consultation with employers and businesses in New Zealand.

That is pretty powerful language from a group that is not known to be anti-Government. Business New Zealand works quite closely with the Government, but it said to the select committee that these provisions ambushed New Zealand businesses. It went further and told the select committee that some of the provisions around the compulsory employer contributions were “employment relations sandpaper”. In other words, the provisions would cause major problems to employment relations in New Zealand as we look ahead.

What did Business New Zealand mean by that? Probably the best example of what it meant by that can be found if we look at clause 219 in the bill, which is on page 363. Clause 219 is a long clause with many amendments to the existing Act, such as sections 101A, 101B, 101C, etc.—it goes right through. The new section that will cause quite a lot of trouble is new section 101B, to be inserted by clause 219. Let me draw the Committee’s attention to what that new section is doing. It states: “The purpose of this section is to ensure that, for contractual arrangements of parties to an employment relationship (as defined in section 4(2) of the Employment Relations Act 2000), compulsory contributions are paid in addition to an employee’s gross salary or wages described in section 101D(3).”

This means that employers may have entered into existing agreements with employees based on an employer’s ability to pay a certain level of wage or salary based on the business’s income. Suddenly, this legislation will require employers to add to employees’ total remuneration package through making contributions under this clause to the compulsory employer contributions. To land that on employers part way through negotiations on an employment relations agreement, when they may be already fully stretched in meeting the obligations of that agreement, is obviously a very significant imposition on employers.

We will be covering a number of the various new sections inserted by clause 219 as this debate goes on, but perhaps one of the features that concerns us most as we look ahead—and a number of features concern us—relates to employment agreements and the negotiation of them. How are employers to handle them? An employer may negotiate an employment agreement with a number of workers, and some workers may say: “Yes, we want to be part of KiwiSaver.”, and the employer may say: “OK, if you want to be part of KiwiSaver we can afford this much as a salary or wage increase. But then we have to consider that on top of that we have to pay our compulsory contribution, so we will agree to this deal for you.” Other employees may say: “No, we’re not going into KiwiSaver.”, so the employer may say: “OK, to make it a fair package, you have to be remunerated a little more to make sure you have an equivalent package.” So a slightly higher wage or salary is agreed on for that person because the employer does not have to make a compulsory employer contribution, which is part of a total remuneration package.

What happens, then, if a few weeks or a couple of months later an employee who gets that slightly higher wage or salary remuneration because he or she is not part of the KiwiSaver scheme, suddenly says they want to be part of the scheme? That person has a right to do that under the law, so the employer is caught. The employer has agreed to a certain wage or salary package on the basis that a person was not part of the scheme, but the person changed his or her mind and now wants to become part of the scheme.

That is the kind of friction that Business New Zealand was talking about. The select committee heard a lot of submissions on this particular issue. A lot of submissions were received on new clause 219. There are a number of other areas, such as the age of entitlement, on which employers make contributions. Other colleagues will be covering the full range of issues, but I wanted to emphasise that first set.

CHARLES CHAUVEL (Labour) : I would like to make some brief comments about the changes to KiwiSaver made in Part 3, and also to direct some comments to the Minister’s Supplementary Order Paper 167, at least in as far as that Supplementary Order Paper will make changes to the KiwiSaver scheme. The changes proposed on the Supplementary Order Paper will assist to make sure that KiwiSaver does work as intended, and to the best effect.

Dr Smith is quite right; we did hear some very compelling submissions on KiwiSaver at the Finance and Expenditure Committee. The select committee proposed a number of changes to the legislation and recommended, for example, allowing employees who contribute to KiwiSaver schemes to phase in their minimum 4 percent contribution, starting at 2 percent on 1 April 2008 and arriving at the full 4 percent as late as 1 April 2011. To be consistent, that option is to be offered to members of complying superannuation schemes, as well, and that is obviously a commendable move. I note that the New Zealand Council of Trade Unions last week issued a statement welcoming, in particular, that change and asserting—I think with a degree of justification—that the KiwiSaver improvements will help those on low incomes. It was speaking in particular about that recommended change, and I think that will encourage what is already a spectacular rate of KiwiSaver uptake.

Just having a look at the other changes recommended by Supplementary Order Paper 167 in this area, I note there will be good consumer protection measures that will require complying superannuation funds to ensure that their fees are not unreasonable. This requirement already exists for KiwiSaver schemes. The Government actuary will be empowered to monitor any fee changes to see whether they are unreasonable, so there is a good prudential oversight regime that will be introduced. These changes will see the introduction of a public register of complying superannuation funds so that everybody can see whether a specific scheme will attract the relevant KiwiSaver benefits. So the changes mooted will increase transparency and make what is already an excellent scheme an even better one.

GORDON COPELAND (Independent) : I will also speak about Part 3, in particular about clause 235 and the provisions thereafter that relate to the mortgage diversion provisions in relation to KiwiSaver. I think that all of us in this Committee recognise the importance of homeownership, not just to provide stability for families, which in itself is a most important public policy goal, but also in retirement. In fact, a free home in retirement is the difference for many hundreds of thousands of New Zealanders between relative comfort and moderate to severe hardship. All of us know that New Zealand superannuation is inadequate if, at the same time, a person is trying to pay rent on a house.

In that connection, I will draw some statistics to the attention of the Committee, prepared for me by the Parliamentary Library. The number of privately owned owner-occupied homes in New Zealand peaked as a percentage of all homes at 73 percent in 1986, but by the year 2000 that percentage had dropped to less than 50 percent. That is a massive drop of 23 percent in just 20 years. By contrast, the percentage of people renting or leasing a home went from 23 percent in 1986 to 44 percent in 2006—almost a corresponding offset. One statistic, the percentage of private homeownerships, went down 23 percent, and there was a 21 percent increase in the number of people renting or leasing.

That brings into focus, I suppose, the tremendous importance of the mortgage diversion part of the KiwiSaver scheme. It can be utilised by people who have been in KiwiSaver for 12 months, and it enables them, under subparagraph (i) of new section 229(2)(i) in clause 235(6), to divert “half of the total contributions deducted for or contributed by the person, received by their KiwiSaver scheme provider;” into the repayment of a mortgage on their home, for as long as that mortgage continues. That of course is a very, very important part of the overall arrangements. That is a holistic approach to savings, because it enables a KiwiSaver member both to pay off a mortgage and to save systematically for retirement, at one and the same time. As a result many will enter their retirement with both a freehold home and a well-diversified portfolio of financial investments. That is the goal we want to achieve through this important legislation.

The first anniversary of people coming initially into KiwiSaver will occur on 1 July 2008, so in practical terms mortgage diversion will start from that point onwards. I can confidently predict that this facility will be extremely popular. Why do I say that? I say that based just on my own personal experience and that of many other people I know. We all appreciate that for young people raising children and endeavouring to pay off mortgages, it is also very difficult at that point in time—when the bills are mounting and there are mouths to feed—also to be setting aside money systematically for retirement. That reality has not changed. In fact, the statistics I have just quoted show that it has actually become worse—much worse—in the last 20 years.

In my view the huge reduction in the level of homeownership rates and the increasing number of people who are forced, long-term, to rent, is now one of the great problems that face our society. So we need to find a way through that, and that is what mortgage diversion does. It is a vitally important component of KiwiSaver, in my view, and one that I have no doubt will make an important contribution to both the social and financial security of hundreds of thousands of New Zealanders as we move through time. I can foresee 20 years from now that this House and all New Zealand will look back on the introduction of KiwiSaver, including the mortgage diversion component, and say that it has profoundly affected the financial and social security of New Zealanders and their families. For that reason, this part of the bill has my wholehearted support. It was something I personally worked very hard to bring into legislation. I am delighted that it was adopted by the Government and I think that in time it will prove to be a very, very important contribution. Thank you.

CHRIS TREMAIN (National—Napier) : Gordon Copeland has just spoken on the mortgage diversion scheme and on the part he played in bringing that to its inception. Although I certainly have empathy with his view of the level of homeownership in this country—and he is right; it has dropped significantly, which is nothing for us to be proud of as a nation—I am not so convinced that the mortgage diversion scheme will be as successful as he makes out.

It is an initiative, yes, but the reality is that other issues involved in getting people into their own home, such as the cost of that housing, need to be considered first. There is a lot of debate around once people are in properties where the full amount of their savings should be going. There is a lot of argument to say that the money should be going fully into the house. With the combination of higher interest rates and capital accretion that can be achieved through having our own home, it can be argued that people are far better to have their money going entirely into the savings in those homes than going, by a convoluted process through KiwiSaver with its added bureaucracy, back into the home in another way. However, it is an initiative and part of the scheme, and we will be interested to see how the numbers work out when we go into July next year and see the effect then.

I will focus on Part 3 of the Taxation (Annual Rates, Business Taxation, KiwiSaver, and Remedial Matters) Bill, largely on the amendments to the KiwiSaver Act 2006. In my 5-minute slot this morning I will focus on three specific areas. The first I will deal with is the age of entitlements debate, which was an area the Finance and Expenditure Committee had quite significant representation on. I will also talk about the salary sacrifice agreements and the position that employers such as the Christchurch City Council found themselves in. I will also touch on the transitional rates and the position we have got to in regard to those rates.

I start with the age of entitlements. This was an issue that did not perplex the committee but that the committee gave some consideration to. It concerns the question of whether we should allow individuals under the age of 18 to obtain all the benefits of the KiwiSaver scheme. Many submissions were received from people from across the board, and particularly from the unions, who felt that the full benefits of the KiwiSaver scheme should apply to 16 and 17-year-olds. Both the National Distribution Union and the Council of Trade Unions were most vocal on this particular aspect of the legislation. The Council of Trade Unions, the National Distribution Union, and the New Zealand Nurses Organisation said that preventing young workers from gaining tax credits and employer contributions was somewhat discriminatory.

The argument behind not providing the credits to 16 and 17-year-olds was that the Government felt that it would take away the focus on education, and that 16 and 17-year-olds should remain in the education system. I take a different point of view, in that I believe that some 16 and 17-year-olds out there are better off in the workforce. They have reached a point in time at that age when, for one reason or another, they have decided that they have reached the end of the road as far as school is concerned. But many of them go on into careers. They become young apprentices and take on jobs where their future is in doing the hard yards of being an employee and learning a trade. Sometimes, their education blossoms for them as they take up an apprenticeship and learn many more skills through doing that.

My argument is that we should be encouraging 16 and 17-year-olds to be saving as early as possible. In that regard, I think it is good reasoning to allow 16 and 17-year-olds to take up that opportunity once they end up in employment.

I understand the argument that by totally removing any age criteria we are allowing many families to take up these tax credits for very young children. It will be interesting to see how many take-ups of KiwiSaver there are by those under 20, which have been taken up by families getting their 5, 6, and 7-year-olds into a savings scheme early on in their life. I think members will find that quite a significant number of families of high net worth are taking up that opportunity.

KATRINA SHANKS (National) : It is my pleasure to speak to Part 3, and I will address the KiwiSaver aspect of this bill. I would like to talk firstly about the uneven playing field out there. With this legislation I would not like to be an employer or an employee, because the playing field has become really uneven. When an employer goes along and offers KiwiSaver to its employees, that is all very good, but the reality is that not everybody will take it up. Employers may be offering this scheme to encourage their employees to work and save, which is absolutely great, but under this scheme employers are also contributing up to 4 percent going forward. An employer is giving one employee who is taking up the scheme 4 percent, and another employee who has not taken up the scheme is not getting that 4 percent.

The Government says that is fine because the employer can negotiate with its staff, according to who has taken up the scheme and who has not. But, at the end of the day, somebody may leave the scheme because he or she is in financial hardship and needs to have a respite from it, so he or she will lose that 4 percent, or an employee may decide to enter the scheme after he or she has been through a wage negotiation round, and that employee has every right to enter that scheme. But all of a sudden the employer’s payroll is changing. It cannot predict what the payroll will do from month to month, so it is up to the discretion of the employees as to what they will do.

The great thing we have had in the past with salaries and wages is that they have been pretty transparent. When someone goes in and earns $20 an hour, that person actually earns $20 an hour. The person beside that employee who earns $20 an hour earns $20 an hour as well, and that is the way it is. I thought that we brought in the fringe benefit tax a few years ago to keep that situation transparent. To keep things even, those people who got benefits like cars and perks relating to their work would put in a fringe benefit tax and they would be taxed at a higher rate. There was a disincentive so that people got a dollar value for the work they did. In that way we could even out that playing field and there would be a bit more transparency.

Now in the workplace we still have the fringe benefit tax to keep that transparency, but we also have Working for Families, which complicates that situation. We can now have a situation where two people are working beside each other and doing exactly the same job. One person is getting Working for Families and is getting a little more. That person is still doing that same job but is getting a little more. That person could also decide to go into KiwiSaver, and could again get a little more. All of a sudden a gap is created and it is growing between two people who are doing exactly the same job. One is getting KiwiSaver and Working for Families, and the other is not getting those payments but is doing the same job, and the gap is growing. It also works in the reverse, which is quite complicated. One person who is getting Working for Families might not want to go into the next income level because that would affect the Working for Families payments, and the other person is not getting Working for Families and might take that promotion because it does not affect the income that the person is bringing home. By the time we put KiwiSaver into that mix as well, it all gets really murky.

Where is the transparency in the workplace when employers go into negotiations with their employees? We are creating complexity in the workplace. I would ask how employers are meant to act in good faith with their employees all the time, which is what we ask them to do under our labour legislation, when there is a moving feast in front of them. What employers want to do is to reward and pay people an amount of money for the work they do, but how can they do that when there is shifting ground underneath those employees all the time? Employers cannot do that.

I think we will find that, going forward, a lot of court cases will show that employers are not being fair when, in fact, they are trying to be very fair but the rules they have been given create this changing ground underneath them. I would ask how an employee who cannot afford to go into KiwiSaver might feel working beside somebody else who can afford to go into the scheme and who is getting a 4 percent bonus to go into KiwiSaver. The first employee cannot afford to go into KiwiSaver and has not gone into the scheme, so he or she is not benefiting from it. How do those people in the workforce feel? We have to ask ourselves whether we have given employers and employees a fair playing field now.

CRAIG FOSS (National—Tukituki) : I speak now to Part 3, which deals with changes to various other Acts and regulations. First of all, a previous speaker Mr Gordon Copeland mentioned the mortgage diversion part of the general KiwiSaver scheme, which is alluded to in, I think, Supplementary Order Paper 168 and in this part. Gordon Copeland is no longer on the Finance and Expenditure Committee since he went out on his own, and I think it is important to note that pretty much after he left there has been virtually no discussion whatsoever, no lobbying for, and no sponsoring of the mortgage diversion facility or that part of KiwiSaver. In fact, commentary has been very, very silent because most commentators believe that, yes, it is a worthy goal or worthy ambition to have some facility like that, but it does not sit very tidily at all within KiwiSaver—a long-term retirement savings scheme—to have as part of that same suite of bills a system that assists and encourages people to borrow money.

I note that even the monetary policy inquiry we had, which touched on all things KiwiSaver, shied away from the mortgage diversion part of KiwiSaver. There is obviously a reluctance to take that part out, but I imagine the Minister’s preference would be to take it out—perhaps to carve it out and let it form some part of other legislation. I do not think that is such a bad idea, and the National Party would welcome such discussions, firstly, to simplify the KiwiSaver legislation and, secondly, to make a more pure and transparent method to homeownership. Further to that, even the Council of Trade Unions did not comment on the mortgage diversion part of it, but it did note how unaffordable New Zealand housing is. It was not talking about the debt of the mortgage; it was talking about the ability to fund a mortgage or to get a deposit for a first home. The council lamented how badly New Zealand wages had fallen behind Australia’s. The head of the Engineering, Printing and Manufacturing Union, Andrew Little, before our committee on other business, recently also noted that. He used the example of how in New Zealand an electrician could get between $70,000 and $85,000 a year, while over in Australia the same electrician was on A$120,000 to A$130,000. He agreed, as part of his submission about some other matters before the committee, that that attraction was pretty hard to resist.

I think it was Mr Tremain and Katrina Shanks who earlier touched on the contributions around KiwiSaver. That issue is alluded to in this part but is not hugely addressed. It is more about home affordability, and KiwiSaver will struggle because—remember—it is 4 percent of gross, not 4 percent of those moneys left, which is about 5.5 percent or 6 percent of net. Quite frankly, when people are saving towards KiwiSaver, over time their annual return after tax will be about 3-ish percent, I guess, and their mortgages will be at 8 percent to 10 percent. Why on earth would they save towards KiwiSaver whilst they still had a mortgage? That is the contradiction that the mortgage diversion part starts in this bill.

I will just touch on the amendments to clause 284 set out on Supplementary Order Paper 168. It defines certain disposals by portfolio investment entities or by the New Zealand Superannuation Fund. I would like to mention that New Zealand is heading towards some dangerous territory here. Admittedly it was not a portfolio investment entity or the New Zealand Superannuation Fund, although they have been doing this; it was the Earthquake and War Damage Fund, I believe, which divested from tobacco stocks, thinking that Dr Cullen wanted it to divest from those, and believing that he would be pleased and happy for it to do so. Now, that is a debate that we should have, for sure, but Ministers of Finance, Ministers of the Crown, and any members of Parliament, of course, must be at total arm’s length from any funds that the Crown owns and from any way that their influence could even be misconstrued. Be they for moral or ethical reasons, if it is set up in the deed of those funds, then they should be left alone.

I also seek the Minister’s opinion and advice on the amendments to clause 263B set out on Supplementary Order Paper 168. I would welcome it if he could explain to us the issues around the Health (Drinking Water) Amendment Act 2007, which is included in the Supplementary Order Paper—or perhaps someone from the various health portfolios would like to participate on that one.

Dr the Hon LOCKWOOD SMITH (National—Rodney) : The Opposition would really appreciate the Government responding to some of the concerns that are being raised—for example, the concern expressed by my colleague Chris Tremain about the age limitation on the KiwiSaver provisions in the Taxation (Annual Rates, Business Taxation, KiwiSaver, and Remedial Matters) Bill.

The select committee was asked many times by people making submissions why the provisions were restricted to people above the age of 18. If we want to develop a savings culture in New Zealand, if we want to encourage saving at a younger age, when people first start to work—and of course they can legally work at age 17—why not enable them to be part of the full KiwiSaver scheme when they can legally work in New Zealand? If the Government is serious about supporting a savings culture with this now quite complex KiwiSaver scheme, it seems wrong to tell young new workers that, sorry, they cannot become part of the full KiwiSaver scheme until they are 18. Where is the logic in that?

If the Minister stood up and said that, at the end of the day, it was a revenue issue, that the whole scheme was costing a lot of money, and that if the Government lowered the age of eligibility down to 17 or 16, it would cost too much money, I could understand that. I could understand the Government making a pragmatic decision about the revenue cost, because KiwiSaver is going to cost the Government a lot of money over the next few years—a lot of money—and there are very significant revenue issues. But we need to understand why we do not let people be part of the KiwiSaver scheme when they start work. It is very clearly spelt out in clause 219, where the age of entitlement is specified. National members are at a loss to understand why new workers cannot get into the KiwiSaver scheme when they first start work. It seems bizarre that they cannot do that at whatever age they can legally start work. That is the first issue, and we would really appreciate hearing the Government’s explanation.

The second issue is covered in the transitional provisions of clause 237. Members on the select committee listened to submissions—often from unions, particularly the Council of Trade Unions—that argued quite strongly that the 4 percent contribution from employees is a big ask for low-income earners. Middle and higher income earners already save. One of the big issues with the KiwiSaver scheme—if it is to work properly—is whether it can help lower-income people to start saving and to get the benefits of saving. So many submissions to the select committee stated that 4 percent is a big ask for middle to low income earners.

Many of them asked why we would not allow flexibility whereby an employer could agree with an employee, as part of a remuneration package, to make a greater contribution, thus allowing the employee to put in, say, 2 percent, rather than the full 4 percent. The Government partially responded to this question by saying that, as a transitional measure, it would allow an employee to put in 2 percent for 2 years, if the employer agreed to put in 2 percent—rather than 1 percent, which is the standard rule for employers that is set out in this legislation. It said it would allow that transitional provision for 2 years, then in the third year the employee would put in 3 percent, to be matched by 3 percent from the employer.

The issue is that the transitional measure is not recognising the position of low to middle income earning New Zealanders. A lot of our people are in that area. People do not realise that the average income of New Zealanders is about $10,000 a year higher then the median income, from memory. It is significantly higher. If we look at the median income of New Zealanders, we see that it is somewhere down in the $30,000 to $38,000 range. It is a huge ask to expect people with families to contribute 4 percent of that gross pay to this scheme.

We should hear from the Government why it was unacceptable to it to have employers agree to make up the difference as part of a total remuneration deal, and why it refused to listen to the representations from the unions that it allow a more flexible scheme.

Hon PETER DUNNE (Minister of Revenue) : I am glad that earlier Mr Foss spotted the most critical element of this bill in the massive amendments that are being moved to it, when he referred to the new Part 2A, inserted by clause 263B, which affects the Health (Drinking Water) Amendment Act 2007. This was the deep, dark secret of this bill, and I give him credit for having discovered and revealed it.

I should tell the Committee precisely what this change does. It replaces section OB 1 of the Income Tax Act 2004 with section YA 1 of the Income Tax Bill. More seriously, this change is a drafting change consequent upon the rewrite of the Income Tax Act. It picks up the provision that is in the 2004 Act, which technically no longer exists, and carries it over to the bill. But I give the member credit for his perspicacity in getting to the heart of the issue.

On a less serious note, I turn to the more substantive comments the member’s colleagues have made. Mr Tremain and Dr Smith have raised questions about young people taking up KiwiSaver, why the member tax credit is not available to those under the age of 18, and a range of associated issues. The underlying concern that they have expressed is that this legislation is potentially limiting entry into KiwiSaver by people under the age of 18. I am pleased to inform those members that of the 316,000-odd people who have signed up to KiwiSaver already, just over 16,000 of them are 16 and 17-year-olds. So despite the absence of the member tax credit and despite some of the other incentives such as compulsory contributions not being available to those people, we still have a significant uptake.

Craig Foss: That’ll be by the parents.

Hon PETER DUNNE: The member says that may be by the parents entering into a savings arrangement on behalf of the children. That is quite probable. I can remember many years ago when some of us were young, callow youth, there were various savings schemes our parents entered into on our behalf that, as we grew older and became earners, we were able to carry on. I think precisely the same will happen with KiwiSaver, and I welcome the fact that we are already seeing such a significant uptake.

Dr Smith said earlier that the Government may run some huge fiscal risks here. That is absolutely correct. We have already exceeded 100 percent of our year 1 target for KiwiSaver, and the year from July is barely half over—

Charles Chauvel: An excellent response.

Hon PETER DUNNE: On the one hand it shows that we will run some risks, and, on the other, as Mr Chauvel says, it is an excellent response. People can see that KiwiSaver is a scheme that is entirely beneficial to them and to their long-term interests.

Dr Smith raised a concern about employers having to pay their contribution on top of existing salary or wages they may be paying out and settlements they may be reaching in respect of their employees. He overlooks the fact that employers will be eligible for an employers’ tax credit of up to $20 a week to offset the cost of that contribution. The consequence of that is that in 2008 the employers’ contribution is 1 percent, and the salary or wages that will be covered will be up to $104,000 per employee. That will go to 2 percent in year 2, or down to $52,000; 3 percent in year 3, or down to $34,000-odd; and in year 4, with the 4 percent contribution rate, the subsidy will still cover $26,000 of salary contribution.

Over that 4-year period there is a deliberate phase-in. Employers will be able to restructure their costs in such a way as to not be adversely impacted. If the current trends continue, we will see a substantial proportion of the New Zealand savings market enrolled in KiwiSaver and able to take advantage of all of its provisions—for the first time, perhaps.

I remind the Committee that this country has had a shocking history of long-term savings over a long period. We can go back to the 1970s and the superannuation debacle at that time, the 1980s superannuation debacle, and the mid-1990s superannuation debacle. For the first time KiwiSaver, based on voluntary contributions, has the potential to get us over that crisis that we have all lamented at various times over the last three decades. That crisis has put us into a position where our lament now is: “Look how good Australia is. Look how good Australia has become since compulsory superannuation came in in that country.” I remind the Committee that that was in the mid-1990s. It is a comparatively short transition. I suspect very strongly that if we were to have this debate in a decade’s time, we would be saying that some of the great strengths of the New Zealand economy at that point will be occurring because of the investment through KiwiSaver and the level of uptake.

I think that this scheme not only is very timely, but also is on the right track. It has all the right incentives for people to join. I want to make just a quick comment as I close, in response to Katrina Shanks and one or two others who have talked about—and I think Dr Smith used this phrase—“ambush and sandpaper arrangements” in respect of employers. I think that is most unfortunate. At the time that these proposals were being developed earlier this year, in the context of the 2007 Budget, it was totally appropriate that there be a measure of secrecy and security about their development. I well recall being at the Budget lock-ups where employers were first briefed on the impact of these changes. I did not see and do not remember anyone at those meetings talking about ambushes or other things. In fact, their initial reaction to the changes was extraordinarily positive. If one goes back and looks at their initial statements immediately afterwards, one will find that that was the case.

There will be implications for employers—of course there are—but they are essentially matters to be resolved between employers and employees. I find it somewhat ironic that those groups that spend a lot of time telling successive Governments to butt out of the employer-employee relationships now turn round and say: “Oh, you’ve made it difficult for us because you’re going to require us to talk to our employees, to negotiate with them.” This is the very thing these groups have been telling Governments for years they should be able to do in a free and unfettered way. They cannot have it both ways.

CHRIS TREMAIN (National—Napier) : I want to take the debate in a slightly different direction in this 5-minute speech. I want to focus on the Customs and Excise Act 1996, and the two amendments to that Act that will have quite a significant impact on child support payments in this country.

The first is section 280K, which is inserted in the principal Act by clause 263. It deals with the disclosure of arrival and departure information for the purposes of the Child Support Act 1991. Subsection (1) states: “The purpose of this section is to facilitate the exchange of information …”. Section 280L provides for the Inland Revenue Department to have direct access to arrival and departure information, to help it apply the Child Support Act 1991. In that regard, a range of information is to be provided, and I think that is a good thing. Subsection (4) of section 280K refers to the person’s name, the person’s date of birth, the person’s tax file number—all information that I think will be hugely relevant in starting to dealing with what can only be described as the mountain of unpaid child support.

I want to bring to the Committee’s attention some of the figures, which are frightening. I find it unbelievable that parents can have children, then walk away from their obligation to bring up those children. I find it simply quite unfathomable.

Hon Peter Dunne: Unconscionable.

CHRIS TREMAIN: “Unconscionable” is the word that the Minister uses. For the life of me I cannot understand how someone can bring a small baby into this world, see that baby grow, then walk away from one’s responsibility to bring up that child. I accept that people move out of relationships. I understand that. It happens around the world, and that is not going to change. But for a parent to actually walk away from his or her obligation, both financially and on a relationship level, to bring up that child I find totally unconscionable.

Here are some of the figures. Child support debt now has risen to $1.129 billion. That is up from $380 million in 2000. We have seen this exponential increase in parents of either sex—but I have to say mainly men—walking away from those relationships, walking away from their responsibilities to bring up their children. Quite frankly, I find that unconscionable, as the Minister said.

The second point I will make here is that the amount of assessment debt has gone from $192 million to $450 million. As at 31 March, 23,959 liable parents owed more than $10,000 each in child support. Over 23,000 people in this country have walked away from their obligation to bring up their children, their obligation to financially support their children. To allow the State to take over that role is just unbelievable.

Of those parents, 11,793 now live in Australia, and they owe a collective $354 million. Although this side of the Chamber does not support the vision of this bill, particularly the taxation provisions, in terms of the Customs and Excise Act 1996 I believe that there is an onus on this Parliament to come down on those parents, to make it difficult for them to walk away from their obligations. We should not accept, by any stretch of the imagination, their walking away from their obligations. We should come down hard on those parents who are living in Australia. The provisions of section 280K, “Disclosure of arrival and departure information for purposes of Child Support Act 1991”, and the provision allowing that information to go to the Inland Revenue Department, will help us to clamp down on those parents and get them to take on their obligations. I do not know why the Government should have to do that. It is something that parents should do as of right.

Lastly, and in that regard, although both men and women are involved in this issue, 288 fathers earning over $100,000 have total child support debts of $5.5 million. What are those men doing? What do they think? Do they think they can just walk away from their obligation to raise their child? It is totally unacceptable. National supports sections 280K and 280L.

  • The question was put that the following amendments in the name of the Hon Peter Dunne to the proposed amendments to Part 3 set out on Supplementary Order Papers 167 and 168 in his name be agreed to:

to omit from subparagraph (ii) inserted by paragraph (b) of clause 201(6) the word “share”, and substitute the word “scheme”;

to omit from paragraph (a) of clause 298(3) the words “paragraph (c)”, and substitute the words “paragraph (d);

to renumber paragraph (c) inserted by paragraph (a) of clause 298(3) as paragraph (d);

to omit from paragraph (db) inserted by subclause (2) of clause 402 the words “section LH 2(4)”, and to substitute the words “section LH 2(6)”;

to omit from the heading to section OB 7C inserted by clause 464 the word “business”;

to omit from subsection (2) of section OB 7C inserted by clause 464 the word “business”, and substitute the words “research and development”;

to omit from row 5C inserted in table O1 by clause 466 the word “business”, and substitute the words “research and development”;

to omit from the heading to section OK 4B inserted by clause 480 the word “business”;

to omit from subsection (2) of section OK 4B inserted by clause 480 the word “business”, and substitute the words “research and development”;

to omit from row 4B inserted in table O17 by clause 481 the word “business”, and substitute the words “research and development”;

to omit from paragraph (bb) inserted by clause 482 the word “business”, and substitute the words “research and development”;

to omit from the heading to section OP 11B inserted by clause 484 the word “business”;

to omit from subsection (2) of section OP 11B inserted by clause 484 the word “business”, and substitute the words “research and development”;

to omit from row 6B inserted in table O19 by clause 485 the word “business”, and substitute the words “research and development”;

to omit subsection (3B), other than the heading, inserted by clause 519B, and to substitute the following new subsection:

(3B) Despite subsection (3), this section does not apply for the purposes of section LH 1(2) (Who this subpart applies to); and

to omit paragraph (ob) inserted by subclause (1) of clause 521, and substitute the following new paragraph:

(ob) subpart LH (Tax credits for expenditure on research and development):.

A party vote was called for on the question, That the amendments to the amendments be agreed to.

Ayes 65 New Zealand Labour 49; New Zealand First 7; Māori Party 4; United Future 2; Progressive 1; Independents: Copeland, Field.
Noes 48 New Zealand National 48.
Abstentions 6 Green Party 6.
Amendments to the amendments agreed to.
  • The question was put that the amendments as amended set out on Supplementary Order Papers 167 and 168 in the name of the Hon Peter Dunne to Part 3 be agreed to.

A party vote was called for on the question, That the amendments be agreed to.

Ayes 65 New Zealand Labour 49; New Zealand First 7; Māori Party 4; United Future 2; Progressive 1; Independents: Copeland, Field.
Noes 48 New Zealand National 48.
Abstentions 6 Green Party 6.
Amendments agreed to.

A party vote was called for on the question, That Part 3 as amended be agreed to.

Ayes 65 New Zealand Labour 49; New Zealand First 7; Māori Party 4; United Future 2; Progressive 1; Independents: Copeland, Field.
Noes 48 New Zealand National 48.
Abstentions 6 Green Party 6.
Part 3 as amended agreed to.
Schedule 1

A party vote was called for on the question, That schedule 1 be agreed to.

Ayes 65 New Zealand Labour 49; New Zealand First 7; Māori Party 4; United Future 2; Progressive 1; Independents: Copeland, Field.
Noes 48 New Zealand National 48.
Abstentions 6 Green Party 6.
Schedule 1 agreed to.
Schedule 2

A party vote was called for on the question, That schedule 2 be agreed to.

Ayes 65 New Zealand Labour 49; New Zealand First 7; Māori Party 4; United Future 2; Progressive 1; Independents: Copeland, Field.
Noes 48 New Zealand National 48.
Abstentions 6 Green Party 6.
Schedule 2 agreed to.
New schedule 3

A party vote was called for on the question, That new schedule 3 inserted by Supplementary Order Paper168 in the name of the Hon Peter Dunne be agreed to

Ayes 65 New Zealand Labour 49; New Zealand First 7; Māori Party 4; United Future 2; Progressive 1; Independents: Copeland, Field.
Noes 48 New Zealand National 48.
Abstentions 6 Green Party 6.
New schedule 3 agreed to.
New schedule 4

A party vote was called for on the question, That new schedule 4 inserted by Supplementary Order Paper 168 in the name of the Hon Peter Dunne be agreed to.

Ayes 65 New Zealand Labour 49; New Zealand First 7; Māori Party 4; United Future 2; Progressive 1; Independents: Copeland, Field.
Noes 48 New Zealand National 48.
Abstentions 6 Green Party 6.
New schedule 4 agreed to.
New schedule 5

A party vote was called for on the question, That new schedule 5 inserted by Supplementary Order Paper 168 in the name of the Hon Peter Dunne be agreed to.

Ayes 65 New Zealand Labour 49; New Zealand First 7; Māori Party 4; United Future 2; Independent: Copeland; Independent: Field; Progressive 1.
Noes 48 New Zealand National 48.
Abstentions 6 Green Party 6.
New schedule 5 agreed to.
Clauses 1 and 2

Dr the Hon LOCKWOOD SMITH (National—Rodney) : I will use this debate on clauses 1 and 2 to re-establish exactly why National is opposing this legislation, because there are some matters in here that we support, as members listening to this debate will have heard. We support, for example, the reduction in the corporate tax rate. We support a number of the different measures in the bill. But the fundamental issue in respect of this bill is that this bill is what is colloquially called “the May tax bill”. It is an annual tax bill. What the annual tax bill does every year is set the income tax rates for New Zealanders. The Government had the opportunity with this bill to cut tax rates for ordinary wage and salary earning New Zealanders. This was a fantastic opportunity given that the Government now says that cutting taxes for ordinary wage and salary earning New Zealanders is a priority on its agenda and is something it now considers important. It could have done that with this legislation because this is the bill that sets those income tax rates. But the Government has not. It has not had the slightest interest in reducing income taxes for New Zealanders. Sure, the corporate tax rate is reduced, but there are not that many corporates in New Zealand. Most New Zealanders pay personal income tax. This bill, the annual tax bill, is the vehicle for dealing with that. It is spelt out in the title of the bill. Clause 1, “Title”, spells it out. It has those words “annual rates”.

This is a bill that sets the annual income tax rates, and the Labour members could have used this bill if they genuinely believed in lower income tax rates for wage and salary earning New Zealanders. They could have done it with this bill that we have been debating for these last few hours, which has been in front of this Parliament since May this year. But the Government has not done so. That is why the Opposition is opposed to this bill. We believe in reducing personal income taxes on all New Zealanders. That is what we totally support. We are committed to it. The ACT party is committed with us, but certainly none of the Government parties are committed to income tax reductions for New Zealanders. I know that the Minister in the chair, the Hon Peter Dunne, has taken exception to that comment, and I accept that United Future believes in personal income tax reduction. But does that not show the paradox? He is the Minister of Revenue. Does he not feel something like a neuter? What an extraordinary situation we have in this country today—the Minister of Revenue can say he personally thinks that income taxes should come down, and everyone knows his views are irrelevant. His views do not matter a damn. This Labour Government is not about to bring down income taxes, regardless of what the Hon Peter Dunne personally believes. It is staggering. I was at a conference with the Hon Peter Dunne the other day and as the Opposition spokesperson I dared not say what I believed, because it would have set the hares running, whereas Peter Dunne, the Minister of Revenue, could say what he thought should happen to personal income taxes, because everyone knows it does not matter what he thinks. Everyone knows that Labour takes no notice of what he thinks.

What we all know in this Parliament, and I think what New Zealanders are coming to see, is that Labour might, in election years, talk about tax cuts. It did last time; Labour talked about tax cuts prior to the last election, and once it got back into office it changed its mind. Labour promised to shift the income tax thresholds—a very minimal move but it would have helped. It would have helped avoid the need to deal with redundancy payments in this legislation as an ad hoc measure brought in at the last minute. If the Government had shifted those tax thresholds as promised at the last election, we would not need the ad hoc measures that are being brought in by this legislation. So that is what the people of New Zealand have to be very sceptical about. Labour promised personal income tax cuts prior to the last election and then backed down. It broke its promise on it. We know that Labour will promise income tax cuts again as we head towards this election. We know that Labour thinks about personal income tax cuts only in election years, and all New Zealanders should be very suspicious. Last time, Labour promised tax cuts and reneged after the election. New Zealanders should be very suspicious because everyone knows that Dr Cullen does not believe in lower personal taxes.

CRAIG FOSS (National—Tukituki) : I am speaking to the title of the Taxation (Annual Rates, Business Taxation, KiwiSaver, and Remedial Matters Bill. As I keep noting, this debate incorporates many, many Supplementary Order Papers, some of which are very, very fresh off the press.

I think this bill should actually be renamed the “Sorry, the Government Spending Has Dragged You Into a Higher Tax Bracket Bill”. Because, as Dr the Hon Lockwood Smith just noted, with Government spending New Zealand workers are being dragged into higher and higher tax brackets. In fact, the infamous “chewing gum tax cuts” announced in the 2005 Budget were dragged off the table and are now no more than a piece of dodgy, disgusting chutty on the bottom of some school desk somewhere. They are long forgotten. But, as Dr Smith just noted, election year is coming up and, funnily enough, tax cuts are being talked about.

If the Prime Minister wrote the bill, perhaps it would be entitled the “Oops, Sorry, Treasury Got It Wrong Bill”. Apparently the Prime Minister’s road to Damascus conversion on tax cuts has come about and previous lack of tax cuts are all Treasury’s fault because its forecast was so wrong over so long. In fact—I tell members just as an aside—Treasury produced some papers recently that point out its forecast has not been wrong. It has been predicting surpluses for quite some time, and it has just projected a structural forecast further out.

Perhaps this bill should be the “We Just Thought of Something About Redundancy (We Have Had a Chat to the CTU) Bill”. I would like to talk about the redundancy clauses of this bill. The redundancy provisions were picked up in the Supplementary Order Papers, and there were public relations statements from both Ministers Dunne and Cullen. But I raise the point again about the redundancy rebate clauses in this bill. They have never been aired. They have never been aired in this forum. They have never been aired in a select committee. They have never been discussed by this Parliament. We have not received advice from officials on this—absolutely never. These provisions have never been debated in this Chamber up until the last 15-odd hours. They have never been debated in Committee with cross-party buy-in to try to make some decent legislation. Even if philosophically National might disagree with it, we would try to contribute and help.

The redundancy rebate has never been challenged out in the public by those taxpayers who, at the end of the day, will have to be funding this. It has never been challenged by those who perhaps want some of this tax revenue spent somewhere else—be it on hip operations, education, student loans, or whatever. It has never been challenged other than in a dodgy discussion in a backroom in some Minister’s office up in the Beehive.

The redundancy rebate has never been quantified or qualified. How much is it? What will it cost? What is the fiscal impact? National has Supplementary Order Papers pushed aside because of the supposed fiscal impact of them, some of which is quite minimal. What is the fiscal cost of the redundancy rebates of 6c in every dollar up to $3,600? What is the cost? What is the study historically? How does that rewrite the accounts? How does that rewrite the forecast accounts?

This bill is part of a suite of bills that fell out of Budget 2007, which is a good reminder of the confidence and supply issue. I guess the confidence and supply issue is why the Greens over there are abstaining on this bill and, of course, why National is voting against it. We do not have any confidence in the supply of funds to the current Government.

The title of the bill, I think, is quite misleading. There are some absolutely classic quotes that came from Dr Cullen’s and Minister Dunne’s press releases that I think will come back to haunt them. This is their road to Damascus. Dr Cullen has essentially said that he likes a flat tax rate of 6c in the dollar for any redundancy payments. That is actually what he says. I will read to members, perhaps with a minor change or two, what he said, and this could be the title of the bill. Dr Cullen and Mr Dunne said yesterday, when talking about redundancy, that taxation payments should be fairer to people who are pushed into a higher tax bracket when they receive redundancy payments—and they extended it to lump-sum payments. Well, income is income. If one tries to argue that this income should be treated differently by the Inland Revenue Department than one’s own income, then one is in trouble. The department will go after that person. If one keeps it simple—“keep it simple, stupid”; give the department a big kiss, if you like—one sees income as income. The complexity that this starts to bring into the tax system is not welcome.

Another point is that the redundancy rebate is not quite as generous as the Ministers have announced, because it has to be claimed. It is not a rebate. A person does not suddenly get a cheque when he or she receives redundancy pay. It has to be claimed.

TIM GROSER (National) : As with my other colleagues, I think it is really important to go back to first principles when we look at this massive complex bill and see the giant central piece of the jigsaw puzzle is simply not there—a coherent and strategic approach to tax reform, which is the very purpose of this massive undertaking, and which this Government has singly failed to address. The reason it is the central issue, and the reason it will be one of the central stories next year as the political competition heats up, is because fundamentally we are a market driven economy. That means that people move themselves and their resources in accordance with economic incentives, which are vitally influenced by tax policy structures. Therefore, the absence of any coherence in the life of this Labour Government since 2000 towards a strategic approach to tax is a massive, missing central piece of the political jigsaw puzzle.

The idea that perhaps we could have looked at this in a closed economy setting 30 or 40 years ago is completely out of date in light of the rise of the global economy. The often quoted facts about this massive exodus of New Zealanders—not simply to Australia, but elsewhere—is perhaps the clearest illustration that members of the public can fully understand the need to have a competitive tax structure. Even when we look at the bits in this curate’s egg that we like, such as the reduction of the corporate tax rate, we see that we are lacking coherence there. This is not an overall strategic approach, and I will just mention two or three of the obvious reasons why it is not. Firstly, it is not a comprehensive approach to business tax reform. What we know is that there were—from memory—75,000 individual proprietorships and 44,000 partnerships in New Zealand in the year to December 2006. If we were to have had a comprehensive approach to business tax reform, we would have had some solution for those people.

The second obvious point is that we all know the issue of disintermediation in tax and banking policy—we are about to discuss that in a bill coming up shortly, the Reserve Bank of New Zealand Amendment Bill (No 3). What the Government has now done by failing to have a strategic approach is open up a massive wedge of 9c in the dollar in relation to the top marginal rate. I find it laughable to use the phrase “top marginal rate” when I know it cuts in at $60,000 gross tax, but nevertheless that is the decision the Government has made. To me $60,000 a year does not sound like an enormous amount of money—and we could ask any nurse, doctor, or teacher earning that salary whether he or she feels “rich”—but that is meant to be the threshold for cutting in at this tax rate. So this gap has been opened up and the lack of a coherent, strategic approach now creates this problem. So, yes, bits of this legislation make sense, but overall, when we look at this massive document, we have to say it is a lack of strategy and a lack of coherence.

More recently we have heard the Prime Minister in particular rabbit on about the tax being consistently made in respect of the surplus. She said: “Well, nobody told us. Treasury got it wrong. Treasury didn’t tell us.” What a load of cobblers—I do not think that is unparliamentary language, Mr Chairperson. Let me quote directly from the Treasury advice to the incoming Government in 2005. Members will recollect the Prime Minister’s spin that nobody told the Government it had a surplus and nobody told it about income tax reform. Let us reflect on the following statement to the incoming Government 2 years ago: “high marginal tax rates on personal and company income are more likely to have a negative impact on growth than others, by inhibiting the decisions that drive investment and enabling people to make the most of their economic opportunities.” There are a dozen other such statements from Treasury contained in documents that even we have public access to, going back years, that indicated to the Government, if it had been of a mind to listen, the need to address the problem of growing surpluses, the need to address the growing competition in tax policy, and the need to advance a coherent and strategic approach to these issues. The reduction in corporate tax to 30 percent might have been a pretty hot policy position to take 15 years ago, but not so today.

KATRINA SHANKS (National) : It is my pleasure to speak on the title of this bill. In the debate on this bill I have spoken about KiwiSaver and research and development tax credits, but I have not yet spoken about corporate tax rates, and I want to address them for a little bit. However, the one theme that is coming through as we read this bill, digest it, and understand it is the theme of how complex it is. Where is the long-term strategy for tax in New Zealand? There does not seem to be a long-term strategy. It all seems to be very piecemeal, and I have a problem with that.

I talked about research and development tax credits. We can talk about how there are now vehicles to try to get research and development tax credits. The perfect example was that the policy for research tax credits came from Australia. In Australia, banks tried to take advantage of these research and development tax credits by saying that development of their software was research and development, when actually it was redevelopment of software they already had. And that is what we will see. We will see people coming in and trying to take advantage of situations. Obviously there are loopholes in this legislation that enable people to do that, and I do not think they have been addressed as they should be.

When we talk about research and development it is just one tiny portion of this legislation. There are gaps in the legislation where people will try to take advantage of tax credits. Once again we have created a little tax pocket for a limited number of businesses. When we talk about KiwiSaver tax credits we are talking about exactly the same thing. We are taking about applying a specific tax advantage to a small portion of our population—to those going into KiwiSaver. I get confused as to where the strategy is. Should we not have one tax structure—structure, not rate—for everybody that is the same, so that everybody progresses through the tax structure, instead of “You belong in this silo, you belong in this silo, and you belong in this silo.”, and making it very piecemeal?

I believe that the Minister Peter Dunne, who has put this big bit of legislation together—and it is a big bit of legislation—supported Working for Families when it went through this House, and it is another form of tax credit. The Labour Government would say that it is a tax cut but, in effect, it is a tax credit. For years this Minister has campaigned on income splitting, but nowhere in this bill have I seen income splitting come through. He has campaigned and campaigned on income splitting for the last 24 years. One would think that the Minister of Revenue would be able to get it into this tax bill, but it has not made it. So how does what he has here line up with his long-term strategy for where he wants to see tax in New Zealand? It is quite interesting because obviously he is passionate about that matter, but this legislation does not support what he believes. It will be interesting to see what the long-term strategy is for this legislation.

I would like to touch on the corporate tax rates in this legislation because I believe that they add another level of complexity. We now have a corporate tax rate at 30 percent, a personal tax rate at 33 percent, a personal tax rate at 39 percent, and then there are not-for-profits, which are still sitting on 33 percent. We have a range of tax rates now that people can use, depending on the legal entity vehicle they are using. So we have silos again. People will really have to think about how they will structure their organisation to get the best tax benefits they can. This creates another vehicle for people to get into the 30 percent rate. We do not want to encourage avoidance, which I think this legislation does by widening the gaps between all the different tax rates. We have to be careful when we generate new legislation that we do not allow this to happen, but I believe that is what we are doing in many areas in this legislation. We are creating silos where people can apply, do a bit of manipulation, and move their businesses around. Accountants and lawyers must be extremely happy with this.

CHRIS TREMAIN (National—Napier) : I rise to speak to the title of this bill and to bring another strain of thought to the research and development tax credit side of this debate. I want to speak specifically on that matter and, more generally, on the wider tax base.

National will not be voting for this legislation. We believe that the tax position put forward under clause 3 is not the direction in which this country should be heading. This bill is not going down the track of setting the vision that we need as a country and, as a result, we will not be voting for it.

I want to focus on the research and development tax credits and why we do not believe they will specifically achieve what we need in this country. Under the Labour Government we have seen a supposed agenda of economic transformation. But the reality is that although the New Zealand economy has changed over the last 6 to 8 years, there is no way that it has transformed. Other countries have changed rapidly. The export composition of many countries—of many small nations like Finland, Ireland, and Singapore—has transformed their economies significantly, to the point where their exports as a percentage of GDP are significantly higher than those of New Zealand. We still wallow at the 20 percent level of exports to GDP while other countries like Ireland have a significantly higher rate than that. Those countries saw 10 years ago, 8 years ago, 6 years ago, the need to transform their economies away from specifically agricultural-based industries into more of a weightless economy, and they transformed their economies rapidly.

The legislation before us gave us the opportunity to leapfrog, to go forward, and to focus specifically on the industries that will transform our economy. I think the bill has lacked focus in that regard and that New Zealand has lacked focus in terms of its economic transformation agenda. New Zealand needs to act quickly to take its exports forward. The area where I think we can do that significantly is in the weightless economy. In 1996 our total exports were $20 billion and in 2006 they were $32 billion—a growth rate of some 51 percent. That is a significant contribution. If we look at the weightless economy, which are services that New Zealand provides to economies overseas—such as 24-hour telecommunications services and helpdesk services—we see that they have grown from $792 million to $2.3 billion over the same period of time. That is a 193 percent increase in exports generated out of this nation. To me that is the focus that we should have had with this bill.

I see that the research and development tax credits in this bill are across all industries, such as my own businesses—my real estate business, my travel business, and development companies in Hawke’s Bay. I fail to see how an investment in research and development tax credits for those businesses will take this nation forward, or encourage export growth, or improve our balance of payments deficit. Quite frankly, it will not. Companies that are not in that market will use all manner of means to get a tax credit they would not otherwise get. I think that is the wrong approach. The research and development tax credit was an opportunity to focus on the weightless economy and to focus on our export markets to drive our exports as a percentage of GDP forward and upward. In that regard, I am disappointed.

I do not think there has ever been a precedent for an Opposition party to vote for another party’s tax bill, and National will not be changing that tradition. National is against this bill and will not be voting for it.

A party vote was called for on the question, That clause 1 be agreed to.

Ayes 65 New Zealand Labour 49; New Zealand First 7; Māori Party 4; United Future 2; Progressive 1; Independents: Copeland, Field.
Noes 48 New Zealand National 48.
Clause 1 agreed to.
  • The question was put that the amendments set out on Supplementary Order Papers 167 and 168 in the name of the Hon Peter Dunne to clause 2 be agreed to.

A party vote was called for on the question, That the amendments be agreed to.

Ayes 61 New Zealand Labour 49; New Zealand First 7; United Future 2; Progressive 1; Independents: Copeland, Field.
Noes 48 New Zealand National 48.
Amendments agreed to.

A party vote was called for on the question, That clause 2 as amended be agreed to.

Ayes 61 New Zealand Labour 49; New Zealand First 7; United Future 2; Progressive 1; Independents: Copeland, Field.
Noes 48 New Zealand National 48.
Clause 2 as amended agreed to.

Hon PETER DUNNE (Minister of Revenue) : I move, That the Committee divide the bill into the Taxation (Annual Rates of Income Tax 2007-08) Bill, the Taxation (Business Taxation and Remedial Matters) Bill, and the Taxation (KiwiSaver) Bill, divided into Taxation (Annual Rates of Income Tax 2007-08) Bill, Taxation (Business Taxation and Remedial Matters) Bill, Taxation (KiwiSaver) Bill, pursuant to Supplementary Order Paper 169.

A party vote was called for on the question, That the motion be agreed to.

Ayes 61 New Zealand Labour 49; New Zealand First 7; United Future 2; Progressive 1; Independents: Copeland, Field.
Noes 48 New Zealand National 48.
Motion agreed to.

Dairy Industry Restructuring Amendment Bill (No 2)

Second Reading

Hon JIM ANDERTON (Minister of Agriculture) : I move, That the Dairy Industry Restructuring Amendment Bill (No 2) be now read a second time. The Dairy Industry Restructuring Amendment Bill (No 2) was introduced into the House on 14 August this year. It was read for the first time on 21 August and was referred to the Primary Production Committee for consideration. The committee received and considered 10 written submissions on the bill. The bill amends the Dairy Industry Restructuring Act 2001. It provides for the export rights to 11 designated dairy export markets, at the expiry of the rights currently held by the Fonterra Cooperative Group. The bill will complete the transition begun in 2001 to a new industry structure, without the monopoly powers of a statutory marketing board. It will also provide certainty to all the dairy industry’s stakeholders about the future access they have to these markets.

As well as provisions relating to dairy export markets the bill also extends existing regulation-making powers relating to the New Zealand Dairy Core Database. This is an important industry-good asset containing information on dairy herds and their production performance. The key issues raised in the submissions on the bill related to which export markets should have all restrictions removed and which should continue to be regulated under the new system, the term of allocation for export licences, how long allocated export licences should be valid for, and the scope of powers given to the chief executive of the Ministry of Agriculture and Forestry for the purposes of monitoring and enforcing compliance with new allocation rules.

Issues about the current management of the New Zealand Dairy Core Database were also at issue. Of the current 11 designated markets, the bill provides for all export restrictions to be removed from two markets and from parts of four other markets; in other words, these two markets will no longer be designated markets. In the case of four further designated markets, new, narrower definitions are provided for. The bill provides for export licences to all remaining designated markets to be reallocated periodically among New Zealand dairy companies, on the basis of each company’s share of total milk solids collected from New Zealand dairy farmers. The new arrangements will come into effect as the initial allocations made to Fonterra in 2001 expire, from now through to 2010.

Some submissions to the committee strongly supported removing export restrictions to certain markets, as this would complete the transition begun in 2001, and provide more export opportunities for dairy companies. However, one submission strongly opposed removing export restrictions to some markets, on the basis that this could risk destruction of some value to New Zealand interests. The committee has not recommended any change to which market should remain regulated and which should have restrictions removed. I believe that the committee has considered this matter carefully in the context of the relevant purposes of the principal Act, and I commend its final decisions and recommendations to the House.

The fact is that for some markets, because of the particular import arrangements operating, export licences allocated to multiple participants would not be legally enforceable. The New Zealand Government could therefore not guarantee that licence holders would be able to exercise their rights, even if those rights were actually given. Therefore, the New Zealand Government, by removing export restrictions for these markets, will be providing opportunities for a wider group of New Zealand - based companies to expand their export activities. For one other market the benefits of regulation are not sufficiently large to justify the cost of continuing a regulation.

The bill provides for export licences to be allocated to multiple participants on a periodic basis. This was to be done annually, for the next 3 years, which was proposed in the bill, but moving to every 3 years—that is, triennial allocations—from 2011 onwards. The proposed triennial allocation period was intended to provide a balance between the interests of growing companies, which would tend to favour a shorter allocation period, of course, and those of established companies, which would tend to favour a longer allocation period. The committee has recommended that export licences should always be allocated annually; in other words, the committee recommends not moving to triennial allocations in later years. As the committee points out, no matter what the allocation period is, companies will be able to predict with relative accuracy what their share of export licences will be, as each allocation approaches.

The bill provides a number of powers to the chief executive of the Ministry of Agriculture and Forestry for the purposes of monitoring and enforcing compliance with the rules of allocation for export licences. These include powers of entry, search, seizure, and the power to require certain information. After seeking clarification of the rationale and scope of these powers, the committee has recommended a number of amendments. These amendments aim to clearly define when and how these powers will apply, and to generally make the monitoring of the compliance regime more workable and effective. I believe they are all in the spirit of good legislative practice, and I am therefore appreciative of the committee’s work in this regard.

The bill extends existing regulation-making powers relating to the New Zealand Dairy Core Database, so that if a copy of the database is vested in an entity other than the current operator, which, of course, is the Livestock Improvement Corporation, regulations can be made to apply to any new entity. This will ensure the ongoing integrity of the database, for the benefit of the whole industry.

This bill represents an important step in the evolution of the New Zealand dairy industry. It provides a fair and equitable mechanism for a wider group of companies to access designated dairy export markets. I would like to thank the chairman and members of the Primary Production Committee for their expeditious but thoughtful consideration of the bill and for their timely report, which was tabled on 31 October this year. I commend the bill to the House.

Hon DAVID CARTER (National) : National will be supporting the Dairy Industry Restructuring Amendment Bill (No 2) through all its stages, and I thank the Minister for his comments. To my mind this legislation shows the maturity of the dairy industry and the way it has moved a huge amount since the late 1990s, when we considered whether there was a better way than the old mechanism of sale through the New Zealand Dairy Board. Following the initial restructuring of the dairy industry, we saw the formation of a very large company called Fonterra, which collects 95 percent of all milk produced in this country. The company has clearly done very, very well in the last few years, and I congratulate Fonterra on its performance.

I also share the celebration of dairy farmers who now find themselves seeing a record payout. This is driving the whole of the economy, and if members want further proof of that, they can just look at the comments made by the Governor of the Reserve Bank when he reviewed interest rates a couple of times ago. He made the comment then that interest rates would remain high because of the Fonterra payout. It was interesting that he made those comments as the payout was being predicted by Fonterra, and certainly before any dairy farmers had actually received the benefit of that additional payout.

What the statement proves, and what all New Zealanders need to realise, is that the economy of New Zealand is hugely affected by the success of the whole of the dairy industry. Because of Fonterra’s dominance within that industry, the success of Fonterra affects the livelihood and the standard of living of all New Zealanders. So National is pleased at this further step in the maturing of the dairy industry, and is certainly heartened by the performance of the dairy industry since that time.

The Minister said that the Primary Production Committee handled its role efficiently and reported back on time. Again, it is a disappointment to me to find that we are in urgency—the final rush before Christmas—having to now put this bill through all its stages, when it has been sitting on the Order Paper for the whole of November and could have been done under the normal process. But the legislation must be passed by the end of this year. If members look at the commencement date, which is covered in clause 2, they will see that the legislation will come into effect on the receiving of the Royal assent. We all know that even the Governor-General requires his Christmas holidays, so here we are in urgency making sure that this bill is actually put through. I acknowledge that the whips rang me quite recently to say that we would be changing the Order Paper this morning as a means of making sure that this legislation would go ahead of the taxation legislation. That is how critical it is that the bill be passed.

I will make a couple of comments about the procedure through the select committee and about one or two of the changes we made. As the Minister said, there is the issue of the allocation period for licences. We heard submissions both ways as to whether it should be on a 3-yearly or a 1-yearly allocation basis. Although we were persuaded in the end that there would be an additional cost associated with an annual allocation process—we did not think those costs would be huge—we were very keen that the industry maintained a system that allowed maximum efficiency within the industry. That means that we are encouraged by the dairy industry restructuring legislation and by the way that new players have been coming into the scene and competing against the dominance of Fonterra.

I do not think that Fonterra has much to worry about, because it is such a dominant player, but these new players—the likes of Synlait and Open Country Cheese—have been good for the industry by giving the farmers of New Zealand other choices as to where they may decide to send their milk. We were keen to make sure that the allocation process reflected what we predict, from the select committee point of view, will be ongoing new entrants into this industry. This has to be good for farmers and also for the whole of the New Zealand economy.

The committee was certainly also concerned, initially, about issues around the powers of entry, search, and seizure. We put a lot of effort into this, but at the end of the day the committee was convinced that whilst the measures within the legislation are quite severe, they are necessary. Under no circumstances can the Government entertain not being in a position to carefully monitor compliance with the actual figures by which these quota allocations are finally made. They will be made on the basis of the milk collected from individual farmers. On that basis it will be a direct proportional share of the dairy industry, and the Government needs to have the ability to make sure that that system is sound and complied with by the industry—not that I suspect any of the players who are responsible would attempt to cheat that system.

The final issue I will touch on is the core database. We received submissions—particularly from one company, Ambreed New Zealand—that argued that what is in place now has not delivered fairly, as was expected by the select committee when it heard the original dairy industry restructuring legislation back in early 2000 or 2001. Having listened to the arguments from Ambreed, I sympathise with the position it finds itself in. As it clearly said to us, price equals access, and I think there is an issue around whether we got that legislation right in the original Dairy Industry Restructuring Act. Having said that, I point out that the committee was quickly made aware that the very issue raised by Ambreed was actually outside the scope of the bill. I think it is important that Parliament notes the words in the report from the select committee: “This matter, however, is outside the scope of the bill, but needs further investigation.” I suspect that over time that will occur.

This legislation is necessary. It has to be passed by the end of this year—in other words, within the next few days so that the Governor-General can put his signature to it and then himself have a holiday. I think the select committee did a very admirable job with this complex legislation. This legislation will put the dairy industry in good heart for the future. This industry is also of vital importance to New Zealand.

Dr ASHRAF CHOUDHARY (Labour) : I will take just a very brief call on the Dairy Industry Restructuring Amendment Bill (No 2). As the previous speaker said, this is a bill on which the Primary Production Committee took a very bipartisan approach. We all worked together on it for the farmers of this country and for the industry. We are very pleased it is to be passed before the end of this year, because it will be applicable from early next year.

The bill removes the restrictions of exporters through to markets, and, as was highlighted before, it gives us a reference period for determining the allocation. That means the data will span three seasons rather than two, which was originally in the bill. Also, it highlights the power of entry, search, and seizure of documents in the workplace and talks about the control of a core database.

Overall, it is a very good bill. As the Minister said before, it is really an evolution of the dairy industry from 2001 onwards. It will certainly allow exporters a much better and more streamlined opportunity to export our dairy products around the world.

With those few words, I commend this bill to the House and look forward to the deliberations on it. Thank you.

ERIC ROY (National—Invercargill) : As those listening may have ascertained, there is a great deal of unanimity on the Dairy Industry Restructuring Bill (No 2), so I will not be taking a very long call. I think there are some salient things that need to be said, and I will run through those.

The first is that the Primary Production Committee, under the chair of David Carter, continues the tradition of looking for the best outcomes in solving whatever comes before it. There is always a great deal of goodwill and unanimity about what we end up doing, and this bill is no exception. We recognise the significance and importance of the dairy industry to New Zealand, and we gave earnest consideration to the issues raised in the Dairy Industry Restructuring Bill (No 2). This bill was quite specific. It was not wide ranging, and, as has been suggested, some submitters wished to bring up matters that were not contained within the bill. Whether or not we are sympathetic to them, we are limited in what we can and cannot do.

When the Minister of Agriculture introduced this second reading, he made a comment that I think we can identify with. He said that this bill is part of the evolution of the dairy industry. The dairy industry is New Zealand’s most significant exporter. Fonterra is our biggest company; it generates huge amounts of revenue through exports. But the dairy industry is an evolving industry, and one of the interesting things is that we have seen that it does have the maturity to actually advance. It is not trapped in any kind of time warp.

Besides Fonterra, there are now seven other players, even though their combined mass occupies about 5 percent of the dairy industry. The provision allowing those players to operate is what we actually had to deal with, and the allocation of opportunity in the area of export markets. There are perhaps four conditions that come into decisions about this matter. There are the conditions and rules of the importing country, the desires and expectations of the exporters, the desires and expectation of the producers, and the international rules that exist under the World Trade Organization. All those things kind of come together, and we had to look at allocation of specific markets. Other speakers have outlined the issues surrounding that.

As David Carter said, one of the issues that perhaps has a bit of traction but is not within the bill is the way in which the core database is operated. His comment that price is access sums it up. I think an issue that the industry needs to address is whether what exists now is serving the industry in the best possible way. If the industry is to continue to progress, it needs to have all the information in the database relatively available to other players; otherwise, we are limiting the genetic resources, the sharing of information, and all of those matters. As I said, this matter is outside the scope of the bill and therefore was something we could not consider. However, it may well be addressed at a different time in a different forum.

I am pleased that the Minister is prepared to accept all the amendments recommended by the select committee. We gave quite considerable consideration to how this measure can best operate, and I think we are all pretty much happy with the bill as it is reported back in this second reading. As has been stated, National will support this bill through all its stages.

NATHAN GUY (National) : I think it is important that I make a contribution to this debate. I want to put it on the record from the start that the company I am involved with is a Fonterra supplier and a shareholder in LIC, but the Dairy Industry Restructuring Amendment Bill (No 2) is going to enable greater competition in the dairy industry, which I think is fundamental. The important point I want to make around those two companies is that there are seven players outside of Fonterra, albeit they are small players in the overall dairy industry. But it is important that the markets are opened up and that Fonterra does not have a monopoly over them. I think that that is what this bill sets out to achieve.

I also make the particular point that here we are, at 20 to 12 during the day. We are in urgency—we do not normally sit at this time of the day—to put this bill through Parliament because it is important. But I say to the Minister and the other members over on the other side of the Chamber in the Labour Government, and to those members who prop up the Labour Government, that this bill has been lurking around on the Order Paper for about the last month. Yet here we are, having to put this legislation through in a mad panic under urgency. It is important for the cornerstone of our economy that it goes through today—extremely important—and we will support it in going through. But I make the point that the Government has had to slam the House into urgency because it is so hopeless at managing the things on its Order Paper. This is a hopeless Government. It has had a month to get this legislation through, but here we are today, at 20 to 12, having to put it through under urgency.

Another important point that I make on this bill—and I will probably make further contributions on it when we get into the Committee stage—is that it will allow export licences to be allocated on the basis of a proportion of the milk solids collected from dairy farmers, with a minimum threshold of 0.1 percent of the total milk solids collected. Those export rights will become available between 2008 and 2010 on a yearly basis. That is a very important point to make there. Those rights outside that period will become available from 2011 on a 3-yearly basis.

The other important point, which has been touched on but which I think it is worth making a further contribution on, is around the core database that LIC tends to have a monopoly over in the current regime. It was a little outside this bill to get into the nitty-gritty of that, but I think that with Mr Carter’s chairmanship of the Primary Production Committee, it may be something that the select committee seeks to have a further look at in 2008. It is not necessarily fair that price dictates the level of service for the other minority companies that are trying to get involved in providing a service and dealing with the core database.

So those are some issues that I think we need to make a contribution on. I would like to get the Minister, in the Committee stage, to talk about the definition of milk solids, because that would be an important contribution. I think the Minister should tell the House that whether “milk solids” is written as one word or as two words is significant, because the words have a different definition. So it would be worthy of the Minister in the Committee stage to make a contribution and explain the definition and why that is so, for the benefit of listeners.

National is supporting the passage of this legislation through the House. We wonder why we need to be in urgency to get it through, because if the Government were organised we would not need to be ramming it through under urgency.

R DOUG WOOLERTON (NZ First) : Thank you—

Hon David Carter: Oh, here we go—the Labour leftie.

R DOUG WOOLERTON: In reply to David Carter, I say we will pay it back, on our own terms and when we think it is appropriate—with the appropriate hype and all the rest of it as members would expect. So I tell those members they will not miss it when we do it—

Colin King: Go home and have a look at the news.

R DOUG WOOLERTON: —and they should keep an eye on the news, and they will get there.

I think that it is right to say that New Zealand First supports this Dairy Industry Restructuring Amendment Bill (No 2). I was listening to the previous speaker Nathan Guy, and I just want to run over the things that have made the New Zealand dairy industry great.

Hon David Carter: A lot of people want to run over you.

R DOUG WOOLERTON: I know that a lot of people want to run over me, and I know the reasons they want to. But I will talk about what made the New Zealand dairy industry great, and why we in New Zealand First have concerns about it. A lot of it is encompassed in this bill, but not in the detail. This bill allows the transfer of quota that was shifted from the New Zealand Dairy Board to Fonterra, and that will now go further out to other dairy companies. I will give a couple of illustrations of that.

The New Zealand dairy industry has done well, because we have ensured that it stayed in the ownership of New Zealand farmers and in the ownership of New Zealand, and we have made no bones about the fact that we would protect that industry in any way, shape, or form that we could. It has been a longstanding joke that if the Dairy Board of the day got into trouble it would come to this Parliament, talk to the Prime Minister and the Minister of Agriculture, and ensure that laws were put in place to guard the dairy industry. Now we are seeing proposals to split up the dairy industry and to open it up to overseas owners and wider ownership.

People do not remember, and many people do not understand, that it is the quotas we hold, and the quotas that have allowed us to get into markets—mainly in Europe—that have provided the cream on top of the cake for the dairy industry. Those quotas were held and jealously guarded by the Dairy Board and by Fonterra. Now they are going wider, and I hope that the companies that pick them up respect that, and guard them as jealously and as carefully as has been done in the past.

Dairy farmers, traditionally, have understood something that beef farmers, sheep farmers, and wool farmers in New Zealand have not understood. They have understood the value of vertical integration. Individual farmers have understood that they could not market their products themselves, and they could not turn milk into cheese themselves. So they hired “suits” or, in the early days, white-coated people, dairy factory managers, to do those things while the sheep, beef, and wool industries allowed overseas interests to dominate the market. They became price-takers, and the Vesteys, Hellabys, and all the rest of them clipped the ticket on everything. So that made those industries that allowed overseas companies to dominate the marketing of their products weaker than the dairy industry.

The dairy industry kept our marketing in-house, we kept it in New Zealand, and we make no bones about it. That has been the strength of the dairy industry. Dairy farmers have always understood that they had to hire marketers, they had to market manufacturing people, and they had to market their products in other countries while retaining ownership, retaining control, and making sure the returns thereof came back to this country.

A couple of smaller dairy factories are starting up around the country as we speak. One is called New Zealand Dairies Ltd, in Studholme, not far from Timaru, but we are seeing in those companies a lack of capital. We are seeing them go to the people they are selling to. In this case it is a bunch of Russians. I do not mean a bunch of Russians in that they are not honest; I mean—

Hon David Carter: Xenophobia!

R DOUG WOOLERTON: No, no. This is a fact, and these people have put money into this company and now want to control it. I say to Mr Carter and to this House that xenophobia is what has made the dairy industry great. The dairy industry did not follow the stupid, naive market views that were followed by the meat industry, which is now giving profits to everybody except farmers; or the wool industry that is now on its knees, giving profits to everybody except farmers; or the sheepmeat industry, which is now giving profits to everybody except farmers. That is what—

Colin King: That is rubbish.

R DOUG WOOLERTON: Oh no—it is not rubbish, because the dairy industry that once was the poor cousin of agriculture now dominates agriculture and is earning in excess of 20 percent of our export earnings—because of xenophobia. We decided we would keep this industry within this country and we could control it, and we should still be doing that. We should not allow other countries or other people to come in and take the profits away from our farmers. We have the ability in this country to provide the money we need for this industry.

Hon Member: Come on, Stalin!

R DOUG WOOLERTON: This is not about Stalin. I would just like people who are listening to know that the National members are laughing and mocking in a way that seems quite sad to me, because I grew up in a National Party that took the ownership of the dairy industry seriously. It believed that the ownership of the dairy industry should be in the hands of New Zealand farmers. That was the National Party I grew up in, and now National members mock me for making this speech to say that this industry should be New Zealand - owned. I am not saying that Fonterra should have a total stranglehold on the industry—

Eric Roy: You just did.

R DOUG WOOLERTON: —but I am saying there should be legislation ensuring that whoever starts up dairy farming in this country is a New Zealand company with New Zealand ownership. I hear Mr Eric Roy, who now comes to this Parliament to earn the substantial part of his living. Mr Roy owns a big sheep farm down out of Gore but it does not make enough money for him, so he has to come to this Parliament as an MP to supplement his income, and now he sits here and mocks me when I am trying to protect the dairy industry. Instead of flitting around the world, why did he not involve himself in his industry and protect it while the dairy people were protecting theirs?

Eric Roy: I’ll put my record up against yours any day.

R DOUG WOOLERTON: Well, the member can put his record up against mine. I would like to see that, actually, because my record on dairy company directorship is a damn sight better than Mr Eric Roy’s record on his pitiful sheep-farming career. I tell members that if they look at the returns going to sheep farmers and at the returns going to dairy farmers, then therein lies the story. There is no need to look further. But because of a philosophical belief in unfettered markets, Mr Eric Roy is happy to see the dairy industry go to whoever is the highest bidder. We in New Zealand First are not.

Hon David Carter: Oh, rubbish!

R DOUG WOOLERTON: Mr Carter can say “rubbish” and we will hear his contribution, but Mr Carter is happy for other people beyond these shores to involve themselves in the New Zealand dairy industry. We in New Zealand First are not.

  • Bill read a second time.

In Committee

Part 1 Amendments to Dairy Industry Restructuring Act 2001

Hon DAVID CARTER (National) : I think the important section of the bill is around clause 2, “Commencement”. This legislation has to be passed by 31 December 2007. The date is important because it was the original date on which the allocation to Fonterra of these licences was set. The history goes back to the issue around quota allocation being very difficult to determine at the time of the dairy industry’s restructuring in 2001, when the Dairy Industry Restructuring Act was going through Parliament.

I point out that although the Act went through Parliament in 2001, the discussions on the deregistration of the New Zealand Dairy Board and the opening up and restructuring of the industry actually commenced through the late 1990s. I think Parliament should record today the efforts made by a former Minister of Agriculture, the Hon John Luxton, who drove this process and initiated it. It was something that at the time was not widely accepted by some of the dairy—

R Doug Woolerton: While he and Wyatt Creech were starting up a cheese factory.

Hon DAVID CARTER: Well, Mr Woolerton says that they managed to start up a cheese factory, which was a very successful initiative. It was allowed by this very legislation, and it is something that that member ought to applaud instead of knocking. But that member is at the stage when he is living in the last century, I assure members. Mr Woolerton is living in the last century, but I just say to him—I have a few things I want to say, but I do not want to use up my time—that this industry has been moving on for a long time. It is time that “Rip Van Winkle” woke up and took the chance to look at what has happened, because we should be very proud of this industry.

I say to the Minister in the chair, Jim Anderton, that one of the interesting little developments in the Primary Production Committee was to be found in the definitions. We found, to our surprise, that the whole of the quota issue is determined by the amount of milk solids collected on New Zealand farms. Through this process we found, to our absolute amazement, that the word “milksolids”—and I say it as one word because we found there was a reason why it had to be one word rather than two words—had never been defined in legislation. So we have included that definition to make sure it is there in the legislation so that any subsequent allocation is made on that basis.

The other issue I will touch on, which I did not mention in my first contribution, is around the calculation of quota and the ability of companies now to do that over a period of three seasons. This was something that struck the select committee. The select committee members know, because of the climate change issue as much as anything else, about the issue of droughts affecting particular regions. It is certainly something that is on the minds of the select committee members.

For example, if Westland were to be devastated by a drought in any one particular year, then more than that year would be affected in production terms. The effect of that drought could flow over 1 year, 2 years, or even 3 years. The select committee recognised that and has therefore given the ability for the calculation of quotas to be on the basis of recognising the effect on more than 1 year or 2 years’ production, but in actual fact 3 years’.

I think those are the main points, but one that is certainly of annoyance to members on this side of the Chamber is the fact that the Government, after having had this bill on the Order Paper for some time, has not been able to move it in normal sitting time. Here we are now in urgency, driving the bill through all its stages so that the Governor-General can get it on his desk prior to the Christmas break, sign it, and make sure it is done.

This issue has been around since early 2000. The Government has had 7 years, and now here we are, in the very last, dying days of this Parliament—in fact, in the dying days of this Government, I suggest—rushing it through all its stages.

Dr Ashraf Choudhary: Dream on!

Hon DAVID CARTER: Ashraf Choudhary laughs, but he is the only member on that side of the Chamber who is laughing. At least this bill is finally being attended to, and for that I congratulate the Minister.

ERIC ROY (National—Invercargill) : As has been suggested, there is a great deal of unanimity about this Dairy Industry Restructuring Bill (No 2). However, it is appropriate that we need perhaps to highlight one or two natural issues because, as the Minister said, we are in a process of evolution and we may want to come back and look at some of the things recorded in this debate.

I draw members’ attention to clause 4, “Interpretation”, in Part 1. I note the somewhat vitriolic attack on my good self by Doug Woolerton in the earlier stages of this debate about the need to be xenophobic. If he is prepared to look at who is an eligible participant within the interpretation provision of this legislation, he must be shaking in his shoes. There are two qualifications to be a participant: an entity must hold an export licence and it must collect at least 0.1 percent of the milk production of New Zealand. For a member who is claiming that we need to be xenophobic and need to protect the monopolistic structure, he is allowing and sanctifying in this legislation a provision that someone who holds one-thousandth of the production of New Zealand and an export licence is out there competing in the export field. I am sure this must be of great concern to Mr Doug Woolerton, who has this view that it is extraordinarily necessary to be a monopoly.

I would just make the point that we are in a state of evolution. That is good, because we cannot stand still—we go either forwards or backwards. I believe this legislation is going forward. But the time may well come when we say: “Hang on, we used to have a monopoly and now it is an oligopoly.” As I said in the second reading, as far as I am aware—someone may correct me—seven players are now contesting with Fonterra. At the moment this is not an issue, because those players only have to have one-thousandth of the production in order to be in there.

Hon David Carter: They could be Russians.

ERIC ROY: Some of them could be anybody. Yes, that is a very good point, I say to Mr Carter. For example, New Zealand Dairies, which is situated at Studholme, is a Russian investment in the New Zealand dairy industry. Mr Woolerton, who is claiming the xenophobic approach to monopolistic management of the dairy industry, must be gravely concerned about that.

R Doug Woolerton: I said that’s what made this industry great.

ERIC ROY: Yes, well, Mr Woolerton must be worried that the industry is turning on its head.

R Doug Woolerton: Of course, I’m worried. You’ve seen my statements all over the place. You’re not worried.

ERIC ROY: But he is still voting for this provision.

The second point I wish to raise is in relation to section 28A, which is to be inserted into the Dairy Industry Restructuring Act by clause 12. Here we give a delegated responsibility in terms of transferring export licences. I commend to members the amendments that are in place. One of the things we tend to do with quite a degree of abandon at times is to put these delegated responsibilities into legislation that states that we can do whatever we want by Order in Council. To transfer a licence is quite a significant issue, and although it is appropriate that it be done by Order in Council, it is also appropriate that we have a very clear methodology and process so that there is adequate consultation and adequate checks and balances. That is why I commend to members that the amendments in this bill are passed, because the Primary Production Committee has given due consideration to all of those elements.

The third point I would raise again in this Committee debate relates to the elements to the database. Although the dairy industry is a leading light in many respects in the New Zealand pastoral industry, in terms of genetic gains it is not the leader. The leader now in terms of production through genetic gains is the sheep industry. I believe that one of the key factors is the fact that the sheep industry has open access to its database. Yet the dairy industry has said that it is under the Livestock Improvement Corporation and, yes, there can be access, but the access costs so much per cow. One of the members of the select committee may remind me what the figure is, but I think it is about $2 a cow. As David Carter said earlier, price is access. If I were a dairy farmer and I said that the genetic property of the Livestock Improvement Corporation is the only one we are really interested in—

COLIN KING (National—Kaikoura) : It is a pleasure to speak in the Committee stage of the Dairy Industry Restructuring Amendment Bill (No 2), and I take great confidence and comfort from the speakers who have spoken previously. I want to deal with two areas, one of which is the integrity that is required around a quota system. It is very, very important, because we mention the farmer a lot—the producer of milk solids and suchlike—but the quota is owned by the Crown, and is part of the process of our getting free trade or privileged access to various markets. On that basis, whatever a quota management scheme is about, it has to have integrity.

When we look at new section 29A, inserted by clause 14, we understand just how structured and how principled this process is. That cannot be overlaboured, because we are an export nation; we export 85 percent of what we produce in this country. It is very difficult when we hear the speaker from New Zealand First talking about Fortress New Zealand and that kind of mentality, because, in actual fact, we have to continually argue for the removal of barriers. Quota access, by its very nature, is privileged nation access. It is a very fine line. Effectively, in the world of trade, New Zealand runs two arguments, and it is very important that we are seen to be very thorough and have quota management processes that have integrity.

When we go through section 29A to section 29J, we find that the chief executive has some wide, sweeping powers to be able to go in and check the data, the record-keeping, of anybody who has access to that export market. We see that, at the end of the day, if any of those laws and regulations that underpin the integrity of the quota system are breached, the fines are quite substantial. We see that the fines have been extended under this bill up to $200,000, with a further fine not exceeding $10,000 for every day or part of a day during which an offence is continued. So there is a high level of accountability. That is good to see, and I myself think it has to be there, because from time to time people from the dairy industry have been dragged before various countries’ officials to explain their actions. That sometimes can have an effect upon other quota markets that are held. When we look at the dairy industry we see that this quota is not large as a proportion of the whole of the dairy industry—it is rather small. But in the sheepmeat industry, a very large part of the access to Europe is under quota. So I am pleased, and I take great comfort from the way that this bill progressed through the select committee. I am comfortable that it is fine.

The second thing I want to talk about is the Livestock Improvement Corporation’s core database. This issue is something we need to get sorted, because in itself it can actually be a barrier to improving the productivity of this nation—and not only within the dairy industry. As there is more demand for our products to be scrutinised, we will have to get into areas such as animal identification, and the Livestock Improvement Corporation’s database is a vehicle whereby we can identify the very cuts of meat that people are consuming. The Livestock Improvement Corporation has raised an issue here—we see that it came from AmBreed New Zealand originally, which is a competitor within the market—and it is important to realise that there are other valuable aspects that the Livestock Improvement Corporation’s animal database can contribute to. As a nation we will continue to export a lot of what we produce, and when we consider that 85 percent of what we produce overall goes overseas, it is important that we do it well.

I commend the select committee for processing this legislation in a timely fashion. This issue is something that those in rural areas have been very concerned about since 2001.

R DOUG WOOLERTON (NZ First) : I just want to cover a couple of points made by Eric Roy, when he mockingly said I would be quivering in my boots at this legislation. Of course, he is right, because I and some of my colleagues voted against the Dairy Industry Restructuring Act, the one put into this Chamber by Mr John Luxton when he was the Minister for Food, Fibre, Biosecurity and Border Control. It broke up the monopoly of the Dairy Board and allowed Fonterra to become a monopoly, to a degree. Before that it was not possible to start up a private dairy company, as we know. While Mr Luxton was changing the law for the dairy industry, he was proceeding with plans to start up his own dairy factory, and that is what he did. The National Party thinks that that is good business. I do not think it is the right thing to do. Yes, Mr Luxton obeyed the letter of the law, as we do, but did he do what was morally right? No, he did not, and neither did his colleague Mr Wyatt Creech. He also did not do what was morally right, but now they both have a very successful dairy company, which they are about to lose control of. Mr Talley is going to own that dairy company in Matamata, and Mr Luxton and Mr Creech will do very well out of that. So I will not be going to great lengths to thank Mr Luxton for the Dairy Board restructuring, or, indeed, for any of the legislation that followed.

We in New Zealand First do worry about those sorts of things, because the laws that allowed the dairy industry to become huge and great and internationally competitive are now bit by bit being dismantled. Part of that is the record-keeping that we hear the members of the National Party talking about in LIC, based in Hamilton, which has an amazing database. It is one of the most amazing outfits in the world when it comes to genetics for dairy cows. There have been many assaults on the Livestock Improvement Corporation, which is what it was known as then. People have wanted to get access to its database and access to its information for years, not for the assistance of the dairy industry and not to progress our enterprises, but for their own material gain. That has been staved off, but for how much longer, one wonders?

The arguments are always along the lines of those we have heard today: that opening up access to that information to everybody and his or her mother’s dog will help things in New Zealand and in other countries. We in New Zealand First want to know how it will do that, because we do not believe it will. We think that information should be protected for the benefit of the people who paid for it, for the people who set it up, and for the people—

Eric Roy: It’s xenophobic!

R DOUG WOOLERTON: It is not xenophobic; it is called looking after one’s best interests.

Hon David Carter: It’s communism too!

R DOUG WOOLERTON: No, it is not about communism. New Zealand First supports PGG Wrightson and the sort of enterprises it is involved in overseas, such as operating dairy farms in Chile and that sort of thing, because hopefully the money will return here. But we do not support people who come here and take our money back to their country.

Eric Roy: Oh, so we don’t have reciprocity. It’s a one-way street.

R DOUG WOOLERTON: We do have a one-way street. Those members over there used to believe in reciprocity in the sheep industry, and they used to believe in a fair go.

I remember my father telling me about the days when the farmers in the South Island would toddle across to Tooley Street—I do not like to bring the Chair in, but this is of interest to people, I am sure—and the English of the day used to treat them to drinks, look after them, and give their wives little presents. And they would do the farmers like a dinner. My forebears in the dairy industry thought that that was for toffs and idiots who did not know how the world worked. We believed that an industry should be tied up by those who owned it and should operate for their benefit. But no, no, the people across the Chamber who come from sheep and beef stock backgrounds believed that we should give the wealthy English lords and ladies their cut of the pie. They have done so, and they still do today.

I hope those people are happy about that, because in the dairy industry we think that is nonsense. In the dairy industry, we think that is a rip-off. In the dairy industry, we think that is just childish, naive behaviour. We think the dairy industry should be run for the benefit of the farmers, not for the benefit of the ticket-clippers throughout the world. That is the way the dairy industry has been run and that is what has made it great, over and above other industries that have been going a lot longer than it and that were in fact seen as the premier industries in the agricultural business.

New Zealand First reluctantly supports this bill. We make the points I have made: that it is certainly a sad day when we see people gradually losing control of their industry, supported by the National Party. [Interruption] While I am making this speech I am being mocked by the very people whom farmers put into this Parliament, thinking they would support farmers. I am here to tell farmers not to rely on the National Party for the support of their industry, sadly.

RODNEY HIDE (Leader—ACT) : I rise on behalf of the ACT party to support the Dairy Industry Restructuring Amendment Bill (No 2); it is a good bill. I will respond to some of Mr Woolerton’s comments. It seems to us that this is a good bill, because I do not think that farmers’ interests and producers’ interests are served by having only a monopoly exporting into those quota markets. If we look at the history of the world, then we will see that it has always been smaller companies with an idea that have come along, have innovated, and have provided the new markets and the new ways of doing things, and they have provided for an increase in prosperity for everyone. That is why we support this bill.

I have to say that I was somewhat amazed when I listened to Mr Woolerton’s comments. He does know the industry, having worked in it, but I would suggest to Mr Woolerton that if xenophobia worked, as he says it does, then countries like Albania, North Korea, and Cuba would be rich and prosperous. In a country of 4 million people, we cannot eat all the cheese we produce, we cannot drink all the milk we produce, and we cannot use all the primary produce we produce, and that is why xenophobia does not work. We have to be open to the world. We have to like people from other countries.

Mr Woolerton has an idea to build a fortress around our industry, where we would not change anything, we would not allow any competition or choice, and we would not innovate.

R Doug Woolerton: Oh no, I didn’t say that.

RODNEY HIDE: Mr Woolerton says he did not say that, but the implication of having one buyer and it being run as a farmer cooperative is precisely that. Mr Woolerton said that, yes, New Zealand First has the view that we should have a fortress around New Zealand and that we should protect ourselves from foreigners. We also learnt that Mr Woolerton thinks that anyone who disagrees with New Zealand First and Mr Woolerton is, somehow, an idiot who does not understand the issues as well as he does. He would rather say that than debate the arguments and ideas.

I have also learnt this about Mr Woolerton, and I think this is a sad day. When Mr Woolerton disagrees with someone, it is because that person has ulterior motives. I think it is a sad day when we attack former members of this House for having ulterior motives for what they do. We might disagree with them, but I do not think we have seen people here with ulterior motives promoting legislation.

I make this point, again to Mr Woolerton. Having people who are doing well in business and making money is good for New Zealand, it is good for the farming industry, and we want a successful and prosperous dairy industry all the way along, at every step of the way. That is what will make the dairy industry successful into the 21st century and beyond. The idea that we can somehow have a locked-up little market, where one company sells to the world and that will be good for farmers, has to be absurd. Like I have said, I say to Mr Woolerton that if that worked, then Albania would be rich, North Korea would be rich, and Cuba would be rich.

Hon David Carter: And Doug would be president.

RODNEY HIDE: And Doug could be the president of those countries for life. So the ACT party rises to support this bill.

I learnt one other thing about New Zealand First members. Here they are, railing against this bill, and I have learnt that they are xenophobic and proud of it. I learnt that they want to have a fortress around New Zealand, that they believe in monopolies, that they attack people who disagree with them as having ulterior motives and for being stupid, and that this bill is a disaster for the dairy industry. I then learnt one other thing: New Zealand First will vote for the bill, along with every one of us. Thank you, Mr Chairman.

Hon JIM ANDERTON (Minister of Agriculture) : Because of some of the comments made, I should apologise profusely, having been in Parliament for 24 years, 9 of them under National Governments. Never before has there been urgency before Christmas to push things through, so I have to acknowledge that this is an extraordinary precedent, and it is probably due an apology! Those members who have not been here as long as I have will know that this is all correct! I am putting this through to the Tui ads, so they can say “Yeah, right!” at the end of it.

In a slightly more serious vein, I want to move an amendment on the advice of parliamentary counsel, which I have discussed with the Chairman of the Committee. The amendment will see a minor change in wording, but there will be a different meaning. I refer to page 18, paragraph (b) in clause 29, which has the wording: “(b) the right to access documentation relating to the application for a search warrant and the exercise of a search power under the Official Information Act 1982.” I am advised by parliamentary counsel that the correct wording should be “the right under the Official Information Act 1982 to access documentation relating to the application for a search warrant and the exercise of a search power …”. I am sure the select committee meant exactly that, but I am advised that it would better to have that wording rather than the original wording. Thank you, Mr Chairman.

Hon DAVID CARTER (National) : The National Party will certainly accept that amendment as proposed now by Mr Anderton. I just want to tidy up a comment that Mr Anderton made. It is not clause 29; it is actually clause 14, which inserts new section 29K(6)(b). Just for the record, it is clause 14 that is being amended. But I think it is a very sensible amendment. I am surprised the select committee did not pick it up in the first place.

  • The question was put that the amendments set out on Supplementary Order Paper 171 and the following amendment to clause 14 in the name of the Hon Jim Anderton to Part 1 be agreed to:

to omit paragraph (b) of new section 29K(6) and substitute the following new paragraph:

(b)the right, under the Official Information Act 1982, to access the documentation relating to the application for a search warrant and the exercise of a search power.

  • Amendments agreed to.
  • Part 1 as amended agreed to.

Part 2 agreed to.

Schedule agreed to.

Clauses 1 and 2

NATHAN GUY (National) : I want to make a contribution today that I think is very important in the Chamber. I want to talk just on the schedule. The Primary Production Committee worked hard on this to get it right, and I think it is a fair point that I am about to make. The director-general or chief executive of the Ministry of Agriculture and Forestry technically allocates the export licences. We need to be mindful that the New Zealand dairy industry is primarily based on pasture-fed diet, and primarily our animals are outdoors all year round. We all know that climatic changes occur. In parts of New Zealand we can have a drought, and we are currently experiencing a mini-drought on the East Coast of the North Island. If we think back, in recent times we have had floods, we have had snowstorms, and we have had weather bombs throughout the country.

The significant point I want to make to the Committee is that the select committee worked hard and has come up with the provision in schedule 5B that allows those seeking an export licence to have their historical data analysed out to three seasons. The point I am making is that if we have a weather bomb, and farmers are constrained, as we know can be the case, that flows through to the heifer replacements—that is, the young cows that are going to come into the herd. It needs to be broad in its approach, so that we looking at not just one season or two seasons, but we are taking that data analysis out to three seasons, which I think is very, very important. I acknowledge the hard work, under David Carter’s leadership, of those members on the select committee who do own a set of gumboots, and who have come through a grassroots upbringing, like some of us in the National Party, who were well aware of the point that this is very, very important.

I turn to those members on the other side of the Chamber who were on the select committee and who have not come through that process. I am not sure whether there is one farmer left in the Labour caucus who would even be aware of that point. So this is a significant point in this bill that will mean it is fair, right across the board, that when the director-general or the chief executive of the ministry is technically allocating quota, he or she can look back across those three seasons of data.

  • Clause 1 agreed to.
  • Clause 2 agreed to.
  • Bill reported with amendment.
  • Report adopted.

Third Reading

Hon JIM ANDERTON (Minister of Agriculture) : I move, That the Dairy Industry Restructuring Amendment Bill (No 2) be now read a third time. The bill was introduced into the House, as I said during the Committee stage, on 14 August this year. It was read for the first time on 21 August, then referred to the Primary Production Committee for consideration. The committee tabled its report on 31 October. The bill has now had its second reading and has passed through the Committee of the whole House.

The New Zealand dairy industry has become the country’s largest and most important export industry. For the year ended 31 March 2007, the dairy industry contributed a total export value of $8.4 billion, representing 25 percent of total merchandise exports. New Zealand dairy products are exported to 152 countries.

At the farm level, dairy accounts for an estimated 35 percent of the agricultural sector’s GDP and 2 percent of total GDP. When we include dairy manufacturing and the dairy industry’s contribution to other sectors, such as wholesale trade, we see that the wider dairy industry’s contribution to total GDP is around 7 percent.

The bill is the obvious next step in the industry’s transition to a new structure without the monopoly powers of a statutory marketing board. In the 6 years since the Dairy Industry Restructuring Act was passed, the industry has shown itself to be extremely capable of not only surviving but also thriving in this less regulated environment. This bill will provide the industry with certainty about designated export markets, and will therefore allow industry players to plan for the future with confidence. I believe that this is why the industry has expressed general support for the approach taken in this bill.

The industry has shown itself to be a highly successful organisation and industry sector in reaching world markets and helping New Zealand to be well positioned for the future. The framework contained in this bill will allow all industry players to participate fully in that success and continue to position the industry well on the world stage. I commend this bill to the House.

Hon DAVID CARTER (National) : National supports the Dairy Industry Restructuring Amendment Bill (No 2) and congratulates the Government on finally bringing this matter before the House today. I think that when people analyse the contributions made in the debate we have had in the second reading, the Committee stage, and now the final reading in quick succession, the interesting Hansard will, of course, be that of the New Zealand First member Doug Woolerton. I thought I would make just one or two points, because a lot of the information he stated in his contribution—which was absolutely incoherent, I might add—is incorrect.

First of all, Mr Woolerton congratulated the dairy industry and noted its huge progress over the last decade, and I support that. But he then went on to criticise the Dairy Industry Restructuring Act of 2001, which led to the formation of Fonterra. So in one breath he was criticising Fonterra and its performance, and in the next breath he was saying what wonderful progress this company has made for the benefit of all New Zealanders. I find that logic very, very difficult to understand.

Mr Woolerton then spoke against two of my former colleagues in this Parliament. I am referring to the Rt Hon Wyatt Creech and the Hon John Luxton. He said that both those people drove through the dairy industry restructuring legislation in 2001, and he implied quite definitely that they did that for personal gain. For the sake of the record, I say that neither of those gentlemen was in Parliament in 2001 and they could not have been involved in the debate. They were not in Parliament. To be absolutely fair to them, I note that by that stage they had retired from Parliament. They saw an opportunity under the dairy restructuring to set up a very successful dairy process called Open Country Cheese, and I congratulate them on their ability to establish that company. It has been a significant contributor to the very regional economy that Mr Woolerton came from.

The final point is that Mr Woolerton, having railed against the Dairy Industry Restructuring Bill (No 2), concluded his remarks by saying that the bill was dreadful legislation but that he would vote for it. I think that just goes to show something about Mr Woolerton’s career. He has been involved in the National Party and in New Zealand First, and he now completes his parliamentary career as a true and committed member of Helen Clark’s Labour team.

Dr ASHRAF CHOUDHARY (Labour) : I will take just a brief call. First, I thank David Carter for his good chairmanship of the Primary Production Committee. We work very closely and in a bipartisan way on that committee.

Earlier on, Nathan Guy suggested that the Minister should probably define the term “milk solids”. I will define that term for the House. As a scientist I guess it is probably my job to explain these things. We have two definitions. “Milksolid” as one word is milk solid that contains milk fat plus protein. The definition of the second term, which consists of two words, “milk solids”, is milk protein and fat plus other elements in the milk. So two clearly defined words have been used, I say for the sake of clarification. The farmers get paid on the basis of milksolid—one word—which is milk fat and milk protein, and, of course, the levies to the dairy farmers are also based on that definition. With that explanation I commend the bill to the House.

ERIC ROY (National—Invercargill) : I too will take a brief call in the third reading debate of the Dairy Industry Restructuring Amendment Bill (No 2). It is not so much that there are concerns that some things are not being covered, but that all that is said in the debating process is recorded in Hansard, and at future times people will look at that record and interpret the bill against that. I am largely stimulated by the remarks of the New Zealand First member Doug Woolerton, who seemed to have some comments to make about the ills of the meat industry in relation to the dairy industry.

I ask members to let me just place it on the record that I, along with the rest of the National Party, am essentially very proud of the achievements of the dairy industry. We think it is great that the dairy industry is the leading industry in New Zealand. We are pleased with the way that it has gone forward, particularly after the Dairy Industry Restructuring Act of 2001 was passed, when Fonterra came forward. If the measure is the viability of the dairy industry and the price increases we are seeing in dairy products right now, we can see that rather than the restructuring being an impediment to development, the industry has done exceedingly well. I note, coming from my part of New Zealand, Southland, the great desire of people from the North Island to invest in dairying in the south. If that is an indication of the state of the dairy industry, it is certainly doing very well.

Mr Woolerton alluded to the comparative situation between milk and meat, and said that if we transferred a xenophobic cooperative structure into the meat industry we would immediately solve all the problems, or that had we gone there initially we would not have the problems in the meat industry that we have today. There are some significant issues which I think change the whole landscape.

For example, those who represent dairy farmers in terms of their processing and marketing are under a greater degree of scrutiny than anybody else, because the farmers are themselves under scrutiny. Every single day, sometimes twice a day, when dairy farmers milk they have an opportunity to measure their own performance. They might note that they have more milk and the milk vat is up one day, and ask what they did or did not do. So dairy farmers have a very, very rigorous way of measuring themselves, and they tend to apply that to those who represent them.

The second thing is that milk is a homogenous product. Milk is pretty much the same all over New Zealand. There are variations in butterfat levels and slight variations in milkfat percentages, but, essentially, the product is the same. That is not so in the meat industry.

Thirdly, milk stores relatively easily after it has been processed in comparison with meat products. Particularly as the future of the meat industry is moving into chilled products, meat is becoming even more fragile and requires a greater movement of product through, so it cannot be stored for any length of time till the market is just absolutely right.

Fourthly, there is just an acceptance of milk generally as a product. If people in the world who have never consumed Western products before are given a variety of foods to consume, of the three products that they will consume again and again, two of them are milk products: ice cream, and chocolate. There just is a universal acceptance of milk as a product in the world, and there is a great desire of Third World countries to consume more calcium in order to be healthier and grow better, and that association is with milk products. So there is a universal acceptance of milk. Which product do dairy farmers have as a competitor? Well, they have soy milk. That is virtually the only competitor that is out there to milk, so they have captured an opportunity that is just there because there is such a great demand for the product. But in the case of meat, it competes with a whole range of animal and fish proteins that are out there, so it is in a much more competitive environment. So just to say we should apply this to that, and that will solve all the problems, is an issue. I think we needed to simply place that on the record.

As has been said, the milk industry—the dairy industry—is the foremost part of the New Zealand economy. It is important that we pass this legislation today so that the industry can take the next steps, and so the people who are now involved in company structures outside of Fonterra have an opportunity to provide some stimulus to the industry, not on a competitive basis—well, not specifically for that reason—but with product development, and with opportunities in packaging, marketing, and branding. They are in the marketplace enhancing and increasing the appreciation of the products that are produced out of New Zealand. Yes, those people are a very small section of the industry, but we also need them as a measure against Fonterra. How does one measure a monopoly if there are no other players in the market to say how well they are doing? When they do that, we actually have some measures. I see all those things as healthy, and I see it as a sign of a company that is viable, healthy, growing, maturing, and serving a very, very useful part of New Zealand’s economy.

National supports the third reading of this bill.

R DOUG WOOLERTON (NZ First) : New Zealand First also supports the third reading of the Dairy Industry Restructuring Amendment Bill (No 2), but it does so with provisos—our vote will not come with a proviso; one either votes for a bill or one does not—and with warnings. This bill is at the end of a very long chain, which started with the Dairy Industry Restructuring Act. To guard ourselves against the ramifications of that Act, we had the formation of Fonterra, which came after that Act. The farmers believed that they needed a bigger company in order to protect themselves from competitors. I was a very strong advocate for Fonterra. I was opposed to the Dairy Industry Restructuring Act, but once that had passed I was a very strong advocate for Fonterra. The National Party was not, and many other people were not as keen on Fonterra as I was. My faith, and New Zealand First’s faith, in Fonterra has been realised. But members should make no mistake about it: we are now in a situation where Fonterra will be very different from what it has been, and in our view it will be weakened because of proposals on the floor that are currently outside the parameters of this bill.

Let me deal with a few of the issues that have been raised after my previous speech. One of those issues concerns the word “xenophobia”. Somebody was giving me a lecture about the dairy industry not being able to eat all its cheese and having to export. Well, that is precisely what the proponents of the cooperative structure in the early days of the dairy industry understood immediately—that this was all about exporting. It was all about excellence, and it was all about marketing. The farmers of the day hired people to do all those things, and they did them successfully. I might say that they were not afraid to pay them. Right from the earliest days the salaries in the dairy industry, outside of the farming operation itself, have been very, very good, and the expertise has been at the leading edge of innovation in our country.

The people who set the industry up knew that we had to export. We had to get into new products, and we had to innovate. They did all those things through retained earnings and through borrowings, to the degree that Fonterra now has a credit rating that has slipped since the announcement that it may list on the stock exchange, but that is still second only to that of the Government. Fonterra does not have a credit rating of some third-tier meat company, or whatever, but one that is second only to that of the Government. Those people went after innovation at a rate seen nowhere else in our economy, and it has been really, really successful.

So rather than looking backwards—and I note the talk of Rip Van Winkle and xenophobia—this is an outward looking industry that has always been at the forefront of innovation. This is an industry that is modern. This is an industry that has not gone to other places and begged. This industry has looked after itself. It has been a leading-edge industry, and I have been a proponent of it since my earliest days.

Nathan Guy: You are flip-flopping!

R DOUG WOOLERTON: Oh no, we are not flip-flopping.

I might say that the retained earnings of myself, my three brothers, my father, and many of our contemporaries are still in that company today, because in the days that we operated—not the days of my brothers, though one of them is still going—it was a dollar in and a dollar out for the share. In those days we did not allow other people to come in and get a chunk of the dairy industry. There was one motivation: to grow the company and to grow the industry. Every farmer knew that the result of that growth was a better milk price. Farmers knew what was happening in their company. They knew how successful the executives and the managers were by what was in that milk price.

I tell members that farmers understand this industry like no other. They understand what the executives are doing and they understand the profits that come from the different profit centres within this industry. They are not just suppliers of milk, but they will be if they let other people into this industry—they will become suppliers of milk. But at the moment they own a leading-edge company that from this little place, New Zealand, controls one-third of dairy produce available for market in the world. That is no mean feat. That has been mocked today by members of the National Party as being xenophobic and backward looking, which it is not. It is leading edge technology, and I support it.

The difference comes when New Zealand First says that this industry should be protected, as it always has been, as opposed to what the National Party says, which is led by ticket clippers and market people who just want a chunk of this industry. They do not want to do the graft, they do not want to put in the work, they do not want to take the risk, and they do not want to put up the dough for investment; they want a chunk of this company. I tell members that if I were them and not involved in the dairy industry, and if I were just a money man from wherever, I would want a chunk of it too. But New Zealand First says: “Don’t let them have it.” We implore the farmers to keep control of it themselves as they always have. If they nurture this company and carry on as they have in the past, they will reap the benefits through their milk price. They will not reap the benefits of this company through a share price, because that is a one-off, and they will not reap the benefits of this company from a return on dividend. Other people will reap the rewards of the company through those avenues.

Farmers’ only avenue to a guaranteed result is through their milk price. The forefathers of this industry knew that. It is what they set up—

Sue Kedgley: What about the foremothers?

R DOUG WOOLERTON: And the foremothers. Sue Kedgley is absolutely right to pull me up, and I apologise to her for not mentioning them. In the farming industry it is the women who drive the finances, and they always have. It is the women who have largely had control of the purse strings. I could relate to members many an argument over those matters, but that is indoors stuff.

This industry has been at the forefront, and we are in danger of seeing it slip back. New Zealand First members will not stand by and keep their mouths shut and watch that happen.

NANDOR TANCZOS (Green) : I will begin by indicating that the Green Party is supporting this bill through its third reading, as I think all other parties in the House are. I simply say that this is a sensible bill. As has been said, it continues the process of dairy industry restructuring that has been going on for some time. It opens access and increases flexibility, and we support it for all those reasons.

I think Mr Hide was right in saying that innovation tends to come from smaller operators who come up with those innovations—before, of course, they are munched by the big operators who have the economic might in the marketplace. That is why the Green Party says that we are pro-business but we are anti-corporatism. In particular, we are against corporate welfarism, which is something we continue to see with the environmental subsidy going to a number of big businesses.

I also wish to make just a brief comment on the issue of the context of the broader Fonterra restructuring, which Mr Woolerton has spoken about very eloquently. The Green Party has also expressed concerns around the proposals. We see this as an inexorable process towards the overseas control of Fonterra and the end of the interests of New Zealand dairy farmers being at the heart of the company. We are aware that there are a number of safety mechanisms within the proposals, but we see them as delaying rather than stopping that process, so we do have concerns about those things.

A lot has been said about the bill itself and the access to those markets, and I think there has been a good discussion. I thought it would be useful to take a slightly broader view, because there is always great interest in the dairy industry across the nation and in Parliament. As I think Eric Roy in particular said, what affects the dairy industry affects the New Zealand economy as a whole. So there is always broad interest in these things.

I was interested in the dispute between Mr David Carter and Mr Woolerton in relation to the role of John Luxton and Wyatt Creech, whom Mr Woolerton alleged were setting up a cheese factory while preparing this legislation. Mr Carter made comments in reply but I was not here when they were here so I do not know about the ins and outs of that matter. But I do note something quite interesting in Speakers’ Rulings. Speaker’s ruling 71/2 talks about declaring financial interests. It states: “A farmer member does not have a financial interest in a bill to provide for the payment for and marketing of dairy produce.” I thought that was quite interesting when I came across it, because it kind of indicates another standard for farmers in the Speakers’ Rulings of the House itself. It is interesting because it seems to be the same across a number of issues in relation to farmers.

There have been big payouts to farmers recently and there are flows to the economy from that. Of course, the payouts to farmers flow to the economy for good and for bad. In the past there have been a number of calls for land use diversification, because when those payouts go down the whole economy is vulnerable. By increasing land use diversification we increase the resilience of the New Zealand economy. That has happened at times when there have been lulls in those prices. A booming wine industry is one example of a focus on diversification and on other ways of producing value from our land. For example, there has been the increase in forestry, although that has been moving backwards in recent times. There is a concern that the big payouts are reversing that trend and moving towards a conversion of large amounts of land into dairying, and there is a kind of monoculture spreading across the New Zealand landscape. I think someone described it as a geological shift in land use.

It is also interesting that much conversion is not on the basis of the payout per se, but on the capital gain to be made from the conversion. This is particularly so as access to water becomes more of an issue. Of course, there is increasing tension in this country and around the world in terms of access to clean water, and that will be an increasing issue for the rest of this century.

There has been massive expansion and intensification of dairy farming, sometimes in areas that are entirely inappropriate for dairy farming, and this is something that the Green Party is seriously worried about. I note the comments made by Environment Waikato’s Dr Peter Singleton, who said that the issues of dairying and water quality are urgent and critical, and that the only hope is through regulation. That comment was made in the context of Federated Farmers running a massive campaign to gut the Resource Management Act—side by side with the National Party, I might add—and to remove all environmental restrictions on farming activity. This is of enormous concern. In fact, Charlie Pederson said that Federated Farmers could not accept any constraint on the continued growth of dairy farming. I have to wonder whether he is including the laws of physics in that, because the reality is that we are starting to hit the environmental constraints, and no business can continue to expand indefinitely exponentially when confronted with environmental limits.

Let us be clear that the Green Party does want what is best for New Zealand farmers. We recognise the enormous economic importance of farming, and we recognise the communities that are built around farming, as well. We have opposed vigorously the closing of rural services—for example, schools—because we see the importance of those things. But we also continue to assert environmental accountability from farmers as we would from any other business. We recognise that the environment was not a big issue in the past. Many farming practices were developed at a time when environmental accountability was not really a matter of debate. No one was talking about it.

We also recognise that there is a natural stewardship in farmers. Farmers live on the land; they are obviously concerned with the sustainability of their farming operations, particularly family farmers, people who may have got their farms from their ancestors and who want to pass them on to their descendants. In that context we also note the increasing extent of corporate farming, where those social and family constraints are not as apparent. Of course, that is not always true, and being a family farmer does not necessarily mean one is a sustainable farmer, but I think there is an intrinsic interest among family farmers to look at questions of sustainability. That influence is now perhaps becoming less important in the farming sector.

We acknowledge that there has been a huge amount of progress in the farming sector. We have seen the growth in, for example, nutrient budgeting, which is an important mechanism for increasing sustainability and reducing environmental impact at the same time as increasing profitability in farming. We are seeing increasing riparian protection, and effluent management has become a lot better, but we have to acknowledge that many farmers are still not participating. We are saying that farmers’ representative organisations like Federated Farmers should be spending their energy supporting the change leaders in these areas, rather than continually defending the laggards.

The reality is that even with best-practice farming, simply as a result of the massive intensification and expansion of dairy farming, we will see a decline in water quality in this country. The point is that this is a challenge for all New Zealanders, not just farmers. We need to move beyond the rural-urban divide, and we need to move beyond seeing this as a farmer versus a greenie thing, and actually start to work together. I know that some farmers feel like they are getting the bash from environmentalists all the time, but we need to work together on these huge challenges.

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

NANDOR TANCZOS: In confronting the environmental challenges before farmers, we have to move beyond the rural-urban split and start to work together. That means giving credit where it is due—and it is due in places; a lot of progress has been made—but also it is about farmers acknowledging that a lot needs to be done. We need to move beyond denial. We need to move beyond minimisation and ask how we are going to work on this stuff together. In the context of mass conversions, where a lot of money is being invested in dairy conversion, we have to acknowledge that the context is changing.

Climate change will change farming, both because of the climatic impact and because of the price of carbon. Environmental regulation will increasingly change the context. Issues around water access will increasingly change the context of farming, and there is increasing talk now of farmers and commercial users of water paying a price for the use of that water. That is something that will affect farmers. So industry leaders have to understand how the world is changing, rather than trying to hold back the tide.

TARIANA TURIA (Co-Leader—Māori Party) : It is good to be able to speak to legislation on which—an unusual occurrence—we generally all agree. That is pretty good, actually. When Samuel Marsden arrived in the Bay of Islands in 1814 with two cattle and a bull, he probably had no idea that less than two centuries later the dairy sector would constitute New Zealand’s biggest industry, injecting some $8 billion into the economy and constituting some 20 percent of all our exports. As the good reverend set about training Māori in British farming and gardening techniques, believing that those would pave the way to the adoption of Christianity, he would have been amazed at the dividends that such skills would pay off in 2007, for the Māori dairy sector now owns over 100,000,000 dairy shares, and Māori also represent over 15 percent of all sheep and beef interests in Aotearoa. That is the context in which the Dairy Industry Restructuring Amendment Bill (No 2) is being read.

The bill allows the Fonterra Cooperative Group to have the right to keep exporting to designated markets, and also allows for other dairy processors to become eligible to hold export licences. The bill consolidates the position of New Zealand in the global marketplace once more, after the expiry date of the dairy quota markets established under the Dairy Industry Restructuring Act 2001. This opportunity to again secure a welcome mat in external markets is a move that the submitters and the Primary Production Committee endorsed, and it is a move that we in the Māori Party also fully embrace.

We see that the allocation of export rights to dairy quota markets to a wider group than Fonterra is consistent with kotahitanga, the principle of unity and purpose of direction. Allowing for greater participation and certainty in the dairy industry is a more inclusive approach, which should bring with it a wider support base amongst the industry. Public feedback supports that claim. The submission from the Tātua Cooperative Dairy Co. Ltd, which is based in Tātuanui, outside Morrinsville, supported the bill as finally enacting the goals of the Dairy Industry Restructuring Act: to maximise economic benefits for our country arising from tariff quotas as maintained by foreign Governments.

In that regard we know that Māori dairy farmers are ready and willing to take on the world. They want to be poised to benefit from the widened eligibility for export rights that will be put in place by this legislation. Just how ready they are is able to be gauged from a project that is currently collecting physical, financial, and environmental data from 45 properties in the Tai Tokerau, Te Arawa, Taranaki, and Ikaroa Rāwhiti regions. I am pleased to share with the House that the Māori dairy farmers of New Zealand have a project supported by the Ministry of Agriculture and Forestry that benchmarks Māori dairy farm physical, financial, and environmental performance. The data will be collected for three seasons, to balance the effects of climate, from across the four North Island regions. The farms will be benchmarked for their physical and financial performance, as well as receiving overseer assessments for environmental sustainability. The farms reflect varying ownership structures, from sharemilker to owner-operated to Māori incorporation - owned and governed farms.

We are hopeful that through that project, Māori farming authorities—incorporations and trusts—will be able to realise the benefit of meaningful management and monitoring information in order to support their future progress and development. The Māori Party welcomes the advancing of projects such as that one, as they will lead to a strong platform from which to enter designated dairy markets that operate country-specific tariff quotas for New Zealand products.

The bill will also provide future certainty to the industry, and given that the Livestock Improvement Corporation advises us the New Zealand dairy industry enjoyed, in 2006-07, its most productive season on record, such certainty is clearly a bonus. Just to put some context around all of this, I tell members that we are talking about 11,630 dairy herds and a population of 3,917,000 cows, which is an increase of 84,000 just in the least year.

But we do note that the changes will not be without controversy, particularly associated with Fonterra. It appears that Fonterra strongly opposes removing export restrictions for Japan in the cheese market, and for those parts of the United States designated markets without provision for designated imports. It believes that removing the restriction risks a significant loss of value to the New Zealand dairy industry and economy over time.

Meanwhile, other players, such as the Tātua Cooperative Dairy Co., have a completely opposite view to that of Fonterra, suggesting that the key thrust behind the Dairy Industry Restructuring Act of maximising the economic benefits for New Zealand arising from tariff quotas will be better achieved by the removal of export restrictions, thereby allowing other companies to expand and increase their performance. In such a view, the removal of export restrictions for cheese exports to Japan is therefore desirable.

We know that Fonterra held a round of five meetings with all of its Māori shareholders in the last week of November, so we are hopeful that if Māori had a view about the maintenance of tariff quotas, it would have been raised in those hui. We are all awaiting, too, the results of those hui, as we are keen to hear from whānau their thoughts on the selling-off of Fonterra shares to the overseas market.

The Māori Party has always believed that farmers must keep control of the dairy industry, and as such the proposal to sell off interests to external markets leaves us with considerable room for concern. It is the farmers, who own the shares now and who have put their hard work into the production of milk and the tilling of the land, who require our support. We would be concerned if overseas investors took control over an industry that is so crucial to the future prosperity of this country. So although we support the general intentions of this bill to open up the market, which will allow for greater participation and certainty in the dairy industry, we are, if you like, alert to the possibility of the inevitable issues around control that come when overseas investors raise interest in our land. Nā reira, tēnā koutou.

NATHAN GUY (National) : I wish to thank that member, Tariana Turia, for her contribution on the Dairy Industry Restructuring Amendment Bill (No 2). I enjoyed listening to the very sound debating points she put in front of the House today. This is a very important bill for the cornerstone of New Zealand agriculture. I have also enjoyed hearing the debates from the Green Party and, in particular, New Zealand First, because I want to take up the challenge from New Zealand First around what Mr Woolerton has been talking about in terms of Fonterra looking to the future around its capital structure regime. Mr Woolerton has spoken two or three times today, and it seems that during his addresses, he has been all over the park. On the one hand he has been saying that we do not want Fonterra to look offshore to overseas investors or even to internal New Zealand investors, and on the other hand he is saying we support competition. I believe that this bill will allow greater competition in the New Zealand dairy industry. Where Fonterra in the past has probably had a monopoly on some of these overseas markets, this legislation will let the smaller players—

Hon David Carter: They did have a monopoly.

NATHAN GUY: The chair of the Primary Production Committee, David Carter, points out that it did have a monopoly. The smaller players—there are about seven of those smaller producers in New Zealand, making up about 5 percent of milk that is exported—now have the ability to get into those markets. But I say to Mr Woolerton and New Zealand First, who are wading into this debate, it is really up to New Zealand farmers. Tariana Turia has acknowledged that today. New Zealand dairy farmers will make that decision without New Zealand First wading into the debate. New Zealand farmers are smart enough, and Fonterra, I believe, is smart enough, to recognise that we need to get Fonterra’s suppliers to agree to 75 percent of this to get it through. Seventy-five percent of farmers need to look outside their own backyards to make a decision in the direction of where Fonterra wants to go—not be driven to listen to what New Zealand First is saying, because it seems that New Zealand First is keen to look inwards instead of outwards. This is a big decision that New Zealand farmers need to make, and they will make it in their own time when they get all of the facts. I am not sure New Zealand First is full of the facts when it joins this debate today, because listening to Mr Woolerton I am confused as to where his party actually sits on this issue.

The other important thing to realise is that this industry is producing 15 billion litres of milk a year. When one thinks about it, one realises that we cannot export that fluid, fresh milk around New Zealand, so it has to be processed. The money for all New Zealand dairy farmers is in the fluid, fresh, the liquid milk market around the world. That means investing in worldwide markets. But New Zealanders cannot do that without opening it up. So the challenge to New Zealand First is whether it wants to see the status quo with Fonterra or whether it wants to see Fonterra move into the worldwide markets. I say to Mr Woolerton that New Zealand farmers, not the influence of New Zealand First, will make that decision.

The important issue with this bill—and we are in urgency—is for us to realise that it will allow greater competition in the New Zealand dairy industry. New Zealand dairy farmers have other external factors tthey are concerned about. I believe those external factors will be further debated in the House this afternoon. Farmers are concerned about the emissions trading scheme, and it will be interesting to hear the debate on that this afternoon. Agriculture is set to join that scheme in 2013, and I know that some of my colleagues will make valuable contributions this afternoon around that issue. We should not get drunk in charge and follow willy-nilly and be world pace-setters in this climate change debate, because we need to weigh up the economic opportunities and our environmental obligations. That is what the members of the Green Party and the Māori Party have been talking about this afternoon—balancing those issues. If we look at where New Zealand First members would like to see this whole debate go, we see they believe we should just stay in and look inwards instead of outwards.

Those are some of the challenges we need to think about addressing in the future—not having knee-jerk environmental debates such as Labour wants to have. We need to make sure we are investing in the future of research and development to ensure we are changing the microbes in the rumen of the cow’s gut and ensuring we are making changes at the grassroots level. The most important thing with an emissions trading scheme is to change behaviour—not to have it overall as a tax, which will just be struck down on each individual farmer. We need to change behaviour, and I am acknowledging that, but we need to ensure that the emissions trading scheme will direct the change of behaviour and not be just another tax. We have seen the Government come into the House to try to pass the “fart tax”. We have seen the Government come in to try to impose a carbon tax. We need to be mindful of weighing up the environment and the economic drivers.

In conclusion, the Dairy Industry Restructuring Amendment Bill (No 2) is very important. We are in urgency on a Wednesday afternoon, and the Ministry of Agriculture and Forestry has had this lurking around on the Order Paper for the last month. Now we find ourselves in urgency because it is very important that this bill is passed and gets the Royal assent before the end of the year. So National is supporting the bill. It is fortunate that we have had the good work of the Primary Production Committee, which has focused on the grassroots to ensure that some of the good changes in this bill will help as we move forward, accepting the challenges for the New Zealand dairy industry that lie ahead of us.

RODNEY HIDE (Leader—ACT) : I rise to support the Dairy Industry Restructuring Amendment Bill (No 2). The ACT Party is in favour of competition and choice, and it is in favour of opening up opportunities to our dairy farmers. We support this bill in its third reading.

  • Bill read a third time.

Taxation (Annual Rates of Income Tax 2007-08) Bill

Taxation (Business Taxation and Remedial Matters) Bill

Taxation (KiwiSaver) Bill

Third Readings

Hon PETER DUNNE (Minister of Revenue) : I move, That the Taxation (Annual Rates of Income Tax 2007-08) Bill, the Taxation (Business Taxation and Remedial Matters) Bill, and the Taxation (KiwiSaver) Bill be now read a third time. The Taxation (Annual Rates of Income Tax 2007-08) Bill is the annual bill that sets out the income tax rates to apply, in this case, for the 2007-08 tax year.

The Taxation (Business Taxation and Remedial Matters) Bill introduces a wide range of important measures. It introduces the new 15 percent research and development tax credit—a measure that is intended to help raise the amount of private sector research and development in New Zealand. The bill also introduces amendments resulting from the recent reduction in the company tax rate to 30 percent. I should point out that both sets of changes are a direct result of the recent business tax review that was carried out as part of the confidence and supply agreement between United Future and Labour.

The bill also relaxes a whole range of tax penalties, such as that for taking an unacceptable tax position, so that those penalties now reflect the seriousness of the offence and distinguish between people who try to do the right thing and fail, and those who have no intention of doing the right thing. The idea behind these changes is to further promote voluntary compliance.

The bill also increases tax incentives for making donations to charitable organisations—again, a particular consequence of the confidence and supply agreement between United Future and Labour, and arising out of the discussion document on charitable tax changes that we issued last October. The changes include removing the current rebate thresholds on donations made by individuals, and removing the deduction limit on charitable donations made by companies and Māori authorities. So from 1 April next year all charitable donations will be tax deductible. That is a significant and dramatic step forward.

On the savings front, the bill allows policyholders in unit-linked life insurance products to access some of the benefits of the new portfolio investment entity rules. It also allows certain contributions to retirement schemes to be subject to withholding tax rather than income tax, which means that contributions to those schemes will not be taken into account for social assistance purposes. I might observe in passing that earlier I made a call for an objective of tax policy to be an alignment of personal, company, and trust tax rates at 30c in the dollar. The combination of the business tax changes and the changes related to the tax treatment of certain savings vehicles contained in this bill gets us just over halfway along that path.

The bill also allows for the introduction of data matching between the Inland Revenue Department and the New Zealand Customs Service. That change will enable the Inland Revenue Department to identify when people with outstanding child support debt enter and leave New Zealand, so that it can take steps to recover that debt before they leave the country. I acknowledge that that provision of the legislation received pretty much universal support from the House. There is no tolerance for those who shirk their child support responsibilities. The change that is contained here will make enforcement of the existing regime that much more effective, and it comes on top of changes that we made last year to introduce further incentives for people to meet their obligations.

Supplementary Order Paper 167, which was released yesterday, added two further important policy measures to the legislation. The first was the introduction of a new tax rebate for redundancy payments, to make the taxation of redundancy payments fairer for people who find themselves in a higher tax bracket as a result of receiving a lump-sum payment. The second change was to reintroduce legislation intended to shut down tax schemes relating to leases on overseas assets that result in a loss to the New Zealand revenue. The amendments had been introduced at an earlier stage, but were later withdrawn to allow the Government more time to consider transitional concerns that had been raised in submissions made to the Finance and Expenditure Committee. As a result, the proposals have been modified to allow a less disruptive transition to the new rules for parties that were involved in leases that existed before 20 June this year.

These are the main policy changes to which the bill gives effect. It also contains a number of remedial changes designed to ensure that the tax law is as effective as possible and always works as intended. Supplementary Order Paper 168, which was also released yesterday, takes amendments made by each of these bills to the Income Tax Act 2004 and inserts them into the Income Tax Act 2007, which was enacted while this legislation has been before Parliament. This lengthy process involved restructuring the legislation proposed in these bills, and using the new terminology developed as part of the overall process of rewriting the Income Tax Act, and it contributed to the substantial size of that particular Supplementary Order Paper.

The third bill is the Taxation (KiwiSaver) Bill, which gives effect to Budget announcements relating to employer contributions to KiwiSaver and to complying superannuation schemes. The main changes, of course, are the introduction of compulsory contributions on the part of employers to match their employees’ contributions, and the introduction of an employer tax credit to help offset the costs to employers. These changes are part of the package of KiwiSaver changes that were introduced in the Budget this year with the primary objective of increasing the incentives for people to save for their retirement. The fact that over 316,000 people have joined KiwiSaver in the first 5 months of its operation shows not only that this savings scheme is meeting a need but also that people do want to save for their retirement. It is particularly encouraging—and this was a point noted during the Committee stage debate—that many of these savers are younger New Zealanders who are being introduced to a savings habit that will, hopefully, stay with them for their life. That has to be good for the country in the long term.

It was also observed that the Government does run huge financial risks here. The biggest risk is the popularity of the scheme. The fact that after 5 months we have exceeded the year 1 target for uptake shows that most New Zealanders were ready for a scheme of this type, applauded its introduction, and are pleased to be part of it. This Government and successive Governments will have to cope with the consequences of the popularity and the vitality of KiwiSaver.

These three bills, which emerged from legislation that, until divided by the Committee, was one piece of legislation, have required a huge effort on the part of a number of people. I acknowledge, in no particular order, the contribution of members of the Finance and Expenditure Committee, who worked through this legislation over some months; the drafters; the policy officials in the Inland Revenue Department, Treasury, and my own office; and the people who made submissions. I acknowledge the members of this House who participated in the debates for their lengthy and complex consideration of this matter. Very detailed issues are contained in these bills, and I think that, as they arrive for their third readings, the legislation is in good shape. This marks another significant achievement in the process of tax reform in New Zealand. I want to record my thanks to all of those people for the contribution they made, at whatever stage, to make this legislation possible. Therefore, I commend these bills to the House.

Dr the Hon LOCKWOOD SMITH (National—Rodney) : This legislation that we read for a third time today reveals the full sham of this Labour Government’s new-found interest in personal income tax cuts. The Government members tell us now that Treasury has finally told them that the Government can afford personal income tax cuts. Well, this was the first test. This Taxation (Annual Rates of Income Tax 2007-08) Bill was the test. Labour could have reduced personal income tax rates. It was the first test. And what does Labour do? It fails, because it does not reduce the rates at all. We know why. The reason is that there is no election this year. There is no election this year, and this Labour Party is so dumb it thinks the people of New Zealand can be fooled into believing that Labour supports tax cuts when the only time it talks about them and promises them is in election years, and then it does not do it.

So, what have Government members done with this bill? What they have done is so extraordinary it would find a perfectly good place in a Monty Python show. They have suddenly decided: “Redundancy payments! We’ll reduce the tax on all redundancy payments by 6c!”. Has anyone had a chance to make any submissions on that policy? No. Has the policy been through the generic tax policy process, which is an important part of trying to make sure our tax legislation in this country makes sense? [Interruption] Paul Swain knows about it. The young Darren Hughes would not know anything about it, but Mr Swain knows about the generic tax policy process. It is an important process. Did this 6c rebate in redundancy payments go through that process? No.

Let me share just a couple of things that show what is so stupid about this provision. The Minister Peter Dunne has just said that the reason for it is that a redundancy payment can put a taxpayer into a higher tax bracket, and therefore that taxpayer pays more tax than he or she should on that redundancy payment. I have no problem with that argument. But the Minister should think about it a bit. Let me give him an example. Let us say for argument’s sake that a salary earner on $40,000 loses his or her job. This person has been in this job for a few years, so he or she gets a $40,000 redundancy payment. Under this legislation, this person will get a 6c rebate on that $40,000 redundancy payment. But I want the Minister to reflect on this. If this person genuinely was getting a reduction for the tax that the higher tax bracket would impose on him or her, he or she would not get a 6c rebate on all of that $40,000.

Hon Paul Swain: Yes, they do.

Dr the Hon LOCKWOOD SMITH: No, that person would not. That person would not, if, in fact, he or she was being compensated for being taken into the higher tax bracket. You see, at $40,000 of salary, this person’s marginal rate is 33c. It does not change to 39c until he or she hits $60,000. So the first $20,000 of the redundancy package would be taxed at only 33c, and only the last $20,000 would face the 6c higher marginal rate. But by giving the full 6c rebate on the entire $40,000, on the bit from $40,000 to $60,000, this person is paying a 27c tax rate on that bit of income. Where is the logic in all of that? I see the Minister frowning. I can tell him that I am right. My figures are absolutely right. I am correct. Where is the logic in saying that the person getting this payment should pay only 27c on the bit between $40,000 and $60,000? Where is the logic in that?

What makes it more stupid is that the person we are talking about is, sadly, now put out of work and gets a redundancy payment—and of course we should be concerned about excessive tax on that payment—but what about the same person on the same salary who is injured at work, sadly so injured that the person will not be able to work again for the rest of his or her life? At least someone who gets redundancy has the chance to get another job. Someone who will not be able to work again for the rest of his or her life will get a lump-sum payment from the Accident Compensation Corporation, say for argument’s sake for the same amount of $40,000. But that poor person who perhaps can never work again gets the full tax—the full 39c—on their lump-sum compensation.

Why does Labour hate injured workers? Why does Labour hate so much these poor people who get put out of work and cannot work again because of a tragic injury that may not even be their fault but have to pay the full tax rate, and someone who is made redundant, whose prospects are nowhere near as serious because he or she can at least work again and get another job, gets this really special tax treatment whereby over a certain range of income the tax rate is below the tax rate that ordinary people earning that kind of money would pay? Had this policy been through the generic tax policy process, all these silly anomalies would have been sorted out.

What we see with this legislation we are debating in the third reading today is really a reversion back to the bad old days. When I came into this Parliament in 1984 we had ridiculous tax law. I think something like 70 pages of tax deductibilities were available to taxpayers in New Zealand. I give the Labour Government of those days some credit—the Labour Government post-1984—and Michael Cullen was part of that Government. It is a shame Michael Cullen has forgotten some of the good things he did back in those days. It is a shame he resiles from some of the good things Labour did in those days. Labour simplified the tax system. It accepted that the policy of a lower, broader base actually brings in more tax revenue. But what we see with this legislation now is that, today, this modern, Helen Clark - Cullen Labour Government is turning its back on that sound tax policy. What we get is a whole lot of adhockery, such as the 6c rebate on redundancy payments and the tax credits for working families or for all kinds of New Zealand families. This bill also changes the names of the various family tax credits.

What is so bizarre about this bill is that a family that Dr Cullen considers is so rich it should pay the top personal tax rate is on $60,000. Dr Cullen considers that someone on $60,000 is so well off he or she should pay the top personal tax rate.

Hon Dr Michael Cullen: The top.

Dr the Hon LOCKWOOD SMITH: Michael is right—the top. But if they have five children then the Government considers that they are so poor they should pay no income tax. So on the one hand the Government is saying those people are so wealthy they should pay the top rate, yet on the other hand if they have five dependent children they are so poor they should pay no income tax at all. Those are the facts. If a family has an income of $60,000 and five dependent children, their net tax position is zero. So we can see this stupid adhockery. Why do we maintain these ridiculous high tax rates on ordinary working New Zealanders, then say: “Hang on! After we have collected all this tax, we have to give it all back to them.”?

That is not the only adhockery in this legislation. It now brings in the tax credits for research and development. What we will see with those—and we are already seeing it—is accountants up and down this country, working on how much of most businesses’ current expenditure can be brought in to qualify for the research and development tax credits. We know that Shane Jones, the Labour member and chair of the Finance and Expenditure Committee, asked officials whether there was any evidence at all from Australia that these tax credits work. The officials had to say that there is not. We have all these bits of adhockery that this legislation brings into our law.

The final one I want to mention is this: in the final stages of major tax law we had five Supplementary Order Papers—three major ones and two minor ones—just dumped on this Committee yesterday. That is not very good tax legislation. One of them brought in a new provision for cross-border operational leases whereby one-sixth of the depreciation write-off available for these leases will now no longer be available. What is objectionable about that is that the Government tried to sneak in a Supplementary Order Paper on that a while back. The select committee examined it, found that it would be unacceptably repressive on certain business deals done in New Zealand through its retrospectivity, and threw it out. But the Government then brought in this Supplementary Order Paper and dumped it on the Table yesterday.

The commercial interests involved now have to work through how they will actually live under this new provision. Time will tell whether serious litigation follows this measure. Again, it is ad hoc. Again, it has no rational basis behind it. That is the problem with this legislation. It ignores a rational reduction in tax rates for all New Zealanders and brings in a whole rash of ad hoc provisions. That is why National is opposed to the bill.

Hon Dr MICHAEL CULLEN (Minister of Finance) : We have just heard from a member of the tax-cutting National Party. It is the party that has run for years that the only thing that matters in life—the only maiden’s dream that is worth having—is having a tax cut in one’s Christmas stocking, or somewhere or another. We heard from Lockwood Smith, first of all, that the tax cut for redundancy is too big and has to be opposed. It is not fair; it is too big.

Secondly, we heard that the Government is providing tax credits for families, so that people with five children will get, and are getting, a tax reduction compared with somebody with no children—somebody who shall remain nameless in this House. I gather from recent rulings that we are allowed to refer to childlessness now; but I will not mention the member in that regard. People with five children will pay less than somebody who does not have any children. The member may not know this, because his specialisation in life is dairy herds or something of that sort, but I tell Dr Lockwood Smith that bringing up children is expensive. He should try it some day. It is still not too late. It is still not too late, by the look of those photos we have seen of him. He could still be the father of some children, and he will find that they cost money.

In most countries—in almost every Western country that I know of—the tax system recognises the cost of raising children. That might be a rort to an accountant—though how I do not know—but to the rest of us it is regarded as some form of social justice and social equity. If the member wants to think about why we have a simple 6c in the dollar rebate on redundancy, he should think about the accountants he was just referring to. What he is proposing in terms of the marginal rate approach provides a huge opportunity for a tax rort. It means that after working 1 month somebody on, for example, $150,000 a year could collect that month’s salary, and the remaining 11 months’ salary as a redundancy payment, and be taxed at 15c in the dollar. The member has gone quiet now.

Then we come to the issue of the top tax rate, which for some reason obsesses the National Party. Of course, the level it cuts in at depends on what the rate is. When the National Government left office, the top tax rate was 33c and it cut in at 1.1 times the average wage. Actually, I am wrong in that; it cut in at below the average wage in 1999—$35,000, and the threshold was $38,000. Now it cuts in at well above the average wage, and it is slightly higher. Is it huge by international standards? The famous low tax rate country, Ireland, taxes at 40c in the dollar—and has no imputation credit for dividends—and it cuts in at 1.2 times the average wage. The National Party—I hate to tell members this, because they might not have learnt this—in living memory, has never ever cut the top tax rate when in Government. It has never ever, in living memory, cut the corporate tax rate when in Government. It has never ever, in living memory, cut the tax rate on savings when in Government. So where is that tax-cutting National Government?

What has this Government done? We have cut the tax rate on savings, and this legislation carries that forward somewhat further. We are cutting—and this legislation will carry out the completion of the process—the tax rate on business for the first time since the time of the last Labour Government in the 1980s. National did put up the top tax rate, and it was National that left the 66c in the dollar tax rate in 1981 that the member referred to. I tell Mr Foss that there is no point in apologising now; he was probably not even born then. But the fact is that it was a National Government that put up the top tax rate, and it never lowered it. So let us try to work out which Government actually delivers in these areas, and which Government just talks about it. National puffs up its chest in Opposition and says that it will cut taxes, but it gets into Government and puts them up.

What is the other feature of this legislation? We have heard practically nothing about this. This legislation has important considerations in respect of KiwiSaver. Have we heard anything about KiwiSaver from the Opposition in this debate? Those members do not want to talk about it. We have well over 300,000 people enrolled in KiwiSaver, and the number is growing by thousands every week—every week. The National Party does not want to say now what its position is on KiwiSaver.

Hon Member: What is it?

Hon Dr MICHAEL CULLEN: Oh well, at some point it used to be that it was terrible, it was a rort, it was unfair, it was indecent, and it would do nothing. Now National is saying: “Oh my gosh, there is well over 300,000; it will be well over half a million by the time of the election. What is our position going to be on KiwiSaver?”.

Then we heard from Dr the Hon Lockwood Smith PhD and bar about research and development tax credits. He is opposed to them, but he did not hear his deputy leader’s speech in an earlier stage of this legislation, where Bill English gave them reasoned support. Why? I have to tell the member that life has moved on since the 1990s. The evidence is now very clear that limited tax credits do work—

Dr the Hon Lockwood Smith: Oh yeah—

Hon Dr MICHAEL CULLEN: Oh yes! And the reason for that is that the return to society from investment in research and development is not the 20 percent or so that is the return to the business; it is more like 90 to 100 percent. How come New Zealand firms—including Fonterra—have been doing research in Australia since Australia introduced research and development tax credits? And how come Australian businesses are looking to move research and development to New Zealand, now that we are talking about research and development tax credits within New Zealand?

The point is that we can be so pure that all we do is drink pure water, and wonder why people are enjoying champagne in other countries. Well, it is time for us to get just a little bit more intelligent about, firstly, how we support savings in this country. If anybody thinks we do not have a savings problem, that person should just go and look at the data, at the weakness of our capital markets, and at the price we pay for interest in this country compared with our competitors. We should look at the cost to business that that creates and realise that we have to act on this challenge. Cutting the top tax rate, compared with lifting the performance of our capital markets, is a matter of utter, utter insignificance.

When members opposite finally get around to the point of announcing what their tax policy will be, they will have to explain what will happen to those who are earning modest incomes. Will they receive anything? Will they follow Dr Lockwood Smith’s prescription today, which is to cut assistance to families in order to give money to people like Dr Lockwood Smith? He said that people on $60,000 a year with five kids—five children—should not receive any tax credits—

Dr the Hon Lockwood Smith: I didn’t say that, at all.

Hon Dr MICHAEL CULLEN: Oh yes, he did. He said that it was wrong; it was wrong that people on $60,000 a year with five children received tax credits in relation to the cost of raising those children. Well, we on this side of the House are very proud that with Working for Families we are helping a broad range of lower and middle income New Zealanders to meet the cost of raising a family. Nothing is more important than that in New Zealand.

We are proud that we are introducing a research and development tax credit that will help to lift our performance. We are proud that we have a KiwiSaver scheme that is already a stunning success, and that will lift the savings rate within New Zealand. We are proud that we are lowering the corporate tax rate, and in next year’s Budget we will announce personal tax cuts that will not go to all of National’s friends, but will go, in significant amount, to people on low and modest incomes, because it is about all Kiwis sharing in the economic success that this Government has created.

Unlike Mr Hide, who said in the Committee stage that people who earned more than $60,000 were the only people who worked hard in this country, we believe that all New Zealanders contribute to the success of this country—[Interruption] And at that they jeer. Well, if they want to jeer at that, they should go out door-knocking in the average Kiwi suburb and tell people that they do not contribute to New Zealand. We will follow and collect their names, because they will be voting Labour on election day.

  • Debate interrupted.

Personal Explanations

New Zealand First—Donation of Money

Rt Hon WINSTON PETERS (Leader—NZ First) : This morning at 9 o’clock in Auckland, on behalf of New Zealand First, I handed a cheque for $158,000 to Kay Hyman from Starship Children’s Health. The money will be used for paediatric research.

We have always contested, and continue to contest, the findings of the Auditor-General’s report against both New Zealand First and United Future, because both had their expenditure pre-approved by the Parliamentary Service and the Chief Electoral Office. I have written—

Hon Bill English: I raise a point of order, Mr Speaker. The member sought the indulgence of the House to make a personal statement, and the requirements around a personal statement are very well-known. This statement is going well outside those requirements. If we were aware that this would be the subject matter of the personal statement, we certainly would not have given leave, because it would not have met the requirements of the Standing Orders.

Rt Hon WINSTON PETERS: The claim cannot be made that if one was aware something might have happened somewhere during someone’s personal statement, consent would not have been given. That would require someone to be clairvoyant. Mr English knows that. But the most important thing is that I have only two more sentences to go, one of which concerns the Auditor-General. It is a personal statement because it concerns exactly what we have done. That is all it is—two more sentences. All right?

Mr DEPUTY SPEAKER: Yes, of course you will finish. But I just say that the member should not stray outside the facts of the matter he is raising. He is entitled, in my view, to have gone as far as he has, because he and his party have been under considerable attack in this House in respect of the subject matter of his personal explanation. I think he is explaining what they have done and why. But I advise the member not to go too wide.

Rt Hon WINSTON PETERS: Thank you, Mr Deputy Speaker. I have written to Kevin Brady, the Auditor-General, advising him of the donation and explaining that at least now some good will have come from this issue. I seek the leave of the House to table a photo of the donation taking place and my letter to the Auditor-General.

Chris Tremain: What about the press release—table that, too?

Mr DEPUTY SPEAKER: I am pleased you waited till the point of order was finished, Mr Tremain. Thank you. Leave has been sought to table those items. Is there any objection? Yes, there is objection.

Rt Hon WINSTON PETERS (Leader—NZ First) : I also seek leave for the National Party to explain now why it has not paid its GST—

Mr DEPUTY SPEAKER: No. Thank you, Mr Peters.

RODNEY HIDE (Leader—ACT) : In a similar vein to Mr Peters’ seeking of leave for National to make an explanation, I seek leave for Mr Peters to make an attempt at an explanation about why he has not paid back the money yet.

Mr DEPUTY SPEAKER: No, the member may not seek leave for any other person or party.

Rt Hon WINSTON PETERS (Leader—NZ First) : I raise a point of order, Mr Speaker. In response to an allegation that has now been made across the country by Mr Hide, I say that if he knew anything about the law, then he would know full well there is no cubby hole into which to poke any such payments, as the law has now changed. But we have done something worthy in the interests of the ordinary, poor people of this country—

Mr DEPUTY SPEAKER: No, no. We are now debating the motion that was moved by Mr Dunne.

Taxation (Annual Rates of Income Tax 2007-08) Bill

Taxation (Business Taxation and Remedial Matters) Bill

Taxation (KiwiSaver) Bill

Third Readings

  • Debate resumed.

Hon BILL ENGLISH (Deputy Leader—National) : Well, Mr Peters might want to explain just where he got the $158,000 from.

Rt Hon Winston Peters: I raise a point of order, Mr Speaker. I did not get it from abroad, as the member’s party did.

Mr DEPUTY SPEAKER: Enough points of order have been raised this afternoon. Members will settle down please, particularly Mr Peters.

Hon BILL ENGLISH: What we do know about New Zealand First’s repayment is that those members did not get it from the taxpayer, which is where Dr Cullen got the money he used to break the cap on electoral expenses in the 2005 election, in a manner that was unprecedented. That is directly relevant to this legislation, which sets our tax rates, because that particular incident helps explain some of Dr Cullen’s ambivalence about tax policy and where it is headed. I will just pick up on some of the statements Dr Cullen made in his speech to the House. He is falling back on the mechanism that Labour uses when it is in electoral trouble—that is, the making of loud and vigorous statements of principle.

Dr Cullen made a couple of statements that I think bear some scrutiny. In relation to the first, one would think that Labour had invented the idea of compensating families for the cost of raising children. Well, it did not. Working for Families is simply an extension of the child tax credits that were brought in by National in 1996 and 1997. Those child tax credits, which were much criticised by Labour at the time, were simply an extension of the rationalisation of family assistance through family support that was carried out by the Labour Government in 1987, under Roger Douglas when he brought in the family support system. So for Dr Cullen to claim that only Labour has ever recognised the cost of raising children, and that it is some kind of radical new statement of equity, is rubbish. It is just rubbish. He updated a model brought in 10 years ago under National, a tax package that cost, I think, about $3 billion, which was the largest personal income and family support tax package the country has ever seen, even including those in the 10 years since then—even since then.

The point my colleague Dr the Hon Lockwood Smith was making was simply that taxing people at 39c in the dollar when they earn under $40,000, and then recycling all of that money back to them as child tax credits, is a system that bears some scrutiny because we may be able to simplify it. We have had quite a lot of discussion about how that could happen, but Dr Cullen is going far too far—in the manner he has become accustomed to—by saying that Dr the Hon Lockwood Smith is opposed to Working for Families and tax credits for families. Of course, the system can be simplified.

The other statement Dr Cullen made in respect of equity for taxpayers leaves me absolutely puzzled. You see, as Dr the Hon Lockwood Smith pointed out, tax policy has become a hotchpotch of ad hoc arrangements. One of the reasons is that Dr Cullen is now implementing policies he has opposed for almost all of the time he has been the finance spokesman for Labour, going back, I think, to 1994 or 1995. So he has had to change his mind under political pressure—

Hon Paul Swain: What an outrage.

Hon BILL ENGLISH: Well, that is not an outrage, but there is clearly no principle in what he is doing. I will just use the examples that have come through the debate. The way the Government will handle the tax on redundancies will effectively reduce the tax rate on redundancy payments, compared with the tax rate people are due to pay on their income. So someone on the tax rate of 39c in the dollar, which cuts in at well under the income levels that anyone would consider wealthy, will be paying 39c in the dollar on their income tax and they will pay 33c on their redundancy payment. People who earn $400,000 can use tax and company structures that mean, effectively, they pay the same tax rate as a person who earns $40,000. They can pay 33c in the dollar. Under Labour, people who earn less than the average wage—who earn $39,000—pay tax at the rate of 33c in the dollar. Again, the tax regime on savings now provides through the portfolio investment entity regime the opportunity for people who pay 39c in the dollar on their personal income to pay 30c in the dollar on the income they earn on savings.

What is actually happening is that Dr Cullen is gradually flattening the tax rates on everything except personal income. Why is he doing that? Well, one can only assume that it is some kind of obsession, as expressed the other day when he referred to the leader of the National Party not just as a “scumbag” but also as a “rich”—and then a four-letter word that I think is probably unparliamentary.

Rodney Hide: Five letters.

Hon BILL ENGLISH: It was a five-letter word that we cannot repeat. Dr Cullen and Labour have this fixed view that anyone who earns $60,000 is rich and, therefore, that they should be punished. So he has reduced the tax on companies, reduced the tax on savings, and today he has reduced the tax on redundancy payments. He has done everything except reduce the tax that people pay on their personal incomes. What is it with Dr Cullen that, although he claims to be the guardian of equity, the first $2 billion worth of tax cuts he has made have gone to companies? How does he explain that to the Council of Trade Unions conference—to the person on $39,000 who has had no tax breaks for 8 years under Labour, but who knows that $2 billion worth of taxes a year have been reduced for companies. What did Dr Cullen used to say about company tax cuts? He used to say that they were mindlessly stupid. He used to say that the only beneficiaries of company tax cuts were overseas investors who owned businesses in New Zealand.

Hon Darren Hughes: Disproportionately that’s true. Disproportionately that’s right.

Hon BILL ENGLISH: Well, I ask whether that is right. Why is it that Labour, all fired up about equity and fairness, has given the first $2 billion worth of tax cuts to the overseas owners of New Zealand businesses? That is apparently what Labour has done, according to its own logic. Of course, there is a logic to what Labour has done, which is that the lower company tax rate means that companies will retain their profits and reinvest them. There is some logic to that, but what has happened to the equity argument? How will Labour MPs explain to middle-income New Zealanders on the factory floor why those people have not had a single tax break in 8 years? Labour members cannot explain it. They cannot explain it, and that is why they have lost the argument.

Hon Darren Hughes: Oh, no.

Hon BILL ENGLISH: Well, they have lost the argument. That is why Helen Clark suddenly announced her new-found understanding of fiscal surpluses, and said that they are big enough for tax cuts. The reality is that middle New Zealand should have had a dividend from economic growth over the last 8 years. People are looking increasingly to Australia, where workers have had a dividend from economic growth. New Zealand workers can feel doubly aggrieved that the dividend from economic growth has gone to people who can afford to save, to people who run companies, and to Kiwis who live in Australia. So Kiwis have had tax breaks, but they have had to go to Australia to get them.

Dr Cullen cannot have it both ways. One argument he makes is that National is a bunch of mad tax-cutters who cannot be trusted. Today he made the opposite argument: that people cannot trust National to cut taxes because it never has. He is actually wrong about that. But he cannot have it both ways.

Labour members will have to make up their own minds about tax cuts. They need to own their record and their record is that they have given tax breaks to those who are better off, to people who own companies, and to those who can afford to save, but Labour’s own supporters have gone wanting for 8 years for a single dime, for a single cent. Dr Cullen promised them in 2005 the “chewing gum tax cuts”—as the leader of the ACT party so grandly called them. Then he took those cuts away. So the only thing Labour members promised workers, it took away. That is why, next year, workers will not trust them. Labour members had the chance, with the passage of this bill this year, to give some tax reductions to low and middle income New Zealanders, yet for the eighth year in a row they have refused to do it. But magically in election year the workers out there who have had to pay more and more tax are meant to believe that now Labour members are giving tax cuts out of the goodness of their hearts. What a load of rubbish! Dr Cullen has spent 8 years ruining his credibility on tax; it will not come right next year.

RODNEY HIDE (Leader—ACT) : The performance of the Rt Hon Winston Peters in the House, just before, illustrates why we have got ourselves in such a muddle over tax policy. It was all about politics and grandstanding and nothing about principle or sound policy. Just to recap, I remind members that all of the political parties were discovered by the Auditor-General at the last election to have spent money outside what the rules were considered to be, and every party—some begrudgingly—paid the money back. Mr Peters and New Zealand First did not. They were going to take a legal case, they held off, and they kept the interest, apparently, on their money all that time. Then, rather than pay back the money to the taxpayer, as every other party did, they grandstanded and had their picture taken giving the money to a hospital. That is like a taxpayer who, on being found not to have paid his or her tax, does not actually pay it back for 2 years and does not pay any interest or any penalties, but who then gives the money owed to the taxman to his or her favourite charity, gets his or her picture in the paper doing so, and says: “Look at me, how wonderful I am!”. There is nothing principled or sound about that.

If Mr Doug Woolerton wants to keep chirping in as he does, he and his party should announce where the money that New Zealand First has been spending has actually come from—not just the money it paid to the hospital but the money that Mr Peters spent in taking Bob Clarkson to court—money that has never been declared. I say to New Zealand First members that before they start giving some bad motives to the National Party or to the ACT party over what those parties are doing, I think they should be a bit more upfront about where their leader has been getting his money from all these years.

As to this bill, I say that the problem is that there is no principle, there is no sound policy, and there is no forward thinking in anything that this Government is doing in the area of tax. Let me explain. The first thing we should do with a Government is decide what we want that Government to do. Once we decide what we want the Government to do, we can then go and figure out how we raise the money for that. But that is not what this Government has done. It has sat on a pile of cash and asked “How can we spend it?”. In fact, it has asked “How can we get more?”. It has put up taxes and charges to get more money to spend rather than think about what New Zealanders want their Government to do.

The second thing we should do, having decided that, yes, it is appropriate that the Government spends this amount of money, is raise tax as efficiently and as effectively as possible, because a poorly designed tax system puts costs on the economy—that is to say, on all New Zealanders. The costs are not just the cost of filling out the forms, the costs are what is called in the jargon the dead weight costs of tax—the costs, the trades, the deals, the business, the jobs, and the opportunities that are not realised because of the tax system that this Parliament has put in place.

If people think like that, they will want this—they will want the tax system to be fair. It is fair to say that fairness is somewhat in the eyes of the beholder, but let us discuss both concepts. If we want a tax system to be efficient—that is, to raise a set amount of money in the least costly way—then, indeed, we will have a low flat tax on income, or a consumption tax like GST. That is the way we will do it. And we will say to ourselves: “We are not going to have a tax system that is designed to push people a certain way, or that tells us how to spend our remaining bits of money left after the tax has been taken.” No, because when we do that, we distort the economy, we add costs to the tax system, and we complicate the tax code.

So we would be looking for, maybe, a flat tax of something like 18c in the dollar and a GST of 12.5c in the dollar, and then people would be left with the money above that to spend as they choose, not as politicians think they should choose. That is what we would be doing; not saying “We think saving’s a great idea. Let us allow people to keep some of their money if they save it.”, or “We think research and development is a good idea and we will give tax breaks for that.” No, we would not say that, because that is just politicians telling people what to do with their own money.

Here is another thing. We would not be having this argument about tax rates of 39c and 33c in the dollar, because we would be thinking about tax from the point of view of efficiency and fairness. We would say that the fair proposition is that if someone earns twice as much money as others, they should pay twice as much tax—not three times as much, not four times as much, and not 100 times as much, as can happen under the Labour Government, but twice as much. People can live with that, but they cannot live with the idea that as they earn more money they should pay not just progressively more tax but exponentially more tax, because that quells any incentive to be entrepreneurial, to invest, and to get ahead. That is another feature we have seen in our current tax code.

But there is a big elephant in the whole room of this debate about tax, and it is the one that I think we have to link in much more closely—that is, we cannot talk about tax cuts, or what tax rates should be, unless we get Government expenditure under control. As long as politicians sit there and view the cash they take off New Zealanders through the tax system as a war chest to spend on policies to win an election, then no tax cuts will be sustainable, taxes will continue to rise, New Zealand’s economy will continue to be sluggish, our performance will be poor, and our best and brightest will leave for overseas climates. In order to get a strong economy, in order to get savings, and in order to get interest rates down, one thing is needed, and that is for the Government to get its own spending under control.

Government spending is not under control. This Parliament cannot begin to scrutinise the spending of Government departments that are running out of control. The budgets are simply too big. When I first came here I made a bit of a name for myself by exposing the odd million dollars, $10 million, or $20 million that was wasted. I made a bit of a name for myself, but I soon realised that those sums were a pittance because while I was doing that, this Parliament had gone from spending $100 million a day every day to $150 million a day. That is what happened. While we were saving by exposing the odd scandal of around a few million, actual Government spending was going up by billions.

What should we do about it? It seems to me, and to the ACT party, that we do need some discipline on ourselves and on Governments to constrain Government spending. I think we should agree to hold Government spending at the rate of inflation. How is that for a start? Then Government spending can increase to compensate for inflation, but it cannot go beyond that. We constrain ourselves. If the Government wants to spend more money, there is a simple solution to that: ask the people. Let us have a referendum and say “Look, we have all these great projects. We have got KiwiSaver, and this and that, and we want to spend the money on that.” Let us ask taxpayers if they want their taxes to go up this year at a rate faster than inflation. I know that it seems odd to people in this House that we would actually ask for taxpayers’ consent, but, after all, it is their money. Thank you very much.

R DOUG WOOLERTON (NZ First) : New Zealand First supports the third readings of the three bills arising from the Taxation (Annual Rates, Business Taxation, KiwiSaver, and Remedial Matters) Bill—

Hon Members: Pay the money back!

R DOUG WOOLERTON: Seeing as those members want me to talk about paying the money back, I will talk about that in a moment. Firstly, I say that New Zealand First supports, and always has done, any cut in taxation that we possibly can support. We support savings wherever and however we see them packaged, we support incentives that give an advantage to our producers and our entrepreneurs as opposed to those in other countries, and we support the Government to help our businesses wherever it can.

We believe that the Working for Families package is a positive thing, and that it sends the right messages and does the right thing. I say for about the sixth time that if at the time of the last election—around the time when Working for Families came out—we had adopted across-the-board tax cuts as proposed by the Opposition, I would have received something in the vicinity of $90-odd a week extra, as an MP, which I would have enjoyed. As opposed to that my son, who has a very good job, and his wife have recently had their second child. She was off work—off paid work, I might say, but working harder than ever as a mother—and they would have received nothing under across-the-board tax cuts. Under the Working for Families package they received in excess of $100 per week, and I received nothing. [Interruption] We will never cross the divide on that argument, because it is a philosophical one. We in New Zealand First believe that Working for Families is the right way to go, and we support this bill.

Talking about principle, Mr Hide made a statement that we are not acting in a principled way in New Zealand First. I say to members that if we believe that we have not done wrong, if we believe that we have been served badly by circumstances or a wrong decision, and if we believe that the principle is wrong, then it is wrong to go, under pressure, and pay back money when we do not believe we owe it—

Rodney Hide: Pay it back to the tax department!

R DOUG WOOLERTON: We are talking about principled decisions now; we are not talking about the tax department, or anything close to the tax department. If we want to act in a principled way—and, as a party, we want to give the message that we understand people’s concerns, but we will not fulfil the demands of people who demand wrongly that we pay some money back that we do not believe we owe—then we take a principled decision and give the money to a worthy charity. That is what we have done. We have paid the money to a charity, and good will come out of that.

Hon Members: You stole taxpayers’ money!

R DOUG WOOLERTON: Let the members in the Opposition tell me whether they would take the money off Starship Children’s Health. Would they take it away from those children? Will they say that that money is not doing good? Are they saying that that money will not help a child in New Zealand? Are they saying that that money does not help the community? Are they saying that that is not the right thing to do? If they are saying that, let them go into the public, and stand on a platform at election time and say that they would take that money off Starship Children’s Health and deny those children the opportunity for health. That is what we call a principled decision. I come back to the bill—

Dr the Hon Lockwood Smith: You stole taxpayers’ money.

R DOUG WOOLERTON: We have not stolen any money, and we certainly do not use $7 million of public money like the National Party does.

We support this legislation because we believe it does all of the right things for society. It sends the right messages, it provides help where it is needed, and it is good for society overall.

NANDOR TANCZOS (Green) : I rise to give a brief contribution on two points in the legislation before us.

The first one is in relation to the tax cut debate that has been going on here. The National Party and Mr Hide have talked a lot about the need for greater tax cuts, and that has been debated both here and in the public domain. The Green Party considers it unfortunate that the debate in this House, in particular, is always between whether we should have higher or lower rates of income tax, or, for that matter, company tax. We believe that it is time to redefine the question of what is being taxed. Outside this House there is increasing recognition of and support for the use of Pigovian taxes and other forms of eco-taxation as a way of both simultaneously addressing environmental problems and raising revenue, ideally to provide a means to reduce income tax as a result. The Green Party will continue to push for the use of those forms of taxation.

The other issue relates to KiwiSaver, where the Green Party would have liked to see substantial ethical investment criteria set out in the legislation. There are obviously strong incentives for New Zealanders to participate in the KiwiSaver scheme, and we support it, but it seems obvious to us that making substantial ethical investment criteria part of the package would have been a sensible thing to do. We think it is unfortunate that that has not happened.

On both of those fronts, we consider the failure to incorporate those ideas to be a lost opportunity.

CHARLES CHAUVEL (Labour) : I am going to take a brief call on these bills that enact promises outlined in the 2007 Budget, and which are the latest example of this Labour-led Government keeping its promises to continue the process of New Zealand’s economic transformation.

In this third reading speech I want to address three of the matters that are dealt with in this legislation—KiwiSaver, the company tax cut, and the research and development tax credits. I will start with KiwiSaver. An important aspect of these bills is the enhancement made to KiwiSaver, first, in the Budget, secondly, in the recommendations coming from the Finance and Expenditure Committee, and, thirdly, in the Minister’s Supplementary Order Paper. To refocus KiwiSaver, definitions have been reviewed, loopholes have been closed, and general submissions as to the burden on companies and individuals have been considered and dealt with. This bill will ensure that the original aims of KiwiSaver will be met in the fairest and most efficient way possible.

The enhancements to KiwiSaver, introduced by this legislation, will make it even more attractive to New Zealanders, and they certainly come in a timely fashion. If anyone doubted the need for this scheme, he or she should consider the statistics that I found the other day when I was considering the remarks that I would make on this occasion. Members opposite might be interested to know that in the year to March, prior to the opening of the scheme, savings from all sectors in New Zealand fell to $1.3 billion. This was down from $5.9 billion in 2005, and $7.4 billion in 2004, and our household savings rate remains very poor. New Zealanders spend $1.15 for every $1 saved. Just this month a World Economic Forum report ranked New Zealand 108th out of 131 for our national savings rate. Those are historical scandals.

We simply must do something to address those dreadful savings rates, and KiwiSaver starts us along the road. The public understand this. They have embraced the scheme. As the Minister of Finance and the Minister of Revenue observed, over 300,000 New Zealanders have enrolled in the scheme already, after only 6 months of it being open for enrolment. Finally, 32 years after the Kirk Labour Government first sought to guarantee retirement peace of mind to New Zealanders, and after all the years after National dismantled it and put nothing in its place, KiwiSaver, along with the New Zealand Superannuation Fund, accomplish that goal. I cannot describe how proud I am to be about to cast a vote for that future.

I want to speak briefly also about the company tax rate and the research and development tax credits. I am not one of those people, like members opposite, who believe in cutting tax for the sake of it. Frankly, anyone who does is a fool. Depriving a State—distant from its markets and with a history of under-investment in infrastructure—of revenues can be downright dangerous, as the 1990s showed us. I am not one of those, like members opposite, who think that tax rates by themselves are the only determinant of where companies choose to base themselves. If they were, no company would ever elect to base itself in the United States with a federal company tax rate of 39.3 percent, or Japan 39.5 percent, or Germany 38.9 percent. For the foreseeable future, clearly we will never compete, nor should we, with ultra-low corporate tax regimes in nations like Singapore and Hong Kong.

Having said all that, though, it is clearly desirable to maintain rates of taxation that are broadly competitive with those jurisdictions in our neighbourhood and with those with living standards with which we like to compare ourselves. Australia is obviously relevant in this regard, having cut its corporate tax rate last year to 30 percent. Even though we have to treat comparisons with Australia with some caution as we have a very simple tax system, unlike Australia’s system with its payroll tax, superannuation levies, Medicare surcharges, and stamp duties, it was clearly important to consider following suit and to make the necessary amendments. We now do so and, as Dr Cullen said, we are doing it in the first cut in corporate tax rates in New Zealand since Labour was last in office in 1988.

The value of these tax cuts to New Zealand business next year will be $2.1 billion. Astonishingly, members opposite, whose rhetoric is all about cutting tax—indeed, it seems to be their only policy—are voting against this legislation. This legislation also introduces a 15 percent research and development tax credit to bring us into line with the many other developed countries that invest in building know-how in this way.

Just as KiwiSaver is addressing our abysmal savings record, so too research and development tax credits will help to raise the level of private sector investment in research and development in New Zealand. It will benefit business to the tune of $630 million in its first year of operation. I really do believe that this measure will help New Zealand businesses to expand domestically and overseas, to improve their ability to research and develop new products, and to invest in skilled staff. All this will drive higher productivity with internationally competitive firms selling products for which international consumers will pay a premium. These outcomes are absolutely key to our future economic success.

I say in conclusion that New Zealand is enjoying the longest period of economic growth in 30 years. Since 1999 our average growth rates have outstripped those of Europe, Japan, the US, and the UK. Company tax returns show that recent profit growth has averaged some 20 percent per annum. We continue to rate highly in terms of international competitiveness, openness, freedom from corruption, and ease of doing business. Unemployment at 3.6 percent is at record lows, and labour force participation is at record highs. None of this is happening by accident. It is in very large part a legacy of Michael Cullen’s excellent economic management, typified by the measures contained in this legislation. Long may that continue.

Dr PITA SHARPLES (Co-Leader—Māori Party) : Tēnā koe, Mr Deputy Speaker. At the end of this month all Ngāi Tahu whānui who have joined the Whai Rawa programme will be eligible to receive the next distribution from Te Rūnanga o Ngāi Tahu. The distribution of some $250 is twice as much as last year. Every dollar that a member contributes to his or her savings under Whai Rawa will receive $1 in matched savings from Ngāi Tahu. It gets even better for Ngāi Tahu rangatahi, youth, who are matched at a ratio of 4:1. So if one of their young people under 16 years of age saves $15, Ngāi Tahu will match it with $60. This is Māori enterprise and success at its absolute best. It is a programme designed to provide a base level of saving for all registered Ngāi Tahu members, as well as supporting a culture of savings and asset building.

At the end of July 2007 there were over 6,300 members and over $1.5 million invested. But the entrepreneurial capacity of Ngāi Tahu is confined not only to their steady membership and the fund size of their medium to long term savings scheme. The influence of Te Rūnanga o Ngāi Tahu is also felt in this legislation. Ngāi Tahu specifically lobbied to ensure there was creativity and clarity around the retirement scheme contribution tax. Their efforts have been rewarded through the provisions that Ngāi Tahu have promoted, which means that contribution tax can be directed at source, rather than 6,300 members having to make their own individual contribution.

We commend Te Rūnanga o Ngāi Tahu for their efforts, and we acknowledge also the sponsor of this legislation, the Hon Peter Dunne, for being willing to do what was necessary to achieve simplicity and clarity. We also note that this legislation enables the retirement contribution to be offset by any imputation credit or Māori authority credit. These two initiatives, we believe, will avoid setting up a whole new raft of compliance issues that can only run the risk of creating non-compliance breaches at an individual level.

The legislation we are debating today sets the annual income tax rates for the 2007-08 year, introduces amendments to encourage voluntary compliance with tax obligations, and amends other Acts and regulations such as the KiwSaver Act 2006. In many respects there are some positive proposals included within the legislation. We welcome the tax credit for research and development, and support the changes made in the select committee to the eligibility criteria for clarity purposes and to make them less restrictive.

We believe that it is a very positive initiative to establish a tax credit for science and technology - based research and development conducted predominantly in New Zealand by New Zealand businesses, and we are confident that such support will pay dividends in the long run. We support also the tax incentives for charitable donations. We accept the rationale of submitters who suggested that increasing the tax incentives will in itself increase the opportunity for charitable giving. We will be interested to learn how the Inland Revenue Department will take this into account in its review of tax incentives, which is to be reported back on 31 March 2008.

The other major development we wish to speak to in this legislation is the recommendation that the minimum employee contribution be reduced to 2 percent to facilitate greater participation in the KiwiSaver scheme. At the second reading of the legislation, my colleague Hone Harawira revealed the results of the Marae DigiPoll carried out just 1 month ago, in which it was disclosed that 84 percent of the 1,000-strong group polled had decided not to join the KiwiSaver scheme—84 percent.

Yet although there was such little interest in KiwiSaver, there was enormous interest in the issue of tax cuts. Tax cuts were one of the highest priorities. We in the Māori Party are very interested in the whole concept of support for tax cuts. Manaakitanga and rangatiratanga lead us to address the impacts for low-income taxpayers. We certainly are of the view that those people on lower incomes should carry less burden proportionately than those who are on high income levels. We know, for instance, that 1.9 million taxpayers are on an income of $25,000 or less and that these people are paying $1.5 billion in tax while the Government is accumulating surpluses of $4 billion to $7 billion per year. It is this group that should benefit from tax cuts.

I come back to the issues with KiwiSaver. We are pleased to note that following advocacy from the New Zealand Council of Trade Unions, the National Distribution Union, and the New Zealand Nurses Organisation the minimum employee contribution will be reduced to 2 percent in order to facilitate greater participation in KiwiSaver. The recommendation that came back from the Finance and Expenditure Committee duly included a minimum contribution rate of 2 percent of gross salary until 31 March 2010, 3 percent from 1 April 2010, and 4 percent from 1 April 2011.

Although we are pleased that the recommendation for a lower contribution rate for KiwiSaver was accepted, we were disappointed that another recommendation from the combined unions that under 18-year-olds should be eligible for KiwiSaver was not accepted. We did have to wonder at the evident flaws in the argument that opening up the door for people under 18 might reduce incentives for young people to remain in education and training. We have to ask whether this will be another piece of legislation that acts against the interests of our young people, just as, for instance, we saw the Minimum Wage (Abolition of Age Discrimination) Bill have the words “age discrimination” removed from the title, and promptly do exactly that.

Like many of thesemultifaceted bills, some very positive changes are included alongside the not so desirable changes. We support the tax credit facility for research and development, tax relief for donations, tax exemptions for Tokelau and Niue trusts, and the lower contribution rate agreed to for KiwiSaver. But we have to once more temper our support by asking the constant question: when will we see tax changes for the poor that will bring about justice for those who are not currently enjoying an enviable standing of living? We wonder why the endless name changes are necessary. The terminology that has been associated with tax—for example, credits for families, the in-work tax credit, the parental tax credit, Working for Families tax credits, family assistance, family support, and minimum family tax credits—just adds layer upon layer of confusion, which makes an already alien concept like taxation even more inaccessible to the general public. It is just as nonsensical as the logic around excluding 18-year-olds from being able to join.

We will be supporting this legislation, and we hope that some of the issues we have raised here tonight will be given further consideration in the interests of the well-being and the wealth of all peoples of Aotearoa.

Hon PAUL SWAIN (Labour—Rimutaka) : There are lots of businesses in my electorate, and I will tell those businesses that the National Party voted against a tax cut for them. I will tell the businesses in my electorate that when National, the so-called party of tax cuts, had a chance to vote for a reduction in the corporate tax rate, it voted against that—again. I am absolutely going to tell them that.

Lots of businesses in my electorate do research and development. I have something to tell those companies, which wanted a tax incentive to be provided for research and development. [Interruption] Mr Bennett has been saying he supports a tax incentive for research and development. I will ask those companies whether they know that when the Government took legislation to Parliament that gave companies incentives for research and development, Mr Bennett voted against it. I will tell them that all Mr Bennett did was to shout and scream across the House. He would not stand up and make a speech to tell people why he was voting against research and development incentives. He just shouted across the House. I will tell businesses that.

I will tell the companies in my electorate that make charitable donations that when the Government put forward legislation to try to improve the incentives for that, the National Party voted against it.

Hon Members: Oh!

Hon PAUL SWAIN: Yep—National members did. They voted against incentives and improved contributions for companies, which they had been calling for for some time. Pansy Wong stood in this House and said she was pleased that that would happen. I will say to those companies that when National members had the chance to vote for that, they voted against it.

Then, of course, I will be talking to lots of people in my electorate who have joined the KiwiSaver scheme. I will tell those people that when the Government introduced legislation to make improvements to the KiwiSaver scheme, so that when they retire they will have more money in their pockets—which I thought the National Party was in favour of—the National Party voted against it.

Hon Ruth Dyson: What?

Hon PAUL SWAIN: National voted against it. No one has given us any reason why that should be; National members just shout across the House. [Interruption] No, I did not hear anything from the National Party as to the reason for that. I think National will remove those incentives. In fact, the message that is going out is simply that if people vote for National, the KiwiSaver scheme is in peril. In my view, it is gone if the National Party gets in. That is just a message of warning to the voters.

Now, a few workers in my electorate have been made redundant, particularly at South Pacific Tyres. I will tell those workers and their families that when the Government introduced a scheme in this legislation to give them a tax rebate of 6c in the dollar on their redundancy payments, the National Party voted against it. The National Party voted against a tax rebate on their redundancy payments.

Finally, there are taxpayers in my electorate who have suffered penalties—we know people who have suffered penalties. I will tell the taxpayers in my electorate that the Government listened to what they said. We said that the penalty regime was too rigid, and that we would introduce a scheme to make it more flexible and more reasonable, in order to encourage compliance. I will tell them that the National Party voted against that.

National voted against tax cuts for business, voted against incentives for research and development, voted against improvements for companies that wanted to make donations to charities, voted against increased incentives for KiwiSaver, voted against a better redundancy for workers, and voted against a more liberalised scheme for the penalties that taxpayers have to pay. National is a party that has only one policy: tax cuts. It is the only tax policy it has. Of course, we waited during the entire debate on this legislation to hear what National’s policy was. There was not one dicky-bird, not one sausage, and not one mention of what the National Party was going to do. National talks about making tax cuts when it is in Opposition; it never gives them when it is in Government, of course. It has talked about tax cuts for years. Here was the chance for National members to stand up and say what they were going to do, and there was not one mention of that—not one dicky-bird. And when the National members had the chance to vote for tax cuts, they decided to vote against them.

I want someone to explain the reason for that. I cannot understand it. Maybe I am missing something. Maybe I am not bright enough to get the little nuances from the National Party. But I do not understand why, when the National members had a chance to vote for tax cuts, they voted against them.

In conclusion, all I will say is that the National Party supports tax cuts; it says it is in favour of tax cuts. But when it is in Opposition and it gets the chance to vote for tax cuts, it votes against them. That is why no one will trust National on tax cuts. I say roll on next year!

CHRIS TREMAIN (National—Napier) : Well, that was Mr Paul Swain, the hard-working MP from Rimutaka, who just gave an election platform speech for the next election.

R Doug Woolerton: And very good it was, too.

CHRIS TREMAIN: There is one problem.

R Doug Woolerton: What is that?

CHRIS TREMAIN: Mr Swain will not be giving that speech, because he is, in fact, retiring from Parliament at what I would suggest is a very good time in his career. He is retiring before the Labour Party is run out of office. So I say to Mr Swain “Well done!”; that was a good election platform speech, but unfortunately the electorate will not be hearing that one when it comes to the next election.

I want to get into the taxation debate, but before I do that I must comment about the antics of Mr Winston Peters this afternoon. The leader of New Zealand First, before waltzing into the Chamber, quietly had a look at himself in the window to make sure he was looking just right for the occasion. He came in, sat down next to Mr Woolerton, and requested leave of the House to table a picture of himself—a picture of his giving a gift to Starship Children’s Health hospital. I am a short-term MP here, but the arrogance of that is hard to justify, and I cannot understand it. It begs the question whether young MPs like myself should be seeking leave to table pictures of ourselves giving donations to charities in, say, Napier, because we do not feel like paying our Bellamy’s bill on a particular occasion. Quite frankly, it was unbelievable. But we are not here to debate those antics; we are here to discuss the third readings of the taxation legislation.

I want to get to the guts of why National is not supporting this legislation. Mr Swain stood over there and spoke at length about how he could not understand why we are against it. Various members across that side of the House have tried to say that our opposition to this legislation is all about protecting our rich mates. Well, if they call nurses, policemen, and wharfies our rich mates, then maybe they are right. If they call builders, plumbers, engineers, and fitters and turners our rich mates, then maybe they are right. If they call university staff, plumbers, and Wellington bureaucrats our rich mates, then maybe they are right. We believe that hard-working Kiwis are being overtaxed, and this legislation does nothing to resolve it—absolutely nothing.

I want to talk to five specific points this afternoon to put our side of the argument as to why we are not supporting the legislation. The first point is the increasing tax burden, and the second is the quantity—the mountain of tax that has been collected in the last 6 years. I want to touch on fiscal drag, I want to look at our surpluses vis-à-vis Australia’s, and, lastly, I want to finish on the chance of tax cuts under this Government.

Once again, we think Labour has overtaxed hard-working Kiwis, and, as a result, we will not be supporting this legislation. In terms of the increasing tax burden, when Labour came into office and introduced the 39 percent tax rate, Dr Cullen said on 23 December 1999 that 95 percent of people will not be asked to pay more tax, and that, instead, only the top 5 percent of income earners will pay more. According to Cullen’s answers to questions in the House just recently, not 5 percent but 12.9 percent of taxpayers are now expected to pay the top income tax rate in the 2008 income year. They include those nurses, those wharfies, and those fitters and turners who are now in that top tax bracket, and who that side of the House believes are rich. Treasury’s key facts paper released on Budget day actually goes further than 12 percent; it states that 14 percent of taxpayers are now paying that level of taxation.

Remember also, and more important, that virtually everyone—not just those top taxpayers but virtually everyone—is paying more tax because of bracket creep. People on the 19.5 percent rate will have drifted to 33 percent simply because of CPI increases in their wages without any accompanying adjustment to the bracket levels. Bracket creep means that in real terms our tax rates increase subtly every year as we earn more income and move to higher tax brackets. As a result, a person on the average wage now pays an extra $2,400 in personal income tax a year than he or she did in 2000, despite being no better off in real terms. It is those people who have moved into higher tax brackets who that side of the House believes are in the rich category.

Note too that our top tax rate kicks in at only 1.4 times the average wage. Although Australia has a higher top personal tax rate—National members acknowledge that—it kicks in at $180,000, not $60,000. That is what catches our nurses, that is what catches our policemen, and that is what catches our wharfies. Do members on this side of the House think that nurses, teachers, and wharfies are rich? No, not one iota. We think Labour has overtaxed those hard-working Kiwis, and as a result we do not support this legislation.

Secondly, in terms of the quantum of the tax burden, let us have a look at how much tax has been collected over the last 6 years. In the year ended 30 June 2000, $34.4 billion was collected in tax in this country. In the year ended 30 June 2007, it had risen to $56.5 billion. That is a whopping $22.1 billion increase in taxation across the country over those 6 years—$5,525 per man, woman, and child in this country in extra taxation—a whopping 64 percent increase in additional taxation. If that is not reason enough to be voting against this legislation, then I do not know what is. National members think Labour has overtaxed hard-working Kiwis, and as a result we are not supporting this legislation.

The third point is fiscal drag, which is the net effect of additional tax collected through people rising into higher tax brackets. Fiscal drag in New Zealand since 1 April 2000 is estimated as being in the order of $1 billion in extra income tax revenue. Since 2000 Australia has increased tax thresholds and reduced tax rates. Like I said before, the top personal income tax threshold has increased in Australia over that period from $60,000—where we are at now—to $180,000. The lower personal tax rate, which applies immediately after the tax-free threshold—yes, the Australians have a tax-free threshold, which they are aiming to pick up to $20,000 over the next 6 years—has reduced from 17 to 15 percent. So, above the tax-free threshold, if one is a low-income earner, the lower rate that one pays is 15 percent. These tax changes have largely offset the effects of fiscal drag in that country, and that was a key reason behind average take-home pay increasing in Australia over recent years. Between 2000 and 2006, the gross average hourly wage in Australia increased by 34.3 percent, and the average net income increased at a similar rate.

But here in New Zealand, between 2000 and 2006 the gross average hourly wage increased by only 22.1 percent. New Zealand net incomes have grown at a slower rate. That has to do with income taxation. That has to do with the personal tax rates that we charge people in the middle and lower income levels. Changes to those levels can have a massive impact on the take-home pay of hard-working Kiwis, and that is why we are not voting for this bill.

This situation has been exacerbated in no small way by the number of Kiwis moving to Australia. There were 75,000 last year in total, with net migration of some 40,000. Dr Cullen wrote that off as a lifestyle choice. He said people were leaving because of a lifestyle choice. Then he went on to say that they are functionally innumerate and we do not need them anyway. Unbelievable! In closing, I say that I think those people understand the numbers. I believe they are not functionally innumerate. They understand that the tax rates are lower there and that they earn a better wage there, and that is why they are going.

KATRINA SHANKS (National) : It is a pleasure to take a call on the third readings of the Taxation (Annual Rates of Income Tax 2007-08) Bill, the Taxation (Business Taxation and Remedial Matters) Bill, and the Taxation (KiwiSaver) Bill.

First of all, I acknowledge the Minister in the chair for the Committee stage, Peter Dunne. He sat in that seat and listened very carefully to what the debate was about, and he responded on a very regular basis in order to address the concerns we had in relation to the original Taxation (Annual Rates, Business Taxation, KiwiSaver, and Remedial Matters) Bill. I realise I am new to this House, and I have spoken few times compared with everybody else, but it is not often that I have watched a Minister sit there, listen intently to the debate, respond, and add some value to the debate as a bill has gone through the Committee stage. That is what he did, and I acknowledge that, because we appreciate the respect he showed in paying attention to what we were saying during the debate.

At the same time, I apologise to the officials who normally would be sitting on those seats by the Chair. They sat here all last night, until 10 o’clock—because we sat until 10 o’clock on this legislation—and they listened and took notes. Then they came back into the Chamber this morning to listen to the rest of the Committee stage. Obviously, they did not realise that this debate on the legislation would come up now. The legislation is being rushed through—that is what happens in urgency; things are pushed through this House, instead of being planned out—and they have not been able to make it back for the third readings. I apologise to those officials. They do good work for this Parliament and this Government, and they work long and hard to try to make legislation as good as they can for the Government at the time. I apologise to those officials who have done the long yards for us and who are not here today.

I must say that during the Committee stage I was expecting the Labour MPs to take a lot more calls than they did. I think one call was taken, by Charles Chauvel, in over 2 hours of debate this morning, and that is disappointing, because this legislation is really important for New Zealanders. The fact that Labour members did not give it enough respect during the Committee stage to get up to speak to it and support it says something about this legislation.

I have been sitting here during these third readings and I have been disappointed again in the personal attacks happening in this House—the attacks Michael Cullen made against Lockwood Smith—and I really think we can do better for New Zealanders. I think New Zealanders are getting frustrated by the personal attacks that are happening in this House. It is about time we raised the level of debate in the House.

I come to the taxation bills that we are here to talk about. This legislation is very comprehensive and it has taken a long time to come before the House, but the thing that strikes me about it is that there is nothing about personal taxes. People are coming to our constituency offices to talk about how they do not have enough money, and how they find it hard to make ends meet. One would think this legislation would address that at some level, but, no, there is nothing about personal tax cuts in it. In fact, soon this Government will not have to worry about it, because 40,000 people a year are leaving this country to go where they can get tax cuts—Australia. More and more people are leaving. Steve Chadwick over there is laughing her head off, thinking it is funny, but it is not, because what we are losing are the people we want to keep—good, hard-working New Zealanders. We want them to stay in New Zealand and get ahead under their own steam because we have a good environment for them.

Moana Mackey: Oh yeah, it was fantastic in the 1990s. It was wonderful.

KATRINA SHANKS: We hear Labour members say “What about 1990?”. I do not actually care about 1990. I care about the future. I care about the future for myself, my family, and my children. If that member wants to sit there and talk about 1990 and live in the past, she should please do so, because next year, in 2008, when the people of New Zealand get to have their say, they will not say that they want a worn-out, tired Government, which you are, because you have no answers to any of these issues—

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

KATRINA SHANKS: My apologies, Mr Assistant Speaker. The people of New Zealand will be asking for a change of Government, and they will put National on to the Government benches. That is what will happen, because they are sick of this Labour Government interfering in their lives and not delivering what Labour said it would deliver. Take, for example, the “chewing gum tax cuts”. Where are they? Where are they in this tax legislation? They are absolutely nowhere. Many, many more people will be joining those 40,000 people who left last year to go to Australia to get the tax cuts that they deserve because they are hard-working New Zealanders. The Government over there does not believe in building the kitty like the Government here does.

I looked at this tax legislation in quite a bit of detail the other day, when I knew I would be speaking on it, and I could not figure out where the long-term strategy for tax was. Where are we going with our taxation policies in New Zealand? The Minister of Revenue is in charge of this legislation. He has advocated for 24 years for income splitting—that is his passion. He has been in charge of this legislation. He has charged ahead, taken the lead, and gone out there, but there is nothing in this legislation about his passion. There is nothing about what he really believes will make a difference to New Zealanders, which is income splitting. He has put together this tax legislation, but he has not put in it what he believes in. So how much is his heart in it, and does he really have a long-term strategy, considering that he thinks he will change this legislation in a year’s time? That is not what the people of New Zealand want. They want to see a Government that is committed to a long-term tax strategy that will get us ahead in the years to come.

At the same time, the Government should be interested in protecting its revenue base. That is very important for this country, if we want to get ahead as a country. What we do not realise when we look at this legislation is that the New Zealand Government is the biggest business in New Zealand. It takes the most money—it has the biggest revenue—of any business in all of New Zealand. Given that it takes in the most revenue in New Zealand and it has no long-term strategy, what does that tell us about this legislation? It tells us quite a bit. It tells us that it has no direction and that it is piecemeal legislation. I truly believe that is what we are seeing here today.

This legislation addresses four or five main issues. They are the new research and development tax credits; a reduction in corporate tax rates; the KiwiSaver employer tax credit and compulsory employer contributions; moving the rebate cap on charitable donations, which is what the National Party talked about last year, and which this Government has picked up on; technical changes to portfolio investment entity rules, which have already had changes; offshore portfolio share investment rules; and amendments to tax penalties, which are interesting in themselves. When I was out there in my previous life as a chartered accountant, I talked to those poor business people who try their hardest to keep it together and run their businesses. They have a passion for their small businesses. They are trying to make ends meet, which is really hard for many small businesses out there, and they wear every single hat one can imagine. They do HR, they do finance, they do law, they import—you name it, they do it in their businesses—and then they forget to file a GST return on time.

Or they make simple errors because they cannot afford accounting systems. Many small-business people do not know how to use accounting systems, which is even more important; they do not have the time to sit down and learn that, because they are busy trying to run their businesses. So they input a spreadsheet backwards on to a GST return, inputs become outputs and outputs become inputs—it is very easy to do, and many people do it in New Zealand—and all of a sudden they are slammed for a false return, or for a return that is dated incorrectly, or for a return that is on the wrong form. Many businesses do Internet banking today, and they may draw down the wrong form off their Internet banking website. All of a sudden they find that there are a zillion transfers between all these accounts to make up the differences—which the Inland Revenue Department automatically does—and before they know it they have got a muddle and they cannot get out of it. It is such a common theme coming through, which I saw as a chartered accountant. All of a sudden one has four or five different tax accounts within the Inland Revenue Department—one for GST, one for annual tax, one for provisional tax, and so the list goes on. Then one has PAYE and student allowances. It is really difficult for people out there.

To conclude, I would like to say that this tax legislation that the Government has put together for New Zealanders is disappointing.

A party vote was called for on the question, That the Taxation (Annual Rates of Income Tax 2007-08) Bill, the Taxation (Business Taxation and Remedial Matters) Bill, and the Taxation (KiwiSaver) Bill be now read a third time.

Ayes 65 New Zealand Labour 49; New Zealand First 7; Māori Party 4; United Future 2; Progressive 1; Independents: Copeland, Field.
Noes 50 New Zealand National 48; ACT New Zealand 2.
Abstentions 6 Green Party 6.

Climate Change (Emissions Trading and Renewable Preference) Bill

First Reading

Hon TREVOR MALLARD (Acting Minister for Climate Change Issues): I move, That the Climate Change (Emissions Trading and Renewable Preference) Bill be now read a first time. This is a debate about a landmark piece of legislation—the Climate Change (Emissions Trading and Renewable Preference) Bill—and at the appropriate time I will move that this bill be referred to the Finance and Expenditure Committee.

The bill establishes two new tools in delivering climate change solutions—an emissions trading scheme, and a preference for renewable energy generation by implementing a 10-year restriction on new fossil fuel thermal-energy generation, with exceptions that ensure the security of New Zealand’s electricity supply. This will assist in meeting the Government’s goal of 90 percent of our electricity generation being from renewable sources by 2025.

Reducing greenhouse gas emissions below “business as usual” levels is the objective underlying the emissions trading scheme. The broad design of the policy has received considerable praise—both within New Zealand and internationally. I might say, having acted previously for the Minister at the United Nations, our approach caused considerable comment from a number of countries.

People have by and large accepted that climate change is real and that we must reduce emissions if we are to do our bit in helping the world deal with it. Most people agree that the emissions trading scheme needs to cover all gases and all sectors, and I think this is the difference between the approach New Zealand is taking and the approach of many countries so far. Overall, and generally, they agree with a gradual, staged introduction.

The Government’s approach is to maximise the scheme’s environmental integrity while minimising any costs and adverse effects. The Government will assist households and businesses to adapt, and will provide a smooth and gradual transition. The Government has relaxed the penalty regime and set up a consultative process to develop allocation plans.

Other key issues that arose during the previous engagement focused on three key aspects: how the Government should assist through the free allocation of units to sectors and within sectors; how the market will operate in terms of international linkages, liquidity, and the unit of trade; and the treatment of pre-1990 forest.

The legislation maintains a policy of free allocation of units, as was discussed in the framework document. It makes clear that the planned review of the emissions trading scheme must consider our allocation model in the context of the emissions pricing policies of major trading partners. Even in the last few weeks, the international competition issues for our economy have decreased as a result of the new Australian Government’s decision to ratify the Kyoto Protocol, and through it to take on a binding cap on its emissions.

Final considerations on the matter of the phase-out of allocations are not complete, and the ongoing views of stakeholders through the Climate Change Leadership Forum and other ongoing engagement are important. The legislation also contains the Government’s preferred approach around issues such as international linkages to other emission trading schemes, liquidity, and the unit of trade.

An important issue on which the Government has yet to make a decision at this point is the inclusion, or not, of the so-called hot air assigned amount units in the emissions trading scheme. Hot air units is the term given to certain Kyoto units issued to countries like Russia and the Ukraine under the Kyoto Protocol. These units represent real emissions reductions in Russia, whose ratification of the Kyoto Protocol was crucial to it coming into effect. The Government intends to analyse a series of options prior to making a final decision next year. The ongoing engagement with stakeholders will be highly relevant to this consideration.

The existing Climate Change Response Act provides a regulation-making power to impose restrictions on the units that may enter the New Zealand Emission Unit Register and what they can be used for. The bill re-enacts this power, making it possible to place restrictions on hot air units if the decision is to do so. Any changes to the rules on what units can be surrendered for compliance or held in the registry will not apply retrospectively, and the bill makes this clear.

In respect of pre-1990 forest, the Government’s proposal would see compensation for landowners on the basis of hectares of forest. The Government has not been able to identify any fairer method for targeting that assistance. The overall level of allocation to deforestation is generous, and it is equal to the full amount of deforestation emissions at historic rates of deforestation. Some forest owners purchased their forests after the cap on deforestation was announced. Some forest owners have deforested significantly in the period since the cap was announced, and others have been unable to.

The bill is silent on how units will be distributed to individual landowners, and provides a process for an allocation plan to provide for free allocation to landowners of pre-1990 forest. The allocation plan will be publicly released in draft form, and submissions will be considered before the final plan is agreed.

The bill provides for a self-assessment model, in which participants who do activities must monitor their activities, record their emissions, report them, and surrender units to cover the emissions. Provision is also made for participants undertaking removal activities, such as afforestation of post-1989 forest land, to earn units for every tonne of emissions they remove from the atmosphere. The administering agency will have the powers to audit participants’ compliance with their obligations, and to take enforcement action where there is failure to comply.

Important issues remain upon which the Government has yet to make decisions. We are determined to engage fully in these issues over the next year.

The legislation being introduced includes default provisions for all sectors, including activities on the dates upon which sectors assume obligations, which align with the announced dates of entry into the scheme. The bill also sets broad parameters that will govern the free allocation of units to the forestry, industrial, and agricultural sectors, although it does not state the total number of units available for allocation to the industrial or agricultural sector, or precisely which individuals and firms within the sectors will receive a free allocation of units. The inclusion of these default provisions in no way negates the Government’s commitment to ongoing engagement with stakeholders on implementation issues. The default provisions are included because an essential principle of the scheme’s design is that it applies fairly across all sectors and to all greenhouse gases.

It is important that there is certainty to all sectors, in the absence of further legislative action, that they will be covered by the scheme. It is important that the forestry and transport sectors, which are entering the scheme first, have the assurance that they will not be alone in having obligations under the scheme. The option of either a processor or a farm-level obligation in the agricultural sector is one example where the Government wishes to consult further before making a final decision and where the legislation allows either decision to be implemented.

One important element in the original framework of the emissions trading scheme elicited little debate, indicating a broad consensus. That was the overall objective of the scheme. The objective outlines the need to establish a new equilibrium between environmental impacts and economic growth. For too long there has been an imbalance.

There must be a concerted international response to climate change. Emissions trading is a crucial element of New Zealand’s response. It is especially pleasing that the framework we launched in September has received strong support in many quarters, including reviews by internationally respected organisations. I commend the bill to the House.

Hon Dr NICK SMITH (National—Nelson) : National supports the first reading of the Climate Change (Emissions Trading and Renewable Preference) Bill because we believe that an emissions trading system is the sensible approach for New Zealand to take in response to the huge challenge of climate change. In fact, back in 1999 the National Government did a large amount of policy work on this subject and it concluded that an emissions trading system was the right way forward. When the current Government proposed a carbon tax, National members said that an emissions trading system was a better option. Then 18 months ago, when we produced A Bluegreen Vision for New Zealand, we again said an emissions trading system was the right way forward. The irony is that at that time Labour heavily criticised the proposal. We now welcome the fact that there is consensus between the major parties that an emissions trading system, covering all sectors and all gases, is the right way forward.

The reason National believes that emissions trading systems are the foundation for a sensible climate change policy is that pricing signals are the best way in which to incentivise people in forestry, agriculture, energy, and transport to make better decisions in respect of the environment. We think that a little country like New Zealand needs to take into account the decisions that other countries are making, as we respond to the challenge of global climate change. We look at the United States, where 23 states are now part of emissions trading schemes. We look at Canada, we look at the European community, and we look at the decision of both the previous Government of Australia and the new Government, all of which have come to the same conclusion that an emissions trading system is the right way forward.

National believes there are a number of very important detailed issues in how emissions trading systems are put together, and believes also that this bill needs very heavy scrutiny. The Acting Minister Trevor Mallard noted the issue of whether we should accept into our market Kyoto-compliant units from those Eastern European countries. In truth that will probably make it less expensive. It will make it more unstable, and it may mean it has less environmental integrity. National members look forward to detailed work at the select committee to make the right choice around that important issue.

There is the big issue about allocation plans. New Zealand has major industries such as agriculture, forestry, steel, aluminium, and cement. National does not want to provide a bill that simply exports those industries and jobs offshore because of the costs that we impose on them in New Zealand. The proposition in the bill for an allocation plan of units to those industries that face competitive issues is the right way to address that. But National raises questions about the very rapid level of removing that assistance where, effectively, from 2012 to 2025 all of that assistance will be taken away. If that is broadly in line with where the international community moves, that would be appropriate. Having just returned from an international parliamentary conference in London and the United Nations conference in Bali, I think the Government is being overly optimistic about the level of international progress, and that is an issue that we will want to visit.

Furthermore, New Zealand needs to understand that in respect of the areas of forestry and agriculture this emissions trading system is unique. To date, no other country has attempted to put land use and the issue of agricultural emissions into an emissions trading scheme. We in National will want to scrutinise those provisions of the bill very closely at the select committee, because New Zealand will pay a high price if we get those provisions wrong. In National’s proposal for an emissions trading system we felt that we should put the electricity sector first rather than the transport sector. The argument is over 1 year. We will not argue heavily about that, although I raise the question of timing. Why has the Government decided to put our landfills that emit emissions at the very last point—in 2013—when all of the evidence is that that is some of the lowest-hanging fruit, of which we can, for the least cost, make the most gains? National’s preference would be to see that sector come in earlier.

I must make comment on the proposition in this bill to put a ban on new thermal generation. We have seen a real hotchpotch of Government policy in this respect. Let me recite the history. The Government intervened in the electricity market in 2002 in levying all New Zealand electricity consumers to build the new Whirinaki oil-fired power plant. It then came along in 2003 and rejected the Dobson hydro scheme, which would have produced renewable energy. The Government intervened and stopped it. It then came along in 2004 and through legislation blocked Project Aqua, the biggest renewable energy project this country has seen in a long time. The next year the Government provided a guarantee for the massive new E3P gas-fired generator at Huntly. And now it will put a ban on new thermal. I simply ask the Government: where is the consistency? One moment it is intervening to stop renewables and to provide Government guarantees for thermal—as for the oil-fired power station and the gas-fired station—and the next minute it does a massive U-turn and wants to completely reject and ban them. Albeit, I have to say I think the ban in the bill is something of a Clayton’s ban in that there are some gigantic outs.

I think what is really going on with those provisions is that under this Government we have seen a trebling of the amount of electricity produced from coal. The Government is deeply embarrassed by that. It knows that will be an albatross around its neck as it goes into the next election, and it is trying to cover its base with this Clayton’s ban on thermal generation to save it from its appalling record in that regard. National says that we want to heavily scrutinise all of those issues in the select committee.

I will also comment on the wider debate around climate change. I am somewhat amused by the debate around climate change in New Zealand as to whether we are going to be a world leader or a fast follower. I have to say, that is like arguing over whether we want the gold medal or the silver medal when we are last in the heats. If we look at this Government’s actual record on emissions we see that it is pretty appalling. If we look at the United Nations and its report on emissions, we see that of the 36 countries that have commitments under the Kyoto Protocol, New Zealand’s record is the fourth worst. Our emissions have gone up by 25 percent. I compare that with our near neighbour Australia. Australia is on track to actually meet its Kyoto Protocol requirements with a growth of 4 percent in its net emissions.

The truth is that because of the shenanigans we have seen in public policy in New Zealand, despite ratifying the Kyoto Protocol in 2002, it is now 2007 and we have lost 5 years. The loss of those 5 years, in which there has not been any substantive policy on climate change, has seen us now with this bill only 2 weeks prior to the Kyoto Protocol coming into effect. We must be honest and say that this bill includes retrospective controls on industries like forestry. The Government has had 5 years to do its work and it let us down.

I draw Parliament’s attention also to the international council on integrity around climate change, which, when it takes into account record and policy, again ranks New Zealand at the very bottom end. Labour promised when it came to Government that it would reduce emissions by 20 percent by 2005. It has not. Emissions have gone up by 12 percent. National wants to play a constructive role in getting the right sort of emissions trading system for New Zealand, because climate change is an issue that is bigger than any party in this Parliament or than any single country. We want to take a responsible approach to it.

Hon JIM ANDERTON (Leader—Progressive) : I am glad National has joined the 21st century. Last year it was in climate change denial. Last year the National Party was taunting this Government and saying that New Zealand should follow the example of Australia and the United States and not sign up to the Kyoto Protocol. The interesting thing is that had we not signed up, we would now be following Australia to Bali to sign up. What would that make us? It would make us followers, like some other party in this House that I know. The truth is that if we had followed that advice, we would be a laughing stock now. It is a bit rich to be getting advice on the Kyoto Protocol and climate change from the National Party when it has been in denial all along.

New Zealand is exposed to climate change in multiple ways. We face a choice: we can strongly seize the benefits and reduce the liabilities, or we can sit on our hands as the Opposition would have had us do and be exposed to enormous risks. We are more dependent on climate and climate change than any other developed country, because more of our economy is based on climate-dependent production. In our export markets, consumers and regulators are already asking hard questions about the sustainability of our produce. Unless we can say that our exports are from the first truly sustainable country in the world, we will increasingly be shut out of markets upon which we rely. Fortunately for New Zealand, climate change is not only a risk but an opportunity. As consumers are turning away from environmentally damaging products, they are also turning towards environmentally responsible production and are prepared to pay a premium for it. If we can get our own house in order, New Zealand can take advantage of this opportunity.

The emissions trading scheme is a landmark in our efforts to address this crucial issue. It puts sustainability at the heart of our economy. The underlying principle behind the emissions trading scheme is that it should cover all sectors and all gases. It therefore has profound effects on the future of our primary industries. The nature of the effects on forestry and agriculture, in particular, deserves special attention. Agricultural sector emissions represent almost half of New Zealand’s total greenhouse gas emissions. These emissions are currently significant because they are a major source of emissions growth.

It was not plausible for New Zealand to leave our major industries out of the emissions trading scheme. It would have meant, at the very least, that the cost of the sector’s emissions would need to be paid elsewhere in the economy. So all sectors are in the scheme, but we have also had to design a trading scheme that allows for a smooth transition. Emissions trading allows flexibility in land use while ensuring that decision makers consider the true costs, including the environmental costs, of their choices.

We can particularly see the strength of the emissions trading scheme in the forestry sector. A couple of decades ago, the Government used to provide subsidies to farmers to farm marginal lands more intensively—in other words, to cut down their trees. We ended up with eroding hill country and inadequate protection for our soils, waterways, and communities. Emissions trading turns that around. In Gisborne there is a river on land where farmers were subsidised to cut down all the trees. The bed of the river rose 50 feet. The Government was then asked to pay to help with the flooding that resulted. Emissions trading makes for less erosion, because the scheme gives an economic incentive to plant more trees. Protecting against erosion helps the environment and protects communities. It is much better for farming business than over-intensification of marginal land. The emissions trading scheme allows forest owners to benefit from the value they provide to the rest of us when the forests store carbon.

The forest sector will enter the emissions trading scheme on 1 January next year. Forest land will be designated as either pre-1990 or post-1990 forest land. Owners, lessees, and rights holders of forests planted after 1989 can join the scheme if they choose to. They will then receive New Zealand units when their forests grow, and surrender units if their carbon stocks decrease. Depending on the price of carbon, it is likely to be worth at least several hundred million dollars to the forestry sector.

One advantage of the emissions trading scheme is that it allows the benefits and costs from the Kyoto Protocol to be devolved. In fact, the more that costs and benefits are devolved, the more effectively the trading scheme works. It puts the incentives closest to the contributors to the problem and to the solution. From 1 January, owners of exotic forests first planted before 1990 will be liable for emissions if they choose to convert their forest to another land use—for example, if they move from forestry to agriculture. If someone owns a small forest, such as a forest smaller than 50 hectares, and it was planted before 1990, then he or she can be exempted from the scheme. Naturally, if no liabilities are faced, no free allocations will be received.

Deforestation is the second largest source of greenhouse gas emissions globally. Therefore, we have to do something about it. Reducing deforestation is one of the lowest-cost options for reducing emissions. It is also important to address it immediately, as forestry is the one area where individuals can bring forward their emissions to beat any future measure. The Government is easing the transition for the sector. It will meet the cost of 21 million tonnes of deforestation emissions from exotic forests until 2012. An allocation will also be made to cover a further 34 million tonnes of deforestation emissions after 2012. The assistance given to pre-1990 exotic forest owners is equivalent to the historic rate of deforestation over the current exotic forest estate. The first reporting period for deforestation of pre-1990 forests will conclude at the end of 2009, at the same time as transport. The two sectors will be able to trade emission units between themselves. In total, the assistance package offered to pre-1990 exotic forest landowners is worth around $825 million at a carbon price of $15 a tonne. This is a very substantial commitment.

The Government is still looking at the question of indigenous forests. There has been some consultation with owners of indigenous forests planted before 1990. It is unlikely that much of our native forest can be chopped down now, because it is largely protected. For example, we have stopped cutting down 1,000-year-old beech trees on the West Coast, and the region has already been compensated for that.

Other sectors, like agriculture, will not come into the emissions trading scheme for a number of years. They still need certainty, and for that reason the bill includes provisions about that point of obligation. Back in 2003 the Government agreed to meet the cost of non - carbon dioxide emissions from agriculture until 2012. In return, the sector increased its research efforts on cost-effective abatement technologies. That agreement has been kept, and agriculture will not come into the emissions trading scheme until 1 January 2013. In the meantime, the agricultural sector will start measuring and reporting its emissions before trading begins from 2011.

There is more work to do in deciding some issues affecting the sector. One crucial question is where the point of obligation can lie. Options include at the farm level, at the process or company level, or at the sector level. At the moment the Government preference is for a process or company level point of obligation, but we will work with the sector closely to develop a practical and cost-effective system that rewards good environmental practice. The Government will work with the sector on these and other issues, and the issue of a phase-out of free allocations by 2025 is still on the table for discussion. The bill we are introducing today has review provisions on this that will ensure we consider developments with our major trading partners.

This issue of climate change, and the policies that this and other Governments will follow to reduce emissions, is one of the most complex and vital issues that we have ever faced in this Parliament, and probably one of the most complex and vital in terms of the planet—all of us are in this together. We now have a comprehensive package of measures to rebuild capacity in order to address New Zealand’s land-management challenges. New Zealanders expect our primary industries to play their part. Our markets expect us to play our part. We have to get started with a vision of a sustainable and carbon-neutral New Zealand. This Climate Change (Emissions Trading and Renewable Preference) Bill gives us a historic place to start, and I commend it to the House.

GERRY BROWNLEE (National—Ilam) : I will follow the comments made by my colleague the Hon Nick Smith in response to the Minister’s speech earlier this afternoon, because he very clearly articulated National’s position and our concerns. We are committed to going through the select committee process in order to ensure that New Zealand gets a very good climate change and emissions trading regime. It was disappointing, therefore, hear the second speaker for the Government sound, again, a little petty about how people get themselves to any particular position. I would be quite within my rights to say that the Government is only now, after 8 years, getting to where National was back in 1999.

The tragedy is that we have seen an extraordinary deforestation of this country over the past few years. The very Minister who is criticising the position taken by us—which is in favour of this bill, I might add—is the person who has presided over the felling of some 15 million trees in the last 2 years, and who this year, in 2007, has presided over some 30,000 hectares of New Zealand forests being cut down and not replaced. That has to be a concern to anybody who looks at New Zealand’s emissions profile. I agree with him that we have to do something because of the reliance we have on the world’s demand for agricultural products from our country. If we do not have a tidy carbon footprint, then we are likely to see a degree of stress, probably significant stress, in the markets we need to access in order to sustain our lifestyle in this country.

One of my other responsibilities is in the area of energy, and I want to make a couple of comments about the way that this bill is supposed to fit in with the Government’s Energy Strategy. The Energy Strategy was produced after a long gestation, and I think it was somewhat of a disappointing document, inasmuch as it talks about a whole lot of concepts and has some very, very challenging goals in it, but does not talk about the practicalities and realities that will face this country in meeting the energy needs of its citizens and in trying to comply with a regime that demands we reduce the carbon dioxide emission profile from that sector.

The only thing I take comfort in is that the emissions trading system should see encouragement for some fuel substitution inside the energy market, particularly around fossil fuels, and it should see, we would hope, more renewable generation come into play. But as my colleague Dr Smith pointed out, every time that this Government has had an opportunity to support a sizable renewable energy project, it has found some reason to knock it over. That has to be the ultimate irony that works against the credentials it is trying to claim as a Government that is keen on looking after the environment.

Some serious questions need to be answered in the select committee process, and not the least of those, when it comes to energy, concerns the definition of security of supply. If we look at the demand curve for electricity in this country, we see that the Government has massively underestimated what it is likely to be. Currently, if we read the Energy Strategy we learn that it says there will be about half a percent of demand growth every year. But we know that historically that rate has been well ahead of 2 percent. There is a suggestion there that energy conservation will make up the difference. Well, that is highly unlikely, in our view. As Dr Smith pointed out, the dependence that New Zealand now has on thermal generation means that the challenge to get back to a higher level of renewable generation is even greater than it was some short years ago.

Not only do we want to know what the definition is for security of supply but we are fascinated to know what non-baseload thermal generation actually means. Right now, every bit of thermal generation capacity in this country is running, unless it is designated as reserve. Here we are heading into the warmer months of our climate, but we still have thermal generation running at peak loads. So what is non-baseload generation? At the moment every little bit we have is in fact baseload generation.

We would also like to know, in looking at the exemptions provisions of the bill set out in clause 60 right through to clause 62, what will trigger some exemptions being granted. Will it be a price signal? If there is a price trigger, can New Zealanders look forward to massively increased electricity prices? I for one do not accept that we need to have rising prices in an environment where we are reducing our greenhouse gas emissions from our electrical-energy sector. I think there are things we can do. One of the aspects of the energy portfolio is the scarcity of electricity. If it was not in scarce supply, we would not be seeing some of the dramatic price rises that we have seen over the past few years.

So there is a real challenge here to have a better regime for renewable energy to be fed into the grid and to be developed, and for some sensible legislation around the role that thermal generation will play in supporting that. People will be aware, I hope, that Contact Energy has a $1 billion project for the development of a very, very large wind farm on the west coast of the North Island, just below Auckland. The company has made it very clear that it will have to back up that big wind farm with a smaller amount of thermal capacity. That brings us back round in a circle, and causes us to ask what security of supply is, as a definition, and what non-baseload generation is, as a definition. We want to know those two things. We also want to know whether a price signal will trigger the exemption process, or whether it will just be a matter of whoever is the Minister of the day making up his or her mind about what that means.

Another interesting aspect of this bill is the fact that we see nothing in it that talks about how New Zealand might better develop carbon stores. We heard Minister Anderton talking about various projects around the place, but as we have said, some of the biggest carbon stores in this country have been completely knocked over and taken out in the last couple of years. There is no suggestion from the Government in this bill that we are to look at how we might measure the improved carbon store in the country’s pastures or how we might encourage the agricultural sector to get some benefit from improved soils—making the effort to improve carbon sequestration, effectively, in the improved soils. Also, there is no suggestion that active work will be done by the Government of the day, whichever Government it may be, to ensure that we have soil stabilisation. Much of Mr Anderton’s speech made mention of it, but, sadly, none of what he was talking about is reflected in this bill.

Our commitment is to travel with this bill into the select committee, supporting it, and then we will pick up on what the Hon Trevor Mallard said today. He said that the Government wants to consult widely and that it wants to work closely with all of those who have an interest in New Zealand’s future, particularly with regard to climate change, because there is no doubt that we cannot separate what we do to mitigate against climate change and what we do to reduce our carbon dioxide emissions profile, from what our future economic prospects will be. We accept that the Minister is saying in good faith today that he wants to work with us, and we make that commitment as we support this bill going to a select committee.

R DOUG WOOLERTON (NZ First) : New Zealand First supports the Climate Change (Emissions Trading and Renewable Preference) Bill going to a select committee. New Zealand First looks forward to the debate on this bill, because, like most caucuses, we have people who are slowly coming to the realisation that climate change is a problem. We have people who agree and people who disagree, and we have had many debates in our caucus over this issue.

I will mention that Peter Brown has problems with Part 2—he asked me to mention it—and he will be watching over my shoulder as we go through the process, to ensure that we do not get too silly on those aspects. I welcome that, because I think every caucus in Parliament—perhaps not the Greens’ caucus—has struggled with this issue.

We are certainly looking forward to the debate. We will not beat the Government or anybody else over the head about the 5 years that National says have been lost. I am sure that the Greens feel that we have all been latecomers to the party, as it were. But I think those 5 years have been a period when the opinion of the public of New Zealand has moved, and the polls we are seeing now reflect that climate change is of concern to in excess of 70 percent of the population. I think that now is about the right time for us to be debating a bill such as this.

New Zealand First was not amongst the first in this race, but we certainly will be approaching this bill with an open mind, and we are intent on getting things done. It is absolutely true that the debate over the whys and the wherefores has moved on. I think that debate was important, but now we need to approach what we actually will do about it. When I see—what do they call them—Green Cabs running around Wellington—

Hon David Carter: And the Green Parrot.

R DOUG WOOLERTON: —the Green Parrot—I see that the realities of life are moving into the commercial world. People are seeing that they can have a little competitive advantage. I and, I am sure, the National Party and others welcome that sort of thing, and that is the sort of positive debate we are seeing come out of this discussion. We will see many more such positive things. If slings and arrows are cast around, we will just have to accept that, but at least now we in this Parliament are all moving in the right direction.

We, as a population, have had debates with foresters and we have had talks about rights. We in New Zealand First voted against the carbon tax. Now we have come to an emissions trading regime. Others know far more about it than perhaps we in New Zealand do—people in Europe, for instance—but it is still a relatively new science. The trading regime is still relatively new, and I think we have a long way to go before we perfect it. There are a lot of arguments to be had before we agree amongst ourselves, but the debate has started. We in New Zealand First embrace it with open arms, and we will do everything in our power to progress it to the advantage—but not to the cost—of New Zealand.

JEANETTE FITZSIMONS (Co-Leader—Green) : As we debate the first reading of this Climate Change (Emissions Trading and Renewable Preference) Bill to establish an emissions trading scheme for New Zealand, our representatives are in Bali at the annual meeting of the parties to the Kyoto Protocol, discussing the nature of an agreement to follow the current protocol from 2013. The science has crystallised around the key number of 2 degrees of warming, beyond which there is little chance of arresting a process of climate change that will continue to accelerate. There is a strong and urgent international call for countries to agree that keeping warming below an average of 2 degrees must be the goal of everything we do. New Zealand has not yet signed up to that goal. The best scientific advice is that to meet that goal we need to reduce emissions by between 25 and 40 percent by 2040. Europe has agreed to that. Australia, under its new leadership, has just agreed to that. New Zealand has not yet signed up to that, either.

The time for debate about whether human-induced warming is occurring is over. A few sceptics remain, but their arguments have been rebutted repeatedly by the Intergovernmental Panel on Climate Change. Sceptics claim that changes in solar activity are causing the warming—sunspots. The Intergovernmental Panel on Climate Change has systematically investigated and debunked that idea. Sceptics say that warming has stopped and that the world has cooled since 1998, but that is an example of how statistics can be used to justify a lie. The year 1998 was a standout year. It was much warmer than any previous year, and the years since have not been so warm, but they have still all been warmer than the years before 1998. If we remove that one anomalous year, then the warming trend continues smoothly.

So there has been enough talk; it is time to take action. If we had taken action when the Kyoto Protocol was first negotiated in 1997, on the basis of some pretty certain science, then our task today would have been much easier. But like most of the world, we wasted those 10 years, saying “After you.”, and “No, no, after you.”, while the world burned. Although New Zealand’s emissions are small on a per capita basis, they are 4½ times worse than China’s, despite our renewable hydro resources and despite all the coal we are selling to China that it burns and takes responsibility for. Our extraordinarily high emissions per person are a serious trade risk if we do not reduce them substantially by the time our trading partners demand clean trade. Compared with Europe our cars average fuel use of 11 litres per hundred kilometres, while theirs use 7 litres, and our car ownership is the highest in the world. Our homes are poorly insulated, our industry has bad-quality electric motors and compressed air systems that leak, and we have very little public transport. And that relates only to the half of our emissions that do not come from farming.

Addressing climate change has to use all the mechanisms at our disposal: public information, education, skills training, demonstration, benchmarking, regulation, and pricing. This bill is about pricing. It is designed to make fossil fuels and other causes of climate change relatively more expensive, and renewable energy, energy efficiency, and alternative farming technologies relatively cheaper. It is designed to change behaviour and that is how we must measure its success.

Since 1993, the Green Party has been advocating a carbon charge, with corresponding reductions on the bottom band of income tax. So we welcomed the Labour Government’s 2002 policy that among other things promoted a carbon charge. But because the Government did not say what it would do with the money, it lost the political battle and, frightened of even more tractors on the steps of Parliament, it abandoned the charge in 2005. That was 4 years wasted. We now have a second-best system of an emissions trading scheme, and economists and a number of business people have recently come out in support of the view that it is a second-best system. Too late, those who now regret their opposition to the very much simpler and fairer carbon charge, with lower compliance and administration costs and real revenue to recycle, must accept their role in killing the better scheme and accept the second-best. It is here, and we have to make it work.

That is why the Greens will support the bill’s first reading, but we will work very hard to improve it at the select committee. The first question is “Will this complex system reduce New Zealand’s greenhouse emissions?” The answer is—on its own, not very much. There is no requirement for any of the emissions reductions to be made in New Zealand. The intention here seems to be to purchase cheap Clean Development Mechanism credits from developing countries that have no caps on their emissions but that need funding from developed countries to improve their energy efficiency, build renewable energy, and expand their forests. So far, so good—that is how Kyoto works—except that there is now a lot of published evidence that many of those Clean Development Mechanism credits are poorly verified and are, in fact, fraudulent. We need to do a lot more at home rather than rely on those trades.

The Government estimates emissions trading will reduce transport emissions by 0.3 percent; the statistic disappears into the margin of error in any calculation. By comparison, setting fuel efficiency standards for vehicles entering the country, as now agreed to under the Energy Efficiency and Conservation Strategy, will save 25 percent of the fuel that those cars use. This system is claimed to be a world first that includes all sectors and all gases. In fact, it does neither. Half of our emissions are not covered at all until after the first Kyoto commitment period is over.

Agriculture, the major emitter of methane and nitrous oxide, is totally exempt until 2013. Dairying must be the most profitable sector of the New Zealand economy at present, as well as one of its dirtiest. It is the fastest growing source of methane and nitrous oxide emissions. It can well afford to pay for them, but it has been given a taxpayer subsidy for 5 more years, during which time it will grow, converting more and more forest area to dairying, and being aided and abetted by the Government’s own company, Landcorp, that actually does the conversions. It is not as if there is nothing farming can do. Nitrification inhibitors are now available to significantly cut nitrous oxide emissions, but where is the incentive to use them? This huge taxpayer subsidy of well over $1 billion is founded on an agreement in 2003 that the industry has not kept, despite what Mr Anderton just said about research funding. The industry has done nothing to voluntarily reduce its emissions.

Also exempt, but in this case forever, is the methane emitted from underground coal mines. New Zealand is accountable for it under Kyoto but, once again, in a substantial subsidy—this time to the coal industry—the taxpayer will pay for coal seam methane. Unlike a carbon charge, the emissions trading scheme produces no revenue for the Government to recycle in order to help the most disadvantaged become more energy efficient so they can cope better with the higher prices.

It is quite possible to have higher fuel and power prices but lower bills. If a person’s home is insulated and that person has better public transport and a more efficient car, then that person needs less energy. But any money provided for that—and there should be some—will again have to come from the taxpayer, because what little revenue the scheme does provide is all going to subsidise farmers.

Some weeks ago I warned that the Green Party is not of a mind to support legislation that leaves all the most critical decisions to regulation, over which Parliament has no scrutiny, and that is what this bill does. It is critical for the environmental integrity of the scheme that we do not allow Russian hot air—units resulting from the collapse of their industry—into our registry. But that decision is left to an Order in Council decision under new section 30G, as is any decision to link with other trading schemes overseas. Also without parliamentary scrutiny, the Minister has wide powers of exemption, may issue new New Zealand units and auction them, and must make allocation plans.

The hardest decisions of all—and I have been warning of these since the mid-1990s—are the decisions around the allocation of free credits to protect firms that are trade-exposed. The timing in this bill allows the Government to be comfortingly vague until after the election about who will qualify for free units, how many, and over what part of their emissions. The crunch decisions will be announced after the election in the form of allocation plans. We considered very carefully whether we could support such a delegation of powers by Parliament. The mitigating factors are that clear criteria are set in the bill and there will be a process of public submissions. We believe that that has taken care of enough of our concerns, and that it will be workable. However, we will work very hard, with many others who want a system with environmental integrity, to have agriculture enter earlier, to have coal seam methane captured, to exclude Russian assigned amount units based on hot air, and to persuade the Government to sign up to the internationally recognised critical goal of no more than two degrees warming and to a very substantial emissions reduction target within New Zealand in the post-2012 period.

HONE HARAWIRA (Māori Party—Te Tai Tokerau) : Tēnā koe, Mr Assistant Speaker. Kia ora tātou e te Whare. As I was thinking about what to say on this bill, a couple of emails came in. The first was from Lowndes Associates proudly announcing that it is the first law firm to get carbon neutral certification in Aotearoa—although given the amount of methane coming off the bull droppings that are a natural part of law firms, one would have to assess that claim through a healthy whiff of incense. To its credit, though, Lowndes Associates also has an army of legal experts to help its clients understand the Government’s emissions trading scheme and the emerging carbon trading market—and that suggests at exactly what level this whole thing is being pitched.

The second email came from the Indigenous Environmental Network at the United Nations climate talks in Bali, urging Governments to reject the World Bank initiative to include forests in carbon markets. The Forest Carbon Partnership Facility was set to be launched as a key project to reduce emissions through deforestation in developing countries, but the Indigenous Environmental Network said that the scheme would not make any difference because all that it would do is let industrialised nations and companies buy their way out of emissions reductions.

When law firms, international indigenous groups, and the World Bank all get caught up in something as big as climate change, we know that it is a big deal, so we have to ask how come this Government is introducing something as important as this bill under urgency. We simply do not get robust and intelligent debate on a bill that is squeezed into the middle of 19 other bills being rammed through the House just before Christmas. What we get is limited discussion from MPs thinking about something else, and no real depth of understanding of the costs and benefits of an emissions trading scheme to support global efforts to reduce greenhouse gas emissions—a lot of which I am getting from other members in this House today.

But there are a couple of concepts I would like to present as the Māori Party contribution to this debate, if I could. The first is our responsibility as tangata whenua to care for all those who live in this land, and their descendants, in line with our kaupapa of rangatiratanga, manaakitanga, and whānaungatanga, and the obligations we have of care and preservation. This emissions trading scheme has a similar philosophy of recognising and honouring obligations in the industries of forestry, mining, steelworks, and farming, through the verification and surrender of emission units.

The second is the concept of kaitiakitanga and our responsibility to care for our world through the reduction of those activities that would harm and, indeed, destroy that world. In the interests of life itself, let alone social, economic, and environmental sustainability, we have a responsibility to reduce our carbon output. Māori have a role to play in the reduction of greenhouse emissions, and we do not resile from that responsibility, but Māori also have the right to manage what little assets they may have for the betterment of their people. We realise that in order to manage both roles effectively we must—and we do—appreciate that our total well-being, our health, our economy, and our sustenance are dependent on the well-being and health of our world, just as all indigenous peoples across the globe understand their unique role of caring for and conserving mother Earth.

But is this emissions trading scheme really the answer to all our climate change problems, or is it just creating another property rights regime to let the world’s biggest polluters continue along their merry, filthy way? Charging people for greenhouse gas emissions was supposed to encourage businesses to come up with alternatives to fossil fuels, but all it is doing is giving them an excuse to continue. Why bother with the expensive, long-term structural changes if we can meet our targets by simply buying pollution rights from operations that can reduce their carbon cheaply?

To understand how the Climate Change (Emissions Trading and Renewable Preference) Bill will affect Māori we looked at what it would mean for Crown forestry. In a report called Māori Impacts From Emissions Trading Scheme we get a clear understanding of the responsibility Māori owners of Crown forest licence lands have: “In determining what constitutes a fair, equitable and proportionate burden, Maori are assumed to be concerned with their level of economic development relative to non-Maori (as a consequence of past Crown actions or otherwise) as well as their relative contribution to New Zealand’s green house gas emissions.” There are no simple solutions to this problem, particularly with so many factors at play. To meet the challenges posed by greenhouse gas emissions we need to be creative and innovative.

Furthermore, there is the question of whether the 55 million carbon credits due to be allocated to pre-1990 forests under the proposed Act for Crown forestry lands should be allocated as part of Treaty settlements, and here is where it all gets kinda tricky. Naturally, Government officials say the claimants should have to buy their carbon credits out of their settlement moneys, whereas Māori involved with Crown forestry rental lands quite rightly say that those carbon credits should be treated like accumulated rental separate from their settlements. The Māori Party supports the advice from the Climate Change Iwi Leadership Group and the Māori reference group that carbon credits should be allocated on the same basis as accumulated rentals held by the Crown Forestry Rental Trust. In other words, once one has acquired Crown forestry land, one gets carbon credits of equivalent monetary value over and above one’s settlement. We do not see the sense in making claimants buy these carbon credits from their settlement. In fact, we believe that to make them do so would constitute a further breach of the Treaty of Waitangi. Claimants are not the reason these lands are not in Māori ownership, and Māori should not be punished for that while still being denied the same opportunities available to other New Zealand owners of pre-1990 exotic forest lands.

We also note the concerns of the New Zealand Council for Infrastructure Development that this legislation might place a 10-year ban on thermal energy. We have a particular interest in this, given the contribution the Tuarōpaki Trust is making to geothermal power through Mōkai I. The Tuarōpaki Trust, which comprises hapū of Ngāti Tūwharetoa and Ngāti Raukawa, is an ahu whenua trust that is fast advancing progress in efficient thermal generation, and we will be extremely interested to hear from its chairperson, Tūmanako Weretā, about the implications of this bill for them.

As I said earlier, there are some huge issues in this bill; issues that will linger long after this session of urgency has been lifted. We welcome the opportunity for iwi to reflect on the issues that emerged at the national climate change hui in October, and the national Māori forestry hui held just last month. We recommend in the strongest manner that all Māori interested in this debate make sure they get along to the next national hui on this climate change bill, which will be held at 1 p.m. on Tuesday, 18 December, at the Brentwood Hotel in Wellington. We cannot just leave this to chance. We must manage both the opportunity and the risk that presents itself with this bill. So the Māori Party will support its first reading, to enable those debates to be held. Kia ora, Mr Assistant Speaker. Kia ora tātou e te Whare.

Hon PETER DUNNE (Leader—United Future) : In 1989 I had the privilege of leading the New Zealand Government delegation to the first Conference on Atmospheric Pollution and Climate Change, in a little village called Nordvijk just outside The Hague in the Netherlands. The events of that meeting, which was attended by representatives of 160 countries, became somewhat overshadowed when on day 2 of the conference the Berlin Wall fell and most of the Eastern European delegates who had been there suddenly shot home very quickly. I recall at breakfast on the day of that event dining with the East German Environment Minister, who assured me that there would have to be one or two changes back home, but nothing serious was going to happen. By lunchtime, he was gone—

Hon David Carter: At least he’d finished his breakfast!

Hon PETER DUNNE: It was a good breakfast, too. That meeting set the pathway for what became the Rio Earth Summit in 1992, which, in turn, set the groundwork for the Kyoto meeting that led to the Kyoto Protocol, and, now, the Bali meeting, which is looking at the post-Kyoto environment. It is interesting to track the change in thinking that has occurred over those two decades. Back in 1989, the focus was much more on atmospheric pollution, the concern about deforestation, the fact that there were issues relating to international development and debt, particularly amongst Third World nations, and there was this consequential thing in the background about how this might be doing something to promote greenhouse gases, which might be damaging to our environment.

Over the subsequent two decades the emphasis has shifted 180 degrees. We are now totally preoccupied, and quite properly so, with climate change and the ways in which that can be mitigated. These other matters that were at the forefront of the agenda at that first round of discussion are now seen as more of the symptoms of the problem, rather than the problems themselves to be resolved.

Over those two decades a number of issues have arisen as ways in which we should address those issues. The bluntest instrument of all, in my view, was the notion of a universal carbon tax. I think it is totally appropriate that having looked at this matter the New Zealand Government abandoned it in 2005, because it was too blunt an instrument. I do not accept the viewpoint put forward by an earlier speaker that moving to an emissions trading regime is a second-best option. I have long felt that that is actually the better option, where we put a price on a product, enable people to trade in the commodity, and establish the type of regime that is, in fact, envisaged in this bill.

Having said that, it is one thing to take a view in theory about what is desirable; it is quite another thing to design a workable system in practice. While we will support the introduction of this bill, we give notice that the detail that needs to be resolved will require a great deal of work by the select committee before we could feel confident—and I am sure others would have a similar view—that the regime we are putting in place is a sustainable and workable one.

For example, let me turn to the provisions under Part 1 relating to the point at which various sectors will enter the regime. On the face of it, it seems logical to have a staged approach, presumably based around the complexity of resolving industry or sector-specific issues. I suppose one could say, given the work that has already been done in some quarters, that it is logical that forestry should be the first entrant, liquid fossil fuels should follow, stationary energy, industrial processes, agriculture, waste, and so on. But it is actually not as simple as that, because while forestry might, for example, appear to be the obvious candidate, it does not necessarily follow that all of the issues relating to forestry are resolved at this point, or are in a state where they are likely to be resolved to enable, without significant work being done, the entry of the forestry regime in part by 2008—that will not happen—but certainly by 31 December 2009. There are issues relating to some of the technical details, and I had advice only this afternoon about more problems that will need to be addressed in that regime. The same applies to the various other sector areas set out in this bill.

So we support the bill going to a select committee. We support it being carefully considered and these matters being resolved to the greatest extent possible. But I want to enter a couple of caveats. There will be natural tendency to have this bill passed before the election, because the Government, and, I suspect, parties supporting it, will want to be able to go out and say: “We have done something. Look at this, it has been passed into law. New Zealand has a strategy.” If that can be achieved, well and good, and the cards will fall where they will. But this is an issue—and I think Dr Smith made this point in his remarks earlier on—that is bigger than any particular political party, this Parliament, or any particular Parliament. I would far rather that we took a little longer and got it right, rather than rush to a glory that might be very short-lived because we are amending it at our leisure over the subsequent years. That is the first point I have some concern about.

The second point is that, as we work our way through this, it is going to be critical to get the maximum buy-in from the largest number of people possible. As I hear all the discussion about this group being involved, that these meetings are being held, that these people are in favour, and so on, there is one large group of New Zealanders who are completely left out of the process to date, but who are in fact going to be critical to its ultimate achievement in so many different ways. I refer to New Zealand households. We are going to be talking, through the various stages of sectors joining this regime, about all sorts of impacts on households.

Reference has been made to some form of compensatory adjustment being made available to them so that they are not adversely financially affected by the provisions of this bill. That is all fine in theory, but the real test will be the extent to which they feel, as the regime unfolds, they are actually part of what is happening. Because if they feel in any way disconnected or imposed upon, or unfairly treated, or unequally treated, then I strongly predict that there will be an adverse political reaction that will see the Government of the day, whichever it might be, forced to make compromises and changes that will challenge the fundamental integrity of what we are trying to do. I strongly urge that the Government—in the first instance—the select committee, and all those involved with furthering the development of this process take some time over the next few months to make sure that we are not just putting in place a high-level strategy with a language all of its own that most New Zealanders do not understand, but that we start to talk about it at a level that people can relate to and can start to see what the impact on them will be, what the consequences will be, and where those compensations, if they are to be made, might be.

Otherwise, we will be setting this up to fail. We have gone down the path previously of saying that we do not want a carbon tax. I think that is absolutely right, because it is a blunt instrument, unevenly imposed, etc. There is an overwhelming public view that we have to do something. The danger here is that if we put in place a regime that is half-baked, ill-considered, and does not have public buy-in, it too will go the way of a carbon tax, and as other regimes and other agreements enter into it, New Zealand will still be left in the position of trying to figure out what its response is. I do not think we can afford to do that.

RODNEY HIDE (Leader—ACT) : I know that Mr Harawira worries about the quality of the speeches given under urgency, but I say that the speeches on this bill have been excellent.

On behalf of the ACT party I feel as though I need to offer an explanation, because I believe that we will be the only party voting against this bill. Let me explain. I first became aware of the possibility of anthropogenic effects on the world’s climate, I believe, in 1972. There was some debate then about whether the earth could be possibly warming or cooling, and certainly there was a possibility of an effect of industrialisation and its impact on world climate. Subsequently, the consensus emerged in the late 1970s, interestingly, that the earth was cooling as a consequence of human actions. Indeed, because of my interest in such matters I went on to do a master’s degree in ecology and environmental science, and indeed lectured in environmental science for many years, and did a master’s degree also in resource economics.

Over that time a lot of scares came along and obliterated the concern people had about the possibility of human impact on world climate. These scares have come and, thankfully, gone. I am mindful of Mr Peter Dunne when he was speaking, and alarming the House about Y2K. The scare now of course is global warming, or in fact as it has now been called, climate change.

It is a worry, of course, because we are having such a large impact on the earth, and it is a worry in a host of complex ways. New Zealand is a trading nation, and the perception of New Zealand and our markets is crucial. So whatever we might think of the science, we have to be good environmental citizens. I use the word “good” not in an objective, scientific way, but in a way to justify ourselves to the very peoples we want to be selling our products to in order to maintain our access, and, more particularly, to win a preference for New Zealand goods and services. It is good that New Zealand maintains and extends its green image, and I fully support that.

Let me just run through why we are opposed to this bill. I think essentially it is that we do not want to be running ahead of the rest of the world. If we are going to constrain carbon emissions in New Zealand, it is going to be a huge cost on New Zealand. I find it interesting that not even a rudimentary cost-benefit analysis has been done on the scheme. I notice with some interest that the National Party leader, John Key, said “Oh, by 2050 we’re going to reduce what emissions were in 1990 by 50 percent.”, which is a huge stretch. It would constrain enormously New Zealand’s capacity to produce, and divert resources out of current industries from which we make a great deal of money into those that are not even on the horizon. It is hard to imagine how New Zealand could possibly meet that goal. Even holding the level of emissions has proved impossible for this Government. We can set these worthy goals without thinking about the costs, but if we are going to hold down carbon emissions it will be a huge cost on the economy, and indeed a huge disruption to the economy. So members should make no bones about it; this is a big issue.

The second point I will make is that although there is some debate about the science, I think a good working place for politicians to start is the Intergovernmental Panel on Climate Change. We can all point to that and say that, yes, this is where—I guess I am saying—there is scientific consensus, but we all know that science is not run by consensus; it is run by facts. Yet as politicians we have to come up with a response, and that is a good place to start. I should point out that that is a political response. The science does not tell us what we should do. At the end of the day it is going to be politicians, not scientists, who have to decide what the response is to any environmental scare or threat. As limited as we are in many people’s imaginations, it is hard to think of any other route whereby there can be a response, other than a political one, to the questions and issues of science and, in particular, of the environment.

When we look at it, certainly the alarm statistics we were having some years ago have somewhat diminished, so it is less scary than it was. We are talking a long time frame—a hundred years, a temperature rise of 2 or 3 degrees over a hundred years. But a lot can happen in a day, a lot can happen in a week, a lot happens in a year, and a heck of a lot will happen in a hundred years. For example, the Western World will probably be three times richer per capita. Poorly developed countries will be eight times richer per capita, hopefully, if they pursue good policies. So the world will be a richer place, it will be a different place, and it will be a technologically advanced place compared with what it is now. So the sorts of things that we are worried about—about where we are going—are quite something.

Let us think about temperature. There are a lot of cold countries in the world. Finland is cold, and it is a very successful economy. I guess its average temperature must be zero degrees or 5 degrees. If we look at Singapore, its average temperature must be jolly hot, and the temperature range between Singapore and Finland is far, far higher than any change we are talking about for the world, even in the worst case scenario from the Intergovernmental Panel on Climate Change. That is the point that I would like to make in this speech. The amazing thing about human beings and modern society is our ability to adapt to our environment and, indeed, our ability to change our environment, which is what we are debating here. All this alarm that we have that we must stop climate change, and that we must stop carbon emissions, escapes the point that we can adapt to changes. We can adapt to somewhat higher water levels; of course we can. We have adapted to far worse. We can certainly adapt to different temperature regimes. Human beings demonstrate that. We can succeed in cold environments and warm environments. Yet the suggestion is that somehow some change in temperature would be a calamity. Actually, the facts do not bear that out. So my view on the science is that we should just be a bit cautious and a bit sceptical, particularly in our response.

I know that Jeanette Fitzsimons said that this bill will have an almost negligible effect on New Zealand’s carbon dioxide emissions. That is absolutely true. This bill is a political thing so that Parliament, the Government, and the political parties can say they are doing something. But the actual impact is quite small. It goes nowhere to meeting the commitments that Labour and National have signed up to; all it does is set up a soft regime. That is another point about this environmental trading scheme.

Here is my worry about it. I was involved on the side, as an academic, in setting up the quota scheme for the fisheries, so I know something about setting up market schemes. I heard Dr Nick Smith say that we need to incentivise in pricing, and I think that that is true. But what we are doing here, I think, is setting up a scheme that will be a potentially corrupt scam worldwide, because what is being traded is an odd thing—the ability to emit carbon dioxide, and eventually other greenhouse gases, I guess. Countries that are crooked will be involved, and companies that are crooked will be involved, and they will be trading in these emissions.

There will also be people sitting on property rights that are made valuable simply because of legislation such as this. They will defend those rights to the death, lobby politicians, and say: “No, you can’t do that.” We have seen that already in New Zealand with the forest owners. They said: “We thought we were planting these trees and that we’d own these carbon credits.” I think the potential for abuse and corruption on this is massive. I agree with Jeanette Fitzsimons that this is a very second-best solution. We can achieve Nick Smith’s goal of incentivising in pricing by a tax. The virtue of a tax is that it does not create a property right or therefore a political lobby group that will be arguing around that. In fact, a tax creates a lobby group that says: “Is this a good thing that we should be doing—paying this tax?” But the lobby groups will be huge on this bill when it goes through the committees, and over time.

It is a great thing to be part of the ACT party. We are just two MPs, but we have two votes against this scheme.

MOANA MACKEY (Labour) : I am very happy to stand up and take a call in the first reading debate on the Climate Change (Emissions Trading and Renewable Preference) Bill. With reference to the member Rodney Hide, who has just resumed his seat, I say with the greatest respect that, if anything, there has probably been too much caution and too much scepticism from politicians around the world on this issue. I do not think we could say that that has been lacking. I think that were we ever to rely on science to produce an absolute result on anything, we would be very disappointed, particularly when it comes to an issue as complex as climate change.

This issue is not about deciding where we will spend our holidays next year because it will be 2 degrees warmer somewhere and 2 degrees colder somewhere else; it is actually about the very subtle but important changes that happen in ecosystems with very small increases or decreases in temperature, which have huge flow-on effects that impact on the rest of our economy. We have had issues in this country, such as the importation of honey from Australia, which have highlighted what could happen if new pests are introduced into New Zealand. If our bee populations were to suffer, that would have huge flow-on effects down to our agricultural sector. This House should take very, very seriously any indication that there may be a change in climate.

Even if we take the very sceptical view and say there is only a 1 percent chance that all the scientists in the world whose research has been quality peer-reviewed are right and we are on a pathway to massive destruction, we should take that seriously, because by the time we are certain that climate change and its devastating consequences are a reality, it will be too late to do anything about it. A year ago the Government released five energy and climate change discussion documents and engaged in a significant consultation process. The 3,000 submissions that were received showed the depth of feeling out there in the New Zealand community, and those submissions have been worked through over the last year. Certainly, we know that around the world the depth of feeling about climate change is high. I take on board what the Hon Peter Dunne said, but, of course, this bill is only one tool in the arsenal to combat climate change. Other policies and other initiatives are also going on. It is not the only one, although it is obviously an incredibly important one.

Other members have gone through at length what the bill does, but it is important to highlight the need for New Zealand to play its part. We are second only to Australia in the amount of greenhouse gas we generate for every dollar of economic activity. That means that New Zealand, as one of the OECD’s biggest per capita polluters, needs to stand up and say we are prepared to take seriously our role in climate change reduction.

Again, in contrast to what Mr Hide was saying earlier, there are actually many precedents in the world already for emissions trading schemes. New Zealand is certainly not “well ahead” of the pack when it comes to emissions trading schemes. There are active trading schemes in a variety of pollutants, not just greenhouse gases, around the world, and the largest is the European Union Emission Trading Scheme, which I am sure the select committee will take a great interest in. Also, various states in the United States have their own schemes, including markets to reduce acid rain, reduce nitrous oxide, and other schemes like that. I think it will be very important for the select committee to look at the experiences of the European Union, even though New Zealand has a very different greenhouse gas emissions profile, and we are bringing in a different trading scheme.

I note for members’ benefit that, since the beginning of 2005, 12,000 energy-intensive plants in the European Union have been able to buy and sell permits that allow them to emit carbon dioxide into the atmosphere. The companies that exceed that individual limit are able to buy unused permits. This scheme goes on until the end of 2007, when the second period will start. Although organisations such as the UN and the World Bank have praised the European Union Emission Trading Scheme and highlighted it as a scheme that could form the basis of a global system, in practice there have been a few bumps that I think we need to look at during the select committee process. For example, the accusation has been made that more permits to pollute have been granted than were needed. Certainly, that is something we should look at.

Of interest is the fact that the European Union now wants to bring the aviation sector into its emissions trading scheme. It produces about 3 percent of the European Union’s greenhouse gas emissions, but it has had an 87 percent increase in carbon dioxide emissions since 1990. Following the emergence of cheap air travel in the European Union, with £5 fares, that is hardly surprising. According to the European Commission, someone taking a return flight from London to New York will generate the same amount of carbon dioxide as an average person heating his or her home for a year. That tells us how significant this issue is for the European Union. This proposal has been strongly opposed, not surprisingly, by the International Air Transport Association, and airlines outside the European Union, particularly those in the United States, have said they will oppose the proposal, and plan legal challenges. The US has even warned that it could spark a trade dispute. I think these are issues that the select committee needs to look at when considering our emissions trading scheme.

A number of suggestions and proposals were considered during the consultation period, and it is important to look at why an emissions trading scheme was pursued. From those submissions, it was clear that there was broad—although, it must be said, not unanimous—support to introduce an emissions trading scheme. There was strong consensus that, to be fair to all sectors involved over time, it had to involve all gases and all sectors, and that is what this bill does. An emissions trading scheme is also the most flexible and the lowest-cost option, and it enables firms and industries across all sectors to pursue emission reductions, and that is something we want to incentivise.

Also, the science tells us that we need to control the quantity of our emissions. We can talk for a long time about where those emissions should come from and which industries can do better, but, of course, over time the important factor is an overall reduction in the total amount of emissions. If we look at New Zealand’s current net position, we see that our emissions are set to continue to rise if we do not introduce measures now to stop that. This bill is an important part of that. The good news for New Zealand is that we can, in a cost-effective way, reduce our emissions substantially through both a range of recently announced policies and this emissions trading legislation.

Of the sectors that will be brought in, a lot will be said about the agricultural sector. There has been a large amount of discussion about the time frame for bringing in the agricultural sector. Unlike most developed countries, almost half our emissions come from the agricultural sector. We are unique in the world in that respect. It is our single biggest source of greenhouse gases. One-third is from nitrous oxide, and approximately two-thirds is from carbon dioxide—a by-product of partial digestion in ruminant animals. A fair and equitable emissions trading scheme, I think we all agree, must over time include agriculture as well as all the other big emitting sectors. Part of the reason is there is huge opportunity within our agricultural sector for low-cost greenhouse gas emission reductions. It would be a huge cost on the rest of the economy if we were to exclude them and not get the benefit from the potential that lies within that sector. It would also be unfair on all the other sectors and on the taxpayers, who would have to carry the burden of those emissions if this sector was not brought in to play its part.

But we have acknowledged that its inclusion is complex, and therefore it will not happen till after the first commitment period, although, as already indicated, monitoring of this sector will commence well before then. Minister Parker has said that when the sector joins the scheme, the Government would prefer to impose direct obligations on processing companies rather than individual farmers, but many approaches will be investigated and all options will be looked at. Fortunately, I think our agricultural sector is known for being adaptable, and it is known for leading the world. We know we have a lot to lose if we open ourselves up to false barriers to our trade from markets that are prepared to say they will not deal with a country that does not have an emissions trading scheme. We are already world leaders, because we know that we produce 1 kilo of meat or 1 litre of milk far more efficiently than anyone else in the world does.

I welcome Federated Farmers’ response to this bill and their commitment to being part of the solution. The challenge has been firmly laid at their door, and the Government is coming to the party with an investment of $175 million over the next 5 years in a plan of action for land management and climate change, and in science and technology. Although work has been done on nitrogen inhibitors, methane reduction research is still in its relative infancy, and it holds huge potential. The benefits to New Zealand of that could be not only greenhouse gas reduction and the trade benefits that would come from that, but also the use of that technology around the world to bring in other countries, and to ensure that once again New Zealand is seen as a leader in assisting the entry of the rest of the world’s agricultural sector into the Kyoto Protocol. That perhaps could also allay many of the concerns around the world about the implication for food supplies of the Kyoto Protocol. No other country is looking to bring agriculture in at this stage, although the European Union reform of the common agricultural policy has led to some reduction in greenhouse gases, and what New Zealand is doing here is being watched with interest.

We have addressed many of the other issues in other speeches today, but I just want to say that the select committee will have a range of important options to look at. One that has been pointed out is minimising environmental leakage, which is going to be extremely important, and also making sure that as the methods of measuring greenhouse gases change over time, any scheme that we put in place here is able to adapt to that. Thank you, Madam Assistant Speaker.

Hon DAVID CARTER (National) : As has been stated earlier by my colleagues Nick Smith and Gerry Brownlee, National supports the Climate Change (Emissions Trading and Renewable Preference) Bill to the select committee, but we do so with caution. We will use that select committee process very, very carefully to analyse, or attempt to analyse, the effect that this legislation will have on New Zealand’s economy. Under no circumstance can I accept legislation that will significantly impact on our New Zealand economy at a rate far greater than any similar economy in the world. That will not achieve anything for New Zealand.

I want to pick up on two or three comments that have been made by earlier speakers. Firstly, in relation to the contribution made by the ACT member Rodney Hide, I say to him that it is not an option to do nothing. New Zealand ratified the Kyoto Protocol in 2002. There was significant debate around that decision of Helen Clark to ratify at that time. I remember National arguing very strongly that we did not need to be ahead of our major trading partners. But that debate is a past debate. New Zealand has ratified Kyoto. We have significant international commitments to meet; therefore we have to get on with it.

The current Government has an appalling history of rushing to ratify, and then spending 5 years to get to the current position. The Government had the “fart tax” as its first proposal. Well, that cost the member who promoted it—the Hon Jim Sutton—his job. He is no longer in Parliament. Then Labour pronounced a carbon tax, and we have had a number of people talk about that today.

R Doug Woolerton: That bit the dust.

Hon DAVID CARTER: That bit the dust, as Doug Woolerton said. So there is an urgency about this matter, and I say to Mr Hide that the option of doing nothing is not a runner.

The second comment I picked up was from the Minister who introduced the legislation, Trevor Mallard. He said that this is landmark legislation, and that is very, very true. This is the most complicated piece of legislation I have ever had to grapple with. A lot of tax legislation goes through here—terribly complex stuff—but because there is a benchmark preceding it, it is easier for me, as a member of Parliament, to get my head around it. This is ground-breaking legislation. As mentioned by a number of speakers, this is about an emissions trading scheme that is far wider than attempts made by any other country in the world. No other country in the world has attempted to put agriculture into an emissions trading scheme, and I will talk about that later. I am not arguing for 1 minute that agriculture be exempted; I am just saying that we must get this right for the future of our economy.

The important point about this legislation, as it goes to the select committee, is that our emissions trading scheme will be one that will work. There are thousands of variations to an emissions trading scheme, but for one to work properly it must introduce behavioural and management changes to those who emit. If it does not work properly we are simply back to where Labour was and, in effect, we are putting a de facto tax on emitters. If it does not change behaviour then we are not actually achieving anything to address global warming. That is what I will watch in the select committee process—that we truly have an emissions trading scheme that is about emitters and those in a credit position being able to negotiate between themselves, and, more important, that gives signals back to emitters that they need to do something responsible about reducing their emissions.

One of the things that I fear, as I understand the legislation introduced in regard to agriculture, is the proposal to signal the collection of any liability to agriculture at the point of the processors—the meat companies, the Fonterras, and others. If that happens we are missing a very valuable opportunity to get that signal back to the farmer, who ultimately will pay the cost. For example, if I send lambs from my farm to the works and there is an associated cost levied by the Government on the freezing company, then I will cop the cost. But if I am a guy who wants to do something about it on my particular property—as opposed to my neighbour who says “I couldn’t care less and I’m not going to take any action at all.”—that is the sort of emissions trading scheme that has to get back, with the correct signals, to those who can change behaviour to do something about it.

The legislation will be examined very, very closely at the select committee. One of the questions I will ask is one I have already asked of the Ministry of Agriculture and Forestry officials when they were before the Primary Production Committee a couple of weeks ago: “What work have you done, Mr Murray Sherwin, as the Director-General of Agriculture as to the impacts of this proposed legislation on farmers?”. His answer was, in my mind, close to irresponsible. He said to the select committee: “We have done no real work because the matter is too complex.” Now this country is so reliant on agriculture that we cannot make decisions without knowing what the financial impact will be, and that is certainly an issue that I will be teasing out at the select committee.

The third comment that was made in this House earlier today that I want to pick up on was from the current Minister of Forestry and Minister of Agriculture, Jim Anderton. He said something that is probably typical of Mr Anderton. It reflected his absolute ignorance, and I found it offensive. He suggested that anybody who questions this legislation is, in effect, a sceptic about climate change. I am totally fed up with people who call me a sceptic simply because I question the economics of this and the effect it will have on New Zealand agriculture. Mr Anderton is the Minister of Forestry who has overseen 15 million trees coming out and he is the person who has seen our forestry situation in New Zealand go to a net deforestation figure for the first time in 50 years.

The more alarming statement made by Mr Anderton was that agriculture had to pay its share of the burden because agricultural emissions have increased substantially since 1990. I say to Mr Anderton that he should go and do some research. If he bothered to contact the Parliamentary Library, it would tell him that agricultural emissions from 1990 until 2005 have gone up 15.2 percent—effectively 1 percent a year. By comparison, energy industries emissions have gone up 53.7 percent and transport emissions have gone up 61.9 percent. So again I say to Mr Anderton—who is meant to represent the farmers of this country—that he should know the facts. The growth in emissions from 1990 until today has been in small part agriculture—and significantly around dairy conversions—but in no way should agriculture be hung out by that Minister as the industry that is to blame.

My final point is that I accept that the need to do something is urgent, but we cannot do anything that makes this economy suffer. If we get this wrong—and do not get an emissions trading system that sends the correct signal to our New Zealand farming industry—we will do two things. Firstly, at the end of each commitment period we will transfer a bundle of money to the Russians. That will not help global warming. Secondly, and more important, we will put New Zealand agriculture at a competitive disadvantage compared with other people who produce similar products in countries such as Australia or South America.

Parliament needs to realise that the New Zealand economy is based on primary production, and what we produce is not unique in its quantum—it is unique in its quality; I will accept that—and what we produce here can be produced elsewhere. At the end of the day, if we impose a huge cost on New Zealand farmers and no other country does, that means that our product suddenly becomes difficult to sell. Again, what have we achieved for global warming?

The one thing that Mr Anderton was right about when he made his contribution is that this does present opportunities for us. The initial reports from the likes of Lincoln University show that in a carbon efficiency sense New Zealand’s farming systems are very, very efficient. The world needs to note that there is no point in making it difficult for New Zealand to carry on an efficient farming system, and then make it easier for the European producers, who are huge emitters themselves in an agricultural sense. There is no sense in transferring the wealth from this country to make us poorer, and to make the Russians wealthier.

TIM GROSER (National) : I am very pleased to follow the very thoughtful contribution by my colleague David Carter. I would go one step further than him and say that I think this is probably one of the rare occasions we have in this House to write policy almost on a blank page. Although that is not technically true, because there are some antecedents to this, it is about as true as one ever gets in the real world of politics to writing a policy on a blank page. It is a policy of—and for once the words are justified—profound importance. This will have very large impacts on the way New Zealand will look in 20 to 30 or more years.

Behind all the uncertainties of the debates we have had on climate change over the last 10 to 15 years, I think the thing that motivates us in the National Party is a clear sense that in recent years the science has absolutely firmed up that human-induced, or anthropogenic, climate warming is becoming a greater and greater problem and that it is totally irresponsible to sit there and worry about the uncertainties and do nothing. I understand the uncertainties around the effects. For example, we have around 380 parts of carbon dioxide - equivalent gases per million in the atmosphere. According to the Stern report, this may reach a range of 450 to 550 parts, inducing perhaps 2 to 3 degrees of global warming. Others have an even more frightening prospect. We are never going to settle these issues, but we have to make a response now. The one thing I agreed with in Rodney Hide’s analysis was that, yes, some major issues are still being debated out there but, as he said, politicians have to decide on a response. On that ground the National Party will support this emissions trading scheme bill going to a first reading.

In relation to the uncertainties there is a metaphor I like to use that I have used in the past, and it is a quote from Arnold Schwarzenegger in his latest career move as Governor of California and one of the leading exponents in the United States of standing up to the plate on climate change. I thought he put it very simply and very neatly when he said: “If my son shows signs of sickness and I have nine physicians saying ‘Take him to the hospital.’, and I have one physician saying ‘This is a naturally occurring phenomenon. Don’t do anything. He’ll get over it.’, what do I do? I take my son to the hospital.” It is a very simple political metaphor, and I think it is exactly the right prudential approach.

Moving from that to the policy response is an awesomely complicated matter. There are two faces of this: the domestic and the international. The first point I want to make when I look at those two interconnected faces is that precisely because we are trying to get something that will be durable, we have to factor political sustainability into the equation, both domestically and internationally. That is why we put into the discussion paper on external strategies the following statement. We observed that there were three traditional strands to New Zealand foreign policy that we saw consensus emerging on, across particularly the two parties—defence, foreign affairs, and trade—but we saw a fourth strand emerging, which is climate change, and that is the area that we need to work on. We need to work on that because only if it can command at least bipartisan support in the context of New Zealand politics will we have a politically durable base. And it is only if it is based on political reality that the companies and individuals whose behaviour we expect to modify through an emissions trading scheme will have sufficient certainty that although there will still be fine-tuning of the scheme in the future, to be sure—this will have to regarded as a work in progress—the fundamental direction is settled.

To me that is the real lesson of the carbon tax and the “fart tax”. I am not trying to make a partisan point here; I am just trying to make a point about the importance of factoring political sustainability into the equation. If we start off with a view that we do not need to take account of political realities and commercial realities, as soon as pressure is imposed on those environmental policies, what happens? It is the collapse of those environmental policies. So, taking too extreme a view in terms of the balance between the environment and economic sustainability resulted, in those two cases, in the complete collapse of an environmental response. There is a deep lesson there for all of the people who will be involved in this debate. That is why, right at the start of this process, our leader, John Key, made it absolutely clear that we are not a one-issue party. We do want to sustain this country economically, just as we want to fulfil our environmental responsibilities, and we will be looking for balance. It is only in that way that we will get a politically sustainable solution.

I now want to pass to the international dimension of this issue and make some fairly general observations. Frankly, the international negotiation of this is the heart and soul of the matter. If we do not get an international response that builds on the first commitment period with a successor agreement or a set of interlocking complementary agreements, then we have literally nothing. Kyoto is a first response by the international community to global warming. I was much intrigued by Peter Dunne’s interesting personal recollections of predecessor negotiations to the global warming convention. It is easy to criticise Kyoto, precisely because it is a first, and, I think, limited, response by the international community. In reality, all international economic diplomacy moves forward on the basis of incremental progress. People want revolutions. New Zealand farmers in the world trading system always wanted a revolution. That is not how it happens. If we look at the history of the international community’s response to international trade imperatives, what we see is a successful policy of incrementalism—starting off 50 years ago with a very limited set of agreements, building on the back of that, and always moving in the right direction.

I suspect that when the history—30 or 40 years from now—of the international community’s response to anthropogenic-induced global warming is written, the history will be a very sad story of failure if we simply stop at Kyoto, with its limitations. It will be a success if the future historians on climate change politics can write: “Kyoto was a first, limited step, which led to more sustainable political agreements.”

In respect of the future of the negotiation, let me make just a couple of points about the United States and the developing countries, because quite clearly this is where we need major buy-in. Of the two, personally I am much less concerned about the situation of the United States, and I say that for three interlocking reasons. First of all, in terms of the dimension of the problem, the United States is probably currently around equal to China in respect of its total greenhouse gas emissions. In fact, according to some estimates China may now be fractionally ahead. So the nature of the threat and the nature of the problem from the sum of all developing countries is a much, much larger problem.

Secondly, I think it is palpably clear that opinion in the United States is changing. My colleague Dr Nick Smith, our spokesperson on this issue, has referred to 23 individual states where there are climate change initiatives under way. So although there have been some problems at the federal level, to describe the United States as not moving in the right direction, is, I think, a gross mischaracterisation of the reality. Thirdly, we will be absolutely relying on the combination of international commitments and science breakthroughs if we are ever to seriously get on top of this problem. An enormous proportion of the world’s scientific knowledge, scientific talent, and research development money resides in the United States. I am not so concerned about that.

I am not expecting very much from Bali, and I would urge other people to be a little patient. The way I would see it panning out, in terms of my experience with international economic negotiations, is that Bali will be seen essentially as a holding pattern. The United States will define its position, essentially, for the post-Kyoto commitment period, starting in 2013, after the next presidential election. That will take place at the end of 2008. The President, whoever she or he is, will appoint her or his chief climate change negotiator, probably around May 2009. This will require a long period of consolidation in the United States. Members should not be surprised if it is not until 2010 that we see a United States response.

In the meantime we will proceed down this track. We are committed to working with the Government. We think it is very important to get the detail right. Let us observe the point that Peter Dunne made—that this is far too important to rush through. Let us try to get this as right as we can.

A party vote was called for on the question, That the Climate Change (Emissions Trading and Renewable Preference) Bill be now read a first time.

Ayes 119 New Zealand Labour 49; New Zealand National 48; New Zealand First 7; Green Party 6; Māori Party 4; United Future 2; Progressive 1; Independents: Copeland, Field.
Noes 2 ACT New Zealand 2.

Hon CLAYTON COSGROVE (Minister of Immigration) on behalf of the Minister responsible for Climate Change Issues: I move, That the Climate Change (Emissions Trading and Renewable Preference) Bill be referred to the Local Government and Environment Committee

Hon Dr NICK SMITH (National—Nelson) : I raise a point of order, Madam Speaker. The Minister, in introducing the bill, indicated it would go to the Finance and Expenditure Committee. Perhaps the junior Minister would like me to move it for him.

Hon CLAYTON COSGROVE (Minister of Immigration) : I accept that.

The ASSISTANT SPEAKER (Ann Hartley): Would the member move it again, please. He needs to state the words.

Hon CLAYTON COSGROVE (Minister of Immigration) on behalf of the Minister responsible for Climate Change Issues: I move, That the Climate Change (Emissions Trading and Renewable Preference) Bill be referred to the Finance and Expenditure Committee.

  • Motion agreed to.

Real Estate Agents Bill

First Reading

Hon CLAYTON COSGROVE (Associate Minister of Justice) : I move, That the Real Estate Agents Bill be now read a first time. At the appropriate time I intend to move that the Real Estate Agents Bill be considered by the Justice and Electoral Committee.

This bill will provide long-overdue protection to people buying and selling their homes. It will support the vast majority of good, honest professionals working in the real estate industry who are unfairly tarred with the same brush as the last land shark who ripped someone off. Such people are a minority in the industry.

Hon Member: Oh, land sharks! What’s a land shark?

Hon CLAYTON COSGROVE: The land sharks—that is right—who indulge in dubious business practices, have caused great financial hardship and anguish for consumers. That is indeed undeniable. The risks this minority pose to ordinary Kiwi consumers are considerable. The risks include mishandling of funds, poor contractual advice, misleading representations, conflicts of interest, misuse of information, and fraud. When things go wrong it is ordinary Kiwis and their families, as we know, who pay the price. The cost to victims who have been ripped off by careless or rogue agents can run into hundreds of thousands of dollars.

For most New Zealanders their greatest asset is their home. Buying or selling a house is, for most people, one of the biggest financial transactions of their life. That is why this bill, which is about protecting consumers and good, honest real estate professionals, is so important. We are all aware of the succession of cases that have raised serious concerns in the community and in the media. Consumers have turned to the Real Estate Institute of New Zealand’s complaints and disciplinary regime when things go wrong, yet many feel they have been deprived of a fair hearing. It is clear to the public that the current system lacks transparency, openness, accountability, and independence.

The media have picked up on these public concerns. I quote from the Southland Times: “It is almost a test of stamina to see whether the community can muster any sense of actual outrage, rather than just weary sourness, over the alleged misdealings of yet more sharkish real estate agents.” The Dominion Post stated: “It is time for a system that focuses on the customer, rather than protecting patches and quashing competition.” The Independent stated: “Public outrage has been sparked by cases involving agents seeking to buy properties themselves, serious undervaluations, and the concealing of vital information from buyers.” Finally, the New Zealand Herald stated: “The institute … has regarded its duty of self-regulation for the industry as about just one of those two words, self.”

Members of the public and honest real estate agents alike have complained to me about the way the institute handles complaints—for example, the long delays in processing complaints, the poor quality of investigations, and complainants not being adequately informed. The industry’s actions on occasion have been inexplicable and inexcusable. Members should remember the Ottaway case, where an agent was formally warned by the Commerce Commission and fined a paltry $750 by the Real Estate Institute for marketing a house as being “out of the hustle and bustle” without disclosing that an apartment block was planned for next door. The buyers estimate their losses to be $35,000 of house value, yet that same agent went on to win several awards as being a top real estate agent.

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

Hon CLAYTON COSGROVE: Before the dinner break I was referring to the Ottaway case. The buyers lost $35,000 of house value, yet that same agent went on to win several awards, as we know, for being a top real estate agent, and was hailed as being an example to the community, an example that the community should be proud of.

Members will remember the institute taking action earlier this year against the Joneses, a real estate firm, for publicly saying: “New Zealanders pay way too much money for a fairly indifferent sort of service.” The charge was that the Joneses had brought the industry into disrepute by saying that consumers deserved a better deal. The Real Estate Agents Act 1976 gives the Real Estate Institute the privilege of self-regulation and the power to act as the gatekeeper for complaints. In essence, the institute determines the level at which a complaint will be dealt with, if at all. According to the institute’s own figures, which it sent to me, between 2004 and 2006 it received 507 complaints from members of the public, but only nine of those were referred to the independent licensing board.

But it gets worse. The institute recently advised me that it had also received a number of other serious complaints from bodies such as the police and insurance companies, of which 140 were referred to the licensing board. Who knows how many hundreds of complaints were actually made to the institute by police and the insurance industry but not acted upon? We do not know. The institute’s own journal of 4 December this year said that these complaints “tend to be at the more serious end of the scale”. The need for openness and transparency in this sector cannot be overstated. The industry is seen by many as a closed shop, and that is not good enough.

Last year I offered the Real Estate Institute the opportunity to come back to me with a solid set of proposals that would deliver a complaints and disciplinary system that was independent, accountable, open, and transparent. I suggested that the institute look at the Banking Ombudsman, for example, which achieves those outcomes and is funded by the industry, not by the taxpayer. Sadly, the Real Estate Institute’s proposals, in my view, amounted to tinkering. It asked me to increase fines and, effectively, set up regional disciplinary committees, but its proposals would not deliver on transparency, independence, or increased accountability, nor would they restore public confidence in the sector. It was at that point that I instructed the Ministry of Justice to provide me with advice on options for reform to deliver what the community—not the politicians—is demanding of this industry.

The result is the bill that we are debating tonight, which, at its heart, is about protecting the Kiwi consumer. The Real Estate Agents Bill will provide a modern regulatory framework to protect the consumer when buying or selling property, and will restore consumer confidence in the real estate industry, which is what all those honourable, honest real estate folk want. The bill will make the day-to-day business conduct of real estate agents more open and transparent, will raise the standards of conduct of industry members, and will support honest real estate professionals in their work. The bill addresses the need for more consumer compensation for losses. At present, the Real Estate Institute keeps fines paid by dodgy real estate agents, yet it can legally and morally pass on those same moneys to the victims if it wants to.

What does the bill do? The bill removes the regulatory functions from the institute, as well as removing the compulsory requirement for agents to become members of that institute. It abolishes the Real Estate Agents Licensing Board and creates a new body independent of the industry, called the Real Estate Agents Authority, to oversee compulsory licensing as well as complaints, disciplinary, and enforcement processes. It will also provide information for consumers. It introduces a fit and proper person test for people entering the industry, and requires ongoing professional training. It sets up a public register of real estate agents, branch managers, and salespeople, to record any breach of industry standards, and any disciplinary matters upheld by the authority and disciplinary tribunal, against the names of those involved. It strengthens mandatory disclosure requirements, including possible conflicts of interest, and introduces a cooling-off period for sole agency agreements. It requires agents to provide buyers and sellers with mandatory standard information before they sign a sale and purchase agreement. The new authority will have a wide range of investigative powers, and will be able to order a wide range of penalties and remedies, including censuring or reprimanding an agent, requiring an agent to apologise to consumers, ordering a reduction of an agent’s fees, and imposing fines.

The bill also creates a fully independent disciplinary tribunal to deal with serious cases. The tribunal will have the ability to order the cancellation of licences, award compensation, and impose fines. It will not cost consumers anything to lodge a complaint, and they will not be required to hire lawyers, because the authority, through its complaints assessment committee, will represent their case if it is referred to the disciplinary tribunal. Penalties for criminal offences under the bill are greatly increased. Dishonest agents will now face fines of up to $40,000 for individuals and $100,000 for companies.

The bill does not make any changes to the employment status of salespeople within the industry. The Government will review this provision after 5 years to consider whether there is any justification for the real estate industry not being subject to the same employment law as other industries.

These reforms will not be funded by the taxpayer but will be funded by the industry from the over $1 billion in commissions collected each year through licence fees and levies.

I will quote from one of a handful of letters I have received since I foreshadowed these reforms: “On behalf of Bayleys Realty Group I would like to extend and reiterate our support for the requirement for change and improvement in the regulation of the real estate industry. Both John Bayley and I believe this is an important opportunity to bring positive change to the industry which will in turn elevate levels of consumer protection and confidence in our sector. Mark Grant, CEO, Bayleys Group.”

In conclusion, as I said at the start, this bill is about protecting consumers as they buy and sell their biggest asset, and supporting the vast majority of the people in this industry, who are good, honourable, honest, hard-working real estate folk who do a good job every day, but are tarred by the same brush as the last land shark that ripped somebody off. I commend the bill to the House.

SIMON POWER (National—Rangitikei) : I thank the Minister, Clayton Cosgrove, for his opening comments in respect of the first reading of the Real Estate Agents Bill, and I will address some of the comments he made during the course of the debate. The Minister is right: the Real Estate Agents Act of 1976 does need reform. The legislation does need to provide transparent and accountable governing bodies and disciplinary tribunals. All of those things are true. He quoted a letter from the chief executive officer of Bayleys Real Estate towards the conclusion of his remarks, where the chief executive said that this was an important opportunity to bring positive change.

Unfortunately, National does not believe that the way this bill has been handled brings positive change. The Minister had an opportunity to deal with this issue in a rational and considered way. In my view, and in the view of the National Party, Mr Cosgrove, in his capacity as the Minister in charge of this bill, has overshot somewhat in the way that he has dealt with this particular legislation. In fact, from recollection, this reform has been announced more times than even the economic transformation we are still waiting for from the Government.

We know, for example, that the most common phrase Mr Cosgrove has uttered since he first announced this change in May of this year is “land shark”, which is a phrase he uses at every opportunity. Unfortunately, that type of approach has actually vilified thousands of land agents who have never done anything other than to go about their business selling properties on behalf of customers—vendors who are satisfied with the process, who have paid their commission, and who have got on with their lives.

National agrees with the Minister that an independent authority to deal with complaints and disciplinary issues is needed. We are in favour of transparency and accountability, but we are not in favour of the vilification of an entire industry off the back of some scattered examples the Minister has used. The Minister came to the House today and started talking about the “honest folk” in the real estate industry but, unfortunately, since May of this year that is not a phrase that has carried the same amount of mentions as the phrase “land shark”.

What worries me most about this particular piece of reform is that it is actually a missed opportunity, because there is need for reform, and on that I agree with the Hon Clayton Cosgrove. But here we are going to miss the opportunity to found a system that is based on the customer—on the consumer, and on his or her right to be treated fairly. Rather, the opportunity is being taken to pound an industry into submission. When the Lawyers and Conveyancers Bill came to the House, we trusted the lawyers to come up with some suggestions that would make their industry more user-friendly. I suggest that the rational, calm approach adopted in that instance would have been a good model to use in this instance.

I tell members that on this side of the House we are concerned about several things. First, bureaucratising is not the answer, and we have seen that with the Department of Building and Housing. That particular department was an answer to a problem that could have been solved in quite a different way, and we need to be convinced that the costs associated with the new process the Minister has described this evening are not going to be passed on to the very consumers the Minister purports to protect with the introduction of this legislation. I have followed this debate very carefully for the last 8 or 9 months, as the Minister knows, and one of my favourite things that I found very interesting in the original discussion document, which was tucked away in the middle of the document under an innocuous bullet point, was the issue of changing the employment status of real estate agents from independent contractors to employees, and all the legislative implications that that would have for that industry. Of course, the Minister backed off that suggestion once people said to hang on; they began to ask: “Where’s the evil?”, “Where’s the harm?”, and “What is it that the legislation is trying to address?”.

Hon Clayton Cosgrove: A listening Government.

SIMON POWER: The Minister says he is part of a listening Government. It is a pity he was not in the Chamber for the Committee stage of the Electoral Finance Bill. But what I can say is that to impose in legislation a 5-year review of the employment status of 20,000 New Zealanders is to hang the sword of Damocles over those particular individuals, so that the Minister, whoever that may be at the time, retains the power and the authority simply to change the employment status of a group of people at whim. It is unacceptable to leave an industry in an uncertain state for that entire 5-year period; all those prospective agents, who like the freedom of being independent contractors, and who do not put demands on their employers with legislative requirements, now do not know what their employment status could be in 5 years’ time. That is a bad way to draft law. It lacks certainty and it lacks clarity. It is not a good way to propose to deal with that issue.

I tell members of the House that I have read through this debate, and I cannot in fact understand why, if the Minister is so determined to reform the negatives in the real estate industry, property management is excluded from this legislation. Why is an industry that holds trust account moneys on behalf of clients excluded from this legislative framework? Why are residential tenancies excluded? Who is not being protected in those two instances? It is the consumer who is not being protected, yet the Minister comes to the House and says that this bill has nothing to do with promoting his own political prospects; this bill is all about the consumer. Well, actually, if it were about the consumer, property managers and the like would be included.

A first read of the bill reveals that it also fails to remedy an oddity under the Auctioneers Act: a real estate agent cannot hire the services of a registered auctioneer unless that real estate agent is also a registered auctioneer. That situation is not addressed in this wide-sweeping reform with which the Minister proposes to protect the consumer. So I say to the Minister that we come at this issue determined to see accountability and transparency, and an independent body put in place. What we will not agree to—and the reason that we will not be voting for this legislation today—is a half-baked effort, with truly poor work having been done on legislation that is to protect consumers.

We are going to hear more rhetoric from the Minister over the next short while, and he should bear this in mind: every time he opens his mouth to promote himself and his so-called destruction of land sharks, he should think of those thousands of land agents who have done nothing wrong, and of the entire industry that is at risk of being vilified by a piece of legislation not comprehensive enough to deal with many of the proper issues it should be dealing with—many of the issues that, in fact, National members agree should be dealt with.

Hon DOVER SAMUELS (Labour) : Kia ora tātou, Mr Assistant Speaker. I would like to take a short call on this Real Estate Agents Bill, because when somebody mentions the word “shark” my ears prick up. Why? As a diver who has been diving for many years, and as a fisherman, it has been my experience during my life to encounter many kinds of sharks, starting from the Carcharodon carcharias, which is the white pointer or the “white death”, the mako shark, the thresher shark, the orca, the blacktip shark, the whitetip shark—you name it; I have dealt with them all both as a fisherman and head-on as a diver taking photos.

I am very interested in Simon Power’s analysis in terms of land sharks.

Simon Power: Have you read the bill?

Hon DOVER SAMUELS: Yes, I am speaking to this bill. That member has mentioned land sharks on many occasions, and I think it is appropriate that I get up in reply. Simon Power said in his presentation that my colleague has offended thousands of real estate agents. Having read the bill, I found no provision in it that would offend me, except—

Simon Power: Have you read the bill?

Hon DOVER SAMUELS: Yes, I have. I listened to the member. The advantage of becoming a diver is that one goes into a silent world, and one observes—

Simon Power: You got that right.

Hon DOVER SAMUELS: Absolutely, I got it right. In that silent world one observes, with wisdom, what is actually happening.

I say to that member and to the House that this bill is not directed at law-abiding, decent land agents—and that member knows it. I ask whether anyone has tried to extract teeth from a mako shark, and I challenge that member. To say that this bill will wipe out a number of legal, law-abiding land agents, is a lot of humbug. I will invite that member, perhaps the next time I go diving off the Cavalli Islands, to come with me. I will look after him, and I will take him into the land of real sharks—real sharks. In my area of the Cavalli Islands and Matauri Bay, the sharks love legs that look like milk bottles We see flippers, half a wetsuit, and those white legs, and that is when we understand what sharks are all about. They will hone in, without any prejudice and discrimination. But I will offer that member, that colleague across the Chamber, an invitation to come diving with me in the Christmas period. It will be “Pokare Kare Ana” for him.

To suggest that this bill will cut across the intelligence and the rights of real estate agents who are going about doing their job—come on; get a life! When someone mentioned the word “sharks”—and that member mentioned the word several times—I thought that I had had a lot of experience with sharks. I compliment my colleague Clayton Cosgrove, because he has the courage to be able to decide who the real sharks are, and who are in between. At the end of the day, this legislation is designed to protect the public of New Zealand, those hard-working families, who are out to purchase a decent house—genuinely—or a piece of land, and it will protect them from people who are going to exploit them.

At this time of the year, when there is goodwill to all men and women, and a time of sharing and greetings, perhaps my invitation to the colleagues across the other side is kei te pai—be of good cheer—even though there are a few sharks swimming around here. Nō reira. Mihi atu ana ki a koutou. Kia ora koutou katoa. Mere Kirihimete; happy New Year.

KATHERINE RICH (National) : It is a pleasure to speak to the first reading of the Real Estate Agents Bill. I very much enjoyed the last contribution about sharks, and the long list of different types of sharks, but I have to say that it did not have anything to do with the bill tonight.

If we are looking for a reason why real estate agents are so exercised and upset about the way in which these reforms have been handled, we find that one of the things comes down to the use of that word “shark”. For good, honest people who take their work seriously and conduct their work professionally, being called a land shark is incredibly emotive and deeply insulting. I think that the Minister Clayton Cosgrove needs to go and talk to some agents in order to understand how deeply insulted they have been by being called not only land sharks but rogues and cowboys. The board of the Real Estate Institute certainly did not enjoy being called a B-grade Goon Show.

These people take their work extremely seriously and conduct it with a high level of professionalism, but by the way we hear the Minister talk about the industry, in that kind of John Wayne meets Buzz Lightyear style—he is there to shoot up the town, to reform this industry, and to drag it kicking and screaming into the new century—it is as if he is on a crusade to tidy up a range of issues that are purely and simply not there for by far the majority of those hard-working Kiwis who work in this area. The crusade is certainly designed to build the Minister’s own profile and to build a platform—which has been successful—to elevate his position in the Labour Government. But it bears no relation to what is going on out there in the industry. If we look at what is happening in the real estate industry, we find that in any given year there are about 200,000 transactions. Most of those go well, without incident. This year there have been only 57 complaints. I have been told today that about one deal in 10,000 goes wrong, so what we have here is a sledgehammer to crack a walnut.

The Minister wants to give the impression that he has dragged the industry kicking and screaming into reform, but that is not true. The industry has been calling for reform for years. The industry has been saying that its Act needs to be updated, and that it needs to have a modern Act that reflects today’s situation. But that has not happened. The Government has actually dragged its heels and it has not updated the Act. But it now wants to give the impression that the industry has been against these reforms, and that it is somehow being dragged into a modern century.

I think the Minister has also overlooked the fact that some of the changes being called for—and some are in this bill—are exactly what the institute has been asking for, for years. The Minister said that in the event that something went horribly wrong and there was a crook in the industry, the fine would be “a paltry $750”. Well, it is $750 because that is what it says in the Act. And the agents themselves have been saying: “Let’s increase it. Let’s increase it dramatically, so that when crooks are found they can be pinged for $10,000, $20,000—$50,000—and we can really make a difference and send a strong message.” But, once again, the Government has dragged its heels in updating the reforms.

Likewise, industry representatives have been calling for changes to the way that agents are educated. They have wanted to add a lot more rigour to their education, and to make sure that the hurdles are significantly higher for agents to get into the market. Once again, the Minister has dragged his heels. We know that he has, on his desk for sign-off, a new education regime for agents, but he is refusing to sign it.

So while the Minister is channelling a Clint Eastwood - type character, our message from this side of the House is that he is not Clint Eastwood, actually; he is a Minister in a responsible position, and it is not his job to use emotive language to highly politicise an issue that could have been straightforward. It should have been a genuinely straightforward reform issue, but the Minister has made it a highly political issue and has done 20,000 agents a disservice. He has done their families a disservice but, more important, he has created the impression that all real estate agents are crooks, that they are all land sharks, and that they are sort of Herb Tarlich goons who are there just to rip people off. He actually used the phrase “ripping off” in his speech. If we bring some common sense to the discussion and the debate, and if we bring the debate back down to a more reasonable level, we find that that is not the situation.

There are tens of thousands of agents who work extremely hard. They are small-business people. They pay their taxes. They take their own risks. They put bread on their families’ tables, and they take their jobs extremely seriously. They see what they do as being a profession. They see what they do as being something really important. But that has been lost now in this debate, because we have had this hysteria created that they are all a pack of crooks—that they are all out there to rip off Kiwis. And that is a deep insult.

I have been speaking to some real estate agents, and many of them, the Minister might be interested to know, voted Labour. I do not know why, but they voted Labour in the past and they feel deeply insulted by what the Minister has said. He has used this bill as a platform for his own profile; he has not looked at this issue in a common-sense way. While he has talked about tarring agents with the same brush, he is the one who has done that. He is the one who has used that emotive language to create the impression that all agents are crooks. Had this been handled in a different way, I think our side would probably have supported the majority of these reforms.

In terms of what needs to be done, we think there are some significant areas to tidy up. Who knows why property managers are left out of this bill—

Simon Power: Bizarre!

KATHERINE RICH: It is utterly and totally bizarre, when one in five complaints is as a result of some kind of property management issue, not the real estate aspect, at all. We have 200,000 transactions in a year, and only about one in every 10,000 of those goes bad. This Minister is pretending that it is the norm for real estate transactions in this country to go bad. Well, I do not think that Kiwis buy that kind of rhetoric. I hope they understand that the debate here has been very misleading, it has been hysterical in parts, and it is a method of building a platform for the Minister to build his own profile as opposed to doing a service to New Zealanders by putting forward reasonable reforms.

Real estate agents themselves have been calling for many of these reforms, so although I think that the Minister wants to create the impression that he has corralled these outlaws and that he is the one who is bringing some professionalism back into the industry, that is not true. It is a deep insult to those agents who have worked extremely hard, have built up a professional background, and have done work in our communities over the years. That is one of the things in this bill that we think needs to be tidied up during the select committee process. We want to see things like the issue relating to property managers debated during the select committee process.

We want to see some changes, but more than anything we want the Minister to peg back the politicisation of this issue. We want him to bring back some common sense, to get these reforms through, and to update some of the laws relating to this industry in a common-sense, reasonable way, because the politicisation of the issue has been deeply insulting to the professionals who work in the industry and to their families, and it has done a disservice to the community.

Hon CLAYTON COSGROVE (Associate Minister of Justice) : I raise a point of order, Mr Speaker. I will not labour this, but I just ask your indulgence and advice. I have been accused time and time again in this debate of characterising all real estate agents—

Simon Power: It’s a matter for debate.

Katherine Rich: That’s not even a point of order.

Hon CLAYTON COSGROVE: I ask the members to excuse me, but this is a point of order, and I ask whether I could be heard in silence. I thank the members. I have been accused of characterising all real estate agents as rogues, land sharks, or evil people. For the record—and I am quite happy to provide it to all members—in the last 12 months, in every interview and every press statement on this issue, I have said repeatedly that the vast majority of the industry are honourable, hard-working, honest folks. That is a fact.

The ASSISTANT SPEAKER (H V Ross Robertson): I thank the member. That is a debatable issue.

PETER BROWN (Deputy Leader—NZ First) : It is not my job to defend the Minister, but I have to say that in the discussions I have had with the Minister he has always recognised that most real estate agents in this country are honest, law-abiding, genuine people. I know that from time to time he has used the words “land sharks” and perhaps some other stronger terms, but he has normally clarified that with a specific case, as he did in his opening speech tonight. I know a number of real estate agents. I know them personally and I know them professionally, and I have not had one of them complain to me about this bill. I have had several mention that they are concerned about the industry and say that it needs a tidy-up, as the two National Party speakers have said.

I have listened to the National Party contribution thus far with a good deal of interest. I thought that Simon Power made some very good points and that Katherine Rich made some good points at the end. But the underlying point that seems to come across from National members is that they will not vote for this bill because the Minister has upset a few real estate agents. Katherine Rich said at the end of her speech that she wants the bill to be tidied up at the select committee and that she recognises that some technical amendments could make it a better bill. That is in essence what she said, but she summarised that by saying, in effect, that as the Minister has upset a significant number of real estate agents, National cannot see its way to supporting this bill.

The real estate industry is, to all intents and purposes, a closed shop and it needs to be opened up. It needs to be opened up and—

Simon Power: Anybody can join it.

PETER BROWN: Everybody can join it, but they have to join it, and they have to abide by rules and standards that are pretty much second-rate. The underlying point is—[Interruption] Should I sit down, Mr Assistant Speaker, while the members have an exchange?

The ASSISTANT SPEAKER (H V Ross Robertson): I say to the member on my left and to the member on my right who are interjecting on each other that that is totally out of order.

PETER BROWN: Thank you, Mr Assistant Speaker. The underlying purpose behind this bill is to give some protection to people who buy houses and homes. Having one out of 10,000 being ripped off is not good enough. It is not good enough. The member Simon Power shakes his head. He thinks it is OK for one in 10,000—

Simon Power: The bill doesn’t do that. Read the bill.

PETER BROWN: I think that the member should read the bill, and I remind the member what the purpose of the bill is. The bill states: “The purpose of this Act is to”—[Interruption]

Simon Power: I raise a point of order, Mr Speaker. The Minister opposite knows what I am going to say; I have let the comment go three times so far. It is completely inappropriate, under the Standing Orders, to suggest that any member of this House is under the influence of anybody outside this Chamber, and I want him to withdraw and apologise.

Hon Clayton Cosgrove: I didn’t say that.

The ASSISTANT SPEAKER (H V Ross Robertson): Can I just say that I never heard anything like that, but members know that they cannot indicate that anyone is under the influence of any outside person. All members here are honourable members and their word is their bond. I would suggest that we get on with the debate. The Minister said that he did not do that.

PETER BROWN: Thank you, Mr Assistant Speaker. I was about to read the purpose of the legislation, which is in clause 3 in Part 1, for the benefit of the National Party. It states: “(1) The purpose of this Act is to promote and protect the interests of consumers in respect of transactions that relate to real estate. (2) The Act achieves its purpose by—(a) regulating agents, branch managers, and salespersons: (b) raising industry standards: (c) providing accountability through a disciplinary process that is independent, transparent, and effective.” To New Zealand First that all sounds like very good news. This industry needs a tidy-up, and this bill will go some way to achieve that. I accept that when it goes to a select committee it will be amended, changed, and adjusted, but at the end of the day it will come out as a bill that one hopes will address the problems of consumers.

Real estate agents are a service industry. They service the public. I can say to the honourable members opposite that the most expensive asset an individual, or in particular a young married couple, purchases is a home. Those people need to know that they will get a fair and reasonable deal out of the whole thing, and they do not need to go away thinking that they have been ripped off. This bill attempts to do that. It puts in place a number of rules, which those members have referred to and that will possibly be subject to some change at the select committee, but they are relatively minor amendments. They are not a reason for National Party members to shake their heads and say that they will not support this bill.

Simon Power opened his speech, and I thought he was going well, by saying that the current legislation, the 1976 Act, needs updating and needs to be brought into the 21st century. This bill attempts to do that, and with his willingness—I know he is a lawyer and he knows the ins and outs and the intricacies of legal matters—and his positive contribution, I am certain this bill could be improved to the point that it satisfies him.

New Zealand First is comfortable with the way the bill reads now, but we recognise that we are not the experts on the real estate industry and that some concerns will probably need to be addressed as the select committee progresses with the bill. But we think this is something that needed to be done a long time ago. I note that the Minister did call the real estate industry to account some time ago. He asked agents, on a voluntary basis, to tidy up their act—putting it in finer words. That opportunity was declined, so the Minister had to make the choice of either doing something or sitting on his hands and doing nothing. Thankfully—and New Zealand First thanks him—he has come to grips with this issue and has produced this bill that will go a large way towards addressing the concerns of people who purchase houses and homes. That is the purpose of this bill. Those people have to get a fair and reasonable deal. New Zealand First supports this bill going to a select committee.

SUE BRADFORD (Green) : The Green Party welcomes this bill and will support it going to the select committee. Like the Government and many people in the community, we too have concerns about whether homebuyers and sellers currently have adequate rights and protections in relation to the activities of unscrupulous or incompetent real estate agents.

Buying or selling a house or other property is the biggest commercial transaction many ordinary citizens undertake in their lives. Often people do not fully understand what they are getting into when they sign agreements with agents, even if they have been in the property market before. It is an even more perilous exercise for the many people for whom this is the first time. Buyers and sellers can, and do at times, become the innocent victims of wheeling and dealing at a level of which they have little or no comprehension. As non-professionals in the world of real estate, most of us tend to take real estate agents at their word and when something goes wrong we have only a dim notion of what, if any, remedies are available to us. Some of the more notorious cases, for example, that of Deb Leask in Napier, have appeared in the media but many never see the light of day. All too often people do not make a complaint at all because they do not understand the processes involved and/or because they have no faith that they will receive any redress, at least without having to take on potentially expensive litigation, which would undermine the purpose of the action in the first place.

We appreciate the effort the Government is taking to reform real estate law and institute a range of new consumer protection measures, including the establishment of an independent Real Estate Agents Authority that will oversee licensing, complaints, and disciplinary and enforcement processes, and provide information to consumers. The new authority will have broad investigative powers, along with the ability to order a wide range of penalties and remedies. The bill before us tonight also includes the establishment of a Real Estate Agents Disciplinary Tribunal that will be separate from the authority. This tribunal will investigate all charges laid by another new body, called the complaints assessment committee, whose job it will be to sort out which complaints are serious enough to go forward and, where necessary, refer them to other bodies too, like the police or the Commerce Commission.

At the moment the system is run almost entirely in-house by the Real Estate Institute of New Zealand. The Government says that only nine complaints out of the 507 received by the Real Estate Institute in the past 3 years have actually gone to the independent Real Estate Agents Licensing Board for resolution. Although these figures may, for all I know, be contestable—I have not extensively researched this—it is still of concern that so few complaints reach any independent body for action. Most complaints, meanwhile, go to subcommittees of the institute where the maximum penalty is $750, rather than the $5,000 that can be applied by the licensing board. The new authority will be able to fine an agent up to $10,000 and an agency up to $20,000 and will have the power to publicise its findings and the sanction imposed. It will be able to demand an apology, order terms of settlement on a house deal, and if a criminal offence is committed the fines rise to $40,000 and $100,000 respectively.

Further major measures contained in this bill include the establishment of a public register of real estate agents and sales people, recording any breaches of industry standards on their part, a requirement that licensed agents have ongoing professional development training, and an obligation on agents to give consumers educational information about their rights, plus a written statement disclosing any conflicts of interest they may have.

The Real Estate Institute and its members are, of course, affected hugely by this bill. I note that the institute “welcomes those reforms in the bill which remedy real problems in the current regime but is concerned that the bill goes too far in changing the law where there is no problem and not far enough in other areas which require more regulation.” The Real Estate Institute appears to endorse the purpose of the bill in further protecting consumers’ interests, raising industry standards, providing an independent and transparent disciplinary process, and introducing compulsory continuing education for agents. The Real Estate Institute also appears to be happy that the bill makes no change to the employment status of salespeople within the industry, although I note that this will be reviewed within 5 years of the legislation becoming law—a measure that the Green Party definitely welcomes.

However, the institute, as the National Party has pointed out, also has a number of major issues with the bill, including what it sees as its failure to include property management and letting within its scope, a perceived lack of industry consultation on the setting of levies and fees, the aforesaid requirement to review the employment status of agents within 5 years, and the proposed changes to the education of real estate agents—an issue where I have a particular concern about what is going on. I look forward to hearing further from the institute on these matters and the other matters it raises, along with hearing from all the other submitters who will, I am sure, come forward with all viewpoints during the parliamentary process ahead.

In summary, I think the bill is about justice not only being done but being seen to be done. In this day and age most of us are keen on some real independence and transparency in complaint and review functions, whichever body of Government we are dealing with—something, by the way, I would love to see applied to the operations of the Ministry of Social Development. Meanwhile I think there are some aspects of the bill before us that may need tidying up. Although fundamentally supporting the bill, the Green Party will, as ever, remain alert to the possibility of helpful amendments during its passage through the House.

TE URUROA FLAVELL (Māori Party—Waiariki) : Tēnā koe, ki a koe anō Mr Assistant Speaker, kia ora tātou katoa e te Whare. Let me open this kōrero with something that I found fromMargaret Mahy: “These days it seems to me that when I look at the world I see many people including politicians, television readers, real estate agents and free-market financiers, librarians too at times dressing as sharks, eating leaves and drinking out of puddles, casually taking over the powerful and dangerous images that the imagination presents, eager to exploit the fictional forms that haunt us all …”. How awesome is that! In other words, the operation of truth is exercised with a certain amount of freedom.

As anyone who regularly has a look at the real estate magazines would know, real estate agents have a pretty remarkable talent at being enormously creative in the way they describe the state of property. A derelict, rundown shack can be branded as “needing a lick of paint”, an ugly throw-back to the 1970s with colours thrown together during a late-night dope session or acid trip is promoted as “funky”, and a house that breaches every building code under the Act is labelled as “DIY delight”. The reality is that disturbing mistruths, poor contractual advice, misleading representations, and outright lies have all entered the environment in which we consider this bill—a bill to protect and promote the interests of consumers in real estate transactions, and the Māori Party says it is about time. I think the ultimate irony of the state of the real estate industry was revealed earlier this year when Harcourts sought to honour one of its real estate agents who deliberately misled consumers.

The Māori Party welcomes the advent of a new regulatory framework for the real estate industry for another very important reason: the correlation between discrimination by real estate agents and limited accommodation options for Māori has long been a part of the scene. In 1991 the Māori Women’s Housing Research Project reported that non-Māori or Pākehā families will have more choice of housing because landlords, letting agents, real estate agents, and mortgage lenders will feel more comfortable interacting with them and will believe their families to be more reliable, trustworthy tenants or mortgagees.

Just 2 years ago, in October 2005, in my own electorate a Māori woman was reported to have been told by a Tauranga real estate agent from First National that the rental property did not want Māori tenants. Kelly Lovett subsequently lodged a complaint with the Human Rights Commission and the Race Relations Commissioner, Joris de Bres, and they confirmed that such discrimination was illegal. Illegal or not, Tokoroa landlord Walter Pellikan quickly came in to support the taking of such a stand. His view was that “banning Māori tenants makes good business sense and should be allowed”. Just to put this in some context, the Real Estate Institute of New Zealand eventually came out with a very strong statement encouraging members to “actively work against racist policies by rental property owners”. It also advised that such actions went against the institute’s code of conduct. Yet 6 months later, despite the advice of the industry leaders, another report, this time in Nelson, Tasman, and Marlborough, confirmed that discrimination in the home ownership market was still being delivered by some real estate agents. The Centre for Housing Research described comments from social service organisations in Marlborough that spoke of difficulties in working with real estate agents to house Māori clients, concluding that Māori were being discriminated against by racist practices that act as barriers to Māori accessing rental housing.

I rise to give this context to provide some perspective on how Māori consumers have experienced real estate agents, managers, and salespeople for decades upon decades of encounters. We are well aware that the industry’s disciplinary procedures and processes have not worked in ways that exude transparency and accountability. The sales psychology has dominated over industry standards. Consumers have faced real risk from agents who have mishandled funds, given poor contractual advice, misused information, or have undisclosed conflicts of interest. The home truths of the industry have been far from acceptable.

We will support this bill to ensure that the administration of licensing, complaints, disciplinary and enforcement processes, industry standards, and practice rules are enabled to take place and restore the reputation of the real estate industry. The bill sets out the specifications by which anyone engaged in real estate agency work must be licensed and act within the scope of that licence. That is extremely constructive and well worth supporting.

There is one issue we are hoping the select committee stage will advance. The bill enables certain exemptions for the licensing processes for real estate agency work. Amongst the exemptions are Landcorp and its employees. This issue is one that we are keen to receive further advice on, particularly in light of the issues that we have been raising over the past 2 years in regard to Landcorp sales.

We have brought to this House, and to the attention of the Ministers, concerns raised by Hauraki and the Tainui Waka Alliance, Ngāti Kahu, Ngāti Tūwharetoa, the New Zealand Maori Council, and other iwi regarding Landcorp activities in relation to the sale of lands subject to Treaty claims. We all remember the noble advocacy put forward by Ngāti Kahu to try and stop the sale of the repossessed Rangiputa station on the Karekare peninsula. We remember the concerns over the sale of the Taurewa land blocks and the proposed sale of a $10 million block of prime Coromandel land at Whenuakite, which should have been the subject of negotiation with the Hauraki Māori Trust Board.

While we were pleased that in raising these issues the Minister for State Owned Enterprises eventually announced a review of Crown land disposal, a review reported back in September that we must never leave a stone unturned when considering the vital significance of whenua, of land, to tangata whenua. We will be looking at the select committee process for clarity around the exemptions from the regulations proposed in this bill, particularly the fact that Landcorp will be exempt from the regulations around disclosure of conflicts of interest. We in the Māori Party believe we need robust processes for the sale of land subject to Treaty claims by Landcorp, and we will definitely be interested in the debate as it unfolds.

Finally, urgency can be long and hard work without too much let-up or moments of light relief. In thinking about where these problems have come from in the recent real estate industry debacles, I came across this poem by Andrew Chiu-kit Tsang of Manukau that I thought I might add to the debate. This poem, this waiata, this kōrero, is called “During the Real Estate Boom”, and I am sure Mr Power will be interested in this, because he listened to my first waiata—

Simon Power: I did.

TE URUROA FLAVELL: Thank you very much. It goes something like this:

During the real estate boom

Everyone becomes a real estate agent

No wonder

There are 13,000 real estate agents

8,000 police

and 3,000 soldiers in our country

I went to my favourite sandwich shop in Manukau

The boss wished to sell me his listing

But I only wanted a sandwich!

I went to Papatoetoe to get a fresh chicken

The boss wished to sell me her listing

But I only want a fresh chicken

I ring up my best friend in Howick hoping for a good chat

He also wished to sell me his listing

But I only want a good chat!

Some say a good man should be able to buy his own castle

Gimme a break!

I’m not yet a good man!

That is deep and meaningful. It is food for thought, honourable members. Tēnā koutou katoa.

Hon PETER DUNNE (Leader—United Future) : There can be no argument that as service providers, real estate agents ought to be accountable for their actions and for the service they provide. We will be supporting the reference of this bill to a select committee for one reason, and one reason alone. In the debate that has unfolded over the last year, the one organisation that has not, in our view, had a significant opportunity to put its case forward and to be examined and tested upon that case, is the real estate industry. We think that an opportunity before a select committee for those issues to be teased out is the appropriate way forward, because when we look at this bill, we see that it takes us a long way from what we would regard as an acceptable regime for the regulation of the real estate industry.

The Real Estate Agents Act dates back to 1976. It is outdated. It does need to be reformed, but this bill goes way beyond that. This is not a reformation; this is a complete replacement. It is a revolution, and it is an unnecessary revolution; the case has not been made for the measures that this bill contains.

For example, there is no doubt that there needs to be in place an adequately structured and resourced disciplinary regime for real estate agents. Under the existing legislation, for 30 years there has been a provision for the appointment of regional disciplinary committees, but none have ever been appointed. So the Minister has said that because no Government has ever implemented this Act, the Act is not working and it should be replaced. Worse still, the Government will veer away from what has been a long-established principle when it comes to industry regulations in New Zealand, and that is the principle of industry self-regulation. We hold industries accountable for the activities of their members. The Law Society, the Institute of Chartered Accountants, and any other professional body has its own internal rules, procedures, and accountabilities. In this instance, this bill effectively nationalises the real estate industry, because it says “We do not trust you to regulate your affairs and the conduct of your members in a way that is appropriate. We will therefore put in place a statutory environment that you will not have control over but that will be independent”—and that is a double-edged word at the best of times—“so that we can ensure”, allegedly, “a standard of public performance.”

The Minister said tonight that we should not worry, as the taxpayer will not pay for this; the industry will pay for it. What that means is that the consumer will pay for it. People have spoken tonight, Mr Brown and others, about the young couple going out to buy their first home, but I say that every time they buy a first home or shift up to another home they will be paying for the regime put in place by this bill.

We have around 19,000 or 20,000 real estate agents in New Zealand. By my count, the so-called bad eggs—and I am not going to use the language the Minister has, because I do not think Ministers should use extravagant language to describe situations—or the non-performers would be, by the most charitable of counts, fewer than 100, and probably around 50 out of 19,000. So here we are, putting in place a regime to curb the excesses of the few by controlling the many. But we are going to go beyond that and say that we no longer trust the industry to regulate its affairs. We are going to impose statutory regulation on its affairs, and the costs will be borne by the users. If we think about any other set of professions in this country and apply the same yardstick, we know there would be uproar. It is totally unnecessary.

As I said, the only reason for supporting the introduction of this bill is to allow the real estate industry the opportunity to put its case before a select committee, to be examined in public, and to be able to answer some of the charges and allegations that have been made, by innuendo in the main, over the last 12 months. I say very clearly that if this bill emerges from the select committee looking as it is today, then we will not be supporting it any further because it is simply a step too far.

The good real estate agents that we have heard referred to tonight provide an immense community service for a large number of people. I know from my own electorate that a number of real estate agents are involved in local service clubs, and their companies are involved in funding or supporting a myriad of local activities, because they need to be part of their communities in order to provide a service to those communities. They need to know about schools, community organisations, and neighbourhood set-ups, in order to advise clients and give them confidence when they are buying in a particular area. People want to know about the type of neighbourhood they are buying into and what facilities are available to them—how the system basically runs. So it is in the interests of real estate agents to be in tune with their communities. It is in their interests to provide a good service, a professional service, and an ethical service to the people they serve.

I repeat that there will be bad eggs in all cases, and there does need to be an effective disciplinary regime put in place. Everyone agrees with that point. But the way to do it is to update and modernise the existing legislation, not to throw it out and impose a State-controlled bureaucracy, in terms of the way in which this industry is to be regulated in future. I am not going to speculate upon the Minister’s reasons for what he is doing, but I think they are grossly excessive. I do not think they are necessary, I think they go way beyond the types of steps that need to be taken, and unless the measures in the bill are radically reformed, then it will not be worthy of further support.

But I say to members of the real estate industry that over the years I think they have, in many senses, been their own worst enemy. I think they have been complacent in terms of the representation of their interests. I think they have believed that basically they could just drift along. They do need to put their case, they do need to be heard, and they do need to be tested. At the end of the day, I am certain that the process will show that the best way of dealing with the issues that consumers, politicians, and, I suspect, the general public are concerned about—and good real estate agents in relation to the credibility of their industry—is through far less Draconian measures than are contained in this bill. If this bill proceeds in this form, then it will do so without United Future’s support.

KATE WILKINSON (National) : I am very pleased to follow on from what the Hon Peter Dunne has said. I have to say that there is not much in the content of his argument that I can disagree with—just the conclusion. At first glance it may certainly seem prudent to vote for this Real Estate Agents Bill at its first reading and subject it to the proper scrutiny of a select committee, but it needs such an extreme makeover and such amendments in terms of property management and other integral issues that have been omitted, that any proper amendments should well be outside the ability and scope of the select committee to make the meaningful changes that would be required. Basically, we need to start again. We need to do it once and do it properly.

On reading the explanatory note of the bill, one could be led to the conclusion that a huge problem regarding real estate agents has just recently surfaced and that this “remedial sledgehammer to crack a nut” bill is the only solution. The explanatory note states that in March 2007 Cabinet noted a range of problems with the Real Estate Agents Act and agreed to a full review of it. What I want to know, though, is what happened in July 2003 when according to the Associate Minister of Justice, who I understand was Minister Barker, Cabinet made decisions on the Real Estate Agents Act review. Suddenly, 4½ years later, we need to consider this bill—and now, under urgency. Associate Minister of Justice Clayton Cosgrove unfortunately has vilified the industry. He said he had to take the real estate agents—the so-called land sharks—“kicking and screaming”. The Minister was going to drag land sharks “kicking and screaming” into the spotlight and “drop the hammer on them”, in order to impose a new regulatory regime. We have heard references by the Minister to land sharks, rogue agents, and carnage in the sector.

I want to ask why, if it was so bad, nothing was done about this back in 2003. What happened back in 2003, which is over 4 years ago? At the time the Real Estate Institute welcomed the opportunity for public consultation on how the real estate agency industry should be regulated. It said that it had been well aware for over 10 years that a number of elements of that regulatory regime needed updating, particularly in areas of licensing procedures and enforcement of obligations. That is hardly “kicking and screaming”. It was aware then of a significant number of detailed issues that needed be addressed. Those issues had been drawn to the attention of successive Ministers and discussed with officials, and the work was set aside for over 4 years.

That is what the institute said then and what it wanted then. What did Minister Barker do 4 years ago? It appears he did absolutely nothing. Unfortunately, there is now a real risk that this review of the real estate industry has lost its objectivity, and that it has been hijacked by hyperbole, by emotive labels such as “land sharks” and “carnage in the industry”, and by exaggerated claims that have not necessarily been sustained. For example, we heard in the select committee from the Minister, who said: “I was accused of taking a cheap shot when I referred to the premium case where a High Court judge ruled against a real estate professional. I think it was to the tune of $3.2 million.” I had a look at that case; the amount was $900,000, not $3.2 million as the Minister alleged. Although I admit that it is a significant amount of money, I think the important thing about this case is that, on appeal, it was won and the real estate agent was vindicated. The real estate agent was vindicated, not vilified.

Unfortunately, this is the sort of example that does nothing to inspire confidence in the process of this review. We have heard of delays waiting for complaints to be heard. Yet in the most public example of this, where the appropriate forum for that complaint was a regional disciplinary committee—and we have heard about regional disciplinary committees—that committee had to be established under the existing 1976 legislation. Its establishment had to be ratified by the Minister, who had to approve both its establishment and the members. Was he asked to establish it? Yes, he was. Did he do so? No, he did not. It is dangerous to look at only one side of the story and to vilify an industry, when the papers have been on the Minister’s desk for over 4 years.

Having said that, it is important to support absolutely the purpose of the bill, which is to promote and protect the interests of consumers by regulating agents, raising industry standards, and providing accountability through a disciplinary process that is independent, transparent, and effective. Indeed, the real estate industry itself totally supports this objective, as do we. If one reads the Real Estate Institute’s views it is important to note that it supports, and indeed welcomes, the reforms that remedy real problems in the current regime, but the institute is concerned that it goes too far, changing the law where there is no problem, and not far enough in other areas that require further and more regulation.

This is not an industry being dragged kicking and screaming; this is an industry that has been asking for years for the laws to be updated. This is an industry that is welcoming the update of its regulatory framework. This is an industry that welcomes the independence of the complaints investigation and disciplinary process. This is an industry that welcomes the introduction of compulsory continuing education. This is an industry that wants to be respected, wants accountability, and wants transparency, but it is an industry that deserves good law. It is vital that New Zealanders buying and selling probably their most substantial asset have confidence in the professionals they are using to assist with such a significant financial transaction. There needs to be strong consumer protection and there needs to be strong consumer confidence.

Real estate involves not only buying and selling property. An important part also relates to property management, and this has been totally ignored by this Government. An integral part of property management is the handling of funds. The Minister himself has highlighted the mishandling of funds as one of the rules that should be applied. So why on earth, then, is it not addressed in this bill? The Government believes that property managers pose less risk. The institute believes, however, that one in five complaints relate to property management groups. Way back in 2003 the institute advised the Minister it was concerned about property managers operating outside trust account control and an audit regime. Now, in 2007, it is still concerned, but what has the Minister done? The Minister has ignored the institute.

Property management involves holding significant funds in an account. Hundreds of millions of dollars pass through the bank accounts of property managers. What happens to missing rent moneys? The institute, under this bill, has no jurisdiction to deal with complaints about missing rent moneys. There is no requirement to hold the moneys in a trust account. There is no fidelity fund. If residential property managers are not covered by the new regime, then gaps in the current laws will leave consumers vulnerable. If anything goes wrong, the only recourse for consumers may be via the courts. This is contrary to the purpose of the bill, which, of course, is consumer protection.

There are concerning parallels between the latest bureaucratic system proposed and the Department of Building and Housing. Consumers can still be protected without having to bear the costs of senseless bureaucracy—that is what will happen. The industry will not bear the cost; the cost will be handed down to the consumer, and housing affordability will get harder. For these reasons and the uncertainty, as mentioned by my colleague Simon Power, of whether in 5 years’ time salespeople will be able to work as independent contractors, or whether they will be regarded as employees, National opposes the bill. We welcome and support the industry’s view that transparency and accountability are welcomed. But, unfortunately, this is a wasted opportunity. Proper reform is welcome, but this is not proper reform.

A party vote was called for on the question, That the Real Estate Agents Bill be now read a first time.

Ayes 70 New Zealand Labour 49; New Zealand First 7; Green Party 6; Māori Party 4; United Future 2; Progressive 1; Independent: Field.
Noes 49 New Zealand National 48; Independent: Copeland.
Bill read a first time.

Reserve Bank of New Zealand Amendment Bill (No 3)

First Reading

Hon Dr MICHAEL CULLEN (Minister of Finance) : I move, That the Reserve Bank of New Zealand Amendment Bill (No 3) be now read a first time. At the appropriate time I intend to move that this bill be referred to the Finance and Expenditure Committee for its consideration. I express my pleasure at being able to address such a crowded and excited House at this time.

This bill, which amends the Reserve Bank of New Zealand Act 1989, will require all non-bank deposit takers to be registered by the Reserve Bank and to comply with minimum prudential requirements. This will see a significant step forward for the stability of the non-bank sector in New Zealand and, hopefully, for the understanding of New Zealanders about their investment decisions. The bill is part of a package of measures that will strengthen regulatory oversight of our financial sector. My colleague the Minister of Commerce will address some of the other measures later in the debate.

The work on this framework predates the current difficulties some non-bank deposit takers are facing, and it is the Government’s response to the recommendations of a review that I requested from Treasury, the Ministry of Economic Development, and the Reserve Bank in 2005 on the regulation and performance of New Zealand’s financial institutions. So that in turn led to the review of financial products and providers. That review was aimed at strengthening the current regulatory environment in order to promote confidence and therefore increase participation in sound and efficient financial markets. This bill assists that objective by bringing the regulation of non-bank deposit takers into line with international benchmarks. It does this by requiring non-bank deposit takers to comply with minimum prudential requirements set by the Reserve Bank. Recent collapses of finance companies do, however, underscore the need for regulation that raises prudential standards in this sector.

The amendments in this bill implement the first phase of the new non-bank deposit taker framework. A second bill, to be introduced next year, will cover the remaining amendments required to implement the registered non-bank deposit taker regime, including licensing and fit and proper requirements. The bill adds a new Part 5D to the Reserve Bank of New Zealand Act to provide for the regulation of non-bank deposit takers. The power conferred on the Governor-General, the Minister, and the Reserve Bank under Part 5D must be exercised for the purpose of promoting the maintenance of a sound and efficient financial system or for avoiding significant damage to the financial system that could result from the failure of a non-bank deposit taker. This provision is similar to section 68 in Part 5 of the Act, which deals with the registration and prudential supervision of registered banks. Non-bank deposit takers are defined to include finance companies, building societies, and credit unions that issue debt securities and provide financial services.

The bill also provides for entities to be declared by regulation to be deposit takers, to cover situations where some institutions that are non-bank deposit takers in substance are not caught by the definition but should appropriately be regulated as non-bank deposit takers. The legislation empowers the Reserve Bank to exempt particular deposit takers or classes of deposit takers from complying with any of the non-bank deposit taking requirements in situations where it makes no sense to capture them in the non-bank deposit taker regime. Non-bank deposit takers will continue to be subject to Securities Act requirements—we are setting this to music later—as enhanced by the review of financial products and providers reforms, including the need to have a trust deed and a prospectus and investment statement. Trustees will continue to be the front-line supervisors of non-bank deposit takers and will have responsibility for enforcing most of the requirements imposed on non-bank deposit takers by the new framework.

The bill proposes that non-bank deposit takers will be required to have a current credit rating from a rating agency approved by the Reserve Bank. The bill also includes regulation-making powers relating to the governance of risk management of non-bank deposit takers and the minimum capital a non-bank deposit taker is required to maintain. The non-bank deposit taker and the trustee must ensure that the minimal capital amount is set out in the trust deed. The bill also empowers the making of regulations for the purpose of imposing requirements that non-bank deposit takers and their trustees ensure that trustees include the capital ratio the non-bank deposit taker is required to maintain, a maximum limit on exposures to third parties—that is something I think some of us might like to have in this House—and requirements relating to liquidity. In each case the bill provides that there is not only an obligation on the non-bank deposit taker and trustee to ensure that the trust deed includes what is required by the regulations but also an obligation on the non-bank deposit taker to comply with that provision in the trust deed.

The bill enhances the ability of trustees to perform in their new role. If negotiations with the non-bank deposit taker to agree to an amendment to the trust deed in order to comply with the regulations have not been successful, trustees will have the power to make the amendment. The bill creates new offences by non-bank deposit takers, trustees, and directors of non-bank deposit takers. The legislation gives the Reserve Bank the powers to investigate and enforce the regulatory requirements under new Part 5D.

As the prudential responsibilities of the Reserve Bank are expanding, the bill also makes changes to the institutional arrangements of the bank itself. They include amendments to the bank’s governance arrangements that will include the bank’s transparency and accountability, while maintaining an appropriate degree of regulatory independence. The bill does not alter, I wish to emphasise, the Reserve Bank’s monetary policy functions or monetary policy independence. The bill provides that the Minister can direct the Reserve Bank to have regard to a statement of Government policy objectives relating to the financial sector functions and objectives of the Reserve Bank, and to demonstrate in its statement of intent that it has done so. Ministers have the same power in respect of comparable Crown entities.

The bill enhances the required content in the Reserve Bank’s statement of intent to also bring it into line with Crown entity requirements. In addition, the Reserve Bank’s annual report will need to contain an assessment against the intentions, measures, and standards set out in the statement of intent. The Reserve Bank will be required to regularly assess a report to the Minister on the regulatory impacts of the policies it adopts or that apply in respect of its powers relating to prudential regulation, and the oversight and designation of payment systems.

The legislation will require that the Reserve Bank publish a financial stability report, which will be provided to the Minister of Finance at least 6-monthly and presented to the House of Representatives. At present the Reserve Bank publishes such a report but is not required to do so. The financial stability report will be required to contain the information necessary to enable an assessment to be made of activities undertaken by the Reserve Bank to achieve its statutory prudential purposes. The bill also increases the Reserve Bank board’s focus on prudential functions when reviewing the performance of the Reserve Bank and the governor, by making specific reference to the Reserve Bank’s prudential functions in the section that outlines the duties of the board.

In conclusion, the Reserve Bank of New Zealand Amendment Bill (No 3) broadens the ability of the Reserve Bank to promote a sound and efficient financial system, while retaining the role of trustee as the front-line supervisor. It is a significant step forward in terms of updating the regulation of non-bank deposit takers and improving the prudential standards adopted by these entities, and I suspect we will have unanimous support for this bill being referred to a select committee.

Dr the Hon LOCKWOOD SMITH (National—Rodney) : To listen to the Minister of Finance now in the first reading of this Reserve Bank of New Zealand Amendment Bill (No 3), one would think he sounds about as enthusiastic for this legislation as he is for personal income tax cuts, for which he has about zero enthusiasm. But the difference is that this legislation will go through, whereas with personal income tax cuts, who knows? The last time this Minister promised personal income tax cuts, of course, he changed his mind and he did not deliver them.

Let me come to the detail of this bill. The Minister has covered most of it, and there is little point repeating all of what he said. He went through it so fast that listeners may have missed out on some of the key bits. He mentioned an awful lot about these non-bank deposit takers—he referred to them often. That is what they are, but I want to make it clear that here we are referring to the finance companies, the building societies, the credit unions, and businesses like that.

It is important that we introduce a better regulatory regime for these businesses, because I think many New Zealanders in recent times have suffered significant losses following the turmoil in financial markets associated with the problems in the subprime mortgage market in the United States. We have seen finance companies here in New Zealand go under, with many lenders, if you like—people making deposits with those financial institutions, those non-bank deposit takers—losing their money. I think it is in the interests of all New Zealanders that we improve the regulatory regime around these financial institutions. So many of them now, I think it is fair to say, are actually involved in many activities that the trading banks are involved in. It makes no sense for some of these lending institutions to be carrying out similar kinds of business to trading banks, yet not to be regulated in remotely the same way as trading banks.

I think that the regulatory regime proposed in this legislation makes sense. The Minister went through it very quickly, but it includes things like requiring finance companies above a certain size to have a credit rating. Banks are required to have that and so should these institutions as well. Things like regulations around risk management, minimum capital requirements, capital ratios, maximum limits on exposure by these financial institutions, and certain liquidity requirements are fundamental prudential regulations. I think all members of this House would say: “Yes, now that these institutions are involved in transactions similar to our trading banks they need to have this kind of regulatory framework within which to operate.”

I make it very clear right from the outset that National will support the first reading of this bill and it being sent to a select committee. There are a couple of things we will probably want to learn a bit more about during that process. The first one I mention is one the Minister did not mention in his first reading address. He went so fast that I may have missed it—if so, I ask the Minister to forgive me. Clause 6 of the bill has a curious amendment to the principal Act. Maybe a Government speaker will be able to enlighten us as to the purpose of this amendment. Up until now section 16 of the Reserve Bank of New Zealand Act has enabled the Reserve Bank to deal in foreign exchange. The current provisions enable the Reserve Bank to deal in foreign exchange with any person it thinks fit, including the Crown. That makes sense. It makes sense that the Reserve Bank should be able to deal in foreign exchange with whomever it thinks it makes sense to deal in foreign exchange with, although it should do so very carefully.

But what is curious about this amendment in clause 6 is that it provides also for the Reserve Bank—and it actually amends the provision—to deal with any person, including the Crown. That is fine; that is the existing provision. But it then adds a further provision, providing for the Reserve Bank to deal on behalf of any person, including the Crown. Why do we want the Reserve Bank to be able to deal on behalf of any person? That means the legislation is providing for the Reserve Bank to become a significant currency trading agent. I am a person under the law. Presumably, if I wanted the Reserve Bank to deal in foreign currency on my behalf, this provision would allow that to take place. The Reserve Bank could do that.

I am curious as to why the Government wants the Reserve Bank not only to be able to deal with any person, including the Crown, which the current law provides for—and I have no problem in dealing on behalf of the Crown, because, after all, the money the Reserve Bank is playing with is really Crown funding at the end of the day, although technically there are probably issues around what is Reserve Bank money and what is Crown money—but also to be able to deal on behalf of any person. I think it would be of interest to learn from any further Government speakers on this first reading as to why that provision has been put in there.

I also note in clause 7 that the Reserve Bank will now be required to hold higher levels of foreign reserves than in the past. Presumably that relates to this new provision in clause 6 that enables the Reserve Bank to become a greater currency trader than it is at present. Again, I think the select committee will want to examine these clauses. I am not sure there are many knowledgable people in New Zealand who argue that the Reserve Bank should get into more currency trading than it has. Sure, banks like that of Singapore with massive reserves behind them have been, perhaps, fairly successful in intervening in currency markets, but there are huge risks around that, so National will want to learn a bit more about clauses 6 and 7.

Another clause we will want to learn more about is clause 10. Clause 10 inserts new section 68B, which will enable the Minister to give the Reserve Bank directions. It is not immediately clear to us why this should be required in relation to the bank’s regulation of finance companies. One would think that the regulatory framework would be something independent of political interference. It is not immediately clear to us why the Government sees the need to be able to direct the Reserve Bank in respect of Government policy in this regard.

We will want to learn more about this, because the last thing we need is what is meant to be an independent regulatory environment becoming one that the politicians—the Government—can start to meddle with. We know from past experience in this country that when Governments meddle in what are meant to be independent regulatory frameworks, they have not produced great outcomes. I am not being partisan; I think our history shows that Governments from both political flavours have meddled in the past to the detriment of this country. We will want to learn more about why the Government wants that power to give directions about Government policy objectives, as we have concerns about that.

Although we want to learn more about certain of those provisions, National does support the overall policy intent of what this bill sets out to do. However, at the select committee we will want to explore some of those matters that cause us some concern.

Hon LIANNE DALZIEL (Minister of Commerce) : I am very pleased to speak in support of the first reading of the Reserve Bank of New Zealand Amendment Bill (No 3). This is the first bill to make it to the House arising from the review of financial products and providers. This extensive project, which has encompassed a task force and nine discussion documents, has followed what I would describe as a quality regulatory design process engaging fully with important stakeholders, from framing the problem definition to designing the policy response, and that is a good process.

As the Minister who inherited the process, I cannot take any credit for where we are now. In fact I would like to remind the House that this review of the financial sector began under the very able leadership of the Hon Paul Swain, who not only gave teeth to the Takeovers Panel but also gave it something to chew on as well, in the form of a Takeovers Code. Then we had the securities markets regime providing for registered exchanges and the introduction of a co-regulatory regime that sees NZX and the Securities Commission undertaking their respective roles in a way that gives confidence to our capital markets, both domestically and internationally. Then we had the changes designed to enhance investor protection, improved disclosure provisions for investment advisers, and stricter rules on insider trading and market manipulation. These take effect at the end of February next year.

Then we had the review of financial products and providers. This had its genesis in two pieces of work. As a new Minister of Commerce in 2002, I raised the alert concerning the first work, which led to the review of financial intermediaries; and the second, directed by Dr Michael Cullen in 2005, was on the regulation and performance of New Zealand’s financial institutions, which led to the review of financial products and providers.

This bill derives from the second of these, and from the work that the Minister of Finance directed. When this resulted in nine discussion documents all being released to the market at the same time, I thought the market would balk at the amount of work that this required, but, to give the market credit where credit is due, it came to the party. Not only did the major stakeholders provide support in their development of the discussion documents themselves but also they provided detailed submissions enhancing the quality of the decision-making process. I pay tribute to all the industry groups, from banks to credit unions, from financial advisers to insurance brokers, and from finance companies to building societies. Out of their contribution we distilled some important principles that we see in the bill tonight.

Confidence lies at the heart of everything we are doing to enhance the regulatory framework for our non-bank deposit taking sector. This is the first of the bills applying to that sector and it sets up the framework for registration and prudential supervision to be undertaken by the Reserve Bank. Non-bank deposit takers will continue to be subject to the securities regime, and trustees will continue to be front-line supervisors in that regard. A bill to be introduced next year will enhance that supervisory regime.

Dr Cullen has already outlined to the House the key provisions of the bill. All I want to say is that the Government’s decisions did not arise from the finance company collapses. However, the need for this legislation is highlighted by them. People could be forgiven for thinking there is no existing regulatory framework to protect the interests of investors in finance companies if all the information they are relying on came from the media. It is very important to recognise that it is the existing framework that we are strengthening. We are not starting from scratch.

The approach the Government has followed has been welcomed by the broad range of sectors that make up our financial sector. I am sure that the bill will attract submissions from those who may dispute the cost-benefit analysis of certain aspects of the prudential requirements imposed by the bank on a wide range of financial institutions, ranging from finance companies to building societies and credit unions. Ministers considered these issues very carefully and felt that the balance fell on the side of exemptions being allowed only to the very small deposit takers from the credit rating provisions. I am sure that the select committee will listen very carefully to all of the submissions in that regard.

Finally, for those who say “Bring in these provisions now. Make credit ratings compulsory right now.”, I just make the point that there is absolutely nothing stopping any finance company from getting a credit rating should it choose to do so. If investors want that level of assurance from their finance companies, then they should demand that they do so. This is actually an area where the competitive market does work.

The Government has adopted a very good process in bringing this bill to the House. I am very pleased that other parties are supporting this bill as part of the review of financial products and providers, and I commend the bill to the House.

Hon BILL ENGLISH (Deputy Leader—National) : As the previous speaker said, we will be supporting the bill. In sending this kind of bill off to a select committee we should be straight-up about why it is here and what we can expect it to achieve. Clearly, we are in an environment where there is stress around the non-bank deposit takers, many of whom, of course, will not do any better as a result of the passage of this bill because of the losses they have already incurred. I have every sympathy with them, but it is probably important for those people who in the future will be considering the investment of their life savings—and I share with the Minister the hope that there will be more of that—to know that this bill will not necessarily secure investments in the future against the risks that are in a market.

I venture to suggest that there was a time when we stood in this House and passed other law related to security for investors, to transparency, and so on, which had the effect that I am sure this law will have, which is that some people, with some investments, will have more security because there will be more transparency, but we cannot contain people’s urge to get better returns. To get better returns they have to take bigger risks.

This legislation will shift the boundary of relatively secure and transparent investments, but it certainly will not do away with risk in the market. It happens that risks around finance companies have eventuated, and, in fact, just about all of them—such as finance companies’ lack of capital, lack of transparency, related-party lending, and published financial information that was either wrong, did not make sense, or could not be understood—will still occur. So Parliament needs to bear in mind that applying this framework to non-bank deposit takers has some merit, but we ought to be careful that we do not mislead investors that there are such things as high-return, risk-free investments. They simply do not exist.

This will reduce the risks and, therefore, probably the returns associated with non-bank deposit takers. Of course, there is a whole range amongst this group. There is the venerable institution of the Southland Building Society, which is expanding even to the Deputy Speaker’s part of the country and opening branches in Auckland. No one could accuse the Southland Building Society of taking risks or of having a strategy focused excessively on growth, but it will be captured by this alongside the finance companies that have failed so spectacularly in recent times. So let us not pretend we are taking away risk in the market; we are shifting the boundary and doing it in a way that, I think everyone agrees, is a step forward, but let us not pretend it is much more than that.

The second point about this is that although these mechanisms help with security of investment, they do not guarantee it. Just because people put their money into an entity that has a credit rating, it does not mean that it is safe from loss. We have venerable institutions such as UBS, a worldwide, top-ranking bank—whose future now appears to be in the hands of one of the Gulf state Governments, which has injected $10 billion into it in the last couple of days—on the basis of products that probably had good credit-ratings. In fact, some of them have had AA ratings, which should be regarded as quite a secure investment.

It is ironic that the time when we are putting this bill through—given that credit ratings are probably the core measure in it to reassure investors—is exactly the time when credit-rating agencies are coming under the kind of scrutiny that applied to auditing firms after the Enron collapse. I hope that the select committee will have the opportunity to get some expert opinion on it. I do not want to imply that credit ratings are a bad thing; simply, they are no more reliable than the entities that give them, and those entities come under their own pressures and face their own incentives. It is no particular guarantee.

The third point I want to make is to back up the comments made by my colleague Dr Lockwood Smith, and that is to do with the ability of the Minister to give a direction to the bank. As far as I know—the Minister might be able to correct me—the legislation has not permitted that kind of thing in the past. Has it?

Hon Dr Michael Cullen: No, because this is much more around the prudential supervision.

Hon BILL ENGLISH: Yes, it is around the prudential supervision. Of course, we need to understand just what the Government might have in mind as the kind of direction the Minister could give. That is in the context of a concern that raised itself about 12 months ago, I think, here in New Zealand around the role of the Reserve Bank. It is my understanding that it is relatively unusual—not unprecedented, but relatively unusual—to have the prudential supervision and the operation of monetary policy in the same entity, as the Reserve Bank does.

In a small country it is probably what is done and what one would expect, but it means that there need to be very clear understandings about how the two might interact. Those understandings—at least in my own mind, small as it may be—were blurred somewhat when the Governor of the Reserve Bank, I think earlier this year or late last year, gave the impression, at least, that he was able to connect the two. That impression may have been created by the amount of commentary telling him he should, which was the idea that he should use the asset ratios that are designed for prudential purposes as an additional tool for making monetary policy more effective.

I do not think he did in the end, and if it was hinted at, then I do not think it would have made much difference in any case. But I think it should be quite clear that the two functions are separate and that the prudential supervision regime is there for the purposes of the security of the financial system—that is its unqualified objective. The conduct of monetary policy should be different.

So if a question were raised about the ability of the Minister to give direction, it would be as to whether, with the completely understandable pressures that come on a Minister such as the Minister of Finance, he or she might be tempted to use that power in some way that would assist political objectives rather than economic objectives. I would hope that in the select committee we will hear a compelling case for that particular amendment. If it is not compelling, then it may not be worth taking the risk of creating any kind of confusion.

After reading through the regulatory impact statement I think the Government has actually made a few wise choices there. The statement sets out a number of alternative options—for instance, to do with minimum capital. It looks to me that it has chosen the right option there. The other one is restrictions on lending to related parties. It would be easy to be panicked by the behaviour of some of the finance companies into having a strict and inflexible regime around restriction on lending to related parties. From what I can see, the Government has chosen the option that is probably the most flexible and gives people the chance to make their own choices and face their own risks. I hope those aspects of the bill, which appear to have the agreement of most of the people who have been consulted, will stay intact.

I suppose the final point is that this is probably about the best that Parliament can do to deal with the distress of all those people who have lost money in finance company collapses. There never has been an easy option, as the Minister of Finance has pointed out, to help people recover their money after they took their own risks. But this is a genuine attempt by Parliament to ensure that in the future there is more transparency and some greater degree of security, particularly for people who regard these institutions as more secure. Now, they happen to be wrong, but this bill will give some body and content to the sense that if someone is advertising in the market as a financial institution and is taking deposits, then that person has met some minimum requirements that did not exist before. We will support the bill.

R DOUG WOOLERTON (NZ First) : New Zealand First members support the Reserve Bank of New Zealand Amendment Bill (No 3), and do so because we think the bill is long overdue. We understand absolutely that the risk in investing can never be removed totally, but we have been far too lax in this regard. It is timely that at least some attempt is made to bring some surety to investing and that there are, shall we say, some messages from the Government of what is and is not reasonable risk.

It is all very well for financially literate people—as many in this House are—to say that one should not be investing in those sorts of investments, but people who are out there working hard in other occupations are not always aware of the risks. If they were going to be moneylenders, they would involve themselves. If they were going to be bankers, they would involve themselves. But they are not, and, unfortunately, it is often the innocents, who are busy doing their daily work and who expect their advisers and the people who help them with their investments to be halfway honest, who too often take advice without checking it or even going further than one adviser, when it comes to taking advice on investments.

This bill attempts, in some way, to redress that situation. New Zealand First absolutely applauds the bill and says it is long overdue. Now, it is long overdue for us to go home, Mr Deputy Speaker, so I will stop right there.

TIM GROSER (National) : I am much inspired by the final comment of Mr Woolerton. I will try to keep this mercifully brief, with just a few observations. In supporting—

R Doug Woolerton: I was trying to set a precedent.

TIM GROSER: Exactly, and we are happy to follow that, I can assure the member—on occasions, at least. When it comes to anything to do with the Reserve Bank, the thought that I—and no doubt many people—have in mind is just what a vital institution a well-functioning, independent reserve or central bank is.

I recall the legendary Australian Secretary to the Treasury John Stone, whom I knew in a certain sense when I lived in Canberra in the late 1970s. He was the author of the “Stone Age” in terms of Australian economic literature and made the point that many a prince, many a country, and many an empire has fallen because they believe that sound money and sound financial institutions are the matter of interest only to dry-as-dust financial people. Thinking about the many pressures that might bring down Robert Mugabe, I suspect that hyperinflation is a better bet than external political pressure.

We have a very good financial system but it is not perfect. We always have to cope with the tendency towards financial disintermediation. If one sets in place any regulatory framework, one puts in place at the same time, unintentionally, a set of incentives to create new institutions and to find new ways around the regulatory framework.

I fully accept the Minister’s statement that the political origins of this bill predate the latest crisis amongst our finance companies, consequent upon the collapse of the subprime markets around the world. It is just a never-ending fight that goes on once every 5 or 10 years between regulators, people, and the marketplace. We are dealing with that all the time.

Mr English was absolutely right to say that one can never eliminate risk. Any attempt to do so actually just transfers the risk to the taxpayer. That is what the literature about moral hazard is essentially all about. I remember reading years ago about one of the senior Bank for International Settlements figures. When asked by a banker who was in serious trouble to define just how far the bank would go towards bailing him out, he replied: “I will discuss that with your successor.” There is a limit to which any regulatory framework can deal with risk. Risk is an essential part of the framework.

We will support this bill going to the select committee. We have a number of questions. I am intrigued to understand a little more of what I call the “peashooter” provisions. That is a reference to The Economist’s description of the first intervention in foreign exchange markets in 20 years by the Reserve Bank. I do not think it is a major issue, but I want to understand better, along with my colleagues, precisely where the lines are in terms of ministerial direction, for the reasons I think Mr English was suggesting.

In due course, the Reserve Bank will sell those holdings, if it has not done so in complete form already. It will tell us that it has made a marvellous profit. I suggest that that would not necessarily prove that it was a good intervention, any more than if Dr Cullen took along $100 to Sky City on Friday night and made $120. That would not prove that he should be there as a professional gambler. These are some of the questions we have in our mind that we would like to explore at the select committee.

In terms of the new disciplines foreshadowed for non-bank deposit takers, again I see no particular purpose in repeating the main provisions of the bill. They have been discussed by a number of speakers. We start from the basis that we have a sound system. That system has now been subjected, essentially, to two international crises. One of these occurred in late 1997 and spread into 1998. It was rather erroneously called the Asian economic crisis. I say “erroneously” because although it started with the Thai baht, the contagion process reached Russia and Brazil before, finally, stellar work by Rubin and other major players in the international finance system managed to hold the thing in place.

New Zealand performed pretty well, although it did have major implications at the time for, first, our exchange rate and, second, the final, frankly overdue, junking of the—I have forgotten the technical term of the targeting system used at the time.

Hon Dr Michael Cullen: MCI.

TIM GROSER: Yes, that is right; the monetary conditions index. We got our exchange rate depreciation through the back door, because the international financial markets basically misread New Zealand’s dependence on Asian markets.

Hon Dr Michael Cullen: MCI.

TIM GROSER: That is correct.

We will obviously still have risk in the system no matter what happens to this bill when it has been processed professionally through the select committee. The tragedy is that it is not just in respect of electoral finance that the law of common sense does not apply. There is a rather nasty phrase that we all know: “There is nothing faster parted than a fool from his or her money.” It is a very cynical phrase but, unfortunately, we cannot legislate for common sense. All we can do—and this is the purpose of the bill, quite clearly—is set up a framework for better prudential controls of this currently poorly regulated sector, though it is, of course, regulated to a certain extent; provide better information and better public disclosure; and hold the directors and management to account. I am happy to participate in a positive way, and the National Party will be supporting this legislation at its first reading.

HONE HARAWIRA (Māori Party—Te Tai Tokerau) : Tēnā koe, Mr Deputy Speaker. Kia ora tātou e te Whare. In July this year the Waitakere Wellbeing Summit held a hui at the Kelston Community Centre to consider a simple question: do all families in Waitakere have enough to live on? It found that 19 percent of people living in Waitakere—some 27,000 people—are living on low incomes. But even amongst the poor it noted disparities. Although it found that some 15 percent of Pākehā were categorised as low-income earners, for Māori that figure rose dramatically, to 25 percent, and it rose even higher, to 27 percent, for Pasifika, and, surprisingly, to 32 percent for Asians. The focus of the hui was to think of ways to help families who are in a state of multiple disadvantage and who, therefore, are at the greatest risk of extreme hardship.

Well, we know all about the impacts of the current financial situation on citizens here in Aotearoa. I remind the House today that the level of household debt in the last 7 years has rocketed by a massive 73.6 percent. Consumer debt is growing larger by the day, the consumer price index has increased by 1.8 percent, house prices have not just gone through the roof but settled above the cloud layer, and prices for basic foodstuffs have shot up.

The costs of getting finance are ever increasing, and, to no one’s great surprise, dodgy finance companies, which are playing fast and loose with everybody else’s money, are going belly up as well. Over the last 18 months, in fact, 12 such companies have collapsed, thus creating crisis and chaos for more than 50,000 investors and costing $1.3 billion in debenture deposits. To come back to that hui in Waitakere, I note that one of the recommendations was to regulate lending institutions and lending rates, particularly in the non-bank financial institution sector—retail money lenders and loan sharks. There is that word again; it is a favourite of my whanaunga Dover Samuels.

This bill is supposed to introduce changes so that deposit takers, including non-bank deposit takers like finance companies, building societies, and credit unions, will have to take greater care of the finances of their investors by getting a credit rating from an approved rating agency. I cannot help but see the irony in the latest finance company to bite the dust, Capital + Merchant Finance, which went bust under the slogan “Invest with care”—not that the 7,000 investors who are owed about $190 million have much to laugh about. Certainly, these 7,000 investors thought they were investing with care by putting their hard-earned cash into the country’s 13th largest finance company, which had a high profile through its sponsoring of Television One’s news, until it all went haywire last week, along with the Christmas plans of 7,000 households.

The Māori Party supports the movement that this bill makes to establish regulations for deposit takers. We support the maintenance of minimum capital levels and capital ratios, limiting exposure, and maintaining risk management approaches in line with good corporate governance standards.

The McDouall Stuart 2007 report on the New Zealand finance company sector, Flow and Ebb, set out a clear context for the volatility that has affected finance companies over the last 18 months. When we consider that this is a sector with more than $10 billion of investor money, we see that it makes sense for Parliament to try to minimise financial collapse. Of course, when we consider that this sector has more than $10 billion of investor money, we see that it also makes sense for Parliament to express concern about the impact of such volatility on whānau, on the economy, and on general well-being, and to do all that it can to ensure that care is taken in providing for the future.

There is a lot of talk around the easy cash market about the impacts of financial collapse on mum and dad investors, so I thought I would tease out that mum and dad concept a bit more. It occurred to me that one of the greatest investments any parents can make for their descendants is in reviewing their financial, emotional, genealogical, and physical circumstances when it comes time for them to get married.

Back in the old days, partnerships forged through marriage were regarded with enormous significance. Peace and the settling of grievances, the strengthening of whakapaka, political solutions, and land rights were all factors that might be considered by elders in pledging their descendants to another hapū or even another iwi. Whānau would look into the other party’s background, hold negotiations, and debate with the whānau of the other party, so that when the deal was finalised everyone would be aware of the legacy being created by the union.

In much the same way, a whānau considering making financial investments should also carry out the same kind of thorough investigation and analysis in order to guarantee the future health of their investment. But to do that, investors need to have better information from which to make strong decisions.

Too many investors, Māori included, invest their savings in finance companies without realising the risk they are exposed to due to the fact that the finance companies do not always have the proper rules and standards in place to safeguard their investors properly. The common misconception is that standards are in place and that proper monitoring has occurred, but that is not so. As a result people, many on low to modest incomes, have lost their hard-earned savings. We can blame individuals for not doing their homework, but often we find that some people are simply being pushed to live beyond their means.

It is also a matter of knowing whether the claims made by financial advisers actually stack up, like companies saying that they are underwritten when they are not; that they are guaranteed by Lloyd’s of London when they are not; or that investors will get their principal back even if the company collapses, which, of course, they do not. The real test is not so much about whether investments are safe. All investments carry a measure of risk, and the greater the promise the greater the risk. The test is whether the investing public can believe that the rules of the game are fair.

This is where recent research from Massey University warns us that legislation like this is needed, quick smart. Dr Chris Malone from Massey’s college of business says that a failure to quell investors’ fears and help remaining financial institutions survive could lead to negative impacts on other sectors, and that restoring investor confidence is critical to cutting the circuit of panic.

So the Māori Party welcomes this proposal for a sound and efficient financial system and for putting measures in place to avoid significant damage to that system in the event of financial company failure. Just as our tūpuna did all the homework necessary to ensure a good marriage, so too should we carry over those same principles to ensure that our own Reserve Bank can effectively protect the New Zealand financial system. The Māori Party will support this bill at its first reading. Kia ora, Mr Deputy Speaker. Thank you very much.

RODNEY HIDE (Leader—ACT) : The ACT party rises to support the Reserve Bank of New Zealand Amendment Bill (No 3) going to the select committee. We listened most carefully to Mr Groser’s remarks, and concur with him that there is a difficulty when people invest money. Particularly where they are getting high returns, they have to be accepting of the risk. I think the Government fully understands that. The regulation around securities is no easy matter, because it is very easy to find risk being shifted from the entrepreneurs on to the taxpayer. The select committee will need to study this legislation most carefully. But ACT certainly supports the bill being referred for consideration. Thank you, Mr Deputy Speaker.

  • Bill read a first time.
  • Bill referred to the Finance and Expenditure Committee.

Public Health Bill

First Reading

Hon STEVE CHADWICK (Associate Minister of Health) on behalf of the Minister of Health: I move, That the Public Health Bill be now read a first time. At the appropriate time I intend to move that the bill be referred to the Health Committee for consideration and that the committee present its final report on or before 24 June 2008. The proposed Public Health Bill will update New Zealand’s currently fragmented and very outdated legislation for public health and become the primary health statute. It will replace the Health Act of 1956 and the Tuberculosis Act of 1948. In fact that Act will be almost 60 years old at the passing of this bill. This bill is designed to improve, promote, and protect public health—truly a primary health measure. It sets out specific responsibilities for the identification and management of risks to public health, in particular those arising from communicable diseases—diseases that can be spread from person to person, such as tuberculosis, HIV and AIDS, and non-communicable diseases, such as diabetes and cancer, and also protections to the environment.

A particular new feature of the bill is that it provides for an all-risks approach—that is, an approach that allows for comprehensive management of all significant and emergent threats to public health. The Public Health Bill is an extensive piece of legislation, covering many facets of health. The bill will continue the traditional public health focus that we all know on communicable disease control and on environmental health issues, such as water quality, food safety, and drinking-water monitoring.

The bill will also expand on health emergency provisions in the Health Act, which currently deal only with epidemics of communicable diseases, to all actual, or even potential, public health emergencies, irrespective of the cause. We have all realised the need for an all-of-Government response to potential pandemics, and this bill takes account of changes in international travel patterns and threats, such as SARS and pandemic influenza, to enable the range of risks to public health to be managed at New Zealand’s own borders. New Zealand can be congratulated on its planning approach. The bill includes new provisions aimed at reducing risks of non-communicable diseases, which include the power to issue guidelines and to make regulations. There are several reasons why this new public health legislation is required.

Public health legislation has traditionally focused on controlling infectious disease and on ensuring a safe environment—for example, by preventing overcrowding in houses or providing for sewerage systems. The bill continues that focus, because it is important, but modernises and updates approaches and terminology to reflect the 21st century. In particular, the bill reflects that human rights and the notion of individual freedoms have advanced significantly since the Health Act was enacted some 60 years ago. The bill ensures that public health powers are exercised within a human rights framework. This means that individuals are informed about the applicable law, time frames are given, and the right to appeal is explicit. The bill balances the rights of the individual against those of the public interest to be protected from diseases or other threats to public health—a very important aspect. Where individual rights are limited in the public interest, the bill ensures that safeguards are provided—also a very important aspect.

The current Health Act tends to provide an all-or-nothing approach for managing risk. For example, in relation to communicable disease, the only power currently available is to detain a person with a communicable disease, which is a very old-fashioned approach. In contrast, the bill provides that public health risks are managed with responses that are commensurate in proportion to the risk. Throughout the bill, tiered options, or pick-and-mix menus, are provided depending on the disease confronted, and that is very important. Further action must be proportionate to the risk. The bill provides that the least restrictive option and alternative must be applied when managing health risk.

Another reason we need this new public health legislation is that our current legislation focuses on issues that were only current 50 years ago. Fifty years ago our public health issues were communicable diseases, such as tuberculosis and typhoid, and environmental health. Issues such as a lack of sewerage and non-sanitary buildings are a picture of long ago. Although communicable disease and environmental health are still important issues, we now face other threats to public health. For example, when the Health Act was drafted ships were the predominant mode of international travel. Now most people fly between countries, making the spread of conditions that are a very serious risk to public health so much easier. These changes in international patterns, and new threats such as SARS and the pandemic influenza mean that we need to be able to manage all kinds of risks at our borders. The bill updates and clarifies provisions to protect our borders, and expands the current emergency provisions that deal only with disease epidemics.

Heart disease and cancer are now the two leading causes of death in New Zealand, as well as being significant drivers of health expenditure. In order to reflect the significant impact that non-communicable conditions have on death and ill health in New Zealand, the bill has new provisions for dealing with non-communicable disease risk factors. Health has never been about hospitals and surgical volumes alone. The bill provides for the Director-General of Health to issue non-binding codes of practice or guidelines about non-communicable disease risk factors. It also provides the option of making regulations to reduce, or to assist in reducing, risk factors associated with communicable diseases.

As indicated, the Public Health Bill covers a wide range of public health issues, and is one of the foundation pieces of legislation that supports a modern health system. The Health Act has served us well for 50 years, but it is time that it is replaced with modern legislation. The Public Health Bill will enable New Zealand to be more effectively protected from all risks to public health. I am very aware of the high level of interest from public health officers, medical officers of health, and practitioners, in the introduction of this bill tonight. I commend the Public Health Bill to the House.

Hon TONY RYALL (National—Bay of Plenty) : The public will be wondering why Parliament is sitting under urgency to introduce legislation that talks about protecting our country from cholera, yellow fever, and the plague. I am reliably informed that the arrival of these diseases to our shores is not imminent, but new public health issues are asserting themselves in this new century. Severe acute respiratory syndrome, bird flu, obesity, and diabetes present actual or potential challenges to New Zealand’s public health. The updating of the Public Health Act is overdue, and much of this bill represents improvement on the 1956 legislation.

The bill moves beyond dealing with the prevention, monitoring, and control of communicable diseases such as TB and cholera. For the first time, it is proposed that public health laws will include measures to deal with non-communicable diseases like obesity and diabetes. This is a significant step, underplayed by the Minister. The National Party has considerable concerns about this proposal. In particular, we question the so-called voluntary codes, and the sweeping powers to regulate just about everything we do, that are hidden in clause 374. Parts of this bill smack of nanny State gone too far. Communities and individuals want to be empowered to make choices to achieve their goals. New Zealanders do not want to be told what to do by some central agency, and given no support other than to follow orders.

New Zealanders are fed up with this Labour Government interfering in their lives, and parts of this bill will hand control of many of our choices to the Wellington bureaucracy. Let me explain National’s concerns. The first is the issue of voluntary codes—the so-called voluntary codes. Clause 81(1) grants the Government the power to issue a code of practice or guidelines to a sector of a particular activity that the sector undertakes, where the Government believes “that the sector can reduce, or assist in reducing, a risk factor associated with, or related to, an activity. Clause 83 spells out what a code can provide. It includes, under subclause (2)(d), “the accessibility of specified goods, substances, or services to members of the public or to sections of the public, in particular, to minors:”; and under subclause(2)(e), “the ways in which specified goods, substances, or services are advertised, sponsored, or marketed (whether directly or indirectly):”. The Government also wants codes for the provision, under subclause (2)(f), of “the information to be given to consumers of specified goods, substances, or services, whether as part of any advertising, sponsorship, or marketing or as part of any packaging or labelling of goods or substances.”

These are wide-reaching provisions. Although the ministry must consult with industry representatives prior to issuing a code, the final decision will rest with the ministry. Further, the Ministry of Health will have to report in 3 years on the effectiveness of these so-called voluntary codes, and no doubt that will lead to enforceable codes. Our question to the Government asks: if these codes are voluntary and not legally enforceable, why are they included in the law? If these codes are to be voluntary and are not to be legally enforceable, why are they included in the bill? If this Government truly had no secret agenda, then voluntary codes would be just that—voluntary, and agreed cooperatively. Instead, we have a Trojan Horse where voluntary codes can, on the signature of a Minister, become compulsory.

Secondly, our concerns focus on clause 374, and on paragraph (x) in particular. This clause completely undermines the Government’s argument that there are no coercive powers for its food police. This clause allows untold regulation in the name of dealing with non-communicable diseases such as obesity and diabetes. Clause 374(x) states that the Government may regulate in any way for the purpose of “reducing, or assisting in reducing, risk factors … associated with, or related to, non-communicable diseases:”. A “risk factor” is further defined in clause 79 as “a thing or substance that, on its own or together with other things or substances or conditions, may, … give rise to, or increase the incidence of, non-communicable diseases … in the general population or in communities …”. Put together, that means that the Government has an unfettered ability to reduce any risk factors associated with any non-communicable disease. It has carte blanche to deal with that. This clause gives the Government breathtaking powers to regulate what we eat, what we see, and what we choose. For example, this clause will allow the Government to regulate what appears where on supermarket shelves. This clause will allow the Government to restrict the sale of fish and chips to adults only or to children accompanied by adults. This clause will allow rules being enforced in school tuck shops to be enforced in workplaces and homes throughout the country.

Bob Clarkson: You’d better hurry; this is under urgency.

Hon TONY RYALL: It is being done under urgency, but what is worse is that this provision, this sweeping regulatory provision, warranted fewer than seven or eight words in the Minister’s introductory speech. We also draw the House’s attention to clause 374(r), which allows the Government to halt at the border any products that it sees contributing to non-communicable diseases. Surely a Government must be able to achieve its goals for public health without telling its people how to live their lives or feed their families.

The Government tells us that industry is working very cooperatively with it. The Government claims great progress. If that is true, then these provisions are at best unnecessary or at worst Draconian. There is no doubt that obesity and diabetes are major challenges for our people and our health system. As National states in its health discussion document, encouraging individuals and members of at-risk communities to adopt healthier lifestyles can make a big difference. Besides increasing awareness about health issues, promotion should identify and target the sociocultural aspects of human behaviour. Our cultural hard drive has to alter so that healthy choices are preferred. A successful long-term approach will provide people with the education, skills, and desire to make healthy dietary and lifestyle choices, and stick to them.

People make personal decisions every day that affect their health and well-being—exercising, drinking, smoking, and eating. Although these choices may be shaped by public health messages and cultural experience, they are still choices that individuals are responsible for. The Government should be providing the information and support that people need to make healthy choices, instead of making those choices for them. Surely we must have a country that can achieve its goals for public health without telling its people how they have to live their lives.

National will support the passage of this bill to a select committee, but we make it very clear to the Government and the Ministry of Health that we are not prepared to countenance the unfettered regulatory power that this bill proposes to give central government.

Hon MITA RIRINUI (Associate Minister of Health) : I rise to support the Public Health Bill. The Public Health Bill is fundamental health legislation. It is extensive and it covers many areas of public health. The bill is designed to improve, promote, and protect public health. It includes provisions designed to manage actual and potential risks to public health, to give clear responsibilities and accountabilities, to ensure monitoring and reporting of public health risks, to give explicit emergency powers, and to avoid undue infringement of human rights and privacy.

A main feature of the bill is that it sets out the purpose, powers, functions, and duties of the various key players, including the Minister of Health, the Director-General of Health, the Director of Public Health, the district health boards, and the territorial authorities and statutory officers—namely, medical officers of health, health protection officers, and environmental health officers. The bill organises the key players into three levels of operation: locally, through statutory officers; regionally, through district health boards and territorial authorities; and nationally, through the Minister of Health, the Director-General of Health, and the Director of Public Health.

The bill contains provisions regarding health information, notification, and cervical screening. The health information provisions largely reproduce the Health Act, which defines and provides the routine information flows of personal health information, updates existing audit provisions, and provides for notification of specified conditions. Notification provisions include, for example, a duty on medical practitioners in laboratories to report conditions such as typhoid.

As will be mentioned in further detail in other speeches, the bill contains provisions relating to non-communicable disease risk factors. These provisions provide principles and non-binding codes for reducing non-communicable disease risk factors—for example, through improved nutrition—as well as legislate for a parliamentary report back on possible further legislative measures to address non-communicable disease risk factors. The bill also provides the option of making regulations to reduce, or assist in reducing, risk factors associated with non-communicable diseases.

The bill contains provisions to manage conditions posing a health risk. Communicable conditions such as HIV, hepatitis, and tuberculosis pose risks of infection to others unless appropriate steps are taken to prevent or minimise such risks. The current Health Act simply provides for the detection of people with notifiable conditions through the decision of the medical officer of health, with no time periods or appeal provisions specified other than that the person may be held until he or she is no longer infectious. In contrast, this bill aims to build on existing provisions in the Health Act and the Tuberculosis Act, within a human rights framework that includes explicit time periods and appeal provisions.

The bill also aims to provide a range of options—rather than only the detention option in the Health Act—for preventing the spread of communicable conditions that pose a risk to public health. Contact tracing involves identifying and seeking people who have been in contact with a person who has a communicable disease, such as tuberculosis, in order to prevent the further spread of the disease. The bill includes provisions that enable medical officers and medical health practitioners to undertake such contact tracing.

Local government already has an extensive public health role under the Health Act, principally in relation to environmental health—in other words, public health matters related to the physical environment, such as sewerage. The bill largely reproduces the Health Act functions of territorial authorities in relation to environmental health, with minor modifications to update and modernise the language. The bill introduces a new framework to regulate activities that may pose a public health risk. Industries that are regulated under public health provisions, such as camping grounds and hairdressers, will continue to be regulated in the same way as they are now. At some point in the future, and with consultation, the regulations will be revised to reflect the new framework, and consideration may be given in the future to whether other activities that pose a risk to public health should be regulated under the framework.

The bill implements an all-risks approach to emergencies by providing special powers that can be used to manage an actual or imminent public health emergency, irrespective of cause. This means infectious diseases, as well as emergencies arising from physical, chemical, or radiological factors. The border health protection provisions aim to prevent, reduce, or eliminate the spread of risk to public health at the border. They relate in particular to people and craft coming into or leaving New Zealand, as possible sources of infection. I commend this bill to the House.

JO GOODHEW (National—Aoraki) : I rise to speak on the Public Health Bill 2007 along with my colleagues. We will be supporting this bill going to the select committee, but as has been outlined by the Hon Tony Ryall it is with some misgivings. We have considered this bill and have looked into the bill and have many, many questions. The first of those questions must be why this bill is being considered under urgency. What exactly, after 50 years, requires it to be considered this year rather than next February? However, putting that aside, we will be supporting the bill as it passes, as we expect it will.

This bill will head in two directions in particular. The first direction is reviewing the current legislation—the public health legislation—and we know that it is woefully outdated. The second direction is looking at the promotion of public health, and that is where we get into, shall we call it, uncharted territory. That latter direction gives me and my colleagues some cause for concern. It is a little bit like the question, how long is a piece of string? We are very unclear, in reading this bill and in looking at it, just exactly what some of the provisions will encompass and what they will mean in the long run. I think that my colleague the Hon Tony Ryall hit the nail on the head when he said that when we take codes and, with the stroke of the Minister’s pen, put them into legislation, then we are providing a very powerful, powerful thing for the Minister to do. When we are talking about non-communicable diseases, then I can tell members that we have some cause for concern.

The purpose is all-encompassing and there is no doubt that when it comes to some aspects of that woeful, and now inadequate, 1956 Health Act, there needs to be an all-encompassing update of the legislation. But there are examples of the sorts of things that one would expect in a public health bill, such as the declaration of a health emergency, the assessment of the risks to public health, and the appointments of health protection officers or the medical officer of health that one might expect would be in the bill. Health information is one aspect that is covered in the newer parts of the bill. The access that health professionals will have to information is, I think, very topical right now, and it will be very interesting to get a very good picture within the select committee of how New Zealanders see that part of the bill working.

Of concern to us are the non-communicable disease provisions within the bill, which relate to diseases such as cancer, cardiovascular disease, and diabetes. There are some very broad and woolly statements in the bill. I will just explain to members what I mean by that and give the examples of these quite broad and woolly statements. The Director-General of Health, in exercising his or her functions, must take into account the importance of improving and enhancing the health of communities by addressing broad determinants of health, including risks factors. That is a very wide set of considerations. He or she must manage or eliminate risk factors by involving communities, sectors, and Government agencies. That is all of us. He or she must consider the well-being and mutual interdependence of families and their communities, including whānau, hapū, and iwi, promoting, maintaining, and enhancing the health status of the general population and communities. That is a pretty broad statement again. Lastly, he or she must also implement public health objectives through coordinated action. There is not much that cannot be covered by this bill, in other words.

It is here that we come to the codes of practice and guidelines, and, as has been outlined by the Hon Tony Ryall, the bill authorises the Director-General to issue those codes of practice or guidelines to a sector on a particular activity. That is all about, as has been outlined by the Hon Steve Chadwick, an all-risks approach. We have already seen an all-risks approach in the Health Committee quite recently. It was in relation to drinking water.

The last thing I will outline in my discussion on this bill tonight is in relation to the territorial local authorities and their particular responsibilities under this bill, because I have some concerns. The bill sets out the general powers and duties of territorial local authorities in respect of public health, and they already have some responsibilities in this area. It talks about the necessity for them to control nuisances. I was quite perplexed by the word “nuisance” and I wondered what this meant. Clause 166(2) states: “A nuisance may, without limitation, arise from or be constituted by any 1 or more of the following:”—and I was not concerned about these—“(a) buildings or structures: (b) land, air, water, or land covered by water: (c) animals, insects, or birds: (d) refuse or accumulations of material: (e) noise or vibrations: (f) emissions or discharge.” But then it got a bit trickier. Clause 166(3) states: “In particular, a nuisance may arise from or be constituted by any 1 or more of the following:” Now, there are paragraphs (a) through to (f) here, but I will not take the time over them all. I just want to tell members that amongst them are “(d) dirt or odour: (e) animal carcasses: (f) composting.”—they constitute nuisances. Under this bill a territorial local authority is required to regularly patrol or go looking for those particular nuisances. I just wonder whether they will be coming past my section, looking to see whether I am doing any composting, or whether there is any dirt or odour. I wonder whether they will notice, as I did, that there is a dead hedgehog down the back of my section that smells somewhat at the moment.

It may seem like I am being overly light about this particular bill, but I am saying that the select committee members will need to be very careful when we examine the bill, when we call for submissions, and when we hear those submissions, that we hear whether this bill goes too far. I believe there is a possibility that it will be too encompassing—that it will give too many powers to the Director-General and, by the stroke of a pen, to the Minister. Therefore the National members of the select committee will be very diligently listening to the people of New Zealand as they submit on this particular bill.

BARBARA STEWART (NZ First) : On behalf of New Zealand First I rise to support the Public Health Bill going to a select committee. I must admit that when I heard one of the previous speeches I actually wondered whether I had a copy of the same bill as that particular speaker. I have checked, and I definitely have the same bill, but my interpretation is quite different in many ways from that of the member. So I can see we will have a very interesting debate at the select committee.

This bill is not part of a conspiracy; it more than likely should have been completed a long time ago. It was not just deliberately put through under urgency in any conspiracy mode. I believe that the first reading is being completed at this particular time so that the select committee can get to work on the bill as soon as possible, after the adjournment. It is timely to update this legislation; it has not been done for some time. It is long overdue.

As other speakers have said, this legislation will replace the Health Act of 1956 and the Tuberculosis Act of 1948. By my calculations the Health Act is over 50 years old, and many aspects of life have actually changed quite markedly since its introduction. The Act now does not reflect contemporary public health issues or contemporary human rights and values.

This is important legislation, and the public of New Zealand and those people involved in the health area will be very keen to have some input into this bill. It is a pretty hefty piece of legislation—there are many, many pages there—and it covers aspects of health from the roles and responsibilities of various officials in the health system through to health information. It also covers reporting in cervical screening—and I must say that was an area I thought was rather settled now—management of conditions posing health risks, through to emergencies and border health. There is a high level of accountability within this particular bill. I was very interested to read that territorial authorities have an extensive role—principally in relation to environmental health, under which, of course, comes food and drinking water. The bill is an extensive update and, hopefully, it will have a similar life to that of the previous legislation. So it needs to be right. We need to make sure during the select committee process that we have everything absolutely right.

This legislation is important because it will become New Zealand’s primary public health statute. Fifty years ago, immunisation for many diseases did not exist. Some diseases that are relatively common today were previously unknown—and here we can talk about cancer and heart disease. The 1956 Act was relatively silent on non-communicable diseases. We all know that one of those diseases is obesity, and closely related to that is diabetes. Communicable disease control includes the controls necessary for HIV and AIDS, which were diseases that were not even identified in the original legislation. Today we have to take account of changes in international travel and of threats such as severe acute respiratory syndrome and bird flu, which are best identified at the border rather than having some sort of reactive response in New Zealand.

We also have to be concerned about some of the diseases that some immigrants are bringing into this country, and here we are particularly referring to tuberculosis. We have to be aware that the strain of TB that is now prevalent in New Zealand today is resistant to today’s drugs and can be only managed rather than cured, and that in itself is quite a concern to us. I think it would be fair to say that most New Zealanders believed that New Zealand was on top of all Third World diseases, but, unfortunately, the reality is that we are not. It is a fact that all of the guilty parties that are right here in this Parliament, and that have directed comments about xenophobia in New Zealand First, have, at the same time, opened the public purse to cure the Third World diseases that have been brought in—and I can see some heads nodding in agreement. We are told that there is a large number of TB cases in Auckland hospitals; in fact, some wards are dedicated entirely to TB, a disease that most New Zealanders believed had been totally eliminated here in New Zealand. So risks to public health do need to be managed, and managed very carefully. In New Zealand First we believe in the precautionary principle and we think it is of paramount importance.

I was very interested to read in the explanatory note of the bill that the risk management approach will be paramount in this bill, and, of course, we could see that in the epidemic preparedness legislation that we passed earlier in the year. The bill notes that this approach is going to operate locally through the district health boards and nationally through the Minister and other high-level ministerial roles. However, the last thing that most New Zealanders would want to see—and I know National members would agree with me, in this particular instance—is the construction of 21 different plans in 21 different locations. We accept that there can be some regional variations, but not to any great extent.

In New Zealand First we were quite interested, too, in the contact-tracing requirements. It is absolutely essential to have these provisions in place in order to identify and seek people who have been in contact with a person with a notifiable condition, to prevent the further spread of that condition, and, of course, to offer treatment. We had that situation earlier in the year in respect of the Zimbabwean refugees and AIDS. We actually believed that this would have been the current practice, but if it has not been legislated for, then it has to be.

We were very interested to read in the bill that the following activities are regulated by the Health Act, and that they will continue to be regulated under their current regulations in the bill. It is a pretty diverse list, from camp grounds, to hairdressing, to burials and funeral directors, to needle and syringe exchange programmes, to the manufacture, import, and assembly of microwave ovens, and to the business use of plastic wrapping. We understand that after this bill is enacted, these regulations will be reviewed under the new framework that is being provided in the bill. We also understand that no additional activities are included in the bill, but any that might be in the future—for example, tattooing—will be included only after a consultation practice. We would also have liked to see sun beds and sunscreen included in the consultation process.

In conclusion, I say this is a very interesting bill with many different parts that will no doubt be very carefully examined by all of the members on the select committee. I must say we all expect the Government to be adequately prepared for any public health crisis, and this is an attempt to update this particular legislation and to be prepared. New Zealand First supports this legislation, and we look forward to receiving submissions from all of those parties that are going to be affected by this bill.

SUE KEDGLEY (Green) : It seems that there will be a consensus of support right across the House on this Public Health Bill. The Greens are delighted that this is so, even though it is an incredibly complex bill of 259 pages dealing with all sorts of minutiae, as the previous speaker said, from hairdressers and shops to microwave ovens, operating camping grounds, mortuaries, and many other details. Nevertheless, it is an important bill and we are particularly pleased that this bill, as it says in its explanatory note, is addressing non-communicable diseases and environmental health issues—public health issues. It points out that the major causes of population ill health today and the major drivers of health care expenditure are those broadly categorised as non-communicable diseases such as cardiovascular disease, diabetes, and so forth. We are very pleased that, for the first time, this public health legislation will address these major causes of population ill health and disease in New Zealand today, although it is interesting to note, having said that, that only five slender pages out of an almost 300-page bill deal with this particular issue—that is, the issue of what we loosely call non-communicable diseases.

It is particularly appropriate that this bill is coming before the House now, because the Health Committee has spent a year or more inquiring into the obesity and type 2 diabetes epidemics. We have heard compelling evidence over the last few years that the key threats we face in New Zealand—as elsewhere, particularly in the Western World—are from the epidemics of obesity, type 2 diabetes, and so forth. We were informed by experts that if we do not deal with these epidemics, these diseases will overwhelm our health system. We had many experts warning that if we do not change the eating habits of young New Zealanders, in particular, then young New Zealanders will be the first generation of children to die before their parents. We will not have a lot of money left to deal with waiting lists and other things because we will be spending all of our money trying to cope with the consequences of obesity and type 2 diabetes. That is the evidence we have heard over the last couple of years in the select committee.

The reason for those epidemics is quite simply that we have created an environment in New Zealand where unhealthy foods are more heavily promoted, more available, and more accessible than healthy foods. There are overwhelming commercial pressures on our children to eat unhealthy food. The vast majority of submitters to the select committee called for changes to that environment. They said education alone simply would not work, any more than education alone worked in terms of reducing smoking in New Zealand. It is not going to work. Changing the whole environment is like turning around a supertanker.

The overwhelming majority of submitters said that we needed to change the environment and that education alone would not work. They said: “Please, put in some provisions or regulatory powers to enable the Government to restrict, for example, the advertising of unhealthy foods to children and to put in some marketing restrictions.” The overwhelming majority of submitters called for these provisions. So we are delighted that there is a very minor provision in the bill, which Tony Ryall referred to as that insidious paragraph (x) in clause 374. Thank goodness for paragraph (x), because that provision was what the vast majority of submitters and the majority of members of the select committee called for. Thank heaven that in 2007 in this Public Health Bill, which is supposed to be primarily dealing with non-communicable diseases—the major cause of population ill health today—we have one little paragraph, paragraph (x), which will allow us to look at this particular issue.

It is interesting that the National Party members departed from the rest of the select committee, who said: “Yes, this is an overwhelming problem that is going to bankrupt the nation and overwhelm our health system, and all our taxes are going to go up because we are going to have to cope with the consequences of obesity and type 2 diabetes if we do nothing, and if we do not change the environment.” But the National Party said: “Yes, we agree with all that, but education is all we need. All we need is a little bit more education and everything will be fine.” That is nonsense. It is the do-nothing approach. It is basically saying “Let’s do nothing. Let’s allow the food industry to have absolutely unfettered powers to target our young children with unhealthy food. Let’s have no restrictions on the ability of the food industry to make profits from wherever they can.” Instead of being honest and saying “Our approach is that we do not want any restrictions on the food industry.”, the National Party reframed the debate—as public relations people would say—and instead they said: “Oh, we don’t want nanny State. We don’t want any restrictions on the advertising of unhealthy food to children, because that would be nanny State.”

Perhaps the next speaker from the National Party could explain to me whether the regulations that we have to wear seatbelts in cars are nanny State? I do not see National Party members standing up and saying they are an outrageous imposition and nanny State. We have restrictions that say we cannot sell cigarettes and alcohol to children in schools. Is that nanny State? Should that be allowed? Surely by the National Party’s logic we should get in there and sell alcohol and cigarettes, because otherwise it is nanny State. It is a very clever reframing of the debate, but I think people need to know that all this is about, and what the debate will be in the select committee is whether we should allow the food industry the unfettered ability to target our children with unhealthy food, and continue the problems we have such as the obesity epidemic and type 2 diabetes. National members will say: “Oh no, it doesn’t matter if all our children are going to end up with type 2 diabetes, as long as we do not restrict the ability of the food industry to promote unhealthy food to children.” [Interruption] We are delighted with paragraph (x), which I can see is going to be the major issue of contention in the select committee.

However we do have some concerns with this bill. We are concerned with the powers in this bill that will enable schools to be closed to, or school attendance restricted for—basically—unvaccinated children. We think that there are significant issues here about the freedoms of people, and particularly, in this case, of unvaccinated children. We think there is a debate to be had, and we think that the vaccination groups in New Zealand will be very interested in some of the provisions in this bill. We will expect the National Party to support us strongly over these concerns. National wants maximum freedom and the minimum of intervention in our lives, so I am sure it will support us over those particular concerns. Having said that, we are very pleased with this legislation and like, I think, every other party in this House—although I am not sure of ACT, but certainly, the overwhelming majority of this House—will be supporting this bill. We look forward to its debate in the Health Committee and we look forward, in particular, to debating clause 374(x).

HONE HARAWIRA (Māori Party—Te Tai Tokerau) : Tēnā koe, Mr Speaker. I say tēnā koe to Mr Henare. I would like to congratulate the previous speaker on the most intelligent dissertation on this topic today.

Three months ago the Business Council for Sustainable Development did a survey that showed nearly 80 percent of New Zealanders believe that the public health service has worsened over the past 5 years. That same poll predicted that on the current rate of spending on health, at $11.6 billion a year, by the year 2050 the Government could expect to be allocating more than $21 billion a year to help. In the context of that high public interest and exorbitant expenditure, two other reports were issued that brought the matter to a head. The first was a comprehensive analysis monitoring the health of New Zealand children and young people, which concluded that children with chronic conditions, long-term disabilities, mental health issues, or conditions traditionally managed in the primary care and out-patients setting, such as diabetes, epilepsy, and chronic renal failure, were not being adequately captured by routine hospital or mortality data. That report also said that traditional data failed to capture issues of cultural identity or the role this played in health and well-being. Following on from these conclusions, Te Roopu Rangahau Hauora a Eru Pōmare tabled another report from their series, Hauora: Māori Standards of Health IV—A study of the years 2000-2005. As Dr Papaarangi Reid and Bridget Robson explained very clearly in the very first sentence of their report: “Māori have the right to monitor the Crown and to evaluate Crown action and inaction.” This is a right that derives from the indigenous rights of tangata whenua enshrined in Te Tiriti o Waitangi and embodied in the United Nations Declaration on the Rights of Indigenous Peoples.

So the stage is firmly set, from all perspectives, for this bill to start the process of legislative review for the effective management of public health. The explanatory note states that the bill is designed “to improve, promote, and protect public health” in order to help attain “optimal and equitable health outcomes for Māori and all other population groups.” A worthy purpose indeed—on that statement alone the Māori Party could support this first reading of the Public Health Bill.

So let us just see whether this bill achieves that goal. But, firstly, I want to put the statement made by Dr Reid and Bridget Robson into context. As tangata whenua our primary right to self-determination is understood in our capacity to be recognised as indigenous peoples. But it also extends to a sense of duty, of manaakitanga, to ensure the well-being of all people living in our territories. This means, logically, that Māori must monitor health, including any persistent disparities between Māori and non-Māori. Secondly, the urgency for Māori to monitor Crown performance is required by the consistent disparities in health outcomes, the ongoing exposure to determinants of ill-health, the overwhelming lack of responsiveness of the health service, and the ongoing under-representation of Māori in the health workforce. So the Māori Party shares with Māori health professionals the priority that must be given to a focus on Māori as a population group, and our collective responsibility for te ōranga o tō tātou whānau.

We must care about these longstanding inequities. We must not accept normalising and tolerating such unfair and unjust deficiencies of a health system meant to operate in everyone’s interests. We must care about Māori approaches and models being supported across purchasing environments. We know that the Māori health sector has had problems with the population-based funding models promulgated by district health boards and primary health organisations, because these models have insufficient resources to truly support stand-alone Māori or Pasifika primary health organisations. We know, too, that other determinants impact on whānau ora. Poverty, income, low-paid employment, all forms of violence, educational underachievement, dealings with the criminal justice system, income support, impoverished housing conditions, and isolation and alienation from other whānau members all impact on whānau well-being.

We have a major challenge in front of us. In particular, all research pathways lead to three major challenges that contribute to ethnic inequalities in health: differential access to specialist, general practitioner, and specialist-nursing services, and inadequate screening leading to slower pathways through health care; differences in the quality of care received; and differential access to determinants of health, such as the exposure to other risks like unsafe workplaces, substandard and crowded housing, and environmentally unsafe living conditions. But on top of that we have specific instances in Aotearoa linking institutional racism and interpersonal racial discrimination as a key factor accounting for much of the inequality between Māori and others. Evidence is relentlessly paraded through this House that shows that Māori receive lower levels of health services and poorer quality of service. Other evidence, including Ministry of Health analysis of the New Zealand Health Survey, confirms that discrimination may be an important cause for ethnic inequalities in health.

Yet, as unbelievable as it sounds, the Ministry of Health has still not filled the vacancy that has existed for much of this year in the appointment of the Deputy Director-General Maori Health. Given the quality of the applicants, the Māori Party finds it astounding that no appointment has yet been made. Alongside that, the public health unit itself has been diluted and its focus dissipated across the ministry. It now stands under the rule of the strategy directorate, rather than maintaining specialist public health leadership in one area. The statutory requirement to carry out public health advisory functions, as set out in section 3E of the Health Act of 1956, is thus compromised by organisational impediments. It remains to be seen how this bill will achieve equitable health outcomes for Māori or, indeed, manage the risks of emergent threats to public health without having the organisational structures in place to address these inequalities.

The desired change is not impossible. We have not reached the point of no return. All it would take to make a big difference would be to focus on the issues of significance to Māori, to focus on Māori development, and to guarantee a specific focus to address and eliminate inequitable health outcomes for Māori. A big part of making a difference would be to instigate the mandatory collection of ethnicity data and mandatory analysis by ethnicity at all points throughout the public health sector, including planning and management. We note, of course, the correlation with the Monitoring the Health of New Zealand Children and Young People report, which was also concerned about the paucity of data. I said before that we have not reached the point of no return, but we do not also want to be so hands-off that we drift off down a one-way street that ends up in a policy cul-de-sac, closing off all possibilities for progress.

It gives us huge concern that despite the upfront, stated objective of equitable health outcomes for Māori, there is nothing that specifically gives weight to that commitment. There has been no consultation with Māori. There is no commitment in the Public Health Bill to Te Tiriti o Waitangi. There is no explicit focus on inequities or Māori health development. It appears to be another case of “Do what I say, not what I do.” In fact, other than the purpose statement at the front of the bill, Māori seem to be completely absent from the entire bill. We are prepared to let this bill go to the select committee, as we are keen to enable Māori health collectives and professionals to have their say at the table. But we signal our strong concern, which is the unnecessary, avoidable, unfair, and unjust ethnic inequalities that continue to plague the sector. Public heath must benefit from specific focus on Māori if we ever hope to make the difference that is really needed. Kia ora, Mr Deputy Speaker. Tēnā tātou katoa.

JUDY TURNER (Deputy Leader—United Future) : I stand on behalf of United Future to support, along with other parties, the first reading of the Public Health Bill. I am particularly pleased to see that the House is giving this bill the opportunity to be considered by the Health Committee. It is interesting to consider that it is over 50 years since legislation was looked at, in this regard. This bill also replaces the Tuberculosis Act from around that time, and in discussing such legislation we are looking at a time in New Zealand’s history when the majority of New Zealanders died from communicable diseases.

Here we are, all this time later, and the health environment within New Zealand has changed quite dramatically. Now New Zealand health professionals, and in particular the New Zealand health dollar—which will always be rationed no matter how ideal we get the system to be—are dealing with a death rate that is largely fuelled by non-communicable diseases. So there is an intention and an attempt within this bill to bring some public health initiatives into law around non-communicable diseases.

The bill is divided into eight parts, and I want quickly to flick through them. The first concerns the powers, functions, and duties of various key players in the health sector, such as those of the Minister of Health, the Director-General of Health, the Director of Public Health, district heath boards, territorial authorities, and the like. It is very clear that under this bill the powers that those functionaries have are clearly specified and laid out.

The second part of the bill deals with health information, notification, and reporting, and it also includes the cervical screening provisions that were put in place in the previous Parliament. It talks about updating existing audit provisions, and it provides for the notification of specified conditions, which is fairly straightforward.

The third section, which is one I mentioned at the beginning of my speech, concerns the issue of non-communicable diseases. It provides principles and non-binding codes for reducing the rates of non-communicable diseases. This is the controversial part of the bill. I remember that some time ago when I was on the Health Committee, we had a briefing from health officials. I cannot remember what we were having a briefing on, but we asked them about the different ways the Government could respond to a particular circumstance. They said there were three ways. The Government could do nothing, and sometimes that is the best way to respond to a health situation—for example, if it is a virus that is going around, it will be gone soon, so we do nothing and let it take its course. The next thing was to involve public health education, and the third thing was to regulate.

This bill brings in a fourth provision, which would kind of slot into the middle of that continuum. It is the introduction of non-binding codes. This is not full-on regulation; it is a step beyond education, and it certainly allows the Ministry of Health to make some sensible suggestions. One of the areas that came to mind, which I think is an area where we need some non-binding codes right now in New Zealand, is the issue of foetal alcohol syndrome. When I was a young mum—

Hon Tau Henare: A long time ago now.

JUDY TURNER: —it was a long time ago; I admit that—we were advised by our general practitioners that a moderate amount of alcohol consumption was actually OK and would not do any harm. Most of the young mums I got to know consumed mild amounts of alcohol during their pregnancies in the mistaken belief that it was perfectly safe. New scientific evidence now suggests that the advice we should be giving to young mums is that they should go nowhere near alcohol during the term of their pregnancies. There are genuine cases where it has been very clear that even moderate or mild consumption of alcohol during sensitive parts of a baby’s development has created this syndrome. We have a high incidence of that in New Zealand, and we should consider that there is an area where some really interesting non-binding codes could be introduced to make a real difference to the health outcomes of literally thousands of New Zealand children. That is what this bill seeks to introduce.

I note the speech made by the Hon Tony Ryall. He talked about clause 374, and he is quite right in his warning about that. I do not want to sound as if I am criticising him, because he is quite right. When we look at clause 374, which is about the regulations around public health in a general sense, we see that all the way through, in paragraphs (a), (b), (c), (d), and so on, it is mainly talking about communicable diseases. Then we get to a little paragraph, paragraph (x), which slips in the ability for there to be some guidelines to “reducing, or assisting in reducing, risk factors … associated with, or related to, non-communicable diseases:”. That paragraph could be completely overlooked. It has been slipped in there, and I would like to think that during the select committee process some clarity will be given to it. Is it about non-binding codes, or is it about something that could possibly be considered to be a bit more onerous? United Future accepts that there are some concerns. I have certainly been reading some publicity around concerns on that matter, and I think we need to be very clear as to what is being proposed there.

Beyond that third part of the bill are some provisions for the management of conditions posing health risks—that is, to do with communicable diseases—which basically roll over some of the existing provisions in the Act and identify some new and more modern risks of communicable diseases. The bill talks about the role of territorial authorities, particularly in relation to environmental health and the provision of sanitary works. It also deals with the interesting issue of stopping “nuisances”, which will be an interesting thing for the select committee to look at. It talks about regulated activities, and when we look at the regulated activities we see the breadth of what this bill has to cover. Those are activities—such as hairdressing, and needle and syringe exchange programmes—that currently come under some form of regulation, and the bill talks about the fact that there is currently a serious gap in the heath provisions for some of those regulated activities, a gap we need to look at under this bill.

I move to the provisions concerning emergencies and border health. That is where the “all risks” approach to emergencies comes in. The “all risks” approach is specifically to do with emergencies and border controls around health issues, such as severe acute respiratory syndrome, bird flu, and those types of issues. Part 8 of the bill covers miscellaneous provisions.

This is a fascinating bill, and United Future is disappointed that we do not enjoy representation on the Heath Committee. We wish the committee members well in their consideration of and deliberation on this bill, and we are happy to support its first reading.

LESLEY SOPER (Labour) : I thank the very good Minister of Health for bringing this important Public Health Bill to the House tonight. Moving away from the conspiracy theories of the National Party speakers, I would like to emphasise in my speech the important role that the bill has in extending to New Zealand’s borders protection from public health risks.

The Public Health Bill will replace the Health Act 1956. The Health Act contains many provisions that aim to protect New Zealand’s borders by preventing, reducing, or eliminating the spread of risks to public health at the border. However, the Health Act provisions were written 50 years ago, and they reflect the fact that back then ships were the predominant form of international travel. Whereas it was a great novelty in 1956 for my father to travel internationally entirely by plane, aircraft now carry most people travelling between countries. The Health Act provisions are also very specific on the diseases that the border health provisions can be used to manage. The Act provides that anyone who disembarks from a boat or ship is liable to quarantine. However, that provision can be invoked only if the person is known to have one of four listed diseases: yellow fever, plague, cholera, or avian influenza. That is obviously inadequate in this day and age. The bill expands the provisions in the Health Act so that all risks to public health, irrespective of cause, can be acted upon.

Let me paint a scenario as to when the new provisions in the Public Health Bill may be invoked. Imagine that a plane is arriving in New Zealand. During the flight to New Zealand four passengers start coughing blood and bleeding from their nose and bowel, and record very high temperatures. The captain of the flight notifies a medical officer of health in New Zealand that four of the passengers have taken ill, and describes their symptoms. The captain requests travel information from the passengers. Nobody at this stage knows what is wrong with any of the passengers. When the plane lands at Auckland airport the medical officer of health and other ground staff are on hand to meet the passengers. The medical officer of health uses powers under the Public Health Bill to quarantine all the passengers and crew on board the flight. This means that all the passengers are moved to a special facility where they are isolated from members of the public to prevent the spread of the condition. Although no one is yet aware of what is causing the passengers’ symptoms, the symptoms are very concerning, and it is considered that they may be a serious risk to public health. While in quarantine the cases can be further tested to determine the nature of the disease and the threat it poses, and, of course, the people can receive treatment. [Interruption] May I point out that certain vessels full of sound and fury on the other side of the House tonight signify nothing. Other passengers can also be monitored to determine whether they are also developing the condition.

The Public Health Bill empowers medical officers of health to take action to protect New Zealand’s borders from conditions that are suspected of being a serious risk to public health. Under present legislation, passengers on board a ship or plane can be quarantined only if they are known to have one of the four specified diseases I mentioned earlier. The Public Health Bill will allow all risks to be managed at the border, including viruses that we do not even know about yet.

The bill also contains new provisions to control people departing from, as well as those arriving in, New Zealand, to prevent the export of sources of public health risk. New Zealand is part of an international community and we owe it to our neighbours not to export diseases, conditions, or contaminants that may be a risk to public health. That is particularly important given our direct flights to the Pacific region. Medical practitioners or medical officers of health may advise the relevant airline, carrier, or country about a person with a quarantinable condition that is specified in the bill who is intending to leave the country and who is a health risk.

The bill will assist New Zealand’s compliance with the 2005 International Health Regulations that came into force in June 2007. These require New Zealand to be able to implement a full range of health measures at the border to ensure that threats to public health can be managed. New Zealand, of course, is bound by those regulations. The most important benefit of the International Health Regulations is the greater level of global health security that will come from having a coordinated global surveillance and response system for managing emerging health hazards.

Protecting New Zealand’s borders from all risks to public health is an important function in this day and age when risks and threats can come from many directions and causes. The Public Health Bill will keep New Zealand’s border control legislation in line with the 21st century. I commend the Public Health Bill to the House, and, like other sensible members of the Health Committee, I am looking forward to the submissions.

Dr JONATHAN COLEMAN (National—Northcote) : That was all very earnest and dreary, but, frankly, there was nothing in that speech to show why we should be rushing through the first reading of the Public Health Bill under urgency tonight. We have had the Public Health Act for 50 years—since 1956—yet this Government feels a need to push this bill through under urgency right at the end of the year. That had me wondering why that is. It is pretty clear why—in this 259-page bill, one has to get right through to page 213 before one gets to the Trojan Horse clause.

I would say that the Government was hoping that at the end of the year, in the festive season, it could just rush the bill through under the nose of the public and the Opposition, and that all of us, like them, would not have read the bill. Well, that is actually not correct. We have read the bill and we have found what the Minister has been trying to hide in it. The Minister has been trying to hide the power to exert some very Draconian influence that can be used if the Minister does not get his or her way. What will happen is that if the voluntary codes do not work, the Minister will regulate. There will be more of this nanny State stuff that, frankly, the public of New Zealand are absolutely fed up with.

It is quite interesting that in the commentary to this bill there is nothing about this Trojan Horse clause. It is quite interesting that in the Minister’s press release she made no reference to it. It is quite interesting that the Government thinks that if it puts up Lesley Soper for long enough, with her boring, drab monotone, people will go to sleep listening to stuff about border controls and will not see the real nanny State stuff in here, which, frankly, the people of New Zealand are absolutely sick of. [Interruption] Martin Gallagher knows how badly it went down in his electorate when the Government decided it was going to try to regulate tuck shops. It went down very poorly. It just shows that we have a Government that thinks that whatever it does inside the beltway with the white, liberal establishment in Wellington just does not matter. The Government members do not give a toss about the New Zealand public. They think they can ram through anything they want.

Having said that, I note that there are some good elements of this bill. We agree that the legislation needs an update and we will be supporting this bill’s referral to the select committee, but we will have some really hard debates with these failed Labour Party lackeys when we get there. We will be going through this bill clause by clause. I tell members that the National Party will not stand for this State-dominated regulation that these guys are going to foist on the public of New Zealand. This will be an election issue. It really will be.

The Government thinks it can legislate against diabetes and obesity. It thinks that New Zealanders want to be told what they can eat at the tuck shops of the nation. We heard Sue Kedgley speaking before. She was talking about the National Party and about what happened on the obesity inquiry. I can tell members what the Green Party’s priorities for health are. Would members believe it? We spent more time on an inquiry into aspartame in chewing gum than we did on child cancer services in Wellington. That was because the Greens and Labour dominate the Health Committee. [Interruption] That is right. That is where their health priorities are. They are not saying anything now because they know that is right. The fact is that for once I agreed with Hone Harawira. This Government has completely let Māori down in the area of health. It has done nothing, really, for Māori health. [Interruption] It has not. It has been pathetic and poor.

This bill will be pretty controversial, and we will have a real battle in the select committee. Government members think they can hide the Trojan Horse clause on page 213 of a 259-page bill and rush it through under urgency, but that just will not wash. It is just another example of this Government thinking it can fool the public of New Zealand and get stuff through that the public are strongly, strongly opposed to. They will pay for it at the polls next year, I can tell members that.

We concede that a few things have to be updated in relation to communicable diseases. We have had SARS. We are in the age of bird flu. Indeed, I will grudgingly concede—even though the list member from Southland, who is soon to be retired, made such a terrible speech—that we do have to have border controls to take steps against communicable diseases entering New Zealand. But on the issue of non-communicable diseases, if we cannot change the way people think about stuff like obesity and diabetes, and if we cannot convince them that they want to make healthy choices as of right, we will not be able to tackle obesity. We cannot legislate for this stuff. People want to have the choice to eat what they like. If we give them the right education, if we give them choices, and if they learn from an early age, they can be educated into making those right choices.

I say in summary that, yes, we will support the Public Health Bill being referred to a select committee, but we will see what happens there. We will certainly not be supporting any of the Draconian legislation that the Labour Party has hidden away on page 213 of a 259-page bill.

MARTIN GALLAGHER (Labour—Hamilton West) : We have listened to an exercise in absolute cynicism from members opposite. We have heard the dog-whistle speeches from over there. For the benefit of people who are watching this debate tonight, I tell them that National is actually supporting the Public Health Bill. National members go into some sort of diatribe, and because Government members are concerned with the outbreak of diabetes, or concerned with the issues that Sue Kedgley and my good colleague Lesley Soper raised about critical public health issues, we are somehow accused of being politically correct and of running a nanny State. Well, talk about what we call dog-whistle politics! The classic was the member for Northcote, who admitted: “Well, I am saying all of this stuff for public consumption, but—cough, cough—by the way, we support the bill.”

Lesley Soper: They are hollow, that’s all.

MARTIN GALLAGHER: They are hollow, all right. They are hollow vessels—hollow men and hollow women. I stress that this bill will become the primary public health statute for New Zealand and that it replaces outdated legislation for public health—the Health Act 1956 and the Tuberculosis Act 1948.

In my brief call I take the opportunity to commend all the people who are working in the field of public health—the public health officers working for the Ministry of Health up and down the country—for the excellent job they do. Instead of slagging off those people and implying that people who work for local government are somehow politically correct, grey inspectors poking about, I commend them for the excellent job they do in public health in this country.

If members want an example of leadership, I tell them that this is a Government that is showing, yet again, excellent leadership with this very, very important legislation. Indeed, this bill is a very good way forward. I strongly support the bill and am deeply disappointed in the Opposition members, who, in spite of all the rhetoric, cough and splutter and say they support the bill. Thank you, Mr Assistant Speaker.

  • Bill read a first time.
  • Bill referred to the Health Committee.

Waka Umanga (Māori Corporations) Bill

First Reading

Hon PAREKURA HOROMIA (Minister of Māori Affairs) : Tēnā koe. Ka nui te mihi ki a koe e te Kaiwhakahaere o te Whare. Greetings to you. I move, That the Waka Umanga (Māori Corporations) Bill be now read a first time. At the appropriate time I intend to move that the bill be considered by the Māori Affairs Committee and that the committee have the authority to meet at any time while the House is sitting, except during oral questions, despite Standing Orders 192, 195(1)(b), and 195(1)(c).]

The Waka Umanga (Māori Corporations) Bill provides for the establishment of a new, optional, legal entity tailored to meet the needs of iwi, hapū, and Māori associations that manage communal assets. The bill is underpinned by the Government’s Māori affairs policy of supporting the realisation of Māori potential, and is the result of the consideration by this Government of issues and opportunities in the area of Māori governance and tribal representation.

The bill recognises the right of Māori collectives to develop their own structures to suit their cultural and governance needs, to determine their own mandate and representation, and to do so through an independent process. It is also about recognising that good governance is a key enabler of effective organisations. Good governance leads to sustainable cultural, economic, and social success and to an enhanced contribution by Māori to the future of Aotearoa New Zealand. The New Zealand Law Commission initially investigated these ideas in the context of the Treaty settlement process, identifying a pressing need to provide a structure for the successful receipt of Treaty settlements and to facilitate the efficient administration of community-owned assets.

This bill seeks to address a number of problems that arise out of a number of common and defining experiences for Māori collectives within the current environment. First, there is a lack of cohesion between the form and function of existing legal frameworks and the unique characteristics that shape Māori collectives. Although Māori have adapted to using legal forms such as trusts and incorporated societies, often these structures do not enable them to operate in the most efficient and transparent way possible. In some cases unwieldy structures are being developed to accommodate the many activities of the group, resulting in the duplication of limited resources. Māori collectives are increasingly pursuing multiple, diverse objectives. These range from managing Treaty settlements and fisheries assets, retaining and protecting their tribal land, to operating commercial entities and providing important community services. It becomes imperative for these collectives to establish a structure that can incorporate commercial and non-commercial activities so that the different objectives of those activities can be managed appropriately.

Second, historical Treaty settlements will continue to be a key driver for the establishment of representative organisations in the immediate future, although they are not the sole focus for those entities. Cultural, commercial, and other activities are of equal importance. Third, tribal resources and assets are owned by members of the tribal group community. Representative entities have an ongoing obligation to manage those assets for the benefit of both current and future members in perpetuity. Fourth, members of iwi and hapū cannot opt out of their tribal membership in the same way individual shareholders can. Therefore, the rights and interests of members need to be protected.

There is a clear need for a mechanism to assist Māori collectives in managing their communal assets in order to achieve greater certainty for Māori, to assist the Crown and third parties to leverage off existing successes and focus on forward development and growth, and to support cultural identity and positive contributions to national identity. This legislation supports these objectives.

As I have mentioned, the bill provides a new voluntary legal entity for iwi, hapū, and non-tribal Māori associations that hold communal assets. It provides democratic and transparent processes for the formation of a waka umanga, with an emphasis on an open and early dialogue with prospective members. The bill enables those using the waka umanga model to create a structure that represents both their overarching tribal body and its constituent parts—hapū, marae, or rohe. The model can be developed to reflect traditional tribal structures. Tribal groups can seek recognition as the legitimate representative of that group for matters outlined in their charter, in effect creating a mechanism for tribal groups to confirm their mandate and gain legitimacy.

The bill provides that the Government must act in accordance with the interests of members—current and future—whilst allowing waka umanga the flexibility to shape themselves through their charter. Existing entities such as Māori trust boards, charitable trusts, and incorporated societies can transition to the waka umanga model if they wish. The bill provides that internal dispute resolution is mandatory, with an emphasis on process and early resolution. A secretariat will be set up under the bill to assist waka umanga in complying with the Act, and to provide guidance and support where needed through the registration process and beyond.

Extensive consultation with Māori and other key stakeholders has been undertaken by Te Puni Kōkiri and the Law Commission since 2004, including in late 2006 concerning the overarching waka umanga proposal and in June-July 2007 on the detail of the bill itself. I am confident that the views expressed by Māori have been heard and taken into account. Yes, some iwi are already well established and comfortable within their existing structures—like Ngāi Tahu, for example—but many are not and are currently bending into a structure that does not meet their particular needs. It is these groups that I envisage will see benefit in a model that has been designed for them.

In summary, this innovative legislation is a purpose-built governance model, underpinned by the principles of cultural match, flexibility, and good governance standards. It is about creating certainty for iwi and hapū and for those third parties that deal with them—including the Crown. With the advent of technology, globalisation, and digitalisation it is clear that Māori need to adapt in order to remain relevant in the ever-changing world. To do that, they need to be supported by good governance structures and practices.

The Government has placed much emphasis on economic transformation as one of its key goals for this term of office, and especially for Māori. I believe that the Waka Umanga (Māori Corporations) Bill is a prime example of how the Government is providing and supporting Māori leadership in this area. I believe that the bill will provide a very positive step forward for Māori governance. I commend the bill to the House.

Hon GEORGINA TE HEUHEU (National) : The public may well wonder why it is that at 10.30 tonight, under urgency, until midnight, this House is debating a range of bills, one of which is the Waka Umanga (Māori Corporations) Bill, which is before us now, when no Māori leader that I know of and no tribe that I know of asked for this legislation, when the entities that it sets up are voluntary in any event, and when there are far more pressing matters that relate to Māori development than the setting up of yet another governance entity, which this Government seems determined to press on to Māori. I do not doubt the sincerity of the Minister’s speech but, really, there are far more pressing things that he should be addressing his mind to after 8 years in Government. Some of the things that are preventing Māori from moving forward have nothing to do with the kind of thing that is in this bill.

We could go into urgency to address the appalling rate of child abuse that goes on in many of our communities, but we will not. We could go into urgency to address the educational failure that is inherent in some Māori communities, but we will not do that. Instead, we will debate a bill about the setting up of entities that are voluntary and whose value is untested and debatable; a bill that has the potential to create more problems than it solves and more tension within tribes than tribes need at this particular time in their development. Suffice it to say, for those reasons, and for other reasons, National does not support this bill.

Māori did not seek this legislation. There is no demand for it from Māori. The initiative is one that was developed solely in Wellington, and now it seeks to be imposed on Māori tribes. It is voluntary, so it may never come to pass. Māori do not have to pick it up, so one wonders why the Minister would waste his time introducing it. Māori in the 21st century are quite capable of developing their own entities and managing their own affairs. In fact, there are a number of increasingly high-profile Māori entities in New Zealand now, which bears testament to the fact that Māori are capable of managing their own affairs. They do not need a Labour-led Government to, yet again, impose on them an entity that, as I said, is debatable in its value.

The Waka Umanga (Māori Corporations) Bill, as the Minister has outlined, makes provision for the establishment of two types of entities. It makes provision for their formation and their registration, for accountability back to their stakeholders or beneficiaries, and for the Māori Land Court to oversee all. There in itself is a huge problem. Sitting overall is the Māori Land Court, with whom Māori have had not the best of relationships over the decades, and that court now seems to be so much the decider of Māori affairs that one would think we have not moved out of the 19th century. But, of course, oftentimes with this Government one gets that feeling anyway.

Although the Minister has gone into some detail in relation to the bill, probably to enhance his own understanding, nothing he has said gives any confidence that the purposes, as set out, will be achieved, particularly the purpose designed to give legal certainty and stability to Māori governance entities, because this bill has the ring of an Act that was passed by the Labour Government of the 1980s—the Runanga Iwi Act. That, I think, was also passed under urgency, against the wishes of Māori. Nobody had asked for that either, but that Government determinedly pushed it through and imposed it on Māori, and, of course, it came to an end when the National Government in 1990 sensibly repealed it. There is a bit of déjà vu here, and the Labour Government should think about that. Again, it finds it difficult even to contemplate that Māori are capable of managing their own affairs.

I want to take just one example from the bill. Clauses 9 to 11 deal with the formation of waka pū, which is the tribal entity being proposed. On the face of it, a group of hapū are able to form themselves into a waka pū for the purpose of settling a claim, which they may rightly decide they have proper claim to, and, at the same time, however, a leader or leaders at an iwi level, which embodies those same hapū, could also say that they are the ones who should form the waku pū. What will the Government do then? It seems to me, as I said earlier, that this has the potential for divisiveness and for far more tension than anybody needs at this stage in Māori development.

I want to be quite clear as to why National does not support this legislation. Māori did not seek it. They did not ask for it. Although the Government said it consulted Māori—I might say consulted in inverted commas—the initiative was not Māori. It was the initiative here in Wellington, developed first by the Law Commission—and nobody asked the Law Commission to do this, other than the Government—and then armies of bureaucrats busied themselves, over a number of years, to put this legislation into place. There is no great rush for it. I am sure there will be no great rush for it when it is passed, if the support parties of the Government help it through. It does seem to be an utter waste of time. This is a model developed by bureaucrats in Wellington, and it is now sought to be imposed on Māori.

As I said, this bill had its genesis in the Law Commission, and that in itself does not engender great confidence, especially now with Sir Geoffrey Palmer pushing legislation left, right, and centre. But I suppose when the Government is not capable of doing its own legislation, it has to turn to one of its own. Thirdly, this is typical of the Labour Government’s mode of operation, which is: “We know best. Māori, you need us to tell you how to run your lives.” Frankly, the Minister should be ashamed of himself for coming to the House with legislation that Māori have not asked for. He has had bureaucrats in Wellington busy, wasting time, working on it. Māori do not need any Government in the 21st century telling them how to run their lives—how to suck eggs, actually, because that is what this is all about.

The experience of Ngāi Tahu and Tainui—and I bring those two tribes into this debate with the greatest of respect—is a shining example of what Māori can do when they are released from the shackles of the Māori Land Court, for one, and when they are freed from an overbearing Government that seeks to push legislation on them. Indeed, in the 21st century all Māori ask for is to have full capacity to exercise their rangatiratanga, to find their way, to develop their own structures, and to manage their—

Sue Moroney: Is that National Party policy?

Hon GEORGINA TE HEUHEU: There is some person on the Labour side who thinks she knows better than Māori people. Goodness me! She is typical of the Government she is part of. She is a Pākehā woman, as well. National in Government in the 1990s gave Māori the freedom to develop their own entities, and Ngāi Tahu and Tainui are prime examples of that approach. If only that Government could get it into its head that it does not have the solutions for everything, that it does not know best how to manage Māori, and that it should set them free.

I said at the beginning of my speech that there are far more pressing issues to worry about than this, but this Government has wasted human and financial resources in developing a bill that has no value—it is voluntary, so the Government actually admits it has no value—and it is likely not to be picked up by any Māori group, because no one is asking for it, and it flies in the face of Māori exercising their tino rangatiratanga in the 21st century.

DAVE HEREORA (Labour) : I take this opportunity to rise in support of the Waka Umanga (Māori Corporations) Bill, and I also take the opportunity to commend the Minister Parekura Horomia for bringing this bill to the House. It is not surprising that the Opposition is not supporting this bill. When in the past has the National Party supported a positive initiative to give enhancements for Māori? Never. So it is not surprising that National is not supporting the bill. It is not surprising at all.

The Māori Affairs Committee heard from the Law Commission. It gave us a briefing in relation to the principles surrounding this bill, and it pointed out quite a serious problem, which was that existing legal identities did not provide adequately for the tribes. The commission’s report states that the “incorporated societies law prohibits the pursuit of pecuniary gain as an objective;”. It also states that “companies are designed for individual investors not communal investment;”, and that “trusts manage assets for beneficiaries and not at the direction of beneficiaries; charitable trusts are ultimately responsible to the Attorney-General, not to the people; Maori Trusts Boards are responsible to the Minister; Maori Incorporations serve individual shareholders; and statutory bodies depend on Government for their powers and for any amendment to those powers.” The report continues: “Maori have made creative use of existing legal structures but the Commission considered they should not have to work around structures but through structures designed for them. To overcome that problem the report proposes another option for Maori, the use of a new form of entity … which would have corporate identity and perpetual succession, hold assets for a general class, and operate according to charters designed by the people to accommodate their circumstances.”

The commission also claimed that the lack of legal framework for tribal restructuring was to ensure that entities are developed by people themselves against the background of their own culture. Almost all current legal institutions do not reflect the iwi structures in their governance models. Because of that, Māori are prevented from access and overall participation within the economy. That is unfair; therefore, it deserved to be addressed. So the Law Commission called for legislation to provide a legal governance model that could be adopted by Māori identities managing collectively owned assets that embraced some fundamental aspects reflective of their tribal structure, capturing the cultural sensitivities necessary to enhance the service for Māori as a whole. The bill is reflective of those principles as outlined by the Law Commission.

As the Minister stated earlier, this legislation is underpinned by the Government’s Māori affairs policy of supporting the realisation of Māori potential, and it comes as a result of the consideration by this Government of issues reflective of Māori governance and tribal representation. The bill recognises the rights of Māori collectives enabling development of processes in sync with iwi development—their own structures, with their own administrative procedures—so as to enable iwi to make their own decisions about what was important to them; that is, to provide iwi with the ability to ultimately become independent, self-sustaining, and self-reliant, based on those terms. To achieve that, we must accept the enduring traditional significance and importance of iwi, by identifying the characteristics by which iwi are to be recognised. This bill captures the very essence of those principles.

In taking this short call, as chair of the Māori Affairs Committee, I say that we look forward to receiving this bill, and I intend on calling for submissions and welcoming the input of all affected parties as we analyse this bill and report those findings back to the House.

Hon TAU HENARE (National) : The intelligentsia sitting with their flat whites, pontificating about how they can help the lumpenproletariat! That is how the Waka Umanga (Māori Corporations) Bill came about. That is what it was! The Minister of Māori Affairs, Parekura Horomia, has been Minister for 8 years, and he has not had even one piece of legislation in the House that he thought up. He has been taking $180,000 a year, and not once has he come to this House with his own idea. Who came up with this legislation? The big fat cats of Māoridom have been sitting down on the quay and thinking to themselves what they can do for the lumpenproletariat.

Hon Brian Donnelly: You don’t even know what the lumpenproletariat is!

Hon TAU HENARE: Let us get to New Zealand First. Let us cut to the chase, for the new ambassador to the Cook Islands. I want to quote from a speech.

Hon Member: Are you iwi or Kiwi?

Hon TAU HENARE: I am iwi and I am Kiwi. The speech states: “One result will be that the Government will step back from the role that the last Labour Government took upon itself of interfering in the matter that properly belonged to the Maori tribes. It is not the business of the Government to dictate to Maori how the territory of the tribes is to be determined.”

Who said that? It was the Rt Hon Winston Peters, 17 years ago in this very House. When he became the Minister of Māori Affairs he repealed the Runanga Iwi Act, and that was the one and only thing he ever did right. Well, actually, no; but I will not tell members the second thing. He also went on to say: “The wishes of the people were never a consideration of the former administration.”—meaning the Labour Government. “Instead, it proceeded full speed ahead with a piece of legislation that had neither the support nor the consent of the people.” The Labour Government rushed it through the House on 28 August 1990.

It is exactly what we have here, in terms of being rushed through the House. Why, for God’s sake, after 8 years has this Minister done nothing? He is an abject joke around the traps. He is the worst Minister of Māori Affairs that this nation has ever seen, and I include myself as one of those illustrious former Ministers of Māori Affairs.

But then we heard from—[Interruption] I raise a point of order, Madam Speaker. I do not mind a bit of barracking. I can take it, just like the rest of us. But I always get told to interject from my own seat. I ask that the Minister follow the rules, as well.

The ASSISTANT SPEAKER (Ann Hartley): The Minister has been sitting in the seat he is in for a while. He is allowed to do that. It is only when he moves to another seat for the purposes of interjecting that it is out of order. He has not done that.

Hon TAU HENARE: Oh well, there we go. After 8 years, what have those members opposite done for Māori? The National Party when in Government supported the first kōhanga reo and supported the first kura kaupapa Māori, and where have we seen kura and kōhanga in the last 8 years? This Government is an abject failure. New Zealand First is about to support the same bill, in principle, as the Runanga Iwi Act. We did not ask for it. Māori did not ask for it. Not one Māori came to this House with a petition. Not one Māori came to the select committee or came to the House with a petition to say: “Please, sir, we need this bill to survive, because we’ve run out of blankets, we’ve run out of beads, and now we need this waka umanga.” For goodness’ sake—

Hon Steve Chadwick: Oh, what an insult!

Hon TAU HENARE: They do not like this bit, but boy do they not smell of the old colonial master! Boy, do they not smell of the old “We know best; Helen Clark is our mother. Helen Clark is the mother of the nation.”

Well, this Government is on borrowed time, and the first thing we will do—well, maybe not the first thing, but the second thing—is get rid of this nanny State rubbish that continues to tell the indigenous people of this country—[Interruption] Well, I wonder what the Māori Party is going to do. I know it will support us. I know it will support the National Party’s view, which is to vote against this bill because it is an abject waste of time and money. I tell members that the Minister did not even know about the waka ama legislation—

Hon Brian Donnelly: Waka ama?

Hon TAU HENARE: —the Waka Umanga (Māori Corporations) Bill. I made a mistake. The other one was joining New Zealand First.

The Minister did not even ask for this to be done; it was Sir Geoffrey Palmer and his mates—the Labour Party lackeys. It was the Labour Party lackeys who thought to themselves that it would be a good idea and that maybe it will make the Minister look really good. I doubt it. They thought that maybe it will show the nation that the Minister has been doing some work. It would have been all right if he had written the blooming thing, but he had nothing to do with it.

Hon Parekura Horomia: You’re soft in the head.

HONE HARAWIRA: I ask Mr Horomia who is soft in the head. That is not what they say about him around the community. Oh, no! They do not say that Parekura is soft in the head. They do not even know who he is. I tell him that he can go to all the tangi and hui he wants, but the Minister of Māori Affairs is an abject joke. He is the laughing stock of Māoridom. This bill only goes to show that he does not know what he is doing and that he has to rely on the former Labour Party leader Sir Geoffrey Palmer to do his bidding. Again, it is nothing more than the old colonial master telling a bunch of Māoris what to do, again. In the Minister of Māori Affairs’ speech, not once—

Hon Parekura Horomia: What about the unemployment?

Hon TAU HENARE: So this is all about unemployment, now?

Hon Parekura Horomia: You did nothing.

Hon TAU HENARE: Well, we did nothing. That is all right, I say to Parekura. The National Party supported kōhanga—

Hon Parekura Horomia: You did nothing.

Hon TAU HENARE: OK, we did nothing. Five kura kaupapa a year were established under the then Minister of Education, the Hon Lockwood Smith. That policy went, under this Labour Government. How many kura have been established under this Minister? Sweet FA. So do not tell me—

Martin Gallagher: I raise a point of order, Madam Speaker. I am wondering whether you could determine whether the phrase “sweet FA”, given what it alludes to, is a parliamentary term.

The ASSISTANT SPEAKER (Ann Hartley): I think all this comes down to order in the Chamber and to a question of taste, really.

Hon TAU HENARE: Well, one person’s taste is another person’s meal. That will not cover up what that Minister is about to feel. He is about to feel the wrath of the people. I saw them out there a couple of years ago and they should have taken the opportunity to boot him out then. But I am relying on the Māori Party to take that seat. I am relying on the Māori Party. In fact, the House is relying on the Māori Party, because we are sick and tired of the garbled messages that we get from this Minister.

Hon Parekura Horomia: You’ll cut and run again.

Hon TAU HENARE: There he goes again. You see, the reason why we have a translator is so we can understand what he is talking about. We cannot understand his English and we certainly cannot understand his Māori. We are sick of him. He is a joke. At least I tell the truth, that he is a joke. This bill encapsulates what he has been doing. Do members know what that is? It is a big, fat nothing. This bill was put forward by the so-called intelligentsia of Māoridom and Pākehādom. Eddie Durie sat down with Sir Geoffrey Palmer and thought that this is what the poor natives need—a corporate structure. Iwi—and Kiwis—have been around for thousands of years. We do not need this bill and we never asked for it.

Hon BRIAN DONNELLY (NZ First) : One or two issues were raised in the previous speech that I think need to be referred to. The first one is that the member continued to use the expression “lumpenproletariat”. He actually does not understand who the lumpenproletariat are. He was referring to the lumpenproletariat as being Māori. Well, Karl Marx used the word “lumpenproletariat”—

Hon Tau Henare: Well, workers don’t understand, so you—

Hon BRIAN DONNELLY: They were not the workers. The proletariat were the workers. The lumpenproletariat were the criminal class—the prostitutes, thieves, and pickpockets. What that member just said shows that he believes that all Māori are lumped in with that class. He has insulted every Māori in New Zealand with the use of that expression, and he needs to go back and do his homework.

A second area he needs to do a little bit of homework on is in relation to kōhanga reo. It is absolutely correct that National said it would put in five kōhanga reo per annum.

Hon Tau Henare: No, no. It was kura. Get it right!

Hon BRIAN DONNELLY: Oh, kura kaupapa—the member is correct. It was five per year for 3 years, starting in 1995. As the then Associate Minister, with responsibility for Māori, I knew that in 1998 we were not going to put in any more—none.

Hon Tau Henare: Well, actually, that’s wrong, because there were—

Hon BRIAN DONNELLY: And that member was the Minister of Māori Affairs at the time, and I had to say “Sorry, we aren’t putting any more in, because there’s nothing budgeted for.” But New Zealand First said: “Listen! You’ve got all these kura kaupapa and they are having to work in broom cupboards, with no support, no help—nothing. We will put in place a policy whereby those developing kura kaupapa can be connected with an established kura kaupapa. We will put in additional money so they can be supported until they get to the stage where they are independent and have been reviewed by the Education Review Office. And we don’t care how many are developed each year as long as they are meeting the quality.” That was a policy put in place by New Zealand First in 1998, to develop kura kaupapa in the absence of any policy by National at that particular time.

Hon Tau Henare: Rubbish—what a load of rubbish!

Hon BRIAN DONNELLY: And the Minister of Māori Affairs did not even know that was going on. He took no interest, at all, and never talked to me about it. He did not even know what was happening.

I will go on with one or two things. I think it is fitting that a Minister from Ngāti Porou is bringing in this bill. Tau Henare got another thing wrong. New Zealand First has said we will support this bill going to the select committee and that we will listen to the arguments there. We believe that some genuine issues have to be worked through. Remember, it was the leader of New Zealand First who introduced Ka Awatea—a document about empowering Māori. It was Winston Peters, the leader of New Zealand First, who resolved the Taranaki leasehold issue by producing an extra $60 million—not the Minister of Māori Affairs at the time.

But I will go back in history and remember that corporations were a concept introduced by a great New Zealander—and I mean a great New Zealander. Many New Zealanders of both Treaty partners do not understand the greatness of the man Sir Apirana Ngata of Ngāti Porou. When we sing “Pokare Kare Ana”, do we think he created it? He did not have the words “wai a Rotorua” in it; “Waiapu” should have been in there. Te Arawa—[Interruption] They stole it. Poi was not a thing the wahine did; it was a male thing.

Sir Apirana Ngata introduced all those sorts of things, but he also introduced the concept of corporations to Māori—and I will now refer to a Marxist concept—who had had the means of production taken away from them. It is part of our shameful history. Sir Apirana Ngata asked how the means of production, which is the land, could be utilised in a productive fashion. He came up with the concept of corporations, and he worked it. As a result, places like the East Coast became very, very economically viable and in fact did very well.

Hon Tau Henare: It’s because they owned their own land.

Hon BRIAN DONNELLY: And Tau Henare knows that that was a great period. By the way, the party Apirana Ngata belonged to was the embryonic party of the National Party. So I ask those members to stand up and say that he was one of theirs. But, in fact, Apirana Ngata imposed a Pākehā structure. He was viewing the world with a Pākehā perspective.

Hon Tau Henare: So is that the reason we’ve got this here?

Hon BRIAN DONNELLY: I want to say—if that man over there will just shut up—that all I am prepared to do is speak with a Pākehā voice, as somebody who has attempted to walk across the bridge, who knows full well that he will never, ever get fully across it, but who is prepared to continue to make the effort to get as far as possible in order to understand.

We in the Education and Science Committee have been looking at how we can make the system work for every person. We had a very good, encouraging presentation from Apryll Parata in terms of Ka Hikitia. I talked to my colleague Te Ururoa Flavell, who said that, yes, it was good, but he still did not have confidence that it would eradicate the gaps. And I had to agree with him. I could empathise with his frustration. It was going to help to close the gaps, I was totally confident, but it was not going to eradicate them.

We have to realise that there have been dynamics of subjugation, and of removal of the means of production—which is land—within our country. That is a fact, and we as a Parliament have to front up to it. As a nation, we need to recognise that and say that, yes, it occurred, and continue to rectify it.

I see in this particular bill the issue once again of wanting to look at how we are operating, and how we are giving back to Māori entities the potential to use the means of production. We will put the bill through the select committee process, we will listen, and we will ask whether it will further empower Māori and whether it is really in the same line as Ka Awatea.

I will use an example, which is a bit of a hobby horse of mine, of the subtle way in which Pākehā have been able to impose their will on the people of this nation. I ask the question—

Hon Tau Henare: And they’ll do it again tonight.

Hon BRIAN DONNELLY: No. I tell the member there that I have said right here and now that I am speaking with a Pākehā voice, as much as possible, to a Pākehā audience, and Māori can agree or disagree with me, but—

Hon Tau Henare: You’re doing it again tonight.

Hon BRIAN DONNELLY: Surely, that member is not going to close down freedom of speech or freedom of expression? But here is the point: we have departments, ministries of education, and everything else that keep calling this nation Aotearoa New Zealand. But we have to ask ourselves when New Zealand was actually named New Zealand. How many people in this House know who actually named this land New Zealand? There is one person, because I told him.

Gerry Brownlee: Abel Tasman.

Hon BRIAN DONNELLY: It was not Abel Tasman; no, he named it Staten Landt.

Gerry Brownlee: Who was it?

Hon BRIAN DONNELLY: It was a guy by the name of Blaeu who was a Dutch cartographer. Who named it Aotearoa? It was another Pākehā, not a Māori. He was a Pākehā by the name of Stephenson Percy Smith. He named it Aotearoa. I will give the reason why the traditional name of this country was not Aotearoa. [Interruption] Hang on a second! I ask Tau Henare to tell me something. There had been linguistic contact between Pākehā and Māori for over 70 years when the Treaty of Waitangi was translated by missionaries into Māori, so why did they not use the term “Aotearoa”?

Hon Tau Henare: What about it?

Hon BRIAN DONNELLY: Well, if that was the traditional name for this country, then surely they would have put “Aotearoa” in there. The Declaration of Independence would have used the term “Aotearoa”; instead, it used “Niu Tīreni”, because there was no traditional name. I tell members here and now that Pākehā have subtly imposed this story through the school journals and through the education system, so we have all come to believe a Pākehā myth. That is the way we have operated.

Hon Member: It was a Smith.

Hon BRIAN DONNELLY: It was a Smith; the member is right. It was a Smith myth. Let us go back to the bill itself. New Zealand First will be supporting it going to the select committee, but not beyond the select committee.

Hon Georgina te Heuheu: Why?

Hon BRIAN DONNELLY: We will listen to the arguments and do the necessary, because if we believe that this bill gives greater empowerment to Māori groups to utilise their means of production, then we believe that that is a positive direction for New Zealand. Thank you.

TE URUROA FLAVELL (Māori Party—Waiariki) : Tēnā koe, Madam Assistant Speaker; tēnā tātou katoa; tēnā koe, Gerry Brownlee. There is a whakatauākī that I will refer to as we consider this bill to provide for the formation and registration of new statutory governance entities—waka umanga—by tribal groups and Māori associations. It goes like this: “Me mātau ki te whetū, i mua i te kōkiri o te haere—before you set forth on a journey, be sure you know the stars.” You see, our tūpuna were celestial navigators and astronomers, referring to the stars as a key navigational beacon for ocean voyages, calculating time and the seasons, and attributing names to each of the periods in the lunar cycle—

The ASSISTANT SPEAKER (Ann Hartley): I am sorry to interrupt the member, but on all sides there is just far too much chatter. If members want to chatter, they should just go outside to the lobbies, please. The speaker is not getting a fair go.

TE URUROA FLAVELL: Do I start my time again, Madam Assistant Speaker?

The ASSISTANT SPEAKER (Ann Hartley): No.

TE URUROA FLAVELL: I am just joking; it is all right. I was talking about the cycles and about how our people attributed names to various periods of the lunar cycle, such as Whiro, Tirea, Ohoata, Ōrongonui, Maurea, Mutu, and so on. Names were also given to the individual stars, or whetū—Te Ikaroa, Te Mangōroa, Te Paeroa o Whānui, Whiti-kaupeka, Ngā Pātari, and many, many more. The legwork was done, negotiation with key stakeholders was thorough and complex, and no journey would be embarked upon until every last factor was accounted for.

As we launch this waka umanga project, which is basically a tailor-made legal structure to cater for the governance needs of Māori collectives, we in the Māori Party ask ourselves whether the same desire for certainty has been followed.

I raise a point of order, Madam Speaker. I appreciated very much the intervention that you took before, and now that I have finished the sorts of funny things at the start, I am trying to move to be a little bit serious. I would appreciate it if those members who are interrupting my flow would move outside please, if that is OK.

The ASSISTANT SPEAKER (Ann Hartley): The member is quite right. It is just chatter, chatter coming in all the time, and it really is rude. If members want to talk, then they should just go outside.


Hon Tau Henare: Oh, I don’t know. Where were you?

TE URUROA FLAVELL: I will tell Mr Henare right now. A key selling point that that member happened to miss when he was talking about this proposal is that a registration as a waka umanga is optional. That is OK; choice is good, we say. That is, of course, depending on whether the choice is a real one, because it would appear from the outset that a powerful incentive exists for iwi, which is that if they gain a legitimate status under the eyes of the Crown, then they are all the more likely to be in a safe position to receive Treaty settlement funds and assets.

The problem is, inevitably, how we define the very nature of the problem in the first place. Let me put it like this: is it a problem as defined by whānau, hapū, and iwi? Or is the nature of the problem envisaged in this bill really just a solution to address a problem for the Crown? Is the solution one that has been dreamt up by the agents of the Crown to solve problems that the bureaucracy has in itself created by imposing inadequate legal structures on hapū and iwi during settlements? These are the sorts of questions we are asking.

We come to this bill knowing, of course, that the governance needs of Māori collectives are not being properly catered for in the existing legal structures such as trusts, companies, and incorporated societies. So, hey presto, this bill specifies that corporate governance arrangements and standards be included in the charter of every waka umanga, including procedures for internal dispute resolution. With true legalese attention to detail, a waka umanga must meet certain standards of accountability before it can be registered. This includes the election and duties of governors, planning, financial management, the role of the chief executive officer, and other specifics.

Although the motive to address the problems of trusts, companies, and incorporated societies was a positive one, the proposed legal entity closes down the possibility of developing Māori models of governance consistent with tradition, tikanga Māori, and tino rangatiratanga. I think that is the major point. The upshot of it all is that although we all see that there are some issues with Māori governance that require a response—there is no doubt about that—the one-stop shop standard, one-size-fits-all corporate model approved by the Crown, is not, we say, and never will be, the only answer.

Hon Tau Henare: So yes or no?

TE URUROA FLAVELL: This was alluded to a little bit by the Hon Tau Henare when he did talk with some clarity. As our whakatauākī tell us, before we set forth on any journey we must be sure we know the full pattern of the stars before us.

This bill proposes a legal entity that is both more easily subject to Crown control, we say, and less expressive of tino rangatiratanga. It is great for the Crown, but it is not so great for the Treaty partner. We believe the solution lies in rephrasing the problem in terms of how to make the Crown recognise Māori governance entities as formulated by Māori. A different starting framework could have come up with something quite different. We have to wonder, if whānau, hapū, and iwi had been given the opportunity to create their own governance model to determine their own governance entities, what would that have looked like?

It comes down to rangatiratanga. It could have been quite different. The bill could have reflected the kōrero that was laid down at Te Wānanga o Raukawa in November at a hui held specifically to explore a kaupapa Māori organisational framework. The hui was stimulated by the Ngāti Kahungunu pepeha, “Mā te rango te waka ka rere”, which refers to the importance of having the foundation correctly prepared in order for a project to be launched successfully. Literally, the rango are the rollers used in the launching of a waka. So when an important waka was built, the trees for the rango were taken at the same time that the tree for the waka was taken. They had their own karakia, and had to be treated with the same degree of care and respect as the waka itself. If the preparations with respect to the rango were not properly carried out, then the waka would not be properly launched and, therefore, it would not glide speedily into the water.

Through this line of thought a paper was provided by Ani Mikaere at the hui, and it demonstrates the importance of having a strong contextual footing before any project is established. She stated: “How should we view the Waka Umanga Bill? It may well incorporate aspects of tikanga, thereby modelling the cultural sensitivity that the Crown proclaims to be in accord with its Treaty obligations, but clearly the accommodation of tikanga values within a Western legal framework is a totally different prospect to the acknowledgement of tikanga as the supreme law of the land.”

In the same hui Annette Sykes argued that tikanga Māori, with its ethical foundations in whanaungatanga, manaakitanga, and kaitiakitanga, should provide the basis for law in this land.

Dr Wayne Mapp: Don’t be misled by Annette Sykes.

TE URUROA FLAVELL: Well, that is all very well for Dr Mapp to say, but she actually tried to make a positive contribution. Her response to the waka umanga proposal was that in seeking to define authority within Western imperatives, Western frameworks, and processes of kāwanatanga, the waka umanga proposal was in itself a further denial of the fundamental right of tino rangatiratanga affirmed into Te Tiriti o Waitangi. And this is the key issue. The Waka Umanga (Māori Corporations) Bill may well incorporate aspects of tikanga, but clearly the accommodation of tikanga values within a Western legal framework is a totally different prospect from the acknowledgment of tikanga as the supreme law of the land.

The overriding recommendation of the hui held in November was in recognition that any such governance model needs to be developed by Māori. We in the Māori Party recognise that even though the Law Commission did seek to consult Māori, it was consultation with a restricted agenda, so the possibility for wide-ranging options to be considered was similarly limited. If the Law Commission had undertaken a different process, then it may well have come up with something quite different. Tangata whenua attending the hui at Te Wānanga o Raukawa opted for that difference. They suggested that hapū and iwi should be given the time and space to come up with their own governance models, and that the Law Commission assist in that project.

Of course, we are fully aware of the risks of opposing a proposal such as the one addressed in this bill. We know the argument that the proposed law will be an improvement on what we currently have. Well, in formulating the waka umanga concept, the commission has striven to create a mechanism that is “specifically shaped to meet the organisational needs of Māori tribes and other groups that manage communal Māori assets”. And, yes, of course that is an improvement on the status quo, and we look positively on that, but at the end of the day it is still a Crown measure that accommodates tikanga in some way. In this way it is but another subordination of tikanga Māori to the laws and philosophical foundations of other world views and Western frameworks. Ani Mikaere in her paper How Will Future Generations Judge Us, asked the people at the hui to consider that as tangata whenua their cultural survival demanded that they look to tikanga Māori for solutions, and encouraged them never to lose their ability to imagine.

So, in summary, we remember the message of the pepeha: “Mā te rango te waka ka rere”, and the importance of ensuring the foundation is correctly prepared in order for a project to be launched successfully. The questions raised at the hui and by some of our leading analysts and thinkers throughout Māoridom make us all the more aware that the foundation for this waka is not yet on steady ground. We will support the Waka Umanga (Māori Corporations) Bill at this first reading to ensure the voices of Te Ao Māori are brought to the table. But we will be alert to the question that haunted the hui: how will the future generations judge us?

METIRIA TUREI (Green) : I will take a very short call on this Waka Umanga (Māori Corporations) Bill after having heard significant and mostly useful arguments about it. The Greens will support having the bill go to a select committee. We think it is worthwhile—

Hon Tau Henare: Oh, yeah, that’s right. That’s great. Here we go!

METIRIA TUREI: If Mr Henare has finished, I say that we think it is worthwhile having this bill proceed so that we can see whether it really will meet the needs of Māori or whether it is too structurally focused on providing for the needs of the Crown and, particularly, the Office of Treaty Settlements. But it is certainly true that the nature and structure of governance entities has been a serious problem in the Treaty settlement process. Arguments about governance entities have held up some settlements for 5 years or more, and the blame for that lies squarely at the feet of the Government and of the Office of Treaty Settlements, because they have argued for their criteria for a governance entity.

Gerry Brownlee: This won’t fix it.

METIRIA TUREI: Mr Brownlee can shout and slap his hands on his desk, but that is not a particularly useful way of dealing with the arguments about the merits or non-merits of the legislation, which I am trying to elucidate to some extent.

The ASSISTANT SPEAKER (Ann Hartley): Please, the interjecting is just too much. We need to hear the speaker and we just cannot over the member’s interjecting.

Gerry Brownlee: Well, ask her to stay relevant.

The ASSISTANT SPEAKER (Ann Hartley): Mr Brownlee, I am ruling on this point of order. I am asking you and Mr Henare to just give the speaker a fair go, please. Thank you.

METIRIA TUREI: Thank you, Madam Assistant Speaker. As I was saying before I was so rudely interrupted by the National members, the Office of Treaty Settlements is largely to blame—in fact, I think it is solely to blame—for the delays that have been experienced by iwi Māori who are trying to get their settlements through.

The Greens have never been strong advocates of the settlement process and we have criticised every settlement. We do not believe the settlement process is fair, and until it has been completely revised in accordance with the needs of Māori as opposed to the needs of the Crown, it will always be a fundamentally—[Interruption]

The ASSISTANT SPEAKER (Ann Hartley): Mr Henare, I will now ask you to desist. The member has really gone over the top in interjecting.

Hon Tau Henare: In what way?

The ASSISTANT SPEAKER (Ann Hartley): Mr Henare, I am on my feet. I will give you a warning. I am asking you now to desist. I think you have interrupted every speaker in this debate tonight quite extensively, and I am just warning you that it is going over the top. I have ruled—

Gerry Brownlee: I raise a point of order, Madam Speaker—

The ASSISTANT SPEAKER (Ann Hartley): Please be seated. I have ruled on that simple point of order and I have ruled that the member’s interjections are too disruptive for the order of the House. I am not taking any argument on it.

Hon Tau Henare: I raise a point of order, Madam Speaker. Can you point out to me in the Standing Orders where it allows you to shut down one person in the debating chamber? The Standing Orders state that I have a right to interject in a “rare and reasonable” way. You might not think the interjections are reasonable, and you may not even think they are rare, but I do have that opportunity to interject on any speaker in the House.

The ASSISTANT SPEAKER (Ann Hartley): Please be seated. I have been very tolerant towards you, Mr Henare. It is my decision, and my decision is from Speakers’ rulings and the Standing Orders.

Hon Tau Henare: I raise a point of order, Madam Speaker—

The ASSISTANT SPEAKER (Ann Hartley): Please be seated. If the member is going to argue with me, the member will leave the Chamber now.

Hon Tau Henare: I raise a point of order, Madam Speaker. I seek a point of clarification. Are you saying that I am not allowed to interject in the next 35 minutes?

The ASSISTANT SPEAKER (Ann Hartley): The member is trifling with the Chair. He is questioning my ruling. The member will leave the Chamber now.

Gerry Brownlee: I raise a point of order, Madam Speaker—

The ASSISTANT SPEAKER (Ann Hartley): Please be seated. The member will leave the Chamber now.

Gerry Brownlee: I am calling for a point of order—

The ASSISTANT SPEAKER (Ann Hartley): Please be seated, Mr Brownlee. I am dealing with one matter, and the matter is that Mr Henare is leaving the Chamber.

  • Hon Tau Henare withdrew from the Chamber.

Gerry Brownlee: I raise a point of order, Madam Speaker. That was an extremely unfair act, in our opinion. Mr Henare has every right to interject on a speaker, as has any member in this House. I have to say that in my time in this House I have heard far worse interjections on speakers than that offered by Mr Henare tonight. The appropriate course of action would have been for you to suggest that in order for the speaker to be heard, her speech should be heard in silence, a position from which there is absolutely no recourse for any member of the House. But to simply single out a member and ask him to leave the Chamber is to be completely unfair, and I think it contributes to disorder.

Hon Brian Donnelly: I want to just say that during my speech of 10 minutes Mr Henare continued to interject for the whole 10 minutes. There was not 5 seconds when he was not making an interjection in that speech. In my particular case I chose to ignore him, but he continued to do that afterwards and, having been given a warning by you, he continued to ignore that warning. I have to say that I believe the action you have taken could very well have been made long before it was.

The ASSISTANT SPEAKER (Ann Hartley): I would say to Mr Brownlee that Mr Donnelly is perfectly right. I think I have been overly tolerant of Mr Henare. However, I will not debate it with the member. The point is that I have made my ruling and the member was certainly guilty of misconduct.

METIRIA TUREI: We hold the Office of Treaty Settlements fully to account for its delays and its behaviour in creating the delays for settlements, particularly around governance entities. As I was saying before, we do not support the Treaty settlement process; we consider it to be inherently flawed. But at the same time, our people are engaged in that process and are trying to do the best that they can for their people, so in the meantime we have to find mechanisms to make it easier for them to get proper justice.

To that extent, we are prepared to consider the bill—

Gerry Brownlee: Stand up when you’re speaking. Stop slouching.

METIRIA TUREI: —I say to Mr Brownlee—and have it go to a select committee. Then we will be able to get people to come in and we can hear their submissions—[Interruption] Mr Heatley is making really helpful comments about personal etiquette, which was nicely done.

I know that there was a consultation process, and my colleague from the Māori Party has outlined a lot of the serious concerns that were raised during that time. We are always reluctant to force Māori to have this continual round of consultation, where they are perpetually ignored. They are always asked for their opinion, which is then largely dismissed.

Dr Wayne Mapp: So you’re going to pass more legislation to make them do it all over again. How stupid is that?

METIRIA TUREI: It is a risk. I agree with Dr Mapp, who so rudely commented on Annette Sykes earlier even though her view is the same as his. Even though she agreed with him on the point that the bill was not a very good idea, he was still very rude about her. The point is we have to be very careful about that process.

But in the meantime this bill is before the House. Let us see whether it is possible to remedy the problems with it and see what other options come out of it. As we know, the purpose of the select committee process is to look at what can be done to fix legislation, and we are prepared to be constructively engaged. If in the end it turns out that there is just not the support for it, that it is not able to remedy the issues it is designed to remedy, and that it will cause more problems or will be used as a tool by the Government and the Office of Treaty Settlements to force Māori into a specific kind of governance structure and will not enable them to have the more creative solutions they are putting forward, then we will not be supporting it any further than that. But it is worthwhile having that exploration.

The Greens take a constructive approach to legislation. We would like to see a real discussion had about this matter by the House and by Parliament as a whole. Thank you.

GERRY BROWNLEE (National—Ilam) : I raise a point of order, Madam Speaker. I have two points. The first is that I called well ahead of Ms Turner. Secondly, the Chair appears to have recognised that New Zealand First and the Green Party are both parties that support the Government ahead of the official Opposition. That seems to me to be somewhat unfair, particularly in regard to the fact that the Standing Orders make it clear that whoever gets to his or her feet first should get the call.

The ASSISTANT SPEAKER (Ann Hartley): The member is perfectly wrong on that point. It has nothing to do with being a competition as to who stands first, at all. [Interruption] Please be seated, Mr Brownlee. I am on my feet ruling on a point of order. I warn the member not to try the Chair. The point I would make to the member, and I would have thought the member knew this, is that there is an order of speaking and we are following that order in this first reading debate.

GERRY BROWNLEE (National—Ilam) : I raise a point of order, Madam Speaker. Would you be good enough to tell the House where I would look in my copy of the Standing Orders to find a contradiction to the Standing Order that states that whoever makes the call first gets the call, because this is a new ruling. Could you could simply tell us, Madam Assistant Speaker, when it became a Standing Order of this House that there is a predetermined order for speaking. We know that that is the case in question time, but it does not exist in any other debate other than the general debate.

Hon HARRY DUYNHOVEN (Minister for Transport Safety) : Perhaps I can assist the member in his request. If he looks on page 41 of the Standing Orders, he will see how the Speaker determines who speaks. There has been a longstanding provision in this House—as long as I have been here, anyway, and that is a fair while—that the Speaker generally picks speakers alternately from the Government and the Opposition. But when the Opposition has had a fair number of speakers, and there are a number of speakers from minor parties, it has been the tradition that the Speaker picks those who have not yet spoken.

GERRY BROWNLEE (National—Ilam) : Mr Duynhoven points right to the dilemma that the House now faces. Standing Order 101, under the heading “Rules of Debate”, states: “when two or more members rise together the member called upon by the Speaker is entitled to speak.” In this case, two members did not rise together. One—me—rose well ahead of anybody else and received the call. Standing Order 102 talks about “Factors to be taken into account by Speaker in calling members”. The rules—and members need to read them, because the House should understand what is going on here—state: “In deciding whom to call, the Speaker takes account of the following factors: (a) if possible, a member of each party should be able to speak in each debate:”. That would be a good idea if we were a Parliament in which parties were equally represented. We are not; we are a Parliament in which the major Opposition party is overwhelmingly represented in the House.

Secondly, Standing Order 102(b) states: “overall participation in a debate should be approximately proportional to party membership in the House:”. That is fair. But the proviso is if it is possible. Thirdly, Standing Order 102(c) states: “priority should be given to party spokespersons in order of size of party membership in the House:”. That is a disputed Standing Order, as the Speaker will know. Most minor parties have one person representing a range of spokesmanships, which means that that Standing Order completely contradicts the idea of any speaking arrangements being proportional. Last of all, Standing Order 102(d) states that in deciding whom to call, the Speaker takes account of “the seniority of members and the interests and expertise of individual members who wish to speak.” I think that the weight of these Standing Orders, quite rightly brought to the attention of the House by the Hon Harry Duynhoven, falls overwhelmingly in favour of the National Party.

Hon BRIAN DONNELLY (NZ First) : The previous member made the statement, when he raised his first point of order, that there was a Standing Order that said that the person who took the call first should get the call.

Gerry Brownlee: 101.

Hon BRIAN DONNELLY: Actually, it does not say that. In fact, the member has just got up and disproved his case.

The ASSISTANT SPEAKER (Ann Hartley): I just remind the member that Brian Donnelly was on a point of order. Nobody interrupted Mr Brownlee. As I said before, it is not a race; it is up to the Speaker’s discretion within the Standing Orders. I remind the member that it is the Business Committee that has agreed to an indicative order of calls, which we have certainly been following for the 5 years that I have been here.

GERRY BROWNLEE (National—Ilam) : I raise a point of order, Madam Speaker.

The ASSISTANT SPEAKER (Ann Hartley): Mr Brownlee, I have ruled on the matter. The call is going to Judy Turner.

GERRY BROWNLEE: That is OK, but I have a point of order.

The ASSISTANT SPEAKER (Ann Hartley): Is it a different point of order?

GERRY BROWNLEE: It is a point of order, Madam Assistant Speaker. You cannot ask me to indicate what my point of order is, then decide whether it is a point of order.

The ASSISTANT SPEAKER (Ann Hartley): Please be seated. I am not going to take another point of order from you on the point of order that I have already ruled on, which concerned the speaking order. That is how it is. I have given the call correctly in terms of the Standing Orders.

GERRY BROWNLEE (National—Ilam) : I raise a point of order, Madam Speaker. I fully accept that you have made a determination and that that is what will happen, but I would be most interested to know on what day the Business Committee decided there would be an order to speaking in the House. I have sat on that committee for some 8 years and do not recall that decision being made by the Business Committee. If I am wrong, please tell me the day on which that decision was made.

The ASSISTANT SPEAKER (Ann Hartley): The member needs to go back to the minutes of the Business Committee meetings in order to find out when it made that decision. These decisions are made at the beginning of each term. The committee has looked at the proportionality of Parliament. As I said, it is an indicative order that the Speaker uses to go by. That is exactly what I have done, as per the Standing Orders. The Clerk has just told me that the decision was made on 8 November 2005.

GERRY BROWNLEE (National—Ilam) : I raise a point of order, Madam Speaker. I offer my sincere apologies. I must have been away that day.

JUDY TURNER (Deputy Leader—United Future) : United Future’s introduction to this bill happened about 6 months ago. We were invited to a briefing that was apparently kick-starting a second round of consultation on the matter that this bill seeks to address. The first round was a series of 15 information hui that were conducted during October and November in 2006, when Justice Durie sought feedback on proposals for legislation contained in the Law Commission report 92, Waka Umanga: A Proposed Law for Māori Governance Entities. What came out of his round of consultation was that tribal authorities felt that the existing legal provisions did not always provide adequately for tribes. For example, they pointed out that incorporated societies, where the law prohibited financial gain as an objective, often did not suit their needs. Companies are designed for individual investors, not for the management of communal assets. Trusts manage assets for beneficiaries rather than at their direction, and charitable trusts are ultimately responsible to the Attorney-General rather than the affected people. Based on that kind of feedback, and a range of other things that came out of that consultation process, the ongoing work on this bill continued.

Let me talk about some of the other concerns that Justice Durie highlighted as a result of that process. There were some real concerns around the issue of formation that there were major and debilitating disputes on how organisations should be formed to manage tribal affairs and assets. As the Green member Metiria Turei mentioned, these disputes often delayed a settlement process while they were being worked through. The second consideration was that there was no independent and fair process for the ready resolution of such disputes, so these disputes went on and on with no clear process in place to help settle them. The third concern was that the Treaty claims process had become overly determinant as to how tribes are being shaped for future generations, and there were some concerns around that. The fourth concern was that the interests of smaller hapū groups may be washed out by larger settlements. The next concern was that there were no clear policies on voting rights for regular marae supporters and absentees, and that the courts were reluctant to intervene on tribal formation disputes. All of these were issues that were raised during that process of consultation.

There was an additional concern about the fact that at present there can be no finality about who represents a tribe in legal proceedings, commercial transactions, or consultations. Therefore, United Future—and I am taking only a brief call—is happy to support this first reading because it seems sensible to us, and it seems to honour the dialogue that has happened to date. We support this bill being referred to a select committee so that tribal groups can further investigate this option to see whether it has merit and whether it has any application for the legal needs that they have, and therefore we are happy to support this first reading.

GERRY BROWNLEE (National—Ilam) : It has been fascinating to sit in the House tonight to listen to the speeches that really do convey the sort of Uncle—and Auntie—Tom approach that so many political parties have towards Māori in this country. The most disappointing speeches of all have come from the Māori Party itself.

I recall that the Māori Party was established because the group who established that party did not like the foreshore and seabed legislation. They went from one end of the country to the other, saying that that was the worst form of colonial suppression and land-grab upon Māori ever seen. They enlisted the support of Māori up and down the country, on the basis that they were going to have some sort of new renaissance for Māori, for Māori leadership, and for Māori governance in this country. Then they came trotting into this House tonight, voting for a bill like this, which confirms all of the worst aspects of the way Māori have been treated in this country since the signing of the Treaty of Waitangi.

This is a bill that simply puts a Māori name on the institutions of the colonial Government and of the modern New Zealand Government, and makes Māori say “Forget about all of your iwi affiliations and all of your traditional ways of doing things, and fall into line with the way we expect the law to be administered in this country.”, which is in total disregard of Māori culture and the history that Māori have always had in this country. It absolutely staggers me. I think it is amazing that we have so much law in this country specifically for Māori. There are those out there who say “Well, if you start saying that, you are somehow a racist. You’re picking on Māori.”

But the worst finger that goes on Māori in this country comes from this country’s statutes themselves. There are so many laws specific to Māori. I cannot understand why normal property laws, if we are to adopt them, have to be so different for them—and Māori have adopted them, by the way; they say “Yep, OK, we’re going to go with those.” Why does there have to be a separate court for Māori to go to? Why do we have to have a different name for some sort of Māori trust structure? Why do we have to have different arrangements for communally owned property for Māori? These are simple points, and it staggers me that Māori are standing up in the House tonight, one after the other, saying “We think this is a great thing.”

We know that Mr Parekura Horomia is basically not a bad bloke. But he is hell-bent and determined upon doing the business of his political party, which has always been about making Māori subservient to its political views. Absolutely! If we take just a few moments to look at serious progress in the last couple of decades for Māori, we see that none of it has been about imposing control on Māori; all of it has been about saying “Take the lead that you know you can, and get on with it.” I find it amazing that somehow the National Party is the villain in tonight’s debate, when in fact it has been the National Party that has been so willing in the last couple of decades to address Treaty of Waitangi issues, to recognise that there was grievance, and also to step outside the circle and say “There is a group of people in this country who can do well for themselves, so let’s create an environment in which they can do it.”

What really is irritating is that some of the advantages that will come to the country in a wider sense from that approach, will be lost if we keep driving down the lines of this sort of legislation. I give the House one simple example of that. In 1992 there was the fisheries settlement. There are a couple of interesting things about that. Firstly, at that point no one really knew how big the fishery was. It was just out there, and there were people fishing it, and there were foreigners coming in, doing joint ventures, and cleaning out the seas, left, right, and centre. Occasionally a new species was found. That was fished to death, and let go. So there was a decision to say “Let’s put some sort of a quota and some sort of a boundary around what we catch in our seas.”, “Let us be fair about it and say that there is a traditional fishery via the Māori in this country.”, and, “Just for simple purposes let’s allocate, among this artificial quota, 20 percent for Māori.”

What has been the effect of that? The effect has been that New Zealand has remained in control of its fishery, and that Māori now control more than 50 percent of that fishery. It has been acquired by commercial means and through good practice, and it is also maintaining an industry that could easily have been lost to this country. That is an advantage not just to Māori but to the whole country. That was a simple, simple exercise that recognised a group of people who had an interest, and a capacity, to look after something that was of use and value for the entire country. It was perhaps the best exercise of a property right we have ever seen, post-1840.

Now we come down to this particular bill. I remember my time on the Māori Affairs Committee where we had numerous occasions to talk to Māori trust boards, left, right, and centre, and numerous occasions to haul in the Māori Trustee—a heck of a nice chap, but doing a hell of a job. Huge amounts of land inside this country were owned by Māori but were of no use to them because no one was looking after the land. Here we have a bill that simply puts a flash name over the top—Waka Umanga, a Māori name—but the bill perpetuates exactly the same sort of uselessness that has bedevilled Māori for years, for decades, ever since the Treaty of Waitangi. I do not think one speaker who spoke in favour of this bill tonight has given one positive reason why the House should support it.

I want to know if some of those people out there, who maybe have even a minuscule interest in some Māori land, will be advantaged by this bill. The answer is no; they will not. Nothing will change. The people who have managed to get themselves into a position inside the Māori structure, and who have then used the law of the land with the exclusions it has particularly for Māori, will continue to control those assets and the benefit from them. But I do not know how Parekura Horomia, who I said before is a good bloke, can reasonably say that this bill represents progress for Māori.

Let me go through the rest of this bill. We have titles like “Governance”. Well, I would have thought that it is no business of this Parliament how a group of people who own property should structure their governance. No one tells me how to do that. No one tells me how I have to own my property. No one tells any others who are individuals in this country the way to own their property and the way to run it. But, oh no, the Māori—well, they are a little bit thick, a little bit dim, a little bit slow, so we had better have a special law for them! It is the worst form of Uncle Tom patronisation that we could possibly get.

Metiria Turei: Iwi Kiwi! Ōrewa speech! Māori special privilege!

GERRY BROWNLEE: I get sick to death of people who happen to have a Māori name railing against the idea that Māori might make progress, simply because they have their own perverted view of what democracy means.

As I go through this bill I look at terms like “public good outcomes”. Well, there is always a public good outcome from the ownership of property if it is well administered. Why does it have to be recognised in a bill specifically for Māori? I look further through the bill and I see terms such as “Governance, management, and other matters relevant to registered waka umanga”. Why does this have to be so different for Māori from any other form of ownership of assets? Why is it that Māori, apparently, cannot make up their minds and cannot make their own decisions? Why do they have to be patronised and held by the hand?

My experience of looking at good Treaty settlement processes over the last 20 years has been that Māori will prosper extremely well. I come from the South Island. We have only one tribe down there, and—

The ASSISTANT SPEAKER (Ann Hartley): I am sorry to interrupt the member, but his time has expired.

Hon NANAIA MAHUTA (Minister of Customs) : I do not intend to take a very long call on this bill, but it is worth mentioning that it should be sent to the Māori Affairs Committee. If ever there was a reason to speak on a bill that advantages Māori, this is the one to speak on. That member of the Opposition—the member who has just resumed his seat—is a stark example of the difference between the Opposition and the Government. The Opposition wants to lock Māori into a way of thinking that there is only one type of law that should apply to everybody, and not recognising that with property law—property law, of all the laws the member points to—the fundamental difference between Māori and Pākehā is collective ownership of land. That is the fundamental difference. So he is showing his ignorance in huge magnitudes in this House tonight, and that shows that the National Party at no point in time will ever recognise fundamental differences in the way that Māori operate in this land, and that is sad. It is sad, because there have been two speakers from the Opposition—Georgina te Heuheu and Tau Henare—who, frankly, should know better. What they are saying tonight in this House is that Māori should lock themselves into governance structures that do not meet the needs of current-day development aspirations.

What is the fundamental difficulty with the Māori Trust Boards Act? Who are Māori accountable to? They are not accountable to their people but to the Minister of Māori Affairs—to the Crown. That is the shackle the National Party wants to perpetuate, and that is a shame. It is a shame that two National Opposition members in this House who are Māori want to perpetuate that type of governance structure. But there is more than that. There are a number of models, which the good member for United Future spoke about, that do not quite fit the current-day aspirations of Māori collectives and Māori iwi organisations who want to modernise the way in which their governance entity operates.

The other myth perpetuated by the Opposition was that this bill was solely driven by the Government. It was not. This was a considered piece of work that was done through the Law Commission. It was led by Justice Durie, someone who is well known to the Opposition and well known across this House, who has a standing well beyond that of the parliamentarians in this House. To perpetuate the myth that this bill has not been at all consulted on throughout the country I think is dishonest. It makes me so concerned about the type of leadership that National members might provide to Māori that we really have to expose them for who they really are, and that is dishonest and not able to achieve the aspirations that Māori want to achieve now.

The other part of this debate that concerns me is in part the argument put up by the Māori Party. Although there is widespread recognition of the collective benefits and interests of Māori as they exist within their iwi and hapū, and their need to develop their own aspirations and ways forward, the reality is that in order to bring them into today’s world and to help their economic development aspirations they have to have an entity that can actually take them forward—a vehicle for today. That is all this bill is. No one has said that this vehicle would be compulsory. No one has said that this vehicle would determine the way in which Māori have to operate in the future. However, it is a vehicle that, should it fit the desires of iwi and of Māori organisations, could be looked at.

It is worth picking up on a point that Metiria Turei raised in respect of Treaty settlements. I hope that once this bill gets to the select committee, the select committee will consider the way in which a waka umanga model will help the transition for iwi who are currently organised as either trust boards or incorporations, so the transitional provisions might be well considered by the select committee. But the other part is in respect of those iwi who are currently in negotiations over their Treaty settlements and whether the establishment of a waka umanga could cut across the types of negotiations that are currently happening with the Crown. It is certainly not the intention, but should the select committee concern itself with investigating this matter, then it would be time well spent.

Can I say that of all the discussions that have gone on tonight—and at 5 to 12 at night some of them may have been from a bit of an intoxicated rabble—one thing we on this side of the House cannot stand is plain, dishonest mistruths.

Gerry Brownlee: I raise a point of order, Madam Speaker. I will raise this point of order, but I rather hoped that you might have noticed what the problem was.

The ASSISTANT SPEAKER (Ann Hartley): I ask the member to withdraw that remark.

Hon NANAIA MAHUTA: If the cap fits, wear it. I withdraw and apologise.

The ASSISTANT SPEAKER (Ann Hartley): Please be seated. The member needs just to withdraw that remark, with no other comments.

Hon NANAIA MAHUTA: I withdraw and apologise.

The ASSISTANT SPEAKER (Ann Hartley): Thank you.

Hon NANAIA MAHUTA: One thing that cannot stand in this House is the perpetuating of an argument that simply is not the truth. Really, what this legislation aims to do is to free up Māori to be able to look at a model—a new vehicle, if you like—to be able to go forward. That is all it is. It is not compulsory; it is voluntary.

Should Māori want to amend the charter to better fit and suit their needs, there is provision in the bill to do that. There are transitional provisions that enable their current entities to move into a waka umanga type of vehicle. Perhaps the best opportunity here is the opportunity to better reflect where the benefits of any sound economic development model should go, and that is back to the collective, back to the iwi, and this bill provides for that. It is not about shareholders. It is about ensuring that one’s collective aspirations can be advanced. It is about modernising opportunities for Māori. It is about ensuring that they are better able and geared to enter into economic development opportunities, which we will see will advantage not just Māori but this nation.

I think that all parties in this House should support this bill’s referral to the select committee, if for no other reason than to have a very robust discussion about the way in which Māori will continue to advance their interests for the benefit of all New Zealanders. I commend the bill to the select committee.

CHRISTOPHER FINLAYSON (National) : I will be brief, because I think the position of the National Party is reasonably clear. We will not be supporting this legislation.

I begin my speech by referring to what the Rt Hon Winston Peters said on 19 December 1990 when he was the Minister of Māori Affairs and was introducing the Runanga Iwi Act Repeal Bill. He said: “Māoridom today needs policies based on the future and not on some dream-time imagery in the minds of cultural fellow travellers and social engineers.” All I would say is “Amen to that.” [Interruption] It is a shame that Mr Donnelly does not understand that as he lapses, in the closing stages of this career, into political correctness.

National opposes this legislation for a number of reasons. First, we ask: why the urgency? We received a briefing on this bill some months ago, so why the rush at the end of the year? A very important question—and one should always ask it in relation to any legislation—is whether the legislation is necessary. Labour Ministers never stop to ask this basic question, nor do they ever ask themselves whether a particular issue is already covered by a statute.

  • Debate interrupted.
  • Sitting suspended from 12 midnight to 9 a.m. (Thursday).