Tuesday, 20 October 2015

TUESDAY, 20 OCTOBER 2015

TUESDAY, 20 OCTOBER 2015

Mr Speaker took the Chair at 2 p.m.

Prayers.

Motions

New Zealand Red Cross—Centenary

Hon GERRY BROWNLEE (Leader of the House): It is a very important day where the Red Cross is being recognised for its contribution to New Zealand. It is my intention to read the motion.

Mr SPEAKER: So you are seeking leave to—

Hon GERRY BROWNLEE: —reflect that. [Interruption]

Mr SPEAKER: Order!

Hon GERRY BROWNLEE: I thank the Prime Minister for his assistance there. I move, That the House congratulate the New Zealand Red Cross—

Mr SPEAKER: Order! Can the member just seek leave to move the motion without debate first.

Hon GERRY BROWNLEE: I seek leave to—

Mr SPEAKER: —move the motion without debate. Leave is sought for that course of action. Is there any objection? There is none.

Hon GERRY BROWNLEE: I was a bit disconcerted. There has been so much criticism of people in this House in procedural roles lately, I was perhaps being just a little overly cautious. However, I move, That the House congratulate New Zealand Red Cross on the Centenary of Red Cross activity in New Zealand, and acknowledge the contribution of thousands of New Zealanders who have, since 1915, worked with New Zealand Red Cross in its role as an auxiliary to the public authorities in the humanitarian field in order to improve the lives of vulnerable people at home and abroad, especially in times of disaster.

Motion agreed to.

Privilege

Maritime New Zealand—Actions in Relation to Evidence Provided to Select Committee

Mr SPEAKER: I have received a letter from the Hon David Cunliffe raising as a matter of privilege the alleged action taken by Maritime New Zealand in relation to the managing director of Maritime Management Services Ltd following evidence she gave to the Regulations Review Committee. It is suggested that this action could amount to a contempt of the House in that the managing director may have been disadvantaged on account of giving that evidence.

When a matter of privilege is raised, the Speaker determines whether a question of privilege exists. The Speaker does not inquire into the validity of the evidence presented, or fully inquire into the matter raised. Rather, he or she appraises the evidence provided with the complaint, to determine whether it points to a reasonable—not a remote—possibility that a breach of privilege or a contempt occurred. It is for the Privileges Committee to investigate the matter and to report its findings to the House.

The matter of privilege raised is a significant one. An allegation that a State sector agency used its power against a person on account of evidence given to a select committee requires serious attention, given the importance of free speech to this House. Consequently, I rule that a question of privilege does arise from the action taken by Maritime New Zealand in relation to the managing director of Maritime Management Services Ltd following her giving evidence to the Regulations Review Committee. That question, therefore, stands referred to the Privileges Committee.

Oral Questions

Questions to Ministers

Economic Programme—Fiscal Strategy

1. Dr JIAN YANG (National) to the Minister of Finance: Does he stand by his statement regarding the Government’s fiscal approach that “we decided to support the most vulnerable, maintain benefits and focus on better public services, rather than cut spending”?

Hon BILL ENGLISH (Minister of Finance): Yes, and a measure of the reasonable effectiveness of that approach has been that in 2014-15 the Government did achieve a surplus despite having, at one stage, a deficit of minus 9 percent of GDP. That means that right across the public services, as we have focused on the effectiveness of spending, we have continued to make ongoing investment in public services such as health and education, and also ongoing investment of a considerable scale in the administrative systems of Government, whether that be tax, ACC, the delivery of benefits, and so on. And in Budget 2015 this enabled us to increase benefits above the rate of inflation for the first time since 1972.

Dr Jian Yang: How has the Government’s management of its finances allowed it to help more New Zealanders to get ahead?

Hon BILL ENGLISH: It has enabled us to have some choices about where the small amounts of new money are directed. For instance, there has been an extension of free doctors visits and prescriptions to children aged under 13, paid parental leave has been extended, ACC levies have been reduced by $2 billion, we are increasing benefit payments, as I said, for the first time in 40 years, and the HomeStart programme has been taken up vigorously by young New Zealanders, particularly in provincial areas, where it enables them to buy their own homes.

Dr Jian Yang: How does New Zealand’s economic outlook compare with Treasury’s most recent forecasts, and what impact does this have on the Government’s fiscal strategy?

Hon BILL ENGLISH: Since the 2015 Budget forecast, we have seen some significant changes: a significantly lower international dairy price; now lower real economic growth, particularly in the first half of 2015; inflation lower for longer than was expected; and a weaker world economic outlook. Although there are now promising signs that after a dip in the first half of the year parts of the economy are now picking up again—for instance, the services and manufacturing sector—it is likely that those changes since the Budget will have an impact on Government revenue and, therefore, an impact on the Government’s fiscal balance. So the Government will focus on what we can control, and that is prudent expenditure management.

Dr Jian Yang: What reports has he received showing growth in services and manufacturing?

Hon BILL ENGLISH: Services make up around 70 percent of the economy. Yesterday the BNZ and Business New Zealand released their BNZ - BusinessNZ Performance of Services Index for September, which showed the largest expansion in services activity in 8 years, with sales and new orders particularly strong. The BNZ - BusinessNZ Performance of Manufacturing Index released last week shows that September was the 36th consecutive month of growth in manufacturing—the longest run of growth in manufacturing since the series began in 2002. These are positive signs for the economy. However, the forecast in Budget 2015 did forecast even stronger growth for both of these sectors, and that is why, despite these positive signs, slower growth may impact on the Government’s books.

Rt Hon Winston Peters: Why did the Minister agree to the questioner’s statement “rather than cut spending” when there have been in excess of 58 spending cuts, including cutting the funding contributions to the New Zealand Superannuation Fund?

Hon BILL ENGLISH: There has certainly been money moved around—no doubt about that.

Hon Member: Oh, that is the understatement of the day.

Hon BILL ENGLISH: That is because we believe, unlike the Labour Party, that if you are spending taxpayers’ money on something that does not work, you should stop doing it. [Interruption] I know that those members regard that as evil, but, actually, we think wasting taxpayers’ money is pretty bad.

Overseas Investment—Overseas Ownership of New Zealand Land

2. ANDREW LITTLE (Leader of the Opposition) to the Prime Minister: Does he stand by his statement made five years ago that “Looking four, five, ten years into the future I’d hate to see New Zealanders as tenants in their own country”?

Rt Hon JOHN KEY (Prime Minister): Yes. Although the Government welcomes investment that creates jobs and growth in New Zealand, we do not want to see excessive rural land sold to overseas buyers. That is why we added additional factors to the Overseas Investment Office consent process, which tightened up on rural land sales by, one, increasing New Zealand participation; two, protecting New Zealand’s economic interests; and, three, limiting vertical integration. As a consequence of the Government’s approach, the net amount of rural land approved for sale to foreign buyers is half as much as it was under Labour.

Andrew Little: Is he aware that his Government has approved the sale of 270,000 hectares of non-residential land, or 140 hectares a day, since he said he did not want New Zealanders to be tenants in their own land—which is at a faster rate than before he made that statement?

Rt Hon JOHN KEY: I am certainly aware that there is a process that parties have to go through. As I said in answer to the primary question, if one looks at the net approval of land approved for sale to foreign buyers, it is half that of the previous Labour Government.

Andrew Little: In light of that answer, can he confirm that the Labour Party has not been in Government, and there has been a different Prime Minister, for the last 7 years? Just when will he start taking responsibility for his own actions?

Rt Hon JOHN KEY: Mercifully for the country, I can confirm both those things. Secondly, I can certainly confirm that we do have policies when it comes to overseas buyers being able to buy a property in New Zealand, but one of them is not whether their surname is Cheng or Xing or another Chinese name.

Andrew Little: Has his Government’s decision to approve the sale of 270,000 hectares—five times the size of urban Auckland—made more New Zealanders tenants in their own land—yes or no?

Rt Hon JOHN KEY: No, what it has done is either created jobs and opportunities or saved jobs and opened up international markets—all the very reasons why the Labour Government approved it at twice the rate of the National Government.

Andrew Little: What specific evidence does he have that these land sales have created jobs, in light of the fact that the Overseas Investment Office has failed to collect any evidence of job creation?

Rt Hon JOHN KEY: Many of the applications give an indication of jobs, but I think it is plain for anyone to see, actually. If they wanted to go along to the farms previously owned by Mr Crafar and have a look and see whether Shanghai Pengxin has actually created additional jobs, the answer is yes. It is also true that when Yili and Yashili created their dairy plants in New Zealand on rural land, that too has been creating jobs. This is an open, vibrant, successful economy, not something that is closed to the world, as the Labour Party would want.

Andrew Little: Is it not true that no matter where these offshore land buyers come from, he is selling out New Zealanders by selling off our land?

Rt Hon JOHN KEY: Well, here is a suggestion. If he really, really believes that, he should look to his left at David Parker, who signed off on the largest land sale in the history of New Zealand, from what I can see, and say: “You’re fired.” But, then again, he cannot actually do that, because he has sacked him already. And, by the way, be careful because to your left and right behind you—

Mr SPEAKER: Order! [Interruption] Supplementary question, Andrew Little. [Interruption] Order! I have called Andrew Little for a supplementary question.

Andrew Little: When will he stand up for New Zealanders’ rights not to be tenants in their own land?

Rt Hon JOHN KEY: Every single day I have been Prime Minister I have stood up for New Zealand. If the member wants me to give eight times that I have stood up for New Zealanders, I am happy to recite them, but, then again, I am no No. 8 and neither is Andrew Little compared with Kieran Read. [Interruption]

Mr SPEAKER: Order! [Interruption] Order! Can I remind members that I am on my feet. Thank you.

Childhood Obesity—B4 School Checks and Other Initiatives

3. SIMON O’CONNOR (National—Tāmaki) to the Minister of Health: Can he confirm the number of referrals from B4 School Checks for obesity-related advice and support is expected to treble as a result of the childhood obesity package announced yesterday?

Hon Dr JONATHAN COLEMAN (Minister of Health): Yes, I can. Yesterday I announced a comprehensive plan to reduce childhood obesity. At the core of the plan is a new health target for 95 percent of children identified as obese in the B4 School Check to be referred to an appropriate health professional. To support this, a range of new and improved practical advice will be available for families and to assist health professionals. This new target is one of the Government’s six national health targets and means—

Hon David Cunliffe: Too little, too late.

Hon Dr JONATHAN COLEMAN: —listen to this, it is important—we are now virtually the only nation with such a target and an extensive programme supporting it.

Mr SPEAKER: Order! Before I call for a supplementary question, there is one particular interjector coming from my left who is too loud.

Simon O’Connor: What other elements make up the Government’s package?

Hon Dr JONATHAN COLEMAN: There is no single solution that will fix obesity, so that is why we have developed a range of evidence-based actions that include the free health checks for children that I have already mentioned, more physical education in schools, more access to sport, increased advice, and stronger food labelling. Our package includes 22 initiatives involving Government agencies, the private sector, communities, schools, family, and whānau. There are interventions for each life stage, starting during pregnancy through to early adulthood.

Sue Moroney: Does he agree with the World Health Organization that there is a mounting body of evidence showing breastfeeding plays a role in protecting children against obesity, and, therefore, will he recommend support for the Labour Party’s proposal to extend paid parental leave to 26 weeks so mums can aim to breastfeed to 6 months, as recommended by the World Health Organization?

Hon Dr JONATHAN COLEMAN: I agree on the first point, but the second is not necessarily related.

Sue Moroney: Point of order. [Interruption]

Mr SPEAKER: Order! I have a point of order on my left that I cannot accept until there is some quiet.

Sue Moroney: I seek leave to table a document dated 2012 entitled Systematic Review and Meta-analyses of Risk Factors for Childhood Overweight Identifiable During Infancy.

Mr SPEAKER: Order! I just need whose document it is.

Sue Moroney: The names of the authors are Weng, Redsell, Swift, Yang, and Glazebrook.

Mr SPEAKER: On the basis that it may not be freely available I will put the leave. Leave is sought to table that particular document. Is there any objection? There is none. It can be tabled.

Document, by leave, laid on the Table of the House.

Sue Moroney: I seek leave to table a document dated 2009 entitled Breastmilk Hormones and Their Protective Effect on Obesity. The authors are Savino, Liguoro, Fissore, and Oggero.

Mr SPEAKER: Are there any other documents that the member is seeking leave to table?

Sue Moroney: I also seek leave to table a document from the World Health Organization of 25 such pieces of research—

Mr SPEAKER: No. World Health Organization information will be freely available. I will put the leave for the document first mentioned. Leave is sought to table that particular document. Any objection? There is none. It can be tabled.

Document, by leave, laid on the Table of the House.

Simon O’Connor: How is he bringing together sport and health to increase healthy activity amongst children?

Hon Dr JONATHAN COLEMAN: Nutritional advice and support is important but so is getting kids active, so the package contains a number of actions to be led by Sport New Zealand, many of which involve working alongside the Ministry of Education to reach kids in our schools. One initiative, Play.sport, is a national approach aligned with global best practice and will improve the quality of physical education in schools. Another initiative, Sport in Education, is an innovative approach to engaging students by placing learning in the context of sport. These are exciting initiatives that are being welcomed by school principals.

Rt Hon Winston Peters: In light of his effusive announcement that included children being given more opportunities to be physically active, will he instruct the Northland District Health Board to reinstate the health promotion in schools funding cut in June 2015; if not, why not?

Hon Dr JONATHAN COLEMAN: As the member knows, if he comes up and visits the district health board, it is a devolved system and it gets to make choices about what is best for people in its communities. That district health board is doing very well and I trust it to make the right decision about that.

Rt Hon Winston Peters: I seek leave to table a letter dated 16 July to the Mangonui School in Northland from the district health board outlining the cuts outlined in my question.

Mr SPEAKER: Leave is sought to table that information. Is there any objection? There is none. It can be tabled.

Document, by leave, laid on the Table of the House.

KiwiRail—Northland Network and Freight

4. Rt Hon WINSTON PETERS (Leader—NZ First) to the Minister of Transport: What discussions has the National-led Government had with KiwiRail about plans for railways in Northland?

Hon SIMON BRIDGES (Minister of Transport): I meet with KiwiRail regularly, and I discuss ways to improve the productivity of the rail network around New Zealand—that, of course, includes Northland. In short, KiwiRail considers that the Northland line’s economics are challenging. This is because almost 99 percent of Northland’s freight and 100 percent of its passenger travel is carried on the roads. That said, there are, of course, two return services per day, 5 days a week, between Auckland and Whangarei, moving mainly dairy and forestry products. There are no plans to change that.

Rt Hon Winston Peters: Has he raised with his caucus colleague Todd McClay, the Minister responsible for KiwiRail, or with KiwiRail itself any concerns about the level of maintenance, or lack of it, on the Whangarei to Auckland rail line; if not, why not?

Hon SIMON BRIDGES: No, because, of course, we are investing very significantly in KiwiRail—indeed, $400 million over 2 years is the biggest single item in Vote Transport, and some $3 billion will go into rail infrastructure. So I think this Government has a very proud record with infrastructure investment in rail.

Rt Hon Winston Peters: If that is true, has he been made aware of the number of sections on the Whangarei to Auckland rail line that require trains to reduce their speed to just 5 kilometres per hour?

Hon SIMON BRIDGES: In fact, I think the networks in Northland are good overall—in the sense that the roading is working well. We have got very significant investments, as the member well knows—Pūhoi to Wellsford, not to mention bridges coming in that area. What is also true with KiwiRail, and I come back to it, is that we are investing significantly in that business.

Rt Hon Winston Peters: Is it the Government’s intention to close the rail line going up north from Auckland?

Hon SIMON BRIDGES: As I say, there are no plans to do that.

Rt Hon Winston Peters: If that is true, Minister, why are private businesses in discussion to metal the Portland railway shunt lines and to upgrade and tarseal a private feeder road to take over logging transport currently supplied by rail?

Hon SIMON BRIDGES: As I say, the basic issue here is a lack of demand on rail, with 99 percent of freight choosing to go by road. So as I said in my primary answer, I think very candidly, that is why KiwiRail considers the Northland line’s economics to be very challenging. That said, there are no plans to close it.

Rt Hon Winston Peters: When many of the logs to the Marusumi chip mill in Portland used to come from Dargaville to Whangarei and out to Portland but have stopped because that line has been shut down, and today 50 percent of the logs still come by rail, why on earth would that shunt line be closed down and metal taking its place?

Hon SIMON BRIDGES: I think the fundamental point is—I think it is right that the member raises it, as the local member—around the capacity and the constraints in and out of Northland for the produce and the various things in that area. As I say, I think the network is actually performing very well overall, but it will get much better when we invest billions of dollars in the Pūhoi to Wellsford area.

Climate Change Policy—Green Climate Fund

5. JAMES SHAW (Co-Leader—Green) to the Minister for Climate Change Issues: What specific instructions has he given to the New Zealand delegation to take to the Bonn Climate Change Conference this week?

Hon SIMON BRIDGES (Associate Minister for Climate Change Issues) on behalf of the Minister for Climate Change Issues: The delegation will be negotiating at the climate change meeting in Bonn this week on the basis of the existing Cabinet mandate. Broadly speaking, New Zealand seeks an agreement that is legally binding, that will set the world on a pathway to stabilise greenhouse gases at safe levels, and that is durable and applicable to all parties within the same legal framework.

James Shaw: Do these instructions include reference to the fact that New Zealand’s contribution to the Green Climate Fund sits at just 88c per capita, compared with the average contribution of $12.46 per capita from other nations?

Hon SIMON BRIDGES: I think that is a very unfair and arbitrary sort of comparison because I think, in fact, if you look at what we are doing internationally—as I have made clear to the member, I think, a number of times on behalf of the Minister—we are investing some $100 million into renewable energy in the Pacific. Actually, the overall figure, as the Prime Minister has made clear, is about $1 billion in the Pacific over 3 years—not all of that is climate change - related, but of course that will have undoubted benefits in terms of mitigation and adaptation. So I believe that we can hold our head up very high on these issues.

James Shaw: If the Minister is correct, why then is our overall climate change aid—that is, everything that the Minister refers to that we contribute towards climate change—just a quarter of what other developed nations contribute?

Hon SIMON BRIDGES: I think of course that it is very much a question of how you put the numbers in. I think that if you look in total at what we are doing in the Ministry of Foreign Affairs and Trade, but also in a number of other areas through Vote Energy and the like, we can hold our head up high.

James Shaw: Given that the Green Climate Fund will provide assistance for countries facing extreme weather events such as the typhoon currently ravaging the Philippines, does the Minister think it is acceptable for New Zealand’s contribution to be so low?

Hon SIMON BRIDGES: I think our contribution internationally on climate change matters is truly considerable, and indeed for a country of our size we can very much hold our head up high, whether it is the Global Research Alliance that we started and that we are investing, I think, about $90 million in over time; whether it is fossil fuel subsidy reform, where a range of Ministers and a range of multilateral organisations are pushing very hard on that significant agenda; or whether it is, as I said in earlier supplementary answers, our contribution to the Pacific.

James Shaw: I raise a point of order, Mr Speaker. My supplementary question there was in reference to the Green Climate Fund, and I do not believe that the Minister addressed that.

Mr SPEAKER: No—not as I heard the question. You certainly made reference to the Green Climate Fund at the start of your question, but then the essence of the question was whether the Minister thought that New Zealand’s contribution was acceptable. The Minister clearly addressed that part of the question.

James Shaw: Will the Minister follow in David Cameron’s footsteps and match the UK’s Green Climate Fund contribution of $28.52 per capita, or even Australia’s contribution of $12.08 per capita?

Hon SIMON BRIDGES: In terms of this particular Green Climate Fund, no, but that is because we are doing so many other things in a range of areas internationally that makes our contribution considerable.

James Shaw: Well then, would the Minister at least be willing to push our contribution up to $1 per capita?

Hon SIMON BRIDGES: As I say, I think if you look at our contribution in total in a wide variety of areas internationally, what we do is very significant and New Zealanders should be proud of what we do.

Housing Market—Australian Housing Policies and First-home Buyers

6. PHIL TWYFORD (Labour—Te Atatū) to the Minister for Building and Housing: Is the reason he does not support banning non-resident foreign buyers from purchasing existing homes, that he agrees with the Prime Minister that the Australian Government’s housing policy has been “spectacularly unsuccessful”?

Hon Dr NICK SMITH (Minister for Building and Housing): The reason the Government does not support bans on foreign buyers is that they are shown not to work. As the Prime Minister said, the policy has been spectacularly unsuccessful in Australia. House prices in Australia’s major cities are even higher than in Auckland and have been rising rapidly. The average price of a house in Sydney is currently $930,000 as compared with Auckland’s $741,000, prices in Sydney have gone up by 9 percent in the last quarter, and homeownership rates in every state and city of Australia have declined over the last census. I also note that those who are advocating banning non-resident foreign buyers propose exempting Australians and, instead, focusing on those with Chinese-sounding names. This sort of inconsistent policy is more about racial politics than helping homeowners.

Phil Twyford: Does he stand by his own statement in the House last week that “The Australian policy has not worked because the prices of homes in Australia have gone up by more and are less affordable than what they are in New Zealand.”; if so, how much faster have Australian prices increased in the last year than New Zealand prices?

Hon Dr NICK SMITH: The specific information I do have is that house prices in Sydney over the last quarter have gone up by 9 percent. The current price of an average home in Sydney is $930,000. That is about 20 percent higher than the price in Auckland. I also note that in every city in Australia, and in every state, homeownership rates have declined over the last census, and so I would not suggest that Australia has the answer to New Zealand’s housing challenges.

Phil Twyford: Can he confirm that CoreLogic Australia’s data shows that Sydney was the Australian city with the fastest house price growth in the last year, at 16.7 percent, yet Auckland house prices in the same period went up 22.6 percent, meaning that Auckland house prices were going up 35 percent faster than Sydney’s?

Hon Dr NICK SMITH: No I cannot confirm that, because I regularly find that that member’s numbers are as dodgy as his Chinese-sounding names surveys—

Mr SPEAKER: Order! That answer will not help the order of this House.

David Seymour: Does the Minister think it is sensible to expect that bringing the same inflow of capital to the same supply-constrained market through a narrower channel, being only new builds, would have any effect on the price in the long term?

Hon Dr NICK SMITH: No, I do not think it would, and I would draw the member’s attention to the experience in Christchurch. Christchurch had very high house price inflation; it went over 15 percent. We have been able to treble the rate of new house builds in Christchurch. Over the last year house prices in Christchurch have risen by only 2 percent, and rents have actually dropped by 8 percent in Christchurch. What that shows is that supply is the most important focus, and that is why this Government, in Auckland, is putting the emphasis on growing supply as quickly as possible.

Phil Twyford: Can he confirm that house prices in New Zealand’s main urban centres went up 40 percent faster than in Australia’s main urban centres in the last year, and that the median price in Auckland is now only $68,000 less than Sydney’s median, even though New Zealand incomes are much lower?

Hon Dr NICK SMITH: No, I cannot confirm those numbers. As I said earlier, I find that member’s numbers as dodgy as his Chinese-sounding names surveys, which are not particularly reliable. I would also note that since we have been in Government an increasing number of New Zealanders are choosing to move from Australia to New Zealand, because our incomes are doing better and New Zealanders see a better prospect for their future in New Zealand under a John Key Government than they ever did when the previous Government ran the place.

Rt Hon Winston Peters: I raise a point of order, Mr Speaker. The Minister in answer said he could not confirm the figures. All the rest was a political tirade and he should have been stopped.

Mr SPEAKER: I did consider indeed intervening, but the level of interjection that was coming from my immediate left was, I thought, enough for the Minister to have the opportunity to respond to that.

Joanne Hayes: In what ways are New Zealand first-home buyers at an advantage over those in Australia, and what steps has the Government taken to further help this group?

Hon Dr NICK SMITH: New Zealand first-home buyers are able to access their KiwiSaver funds for putting a deposit on a house. Our HomeStart package, which took effect on 1 April, expands the funds that can be withdrawn and increases those grants, and, subsequently, there has been a record uptake of those schemes. I note that Australia does not allow access to superannuation funds for first-home buyers, and I think that puts young New Zealand families at a significant advantage in meeting their aspirations of owning their own home.

Phil Twyford: Did he deliberately mislead the House by claiming that Auckland house prices have not gone up as fast as those in Sydney or that New Zealand house prices have not gone up as fast as those in Australia, or did he simply not check his facts?

Hon Dr NICK SMITH: Let me give the member the exact figures. The average price of a home in Sydney—the latest data—is $930,000. The average price of a house in Auckland is $741,000—i.e., houses in Sydney are more expensive than in Auckland. If we look at the latest data on increases, the latest quarterly data shows that—[Interruption]

Mr SPEAKER: Order! There is little point in answering the member’s question when the member is not prepared to listen to the answer. Question No. 7, Alfred Ngaro. [Interruption] Order! The member Phil Twyford will stand and withdraw and apologise for that interjection.

Phil Twyford: I withdraw and apologise.

Waterview Connection—Progress

7. ALFRED NGARO (National) to the Minister of Transport: What recent reports has he seen on progress with the Government’s Waterview Connection Project in Auckland?

Hon SIMON BRIDGES (Minister of Transport): Yesterday Alice, the world’s tenth-largest tunnel-boring machine, completed the second of the twin three-lane tunnels, marking a major step towards completing the Government’s $1.4 billion Waterview Connection project and, indeed, the western ring route. The tunnels will be the longest road tunnels in New Zealand, each being 2.4 kilometres long, twice the length of the Auckland Harbour Bridge. Finally, can I just acknowledge the 800 staff and contractors who have worked hard on the tunnels and congratulate them on their engineering skills and innovation to complete this job safely and on time. It is a fantastic achievement.

Alfred Ngaro: How will the Waterview Connection benefit road users and support the future growth of Auckland’s population and economy?

Hon SIMON BRIDGES: The Waterview Connection tunnels are a critical part of the Government’s strong investment in Auckland’s motorway network to support its population and economic growth. The Waterview Connection and adjacent Great North Road interchange are expected to open in early 2017. That will complete a 48-kilometre alternative route around Auckland, reducing travel time for motorists and congestion on Auckland’s roading network. Although it is the end of the road for Alice, she leaves behind world-class tunnels that will benefit Auckland and New Zealand for 100 years or more.

Childhood Obesity—Commentary

8. KEVIN HAGUE (Green) to the Minister of Health: Is he confident that the interventions announced yesterday will be effective against the key environmental drivers of obesity, given that one-third of New Zealand children are overweight?

Hon Dr JONATHAN COLEMAN (Minister of Health): Yes. I think that being virtually the only country with a national obesity target and a comprehensive evidence-based life course package for children, with interventions across health, education, sport, and food promotion, incorporating both targeted initiatives and broad-based population strategies, will be effective.

Kevin Hague: Does he agree with Sir Peter Gluckman, who says “children are the unwitting actors who have become obese as a result of entrapment by contextual factors operating within society”; if he does, why is his policy package aimed more at individuals than these contextual factors?

Hon Dr JONATHAN COLEMAN: I speak with Peter Gluckman often and I respect his advice, and he has had a lot of input into this package. Actually, it is not just about individuals here; it is about broad-based population strategies as well. There are 22 initiatives in here, 11 of which are new. It is a comprehensive package. I would really welcome your support in going out and helping us to promote this package, because you actually have a contribution to make, and the member knows that there are a lot of good elements in this package, including the health target, which is a signal achievement.

Kevin Hague: Why is the Minister not considering a fizzy-drinks tax when the Prime Minister’s own Chief Science Advisor, Sir Peter Gluckman, has strongly recommended one?

Hon Dr JONATHAN COLEMAN: He has not actually strongly recommended one; he says that, on balance, he recommends one, but there is not any evidence that a tax on sugary drinks would decrease obesity. The University of Waikato is looking at the evidence. It will have definitive evidence in 2017. I know the member would love to tax all sorts of things, but, actually, he needs to consider what the price elasticity of demand would be and how much he would want to put it up to. All I know is that if we have a Labour-Greens Government, the price of everything is going to go up—it will not be just soft drinks.

Kevin Hague: When a recent tax on fizzy drinks in Mexico has already decreased consumption by 12 percent in just 1 year, why is the Government not even considering a fizzy-drinks tax here?

Hon Dr JONATHAN COLEMAN: We did consider it, but there was no definitive evidence. If you look at Mexico, they have done all sorts of things there, which means that there may be a correlation, but there is no direct causation. They have had $30 billion invested in drinking water. They have had major problems with the economy. In short, there is no direct evidence that a soft-drinks tax will have an impact on obesity. If he can show me the evidence, I will be happy to see it, but no one else has been able to.

Kevin Hague: Will the Minister continue to be persuaded by the Food and Grocery Council when it comes to setting policy to improve the health of New Zealand’s children; if so, will the Government’s tobacco control measures now be based on advice from the tobacco industry?

Mr SPEAKER: Either of those two supplementary questions, the Hon Dr Jonathan Coleman.

Hon Dr JONATHAN COLEMAN: Yeah, no.

Childhood Obesity—B4 School Checks and Schools

9. JACINDA ARDERN (Labour) to the Minister of Health: Does he agree with his colleague Hon Anne Tolley’s statement that children who need “that instant hit of carbohydrates, a pie might not be a bad thing,” and her subsequent decision to scrap healthy eating guidelines in schools in 2009?

Hon Dr JONATHAN COLEMAN (Minister of Health): Yes, I think the decision was widely welcomed by schools at the time. It is important to note that the 2009 changes did not take away schools’ responsibility—[Interruption]

Mr SPEAKER: Order! I cannot hear the answer because of the level of interjection. I have risen to my feet on two or three occasions asking for some particular members to cease the loud interjections. I will have no choice but to be asking members to leave the Chamber. Would the Minister please start that answer again—I would like to hear it.

Hon Dr JONATHAN COLEMAN: Certainly. Yes, I think the decision was widely welcomed by schools at the time. It is important to note that the 2009 changes did not take away schools’ responsibility to promote healthy foods and drinks to students. We are now building on this by expanding the Health Promoting Schools programme to an extra 150 decile 1 to 4 primary and intermediate schools. In addition, the Education Review Office will undertake a special review of food and nutrition and physical activity across the education system.

Jacinda Ardern: Is he now contradicting himself, given that he said in 2005 that “I can show you primary schools … where kids have a $1 pie for breakfast from the school tuck shop, then follow up with more of the same for lunch. That’s what has to stop.”?

Hon Dr JONATHAN COLEMAN: I do not think there is any contradiction in what I said 10 years ago at all. But the point is that we are not going to be banning pies. We are going to be working with schools, with families, and with communities to educate them that, actually, the odd pie now and then might not be a bad idea. There you go—that is yours. [Interruption]

Mr SPEAKER: Order! I have not called the member yet. But all members have a right to ask a supplementary question. The Hon Paula Bennett.

Hon Paula Bennett: I think it is important—do not be a pie-hater—

Mr SPEAKER: Just ask the question then.

Hon Paula Bennett: What was Mrs Tolley’s—

Rt Hon Winston Peters: I raise a point of order, Mr Speaker.

Mr SPEAKER: Order! I apologise to the Minister—we have a point of order.

Rt Hon Winston Peters: It is a point of order, because I seriously agree with you, Mr Speaker—I really want to hear this Minister’s question.

Mr SPEAKER: Well then, if the member stays in his seat and listens, he will hear it as much as I will.

Hon Paula Bennett: Thank you—I might know a thing or two about pies. What was Mrs Tolley’s full quote on pies, and what other reports has he seen on pies recently?

Hon Dr JONATHAN COLEMAN: Mrs Tolley’s full quote on pies was on Stuff on 2 March 2009. The full quote was: “For the kid who’s just been doing two hours of rugby practice and needs that instant hit of carbohydrates, a pie might not be a bad thing.” I have received another report today in the New Zealand Herald saying “If you’re wondering about what’s been fuelling the All Blacks success in the Rugby World Cup …”. it is pies. The article goes on to say—this is from the All Blacks—“‘We have a dietician … We loved the … pies.’ And it seems to be working for them.” I suggest to Andrew Little that if he is going to turn up in London and mix with them, he might not want to tell them that he does not like their diet, because they might think that he is a bit of a wuss.

Jacinda Ardern: Is a target based on how many children are referred from a B4 School Check to a health professional for a lifestyle intervention really meaningful when (a) more than 6,000 of the most high-needs children are not accessing these checks in the first place; and (b) we already know that referrals are being handed down for other serious conditions and not being followed up?

Hon Dr JONATHAN COLEMAN: No. The member has got it all wrong. So 92 percent of children are getting the B4 School Check. We have raised that radically from about 68 percent when Labour was in power. We are determined to triple the numbers. At the moment 1,400 children who are obese are being referred from those checks. We are going to triple that by December 2017 to 4,200 children, and no one can argue that that is not a good thing. It has been informed by expert advice. Pat Tuohy, consultant paediatrician—he thinks it is a great idea. Sir Peter Gluckman thinks it is a great idea. It is one part—I tell you—you have got no argument against.

Jacinda Ardern: Why did he not set a child obesity target that actually included reducing the number of children who are obese?

Hon Dr JONATHAN COLEMAN: We could have set all sorts of targets—you know, the field was open. But what we took in the end was the expert advice, and I would trust that advice over that member’s advice any day of the week.

Jacinda Ardern: When did he consult the Children’s Commissioner on this package, given his advocacy role and his position as a paediatrician, and was it as early as May, when he began an official discussion with industry?

Hon Dr JONATHAN COLEMAN: I had my first lecture from the Children’s Commissioner towards the end of last year, and then he came and saw me in my office probably around May. So I have had a full discussion with the Children’s Commissioner, and we have had a free exchange of views on this.

Broadband, Rural—Speed

10. TODD BARCLAY (National—Clutha-Southland) to the Minister for Communications: What recent announcements has she made regarding rural connectivity?

Hon AMY ADAMS (Minister for Communications): Earlier this month I announced that the Government was adopting ambitious targets for rural connectivity. Under this target, 99 percent of New Zealanders, regardless of where they live or work, will be able to access broadband at peak speeds of at least 50 megabits per second, and the remaining 1 percent of New Zealanders will be able to access speeds of 10 megabits per second by 2025. All Kiwis, whether urban or rural, deserve access to the economic and social opportunities that high-speed connectivity brings, and the National-led Government is delivering it.

Todd Barclay: How do these targets stack up internationally?

Hon AMY ADAMS: Most developed countries, including the likes of the US and the UK, have established broadband speeds and coverage targets. These targets that I have announced for rural connectivity are more ambitious than the aspirations of countries such as the UK, the US, Australia, and Canada, and will see New Zealand move from 17th to seventh in the world for rural connectivity targets, and ensure that no one misses out on the opportunities of the digital age.

Rt Hon Winston Peters: If any of that is true, what budget has been set aside to upgrade existing infrastructure, including broadband cabinets in Northland, to ensure that existing businesses and households regain secure and reliable internet speeds, which have been drastically reduced last year as new customers signed up, while speed and reliability fell away for existing customers?

Hon AMY ADAMS: First of all, I can assure that member that internet speeds have tripled under this Government, and are on target to double again, and I can further tell him that we have so far committed $2 billion of funding towards infrastructure across the country. Although I cannot give him the exact breakdown for Northland on my feet, I can assure him that Northland has done very well under both the ultra-fast broadband and the Rural Broadband Initiative projects, and it is thanks only to the National-led Government, otherwise it would have had zero.

Earthquake Commission—Remedial Repairs

11. Dr MEGAN WOODS (Labour—Wigram) to the Minister responsible for the Earthquake Commission: How many homes have been inspected by the Earthquake Commission’s team of 35 staff set up to deal with defective repairs, since this team was announced 5 weeks ago?

Hon GERRY BROWNLEE (Minister responsible for the Earthquake Commission): The team has been in place for 2 weeks. When the team was announced, it was publicly stated that it would be in place by the end of October. One hundred and forty-five homes have been inspected since the team was established, and it is expected that the team will complete 80 inspections a week once fully operating. The “jack and pack” remediation is still expected to cost up to $1,000 per site, which will be covered by the contractor or by Fletcher Construction.

Dr Megan Woods: What is the forecast number of all remedial requests that the Earthquake Commission expects to receive until 30 March 2016?

Hon GERRY BROWNLEE: That would depend on the category of the request that is being made. It could be, for example, that rubbish has been left on the site. It could be that there is some defective paintwork. It could be a range of minor things. The total number is currently 6,736 out of some 69,000 jobs.

Dr Megan Woods: I seek leave to table a paper prepared by the Earthquake Commission showing a forecast of 7,357 remedial repair requests forecast, dated 13 August 2015.

Mr SPEAKER: Leave is sought to table—

Hon GERRY BROWNLEE: I raise a point of order, Mr Speaker.

Mr SPEAKER: I will allow the member to make a comment.

Hon GERRY BROWNLEE: It might help the member to know that that was a forecast in August. The figure I have just given is the up-to-date figure today.

Mr SPEAKER: Order! The member has sought leave to table the document. I will put the leave. The House can accept it, if it wants. Leave is sought to table that particular Earthquake Commission document. Is there any objection? There is none. It can be tabled.

Document, by leave, laid on the Table of the House.

Dr Megan Woods: How has the modelling changed since the report that I referred to, of August 2015, of 116 requests a day coming in—has that modelling changed now, by September 2015?

Mr SPEAKER: Order! There was a mix of questions in there. I will get the member to restate the question.

Dr Megan Woods: OK, thank you. Has the basis of the modelling of the figure of 7,357—the August 2015 figure—changed? Is there now a new weekly expected number of complaints to come in?

Mr SPEAKER: The Hon Gerry Brownlee—either of those two supplementary questions.

Hon GERRY BROWNLEE: The basis has not changed, but the results certainly have.

Dr Megan Woods: When does the Earthquake Commission expect to complete the inspection and remediation of the requests it has forecast by 30 March 2016?

Hon GERRY BROWNLEE: The forecasts are still pretty much on track for that date in 2016, but some types of remediation work, or areas where there has been some sort of request of the Earthquake Commission or where the Earthquake Commission has gone out to have another look at work, should be organised by Christmas. There will of course be people who cannot fit into that programme for various reasons, and that will be largely their choice.

Dr Megan Woods: Will he give a definite date when the forecast 6,000 remedial repair requests will be completed by?

Hon GERRY BROWNLEE: Given that it is a forecast number, all I can give is a forecast date. The forecast date is 18 March 2016, but do not be surprised if it takes a little longer because often when the Earthquake Commission approaches people about doing remedial work, they will have reasons why they cannot get it done at a particular time.

Dr Megan Woods: Does he think Cantabrians have a right to hear some certainty from him as to when this issue will be dealt with and completed, or is their frustration at the long delays and dodgy repairs just more excitement?

Hon GERRY BROWNLEE: The question does not specify an issue, and refers to “dodgy repairs”. The fact is that the repairs that have been found to be less than desirable are being fixed. That does not seem to be the hallmark of a dodgy operation.

Data Futures Partnership—Announcements

12. BRETT HUDSON (National) to the Minister of Statistics: What recent announcement has the Government made on the Data Futures Partnership?

Hon CRAIG FOSS (Minister of Statistics): Last week the Minister of Finance and I announced the formation of the Data Futures Partnership. This is an independent group spanning the business community, Māori, and the public sector, which will be working to create an environment for trusted data-use in New Zealand and to increase the value generated from New Zealand’s data use. The partnership has been designed to embody the principles of value, inclusion, trust, and control, which were identified by the Data Futures Forum as essential to making data work for all of New Zealand. The partnership will focus on providing meaningful impact through the delivery of catalyst projects tackling challenges and issues preventing effective data-use.

Brett Hudson: What expectations does the Minister have of the Data Futures Partnership?

Hon CRAIG FOSS: I expect that the partnership will work to strengthen the data-use environment in accordance with the guiding principles of value, inclusion, trust, and control, by undertaking activities in areas such as progress in catalyst data-use projects, championing data-use innovation, and facilitating an inclusive social licence. I understand that the partnership is very keen to get under way, and I am looking forward to its reports.

Bills

Construction Contracts Amendment Bill

Third Reading

Hon Dr NICK SMITH (Minister for Building and Housing): I move, That the Construction Contracts Amendment Bill be now read a third time. The building and construction sector is a significant sector of the New Zealand economy. It contributes about $16 billion per year to GDP and employs over 200,000 people. It is central to the rebuild of Canterbury and to resolving some of the housing and infrastructure challenges for Auckland.

The industry needs the very best of construction law that will work for massive, multibillion-dollar projects like the Waterview tunnel down to smaller projects like home alterations. This task of ensuring our construction law is fit for purpose is even more important now than ever, given the massive building programme projected over the next few years. It is during such boom times that there is a risk of commercial and building practices getting sloppy.

I must reflect briefly on the history of New Zealand construction law. Prior to the fourth Labour Government we had the Wages Protection and Contractors’ Liens Act, which enabled a builder or subcontractor to register their interest in a property and ensure payment against the title of the land. The Minister who was then responsible, Geoffrey Palmer, argued that there was no such need for special legislation in the sector and that the law of contract was sufficient. The problem with this academic approach was that the management of risk in the sector favoured property developers and main contractors at the expense of the thousands of small businesses that did the bulk of the actual construction work. If a project was successful, all was well—everyone got paid and the developer took their profit. If the project went badly, the developer went broke and the contractors and their subbies did not receive payment. The practice developed for the worse in the 1990s with the evolution of “pay when paid” contracts, creating a precarious stack of cards and excessively risky developments.

It became increasingly apparent that this laissez-faire approach was not working, and in 2001 I tabled a member’s bill for a Construction Contracts Act. The Government of the day, led by Minister Laila Harré, thought likewise, and so the 2002 Act came into existence. The Act has worked well. It has provided an effective payment dispute resolution process and knocked on the head those particularly obnoxious contractual arrangements of “pay when paid”.

This bill arises from necessary improvements to that law. The most significant of the changes are in respect of retentions. These will be welcomed by the tens of thousands of mum and dad businesses involving plumbers, painters, electricians, tilers, plasterers, and many other trades. The retentions are sums where the principal or main contractor retains a portion, often 10 percent, to ensure that the work is of standard. The first change in this bill is that it makes plain that the prohibition on the “pay when paid” provisions applies equally to those retentions. The second change arises from the way some contractors misused these retentions as working capital for the next project. This puts the subbies’ money at risk, in a way in which they had no control or ability to minimise that risk.

The failure of Mainzeal, where $18 million of retentions was lost for mum and dad subcontractors, well illustrates the need for law change. The losses were of such a scale that they caused huge pain for hundreds of small and medium sized businesses across New Zealand, and also resulted in some of those businesses failing as a consequence of those payments not being made. The bill significantly changes the law on how retentions must be managed. The significance of requiring they be held on trust is that they will be treated preferentially in any business failure, akin to wages and tax. This is appropriate. The balance we have attempted to strike in this law is maximising the security of these payments for subbies while minimising the extra compliance costs that go with these provisions.

It is important for the record that I set out how these new provisions will work. Retentions are to be held on trust. Payers can hold those retentions in liquid assets such as accounts receivable, but if they do not get paid they are still obligated to meet those payments. The trust ends when the retentions are either paid out in full or used to fix defective work. These new retention provisions will affect about $200 million a year of funds that are held and are a significant refinement in the way our construction law works.

The Construction Contracts Act will also be amended to remove the distinction between residential construction contracts and commercial contracts, so that parties to either kind of contract have full and equal access to provisions under the Act. These follow on from regulatory changes we made on 1 January requiring written contracts in the residential construction sector. This is a substantial change that more than doubles the scope of the Construction Contracts Act, from about $6 billion per year to $16 billion per year.

Thirdly, the scope of the Act will be widened to include construction-related services, such as the work that is done by architects, by engineers, and by quantity surveyors. Parties to contracts for the performance of these services will be able to access the payment and dispute resolution processes in the Act. This amendment will be of particular benefit to consumers to help them hold architects, engineers, and quantity surveyors to account for their work. It will also benefit those designers and quantity surveyors, enabling them to use the payment provisions of the Act to ensure they are properly paid for their services in a timely manner.

These amendments will come into force on 1 September 2016, to give these professions enough time to adapt to this new construction law. I would like to thank those building and construction sector representatives who gave their time to participate in the working groups and reference groups to assist my ministry with the review of the Construction Contracts Act and in developing the amendments to regulate retentions. I also want to acknowledge the work of the Commerce Committee. Can I also thank the team in the ministry, the Parliamentary Counsel Office, and all those who have worked on this bill. This will make for a more robust and a more commercially disciplined construction sector, and, as I said at the beginning, at a time when there is a record level of construction, this bill is to be welcomed by the House.

Hon CLAYTON COSGROVE (Labour): The Labour Party will support this bill and, I have to say, we support its aims and objectives in terms of ensuring that the construction sector is processing its affairs faster, it is more cost-effective, it is more efficient, and those subcontractors, especially, are protected. But I do say in passing that if you look at the history of this legislation, it is interesting.

As it proceeded before the Commerce Committee, we had, of course, the Mainzeal collapse. I think the Minister holding this portfolio at the time was one Maurice Williamson. We know with the Mainzeal collapse that hundreds of people—hundreds of subcontractors—lost money and that millions and millions of dollars went down the toilet. One—the Rt Hon Jenny Shipley, of course, who vacated her seat on the board of Mainzeal just prior to that collapse—is still chairman, I believe, of Genesis Energy, which is one of our leading State-owned enterprises. She has, to date, supplied no explanation as to what her role was or what her accountability should have been in respect of that.

Hundreds of subbies lost work and lost their livelihoods. Millions of dollars was put at stake and lost. Tools were tied up and people were aggrieved. I remember a quote from Maurice Williamson, because Maurice Williamson brought some kind of Cabinet review to the House and, basically, on the issue of retentions, he said there was no problem and no need to do anything. In fact, officials told us that in respect of the wider issues that the Minister has now included in the bill, all of those things were out of scope.

And then an interesting thing happened. The Labour Party went out with a discussion document—an option modelled on the New South Wales example—which was very similar, I have to say, to what the Minister has put in. I think he is 90 percent right. I think it could still have been improved, but I support where he has gone with it. But we went out and we proposed a number of solutions on the back of the Mainzeal collapse. In essence, we proposed a construction trust, similar to New South Wales, which had had an inquiry, and the construction trust, essentially, was a drop-box where moneys would flow into the holding pen, if you like, that was the trust. It is extremely cost-effective, and the moneys would be paid out under whatever the contractual arrangements between the lead contractor and the subcontractors that they had put in place were. There would be no interference in any of those issues and no interference with timing. If there was a dispute, the trust would say to the two parties: “Go away and sort it out and tell us who to pay.”

But in the event of a Mainzeal-type collapse, it became very important that those moneys would be quarantined off. That proposal at the time by I think it was by Nick Smith or Maurice Williamson—I cannot recall who was actually in the chair—was pooh-poohed: “No, no, unnecessary. Rubbish. There’s no problem to be solved.” Again, there was total inactivity after the Mainzeal collapse. I see the Minister has had a road to Damascus experience because he now acknowledges the pain and suffering and economic hurt that occurred through that collapse. At the time, it was sort of: “Well, you know, these things happen. Commercial risk is commercial risk.” And then, after we had gone out and consulted with the building sector and we firmed up these proposals, hey presto, officials came to the committee and said: “Ah, the Ministers have now got this on their radar screen.”

I find it interesting that at the same time as we are looking at quality work and we are talking about retaining and improving the building sector—and my comments do not relate in whole to all builders and all subcontractors and all practitioners within that sector; they pertain to the small minority of cowboys who exist. At a time when we have just had questions today—and we know that some builders have done extremely shonky work in respect of the Earthquake Commission repairs. We know that that has happened. There has been a lot of pain and suffering for earthquake victims in Canterbury who thought the nightmare was over. At the same time as that is happening—and we are talking about quality work and raising standards—the Government’s so-called loopy rules taskforce is proposing that we turn the clock back and that builders self-certify.

I remember when I was the Minister for Building and Construction and we introduced the licensing building practitioners proposals. I will be the first to admit they were not a silver bullet, but it was people like the Registered Master Builders and the Certified Builders Association and others that wanted licensing regimes in place because those organisations—eminent as they are—wanted the cowboys out of the system because they gave the good folks and the good practitioners a bad name. It was all about lifting standards, proving that you could do what you said you could do, and standing by your work. One of the deficiencies we found in all that process was the good old building inspector. There were some good building inspectors, and some who specialised in what they call the drive-by inspection—but the last line of defence, of course, was the building inspector and those other, independent parties that would certify that work had been done correctly.

And for the homeowner, off the back of the leaky building crisis that Ms Bennett is quoted as saying is all over, it is all done and dusted—you know, moved on to the next phase. Well, for many thousands of people, they have not moved on, they cannot move on, and it is still a crisis for them. We are talking about turning the clock back and getting rid of certain checks and balances, under the guise of getting rid of “loopy rules”. Well, there used to be a day—and I know many fine builders who would stand by their work, regardless of whether there was a contract or not. They would be around in 20 years to put some oil on the hinges of your kitchen if they squeaked, because it was done on a handshake and they were quality practitioners and they stood by their work.

Sadly, when the Government, under Nick Smith and Lockwood Smith at the time, deregulated the building industry in the 1990s, anybody could strap on a tool belt—I know what Nick Smith will do. He will get up and seek leave to table a Hansard quote from George Hawkins. Well, learn by your mistakes, Minister, learn by your mistakes. When they deregulated the building industry, anybody, God help us—even my good self, and I would be lucky to be able to build you a dog house, let alone a house—could strap on a tool belt, call themselves a builder, and go around and claim to be able to build your home. And off the back of that, with other systemic failures—you know, the free market. I am a free-marketeer, but I think there should be checks and balances in place. Nick Smith, of course, says, you know, that anything goes. That was his position in the 1990s; now he has changed it, of course.

But as we talk about quality in this bill—we support many of the aspects, most of the aspects—we would have done a few things differently in this bill. The loopy rules committee talks about turning the clock back and self-certification, as if we can get rid of a bit of paperwork—and the question then is, who watches the watchers? Who then ensures that the standards that are being self-certified are up to scratch, or have we learnt nothing from our history in respect of leaky buildings?

Well, it is obvious that the Government has, because it has come a gutser over the Earthquake Commission repairs. We were told by Minister Brownlee that with the Earthquake Commission repairs there would be the highest-quality standard, monitors in place, and no need for any competitive tension and that we do not need two companies; just Fletcher’s would be OK. Why? Mr Brownlee said that having one company, a monopoly, allegedly kept the price down—I do not know how that works under School Certificate economics; I thought that was the competition party over there. No competitive tensions, and the highest-quality standards would be maintained, and then, hey presto, what happens? We have what we have today, which is a whole series of building failures—and not only building failures, but other failures.

Yet again, we have good, solid, professional building practitioners who stand by their work. When they make a mistake, they stand up and say: “We’ll go and fix it.” But, oh no, they are dragged down into the political swamp and the economic mire through the shonky work of others. The Government’s framework is simply: “Oh well, Fletcher’s or the subcontractor will pay. We’ll wash our hands of it.” Well, we were given assurances in respect of that work. Those assurances have never come to pass.

So I say to the Minister that we support this legislation. We support its intent. We are glad that he has piggybacked on the back of our policy and that we could put some steel in the political spine in respect of his following our policy. We would have done it differently but, you know, we got there first. We actually propelled the Minister to take an interest in some of these issues because he did not want to be seen to be tail-end Charlie.

That aside, we think that this bill will strengthen the industry, but we just wonder. On the one hand, as the Government passes this bill, on the other it proposes to loosen rules, turn the clock back, and get rid of checks and balances in other areas of the industry. Again, it would be good if the Minister could have provided some sort of explanation on behalf of his former leader, the Rt Hon Jenny Shipley, as to her role and responsibility for Mainzeal, as she purports to lead and chair Genesis Energy. We support the bill, but we do support it with some reservations.

BRETT HUDSON (National): It is with pleasure that I rise to support the Construction Contracts Amendment Bill in its third reading. I have to say that I am not completely sure what things are like on “Planet Labour”, but here in the real world we actually do expect that people who perform works are capable of doing them and doing them properly. But for any people out there watching this, if they do not like the history they have been living and they would like to see it revised somewhat, they could do no better than listen to a speech from the member Clayton Cosgrove, who has just resumed his seat.

But it is indeed a pleasure to stand in support of this bill, a bill that will make some really serious and important changes to the management of our construction contracts. It will remove some of the distinctions that have been there in the past between residential and commercial builds. It will increase the scope to include some more of the professions that are involved in construction services and, importantly, because we acknowledge—as the members opposite have acknowledged as well—that in the past there have been situations where smaller contracting companies, in particular, have borne the brunt of, if not some bad practices, certainly some bad fortune when principal contractors, for instance, have found themselves in insolvency issues. Those smaller contractors have been seriously disadvantaged and have not been paid, particularly, some of the retention moneys that have been held on their behalf for the work they have done.

Just before I cover those points, it is worth reminding ourselves just how important it is to New Zealand that we address this because, if we look at it, the building and construction sector is going through a boom that the country has not seen for perhaps as long as 40 years. If we look at what it contributes to our economy, it is about 6.6 percent of gross domestic product. The building and construction sector employs about 9 percent of our total workforce, or around 213,000 people. The National Construction Pipeline report is forecasting that over the next 6 years we will see a total of $200 billion worth of activity in this sector, and that that will peak in about a year’s time at an all-time high of $36 billion. So the scale of this industry is so important to New Zealand that it is important and critical, you could argue, that we take these measures—measures that, as I have said, will remove some of the distinctions that have been in place in the past that do not serve us well. So, for instance, most of the distinctions between the treatment of residential and commercial contracts will be removed and the parties to both kinds of those contracts will have full and equal access to the processes under the Act.

Secondly, the scope of the Act will be extended to apply to design, engineering, and quantity surveying work. So architects, engineers, and quantity surveyors will have access to the payment and dispute resolution processes, which is good for those professions, but, equally, consumers will benefit because that will help to hold members of those professions to account for the quality of that work.

We are a sensible Government. We understand that changes like this can have significant impacts. Those professions will have until the beginning of September next year to adapt to the new regulatory environment, and they will actually benefit into the future from that. But I would like to focus on the area of retentions because it is truly an extraordinarily important part of this. The key thing we are going to do is to prevent retention money from being used by the principal contractor, either as working capital or to offset debts elsewhere, including paying retention payments to other subcontractors. So the requirement is that the retention payments will be held in trust. There is a clarification that will ensure that the “pay when paid” provision, or exclusion, will also apply to retention payments. It will ensure that the retention money held in that trust is not only properly accounted for but it cannot be used for any other purpose, including that it cannot be taken under a court order for a retention payment for another contractor.

The member opposite had proposed that we use separate trusts for each of these subcontractors. All that would do is pile on compliance costs and complexity. We have come up with a very elegant way of dealing with this under a single trust structure, but making sure that the obligations are well managed and well monitored. This will help to remove some of the poor behaviours and poor outcomes that we have seen. It will give everyone confidence in the system. I commend this bill to the House.

PHIL TWYFORD (Labour—Te Atatū): This bill fixes an injustice in our laws in relation to the way contractors and subcontractors are treated in the construction industry. Labour supports this bill.

I want, first, to make a couple of comments about some of the boasting that we heard from the Minister for Building and Housing in his initial contribution. He is very fond of conjuring up in his crystal ball the vast number of buildings that are going to be built. He likes to say that we are in the midst of this incredible boom—more building than ever before. But what he omits to say, actually, is that his signal achievement as Minister is that he has increased the build rate in the last few years—what is it—two, three, four times off the lowest base in living memory. His benchmark, his comparator, for the increase in the build rate is the depths of the global financial crisis. That is his great achievement. When he loves to talk about this huge building boom that he is claiming credit for, what he omits to say is that under his watch, in Auckland, we are in the middle of a housing crisis and the Productivity Commission says that we currently have a shortfall of some 32,000 homes built since National has been in Government. When the Minister talks about the great building boom, as he did in his remarks, he fails to point out that actually we are still building 2,500 fewer dwellings than we need, just to keep up with population growth.

Hon Dr Nick Smith: Not true.

PHIL TWYFORD: That is absolutely the truth. The Minister says it is not true, but it is absolutely the truth. When you look at the statistics, and when you look at the work of the Productivity Commission, the Auckland Council, and anybody else who cares to look at this, it is clear—it is very clear—that the shortage of houses in Auckland is getting worse every week, and it has been getting worse every week since Nick Smith became the Minister.

Mr DEPUTY SPEAKER: You have made your rebuttal. Now move on to the bill, please.

PHIL TWYFORD: The construction industry is very important. The Minister himself pointed out that it has something like 200,000 employees. It is responsible for something like 6 to 7 percent of the country’s GDP. But the problem with the construction industry is that it is plagued by a boom-and-bust cycle that guts it regularly of its skilled workers. When the industry takes a hit, as it does from time to time, firms like Mainzeal go under, taking with them hundreds and hundreds of contractors. This bill fixes part of the problem, which is the law that puts subcontractors at risk. The bill fixes that, and that is great.

I am going to talk some more about how Clayton Cosgrove basically cut the lunch of the Minister in actually providing the most important feature of this bill. It came out of Clayton Cosgrove’s issues paper, after the collapse of Mainzeal, and it came out of his Supplementary Order Paper 439. Nick Smith salvaged some integrity and credibility for this bill by basically picking up Clayton Cosgrove’s good work. The issue of retentions was, I think, really well illustrated by the Mainzeal collapse. Mainzeal went into receivership owing nearly $100 million—having $95 million in assets, and owing $100 million.

I want to quote one small-business owner who was badly affected, who is typical of hundreds of others—an electrical contractor and small-business owner, Dave Burt. He was out of pocket to the tune of $25,000 because the retentions that Mainzeal held for that subcontractor were not protected. They had no legal protection. Dave Burt was left $25,000 out of pocket. This is not to mention the hundreds of contractors who lost their tools. In the Mainzeal collapse their tools of trade were locked behind security guards and locked gates, and they could not get them. I want to pay credit to the work that Clayton Cosgrove did in addressing that.

It is ironic, as Clayton Cosgrove said, that at the very time that Nick Smith brings a construction contracts bill to this House that sets out to reduce the vulnerability of subcontractors in the industry to losing those retentions, National is displaying once again the schizophrenic view that it has about deregulation in the building industry, having been responsible for this ideological burp to deregulate the building industry in the early 1990s, and having put the country through a $22 billion disaster that Paula Bennett now thinks we have all moved on from—$22 billion is the dollar value of the losses faced by tens of thousands of New Zealand homeowners because of the National Government’s leaky homes disaster, and now Paula Bennett thinks we have all moved on.

Well, we have not and, as Clayton Cosgrove pointed out, the Government has come a cropper in Christchurch with the appalling quality of Earthquake Commission repairs, and what we see in Auckland now, according to Auckland Council’s most senior building inspector, is an epidemic of shoddy work. The Auckland Council has just revealed the other day that it has set up a special investigations unit to crack down on cowboy builders because there are so many of them. It has set up a special complaints and investigations unit.

What people in the construction industry are saying is that there are two people who are responsible for this at the moment. One of them is Maurice Williamson, who watered down the requirements of the licensed building practitioners scheme. He was so desperate to get builders registered with the licensed building practitioners scheme that the standards, the quality standards for training and certification, have been made so low that the licensed building practitioners, or LBP, scheme is almost meaningless. So that was a giant missed opportunity to actually raise the standards of quality and of training. The other Minister who is responsible for this is the Minister who has spoken in this debate, the Hon Nick Smith. The most senior people in the construction industry have pointed out to me that in their official task force on this, they recommended to the Government that the Government make a top priority of investing in quality and training in the construction industry. That Minister has, basically, parked it. He has told the construction industry that it is not a priority for him. He has put it to one side, he does not care about it, and the most senior and influential people in the construction industry are appalled by Nick Smith’s attitude.

So he comes to this House with what is, in itself, a very good bill—it fixes a longstanding injustice—and that is the failure to protect retentions for subcontractors in the construction industry, but at the same time, this Minister does nothing to protect the quality of work in the construction industry. This, alongside the boom-and-bust cycle, is what puts the very same subcontractors at risk, and, believe me, in Christchurch with the Earthquake Commission repairs and in Auckland with this epidemic of shoddy cowboy building material, we are going to see more and more firms at risk of going under because of the instability caused by this Government’s failure to actually address the underlying structural causes of the boom-and-bust cycle. That is at the heart of this issue. This Government has done nothing to address it.

Retentions are incredibly important, and there are thousands of subcontractors at work in this industry who are reliant on having guaranteed access to those retentions. The fact is that this bill basically requires them to be held in trust, not in a trust account. It was Clayton Cosgrove’s original proposal that the retentions be held in a trust account, and, as we have heard, the Minister felt that this would create too much in the way of compliance costs. Well, we will see. We will see whether or not a statutory obligation to hold these funds in trust provides sufficient protection. Maybe the Government is right; maybe it is not. But the important principle is that those retentions will be held. They will be legally protected. The companies will not be able to use them for cash flow, and it is our sincere wish on this side of the House that that is going to provide a lot more financial security for subcontractors.

KANWALJIT SINGH BAKSHI (National): Thank you for the opportunity to stand and support the Construction Contracts Amendments Bill. I totally disagree with the previous speaker, Phil Twyford, who said that this bill does not do anything. I think this bill is a very good bill brought by the Minister for Building and Housing, and one of the things that this bill makes sure is that the retention money of the subbies is protected. That is a big concern for those subbies who really work hard and their retention money is never paid to them, and it is a big challenge for the Government to make sure their rights are protected. This bill will also stop the contractors using that retention money as capital for their other projects. Sometimes they go bust in new projects and this retention money is never paid back to the subbies.

We are going through a construction boom, whether it is in Auckland or in Christchurch, and we are making sure that the quality and the productivity are held at the highest level. This is very important because, as our Minister the Hon Simon Bridges mentioned, in west Auckland the tunnelling project is one of the biggest projects in the history of New Zealand. It is progressing very well and the people who are working on such projects, which are going to contribute to this economy, should be paid on time. With these words, I commend this bill to the House.

JULIE ANNE GENTER (Green): I rise to speak on the third reading of the Construction Contracts Amendment Bill. I am very pleased to say that this is one example during my time here in this Parliament where I have seen submissions to the select committee; persistence on the part of the affected people, who were showing up and submitting and calling for change because there was a problem that needed to be dealt with; the role of Opposition parties as well, of course, championing the issue; and a number of other circumstances, and all of those factors have actually contributed to an improvement to the law. It is going to make a real difference in the lives of many independent business owners who work as subbies out there, working on the ground helping construct our buildings, whether they be residential, commercial, or industrial.

I just want to go through the history of this bill, because we have heard different sides of it from different people in this House. In 2009 the Government undertook a review of the Building Act and in 2010 that led to a review of the Construction Contracts Act itself. There were five areas that were identified as needing change, but only three of them actually came forward in the initial bill that was put to the House. So there were two areas identified during the review that were not dealt with in the legislation when it came to the House in its first reading, and they were the areas of security of payment and retentions. We all knew this was a significant issue—certainly people in the industry knew it was a significant issue—and yet the Government was choosing not to deal with it when it went to amend the Construction Contracts Act, probably putting it in the too-hard basket or, potentially, because Government members have some constituents or big donors who are principal contractors who would not like the law to be changed to actually level the playing field for subcontractors.

Finally, the Government introduced a bill in 2013—so that is 2½ years ago. It did not deal with the issue of retentions or security of payment, but then in February 2013 we had the Mainzeal collapse, which many people have referred to today, and of course it eventuated that when Mainzeal went into receivership it owed over $18 million to subcontractors for work that had been undertaken and it was never going to be able to pay. That money was completely unsecured, so we had guys out there who were doing their best, who were not even able to access their tools on the day. The tools sometimes got locked on to sites because the receivers were locking the subcontractors out. They lost $18 million collectively and that money was not secured at all. That was twice the amount that Mainzeal owed to the Bank of New Zealand. It owed $9.3 million and, of course, that money was secured.

So the Mainzeal collapse demonstrated just how much the law was failing the subbies. It was allowing principal contractors to use money that, technically, did not belong to them as cash flow for other projects rather than going to the bank, and that was irresponsible and really immoral.

The problem with Mainzeal was so huge that it was impossible for the Government to completely ignore it, and when the bill came to the Commerce Committee in July 2013, which was more than 2 years ago, although we had politicians saying they were very sympathetic to the subcontractor situation and they wanted to do something about it, ultimately it was out of the scope of the bill, which was actually going to amend the Construction Contracts Act. But during the submissions process we heard from a huge number of submitters, and more than a dozen of them were specifically focused on this problem of retentions and the lack of security of payment. We heard from the Building Disputes Tribunal, the Building Industry Federation, the Construction Strategy Group, the New Zealand Contractors Federation, the Law Society, the Specialist Trade Contractors Federation, Steel Construction New Zealand, Master Plumbers, Gasfitters and Drainlayers, the Electrical Contractors Association, and on and on and on. We heard over and over again that this was a major problem that was costing potentially tens of millions of dollars to subcontractors—money that legally should have been theirs but was being spent by principals and was not able to be recovered. It was completely unsecured and not protected by the law.

So they were saying “We have this huge problem.”, and they were begging us to solve it. Unfortunately—or fortunately, as the case may be—the Minister at the time, Maurice Williamson, was not interested in dealing with this problem in this legislation. So the bill came back to the House with Supplementary Order Papers from the Government in March 2014—that is over 18 months ago now—there was no indication that the issue of retentions or security of payment was going to be dealt with.

There was an issue of BuildLaw put out by the Building Disputes Tribunal that noted that this major problem was not being dealt with in the legislation. It noted that the Labour Party MP Clayton Cosgrove had put forward Supplementary Order Paper 439, modelled on some legislation in New South Wales, I believe, which deemed that for the purposes of commercial and industrial buildings, at least, the retentions should be held in trust. But the Government criticised Clayton Cosgrove’s Supplementary Order Paper and the BuildLaw issue. There were a couple of problems with the Supplementary Order Paper. First, it was requiring that a separate trust account be set up, which the industry thought was going to create a lot of compliance costs; and, secondly, and probably more problematically, it applied only to commercial and industrial projects, not to residential. We saw the research from the Building Research Association of New Zealand during the select committee submissions, and it demonstrated that a majority of the payments that were being withheld—payments that subcontractors were not able to access—were actually on residential projects.

I spoke in depth with the New Zealand Contractors Federation, and it really needs to be congratulated on all the work it did on it. We worked together and proposed a Supplementary Order Paper. It was very, very simple—it worked with the existing language in the existing bill, and it deemed that retentions must be held in trust. It did not require that a particular trust account be set up, but it did allow for the protection of that money through the legislation, and it would have applied to all contracts, whether they be commercial, industrial, or residential. BuildLaw and the Building Disputes Tribunal applauded me for that Supplementary Order Paper 446, although I could not have done it without listening to the expertise of the guys who really knew what was going on on the ground. They were the ones who really worked to propose that elegant solution, which, finally, is going to be included in the legislation that is going to be passed today.

The Green Party is very happy to see that this problem is finally going to be dealt with. But it took a lot. It took members of the industry coming to the select committee. It took Mainzeal collapsing and leaving debts of $18 million to subcontractors. It took a lot of persistence on the part of the affected people. It took Opposition parties effectively coming up with alternative solutions and putting pressure on the Government in the House.

I tabled my Supplementary Order Paper 446 in May of 2014. We questioned the Minister in May of 2014, and, finally—because the previous Minister, Maurice Williamson, ended up resigning in May 2014 and we got a new Minister for Building and Housing, Nick Smith—Nick Smith actually listened to the affected people in the industry in a way it seems that Maurice Williamson was unwilling to do. So I think we do have to thank circumstances—that the Government’s Supplementary Order Papers that were introduced in March 2014 were withdrawn and do not exist in legislation today. Instead, we have Government Supplementary Order Papers that are very closely related to the one I tabled in May 2014 finally being introduced 18 months after the bill was supposed to go through the Committee of the whole House, in a whole other Parliament. The Government tabled its Supplementary Order Paper 106 in September of this year. It deems that the retentions should be held in trust. There is a lot more detail in it because the officials have worked it out.

So, finally, we are going to see an improved bill. Let us see: if this started in 2009, we are looking at a 7-year process to see what is right and moral, which is protection for subcontractors’ money that belongs to them and should not be spent by principals as cash flow in other projects. They are finally going to get protection in the law today. I am very proud, as an Opposition member, to see this bill pass. When you are in Opposition, it is very hard to see what good you are doing, but I do feel that this is one of the biggest wins that I have had since I have been in Parliament. So thank you. The Green Party will be supporting this bill.

RIA BOND (NZ First): I am pleased to rise on behalf of New Zealand First and take this call on the third reading of the Construction Contracts Amendment Bill. New Zealanders cannot afford to have another Mainzeal-type collapse. The severity of such collapses of companies has shocked this nation. The biggest losers here were in fact the subbies: the plasterers, the painters, the bricklayers, the drainlayers, the plumbers, and the electricians. In 2013 we saw that this actually affected over 486 workers, and, indeed, it sent shock waves through the subbies and the industry.

This bill will ensure that there is an appropriate market-driven disputes service. All parties need a clear route to an appropriate, market-driven resolution process. Parties involved can be assured of a faster, more efficient, more effective, and more cost-effective process without additional compliance costs.

New Zealand First supported this bill’s referral to the select committee and its second reading. The addition of Supplementary Order Paper 106, in the name of Minister Smith, amends provisions in the Construction Contracts Act 2002, the principal Act. It makes provision in the Act “for retentions (being money withheld by one party to a construction contract from money payable to another party to the contract as security for the performance of obligations under the contract) to be held on trust.”

Retentions have been an issue, and this was commented on by the Commerce Committee. During the second reading speech I quoted from its comments, and I will do that again today: “We were concerned to hear that many head contractors may be misusing retentions as working capital, delaying payment, or holding retention amounts disproportionate to the contract prices. This behaviour undermines the sector’s growth and productivity. While it is outside the scope of this bill we are encouraged to hear the Ministry of Business, Innovation and Employment is giving priority to addressing these issues. We urge the ministry to continue to work with industry players and look forward to policy solutions in legislation in early 2014.”

I also commented on the debate pack prepared by the Parliamentary Library, and specifically the legal commentary, which, again, I will quote from: “It has been a long-established practice in New Zealand and internationally for retentions to be held under construction contracts to ensure that if there are defective works the head contractor, or principal, is able to recover the cost of fixing these defects. In the wake of the Mainzeal collapse subcontractors’ retentions were unsecured debts in Mainzeal’s liquidation, and amendments were seen as necessary to protect payment of retentions to subcontractors and head contractors.”

I will say it again: what these two commentaries told me is that the biggest losers were, again, the subbies—the plasterers, the painters, the bricklayers, the drainlayers, the plumbers, and the electricians. Where has their protection been over the last 2 years? It is the subbies who have been shafted and left out of pocket, all because developers and contractors withheld the retention money and moved it off to other projects. This placed even further risks on that money, because they actually turned round and used it as working capital. As I mentioned earlier, the millions of dollars lost in the collapse of Mainzeal and the subcontractors having no legal protection whatsoever—well, that kind of sucked, for them.

We have seen with the Canterbury rebuild that homeowners have had two options available to them: one, to go through the Earthquake Commission and use the Government contractors; or, two, to opt out, do their own research, and select a private contractor or company. There are, however, areas in this bill that still do not address some issues, and I can see these will cause some problems in the future, such as this bill not addressing the substandard work that has been carried out. In fact, it has left some homeowners now unable to seek a remedy from the contractors or companies because they have disappeared. They are struck off the New Zealand Companies Register, but then the next day, like a pop-up shop, they come along again as a new company, with a new name, and they open for business, subjecting more homeowners to be left with no apparent way to take legal action, because not only the contractors but also the companies have avoided responsibility.

I, for one, will be watching for this, and I hope that future amendments to the Construction Contracts Act will take place over time. I recognise it has taken over 2 years since this bill was first read in June 2013, and I know that all good things take time. New Zealand First supports this bill.

Hon JUDITH COLLINS (National—Papakura): Well, not all good things take time, because I will not take much on this one.

Listening to some of the contributions today, you would think that this problem arose only in the Mainzeal collapse. Actually, it has been around for ever, and even when I first started practising law in 1981—yes, I know; I was probably about 6 at the time—this was an area that has been a constant problem whenever it comes to the building industry. It is always because money gets tight. Whenever there are any tough issues around funding—and developers and builders often have real problems getting funding through traditional sources like banks, so they used to end up in solicitors’ nominee companies. Then they went to other contributory mortgage forms and mezzanine financing. A lot of those outfits actually went broke during the global financial crisis in 2008 to 2009, and so what happened was an awful lot of financing went.

It also means that during those tough times, people who have signed up to lease buildings or to buy buildings find ways of getting out of doing that, or suddenly decide that they do not want to continue or they want a smaller area. So it is a tough time, and the people who suffer the most are the subcontractors, or—as has been referred to today, colloquially—the subbies. These people are the people who have the least ability to be able to get back their money, and no matter what you say and put in contracts—and I certainly have, over the years, put things in contracts—the trouble is that as soon as you have to go back to that contract, as soon as you look at it, it is all over, Rover. Essentially, you are there because something is not working properly.

And it is all very well to moan and complain about the fact that companies go into liquidation, but they pop up again, and the people pop up again in them. We do now have mechanisms to stop people constantly becoming company directors after they have been in charge of companies that have gone into liquidation and left debts like this, but I would say it is a tough job to make significant changes in this area and actually not put a lot of regulation around it. I think the Minister for Building and Housing has done a really good job, with the Commerce Committee, in trying to have quicker adjudication of issues and to deal with some of the most outstanding of the issues.

It is always going to be difficult in building. There is never quite enough money for what people want. Far too much time is spent. It is very expensive. It is a difficult game, and certainly any developer will say to you that if you really have been a developer, you have probably been bankrupt at least once. That is what happens. It is the nature of it, but we can do things to improve the situation, particularly for the subcontractors, the tradespeople who have no other mechanism of getting paid. This is a good bill, which we should all be supporting.

Mr DEPUTY SPEAKER: I call Denise Roche—a 5-minute call.

DENISE ROCHE (Green): I rise to take a short call for the Greens on the Construction Contracts Amendment Bill. I am going to talk, as well, about retentions and retention payments.

I want to just make a few notes. One is that this bill, when it was introduced on 29 January 2013 by the then Minister for Building and Construction then, Maurice Williamson, it had nothing in it about retention payments. It has been made a much better bill as a result of the process that it has gone through over the last 2½ years. Just to recap, a retention payment is the portion of the contract price that is withheld by the principal contractor and not paid until after the construction work is checked and found to be up to scratch. It is actually used to pay off the subcontractors once that work has been checked.

However, what we have learnt, and what the Commerce Committee heard as well during the process of this bill, is that over time it had become common practice in many instances for the late payment of retentions or for those principal contractors to retain that retention payment and use it as cash flow for other projects. Certainly, I think this is what happened with Mainzeal and what it did, so that when it went bust in February 2013 there was no money there to pay the subcontractors, who had already been doing work on their projects, so they could not be paid. As other people have said, it was a total of $18 million that was owed to subcontractors who had already undertaken work for Mainzeal.

In my community on Waiheke Island, one of our largest-ever projects that we have ever had was the construction of our library by the Auckland Council. It was being constructed by Mainzeal. But all the subcontractors there were local people. They were the local plumbers, the local bricklayers, the local—just the locals. They were locked out the day Mainzeal went bust, and they could not even get to their tools. It was a shocking, shocking example of a company that basically left a whole bunch of other people in the lurch, and it certainly had a huge impact on my community.

But back to this bill. The original purpose of the bill, according to the Bills Digest, was basically to enact the findings of reviews of the Construction Contracts Act that had happened in 2010. There were about four different things that this bill set out to do originally. Those were to remove the distinction and treatment between residential and commercial contracts, to extend the Act to include contracts for design, engineering, and quantity surveying, to remove the distinction between enforcement of payment determinations and of those relating to rights and obligations, and to make the enforcement process more efficient. But it really took the Mainzeal collapse to get the whole issue of retention payments addressed eventually.

It has been an interesting progression. The bill was introduced in January 2013. The first reading was on 11 June 2013, and the submissions closed about a month later. The select committee report came back to the House in December 2013, but the second reading was not until March 2014. It was around that time that the Minister in charge of the bill actually changed. So it was not until 18 months later that the Committee of the whole House actually heard and considered the bill.

I have to acknowledge the Supplementary Order Paper 446 put forward by my colleague Julie Anne Genter at the time, which has now actually been adopted by this Government and will be part of this final bill when it is enacted. So it took a change of Minister to actually get a piece of legislation that does address some of the issues that were actually highlighted during the submission process. I think that is a real tribute to those who submitted and to the tenacity of the people who were affected by the Mainzeal collapse, who very clearly stated their case. It shifted the Minister to a position where we now have a bill that is actually a lot more fit for purpose. We will be supporting the bill.

KRIS FAAFOI (Labour—Mana): It is a pleasure to speak to the third reading of the Construction Contracts Amendment Bill. I would like to pick up on one point that the Hon Judith Collins made, and it is a point that I do agree with her on, in that the global financial crisis did bring about a significant number of closures of building companies. The most notable of those has been mentioned numerous times during this debate—that being Mainzeal. That closure, of course, put everyone under a nervous setting, especially subcontractors to building companies, who had their incomes put at risk. This is how this piece of legislation came about.

It has been mentioned by Labour’s two previous speakers, Clayton Cosgrove and Phil Twyford, that Labour will be supporting this bill, but it has been an interesting road. If I could take members of the House back to 29 January 2013, when this piece of legislation was first introduced, at a time when I think the concern around the collapse of building companies was at its height—and I would remind people of the date today, 20 October 2015.

In his opening address to this third reading, the Minister who is in charge of this bill, Nick Smith, talked about the significance of the sector, which is correct, and how important this is going to be going forward because of the housing issues that we have in Auckland and the reconstruction of residential and commercial Christchurch. But I think the time frame that you have got there—2½ years to take forward this measure for what the Government says is a significant sector in our economy—is laughable. On 29 January 2013 I am sure the Government arrived to Parliament full of gusto, saying: “This is an issue right here, right now. We’re going to take care of that.” But it has taken it 2½ years to actually deal with this piece of legislation, when we get to the third reading. That does not say to me that the Government has taken seriously its responsibility to make sure our subcontractors or our subbies—builders, chippies, and sparkies—are being taken seriously.

I do take offence at a comment made by Brett Hudson earlier in this debate, who said: “Which world do you live in?”. Well, in the real world that we live in, we are speaking to our local subbies, we are speaking to our local chippies and sparkies, and they live in a real world where for 2½ years, after being promised protection from this Government, it has taken it that long to get to this stage when, actually, this legislation will come into force under law. I do recall a breakfast that some local Labour MPs held with our local subcontractors, some chippies—one way to get them to a meeting is to offer them breakfast, so we did that. But they told us how concerned they were that it was taking so long to bring in this measure.

Funnily enough, also, this issue died for about a year until, roughly, about 11 days before the election, when all of a sudden, out of the blue, the Minister put out a press release saying: “We’re going to take action on retentions.” Absolutely and utterly cynical. If this Government were serious and was in the real world about protecting those subcontractors, who feared for their incomes for them and their families and the future of their businesses, then it would have dealt with this before the last election. But, no, it went on the back-burner, down the Order Paper. It was not the significant enough sector or issue that the Minister said it was today for it to go up the Order Paper and for the Government to take swift action. It was not significant enough, so we had to wait another year and a month to get to this stage, when we get to a third reading. Finally, this piece of legislation, which has had a bit of crunching from around this side of the House to help the Government finally get to a position on retentions, gets to its third reading.

I would like to acknowledge Clayton Cosgrove for his work with the industry, and Julie Anne Genter, and I mention her work with the industry, to get the Government to finally come to some kind of position on retentions. It has taken far too long. This was an issue of significance back in 2013, at the beginning of that year, when the Government came and said: “We’re going to sort this out.” But I think that if they look at this seriously, those in the industry—those subbies, those builders, those chippies, those sparkies—will not be impressed with the time that it has taken this Government, because they do live in the real world, and in their real world it took the Government far too long to deal with this.

SIMON O’CONNOR (National—Tāmaki): I am very pleased to rise and speak on this Construction Contracts Amendment Bill in its third reading. I want to just reply to a few of the thoughts that have been put up by the previous speaker, Kris Faafoi, and others. But first and foremost I want to acknowledge the Minister in charge of the bill, Nick Smith, who has guided this through, and, of course, the work of Melissa Lee in the Commerce Committee, on which I am pleased to sit.

This is a bill that has been, I think, rightly looked at carefully and cautiously. I think that when it comes to areas such as the construction industry, it is important to get things right first up, be that in building a house or, analogously, here when it comes to legislation. We heard in the last speaker’s dissertation, if you will, concerns about it taking so long to address this issue of retentions. Fundamentally, we as a Government and as a committee wanted to make sure that we got this right. We wanted it based on good evidence, and we wanted it based on consultation. I know there has been a lot of consultation by the Minister and officials, and discussions—including by me—with builders in the electorates. That has been relatively important. I think that in this bill we do have a comprehensive response to this.

We have also, in a way, set it up more around the trust system—retentions within trusts rather than bonds. I just wanted to mention that briefly. I do not want to go into all the differences, but, suffice to say, trying to work retentions in a bond structure is not going to work as effectively as that of a trust. There have also been suggestions that we are not implementing this quickly enough. When it comes to any legislation, it is important that those in the industry have time to understand what is going on and to implement the correct procedures.

Importantly in this legislation, we are also bringing together residential and commercial contracts. That is quite a fundamental change there. Residential contracts and commercial contracts are not going to be treated differently; they are going to be treated the same. I think it is quite important, particularly for those in residential contracts, to have the time to understand this legislation, because one of the concerns that has come forward is about ambushing claims. Again, I do not want to go into it in depth, but the long and the short of it is that someone who knows the legislation inside and out could easily pull the wool over the eyes of someone who does not. The time frames in the bill around claims are incredibly tight as to when responses are due and so forth. We have to be very cautious there.

I think, again, that this is an important bill. I am very pleased to say that I come from a family of builders. My father, in fact, is even in the gallery today, just by sheer and utter coincidence. He is a chippy from way back. Fortunately, his skills rubbed off on to my brother. I can maybe wave a hammer occasionally, but I would definitely trust him more. But I have, actually, a family with that background. Although I have not discussed this bill at length with my father, which is probably remiss—

Scott Simpson: Make amends.

SIMON O’CONNOR: —that is right, I have to; I will propose a notice of motion tomorrow—I think it is important to recognise that we as a Government continue to try to improve the sector. I am very pleased to commend this bill to the House.

CLARE CURRAN (Labour—Dunedin South): I am pleased to take a call in the third reading of the Construction Contracts Amendment Bill. This bill has been extensively debated in the House, and Labour supports it. Its real intent was to speed up resolving disputes in construction contracts cases, and it was all about greater accountability. It also extended the scope of this area to include things like design, engineering, and quantity surveying. On the face of it, it was a pretty sensible updating of a piece of legislation.

When we went into the select committee process, it became apparent very quickly that there was something rather substantial missing from this piece of legislation. Many of the submitters talked about the lack of protection for subcontractors when the main construction company got into trouble. This went on and on and on, and, as other speakers before me have mentioned, the context around this piece of legislation was really important because it was first introduced into the House on 29 January 2013, and the Mainzeal collapse happened on 5 February 2013, which was just a few days later. When the bill made it to the Commerce Committee at the beginning of June 2013, that was the issue on everybody’s mind, and that was the issue that people wanted to discuss—and discuss very seriously.

You would think that between 29 January and 1 June there could have been some thinking done by the then Minister, Maurice Williamson, on this issue. You would think that there would have been some serious thinking done around: “Let’s have another look at that bill that we have just sent off to select committee. Have we missed something? Is there something else that we could be doing? Let’s get officials working on that.” Well, that did not happen. Instead, when it got reported back on 11 December—another 6 months later, more or less—there was nothing in it on retentions.

I want to draw the House’s attention to the report that came back from the select committee, just briefly, which did have a section in it headed “Retentions”, and that was clearly because the Opposition members—and I really do want to acknowledge my colleague Clayton Cosgrove, who did most of the heavy lifting on this issue, and also Julie Anne Genter from the Greens. There was concern after concern after concern brought out. This was recognised in the report, which said: “We are aware of growing concern in the sector relating to retentions.” It went on about what retentions were all about, and about what the actual issue was. But it said that “… this issue was outside the scope of this bill we are encouraged to hear the Ministry of Business, Innovation and Employment is giving priority to addressing these issues. We urge the Ministry to continue to work with industry players … Labour members especially note that the Minister has changed his position from one of stating that there was no issue around security of payment and retentions to one of now actively exploring remedies around these two issues.”

The fact is that in that period, which was quite a considerable period of time, there had been no work done. Meanwhile, the Specialist Trade Contractors Federation was clamouring for these changes, saying that it was now 12 months since Mainzeal had collapsed, leading to $70 million in losses, and at least $20 million of those losses hitting countless small businesses was due to the retentions issue. The chief executive of the New Zealand Contractors Federation also said that his group was looking at challenging legal rulings that backed the liquidator’s powers to claw back payments.

I would draw your attention to the fact that one of Mainzeal’s directors was Dame Jenny Shipley. All of those directors are now, more than 2 years later—nearly 3 years later—facing legal action as a result of what went on, and yet this Government sat on its hands. The current Minister for Building and Housing, Nick Smith, did eventually see the light—Clayton Cosgrove described it as a road to Damascus experience. He did actually see the light and did finally put a Supplementary Order Paper forward at the Committee of the whole House.

In the meantime, what Labour had done was to put our own Supplementary Order Paper out into the public, and Clayton Cosgrove went around the country meeting with subcontractors. Kris Faafoi just referred to one of the breakfast meetings he attended. I attended a breakfast meeting. There was a campaign that Labour ran around this because we knew—we could see what was happening—there was a glaring gap. So how is it that that Government did not do anything about it? Why did it sit on its hands? Why did it take it so long to actually wake up to what was right in front of its face?

Now we have got another loopy piece of—well, it has not turned into legislation yet. But we have now got this new Rules Reduction Taskforce, which is proposing loopy rules such as builders signing off their own work. That is from this Government task force. So, on the one hand the Government takes so long to work out that it has to protect the subcontractors who are actually doing the work on these construction sites, and it reluctantly put forward a key part of this legislation; on the other hand, it is undertaking another piece of work that actually looks as if it is loosening up all the rules. It is disjointed, it is not joined up, and it is madness, to be honest.

Labour did most of the heavy work on this piece of legislation.

Hon Dr Nick Smith: Rubbish.

CLARE CURRAN: Labour did most of the work in bringing forward the important issues in this piece of legislation. “Rubbish” says the apprentice of Dame Jenny Shipley, who is currently facing legal action over the Mainzeal collapse. Labour pointed these things out and brought them to the attention of the Government over and over again, and it was only at the Committee of the whole House, when there was no ability to actually have any real scrutiny of the substantial Supplementary Order Paper that appeared before us—no ability to have proper scrutiny of it—that the Government finally woke up to what had been under its nose all the time.

In the meantime, $20 million was held up for these subcontractors, many of whom had probably faced substantial problems in their own businesses, and maybe had gone out of business as a result. In the meantime, also, we have had dozens—dozens—of collapses in the construction industry, with no protections for the subcontractors. Finally, that is going to be remedied when this piece of legislation goes through, but the questions have to be asked, and people listening to this at home should be asking this themselves: why did it take this Government so long, why did it not listen to the select committee in the first place, why did the Minister not listen to the submitters and to what was being said by the industry, and what was wrong?

I think that it was the work that was done by Clayton Cosgrove around the country by talking to submitters and talking to subcontractors—actually, he is the real hero of this piece of legislation.

TIM MACINDOE (National—Hamilton West): It comes as news to those of us on this side of the House to hear that the Hon Clayton Cosgrove even had any meetings on this bill. I want to give the proper credit to the Hon Dr Nick Smith for the work that he and his officials have done, because that is where the credit really belongs. Nevertheless, there is, clearly, broad support across the House for this important measure. I welcome that, and I am happy to add my support to this bill.

Bill read a third time.

Bills

New Zealand Superannuation and Retirement Income Amendment Bill

Taxation (New Zealand Superannuation and Retirement Income) Bill

Third Readings

Hon BILL ENGLISH (Minister of Finance): I move, That the New Zealand Superannuation and Retirement Income Amendment Bill and the Taxation (New Zealand Superannuation and Retirement Income) Bill be now read a third time. This bill has taken a while, actually, to get to the point where we are completing the process, but it is pretty important, probably as much for what it does not do as for what it does do. This relates to the New Zealand Superannuation Fund and what it is allowed to do under the 2001 Act. I think, as I said in the second reading of this bill, the New Zealand Superannuation Fund was set up in a way that was fundamentally sound, and Dr Michael Cullen deserves credit for that. It was set up in order to retain and maintain its political independence, because of the basic insight that a multibillion-dollar fund—now $27 billion—could look attractive to politicians who have their own objectives in mind rather than the very long-term objectives of this fund, which are to help offset the cost of national superannuation through the 2020s, 2030s, 2040s, and into the 2050s. It was set up with that degree of independence, and that is something that I think this House must pay attention to—and I will come back to why that is relevant in just a minute.

One of the restrictions on the fund is that it cannot take a controlling interest in any entity. This is simply to prevent what is already a large fund from running a whole lot of businesses, and my own view is that that would not be good for the economy because a Government-controlled fund cannot really go out of business. It would not have the right incentives to improve the performance of businesses that it owned by majority. There may not be much test of the management of those businesses, so, quite reasonably, the House has had a position now for 15 years that it should not own businesses in its own right, but that it can own part of pretty much any business in New Zealand and overseas. The issue here is that, as it diversifies its portfolio around the globe, and by far the bulk of its investment is offshore—that is, we take money that was taxpayers’ money, it goes through the Government into the fund, and then it is invested offshore. In recent years there has not been any of that, but the fund has been making healthy returns on its investments and reinvesting those returns.

In the modern world of funds management, investment entities are set up, and, in this legislation, these are referred to as fund investment vehicles. So the bill has a very specific purpose, which is to say that although the fund is not allowed to own any particular business in majority, it can have a controlling interest over an entity set up just for the purposes of managing investments—just for the purposes of managing investments. The intent of this is to reduce some of the costs that the fund now incurs. Where we can reduce its costs, we increase its returns, and, over the 30, 40, or 50 year life of the fund, that could have a big impact on the fund’s performance—a significant impact. Just in the same way as when you look at a KiwiSaver fund and look at fees of 1.5 percent when the returns are 5 or 6 percent or less, a small reduction in those fees has a significant influence on the returns to the fund. The bill provides the guardians with some added flexibility around how they implement their investment strategy.

There is also the companion bill, the Taxation (New Zealand Superannuation and Retirement Income) Bill, which provides for the taxation of fund investment vehicles in the same way as current taxation of the fund as a whole. The Greens seem to interpret this as enabling the New Zealand Superannuation Fund, wholly owned by the New Zealand Government, to use these new fund investment vehicles as some way of indulging in behaviour around tax havens. We want to be pretty clear that this bill does not change any of the investment universe available to the guardians or its current approach to tax; they will have to comply with tax law wherever they invest in the future—the same way as they do now—and I am satisfied that the arrangements are the right ones.

On the way through the process, there was really only one point of discussion, and that is whether the Minister of Finance should approve the fund investment vehicles. As someone who has had a little bit of experience in that job, it is certainly my strong view that the Minister of Finance should not be involved in any way in the investment decisions of the fund, even if it looks like it is going to be a fairly technical intervention. In my view, it is much better that all those investment decisions are completely at arm’s length from the politicians. And, as it happens, on the way through Parliament, the House has come to the view that that is probably the best way to manage it.

There is always an argument at the margin for the politician to somehow get involved in a way that might enable the officials to have a bit more oversight of this fund or to make a small adjustment at the margin, but, in my view, any move in that direction will simply compound itself on another move in that direction, and before long you could have some real problems of political interference in the operation of the fund. There are legitimate issues for the Government, which we are doing a bit of work on, and one is that the fund takes risk with investments. We know that, because it has been making 20-plus percent returns in some years. You do that only by taking risks. But the Government has to satisfy itself that it understands what risks are being taken and that they are broadly acceptable on the Crown balance sheet, and that is a matter of some ongoing consideration by Treasury. Can I thank both the House and the Finance and Expenditure Committee for dealing with a pretty pragmatic bill designed to slightly reinforce what we hope will be the long-term success of the New Zealand Superannuation Fund.

Hon CLAYTON COSGROVE (Labour): We in Labour support this bill. We support it wholeheartedly, in that we believe that any improvements to the New Zealand Superannuation Fund, or what is colloquially called the Cullen fund, as set up by the Hon Dr Michael Cullen, are to be applauded.

I do take on what the Minister of Finance said in terms of the independence of the fund. When it was set up and the Guardians of New Zealand Superannuation were put in place by Dr Michael Cullen, one of the key features was that independence, and not only that, but there was a requirement—and it may seem self-evident to some—for the fund to invest according to world’s best practice. There has been, from time to time, political pressure from some parties that would like to designate, rather than encourage or promote, that the Superannuation Fund invest in X or Y, or invest very heavily in New Zealand—which, of itself, is a laudable aim—or invest in responsible investment, even though the definition of that is somewhat vague and it depends on who you ask. The guardians and the legislation have always resisted that proposition because, at the end of the day, those guardians are managing taxpayers’ money. They are managing money that is supposed to—certainly up until the suspension of payments from the Government’s coffers into the fund in around, I think, 2009, the aim of that fund was to offset, as the Minister of Finance has said, national superannuation and to provide a buffer in respect of the pension.

I would note, though, with interest, that it was the National Party, for the record, that opposed the fund. This is the second bill where National Ministers have got up and had a road to Damascus experience. What is the biblical term? The scales have fallen from their eyes and they have—

Dr David Clark: You were there on the road to Damascus.

Hon CLAYTON COSGROVE: Was I? Thank you, reverend. I bow to my religious colleague in the front row. They have sort of had a turn-round on what they opposed vociferously in Opposition, often calling some of these things communism and other things—great, colourful language. Once they got their feet under the Cabinet table they worked out that, OK, it was not their idea, but it was a damned good one.

I think the tragedy of this fund—and I do, along with the Minister, thank the guardians and those professional investors who have grown this fund. Since its inception in 2003 the fund has returned, on average, 10.3 percent a year. It returned 18 percent on its investments last year and lifted its value to $29.6 billion as at June 2015. The tragedy, however, is that since the Government suspended its payments in 2009, had those payments continued it is estimated by independent advice that the fund would be worth something in the order of $47.8 billion. The argument was “Well, we’re not going to borrow money to put into the Superannuation Fund and invest.”, even though we were getting on average 10.3 percent gains, which was a hell of a lot better than anybody else was getting at the market right through the duration of this fund. But, actually, the Government was prepared, of course, to borrow for a tax cut. It was not prepared to borrow to invest; it was prepared to borrow for a tax cut.

I note Mr Bennett will be the next on his feet to give us a very authoritative dissertation on this piece of legislation. We await with bated breath. The tragedy is that those payments were not kept up. The Government decided to suspend them. The Government has said that it will not resume them until net debt is 20 percent of GDP, and on current predictions that is 2020-21. So that is a tragedy because all New Zealanders, I think, across the political spectrum, supported the inception of the fund. Many were a little bit concerned, you know, about a Government setting up a fund in this way, but the Minister did make comments, and I do support them, in respect of maintaining the independence of the fund from the sticky fingers of politicians.

I worry more about the sticky fingers of National politicians as they go searching for money anywhere they can—you know, in the next round of asset sales, perhaps, as we debated last week. But it is appropriate, because politicians of themselves are not experts, generally—very few of them, anyway; perhaps the Prime Minister is, and I say that in all seriousness—in investing money and working and managing funds.

Chris Bishop: That’s definitely true.

Hon CLAYTON COSGROVE: Especially that member. So it is important for public integrity and public confidence that that independence is maintained.

I share the Minister’s view about ensuring that the fund does not take a majority interest, for the reasons that the Minister has said. It would take the focus off pure management of funds if you were, effectively, trying to run the companies that you have a majority stake in. I think this fund has proved its worth. I would argue that the sooner we can recommit to and re-engage in the Government instalments or the Government funding the better-off we will be. I suppose this, combined with KiwiSaver, is as good as you get, unless you go to compulsory superannuation as our Australian cousins have. It is probably the next best thing. It is the Government being responsible.

For those who opposed it, they have been proved wrong; for those who were sceptics, they have been proved wrong. It has more than exceeded its obligations, well ahead of most other funds, I am told, in the market. So we support the bill. We would urge the Government to resume as soon as possible payments into that fund. You know, $47.8 billion as opposed to $29.6 billion is a huge gap. Imagine where we could have been if the Government had met the previous Labour Government’s commitments and continued that funding regime. The Government would actually be ahead of the game. If you balanced up the revenue against the interest paid on the loan, it would be well ahead of the game on an average 10.3 percent gain.

So we support the legislation. I do not think there should be a lot of argument about this legislation. As I say, some parties have the view, perhaps, that the fund should be directed, almost, in its investment profile. I do not share that view. The only requirement should be that it invests to world’s best practice, because there are thousands—hundreds of thousands—of New Zealanders going forward, as we age as a population, who will come to depend and are depending on how this fund performs as a buffer for an ageing population.

We wrote it; we initiated it; those members opposed it. We have now brought them onside, which is great; they are now for it. It would be great if the Government could support its views with some dollars out of the coffers, because mark-to-mark this is an extremely good investment and the guardians, the investors, and the fund managers of the Superannuation Fund should be congratulated for what they have done since its inception in 2003.

DAVID BENNETT (National—Hamilton East): I would just like to support the comments made by Bill English and Clayton Cosgrove, the previous two speakers, in regard to this legislation. It is legislation that there should be a lot of support in this House for. The Superannuation Fund itself has a lot of support within this House, and within the public in general as well, because everybody understands the need to provide for one’s superannuation needs in the future. The position where the Government can assist in that through the Superannuation Fund is something that everybody in this House has universal support for, I would imagine. There may be some smaller parties that do not agree with the legislation, but I do not think their concerns are really relevant to the legislation as it stands. They are more like policy aspects on which those parties have a problem with any investment.

The last speaker, Clayton Cosgrove, mentioned that politicians are not experts, generally, in investing money. I think those were his words. That is very interesting to hear when he is the member who says that politicians are experts in the investment in Kiwibank, and he would like to have that supported with their 75 percent support. So it was interesting to see that member talking about his own ability to make that judgment in regard to banking, but not in regard to superannuation. There is a slight difference there, I am sure, in Mr Cosgrove’s mind, but not in the reality of finance.

If we have a look at the legislation, the changes in the legislation relate to the restriction from allowing the Guardians of New Zealand Superannuation to control passive holding subsidiaries.

Hon Clayton Cosgrove: Good old “Cue Ball”. You can always count on him.

DAVID BENNETT: So they are described as fund investment vehicles. Are you all right, Mr Cosgrove? Are you still there?

Hon Clayton Cosgrove: Yeah, I’m good. How are you?

DAVID BENNETT: Yeah, OK. That is—

The ASSISTANT SPEAKER (Hon Trevor Mallard): Order!

DAVID BENNETT: —in the amendment to section 59 of the New Zealand Superannuation and Retirement Income Act. That relaxation is to enable the guardians to make prudent investments as the fund managers of our Superannuation Fund. That is to enable them to do it more efficiently. It also prevents them from holding or taking a substantial controlling interest, which is an important part because that is not actually their mandate. They are seen more as trying to get the returns for New Zealanders through the superannuation system rather than as actually becoming managers or corporate governors as such.

There are a few other changes around the board. Previously it could not delegate any powers of attorney—investment management custodian. Those restrictions have been removed in this legislation, so that is an important part of the legislation as well. Effectively, this legislation amends the powers that the board has and also that the Superannuation Fund has in its investments. That is an important part of progressing the Superannuation Fund so that it can deliver those results for New Zealanders and their superannuation.

We look forward to this legislation passing through the House. The parties that may not support it, and I think New Zealand First has indicated that it may have a problem with it—[Interruption] It is in support? Well, that is good to see. So I think we are going to get good support for the legislation through the House, and that is good to see for New Zealanders going forward. Thank you.

The ASSISTANT SPEAKER (Hon Trevor Mallard): Dr David—[Interruption] Can I just ask members, as I am about to call another member—I have already called Mr Bennett to order for making gratuitous and silly comments to the member. I will invite him not to invite any more of them.

Dr DAVID CLARK (Labour—Dunedin North): It is a pleasure to rise to speak to support this bill and to speak a little about the reason for it because I sat on the select committee, the Finance and Expenditure Committee, that heard the petitions of the Guardians of New Zealand Superannuation and heard them explain the reasons why they think these amendments are necessary.

Before I speak too much about that, I just want to correct a point raised by the previous speaker, David Bennett, relating to my colleague Clayton Cosgrove’s KiwiSaver bill.

Hon Clayton Cosgrove: Kiwibank.

Dr DAVID CLARK: Sorry, the Keep Kiwibank Bill. The previous speaker was implying that this was about Ministers getting their hands on assets and selling them off and so on, and meddling in the day-to-day affairs of Kiwibank. That simply is not accurate. My colleague’s bill is about ownership of the bank, and it is merely a measure to stop the National Party flogging off Kiwibank in the way that it has flogged off so many other assets. I think New Zealanders are sick of a Government that is focused on asset stripping—sick of a Government that is focused on asset stripping. Members on that side of the House know the cost of everything and the value of nothing.

Again, in this fund—precisely in this fund—we see a similar thing going on. The Government has chosen not to invest in this fund, which is one of the funds that has the best returns in the world for a fund of its type, and has foregone revenues of about $18 billion as a consequence of its mismanagement of this fund.

I just want to draw the attention of the House to some of the awards that the Guardians of New Zealand Superannuation have won in recent years. I have a brief list here in front of me. In 2015 they won the gold award in the 2015 Australasian Reporting Awards. In 2014 they were the winner of the governance award in the AsianInvestor Institutional Excellence Awards and the gold award in the 2014 Australasian Reporting Awards, they were a finalist in the RI Reporting Awards 2014, and the guardians’ Cristina Billett was named the joint CLANZ-Chapman Tripp Public Sector In-House Lawyer of the Year. In 2013 they were the winner of the best first-time entrant category of the 2013 Australasian Reporting Awards, and a finalist, again, in the RI Reporting Awards 2013, and so on. The list goes on. In 2012 they won a further four awards and in 2011 they were runner up in another significant set of sovereign wealth fund awards. That is because they have outperformed—they have consistently outperformed.

The Superannuation Fund, which was set up by Michael Cullen, is a very good one, and although Bill English may have called it a dog at the time, he now seems very keen to cosy up to that dog and show some affection for it, which shows some dexterity in terms of his understanding of the issues involved. But the facts speak for themselves. This is a very successful fund and that $30 billion that it is now worth, as a result of returns of 15 percent over the past year and an average of 17 percent annually over the past 5 years and around 10 percent per annum since inception, is an extraordinary return. Even if returns were not so extraordinary, it would still be worth the Government’s while to be investing in that fund—there is little doubt amongst the commentators—rather than stockpiling debt, as it seems so keen to do.

It is a Government, of course we know, that has borrowed more than Sir Robert Muldoon’s Government. This Government is the Government in New Zealand history that has accumulated the most debt. With that in mind, it is good to see it making one or two sensible decisions here. It has just achieved, actually, its first wafer-thin surplus—the first it has ever achieved, even though the last Labour Government achieved nine out of nine. But, none the less, the Government is making a sensible decision here in listening to the guardians’ advice to put these additional vehicles in place.

We had a debate in the Finance and Expenditure Committee about whether these funds should be subject to the Official Information Act, and we sought information from officials. In the end, those of us on the committee were satisfied that the protections in place were appropriate and that the governance arrangements could be subject to the Official Information Act in so far as the guardians were directly involved with them, because the guardians would appoint their own directors, they would often be supplying people to work on those particular funds, and, in so far as being their end of things, we could hold the guardians to account for the decisions that were made—albeit the actual operation itself was at arm’s length. So we did debate those issues fairly robustly within the committee, and that is good parliamentary practice, but in the end we decided that that was appropriate.

We did, as a committee, though, suggest that there should be some involvement from the Minister of Finance in ticking off these operations, to give the taxpayer a voice—because the fund, of course, naturally, is at arm’s length for most of its operational decisions and because we felt that there should be a role, albeit largely a symbolic one, for the Minister of Finance to have some oversight of those decisions and to only intervene when there was a really obviously strange thing going on. This Minister of Finance has, somewhat arrogantly, overruled the will of the select committee, which contained his own members. The very thing that his own parliamentarians recommended was rejected by the Minister of Finance, and in the most recent stage of the Parliament sitting on this bill the Government ran through some changes that will see the Minister of Finance wash his hands of any responsibility for the decisions the fund makes.

That is, of course, this Government’s general approach. It is not keen to be accountable in any way. It is very keen to sell off the assets that this country owns, and very keen to minimise the signs of Government and to not be accountable for the actions of the Government in so far as it can get away with it. We think that is unfortunate. We think the taxpayers should have had a voice in this, albeit not one where politicians were actually meddling in the day to day decision-making, but one where there was a veto at the level of the Minister of Finance.

That aside, we will still support the bill because the vehicles themselves seem sensible and they were requested by the fund, which has been a very good fund. It would have been an even bigger fund had this Government not stopped the contributions that were being made, but, again, we see that that is the pattern of this Government. It has got an ideological agenda that is around minimal involvement and around not putting taxpayer contributions into savings funds. It has said it will not deal with the superannuation issue. This Prime Minister has said that he will not deal with the issue during his prime ministership. He is leaving those difficult decisions to future Governments. And, of course, we have seen the wasteful spending that accompanies this reckless economic management—the television screens in the Ministry of Business, Innovation and Employment, the $140,000—

The ASSISTANT SPEAKER (Hon Trevor Mallard): Order! The member has been quite a long way away from the bill for quite some time. He will return to it.

Dr DAVID CLARK: Thank you, Mr Assistant Speaker. I am merely making the point that this decision the Government is making in this bill is one that we think is not economically as smart as it might be, and so although we will be supporting the bill, it is not without some small reservations. Thank you very much.

CHRIS BISHOP (National): This legislation, as is typical of Government bills at the moment, is sensible and prudent legislation that, I think, has widespread support in the House. It stands in stark contrast, may I just say in passing, to the Keep Kiwibank Bill, advanced by the member who spoke earlier, Clayton Cosgrove, which has been the subject of some discussion so far in the debate. The Keep Kiwibank Bill wants to entrench Kiwibank to the extent that we have a secret ballot in New Zealand requiring 75 percent of Parliament to vote to remove those provisions. That was a silly bill. In fact, it actually breaches Standing Order 266, because to pass an entrenched provision through a bill, you have to have 75 percent of Parliament to—

Hon Clayton Cosgrove: I raise a point of order, Mr Speaker.

The ASSISTANT SPEAKER (Hon Trevor Mallard): The member may be going to test me, but away you go.

Hon Clayton Cosgrove: You have already—

Hon Ruth Dyson: You passed, Mr Assistant Speaker.

Hon Clayton Cosgrove: Indeed. You have already ruled on relevance. I think that was the speech Mr Bishop made last week, and—

The ASSISTANT SPEAKER (Hon Trevor Mallard): And the point is that I am the only person who can rule on it and it cannot be brought up by way of a point of order. You anticipated a comment that I was going to make. I did call a member back to the bill when he was getting too far away from it. The member, I think, should refer to this bill and not to a bill that passed through the House last week.

CHRIS BISHOP: Thank you. I was pointing out that—

The ASSISTANT SPEAKER (Hon Trevor Mallard): Order! No. The member does not make excuses; he just gets on with the debate.

CHRIS BISHOP: OK. This is sensible legislation because it allows for funding investment vehicles, and, as the Minister of Finance rightly pointed out, there is a prohibition in the superannuation legislation that means that the Guardians of New Zealand Superannuation Fund cannot control businesses outright. And, actually, that is a sensible provision because, as has been pointed out, the New Zealand Superannuation Fund has grown to the extent now that it could actually control vast swathes of the NZX. But the guardians have asked for greater flexibility in the way in which they invest in order to allow controlling interest in passive holding subsidiaries, which will allow them to use global best practice in the way in which they invest, and this will, obviously, maximise the return for taxpayers.

There was some discussion previously in the debate, and also in the first and second readings of the original bill, and then at the Finance and Expenditure Committee. I was not a member of that select committee, but there was some debate as to whether or not the Minister of Finance should be able to approve the investment classes of the funding investment vehicles. I think it is fair to say that things have gone back and forward on this point, but the conclusion that the Government has come to is that it is absolutely paramount that we protect the independence of the Superannuation Fund—absolutely paramount. As the Hon Clayton Cosgrove rightly pointed out in his contribution to the debate, politicians are not great at deciding what particular companies to invest in, and they should remain well away from it.

I want to briefly canvass some of the claims made by members opposite about the prudent decision that the Government took after the 2008 election to suspend contributions to the Superannuation Fund. Members opposite have made much of this in the debate today and in previous debates. I think there are probably three things to say about this. The first is that if the Government had decided to continue to make contributions to the New Zealand Superannuation Fund, it would have, essentially, been borrowing money to invest, and that negates the understanding of risk. It would show that the Government does not understand risk. It would be like putting money on a credit card to invest in global equities, which are highly volatile. So, as Michael Cullen pointed out when he set up the New Zealand Superannuation Fund, that is not a smart thing to do.

The second thing is that although it is true to say that the New Zealand Superannuation Fund has made good returns in the last 6 or 7 years, it is equally true that in that time it could have made extremely large losses, and I suspect that members opposite would be saying something very different today if the Government had continued to borrow money at a time at which we were already borrowing to maintain entitlements and invest in infrastructure, and things like that. Members opposite would be saying something very different if the New Zealand Superannuation Fund had declined in value by 30 or 40 percent or any amount of money—they would be saying something very different. It is all very well to look back in hindsight and say—

The ASSISTANT SPEAKER (Hon Trevor Mallard): Order! I am just going to draw the member back to the bill.

CHRIS BISHOP: I think I have made my remarks in rebuttal to the point about the Superannuation Fund. Look, this is something that National supports. We support the independence of the New Zealand Superannuation Fund. We support the New Zealand Superannuation Fund. This is a prudent bill that will maximise returns for taxpayers, and with that, I commend this bill to the House.

JULIE ANNE GENTER (Green): I rise to speak on the third reading of the New Zealand Superannuation and Retirement Income Amendment Bill. I would like to start my remarks on this bill by stating that the Green Party has always supported the New Zealand Superannuation Fund. In fact, we contributed votes that allowed the legislation that set up the fund to pass back in the day, and the Green Party was very supportive of the New Zealand Superannuation Fund being at arm’s length from Government—that the decisions made about where to make investments would be at arm’s length from politicians. We think that is best practice, although we did also think that it was incredibly important that there was a responsible investment clause, if you are going to be investing money for the future—and the whole reason it was set up was not to be a permanent sovereign wealth fund but to be a temporary investment. It might end up being a permanent sovereign wealth fund at some point, but it was a temporary investment and we thought it was prudent, because the Government was running large surpluses, to start to prepay some of the large costs that we knew we were going to incur when the baby boomers hit retirement age. It will not pay for most of it, but it will deal with some of the costs that are going to come down the track in the 2030s—possibly before then.

So we thought, if one is going to invest money for the future, it is important that we have some rules around how those investments are made. I think everybody agrees that there are certain industries that are not ethical to invest in, things like cluster munitions for example, tobacco possibly, and, of course, fossil fuels. It is becoming a huge debate right now about whether or not fossil fuels are an ethical investment because we know that there is a limit to the extent to which we can burn the fossil fuels that we know that we hold in reserve and maintain a stable climate that is going to enable future generations to live good lives on this planet. But there is also the question of whether or not it is going to be a smart investment, because there is a lot of research coming out, a lot of statements being made by, for example, the World Bank, the OECD, the International Energy Agency, the United Nations, and many others, which are saying that the majority of discovered fossil fuel reserves need to stay in the ground if we are going to avoid warming by 2 degrees Celsius. As a species we cannot afford to burn the existing fossil fuels that have been discovered. So those companies whose major assets are fossil fuel reserves are part of a carbon bubble and in the future they could be stranded assets. Of course they are tremendously overvalued because the risk of the world coming to an agreement and limiting the rate at which fossil fuels can be burned has not been accurately priced. So for the fund to be investing in those companies is not only bad morally, because it is supporting fossil fuel production and out-of-control climate change is immoral, but also a bad investment because it means that when the carbon bubble finally does pop and collapse we would lose money on those investments.

At the time we were not able to negotiate as strong a responsible investment clause as we would have liked, but I do think that the fund has tried to work within a responsible investment framework. Recently, when I was talking to the Guardians of New Zealand Superannuation, they spoke to me about their interest in clean-energy investment. They have allocated a certain amount of money, which has been earmarked for investment in clean energy because that is the future, and they are trying to work with their existing investments in fossil fuel companies and to work with a lot of the different investments to get better accounting around carbon budgeting and carbon accounting. All of that is going to enable them to make more intelligent investments, although I have to say that it is the fund leading on this; not the Government. Of course it could have been the Government if it had any vision and it acknowledged the reality of climate change, which so far I do not think it has really acknowledged.

But, of course, even though we support very strongly the New Zealand Superannuation Fund and a lot of the work it is doing and we think it has engaged respectfully with us when we have questioned some of its investments and it has got rid of some of the more questionable investments and is working to deal with the carbon bubble and to invest in clean energy, this particular bill we cannot support. We did think about it. We discussed it at some length, but what this bill does is it makes it even easier for the fund to be invested in what are called fund investment vehicles and of course a large proportion of those are domiciled in countries that are known to be tax havens. So we asked some written questions and did some research back in 2013 that demonstrated that the Superannuation Fund had $1.6 billion, or 7 percent of its funds, invested through these investment vehicles, which were located in tax havens like the Cayman Islands, the Isle of Man, the British Virgin Islands, and Mauritius. We do not think that it is good practice for New Zealand to be investing money through these vehicles. The Government is saying that it is going to result in tax efficiency for the New Zealand taxpayer but, effectively, that is because we are supporting tax havens and avoiding tax.

That is not a responsible course of action for New Zealand, especially at a time when the New Zealand Government and the OECD are trying to run a global campaign to protect sovereign countries’ ability to have workable tax law, because the existence of tax havens creates a situation in which it becomes very difficult for countries to regulate and set up tax laws that will be effective. You have large multinational corporations, effectively, completely avoiding tax because they have the resources available to set up in tax havens. It creates a bit of a race to the bottom where all countries are then under pressure to cut tax rates in a way that is unsustainable fiscally and economically for those countries. We in New Zealand are working to contribute to this global project of reducing tax avoidance, yet at the same time we are passing legislation that is going to make it easier for our Superannuation Fund to use tax havens to avoid paying tax.

The Green Party does not feel that that it an ethical approach to investment. We do not think it is constructive. We are not being a good global player when we are not acknowledging the existence of tax havens, and that is what these fund investment vehicles are largely doing. So although we support the independence of the Superannuation Fund and we support the existence of it and we support good governance with parliaments and politicians in Government being at arm’s length from decisions made about where to invest the funds, we also think it is the role of Parliament to set some ground rules and say we are going to have ethical investment, and we are going to ensure that we are not using our money to invest in things like cluster munitions, tobacco, and other arms. We would like to see a policy of divestment from fossil fuels because not only is that essential for life on this planet, for our children and our grandchildren, but also is simply going to be a bad investment. It is already a bad investment.

The same goes for employing tax havens. We would like to see the Superannuation Fund no longer investing in any fund investment vehicles that are located in tax havens. It does not matter whether it looks like it is going to be a good investment, if the reason it is a good investment is that it is undermining global governance and the ability of sovereign nations to protect their tax base and for there to be an effective regulatory and tax regime around the globe. So, as much as the Green Party supports the New Zealand Superannuation Fund and thinks that in general terms it is doing a very good job, we will not be supporting this legislation.

FLETCHER TABUTEAU (NZ First): As much as it pains me to stand up in defence of Government legislation—and it does pain me—just in response to what the Green Party member Julie Anne Genter was just talking about, she was assigning a kind of personality or proclivity to what are generic fund investment tools. They are simply a mechanism for the purchasing and management of investments. What the Greens have insinuated in their contributions this evening is the suggestion that the tools, in and of themselves, allow and contribute to tax havens or tax evasions. Unfortunately, that is just simply not the case—or fortunately, as the case may be, because New Zealand First absolutely supports this legislation.

We did take note of what the Greens had said in their previous contributions around tax havens and tax avoidance. I did spend a lot of time investigating the inference that they raised, and the reality is that it is only an inference. There are examples of fund investment vehicles being used injudiciously and inappropriately, but that does not make them bad tools in and of themselves. Used well by our guardians in this legislation, New Zealand First is absolutely confident that they are the right tool to be used in terms of moving forward.

I now want to address just some of the statements from the Minister of Finance. I want to agree with him in the main, because the very first thing he said was: “It’s taken us a really long time to get here.”

Hon Clayton Cosgrove: Yeah, them—big time.

FLETCHER TABUTEAU: Yeah, true. It has taken the National Party a really long time to get here, and I cannot understand it. You have had consistent support from the Opposition parties right from the start.

Chris Bishop: A busy Government.

FLETCHER TABUTEAU: No, it is not a busy Government, Mr Bishop. The Minister pointed out—and, again, I will come to this in the body of my contribution—that the Government must maintain its independence, or politicians must remain removed and ring-fenced from the decision making of this fund in particular.

Hon Clayton Cosgrove: Apart from David Bennett. He’s an expert.

FLETCHER TABUTEAU: Yeah, well, Mr Bennett is an expert in his contributions to the House, and I do enjoy listening to those contributions. But, originally, it was suggested that the Minister have the right to intervene. New Zealand First asked the question: is that necessarily appropriate? It was great to see the Minister himself actually come back and say—well, probably not to our querying, I have to admit, but in response to the general outcry: “Actually, it’s not appropriate. We do need to remove this provision for the Minister to intervene into the Superannuation Fund.”

The issue here is what we have been seeing. Until we pass this legislation, the guardians themselves will be restricted in what they can do. They have said it themselves, and I will provide some detail very shortly. But what we like in this legislation—what New Zealand First likes I should more appropriately say—is that it does give the guardians an ability to make decisions around investing in New Zealand business. For us, particularly when you have this premier investment fund, to be able to do that is great, not just ideologically but fundamentally for our economy moving forward. It is an essential device in terms of promoting and enabling investment into this country.

The other thing the Minister said was that the fund investment vehicles themselves are a tool and a device that provides the guardians with a simple approach. It will provide flexibility for the overseers in reducing costs and allowing for greater returns. For us, again, for New Zealand First, that makes perfect sense. You reduce your operational costs, you allow the guardians to get in there and make wise decisions simply and effectively, and, in doing so, you allow for greater returns to this fund. It is not only logical, it is just common sense.

We agree with Mr English. The less intervention he has into this fund, the better. However, contributing to it has been another issue entirely. I do think it appropriate to raise in this debate that the National Government has, in terms of the total contribution to this fund, contributed only 2 percent of that total contribution. That is entirely inappropriate.

The Minister uses reverse logic, which the Government uses to attack Labour on its discussions around the management of the Budget. The Government uses some kind of reverse logic there to insinuate that Labour has got it backwards. The Minister has done the same here with this piece of legislation. The simply reality is that this is a lost opportunity on the part of the National Government. New Zealanders, whether they are retiring now or in the future, have, as a very bottom line, missed out on at least $10 billion in extra funds that would have been there if those contributions had continued.

In terms of just talking about the detail, the reality is—and I have hinted at it just previously—that the legislation basically removes the quite restrictive operating parameters that the guardians are currently under. It does restrict, and it has restricted, their ability to invest, particularly in New Zealand. New Zealand First has always maintained that these funds provide the premier opportunity for good investment into our own country, not only to boost existing businesses but also to create—well, that is a tricky word.

Chris Bishop: Oh, come on, “Professor”!

FLETCHER TABUTEAU: To enable businesses to become New Zealand businesses, perhaps, once again, may be the politically correct way of saying it, without offending Mr Bishop’s ideological principles too much.

As I mentioned in my reply to the Minister, this should not, and cannot, mean direct political intervention. I would like to acknowledge the fact, personally, that here is an example of the Government actually talking to those stakeholders involved in this decision. So it went and actually talked to the guardians and said: “What’s the problem? What’s going on? What do you need?”. The irony of ironies is that it listened, and we now have this very sensible piece of legislation in front of us.

So just to summarise, New Zealand First does support this legislation. It is good, it is sound, and it may be called old school, but the reasoning for it is just because it is common sense. It allows the guardians to make good decisions using modern investment vehicles and, in our mind, will enable greater and more efficient investment into New Zealand, which can only be a good thing in our mind. Thank you.

JAMI-LEE ROSS (National—Botany): The position I take in these debates usually has me providing lots of rebuttal to whatever Fletcher Tabuteau says in the debates. Given that he is now talking about the National Party being full of common sense and that he is coming on board and is agreeing with us, I do not have much content. We have been working on him quite hard during select committees to bring him across to the right side of the House, but he did make some sense. He was talking about the fact that this legislation arising from the New Zealand Superannuation and Retirement Income Amendment Bill is a good thing and is quite logical.

The Guardians of New Zealand Superannuation have asked for this change to be made through legislation, and we are doing it. It is an almost $30 billion fund—it is doing very well—but of course there is room for improvement, and so the guardians have asked for some legislation to enable them to make use of fund investment vehicles, and this legislation does this.

It is a very simple, small bill—it is only 2½ pages—but it will be quite crucial to enable the guardians to operate that fund more efficiently. I do want to touch on a couple of matters though. There has been discussion in the House about the way in which the fund invests and whether politicians should get involved or not. Absolutely politicians should not be getting involved in this fund. The guardians are experts in their field, they are the people who know best how to invest this money, and we should be allowing them to get on and do that.

The second point I want to make is around the lack of—supposedly—contributions that this Government has made to the fund. Well, there is a really good reason for that, and that is because we have been through a global financial crisis. The country has been through difficulty, and to say that the Government should have continued to invest funds into the Superannuation Fund and borrowed to do that is like saying that you should go and invest on the stock exchange by using money off your credit card. Well, it would be silly to do that, it would be economically wrong for us to do that, and that is why the Government ceased making contributions to the Superannuation Fund.

Mr Tabuteau wants to talk about the supposed $10 billion of lost opportunity, where $10 billion he says has not gone to the fund. Well, New Zealand First members would be the first ones to be complaining if the Government debt was $10 billion higher, so there is a very good reason why the Government had to cease contributions. The fund is doing very well though. There is opportunity for improvement, we are doing that through this legislation, and I support it.

The ASSISTANT SPEAKER (Lindsay Tisch): The next call is a split call. I call Jan Logie—5 minutes.

JAN LOGIE (Green): I rise to take a short call for the Green Party on the legislation arising from the New Zealand Superannuation and Retirement Income Amendment Bill. Firstly, to engage with the last speaker, Jami-Lee Ross, and the comments about the Government’s reasons for suspending payments into the New Zealand Superannuation Fund, I say that the Green Party actually supported that decision at the time. We do recognise that when you are running a deficit, it may not be advisable and the best use of money to continue to put money into a superannuation fund at that time. But at the point where that Government cut the top tax rates, we entered into a different situation, and from our perspective of putting the focus on future generations and looking to the long term in our decision making in this House, we believe that it would have been in the best interests of our society as well as our economy to reinstate payments to the Superannuation Fund at that point rather than to cut the top tax rate.

What this legislation does that the Green Party is opposing—and the primary reasons have been outlined by my colleague Julie Anne Genter in her speech previously—is it gives the Superannuation Fund more flexibility to invest and maximise returns through the use of fund investment vehicles. For most people in this country who do not typically engage with investment strategies—and we have had interesting research recently around KiwiSaver that told us that, actually, we need to be engaging a bit more in the types of investments that we hold—I say that these vehicles will enable, amongst other things, the greater use of tax havens for tax efficiency and will, therefore, help limit Crown liability in certain circumstances.

So, for us, we were presented with deciding in relation to this legislation whether our primary focus is on ensuring that return for the country in terms of the Superannuation Fund in this limited perspective, or whether we needed to consider wider issues. The fact is that New Zealand, as well as the OECD, has been engaged in a global and national campaign to protect tax bases for sovereign countries to actually try to rein in the use of tax havens. For us that principle takes primacy—that, actually, we need, as a country, to be able to protect our tax base—and we would also fight for the right of other countries to protect those tax bases.

Currently, we have found out that, on last reckoning, $1.6 billion is going from the New Zealand Superannuation Fund into a range of investment vehicles based in the Caribbean and that they are notorious for tax avoidance. Therefore, although the New Zealand Superannuation Fund has given us assurances that it does not target aggressive tax avoidance measures and that that is not one of its strategies, the fact that this is looking to liberalise its ability to engage in investment vehicles that are based in areas where we know there are tax havens and there is a huge amount of tax avoidance happening does seem to be counter-productive, which is the basis for our opposition to this legislation.

And although we are talking about the security of New Zealand and our tax base, for us the primary thing that we should be considering is the divestment from investment in fossil fuels, because that is the absolutely fundamental question in front of all of us around the security of our people and this planet. We would have loved to be voting and supporting legislation today that committed us and the New Zealand Superannuation Fund to divest that investment. Currently, there is $676 million of New Zealand Superannuation Fund money invested in companies involved in the production and mining of fossil fuels, which is threatening our very planet, and for us that is the priority.

The ASSISTANT SPEAKER (Lindsay Tisch): I call Stuart Nash—5 minutes.

STUART NASH (Labour—Napier): That was an interesting speech by the Greens and I do not really understand why they are not backing this legislation, but I am pleased that Jan Logie is so set in her principles. No doubt she does not own an Apple iPhone or an iPad, she does not drink at Starbucks, she does not use Microsoft, and I have no doubt that she does not use Facebook, because these are just several examples of companies that maximise the global tax structure—at the moment—to minimise their tax. One thing I would say to Jan is that the Caribbean itself is not known for dodgy tax deals; companies choose to locate there at this point in time.

I am the first to agree that base erosion, profit-shifting tax structures are bad. I am the first to agree that we need to do some work around this, and I know that the Government itself is doing a lot of work with the OECD to put laws in place or to limit the opportunity for companies to engage in tax activity that is not in the best interests of the country—put it that way. But we cannot be too high and mighty about this. The New Zealand Superannuation Fund has a substantial investment in Apple.

What I would hope—it is not a hope; I know—is that the Guardians of New Zealand Superannuation are some of the smartest men and women in this country and what they look at when they look at an investment is the return that it is providing, the risk it gives, and all these other variables. I do not expect them to have a look at the tax structures that these organisations are putting in place and question the viability of those tax structures. What I would expect is that these guardians would have faith in the governance structures and the chief executive officer structures and the investment policies of these organisations to choose either to invest or not. So I do not think we can be too high and mighty about this, especially when as a country we are doing a lot of work to mitigate this.

I just need to clarify a couple of things that Mr Bishop and Mr Ross have said. This is not like borrowing from the credit card to invest in the stock market. When borrowing off your credit card, you pay 18 percent interest, and, if you are lucky, you might make 6 or 8 percent off the stock market. Borrowing at the rate that the Government can gives you about 4.5 percent, and you get a return, on average, of about 10 percent. It is not a good analogy and it is slightly disingenuous, and perhaps it just shows that maybe it should have put a couple of the economic speakers up on this legislation, because they might know what they are talking about.

But Labour does support the legislation arising from the New Zealand Superannuation and Retirement Income Amendment Bill. The main reason is that investment basically is about managing risk and, generally, the higher the risk, the greater the return—that is sort of Economics and Finance 101—but there are innovative ways to manage the risk while maximising returns, and this is one of these. The fund investment vehicles, or “FIVs” as they are called, are about managing the risk, and it is about allowing the guardians to be innovative in the way that they take our taxpayer money and invest it with an ability and a mandate to protect our future—to protect the Government’s fiscal position. We all know that there is $29 billion in this; it should be a lot more, but that is just the way it is. Anything that allows greater returns, minimises risk, and potentially lowers operational costs for the New Zealand Superannuation Fund is something we should actually support, because that is in the best interests of all New Zealanders.

I was not on the select committee when the original bill went through it; I was taking a sabbatical from Parliament. But I have had a look through the papers and I do not think I would have done—well, I know for a fact that I would have done nothing different and would have not put forward any other arguments aside from the ones that the Labour team put forward and the select committee accepted.

One thing I would say is that there is a fantastic book called Against the Gods: The Remarkable Story of Risk. It is by a chap called Peter Bernstein. I would recommend that the members opposite read it. It is about how we manage risk. The reason it is called Against the Gods is that no matter how smart classical cultures were, they always believed that when things went wrong, it was the fault of the gods. It was not until the last couple of hundred years that the modern economy developed tools to manage these risks. We do not blame the gods when things go wrong—there are other things we can blame—and we have the tools now, as mentioned, to minimise that risk and maximise returns. In fact, Peter Bernstein actually believes that this is the foundation of the modern economy. So I agree 100 percent that we should allow our Superannuation Fund to take advantage of any tools that allow the guardians of the fund to minimise that risk and maximise that return for all New Zealanders. Thank you very much.

ANDREW BAYLY (National—Hunua): It is a pleasure to be talking on the third reading of the legislation arising out of the New Zealand Superannuation and Retirement Income Amendment Bill.

Life is full of surprises. We have just had an excellent speech from Mr Stuart Nash, and, of course, I thank him for congratulating my honourable colleague Todd McClay on his work around base erosion. I think that is a very important thing. I thought the comments around Chris Bishop were slightly unfounded, actually. But then we have the Greens saying they do not support this legislation because of course it is a conspiracy and the very reputable New Zealand Superannuation Fund is investing in the Cayman Islands only for the purpose of tax avoidance, to use the clause she noted. I find that a rather strange sort of argument to be putting forward for not supporting this legislation. But I think the biggest surprise is actually the New Zealand First members—that they actually support this legislation. I am very pleased that Mr Fletcher Tabuteau is actually taking the opportunity today to support this legislation, and I commend him for that.

The New Zealand Superannuation and Retirement Income Amendment Bill of course goes hand in glove with the Taxation (Annual Rates for 2015-16, Research and Development, and Remedial Matters) Bill, which we are going to be talking about later on this afternoon. I fully endorse and support the purpose of this legislation. I think the major thing, which a number of speakers have talked about, is the ability for the New Zealand Superannuation Fund to adopt fund investment vehicles. As some of us know, these are very usual investment vehicles that are used all around the world, and because of the way the New Zealand Superannuation and Retirement Income Act was originally set up and envisaged, it was precluded from using these investment vehicles.

So what this legislation does is it actually allows those vehicles to be used. There are limits. They cannot be used to hold controlling shares or equity holdings, but they can be used to invest in funds that subsequently invest in debt and equity instruments.

I think the other subsidiary points that the legislation really deals with are the giving of greater powers to the Guardians of New Zealand Superannuation, which, of course, is the Crown entity that controls the New Zealand Superannuation Fund; the power to grant a power of attorney; the power to appoint an investment manager; and the power to appoint a custodian. All of those are sort of bog-standard arrangements.

The last thing this bill really drives hard at is protecting the guardians against spurious claims from third parties for doing acts that can be deemed ultra vires. I think that having protection around the very credible board that we have managing this fund, which has achieved outstanding results, is a good measure. This is a good piece of legislation and I commend it to the House.

Hon RUTH DYSON (Labour—Port Hills): Can I say that unlike my colleague Fletcher Tabuteau from New Zealand First, I am not disturbed in the least at supporting this legislation. I enjoy the rare opportunities we have on this side of the House to support legislation that is good. In fact, it is good to debate legislation that the Government has introduced, given how rarely that has been occurring over the last 12 months. This is a Government that clearly is not pressed for work or pressing for work.

Chris Bishop: Oh, rubbish.

Hon RUTH DYSON: Chris Bishop says it is really busy. He has had a very, very sheltered life. You only have to listen to the start of Parliament every day, when the Speaker says “Are there any bills for introduction?” and there is a long silence—a really long silence—except on the days when there has been a members’ bills ballot, and then there are a few. That is good. Or there is the very rare occasion when Nick Smith introduces local bills or private bills—or today, when a Minister introduced a bill. You could hear the champagne corks popping down the back as those members said: “What a rare occasion this is.” But it is good to be able to support this legislation arising from the New Zealand Superannuation and Retirement Income Amendment Bill.

I am sorry that I am not on the Finance and Expenditure Committee any more. It sounds like it has had some really good debates. Even though this legislation is quite narrow, I do think that commendation to the members of the select committee is in order. It sounds like they have considered the issues with some rigor. There are certainly some tensions in the broader spectrum of what you might be looking at in terms of the responsibility for investment—this is taxpayers’ money we are talking about—as to where the accountability should be, where the liability should be, what the framework of the investment rules should be, and how much or how little political management, or political interference, there should be. Those questions are all legitimate within the frame of this legislation, and it does sound like a wide number of them were touched on during the select committee process. So I just say to my colleagues on that select committee that if they ever need a sub, I have always enjoyed participating in those debates and I am happy to do so again.

It is very interesting watching the National Government’s strong support for the value of the New Zealand Superannuation Fund. I still remember National’s reaction when we introduced it. It just has no qualms at all about doing an absolute flip-flop, from its staunch opposition then to its staunch support now, without any justification. It just changes its mind and pretends the past did not happen. Well, the difficulty with doing that is that the comments that were made by members at the time who are currently Ministers are on the public record. You only have to go to the Hansards and get them. You can look back at the archives of radio and television—

Kris Faafoi: Got any?

Hon RUTH DYSON: I did not bring any with me, but I tell you what, Mr Faafoi, I do not need to look it up in Hansard to recall that Bill English, when he was sitting over on this side of the House, in Opposition, said to Dr Michael Cullen when the New Zealand Superannuation Fund was established: “This is a dog.” That is what he said: “This fund is a dog.”

Well, I know what the expression is about dogs, and now Mr English is treating the New Zealand Superannuation Fund as if it is his best friend. Perhaps that is what he meant by “a dog”, because now it is the greatest investment—the greatest idea. It is as if he had thought of it. It is as if he had supported it, instead of bagging it at the time and failing to see how important it was, and is, for New Zealand to not just plan in the short term, to not just go for the cheap political wins that the current National Government does, and to not dismiss any long-term need of our country and our citizens in the arrogant way that those members do. Even the first-termers have got an arrogant swag, which I find extraordinary, really.

But, actually, our responsibility as a Parliament, and certainly Bill English’s responsibility as the Minister of Finance, should be to look to the long term. What should we be doing now in 2015, 2016, and 2017, to make sure that future generations have at least as good a time as us in our beautiful country, but, preferably a better time?

One of the reasons for us to look so much to the future—it has always been the case that Governments and Parliaments should. But a particular pressure for us to do that now is the changing demographic of our population. We in this Parliament all know that in a few years’ time there will be a far higher percentage of our population who will be eligible for New Zealand superannuation and there will be a much smaller percentage of our population who are in a paid job and paying their taxes, which goes towards paying for New Zealand superannuation. What does that mean?

Well, there are a whole lot of policy alternatives we could look at, but one of the blindingly obvious proposals that the New Zealand Parliament considered in 2003 was to say: “We should save for the future. We should set up a fund that appropriations can be put into. We can deposit money into a fund, and in future years the investment and the actual deposit on that fund can be used to partially offset the increased costs of superannuation.” That was not rocket science. It was very logical. It was a very good thing to do, and we knew that it would give future generations of people who want to have New Zealand superannuation, in the same way that our generation wants to have it, more confidence that there would be more money in the bank in the future. So that was the point of doing that. That was the point of the establishment of the New Zealand Superannuation Fund in 2003, and the National Party’s reaction to the establishment of that fund—saving for the future—was to call it a dog.

I heard one of the contributors earlier—I cannot actually remember his name, but one of the contributors from National—say it is outrageous to borrow money to invest in the New Zealand Superannuation Fund and that it is like getting out the credit card to pay for something that you need. Well, that is absolute nonsense, particularly in light of the fact that the National Government was very willing to borrow money to pay for tax cuts. It borrowed money to pay for tax cuts, not for everyone in New Zealand, but for the highest-income earners. So people in this Parliament—the highest-income earners in New Zealand—got a tax cut from money that the National Government borrowed. It borrowed to pay for tax cuts, but it would not borrow to put ongoing contributions into the New Zealand Superannuation Fund. That is a muddled policy. That is a selfish, short-term outlook on how our financial management should be run.

You just have to look at the returns from the New Zealand Superannuation Fund to see how good it is. Last year the investments from the New Zealand Superannuation Fund returned 18 percent, so now that fund is at $29.6 billion. That money would not be there in the bank, in the fund, had that fund not been established in 2003.

If National had continued the contributions to the scheme, instead of suspending them and borrowing to pay for tax cuts, there would be $18.2 billion more in that fund—$12.7 million of unmade capital contribution, and $5.5 billion of forgone earnings. That is a lot of money that we do not have because of National’s short-sighted economic planning.

We have billions of dollars in that fund that can give our younger New Zealanders particularly the confidence that, frankly, I think they deserve to have. They are New Zealanders. They are working hard. They are studying hard. They will be buying houses—well, if they have got a good KiwiSaver account, they will be buying houses—and raising a family and contributing to our community. I think they should have what we will benefit from—that is, access to New Zealand superannuation.

The Guardians of New Zealand Superannuation have said that New Zealanders would be $6.2 billion better off if contributions had continued, compared with the cost of borrowing—$6.2 billion better off, compared with the cost of borrowing. That is what National gave away. That is what National should have invested in. This legislation, at least, does a bit to improve the standing of the New Zealand Superannuation Fund, and I am pleased to support it.

ALASTAIR SCOTT (National—Wairarapa): The last contribution by Ruth Dyson on the New Zealand Superannuation and Retirement Income Amendment Bill demonstrated once again a lack of understanding of the financial markets. The simple question, vis-à-vis the leverage that the previous speaker was talking about, is how much leverage, how much borrowing, does she have invested overseas in offshore markets? How much mortgage has she—or anyone in this House—taken out to put in? The point is that, inherently, we understand that there is risk involved, and that is why we do not do that, and that is why we do not expect a Government to do that.

In the main point of my contribution, I would rather focus on the importance of the independence of the Guardians of New Zealand Superannuation and why it is so important that we do not have the Minister of Finance’s interference or—yes, well, let us just call it interference—in the running or the management of this fund. For example, if we had the Green Party managing the finances of the Government of the day, we would have—what were the words—“divestment in investment in fossil fuels”, so no investment in Mobil or Caltex or any of these large corporates, so increasing the risk of the fund. We have had contributions from Mr Robertson in the past where he would like to invest more in the New Zealand Superannuation Fund—so, again, overweighting and putting the taxpayer at risk, overweighting the portfolio because of the whim of a potential finance Minister. That is exactly why we do not want—

Chris Bishop: Don’t be too generous.

ALASTAIR SCOTT: “Potential”—that is generous, you are right, Mr Bishop. Then of course I do commend Mr Cosgrove’s points, and he does talk about the importance of the independence of the governance of the fund, but then his colleague Dr Clark wants some sort of oversight, wants to have continued oversight in case “something strange goes on”. What on earth would that mean, Dr Clark? I have no idea.

This is a very good bill. It is very important that the Minister of Finance continues to stay at arm’s length, continues to mind the business of the Guardians of New Zealand Superannuation to get on and do their job. I commend it to the House.

A party vote was called for on the question, That the New Zealand Superannuation and Retirement Income Amendment Bill be now read a third time.

Ayes 107

New Zealand National 59; New Zealand Labour 32; New Zealand First 12; Māori Party 2; ACT New Zealand 1; United Future 1.

Noes 14

Green Party 14.

Bill read a third time.

A party vote was called for on the question, That the Taxation (New Zealand Superannuation and Retirement Income) Bill be now read a third time.

Ayes 107

New Zealand National 59; New Zealand Labour 32; New Zealand First 12; Māori Party 2; ACT New Zealand 1; United Future 1.

Noes 14

Green Party 14.

Bill read a third time.

Bills

Taxation (Annual Rates for 2015-16, Research and Development, and Remedial Matters) Bill

Second Reading

Hon TODD McCLAY (Minister of Revenue): I move, That the Taxation (Annual Rates for 2015-16, Research and Development, and Remedial Matters) Bill be now read a second time. This omnibus tax bill continues the Government’s work in supporting New Zealand’s businesses by delivering the initiatives and policy reforms necessary to create a more productive and competitive economy. At the same time, it continues the Government’s focus on maintaining the tax system over time so that it remains fit for purpose.

With these principles in mind, the first set of proposals are aimed at encouraging business innovation by removing some of the obstacles that the current tax rules can impose on small start-up businesses. Under the current rules, these businesses are often unable to use their tax losses in a timely way, or at all, because the tax rules require them to carry their tax losses forward to deduct against future income. This can be a barrier to undertaking research and development for innovative start-up companies, compared with large firms, which can usually offset losses against existing income streams.

The bill addresses the problem by proposing to allow eligible research and development start-up firms to claim up to 28 percent of their losses for eligible research and development expenditure in any given year. Twenty-eight percent reflects the current company tax rate, and the Finance and Expenditure Committee has recommended futureproofing these provisions so that any change to the company rate in the future automatically flows through to what can be claimed in research and development losses. This cash-out will be delivered in a form of a refund, and the losses cashed out will be capped at $500,000 for the first year, increasing by $300,000 over each of the next 5 years to $2 million. The proposed changes are intended to provide a temporary timing benefit only. When the business makes a return on its research and development it will be required to repay some or all of the amounts cashed out, by either income tax payed by the business or from any gains on a sale.

The second suite of research and development proposals is designed to relieve the problem known as black-hole expenditure, where some development expenditure is never able to be deducted for income tax purposes. To deal with this problem, the bill proposes to allow capitalised development expenditure to be either deducted over time as depreciation, or, if no depreciable intangible asset is created—including where research and development projects turn out to be unsuccessful—then taken as a one-off deduction upon a write-off for accounting purposes. These proposed changes to the tax rules for research and development will be welcome news for our innovative start-up firms.

A third set of changes proposed in the bill clarify the GST rules for New Zealand’s 13,800 bodies corporate. These proposals will give them assurance on their GST position by confirming that services provided are supplies for GST purposes, and give them the option to register for GST. There are also several special rules to protect the tax base from adverse consequences of giving bodies corporate this choice. It is important that in going forward with GST, bodies corporate are not able to shock the GST system when it comes to a period of time where they may have a larger deduction than an ongoing GST case would have where they are registered for a longer period.

The bill also includes measures to reduce the penalty burden on liable parents with child support debt. These measures are aimed at reducing long-term child support debt and encouraging liable parents in debt to better manage their child support repayments. The intention is to encourage liable parents to re-engage with their child support obligations and to strengthen the Inland Revenue Department’s ability to work with parents to regain control of their child support debt and enter repayments. Ultimately, it is about getting child support debt paid so that the money goes directly to the children who need it. This Budget 2015 initiative was referred to the select committee for consideration and now forms part of this bill.

I want to thank the Finance and Expenditure Committee for its measured consideration of the bill and for its recommendations to improve the workability and fairness of several positions. For these same reasons, I wish to advise that I intend to introduce a Supplementary Order Paper to the Committee of the whole House, which will contain a small number of technical amendments. The principal proposal will allow greater flexibility to more quickly align the tax exemption criteria for community housing entities with the Government’s HomeStart threshold. The remaining proposals in the Supplementary Order Paper will further refine and update certain measures already in the bill. I have great pleasure in commending the Taxation (Annual Rates for 2015-16, Research and Development, and Remedial Matters) Bill to the House.

Hon CLAYTON COSGROVE (Labour): Labour will continue to support the bill, but I want to digress slightly—and I do this with a lot of good will for the Minister, Todd McClay—because it has been brought to my notice that there does appear to be a problem. He may wish to address this with his officials in another Supplementary Order Paper. In respect of bodies corporate, the bill includes reforms to GST and bodies corporate—that is, clauses 248 to 254. A large number of small businesses could face unfair, unjustified, and unexpected retrospective liabilities and potential penalties if the bill proceeds in its current form. I have to say that the Finance and Expenditure Committee was not informed of this. I am advised that no submissions on the point were made because the private sector was not aware of the issues. I am not trying to make a political point here tonight; I am trying to be of assistance.

The issue concerns GST on those small businesses that own premises in a building by way of a unit title interest in a body corporate. GST is based on the idea that it is a tax on consumers of goods and services, not the business that supplies them. It is also designed so that the GST is paid once, and once only, through the supply chain. That is self-evident. The problem has arisen where instead of the registered business directly incurring business expenses, those costs are incurred by a separate body corporate that is funded by the owner—that is, the business.

The Inland Revenue Department’s old view was that bodies corporate are just conduits for owners—that a body corporate in itself cannot register and claim GST input credits on expenses. The practice was that owners claimed the input credits themselves on the basis that they funded the body corporate through levies, so, ultimately, owners paid the bills incurred by that body corporate. The Inland Revenue Department’s view was that bodies corporate could not register for GST—that was its view because the body corporate was merely a conduit through which owners operated their businesses but was a firm of one, if you like. In some cases, the Inland Revenue Department actually forced, I am advised, registered bodies corporate to deregister.

In May 2013 the Inland Revenue Department changed its view of the GST law. Instead of being of the view that bodies corporate were unable to register for GST, it concluded that the law actually required them to be registered for GST. However, the Commissioner of Inland Revenue issued a statement saying that, in effect, the issue was being considered and, despite the law, unregistered bodies corporate and owners could carry on as before. That was a definitive statement—the Minister is nodding.

Then we go to June 2014. The Minister of Revenue, who has just spoken, announced the Government’s intention to change the law so as to disallow bodies corporate from registering for GST, and to deregister all existing registered bodies corporate as of that date. To deal with the issue the Government, in effect, proposed a look-through rule. The difficulty is that the Government announced that these rules would apply from the date of the press release—6 June. Then you fast-forward to February 2015. The Minister introduced the bill. However, instead of disallowing bodies corporate from registering for GST, the bill proposes that the registration be generally elective. Right? No look-through rule was provided. As I recall, the select committee looked at it and said: “OK, because it is elective, it seems to be more reasonable than forcing bodies corporate that want to be registered to deregister.” OK?

I am now advised that the Inland Revenue Department says it will apply its new view of the GST law, which is consistent with the clarification made in the latest bill. Importantly, it reverses the position for those who followed the Inland Revenue Department’s old view and the Minister’s 6 June 2014 statement relating to the conduit look-through rule. Unit holders are now disallowed GST input credits for legitimate business expenses incurred on behalf of owners by unregistered bodies corporate. The Inland Revenue Department has now, I am told, reached the view that all those businesses that followed the Inland Revenue Department’s old policy, the ministerial commitment, and the commissioner’s assurance, and kept their bodies corporate unregistered for GST but continued to claim input credits for legitimate business expenses on the basis that these were indirectly incurred for business purposes will be denied input credits. Instead of the expected GST refund, such businesses can be liable for GST.

I am advised that the Inland Revenue Department’s view also means that the Inland Revenue Department can, and should by law, go back 4 years and demand repayment of previous GST input credits of this nature claimed in the past. Essentially, what this means is that small businesses that have followed past Inland Revenue Department views, ministerial statements, and the commissioner’s statement face the prospect of additional GST bills going back 4 years, and the prospect of penalties. I say to the Minister that I think there is a simple solution to this, and I would invite him in a non-partisan way to check with his officials that the way through this is as proposed by him on 6 June—he had an effective date, which is re-instating, if you like, the look-through rule.

I have got some amendments and some proposals that could be of assistance to the Minister, but I say that this is simple: it is the look-through rule as proposed by him—he had an effective date—and perhaps looking at some amendments around this might be appropriate. I think it may well be an oversight. It may be that somebody has got it wrong somewhere, but I have got to say that ministerial commitments and the fact that the Commissioner of Inland Revenue said she was going to look at it but said they could effectively carry on, as I understand it, means that businesses have acted in good faith but could be up the river for substantial costs. So we will raise that in the Committee stage of the bill, and I am happy to liaise with the Minister in respect of possible solutions; there may be others.

I will say, on another issue, that this bill deals with a whole host of issues. It deals, of course—and we have had very little explanation—with child support issues. It deals with those issues but it fails to front up and tell explain the blowout in expenses in respect of this policy. The cost has blown out from what Peter Dunne, I think, said was a $30 million budget under his watch, to up to $120 million under his watch. It then bounced out to $210 million under the Minister’s watch, and we now have ratcheted it back to $163 million. However, we know that is only temporary because the other stages of this policy have yet to go through.

So in the Committee stage, as we go through, we would appreciate some sort of explanation as to why that occurred. I understand—and I have expressed my sympathy for the relatively new Minister in the portfolio; he is the guy with the shovel walking behind the elephant—that Mr Dunne is the longest-serving revenue Minister in any Commonwealth Parliament in the world. The issue is the fact that Mr Dunne freely admits in some of his quotes that he does not quite know why that cost blew out. He does not have the answers—and it is a bit like a hospital pass, as we say in rugby: pass the ball as the forwards come over to coathanger the new Minister, because he does not seem to know why it happened at all.

Without digressing, I note that the information and communications technology transformation project is supposed to be the basis for more efficient tax processing. It is supposed to help along the child support policy. Again, money is being spent like water. We had the Commissioner of Inland Revenue in and she said it is on budget, it is on target. I did ask her at the Finance and Expenditure Committee whether she was around when INCIS was being promoted. She is Irish, and I do not think she was in the this country—I think she was the revenue commissioner in Ireland—when INCIS, the integrated national crime information system, another great project promoted and managed by a National Government, blew out to, I think, $600 million. The infamous integrated national crime information police computer system was subsequently canned.

I am grateful that the Minister has indicated that he will look at clauses 248 to 254. I appreciate that. But I would also like some sort of explanation—and I think this House and the taxpayer deserves it—as to why that money has been used, why the money flows like water, and why there is the blow out on operational side of the child support policy, as well as some assurances as to cost control over the life of the Business Transformation project. I am happy to work the Minister on those clauses 248 to 254, and I look forward to the debate.

DAVID BENNETT (National—Hamilton East): It gives me pleasure to speak on the Taxation (Annual Rates for 2015-16, Research and Development, and Remedial Matters) Bill in its second reading. Just following on from the previous speaker, the Hon Clayton Cosgrove, we have Inland Revenue officials here, so I am sure that they will look into the matters that have been raised by the previous speaker. The issues around the corporate entities that he raised are quite complex, and I know that that member read the instructions he received very well, but there certainly will be a further degree of looking at it by the officials to make sure that those rules are actually what is intended and, therefore, achieve their purpose. With GST and bodies corporate, it is a difficult area, especially when it comes to property transactions and look-through companies—something that, of course, the Minister and the Inland Revenue Department will take a great interest in to make sure that they have it right. That was one of the three big issues in this bill.

One of them is that of GST and bodies corporate, which we have just touched on. Another one—the big one—is the research and development cash-out tax credits. Essentially, that was something that was mentioned in the Budget, as previously mentioned by the Minister. Basically, it enables a cash-out rate of 28 percent of losses from research and development expenditure in any given year, up to certain thresholds, with a $500,000 limit for the first year. That will increase by $300,000 over the next 5 years to $2 million. You can cash-out at a lower rate, of course, if that is the amount that has been spent. There are certain tests around that: around the loss by the company, its total expenditure, and also its labour costs as a proportion. It is to help start-up firms that are engaging in intensive research and development, and it is a mechanism by which they would be able to claim, through a cash-out tax credit, any losses that may have been justified under research and development in certain circumstances.

The second area that was looked at was in regard to GST in bodies corporate—that was just to address some of the uncertainty in the rules around bodies corporate. The previous speaker has raised another issue that he feels has a further degree of uncertainty, and we will certainly be looking at that to make sure that that does not actually eventuate in the manner in which that speaker has said. This bill would look at resolving some of the problems around property transfers in this area. It can be a difficult area with bodies corporate and the nature of the different transactions, so there would always be an element of ongoing legislation to make sure that the legislation keeps up with the market progress in this area as well. It is just that bodies corporate are primarily tax neutral for GST purposes, so it is not really a question of whether they are registered or not. So the proposed amendments look at the tax base in that area.

The third area is the child support reforms. The last speaker mentioned that as well, in regard to the system issues around creating the new computer system, which is part of the Business Transformation project, and also some of the costs that may be involved. That is a huge project for New Zealand and for the Inland Revenue Department, and so it is important that we get it right. I think we need to congratulate the Minister on the way that he has had a very open process with the select committee so that the Opposition parties are well aware of how that project is going. There are the child support reforms—again, mentioned in the Budget—and the large intent of those is to try to make sure that the New Zealand taxpayer recovers the child support payments that are due. We are trying to simplify the administration of the scheme to try to reduce the debt that may be held, and reduce some of the administration and compliance costs involved.

Those are the three big areas of the bill. There are other subsidiary areas of the bill as well, which cover off some more technical tax matters. We look forward to this bill progressing through the House. I think most parties will be in support of it, but we will certainly look into the issues raised by the previous member to make sure that they are also covered by the legislation. Thank you.

STUART NASH (Labour—Napier): As Mr Bennett has outlined, there are a number of things in this bill—some are important, some are not, some are slightly contentious; mostly we got through without any major debates at all. The main one I suppose is the cash-out of research and development tax losses, which every speaker has spoken about—

The ASSISTANT SPEAKER (Lindsay Tisch): I am sorry to interrupt the honourable member. The time has come for me to leave the Chair for the dinner break.

Sitting suspended from 6 p.m. to 7.30 p.m.

Mr DEPUTY SPEAKER: Kia ora mai tātou, tēnā tātou katoa. When the House broke for the dinner break, we were debating the Taxation (Annual Rates for 2015/16, Research and Development, and Remedial Matters) Bill. Stuart Nash was speaking and he has 9 minutes and 40 squandered seconds remaining.

JAMI-LEE ROSS (National—Botany): I am happy to follow Mr Nash’s very long contribution on this bill. It was a well-thought-out contribution, and I am sure it will go down in parliamentary history as one of the better speeches that he has given in this House.

We are discussing the Taxation (Annual Rates for 2015-16, Research and Development, and Remedial Matters) Bill. There are some very good proposals in here that will enable companies to gain greater access to funds to enable them to conduct greater research and development, and that is something that I think this Government feels quite passionately about. Ensuring that we get greater research out of our companies will mean that we can continue to be a country of innovation, a country that sees great opportunities on the horizon, and it will enable our businesses and our individuals in this country to tackle them head-on and do very well in doing so. I am sure during this debate we will hear much more about it.

But I just want to talk a little bit about one of the clauses in this bill. It is clause 65. It is actually the annual rates of income tax for 2015-16. Often when we talk about the annual rates bills, we do not always talk about the actual annual rates, because they are usually just glossed over a little bit. But I think it is important to put on the record again in this House that this is a Government that believes in leaving money in people’s pockets, because we believe they are best to do with their money as they see fit. We are not the big-tax Government like Labour used to be. We are not the Government that would have seen huge spending increases based on the 2008 Budget that the Labour Government put in place. We are the Government that has got Government spending under control. We are the Government that has posted a surplus for the first time in many years. Despite the fact that the global financial crisis has hit the country, despite the fact that the world has seen difficulties, we have been able to steer this country through some difficult economic times, and New Zealanders appreciate that.

The annual tax rates that we see in this bill go towards funding Government expenditure, so it is quite appropriate that we discuss this in this bill. The annual rates that we see through this bill go towards, for example, the extra funding for those in hardship through the $25-a-week extra payment through the two welfare benefits. The extra funding we see coming through in this tax bill goes towards extra funding for education. The extra—the half a billion dollars, actually, that was put into extra early childhood education funding. The extra funding that we are putting into the health system—that is going towards, for example, the programmes announced this week for tackling obesity. We are a Government—

Tracey Martin: You cut the funding. You cut the funding in 2009.

JAMI-LEE ROSS: —that is getting on with the job. We are a Government that is delivering good economic policies for New Zealand. And I know those members do not like to hear it, because they are interjecting on me, but—

Mr DEPUTY SPEAKER: So back to the bill.

JAMI-LEE ROSS: —every dollar collected through the tax rates that clause 65 in this bill talks about goes towards good quality Government spending, and I am happy to support that.

JULIE ANNE GENTER (Green): The Green Party is supporting the Taxation (Annual Rates for 2015-16, Research and Development, and Remedial Matters) Bill. I will speak to the part that we are particularly excited about, because it really does pick up a key plank of Green Party policy and reverses what has been the Government’s policy up until now.

When the Government first came into office it cancelled the tax credits for research and development that had been instituted by the previous Government, even though there was every sign that they were working quite well. In New Zealand we have a lot of research that says we are under-invested in research and development. Our companies tend not to spend as much money on research and development as companies do in other comparable countries that we would aspire to be more like, and that is one of the things that is holding back our economic prosperity, if you will, in the world.

There is a great book, actually, which I highly recommend to anyone watching this speech tonight, called Get Off the Grass. It was co-authored by Sir Paul Callaghan and Shaun Hendy, who is a professor at the University of Auckland, and it is all about how to kick-start New Zealand’s innovation economy. It starts out by identifying a number of myths about what it is that creates the conditions for sustainable economic prosperity. In New Zealand we have a lot of myths that are perpetuated by the current Government—that New Zealand is terribly overburdened and overtaxed and we have got too much regulatory burden, and that what we really need to do is cut regulations and cut taxes and then we are going to get richer. But if we look at the comparable countries in the world that have higher incomes per capita than New Zealand, they actually do not have lower tax rates and they do not have a less regulatory regime. It is not easier to start up businesses in those countries.

We have one of the most liberalised economies in the world, and yet we have still lagged behind on incomes per capita. The question is, why is that? Is it possible that those myths around the barriers to New Zealand’s economic prosperity are actually wrong, and that what we do need to do is build on our competitive advantage, which is our “clean, green” brand? Although the current Government thinks that we have to choose between the economy and the environment, the truth is that we cannot choose between those two. We cannot get richer by mining, polluting, and using up more of our natural resources. In the long term, we will be poorer for doing that. The Green Party has an evidence-based economic strategy that builds on protecting our natural resources and protecting our environment, not only because it is going to be good for us in the medium and long term and because it is going to mean New Zealanders can live better lives but also just because we do love our environment and we know most New Zealanders love our environment.

What is the evidence base? The evidence base—and I am going to cite Sir Paul Callaghan and Shaun Hendy on this—is that we need to create the conditions for more innovation in New Zealand, and one of the most simple ways to do that is through having something like a research and development tax credit. But when this Government came in it cancelled the research and development tax credits, and then it set up Callaghan Innovation to try to direct money to incentivise research and development. But the problem is that with the way Callaghan Innovation is working, it is not the most simple system. It does not reward all businesses equally for investing in research and development. It has a huge bureaucratic burden, which makes it easier for the big players to apply for and get grants but makes it very, very difficult for small companies and start-ups to get the benefit of investing in research and development, because they have to have this incredible infrastructure in place to be able to apply.

Of course, there is another problem, which is that Callaghan Innovation has been a little bit—I would say—politically influenced, or at least that has been the criticism from a lot of researchers working here in New Zealand. For example, a Crown research institute GNS Science applied for a grant to—sorry, it was through Trans-Tasman Resources, which is a majority foreign-owned company with a former Prime Minister as a board member. It received a big grant from Callaghan Innovation to attempt to mine the ironsands in the habitats and feeding grounds of Māui’s dolphins and blue whales. So not only are we not using Callaghan Innovation to pick winners that might have some positive externalities; it seems that the current Government is using Callaghan Innovation to pick winners that do the exact opposite, which is to increase environmental degradation and, basically, incentivise an extractive approach. We should know, from looking at comparable countries overseas, that taking an extractive approach can never build long-term prosperity.

But if we take another country that is very similar to New Zealand in size, Denmark—it is, admittedly, located in the centre of Europe, but it has a similar-sized population. Similarly to us, it had an economy that was almost entirely reliant on simple commodity exports—primarily agriculture. What Denmark did over a period of a couple of decades was apply a whole set of policies that incentivised local value-added economic development. Denmark now has much higher incomes per capita than New Zealand. It is also reducing its greenhouse gas emissions, and it also has much lower levels of child poverty than New Zealand. It is able to do all of this. When you look at a graph of its exports it is really fascinating, because you can see that agriculture remains a very large portion of its exports. The overall size and value of its agricultural exports have not changed much over that period. They have slightly declined, but Denmark has added all of these value-added sectors: high-value IT, clothing manufacturing, pharmaceuticals—a whole lot of other layers on top of agriculture, and Denmark has almost doubled its exports and its GDP.

When the Green Party says we cannot have an economic strategy that relies on doubling our production of dairy because our environment is simply not going to cope with that, and also it is not going to make us better off—the profitability is not going to increase at the same rate; you get diminishing marginal returns—we are not saying that we should abandon agriculture completely. We are saying we can add all of these other areas, and in order to do that we need to have a comprehensive policy.

Right before the last election the Green Party announced a suite of policies that were aimed at incentivising a transition to a clean, green economy, one that is going to enable all New Zealanders to be better off and enable us to reduce our carbon pollution and reduce our greenhouse gas emissions, which is going to be a winning economic strategy in the long term—and a winning survival strategy, which is also good. One of the planks of that suite was a huge research and development package that included tax credits for research and development such as are contained in this bill.

Also, it is incredibly important not only to provide the carrot but also to ensure that the ground rules are in place, because regulations are one of the biggest drivers of innovation. Our climate tax cut, for example, would put a price on carbon pollution at a manageable level. We would be indicating that there would be an independent climate commission that would be overseeing setting the price in future years, but businesses would have the clear price signal that they need to invest for the long term in clean, green, low-carbon technology. By putting that price on carbon we are sending a signal to the market. Yes, it might be true that it costs some jobs in highly polluting industries, but what the Government never talks about is that that incentive—that regulation, that price signal—actually creates jobs in clean, green industries, and that is exactly what we want here in New Zealand.

So you have got the carrot, if you will—the research and development tax credits; the direct investment in research and development; setting up a green investment bank, which would be a low-cost way of setting up a fully commercial bank that would specialise and have expertise in clean tech, which would facilitate private sector investments in those areas—and then you have got the carbon price, which is not kept by the Government but actually recycled back to households and businesses in the form of a tax cut from the bottom, so that all people benefit equally from it. That is the kind of evidence-based, practical policy that the Green Party is proposing so that we can have a long-term, sustainable future for all New Zealanders.

We are happy to see that the Government has picked up one small part of that in this bill, and that is why we will be supporting it. We look forward to it picking up more of our policy in the future.

FLETCHER TABUTEAU (NZ First): I would just like to take this opportunity to start off by pointing out the irony of Mr Ross’ statement in his contribution earlier. He talked about the necessity of enabling businesses through tax breaks, despite the very fact that only several weeks ago it was this National Government that cut funding to one of our biggest research institutions in New Zealand and was told by those very people that it will compromise the outcomes for research in this country for the next couple of decades. So the irony is not lost on most New Zealanders. The Taxation (Annual Rates for 2015-16, Research and Development, and Remedial Matters) Bill is a large and unwieldy piece of legislation that needs much consideration and certainly more discussion than we have the time available for today. So I would like to note that New Zealand First stands in support of this bill, but would take this earnest opportunity to highlight some of the concerns we have around it.

New Zealand First has said repeatedly that these types of bills used to be uncontroversial. They were remedial. They were fixing up small mistakes, and we acknowledge on this side of the House that that happens and you do need to take the opportunity to fix them up. But what we are seeing here now—and, case in point, evidenced in the very House tonight, and I acknowledge the Hon Mr Cosgrove and his contribution earlier—is that there are mistakes being made. There are mistakes in this legislation, and, more to our point, there are a whole lot of unintended consequences of getting the wording slightly wrong, or putting it in the wrong place, or referencing the wrong paragraph or even other pieces of legislation. So this is not what it used to be in that we used to say it was uncontroversial. Actually, this is quite a big issue, and this House needs to get it right. More important, the National Government needs to come much better prepared.

Just speaking to that, one of the submissions to the Finance and Expenditure Committee was the suggestion that this Government provide drafting of these changes to the public prior to this stage of the process. What submitters were saying—and we are talking about the likes of KPMG and Ernst and Young—was that, actually, this is so complex and so broad in nature that to ask our accounting experts and tax experts to consult in the time frame provided was an arduous and perhaps even unrealistic expectation. They want to contribute. They want to be able to highlight the issues to the Government so that as we move forward—and this is essential for tax legislation—it is not complex and it is transparent and it is fair and it is not contradictory. That is what they were asking for, and New Zealand First says: “What a great idea. Let us focus on opportunities like this.” I encourage the Minister of Revenue to take this advice from submitters on board.

With regard to Supplementary Order Paper 77, which was attached to this bill with regard to child support payment, New Zealand First supports the intent of extending the powers of the Commissioner to write off certain penalties. There is a lot of debate that I believe still needs to go into that and that New Zealand First believes needs to go into that, but at this stage we also support allowing the Commissioner to write off certain penalties if it is fair and reasonable to do so. That came through in the submissions also: what is it that is fair and what is it that is reasonable? Providing a purview—even “Here is a list; here is what is not in it.”—that kind of thing is a practical solution moving forward.

Of concern is what the Minister of Revenue mentioned in his opening address to the House. He said this legislation allows for those who have not been paying their child support payments to come forward and work out a solution and try to make it work. To a great extent we agree with the Minister, but it does not actually address the issue. It is an ambulance at the bottom of the cliff, as it were, but having dealt with several cases, and being able to talk to the Minister about those cases, I acknowledge that he and this Government are genuine in trying to find solutions for child support payment problems. It is big; 7 percent of the total debt owed, for example, is in penalties alone, so a strategy needs to come about, but this bill is certainly not the solution to that.

Deloitte highlighted that the policy intent around research and development is a positive one when it comes to the intent of the bill, but, as noted during select committee hearings, it restricts high-growth companies, it restricts start-ups, and it restricts those companies doing business offshore. The eligibility criteria with regard to these exemptions have been questioned by several submitters, so New Zealand First would say and impress upon the National Government that what we would like to see from these research and development tax exemptions is the actual encouragement of research and development for good Kiwi business. So we say around the issues at the moment, especially around small start-ups, that there are solutions presented in this legislation, but it needs to go further and we need some clarity because the more we can do to encourage research and development with our small businesses, the better it is for the New Zealand economy. The more they can do that—come up with the great ideas that Kiwis are renowned for around the world—and take them around the world, the better it is for our New Zealand economy.

The other issue that we would raise, alongside submitters, is the level of guidance, and I mentioned that briefly just a moment ago, or the commentary necessary for businesses to use in order to report and claim that tax break on research and development. I picked on the wage intensity percentage issue. The process for the percentage to be apportioned is confused, and New Zealand First would add that the calculations for start-ups should be made at the market value. Research and development tax credits are supposed to be incentivising research and development. I got from the Minister of Revenue’s address earlier today that his approach was one about administration, but this is a real opportunity and the whole key point, I would like to think, of this part of the legislation is around actually incentivising research and development to ensure it becomes part of New Zealand business culture.

I just want to conclude by saying that tax should not be complex; rather, it should be as simple as possible and transparent so that New Zealand businesses can comply as easily as possible. This would, ideally, include specific compliance and non-compliance examples. Again, businesses are more likely to comply if they know what the rules are. That part of the issue is not addressed in the legislation. So it is just a suggestion to this Government that if it wants compliance and it wants people taking advantage of this, then there are some practical solutions that could be included in the implementation. I will have to conclude my contribution for this evening. Thank you.

ANDREW BAYLY (National—Hunua): It is a pleasure to be talking on the second reading of the Taxation (Annual Rates for 2015-16, Research and Development, and Remedial Matters) Bill. Before I start talking about the bill, I just want to acknowledge some of the wonderful contributions to this debate tonight. I am particularly impressed with my colleague Mr Jami-Lee Ross, who, like a laser, took us to clause 65, which, of course, is an exceptionally important clause of the bill, and also the very pithy and succinct contribution from Mr Stuart Nash, which I thought was valuable.

In terms of this bill, obviously it is a continuation of the Budget and it really covers four parts. The first part is about encouraging innovation in the New Zealand economy. Of course, this Government has a very ambitious target to see our research and development spend in New Zealand increase significantly, not only through what the Government itself spends but also through what the private sector is contributing. So the first part is really about dealing with those entities that undertake research and development but, under current tax laws, they can only carry forward their tax losses relating to those research and development activities.

For large firms that obviously does not matter because they have got other research and development activities they can write expenditure off against, but this is a real barrier to our small to medium sized enterprises and the importance that they have in the New Zealand economy. So what this bill does is allows those firms to access those tax losses at 28 percent, i.e., the current tax rate, and, of course, there is an increasing scale—the first year $500,000 and by year 5 they will be able to draw down or claim a maximum of $2 million a year. I think that is a very valuable cash-out clause. Of course, if those entities do make a subsequent profit they will have to remit those tax losses against those future profits.

The second thing this deals with in terms of research and development is the issue of black-hole expenditure. For those who do not understand the concept, that is where expenditure cannot be deducted—i.e., it must be capitalised on the profit and loss statement or through the balance sheet. So this bill introduces two provisions. First of all, it allows this capitalised development expenditure either to be depreciated, which previously it could not be, or to be taken as a one-off write-off. And, again, this is good stuff for New Zealand and good stuff for New Zealand businesses in terms of promoting research and development.

The fourth issue this bill deals with is the issue around bodies corporate. This is a Government that has listened to submissions on this issue. Of course, bodies corporate at the moment, unless they are registered for some purpose for GST, cannot actually claim back their GST. So this bill makes it explicit, first of all, that the services it provides as a body corporate are deemed to be services and therefore are rateable for GST, and, secondly, if the body corporate wants to register as a GST entity then, of course, it can then take the wins from both the GST that they receive and pay.

Finally, this bill deals with penalties relating to the liabilities around child support. As many people know, there is a significant liability that is built up—roughly about $3 billion. As the previous speaker, Mr Fletcher Tabuteau, acknowledged, about 77 percent of that is encompassing penalties. What this bill is about—and this is the bit I really like about this bill—is that it is enabling the Inland Revenue Department to take a much more pragmatic approach so we can actually address this issue. We want parents who are not paying their child support to be involved in paying, and it is good for families. So I look forward to supporting this bill and working our way through it. I commend the bill. Thank you very much.

Mr DEPUTY SPEAKER: I call Jan Logie—a 5-minute call.

JAN LOGIE (Green): I rise to take a call on this, the Taxation (Annual Rates for 2015-16, Research and Development, and Remedial Matters) Bill, which deals substantially with child support—although you certainly would not know it from the title. The Green Party is supporting this bill for many of the reasons that have been outlined by my colleague Julie Anne Genter in her previous contribution, so I would like to restrict my contribution to talking about child support and, possibly, a couple of other points if I have time and do not talk too much.

When we look at the number of changes to the child support system in this bill, I think that it is important to realise that only 2 years ago this Parliament considered legislation for the amendment of child support. That piece of legislation went to the Social Services Committee, and there was a very, very thorough consideration of child support issues. Yet here we are about 2 years later with quite significant amendments before we have even had the opportunity to see those changes truly bed in. It needs to be restated that while that legislation was being considered, the Opposition did raise concerns about the ability of the Inland Revenue Department to deliver a very complex formula and the system that may be required to implement that, and, as a result of that legislation passing, we have seen the overrun for the implementation of that new formula being estimated to cost $180 million. That is the overrun for that project—around $180 million. We are seeing significant amendments coming back to this House less than 2 years later.

To some of the substance of those amendments that are being put in front of us—they are extending the requirement for the Commissioner of the Inland Revenue Department to write off certain penalties, and they are providing also for an opt-out option for parents if they both agree to treat payments as a private matter rather than as a liability through the Inland Revenue Department. I would like to speak about each of those points separately, and I notice that in the submissions to the select committee—although I did not sit on it—there were no submissions from the social sector, from people who, on a social level, may be dealing with families that are experiencing a break up and are needing to use this child support system.

I thought there was a useful contribution from Baucher Consulting, which has quite a few clients who are using that system. It noted that the outstanding debts around child support were $3.2 billion as of December 2014, which is a phenomenal amount of money. I think that we would have benefited from this bill, rather than it going to the Finance and Expenditure Committee, being considered again by the Social Services Committee in the context of 1996 research: a safety survey that showed that 70 percent—70 percent—of separated women had experienced some form of domestic violence. If the assumption is that the lack of payment is purely because people are struggling to get the administrative things in place, I would tell this House that that is not the experience of most organisations and most women who are struggling to get their child support payments.

We know that child support is used as a weapon in violent relationships, and that factor needs to be considered when we are making changes to the legislation. I have not seen any evidence that that has been properly considered in this piece of legislation, and that is a real shame because it should have been. I totally understand that the penalties may have been disproportionate and not working as an incentive, and I would love to see that recognition applied by this Government in other areas. I believe it is unfair that those penalties accrue to the Inland Revenue Department and not to the family and the children themselves, to get the benefit of that extra money. In summary—because I am being told to wind up—there is a lot to say about this bill, and I do not think that all of these different policy points should be in one piece of legislation, but we are, on balance, supporting this legislation.

Mr DEPUTY SPEAKER: The Hon David Cunliffe, a 5 minute call.

Hon DAVID CUNLIFFE (Labour—New Lynn): It is a pleasure to take a brief call to re-register Labour’s support for this bill. I think the appropriate place to start, given that it is an annual rates bill, is to reflect upon the rate structure, which is unchanged from last year but does, however, reflect the tax switch that this Government brought in soon after assuming office.

That was one of the most major contributors to inequality in this country over many years. It resulted in the top 10 percent of income earners getting 40 percent of the net tax remission—that is, 10 percent of income earners got 40 percent of the tax back—and that went to the top end. That tax switch, which results in the rates that are reconfirmed in this bill, was a major step backwards for an egalitarian society that believes that every New Zealander ought to have the opportunity to prosper, not just those at the top who get extra help to prosper even more.

You will remember that the tax switch was not, as had been heralded, fiscally neutral. There was a net fiscal cost of a billion dollars. Does it matter? Yes, because that is more than twice the amount of the paper-thin surplus that is currently being touted by the Government, which is more than offset by the change to the Earthquake Commission balance sheet. That is, if you took away the Earthquake Commission change, the Government would not be running a surplus at all, and the surplus would be swamped more than twice by the earlier tax loss when that inequitable tax switch happened.

So what is in this bill? Others have mentioned the child support reforms. I will not spend a lot of time on that other than to say it is acknowledged on both sides of the House that the system is capable of further improvement.

The issue here is that the cost of implementing the change to the Inland Revenue Department computer system is $163 million, and, apparently, that has been brought down from $200 million. How much is that? That is one quarter of all of the child support paid in this country for a whole year—for a computer change. One quarter of all of the child support payments is going to the computer programmers and none of it is going to children. That has got to be out of kilter. That is an implementation issue that goes to the Government’s ability to be savvy with taxpayers’ funds. It is not a legislative issue other than that it is provided for in this bill.

The heart of this bill, the stuff that is new, is the treatment of research and development tax losses, a subject that is dear to my heart and to the Labour Opposition’s, recalling that we went into the last election and the one before it promising an across-the-board tax reduction of 112 percent for qualifying research and development expenditure and a change to depreciation rates so that short-life assets like high-tech assets could be written down over a period that was commensurate with their actual life, typically 2 to 3 years, not their on-paper life, typically 5 years. That would have been a tremendous help to the ICT sector.

Instead of that, we have a hodgepodge of non-discretionary grants through Callaghan Innovation, on the one hand, and this sort of retrofitted research and development tax change, which has got KPMG complaining that it does not suit medium or large businesses in its report to the Finance and Expenditure Committee, but, in fact, does not really help small businesses either. The threshold starts at half a million dollars of research and development expenditure, and you have got to be a reasonable sized business to make full use of that.

What is interesting is that in the select committee report there are pages and pages and pages of fine-print consequential changes because this is a dabbling form of research and tax remission rather than a clean, across-the-board research and development tax credit like Labour had proposed. The Government is creating a rod for its own back and, in fact, for every taxpayer’s back who seeks to qualify, because the fine print is onerous—onerous.

None the less, based on the law that it is a step in the right direction and it is going in the direction of trying to support the high-tech economy, we will support the bill, but we are underlining today our reservations that it is clumsy, that it is partial, that it does not do the job properly, and that is exactly what KPMG said about the black-hole expenditure tax changes as well.

It would have been much better to do it properly and across the board. Tinkering sector by sector does not work. Thank you.

ALASTAIR SCOTT (National—Wairarapa): I take issue with what Mr Cunliffe just spoke about when he talked about small businesses. This bill does exactly that—supports small businesses and supports the start-ups that are spending research and development money in their chosen field, often software development, where the business can invest for years and years and years without seeing any revenue, let alone profit. So those small businesses have been at a disadvantage because they have been unable to deduct the expenditure against income like a large business would, because simply they do not have that income.

To make the playing field a level one—I am only talking about this one issue regarding the bill—the small business that invests in this research and development will be able to claim it and receive a refund so that at the end of the day its out-of-tax investment in that project is the same as if it was part of a large business that was able to offset its losses against the revenue. So this bill is very supportive of small businesses, one of a number of bills and legislation that we pass through this House in support of small business every day, and, therefore, I commend it to the House.

Dr DAVID CLARK (Labour—Dunedin North): This is a bill that confirms the 2010 tax changes that this Government made, which have been driving inequality in our country ever since. We are seeing a situation where the very wealthiest New Zealanders are protected and becoming more privileged and more wealthy, and the middle class is being squeezed. The middle class, which once used to prosper and used to think that it could work hard and get ahead, now is being squeezed by the changes that we are confirming here again in this annual bill.

There is a very innocuous—on the surface—little clause in here, clause 65, at the beginning of Part 2, “Annual rates of income tax for 2015–16 tax year”, that reads: “Income tax imposed by section BB 1 of the Income Tax Act 2007 must, for the 2015–16 tax year, be paid at the basic rates specified in schedule 1 of that Act.” If people did not know what that meant, they could just glaze over it because it is a big, fat bill. But that is where we confirm that the changes this Government drove through—to grow that wedge between the very wealthiest and the rest of us—will continue. So that is something we need to observe, something we need to acknowledge that we are doing in this House here today.

Over there, those members want this to continue. They are talking already about driving that wedge deeper, in another set of tax packages, another set of tax changes, that no doubt will be driven towards supporting the interests of the 1 percent, and the 99 percent of ordinary, hard-working Kiwis will miss out once again. Those tax changes in 2010 saw 40 percent of the value go to the top 10 percent of earners in New Zealand, and just 2 percent of the value went to the bottom 20 percent of earners in this country. That little gain for those at the bottom was swallowed up in a GST increase. The Prime Minister, we will all remember, said “There will be no increase in GST. There will be no increase in GST.”, and then, in that 2010 tax package—we are not allowed to call it a lie in this House—he changed his mind. He changed his mind and suddenly lifted GST to 15 percent.

Sue Moroney: He broke a promise.

Dr DAVID CLARK: He certainly broke a promise. I think we can say that. The Prime Minister of New Zealand changed his mind and swallowed up what little benefit that those who were struggling, who were working hard, could get out of that tax package.

And to afford that tax package, this Government has borrowed ever since. This Government has continued to borrow billions of dollars. There is now $100 billion in debt that this Government owes, and that is debt that we as taxpayers carry with us. That is debt that will affect our children and grandchildren. This is the Government, here in this House, that has borrowed more than any other Government in New Zealand’s history. That is because it is borrowing to fund the tax changes that are in this bill that we are confirming yet again in this House. That is a reckless Government—that is a reckless Government.

Instead, the Government could have invested in research and development. It could have supported small business. There have been fewer small businesses created under this Government than under the previous Labour Government. Year on year this Government opposite has failed to create small businesses. It panders to the interests of the very wealthiest New Zealanders, and that is costing New Zealand. In many regions in New Zealand the real median wage is lower than when the Government took office. Six years after the global financial crisis has ended many regions in New Zealand have lower real wages than when this Government took office. That is shameful—that is shameful. It is all because the Government has failed to grow value in this economy. The Government has focused on borrowing, borrowing, borrowing, to afford big, fat tax breaks for the wealthiest New Zealanders, for the very wealthiest New Zealanders.

Let us make no mistake. That is part of what we are doing here today. That is a bitter pill to swallow, because there are some other changes in this bill that need to be made for the security of our tax system. We will be forced, on this side of the House, to support them because we support the robustness of the tax system. But let us not forget that we are swallowing that bitter pill here today because the Government wants to borrow, and it wants to continue to borrow, and to sink New Zealand into a mire of debt to fund the wealthy tax breaks for that 1 percent of New Zealanders at the very top.

We all know that inequality is bad for us. It is a bit of a no-brainer. When kids go to school hungry in this country they do not learn well. They are not going to grow up to be as productive as they would be in this society, to pay the taxes that support the schools and hospitals and roads that we need to get us ahead as a country. When people are making decisions based on desperation, if they have grown up in desperate circumstances, they are much more likely to go and be a money trader in New York, even if they are passionate about becoming a neurosurgeon. They are worried about looking after their own interests because they know how tough it can be when inequality prevails.

You find that when inequality grows, so does infrastructure fail to get invested in. So that is when we see the cutting back in funding for hospitals. We see them pushing out forever the hospital rebuild that so desperately needs to happen in Dunedin. It is on the never-never under this Government because it does not support public health like the previous Government did. The Government does not support it at the real rate of health inflation. It is slowly making cuts to the system, real cuts, that are affecting ordinary New Zealanders’ ability to access health services. And the Government is cutting funding to education. The Government cuts and it cuts and it cuts, to afford those tax cuts for the very, very wealthiest New Zealanders. That is what we see over there.

The Government has failed to grow a high-value economy. Instead it is content to manage decline, and content to see low-value jobs and no jobs at all. We have a stubborn unemployment rate, and that is because employment is simply not a priority. The Government is too busy confirming tax rates that shovel money towards the very wealthiest New Zealanders, at the expense of us all and at the expense of future generations of New Zealanders. We can see around New Zealand that there is plenty of evidence of this struggling. We look at the Government’s own Regional Economic Activity Report that it has just put out. We see that citizens in so many regions of New Zealand are earning below the median wage. I think just about everyone in the South Island is earning below the median wage. There are districts like Otago that would be a billion dollars better off if the citizens there were merely earning the median wage. It is the same with the Bay of Plenty and Waikato. There would probably be a billion dollars more in their economies—certainly a hundred bucks more in people’s pockets per week if they were earning the median wage in those regions of New Zealand.

But the Government does not care—it just does not seem to care. It is focused on shovelling money into pet projects, and into preserving the status quo and preserving entrenched interests. We need a vibrant economy. On this side of the House we believe in things like research and development tax credits that everyone can access, not just the Minister’s favourite few projects, not just those few that he would want to be seen with in a photo opportunity. No, we believe that all New Zealand businesses should be able to access research and development tax credits. We believe that there should be incentives for innovation in this country. We need a high-value, high-wage economy. We on this side of the House are not content to see that situation continue. We are not content to see the lowest homeownership rates in about 60 years, I think it is, because the Government is mismanaging the economy by making decisions like this. The Government continues to make it more difficult for hard-working, middle-class New Zealanders in order to fund the privilege of the very wealthiest 1 percent.

Labour will support the changes in the rest of the bill because we see that the tax system needs to be robust. We need to get rid of the loopholes that emerge. Tax systems need pruning and mending, and on this side of the House we are always happy to be supportive of those kinds of things, of making sure that there is a functional tax system.

We may have our concerns about whether the Government will be able to implement it. Government members have been back to this House many times—many times—to withdraw legislation. They put through child support legislation previously, which would have seen a big a shift in the way things were done, and then they had to come back to the House, at the cost of hundreds of thousands of dollars, to put through legislation because they simply could not deliver on it. The Government has not fixed up the Inland Revenue Department computer system, which should have been fixed up years ago. Several years ago John Key made a Valentine’s Day promise that he would fix it up. He said: “We do not want to be held to ransom by an out-of-date tax system and not be able to make policy changes.” Well, we are there—we are there—because of the Government’s lack of activity. Our country is suffering because the Government has not fixed the tax system. We may be back, fixing things that we are passing in this legislation today, because the Government cannot deliver on them.

The Government is neglecting our economy in the interests of a privileged few. We will support the good changes in this bill, but we will note that there are changes in here that continue to support the privileged at the expense of the 99 percent of New Zealanders who work hard and pay their taxes, as they should.

TODD MULLER (National—Bay of Plenty): It is a great thrill to be able to rise and take a very short call on the Taxation (Annual Rates for 2015-16, Research and Development, and Remedial Matters) Bill and to return to the debate from that verbosity back to the bill itself, and in particular to the research and development section, which I know is going to be of huge interest to the hundreds of information and communications technology businesses that are moving to Tauranga as we speak. In fact, Tauranga was quoted by Diane Foreman as being the silicon valley of New Zealand.

These new research and development tax initiatives will be incredibly welcome—particularly by the loss-making start-up companies being able to cash out all or part of their tax losses from research and development expenditure. That is going to be hugely welcome. These companies will be pouring in and having an opportunity to be able to invest in research and development with this comfort, knowing that they will be able to have appropriate tax losses applied in their case. It is good for research and development, and, aligned with our broader investment in Callaghan Innovation and others, it points to this Government backing business, and backing business where it counts. I very much commend this bill to the House.

Bill read a second time.

Bills

Coroners Amendment Bill

Second Reading

Hon AMY ADAMS (Minister for Courts): I move, That the Coroners Amendment Bill be now read a second time. I want to start by commending our 16 coroners and Chief Coroner on the excellent work that they do in New Zealand. Coroners investigate between 3,000 and 3,500 sudden deaths in New Zealand every year. Many of these involve tragic and difficult circumstances. Despite these challenges and the often intense public scrutiny that comes with the job, coroners conduct themselves with dignity and integrity. They have a critical role to play in our justice system and they carry out those duties admirably.

The Coroners Amendment Bill we are debating today will help improve the roles of our coroners, widening their powers, and making their jobs easier as they carry out these important roles. The bill makes a range of improvements to the Coroners Act 2006. These reforms stem from a targeted review of the principal Act initiated by the previous courts Minister, my colleague the Hon Chester Borrows. The review found that our coronial law was generally functioning well but that amendments could be made to clarify the role of coroners, to ensure their recommendations are better focused and more relevant, and to improve the efficiency of the coronial system.

The bill achieves these aims through a number of ways, and I want to touch on a number of key changes that will improve the way our coroners operate. Firstly, our changes will ensure coronial recommendations are better focused and more relevant by being clearly linked to the evidence before the coroner. In making a recommendation the coroner must show how the recommendation would have prevented the death in question. The coroner must also consult on draft recommendations with interested parties such as families or witnesses before finalising them. This will help ensure that coronial recommendations are more relevant and are more likely to be adopted by those to whom they are directed.

I note that the Justice and Electoral Committee considered and rejected proposals to require those receiving a coroner’s recommendations to respond to them. As the quality and relevance of recommendations improve as a result of this bill, voluntary response and implementation should become more common.

The committee has recommended a change to the provisions governing consultation with interested parties. If the interested party being consulted has not responded within 20 working days, the coroner will be able to assume that they have no comment to make and proceed to finalise the recommendations. This is a positive step. It will prevent unnecessary delays and allow the coroner to proceed with their draft finding, confident that they have given affected parties an appropriate opportunity to comment on the draft recommendations.

Another change in the bill is to remove the need for a public inquest to be held when it is clearly unnecessary, such as when a death in custody is from illness or old age. They of course will still have the ability to order an inquest in any case they feel needs investigation, and interested parties will continue to have the opportunity to request that an inquest be held. Coroners are independent judicial officers. It is important we allow them the freedom to make sensible decisions and ensure that proper oversight remains on the cases where it is needed.

Between 2007 and 2013 there were about 80 deaths in official custody or care for which the Act currently required a public inquest. In nearly 60 percent of those cases the cause of death was known and found to be natural causes. An inquest with a full oral hearing of evidence and witnesses is resource intensive and time consuming. One of the main goals of the Coroners Amendment Bill is to reduce delays in the coronial process and to ensure coronial resources are directed to where they are needed most.

The bill does not remove the requirement for a coronial inquiry to look into the case. This will still be mandatory for deaths in official care or custody but can proceed without an oral hearing. I know that the Chief Coroner, Judge Deborah Marshall, in her oral submission to the select committee welcomed coroners having this flexibility. It is also important to note that when an interested party such as family, medical experts, or witnesses asks to give evidence an oral inquest must still be held. Together these changes will help avoid unnecessary inquests into cases where the coroner considers the cause of death is plainly natural while ensuring appropriate cases continue to receive necessary scrutiny.

Another key change that has drawn some attention is the death of Defence Force staff in hostilities overseas. The bill specifies that coroners may not inquire into deaths overseas of New Zealand Defence Force personnel as a result of hostile action unless the Attorney-General directs an inquiry. This is a sensible and reasonable approach and I am pleased that the committee has recommended continuing with the bill’s proposal. Coroners will still be able to investigate other Defence Force deaths including those not resulting from hostilities or resulting from an accident or suspected suicide both in New Zealand and overseas. Our provision simply avoids duplicate investigations of Defence Force combat deaths, given that these are normally investigated by the Defence Force’s court of inquiry process. It also prevents coroners from considering matters that are not traditionally part of their jurisdiction, such as military tactics, national security, and operational decisions of military commanders in the fields. The provision requiring the Attorney-General’s direction is closely comparable to a similar provision in the Visiting Forces Act 2004, which requires the Attorney-General’s permission before a coroner can inquire into the deaths of visiting service personnel in New Zealand.

The committee has clarified the definition of “hostile action” and specified some criteria for the Attorney-General to consider in deciding whether to direct an inquiry—and I think these changes will be very helpful in practice.

The bill also seeks to ease and clarify New Zealand’s restriction on media reporting of suicides and suspected suicides, which has been in place to prevent copycat suicides. It implements the Law Commission’s recommendations in this area, which were based on considerable research and engagement with experts. Research has shown that certain kinds of media reporting—lurid, glamourising, and method specific—do tend to spur more suicides in the community, especially amongst young people. With New Zealand’s unacceptably high rate of suicides we need to be doing all we can to discourage people from taking their own life while also preserving the freedom of speech of our media.

At present no information about a death that appears to be self-inflicted can be made public until the coronial inquiry is completed. Under our changes if there is reasonable cause to believe that a death is suicide the person’s name, job, and address, and the fact that the death is suspected to be self-inflicted can be made public. Once the coroner finishes their inquiry and finds the death to be suicide, the death can be reported as suicide.

Some may want us to go further and permit all and any details surrounding the death to be published, but I do not want to see the situation in New Zealand that exists overseas where newspapers regularly report suicides in ways that may be likely to be harmful, including publishing photos of sites and gruesome, detailed descriptions of the methods used.

We have worked hard to ensure that the bill strikes a difficult but careful balance between the useful role that positive conversations around mental ill-health can have while minimising the risk of copycat behaviour. The Chief Coroner will also be able to grant an exemption from any restrictions that the bill proposes to retain. A new expert panel convened by the Director-General of Health will be able to assist the Chief Coroner in deciding these exemptions.

The Coroners Amendment Bill will improve the coronial system by making it more efficient and more responsive to the needs of families. I want to thank the Justice and Electoral Committee for its considerations and for the amendments the committee has put forward in its report. The proposed changes are well considered and will help the bill to achieve its goals. This bill builds on a major overhaul of the coronial system introduced by the Coroners Act 2006. Its proposals are practical, well considered, and generally well supported by submitters. I commend the bill to the House.

JACINDA ARDERN (Labour): I want to begin by thanking the Minister for Courts for bringing the Coroners Amendment Bill to the House because, certainly, we could see from the very outset as a party what the intent of the bill was. Obviously, it was in 2006—from memory—that the initial enabling legislation was passed and putting parameters and good guidelines around how we expect the coronial system to operate and reviewing the effectiveness of those mechanisms is just good practice. But we did have concerns that in the attempt to try to narrow the scope of the work that our coroners do that we had gone too far. We did keep a broadly open mind going into this legislation, but, on balance, have concluded that we cannot support the legislation for a couple of key factors that the Minister raised and that I will give Labour’s perspective on.

Just to give that context again though, the initial briefing from the Ministry of Justice outlined that there are about 6,000 deaths reported to coroners every year. Coroners accept they have jurisdiction in about 3,500 of those cases, about 1,300 of those cases lead to the opening of an inquiry, and then about 300 cases are the subject of a public inquest each year.

Just to be really clear on the difference between an inquiry and an inquest, for those who may be listening and may not be clear on that difference, an inquest does allow for a coroner to undertake questioning, allows for there to be a more open and public hearing, and allows cross-examination. And, in contrast to that, an inquiry, therefore, is seen to be, I guess, a less in-depth version of an investigation in that it can be conducted on paper and without those individuals appearing or being cross-examined or questioned. There are, therefore, circumstances where, in our minds, the risk-averse approach would be to opt for an inquest, and, in our minds, that should include deaths in custody, by and large.

So I will cover off the issues where we had the greatest concerns—an area I know that you are very familiar with, Mr Deputy Speaker. The first I would put under the general heading of narrowing what a coroner is able to make recommendations around. So clause 30 of the bill under new sections 57A and 57B, requires a coroner, according to the Ministry of Justice advice, in making a recommendation to show how the recommendation, if implemented, would have prevented the death in question. So it is about making a direct causal link between the recommendation and the death.

That may seem on paper like a perfectly reasonable definition to have for making a recommendation, but let me put that into the context of an example. Say, for instance, a coroner has referred to them what appears, on face value, to be a traffic accident. It has occurred on a dangerous stretch of road where a number of deaths have occurred, and it is found, though, that the individual was intoxicated at the time of the accident. You could therefore say that the only recommendation a coroner could really feasibly make would be to make the recommendation about something around drunk driving, because that was obviously the direct cause of that death as discovered by the coroner. However, what of the fact that there were five or ten deaths on that corner of road? If the coroner cannot determine that that was the direct cause of death, therefore they cannot make a recommendation around a potentially dangerous stretch of road.

That is a little example. But even if anecdotes do not persuade you, I was heavily persuaded by the view of the coroners themselves, who believed that this provision did narrow beyond their comfort levels what they were able to issue recommendations on. That was compelling enough for my colleague Peeni Henare and me on the Justice and Electoral Committee to determine that that was something that we would continue to raise and take issue with.

The second area of concern the Minister has already given some context to, and that was deaths in custody. As she pointed out, according to the advice we received, from memory, we are talking about 60 deaths over 5 years. It may have even been less than that, but it is a relatively small number. Granted, that number will grow, particularly as we now have aged-care facilities, essentially, within our corrections infrastructure, but clause 41 and the replacement of section 80, means that it will no longer be mandatory for coroners to hold an inquest into deaths that occur in official custody or care.

We are concerned that that greater level of discretion, which means that now, obviously, there will be inquiries instead of inquests—we are not arguing that they are being ruled out altogether, but they will be to a lesser degree of investigation—could lead to inappropriate decision-making, less transparency, and, potentially, a loss of faith in the system by family members.

The Minister talked about the amendments that have been made to try to counter that, but it does go beyond just deaths, for instance, in a corrections facility. It could, for instance, apply to a death in a Child, Youth and Family residence. I had someone who worked in the coronial system raise with me a very specific example, for instance. When I issued an Official Information Act request some time ago for reports on deaths in Child, Youth and Family’s care, not all of them were inquests—some of them were inquiries—and that was determined by the nature of those deaths.

But, as a coroner pointed out to me, they had brought before them a death that, by rule, they could have conducted only an inquiry into. It was a suicide-related death, but he decided he wanted to conduct a full inquest, and, as a result of that, he identified that within a tiny, small community there had been a string of related deaths. It was his view that had he not opened up that process that officials and the district health board would never have been aware of that situation. So he saw real value in inquests, particularly when we are talking about those who are involved in State care of some form. So it is our concern and our belief that we need to maintain that higher level of scrutiny where the State has such a powerful role.

Thinking of corrections specifically, I can think of examples where family members have raised with me concerns about deaths that have been explained as being from suicide or natural causes by the Department of Corrections, and, in their minds, they have had doubts over whether that was the case. An inquest allows that transparency. So, again, that is one of the concerns that we have with that provision.

The next issue is of equal significance, and it has been raised repeatedly by Phil Goff as our defence spokesperson. It is the significant shift away from the current role a coroner can play in conducting inquests into deaths in hostile action. The Defence Force went specifically to the Minister and asked for that to be removed. It asked that instead the Attorney-General could simply recommend when they wanted the coroner to be involved in an inquest or inquiry into a death in a hostile action. In our minds, that, again, takes away that critical transparency and oversight of the Defence Force.

The argument that the Defence Force made was that it could reveal important information around security, which could jeopardise the safety of soldiers. It was our view that we should take on board the regulatory impact statement recommendation and the alternative option, which said that you could instead allow the Attorney-General to point out to coroner the circumstances under which they cannot conduct an inquiry but make the default that they still have that role. So it would be reversing the onus from what the bill currently has. In our minds, it would have created much greater transparency and much greater faith in the system.

We are concerned that the Government is creating a closed shop around the Defence Force with these provisions, and we know that that request came off the back of the inquiry by the coroner JP Ryan into the deaths of Private Richard Harris, Corporal Luke Tamatea, and Lance Corporal Jacinda Baker. We do not believe that the Ministry of Justice should have listened to that request from the Defence Force and we are disappointed that it has.

My final concluding remarks are that a coroner’s recommendations are in-depth, they should be listened to, and they should at least be responded to. We will be putting up a Supplementary Order Paper to make that simple request, because it has been suggested by coroners that it is a flaw in our system that you are not required to respond to a coroner, and you should be. I hope that members of this House will at least support that Supplementary Order Paper, because it put forward in good faith. Thank you.

JACQUI DEAN (National—Waitaki): In speaking to the Coroners Amendment Bill, and noting the comments made by the speaker who has just resumed her seat, Jacinda Ardern, I can say that the issues that were raised by that speaker were well-canvassed during the select committee consideration of this bill. I am satisfied with the advice that we received from officials, and we certainly looked into the issues that she raised in some depth and with a great deal of care. I am satisfied that the bill that has been returned to the House has got the balance right in terms of the rights and responsibilities of coroners.

It is to be remembered that at the heart of this legislation there are going to be grieving family members, and that grief is a force that remains raw and open until yet another milestone is achieved by the family and those left behind as the result of a death—until a finding has been made by the coroner. Previously, and up until now, those findings can, in fact, take a considerable amount of time—years, in fact—and for those family members, each time that that unexplained death, or sudden death, or death as a result of an accident is brought up again, either in the media or perhaps in a piece of correspondence from the coroner’s office, those wounds are reopened once again. I think that the committee, across the House, understood that concept very well. I regret that Labour cannot see its way to supporting this bill because, despite the matters raised by the previous speaker, there was broad agreement on the fundamental provisions of this bill.

I am not going to go through each clause; there are a number of speakers on our side of the House who are very well-equipped to make comment on different aspects of the bill. However, there are a couple of aspects that I wish to touch on this evening. I think one of the main provisions of the bill is that it aims to improve coroners’ recommendations by requiring their comments and their recommendations to be very specific to the case in hand and specific to the evidence before them, and to be very clear about how those recommendations would reduce the likelihood of future deaths in similar circumstances.

In talking to that point, the committee gave some care to the matter of suicide reporting. The Law Commission made a number of recommendations to improve and also to simplify the legislative restrictions on suicide reporting. This bill picks up on those Law Commission recommendations. The current restriction on suicide reporting is quite broad. There are variations about how suicides should be reported. Social media has changed the landscape of how suicides are reported. The New Zealand judicial system has no influence over the reporting of suicides overseas or offshore.

The concern for all of us, including the committee, is that there needs to be a balance between preventing harmful reporting, which may give rise to copycat suicide episodes, and enabling enough reporting to note that an event has occurred. The last thing that any piece of legislation would seek to do is enable or encourage copycat behaviour, particularly by vulnerable young people. We believe that the changes to this bill strike a good balance in that regard. There is a restriction around the publishing; the method; or the site, if it suggests the method of the suicide, it will be prohibited unless the Chief Coroner grants an exemption in that case. This is based on international evidence that strongly suggests that the reporting of these details gives rise to copycat behaviour.

I want also to acknowledge the submitters who came to the committee and made, in some cases, some pretty heartfelt submissions on this Coroners Amendment Bill—in particular, Mr and Mrs Still, whose daughter died in the hot-air balloon accident in the Wairarapa. Their submission was very strong, and they submitted that the bill should require coroners to advise family members at the scene of the death of their rights under section 25 of the Coroners Act. Those rights are around viewing a body and touching or remaining near a body in the coroner’s custody. For a number of families in New Zealand, it is of utmost importance that they have access to their loved one whilst in the coroner’s custody.

In the particular circumstance that Mr and Mrs Still brought to the committee, around the balloon crash in the Wairarapa, we looked very carefully at that incident, but we determined in the end—and taking advice and after much discussion—that there was no legislative remedy for it. It was a particular set of heartbreaking circumstances to them. Although Mr and Mrs Still asked for legislative change around their particular set of circumstances, the committee did not recommend any change. However, we wish to convey again our heartfelt thanks to them for their courage in coming to the committee to make their submission and to say to them that they were indeed heard and that the committee and this Parliament considered their request, but, regrettably for their particular circumstances, we could not find a remedy in the legislation.

In closing, I want to thank members of the committee for their careful consideration of this bill. I think that it makes great improvements to the coronial system in New Zealand. My regret is that it is not fully supported in the House, and we will explore that further as this bill goes through its passage in the House. Thank you.

ANDREW LITTLE (Leader of the Opposition): I take a call on this, the Coroners Amendment Bill, because of my experience in representing the families of dead workers in coronial inquiries. I just note, by way of summary, what a missed opportunity this is to do something long overdue but also very important to the powers of coroners and the conduct of coroners’ inquests. Coroners occupy a very special place in the panoply of judicial inquiries into deaths. For many families of loved ones who have died suddenly or in an otherwise unexplained way, this is the opportunity to at least get to the bottom of what has happened and get some sort of truth.

Coroner’s courts are almost entirely dependent on the investigation that the police conduct around the sudden or unexplained death. The bulk of the evidence that goes before coronial inquests comes from the police. But every now and again family members want to bring their own evidence, or other parties to the inquest want to bring their own evidence, and that is very important. But the reason they do that is they want the coroner not only to make a thoroughgoing inquiry and get to the truth of the matter behind the death but often to make some recommendations that will either help others—whether it is a workplace death in the same industry; or a traffic death, to help other drivers; or a death that has been particularly distressing, to help other families who may, at some point in the future, go through the same thing.

But what has happened to this bill, having been through the Justice and Electoral Committee, is that the opportunity to give coroners and coroner’s courts the opportunity to come up with recommendations and make them powerful and binding—that opportunity has been passed up, and that is extraordinarily disappointing. So when the previous speaker, Jacqui Dean, expresses her disappointment that Labour cannot find itself able to support this bill, there is a very good reason, and that is that for those for whom the coroner’s inquiry is the last port of call to understand what has happened to their loved one, or their workmate, or their friend, denying a coroner the opportunity to make a binding recommendation, to require follow-through on their recommendation—a recommendation that the coroner generally believes will either prevent future deaths of a similar nature or help others—is what is more disappointing. That is where the Government has failed. It could have made that change, but it has not.

I think the obvious question arises as to what the point is of allowing coroners—as it will under this bill, if it is passed in its current form—to make some sort of recommendation, if there is no power to require those to whom it is made to have to comply with it, or at least account for whether or not they fulfilled it or have not fulfilled it and to explain why. When we look at clause 30 inserting new sections 57A and 57B, we see that what has happened is the power to make recommendations has actually now been further restricted. The coroner has to meet this test that any recommendation has to be accompanied by an explanation of how the recommendation or comment, if drawn to the public attention, reduces the chances of further deaths occurring in similar circumstances. Well, you cannot guarantee that. No one can be sure about that. A coroner may well come across a circumstance or a factor that is very important; it may not reduce deaths in that particular circumstance, but it may reduce the possibility of deaths in comparable or similar or even other circumstances. Why should they be deprived of making a recommendation in that regard? That is why this starts to look like a kind of a clamping down on coroners, who sometimes can make recommendations that are irritating to Governments. If that is the basis on which this power, the power to make recommendations and comments, has been restricted by this Government, then it reflects very poorly on it.

I think of one very important recent coroner’s inquiry, and I refer to it because it meets the description I talked about before, of the last port of call for people who otherwise would not have had the opportunity to explore and investigate the deaths of their loved ones. That is the coroner’s inquiry into the deaths of the eight people who survived the initial collapse of the CTV Building in the February 2011 Christchurch earthquake but who died during the course of the rescue operation and before they could be rescued—because what is pretty apparent to those families is that the conduct of that recovery and rescue operation was a shambles, and may well have been the cause of those deaths.

The Government has refused to conduct a commission of inquiry into exactly what happened during the course of that rescue and recovery effort. It simply would not allow it to happen. It did not want to expose the authorities involved to that examination and that inquiry. The only recourse the families had was to the coroner’s inquest. The coroner did his level best, and the coroner made some recommendations, but, of course, they do not mean anything, because there is no power to enforce them.

There is no power under the current law to require any organisation to which or about which a recommendation is made to follow through or to comply with that recommendation. That glaring gap, which we know is there now, has not been repaired by this bill, and it could have been. That is the disappointing thing. So I urge this House, as we go through the remaining stages of this bill—we will get to the Committee stage and we will put up some Supplementary Order Papers—to think very carefully about having a coroner’s inquiry and a coroner’s court that can do the job that people demand of it: to get to the bottom of why particular deaths happen and to make effective and binding recommendations as a result.

The coroner’s court is one of the oldest sorts of courts of judicial inquiries we have. It goes back to medieval times. It used to be a part of the church because the church wanted to be sure that the body that was going to be buried in the church cemetery had not arrived there as a consequence of evil purposes. It had to be established, for death that could not be explained, that the death could be explained and that it was right and proper that the person be interred in the local cemetery of the local village church. That is the origin of it.

It has come, of course, in the modern world to acquire a more important significance, and is now seen as part of our judicial system, which is why it is judicial officers who conduct the inquiries. That is largely because we do want to get to the bottom of the facts, and when there is conflicting information we want to make sure those conflicts are resolved—but also, when there are recommendations or comments to be made that could prevent other deaths, that those comments are then on the public record. That has been the case for a long time, but where we have not succeeded is in ensuring that those recommendations are followed through and are made meaningful.

I will just conclude by urging the House to make sure that, as we continue the passage of this legislation, we understand what it is that the loved ones of those who die in difficult circumstances want to know: that the background and the nature and the cause of the death is understood, and that it can be prevented. In the case of suicides, coroners need to be able to make recommendations, particularly to authorities. They may be about better recording or reporting, they may be to the local district health board about better treatment, and they may be about the management of staff. Why should they not make those recommendations? Why should the authorities, about whom coroners make those recommendations, not be required to demonstrate to the public—and at the very least to the family whose loved one’s death has been inquired into—that those recommendations have been heard and have been either made good or very good reasons for why they cannot be followed through have been made clear to the public and the community?

JONO NAYLOR (National): I think that this bill reinforces Parliament’s role in continuing to improve and refine the processes that the Parliament initially establishes. We know that the Coroners Act was put in place in 2006, and, like all legislation, we cannot simply let legislation just sit on the books forever and a day and not look to improve it or have better processes in place. This is what this bill does.

Following the last speaker, Andrew Little, I do just want to reassure the House and reassure any members of the public who are listening that our loved ones and family members are very much at the centre of this bill and what it is that we are trying to achieve. Behind this bill, the provisions within this bill are all about speeding up the coronial process. It is about making this less traumatic for family members in particular.

For family members or for families who have lost somebody through an accident, through a traumatic event, it is a very traumatic time. So when people are having to wait 400 days, or perhaps 700 days, for the outcome of a coronial inquiry or inquest, that is long time for people to wait before they can have closure. This bill absolutely and utterly looks to speed up the process, because family members—those who have lost loved ones—are absolutely at the forefront of what we are trying to achieve here. The potential is for victims to be revictimised at times by processes, and we want to make sure that the coronial process and the length of time that it takes in no way draws that process out any more than it needs to be for those people.

I want to acknowledge a number of the submitters who came to the Justice and Electoral Committee. They were very brave, in that they came and shared their own stories with us. That is not an easy thing to do in a public setting, and I think it was very valuable for us as a select committee to hear from them and to be able to acknowledge some of the difficulties that they have faced through the traumas that they have suffered. I think it was really helpful to us as a select committee, and I just want to acknowledge those families that came forward and shared their stories with us. We also heard from organisations like the New Zealand Medical Association, which, of course—because this is good legislation—was very supportive of the bill. That was positive for us.

There are a couple of aspects that I want to just briefly touch on. One is the removal of the requirement for there to be an automatic inquest if somebody passes away while they are in the custody of the State. A coroner still can conduct an inquest—they are not barred from being able to do this. They still can undertake an inquest where they think it is required. For example, if you have somebody who has been in prison for a long period of time, and perhaps they have contracted a terminal illness of some description, and then they clearly die of natural causes, I think we would all agree that it is pointless to go through the full formal inquest process. This gives coroners that ability to not go through that process where it is simply unnecessary.

Finally, I just want to touch on the new restrictions around suicide reporting. I think we would all agree that the suicide rates in New Zealand are far too high, and so it is beholden on us, where we can, to put things in place that will limit triggering people, in terms of copycat behaviour or otherwise. Under this bill, publication of the method or the site—if it suggests the method of a suicide—will be prohibited, unless the Chief Coroner grants an exemption. This supports international evidence that says this type of reporting, if it is not done properly, can lead to copycat behaviour.

In conclusion, I just want to say that I am really pleased with the way that this bill has come together. I think it is going to make things more practical going forward for the coronial service, and I think it is going to better serve the needs of those New Zealanders who have suffered the traumatic loss of a family member. I commend the bill to the House.

DAVID CLENDON (Green): Thank you. I am pleased to take this call on the Coroners Amendment Bill. I sat in on the Justice and Electoral Committee, and it was an interesting committee. I think we did some good work there. It was challenging. Not having had any background in this area at all, I had a lot of misconceptions, I discovered, about what coroners do, and I suspect they might be shared by a lot of other people. But over the course of the bill I, certainly, and I am sure others, found out a great deal about the day-to-day work of coroners, the demands that are placed on them, and their roles and functions. As was just noted, the last significant amendment to the legislation was in 2006. That was a considerable change, not least of all I think in making coroners full-time judicial officers, which prior to that they had not necessarily been. But it certainly seems timely to have another look at this.

The committee was at times very difficult. We dug fairly deeply into the whole issue of suicide in New Zealand, and that is obviously a major, serious problem for us as New Zealanders. We heard from people, again as has been mentioned, who had lost family members in the most tragic possible conditions—accidents with multiple victims, those sorts of things. So it was somewhat gruelling, and I just reflected on that—that the coroners are confronting these sort of issues every day of the week, literally. It is a 24-hours-a-day, 7-days-a-week, 365-days-a-year service.

There are 16 of them spread around the country, and I suspect that that is not sufficient. I had a conversation with a couple of coroners, and what came through was a sense that maybe we are stretching them rather too thinly, that we ought to appoint another two or three, and certainly that the coroners who are there could usefully be given more administrative support. I do not think that the budget implications would be massive. I am sure they would not be, but it might just take some of the pressure off what is a very demanding, difficult job. Coroners hear something like 3,500 cases a year. That can get to around something like seven, eight, or nine reported cases a day that the coroners need to deal with at some level. So I do think there is a case to be made to increase the capacity there, to make sure that it is an effective—and, critically, that it is a sustainable—service.

In the course of the committee process, we looked at some of the key relationships that the coroners have—initially, with pathologists. There was some debate about whether or not pathologists had sufficient leeway to engage with families of people whose loved ones had passed away in whatever circumstances. The outcome was that they will still be required to go through the coroners in terms of engaging with families. I think to me it highlighted that it is a very strong and a very professional relationship that exists between coroners and pathologists. But I think others on the committee shared the view that maybe at the collective level—at the association level—there seems to be some tension between those two groups, and maybe that is something that could usefully be addressed and perhaps resolved.

We talked and discussed and found out a bit about the relationship between coroners and the police. Coroners, of course, do not have any independent investigative resource; they do rely on police to do the investigations, obviously. There was a little bit of a consideration of the boundaries, if you like, or the limits to the coroner’s ability or rights to direct police to undertake an investigation. There was a bit of to-ing and fro-ing on that. I think the outcome was quite good: that the coroner can, and undoubtedly will, direct police to undertake investigations. If the police believe that is unreasonable or unnecessary—if they are not happy with it—they may appeal to their commissioner who in turn will engage in a dialogue with the Chief Coroner. I think, again, that is quite a positive outcome. Sadly, I suspect we might see more of that. I say that with the utmost respect for the New Zealand Police, but, sadly, Police is being underfunded, it is being stretched beyond breaking point. That matter alone—that reality alone—could cause it on occasion to start perhaps questioning whether it wanted to pursue particular cases on behalf of the coroner. One would hope that would remedied sooner rather than later.

The issue of deaths in custody was one that we had serious concerns about going into the conversation at the select committee. Again, as has been said, and as you know, currently any death in custody must be subject to a full inquest—an inquest is mandatory in those circumstances. The proposition that there could be some discretion around that raised some serious alarm bells for us. Frankly, we do not have sufficient confidence, particularly in corrections to get it right, and we thought that it was important that the coroner would, as a matter of course, always conduct an inquest.

We were sort of discouraged from that point of view, in part by the submission from the Chief Coroner herself, and conversations with coroners. In part because of some unfortunate changes over time to sentencing law, the reality is that we are going to get more prisoners, older prisoners, and people who are in prison who suffer diseases—cancers or whatever it might be. Prisoners as a group have very poor health. A 60-year-old inmate who has been in and out of prison for a lot of their life is a very old person in terms of their general health and well-being. So we accept that, on balance, the coroner’s discretion is appropriate. They saw no point in imposing an inquest where there was a history of ill health, and we accepted that.

We did get considerable change in the language. Initially, I think, the wording of the original draft of the bill said that the coroner could only demand an inquest in those circumstances if they were satisfied there had been some negligence or some misconduct contributing to the death. It seemed odd—almost that you would need to do the inquest to discover that, even in itself. So that has now been turned around to say that there will be an inquest, or, rather, that the coroner’s judgment will turn on the question of would a medical practitioner reasonably have expected the death of that person, given knowledge about their health status and health records? That seems to us to have landed in a pretty good place. My own view is that the coroners will, if there is the least doubt about the cause of the death, go to an inquest. I think we have to have some confidence in them, but at the same time it is something we will continue to monitor to see if these cases do arise where perhaps there is that much grey area that inquests ought to be carried out that have not been.

The point has been made that there is another safeguard: that any other interested party to an inquiry can initiate a full inquest by request if they have concerns that something is not coming to light that ought to come to light. I think that issue particularly is pertinent at the minute to deaths in custody, as we see the phenomenon of private operators of prisons coming into the landscape. There are just too many perverse incentives around the issue of deaths in custody for us to have any particular comfort around what happens. I think we cannot but be alert to the possibility that deaths in custody are something that we need a lot of transparency, a lot of accountability on. As I say, I think this bill has landed in around the right place, given that we can have significant faith in the coroners themselves to pursue this matter.

So we spent a fair bit of time delving into issues around suicide, and suicide reporting particularly. We had one very animated—I would describe it—submission that proposed that there should be no restrictions on the media in terms of reporting on suicides. That did not win any favour. I do not believe, frankly, that the media has earned the right to be trusted about issues of reporting suicides. There would be simply too much temptation, I think, to glamourise, to make celebrities, to simply make reporting that was unhelpful. So, again, the proposition that the media can now make comment that a death is a suspected suicide, in advance of a finding to that effect, I think is reasonable. We all know there are certain codes and meanings within meanings that legitimate reporting can use to indicate that it was a suicide. The absolute prohibition on describing place of suicide, if the place could indicate the method, or, indeed, the method itself—I do think those are useful and necessary restrictions on the media. I think that that will present about the right outcome.

I mean, I must comment—living in Northland, youth suicide in particular has reached what has correctly been described as epidemic proportions. It is a very real, very serious, and very troublesome matter, and I think that we have to constrain the role of the media in that very carefully, frankly. And I think this bill does get to that place. So I will leave it there, and look forward to the Committee stage of this bill.

DENIS O’ROURKE (NZ First): I want, first of all, to acknowledge the work of the Justice and Electoral Committee. It was a very good process, with some excellent submissions and some good work also provided by the departmental officers, and good input, in addition, by the Defence Force.

It is not an easy bill because there is a need to balance public and private interests throughout it. First of all, there is a need to balance between avoiding unnecessary inquests and the need to ensure full transparency. There is a need to balance freedom of the media to report deaths and their circumstances without sensationalising deaths or encouraging copycat suicides. And there is a need to balance the need to inquire into deaths in State custody with the need to avoid pointless inquiries, where some discretion can safely be used to avoid them. There is a need to balance independent inquiry into deaths of defence personnel in all circumstances where the deceased was not in a hostile action situation and to allow a discretion to be exercised where the death was in a hostile action situation, so that the need for independent inquiry can be balanced against the need for protection of the national interest. Some submitters do not always properly address the need for those balancing exercises to be done, and we in New Zealand First have done so. Although not agreeing with every aspect of the bill, we will continue to support it at this stage.

I want to address some key issues: first of all, coroners’ recommendations, which are obviously at the very heart of the legislation. New section 57A in clause 30 applies a new subsection (2), which says: “Recommendations or comments may be made only for the purpose of reducing the chances of further deaths occurring in circumstances similar to those in which the death occurred.” And new subsection (3) would impose further restrictions on recommendations or comments, especially in paragraph (c), which requires an explanation of how the recommendations or comments may result in a reduction of deaths. I initially had some reservations, as the Labour Party did, about those provisions, which did appear to be highly restrictive. However, I have now considered those provisions, in relation to section 57B, which requires notification of those people who are affected and gives them time to respond, and which I think provide a counterfoil to their restrictions in new section 57A, so that the balance that I spoke of has really been achieved. So I am now satisfied that those provisions are appropriate.

The remaining issue, however, on that subject is whether it should be mandatory for consulted agencies to respond. New Zealand First will support any amendment that may be sought during the Committee stage to make it mandatory, because we think that coroners’ recommendations and comments are already far too often ignored and it is time to make them mandatory.

Regarding deaths in hostile action, the current Act gives coronial jurisdiction for deaths of defence personnel regardless of circumstances in addition to the court of inquiry process, and that process also has a safeguard in that it is itself subject to an external legal review panel to be conducted by a Queen’s Counsel. But under this bill the coronial jurisdiction will continue where the death does not happen during hostile action. The select committee’s changes to the new section 59A(2) and (3) in clause 32 will operate to protect the national interest by preventing an inquiry where the coroner determines the death was caused exclusively by the hostilities during hostile action and not otherwise. But the section allows coronial inquiry into deaths during hostile action too, but only if the Attorney-General decides to direct it.

Phil Goff wanted instead for that section to always allow such an inquiry unless the Attorney-General prevented it. The difference is significant but I think not so great as to cause much practical difference in the end, provided the Attorney-General acts professionally and not politically, and we in New Zealand First expect, and accept, that that would be the case. So, as I said, I do not think the difference in practice would be very great. I would also point to new section 59A(4A), inserted by clause 32, which sets out the matters the Attorney-General must consider, and I want to read them out because I think they are important. They say that those considerations are “(a) whether the investigation or inquiry is likely to identify the cause and circumstances of the death; and (b) whether the investigation or inquiry could reveal information that may prejudice the security or defence of New Zealand; and (c) whether the investigation or inquiry is likely to examine military tactics; and (d) whether a court of inquiry has been, or will be, assembled …”, and so on. So for those reasons, New Zealand First is satisfied that the need for independent inquiry is properly balanced by national interest considerations.

Turning to inquests into deaths while in official custody, these, understandably, caused some disagreement in the select committee and also some interesting submissions. However, new section 80 in clause 41 will mean that coroners must decide whether an inquest is needed, rather than that being automatic, and, in doing so, the committee has added a new requirement in section 80(2), which says—again, something quite important—“(a) the death was a death in official custody or care and the death would not reasonably have been expected by a doctor who had access to the person’s health information (as defined in … the Health Act 1956): (b) an inquest would assist the inquiry into the death by providing an opportunity for persons who have not been involved in the inquiry to—(i) scrutinise evidence considered by the coroner as part of the inquiry; or (ii) offer new evidence in respect of the death.” So there is no need for all deaths in custody to be subject to an inquest. Most arise from natural causes, there are proper balances in the legislation as proposed, and in the end we do have to trust the coroner’s discretion, and I agree with David Clendon about that.

Another area of difficulty was the law concerning the reporting of suicides, and that is an important area because it is all too possible for the media to sensationalise things. New section 71 in clause 38 is welcome and necessary. It says that a death that is self-inflicted cannot be reported and that no person may make public the method of the death or the place—if that is relevant to suggesting how the death occurred—or describe the death as a suicide. Those things are all important if we are going to try to suppress suicides and not encourage them in New Zealand. There are provisions for exemption that I think are also appropriate.

Finally, I note with approval new section 116A, inserted by clause 52, which establishes a suicide and media panel to advise the Chief Coroner on applications for exemptions. Those are important matters, and, again, I think the balance has been properly achieved. There are many other important changes made to the principal Act; there are far too many to go through in a few minutes on the second reading. However, on balance we in New Zealand First think that the bill makes some significant improvements, that it largely achieves the appropriate balances that I described, and that it does deserve support, so New Zealand First will continue to vote for it.

ALFRED NGARO (National): I rise to take a brief call on the Coroners Amendment Bill in its second reading. I do want to commend the Minister of Justice and her leadership, and also the select committee, which I am a part of—the Justice and Electoral Committee.

In my speech I want to cover off some other areas of the process and who some key stakeholders are who were involved in the bill. The reason behind that is that the integrity of the process was important to ensure that we had all key stakeholders actively involved. The Ministry of Justice wrote to approximately 168 key stakeholders seeking feedback on the current system, and received 49 submissions from Government agencies, professional stakeholders’ groups, iwi authorities, and some interested members of the public. This information was important while we were amending the Coroners Act.

We know that there are 16 permanent coroners, and, obviously, the Chief Coroner, who plays quite a critical role in their main function: to oversee the coronial system to ensure that the inquiries are conducted in an “orderly and expeditious” manner. That really is the heart of this bill, because we know that many times families have grieved because of the process. Coronial inquiries, on average, are around about 400 days. If there are other investigations, that is around about 700 days. That is a very long time—that is the feedback we also received, so we thought it was important that this bill ensured that we have that in place. I know that other speakers have spoken about those parts of the current bill, with its amendments, that are important.

In regard to a couple of those, the consultation provisions allow, for all key stakeholders who are interested, that they must make some form of an inquiry or an application to that within 20 working days. Otherwise, that allows for the coroner then to be able to expedite that process to come to an end as well.

The other amendments that I think are also important are around removing mandatory inquests. We know these are costly and, again, in cases where there are deaths either in custody or in care, over 60 percent of those are known to be from natural causes. We believe that by removing the mandatory provision, this allows the discretion for the coroner to ensure that where it is proven that the death has happened through natural causes a mandatory inquest will not prolong the process.

I want to commend this bill to the House. I believe that the select committee has worked hard to ensure that we have a true balance in the areas of concern and need. I commend this bill to the House.

The ASSISTANT SPEAKER (Lindsay Tisch): The next call is a split call. Kevin Hague—5 minutes.

KEVIN HAGUE (Green): I want to begin by saying that I was not a member of the Justice and Electoral Committee, which considered this bill, but it strikes me, listening to the contributions in this debate, that the select committee has made a good job. I pick up on Denis O’Rourke’s point about the various balances that are needed to be struck by the select committee, and it does seem to me that those have mostly been struck in the right places.

I want to start with a point that my colleague David Clendon made in relation to the stretched roster of coroners that we have. My experience with coroners has generally been an extremely positive one. I think they do a fantastic job, and I am going to come to one or two of those points in a moment, but it does strike me that we are at risk of under-resourcing this excellent network. That is obviously a problem from several perspectives. One is simply the fact that if we do not have enough coroners or if they are not properly resourced, it will be difficult for them to do their work. But the particular relationship that that fact has with this bill is that one of the areas that this bill changes the principal Act in is to move us away from routine inquests, routine inquiries, into the causes of deaths, and to bring in more discretion in those cases that have been well canvassed in this debate tonight—deaths in custody, in State care, and on certain aircraft or ships in the military.

Where discretion is introduced into those situations I agree with my colleague David Clendon that we can rely on the professionalism and the discretion of coroners to make good judgments about that, but what if it is a line call? What if it is a line call and the resources are constrained? I think it would be a situation that we really must avoid—getting into that position where, because of that constraint of resources, coroners will err on the side of not investigating a death when actually, if resources were not a consideration it would have been investigated. So that is just a little niggle in the back of my head.

I was a submitter to an inquiry that Coroner Mātenga undertook several years ago into a series of five deaths of people who had been riding bikes and who had been killed in collisions on the road. That is a really excellent initiative from Coroner Mātenga. It has led to a panel of experts being convened, which, again, has led to some pretty great recommendations for improving road safety. Again, this issue of resource constraint on coroners bothers me, because if we do not fix this—and maybe this bill is an opportunity to do that, in the Committee stage—then that sort of inquiry may not be held in the future.

The area I have the most expertise in is this area of self-inflicted deaths, or suicides. I have had to try to manage several situations of cluster suicides, and so I have been deeply nervous about the calls from the media to be able to publish more details about suicides that have taken place because I am familiar with the evidence about copycat suicides. So I reluctantly accept what the select committee has done by allowing the fact of a suicide to be reported, basically because I note that the media has already had created a code. Whenever we read now that there has been a “sudden death”, we all read that as a suicide, so, in fact, we do not prevent that risk of copycat suicides by having the current prohibition. I think the select committee has struck a sensible balance, and I am very pleased to continue to support this bill.

The ASSISTANT SPEAKER (Lindsay Tisch): I call Poto Williams—5 minutes.

POTO WILLIAMS (Labour—Christchurch East): Tēnā koe, Mr Assistant Speaker. As members have heard before, Labour is not supporting this bill. I want to talk a little bit about what the role of the coroner—[Interruption]—this is a serious matter—is actually about. It is in the event that a doctor is unable to certify the cause of death, the coroner is there to establish how that death occurred and also to work out whether anything can be done differently to prevent similar deaths in the future. If that is the case, it is their duty to make recommendations. To quote from the Coronial Services of New Zealand website, the coroner “speaks for the dead to protect the living”.

Really, their role is to establish the cause of death—whether it was accidental, whether it was natural, whether it was because of misadventure, or whether it was at the hands of someone or some people. Where those deaths were preventable, their role is to think about the possible mitigations, remedies, and opportunities to ensure that those deaths are prevented from happening in the future. Also, it provides impetus for us to look at health and safety and employment practices to ensure that we are as safe as we can be when we go to work and that we return home safely to our families at the end of the day. And, most important, the role of the coroner is to provide the family of the deceased with some certainty.

The Justice and Electoral Committee has returned its report, and one of the discussions that it had relating to clause 30 talked about the response to the coroner on the coroner’s recommendations. With the insertion of new sections 57A and 57B in clause 30, the agency that has been subject to that consultation may choose to respond to the coroner, but many of the submitters—and some of those who sat on the select committee agreed with the submitters—said that in order to give full effect to the coroner’s recommendations, it should be mandatory for those consulted agencies to respond, whether that is by indicating how the implementation of the recommendations will occur or by providing reasons for the refusal for that implementation. In her submission, the Chief Coroner, Judge Deborah Marshall, made the comment that “the Amendment Bill should include a clause to provide the legislative basis for ‘mandatory responses’”. She submits that those sections that I have referred to should “be amended to state ‘the proposed recommendation or comment must be responded to by those persons or organisations within 21 days of the notification of the recommendation.’ ”

Secondly, what information should actually be reported in that recommendation? Again, I look to the submission made by the Chief Coroner, where she submitted that new section 57A(3) should be amended to read either “ ‘(a) be clearly linked to the issues to which the inquiry relates’; or ‘(a) be either: (i) clearly linked to the factors that contributed to the death … or (ii) considered necessary by the coroner in order to prevent deaths in similar situations’ ”.

Here we speak to situations where the cause may be one thing but where there are underlying factors that should be exposed to public view in order to prevent deaths in the future. My colleague Jacinda Ardern referred to a road death that may have been caused by the driver consuming alcohol, but where, on further investigation, there had been several accidents in that area. That is useful information to prevent future deaths.

Lastly, I just want to refer to new section 80 in clause 41, which we have some discomfort about. When a death occurs in custody, the first response to that by the coroner should be an inquest rather than an inquiry. An inquiry can sometimes be a review of papers, whereas an inquest can seek evidence and require people to appear before the coroner. Cost should not be the factor that determines whether it is an inquest or an inquiry. Thank you.

ANDREW BAYLY (National—Hunua): It is a pleasure to be talking in the second reading on the Coroners Amendment Bill. I have not been a member of the Justice and Electoral Committee, but I have got to say that this is a very important bill. I recognise that the bill is about improving the coroners’ recommendations by requiring them to be specific about the case and the evidence before the coroner and how they would reduce the likelihood of future deaths.

The bill really has a number of important things, and I do note in my background reading that, unfortunately, there are about 30,000 deaths a year, of which the coroner is involved in investigating about 6,000. So it is a very important role that the coroners undertake in New Zealand. The other changes in the bill that I found quite fascinating, firstly, were around the level of consultation. I think it is a really good provision that the coroner has got the right, after 20 working days, to actually proceed and finalise their coroner’s report in the event that the third party has not responded. Secondly, it removes the need for the coroner to investigate deaths when they occur in official custody, and I think that is appropriate.

The one around the Defence Force—and a number of speakers have spoken about that tonight—obviously, it removes the need for coroners to investigate when deaths happen overseas. I do note that the select committee did make changes and refinements around the definition of what a hostile action actually means, and I think that the tightening up of that clause is very good. Fourthly, the dispute mechanism involving the Commissioner of Police and also the Chief Coroner is a good mechanism. Finally, in respect of the sensitive area of suicides, the bill formally prohibits the publication of any information relating to a suicide.

On that basis, I commend the bill to the House.

PEENI HENARE (Labour—Tāmaki Makaurau): Tēnā koe, Mr Assistant Speaker. Tēnā tātou katoa. I rise to take a call in the second reading on the Coroners Amendment Bill. I was and am fortunate to be on the Justice and Electoral Committee, which looked into this particular bill. As already mentioned by my colleagues this evening, it is with reluctance that we will not be able to support this particular bill, and, may I add, it is through no lack of effort—it is through no lack of effort. Other members on the select committee, I am sure, will be able to testify to the amount of good, robust debate that went on in the select committee.

If I may just digress very slightly but still keep on the topic at hand, it was actually during our consideration of this bill in the select committee that my father passed away unexpectedly here in Pōneke—in Wellington. I have got to be honest and say that for the majority of New Zealanders who are not directly affected by this particular process, it is a foreign one. But through my work on the select committee and the tragic circumstances that fell upon my whānau, it was interesting and important to gain an understanding of this particular process firsthand. I want to acknowledge that, as it was not that long ago.

But we entered into a lot of robust debate in the select committee. Colleagues across the House have mentioned some of those aspects, and I want to pick up on some of the ones that Ms Ardern and my other colleagues have mentioned this evening.

Before I carry on, I do want to also echo the sentiments made by many members across the House in acknowledging those who came to submit in front of the select committee. There were some very heartbreaking submissions, there were some that were actually more practical, and there were also some that seemed rather silly, in that the process had not been made a bit easier for those submitters throughout the tragic circumstances that involved their use of the coronial system.

The undertaking of the coronial system—it is important for the mind of our nation that it is robust and promotes consistency and timeliness. The papers here in front of us all talk about the need to rid the system of some of the red tape, if you like, and in particular the duplication that takes place when going through the coronial process.

But I want to touch on the point made by my colleague Mr Naylor around the consideration of the committee. At all stages, it was commendable that whānau and families were placed at the forefront of our thinking when it came to the submissions and also our considerations on the bill. I want to pick up on the words of my colleague Ms Ardern in relation to the debate and discussion around the Defence Force, and I want to acknowledge the Hon Phil Goff, who attended that particular sitting of the select committee. With his in-depth knowledge and expertise, he came to bring a case on behalf of some of the families with whom he has had contact in the past—and those families have been named this evening. He gave very good input, and it was cause for some solid debate within the select committee.

I do express some concerns. Ms Ardern, in particular, did a great job in raising this particular point, but I want to bring up some of the points raised by the Hon Phil Goff in that select committee. It is important that when we consider the plight of some of our families who are dealing with the loss of their loved ones while serving for the armed services, we consider what they are going through. He raised some important points about the long, drawn-out process and the lack of transparency around the process that the families had to endure, and those are some of the concerns that we have with that particular part of the bill.

Many on this side of the House have spoken about the recommendations and how they must be considered seriously, responded to, and, most important, implemented where practicable. I am thinking about underlying themes in some of the speeches this evening, and one of those is actually around the capacity of the coronial office. It has already been mentioned—the number of coroners across the country. My colleague and whanaunga Mr David Clendon spoke about the Bay of Islands and how, basically, from Auckland to Northland there is only one coroner, and how this does not actually help speed up the process so that it can allow whānau to grieve.

For example, if you pass away up in the Bay of Islands and you enter into the coronial process, your loved one must go to Auckland. Days pass, the loved one comes home, and we know that in Māori customs, in particular, we mourn for our loved ones over several days. With this process added on, we are now talking about a week, and that is just not practical. Already, some of the comments across the House are about making sure that this particular bill—not “speeds up” the process, because we want to give it due recognition and it must take its course, but we also want to consider our loved ones who are grieving at home. So it is important that the recommendations must be considered seriously, responded to adequately, and, like I said, given a bit of teeth.

It touches on the point made by our leader, Andrew Little, who spoke about the unnecessary deaths in the workplace. One of those workplaces, in particular, is forestry. I currently sit on a forestry trust board. We have been fortunate that our health and safety record on our land is very, very good, and we work hard to ensure that it is that way. But, sadly, for many whānau there have been a large number of losses of forestry workers over a number of years now. The purpose of the recommendations from the coroner’s office is to make sure that these deaths do not continue—that lives are not wasted unnecessarily. I touch on Mr Little’s point, when he said that this was probably the best opportunity for some time now to be able to get this particular piece of legislation right, so that we do not come back here and revisit this upon the unnecessary passing away of people on the job site.

The legislation has been talked about with regard to the reporting of suicides, and I congratulate the committee on striking a pretty fine balance in what is a very difficult subject to deal with. Indeed, in light of recent weeks, when suicide awareness in particular has been raised across the country, it is important that we allow the media to do its job but also that we protect the whānau who are grieving. It has been talked about—this copycat syndrome or mentality, which could potentially come about through reporting in the media. In some cases that I am familiar with, in and amongst the schools, arguably, the media did not play a part in that, but I do acknowledge that the media actually do have an important role in stopping it as well. That is the balance we are talking about there, and I want to commend the select committee for striking that balance.

In conclusion, during the Committee stage we do plan to put forward some amendments to this bill in the hope that, as I mentioned earlier, we can seize the opportunity to get this right and to support and assist the coroner’s office in its function and in the important role that it performs. I do want to just finish on the theme that I spoke about earlier, which seems to be running under many of the speeches, and that is around capacity. Where we can, I too hope that in the future we can address that, at some point in time. Kia ora tātou.

BRETT HUDSON (National): I rise in support of the Coroners Amendment Bill. As my colleague Mr Bayly pointed out, a key provision is to improve coroners’ recommendations by requiring them to be specific to the case in evidence and, importantly, to be clear about the recommendations—how they would reduce the likelihood of future deaths in similar situations.

I heard the Leader of the Opposition speak earlier on this bill. He seemed to me to be advocating for coroners’ recommendations to be given even more weight, but he was absolutely explicit that they should not have to show how the recommendations they make are actually going to reduce the likelihood of similar occurrences. Well, that is simply astounding. I cannot speak for the motivations of the man, as to what he thinks it would achieve, but it certainly would not achieve better public services.

This is a very sound bill, with very sound measures, and I commend it to the House.

The question was put that the amendments recommended by the Justice and Electoral Committee by majority be agreed to.

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

Ayes 89

New Zealand National 59; Green Party 14; New Zealand First 12; Māori Party 2; ACT New Zealand 1; United Future 1.

Noes 32

New Zealand Labour 32.

Question agreed to.

A party vote was called for on the question, That the Coroners Amendment Bill be now read a second time.

Ayes 89

New Zealand National 59; Green Party 14; New Zealand First 12; Māori Party 2; ACT New Zealand 1; United Future 1.

Noes 32

New Zealand Labour 32.

Bill read a second time.

Bills

Drug and Alcohol Testing of Community-based Offenders and Bailees Legislation Bill

Second Reading

Hon Peseta SAM LOTU-IIGA (Minister of Corrections): I move, That the Drug and Alcohol Testing of Community-based Offenders and Bailees Legislation Bill be now read a second time. Fakalofa lahi atu, Mr Assistant Speaker. The bill received its first reading in February of this year and was referred to the Law and Order Committee. I would like to thank the chairman of that committee, Kanwaljit Singh Bakshi, and the members of the committee for their consideration of this bill and for the sensible changes that have been recommended. This bill will enable the Department of Corrections and the police to require bailees and community-based offenders to undergo alcohol and drug testing to ensure compliance with their conditions—these conditions, of course, being the prohibition on the use of alcohol and drugs.

These conditions are imposed by the courts as a condition of bail or a community-based sentence, or by the Parole Board as a condition of release or an extended supervision order. They are imposed to reduce the risk of reoffending by that individual. Current legislation does not provide a clear authority for the Department of Corrections and the police to test offenders and bailees with these conditions for the prohibition of the use of alcohol or other drugs. The bill addresses this problem by creating a legislative mandate for the testing of these offenders and bailees. In practice, resources will be focused on testing those people who pose the highest risk of causing serious harm if they are to use alcohol or drugs.

The bill allows rules about testing methods and procedures to be made by the Chief Executive of the Department of Corrections and the Commissioner of Police. These rules will be guided by the principles that are set out in the bill—namely, that testing should be no more intrusive than is reasonably necessary; secondly, that testing should take place no more often than is reasonably necessary; and, thirdly, that those being tested are afforded as much privacy and dignity as is consistent with the purpose of that testing.

It is well-known that drug and alcohol misuse is a major driver of crime. The ability to test offenders and bailees for alcohol and drug use will provide both the Department of Corrections and the police with a useful tool to counteract the harm that substance abuse plays in contributing to offending in our communities. Drug and alcohol testing will complement the significant effort that the department has put into increasing offenders’ access to drug and alcohol treatment. In recent years, particular emphasis has been placed on improving access to programmes for remand and short-serving prisoners and the delivery by probation staff of brief interventions to offenders in the community.

Successful interventions to address an offender’s substance abuse problems can make a significant difference in that person’s life and in that person’s family’s lives. I recently announced that the Department of Corrections will spend over $8.6 million over the next 3 years to develop and deliver a drug and alcohol post-release programme. We have a range of drug and alcohol treatment programmes available in prison, but I think that we can do much more in the community to support released prisoners to leave substance abuse behind and live better lives, free of crime. This new programme to promote rehabilitation, along with drug and alcohol testing to promote compliance, will work together to tackle drug and alcohol abuse in our communities and reduce reoffending.

The Law and Order Committee has reported the bill back to the House with a number of improvements that will enhance the effectiveness of this regime, and I would like to just briefly mention four of those significant amendments. First, the bill now includes powers to test for psychoactive substances, which, as you know, have been the scourge of society. Of police detainees who have experienced problems related to drug and alcohol use, 8 percent attribute their substance abuse problems to synthetic cannabis use. Amending the bill to allow testing for psychoactive substances reflects the adverse effects that these products can have on users and on their relationship with their offending.

Secondly, the bill has also been amended to ensure that the Department of Corrections and police will be able to test those who had drug and alcohol conditions that were imposed before the bill was enacted and that are still in effect at the time of the enactment. This was previously unclear in the bill as introduced to the House, and this amendment will help to enhance public safety by ensuring that this category of people can be tested.

Thirdly, a new part has been inserted into the bill to allow for the testing of people on protective supervision orders who have a condition prohibiting the use of alcohol and drugs. Protective supervision orders were introduced as part of the public protection order regime that was enacted into law in December of last year, and this amendment will help to strengthen the compliance with that regime.

Finally, an amendment has been made in relation to the penalties for non-compliance with the testing regime in the bail context, so the bill creates an offence of refusing entry to an authorised person for purposes relating to continuous monitoring equipment. This enables the deployment of technologies that provide for remote monitoring of alcohol use.

The Law Society’s submission on the bill as introduced noted that the penalties for committing this particular offence were unduly harsh for bailees. The bill has subsequently been amended to treat this offence as a breach of bail conditions, which is consistent with the existing approach to bail. The select committee has also made a number of other sensible and more minor technical amendments to the bill in response to submissions and advice from officials.

To sum up, breaking the cycle of substance abuse in crime is crucial to the good governance goal of reducing reoffending. This bill will make an important contribution towards this goal, and, as a consequence, will enhance public safety and security. That is why I commend this bill to the House. Fakauelahi.

Hon PHIL GOFF (Labour—Mt Roskill): The Labour Party supports this bill. As is quite common at the Law and Order Committee, when we have legislation that is evidence-driven and designed to increase the security of the community, all sides of the House can work together on that legislation, both to support it and to improve it, as the Minister has acknowledged in his speech. I think that we have improved this legislation.

Is the legislation necessary? Yes. I think it is common sense that if the Department of Corrections and the police can require offenders and those on bail to abstain from the use of alcohol or drugs, then you have to have a law that can ensure compliance with the conditions that might be imposed by the court or might be imposed by the Parole Board. It is a nonsense to actually have the directive “You must abstain from alcohol and drugs.”, and then not have a mechanism to ensure that the person those orders are placed upon is actually complying with it. So it was a matter of common sense that we should support this.

I think it is well-known to the public and, certainly, to members of the House that alcohol and drugs are a major factor, a major driver, in criminal offending. I think that at the point of arrest, nearly half—48 percent—of those arrested are affected at that time by drugs and alcohol. When you look at the people who are on home detention and community supervision, that proportion of a half of those at the time of arrest becomes two-thirds of those given those sentences who are affected by drug or alcohol abuse or addiction. So drugs and alcohol are important drivers, and if we want to stop recidivism and stop people offending while they are on bail or on community sentences, then enforcing this provision is absolutely necessary.

I think that the corrections system has an absolute responsibility to minimise the risk to the community. When you look at the number of people whom conditions are imposed on, there is an awful lot of them. Some 5,000 people on community sentences have conditions not to use alcohol or drugs, and 15,000 people on bail each year have that same condition. If we were going to apply testing to all of those people, we would be talking about tens of millions of dollars, and that is not going to be very practicable, so what this bill does—sensibly, I think—is target those who are most at risk. The whole Australian experience in this area is that when you target those most at risk, you have the greatest impact. The American experience is that where a person is on a sentence and they think there is a high chance of being detected if they breach compliance with those conditions, then the rate of reoffending goes down quite significantly, and we all hope that that will happen with this bill.

Most of the submissions on this bill were from organisations that were not opposed to having compliance—it is hard to be opposed to requiring compliance—they just wanted to make sure that the testing was reasonable and did not constitute harassment. I think that we have this well covered.

We did not pick up many of the specific recommendations of the submitters, but we very strongly supported the principles that are set out for the Chief Executive of the Department of Corrections and the Commissioner of Police when they make the rules on testing methods and procedures. Those principles are, firstly, that the testing should not be more than reasonably necessary; secondly, that those tested should be afforded reasonable privacy and dignity; and, thirdly, that testing should be no more intrusive than necessary. If those principles are followed, then I think the way in which this compliance is enforced will make sense and will be widely supported.

Debate interrupted.

The House adjourned at 10 p.m.