Tuesday, 3 November 2015

TUESDAY, 3 NOVEMBER 2015

TUESDAY, 3 NOVEMBER 2015

Mr Speaker took the Chair at 2 p.m.

Prayers.

Resignations

Dr Russel Norman, Green Party

Dr Russel Norman

Mr SPEAKER: Honourable members, I wish to advise the House that I have received a letter from, resigning his seat in the House with effect at midnight on Friday, 30 October 2015.

List Member Vacancy

List Member Vacancy

Mr SPEAKER: I have been advised by the Electoral Commissioner that pursuant to section 137 of the Electoral Act 1993, Marama Mere-Ana Davidson has been declared to be elected a member of the House of Representatives in place of Dr Russel Norman. I understand that Marama Davidson is present and wishes to make the affirmation. Would she please come forward to the chair on my right.

Members Sworn

Members Sworn

Marama Davidson was presented to the Speaker, made the affirmation required by law, and took her seat in the House.

Obituaries

Dr Bruce Craig Gregory

Mr SPEAKER: Honourable members, I regret to inform the House of the death on 29 October 2015 of Dr Bruce Craig Gregory, who represented the Northern Maori electorate from 1980 to 1993. I desire, on behalf of this House, to express our sense of the loss that we have sustained and our sympathy with the relatives of the late former member. I now ask members to stand with me and observe a period of silence as a mark of respect for his memory.

Honourable members stood as a mark of respect.

Motions

All Blacks—Rugby World Cup 2015 Victory

Rt Hon JOHN KEY (Prime Minister): I seek leave to move a motion without notice in recognition of the All Blacks winning the Rugby World Cup 2015.

Mr SPEAKER: Is there any objection to that course of action being followed? There is none.

Rt Hon JOHN KEY: I move, That this House congratulate the All Blacks on their historic victory at the 2015 Rugby World Cup. On Sunday morning the country woke up at the better part of 5 a.m., full of expectation and excitement, and a degree, probably, of trepidation, to witness the final of the Rugby World Cup and to see whether dreams could become history and whether the great All Blacks side that we had witnessed right up until this final could ultimately bring home the Rugby World Cup. In beating Australia 34-17 the All Blacks not only made history but proved to the world what a great All Blacks side they are and how proud of them we can be. We witnessed what will ultimately be the final game with the All Blacks for a number of players. To those, we wish them all the very best as they take their careers down the next pathway, whatever that might be.

It is easy when you look at rugby to think of it just in the context of being a sport and, obviously, our national game, but when it comes to this All Blacks side one thing that they have proven is that it is not just the deeds that they do on the field; it is, in fact, the deeds they do off the field. Who will forget the way that this team acted as great ambassadors of this country, right through the entire world cup campaign and right up until after the whistle had been blown, when Sonny Bill Williams took the unusual and, dare I say it, remarkable step of giving his medal to a young lad who had raced on to the paddock?

We want to take this moment as a House, I think, putting aside all of our party political viewpoints, just to say on a united basis that we have enormous admiration for this team, for the captaincy of Richie McCaw, and for the coaching staff led by Steve Hansen. We thank them for what they have done in terms of doing something that no other team has ever done before, and that is win back-to-back Rugby World Cups.

I was in the privileged position to be there for both the semi-final and the final—

Hon Ruth Dyson: Were you?

Rt Hon JOHN KEY: Well, I was, yes—I was, actually. I had a very nice chat and a beer with your boss, actually, after the game, in that spirit of united bipartisanship. I must admit that after the semi-final I had a brief chat to Richie McCaw and I asked him who he thought would be in the finals. He said: “I don’t know, but I hope it’s Australia because we’re going to take them apart.” And that is exactly what they did.

They are a fine All Blacks side. They will be absolutely and rightfully adored by the public when they get off the flight from the United Kingdom tomorrow. They are an All Blacks side that makes every single one of us feel good, and they deserve our congratulations.

Hon TREVOR MALLARD (Labour—Hutt South): I think it is very rarely that I can stand up and say that I totally agree with the Prime Minister. I do want to put on record the thanks of New Zealand to the Prime Minister for being such a good sport in posing with Sam Whitelock, just to show the perspective of rugby players and politicians in New Zealand.

I also want to put on the record thanks to a few people. Thanks to the people who initiated the Rugby World Cup. It was something that was done in the 1980s when rugby was not going quite as well as it is now. It has gone, in a relatively short time, to being probably the most important individual trophy as far as New Zealanders are concerned. I think that that has been important in rebuilding the image of rugby in New Zealand and around the world.

I want to acknowledge the late Jock Hobbs, who took rugby into the professional administration era. He got in Chris Moller, Steve Tew, Neil Sorensen, Don Tricker, and, earlier, Dame Therese Walsh—people who have set a platform of professional administration off which this team has been able to grow. I want to acknowledge the World Rugby award winners: Nehe Milner-Skudder, Julian Savea, Portia Woodman, and Kendra Cocksedge, who did not get quite the recognition that some of the others did coming out of that ceremony.

But a special acknowledgment for Dan Carter for his enormous contribution throughout a wonderful career.

Hon Member: Hear, hear!

Hon TREVOR MALLARD: I note my colleague from Canterbury saying “Hear, hear!”. Dan Carter has broken my heart as a Hurricanes supporter on a number of occasions. His career and especially his vision in the final and his skills in the final were the like of a fly-half that, I think, will be a while until we see one so good again. We do not know yet, officially, the future of Richie McCaw as far as rugby is concerned, but if you ever had someone who could lead by example, who could develop a team of leaders around him, and who could really make a difference both on and off the field, then Richie McCaw has done that.

I want to have my final comments in acknowledging the work of Steve “Shag” Hansen. His dry humour is something that New Zealanders are finding very, very special. I am going to be frank. When Steve first got the job I had my doubts, but the first time I heard him speak—actually, at the Wainuiōmata Rugby Club—I had no doubts whatsoever, because what was clear was a ferocious, but well-hidden, intellect, a wonderful sense of humour, and the ability to select for the longer term, which has meant that he has built a team that is really special. It is a golden era, and I for one hope that he will think very, very carefully about the possibility of being the first coach to take two. Thank you.

JAMES SHAW (Co-Leader—Green): I would like to rise and add my voice and the voice of those Green Party supporters who are also supporters of the All Blacks, in support of the motion put by the Prime Minister.

I would like to start by talking a little bit about the French, actually, because one of the great things about this particular Rugby World Cup was that it put to bed so many ghosts that we have about how we played against France in the past. I happened to spend that game in 2007 in a pub in London, coincidentally, as it turned out, completely surrounded by French people. I just happened to wander into a pub to watch the game and it turned out it was a French pub. We were pretty cocky, so to speak, and we thought we had it. It was to our absolute horror that that game turned against us, particularly as we were surrounded by what must have been 200 cheering French people. It was a sort of catastrophic moment in our national psyche, for those of us who are fans of the game. So to have beaten France by a larger margin than we beat Namibia in this particular world cup was a particular high point. But, of course, the greatest high point was the finale on Sunday morning, which I also did get up to watch at 5 o’clock in the morning with many, many New Zealanders.

I just remember the tension of the Rugby World Cup 2011 when we were so close—playing, coincidentally, France—and it could have gone either way, and, again in this one, putting to bed that ghost. When it comes down to it, not only is this particular All Blacks team the best in the world at this particular time but I think that we can say with some confidence that it is the best team that there has ever been, as proven by the fact that it has now won two world cups. So it has been an extraordinary stretch for the team.

The All Blacks is an extraordinary team. They are led by extraordinary people, both on and off the field, and I do want to acknowledge Steve Hansen and the support team because I think that they have done an extraordinary job, with a group of extraordinary people.

I would also like to just comment that I did see one tweet on Sunday morning from the Black Ferns saying “Congratulations, lads. Good to see that you’re following in our footsteps.”, because the Black Ferns have, of course, won four world cups. So the All Blacks are now continuing that trend, which is all great to see.

So, on behalf of myself, on behalf of Green Party supporters who are real fans of the game, congratulations to the team, congratulations to the support team, and well done.

FLETCHER TABUTEAU (NZ First): New Zealand is proud of our All Blacks. The build-up was masterful and the excitement was high throughout the whole tournament. Individual players’ stories held us captivated throughout—from Richie McCaw, Dan Carter, Ma‘a Nonu, Conrad Smith, Keven Mealamu, to the most-capped prop, Tony Woodcock. We wish them all the best. Richie, whatever you do now, know that New Zealanders do support you.

What has been truly great to observe has been the team—the comments from the players acknowledging everyone, not just those on the field but the support staff, the management team, and everyone involved. It has been about a whole team effort. Through that team, history has been made—the most tries scored in a Rugby World Cup final, the first final won by New Zealand on foreign soil, and the first back-to-back tournament win. It brings to mind the amazing results of the New Zealand Black Ferns, who have, as noted, won four back-to-back world cup titles on foreign soil. Having missed out on the last tournament, they must feel the pressure now as they prepare for 2017. I know everyone in this House supports them in their campaign to reclaim that title. And, importantly, we would like to acknowledge Portia Woodman and congratulate her on being named Women’s Sevens Player of the Year.

Today we celebrate and acknowledge greatness. It is indeed a joyous opportunity for All Blacks supporters to join together in celebration. Around the world the feat has been celebrated by Hollywood A-listers and international pop stars, right down to my friend’s neighbourhood in Hamilton, as that full-time whistle blew. Across the country the shouts of joy rocked homes and whole neighbourhoods.

Churchill said: “Attitude is a little thing that makes a big difference.” Attitude defined everything for this team. The All Blacks personified it on and off the field, and it determined the outcome of the Rugby World Cup. It spoke volumes as players such as Sonny Bill Williams and Beauden Barrett showed the world how humble, how giving, and how selfless New Zealanders can be.

It is a great privilege for me to stand on behalf of New Zealand First—as one of those whose participation in rugby did not involve much more than throwing a rugby ball around with mates—to give my heartfelt congratulations on behalf of this, the New Zealand Parliament. To the All Blacks and to everyone involved in making this victory happen, you have done us all proud and we thank you all.

MARAMA FOX (Co-Leader—Māori Party): Kia ora, Mr Speaker. I want to add my voice to that of David Hasselhoff and Kevin Costner and all of my other good friends in Hollywood, and, of course, to that of the 51st Parliament in congratulating the All Blacks on a mighty win.

I do not know about these guys who got up at 5 a.m., but I was up at 4 a.m.—in fact I did not go to bed. That is right, because we were waiting up, in eager anticipation, watching all the pre-match commentary about whether or not so and so was going to score a try, or who was going to get their first. But we were all amazed at the Ngāti boy, the “scudder” attack on the Australian back line, as he scored that try. In fact, we were not amazed because that is just how we roll on the East Coast.

But I want to congratulate these guys on their black-to-black—I mean, back-to-back—victory. I want to see them back again, in 4 more years, for the “three-peat”. That is right. I think “three-peat” is the new cry from this moment on. In fact, I am feeling a little sorry right now for my other friend Chuck Norris, who, though he may have given his spirit to the Wallabies, was not banking on 5 million—almost 5 million—spirited, parochial Kiwis backing this All Blacks team. So I add my voice to those in congratulating Richie McCaw on leading in the way that he did.

Actually, I just do not understand how Steve Hansen did not become Coach of the Year, despite all of the deliberations that have been had over that. Yes, OK, the Wallabies did try very hard and maybe their coach deserves something for that, but Steve Hansen is top in my books along with Ma’a—local boy, my bestie, and my selfie buddy. What other friends do I have? Actually, I have another friend, Kawhena Woodman, whose daughter Portia was recognised, as everybody said, as the women’s sevens player of the year, and I want to congratulate Kendra Cocksedge, the women’s player of the year. In fact, the last group of people I want to congratulate is the indigenous women’s team who won the gold medal in tug of war.

Hon Member: Yes.

MARAMA FOX: That is right—in Brazil—a gold medal for tug of war. We are just a nation of winners and I love being a part of that and I add my voice to the rest of this country in congratulating the All Blacks.

DAVID SEYMOUR (Leader—ACT): On behalf of the ACT Party I would like to add my congratulations to the All Blacks. I think members will agree that I am completely capable of giving quite a lengthy treatise on why and how I agree with all of the earlier contributions, but I also have the kindness not to actually do it. Suffice to say that I think that the All Blacks are an outstanding group of individuals. They have succeeded at this Rugby World Cup, but actually for the last 11 years they have had an 86 percent win rate. That has happened in an extraordinary culture that is reflective of the wider culture of New Zealand, and it is something of which we should all be very, very proud. Thank you.

Motion agreed to.

Oral Questions

Questions to Ministers

Economic Outlook—Treasury Reports

1. KANWALJIT SINGH BAKSHI (National) to the Minister of Finance: What reports has he received on the New Zealand economy?

Hon BILL ENGLISH (Minister of Finance): Yesterday Treasury published its Monthly Economic Indicators. This shows that slower economic growth in the first half of 2015 is expected to return to around trend growth, or between 2 and 2.5 percent, supported by a recent rebound in dairy prices as well as wider economic resilience, as export-driven firms enjoy the benefits of a lower exchange rate. Inflation remains low. Higher population growth is now boosting housing markets both in and outside Auckland. There are of course risks to the outlook from the weak global economy, but overall the country remains on track for moderate economic growth.

Kanwaljit Singh Bakshi: What reports has he received showing increasing business confidence in the economic outlook?

Hon BILL ENGLISH: Over the last 6 months or so business confidence has been up and down. The most recent report for October shows an improvement from recent lows—that is, slightly higher investment intentions, slightly better employment intentions, and a lift in residential investment intentions; all aspects of moderate future growth. ANZ says the increased confidence is based around a rebound in dairy prices and points to increasing activity in tourism, the services sector, primary industries, and housing outside Auckland. These are supported by lower interest rates and a lower New Zealand dollar. So they indicate moderate growth over the next 6 to 12 months.

Kanwaljit Singh Bakshi: How does Treasury’s outlook for the economy compare with the latest forecast set out in Budget 2015?

Hon BILL ENGLISH: As we mentioned, Treasury is now looking at economic growth returning to trend—around 2 to 2.5 percent—but the low growth for the calendar year 2015 could be under 2 percent. This is clearly weaker than the 3 percent growth Treasury was expecting in Budget 2015, and that, of course, will have a flow-on impact on unemployment and wages. Growth out ahead of us of 2 to 2.5 percent means we will still see solid job growth and wage increases but a bit less than was expected in the Budget.

Kanwaljit Singh Bakshi: What is the impact of low inflation, given that it is currently sitting at 0.4 percent in the year to September?

Hon BILL ENGLISH: The low cost of living increases are good for families. They mean that any pay increases go further, and this also helps keep interest rates lower for longer. The measure of inflation, though, is likely to increase when the effect of the significant drop in oil prices falls out of the index. Our revenue is directly influenced by the rate of inflation, so a lower rate of inflation means the Government revenue is expected to be lower than was previously forecast.

Rt Hon Winston Peters: What effect on the current account deficit will the $4.4 billion in profit this year repatriated by the big four Australian banks have?

Hon BILL ENGLISH: Of course, it is not all repatriated. The New Zealand Government taxes those profits, and I think that in the last year the banks paid something like $2 billion worth of tax. But overall the current account deficit and the international investment position have been improving and generally have been better than forecast for the last 4 or 5 years.

Immigration—Impact on Infrastructure

2. Rt Hon WINSTON PETERS (Leader—NZ First) to the Prime Minister: Does he have confidence in his Minister of Immigration; if so, why?

Rt Hon JOHN KEY (Prime Minister): Yes; because he is a hard-working and conscientious Minister.

Rt Hon Winston Peters: Seriously, is he satisfied with over a thousand new patients a week, and is he confident that our hospitals are able to cope with the record demands as a result, given that they have had no extra funding; if so, why?

Rt Hon JOHN KEY: I should have also added, in the spirit of the Rugby World Cup, the attributes of the Minister of Immigration in his more youthful years when he played for the South Island team, because they are about as relevant as the statement that the member has just made. Of course there is more money going into health. Go and have a look at the last Budget.

David Seymour: When did immigration to New Zealand begin, and how many people were in New Zealand prior to that time?

Rt Hon JOHN KEY: I assume it happened hundreds and hundreds and hundreds of years ago—there is some talk of 600 years, if not more. And at the time when the first people arrived, one would assume there was nobody here, and there is still an awful lot of room left, from what I can see.

Rt Hon Winston Peters: For the benefit of the leader of the ACT Party, can the Prime Minister advise him that an immigrant is someone living legally in a country not of his or her birth?

Rt Hon JOHN KEY: I think that is true of everybody when they came here at some point.

Rt Hon Winston Peters: For those shallow people who—

Mr SPEAKER: Order! If we could just have the supplementary question.

Rt Hon Winston Peters: For those shallow people who argue that everybody is an immigrant, how can he be satisfied that funding levels for our hospitals, schools, police, transport infrastructure, and housing is adequate to meet the demands of a population increase driven by record migration; if so, why?

Rt Hon JOHN KEY: It is true that if one looks at the last 12 months, the net migration numbers are much higher than they have been in recent years, but over half of that, actually, reflects either New Zealanders not leaving or New Zealanders returning. If we look at migrants, they add a lot to our country. They add a lot to the diversity of our political system. The member is, as he knows, the member for Northland. He just needs to wander around his own electorate and look at some of the investment that has come in from the United States and all of that sort of thing. And if that does not satisfy him that migration makes sense, maybe he just wants to look at his own caucus member, who I think is of Indian descent—

Mr SPEAKER: Order!

Rt Hon Winston Peters: I raise a point of order, Mr Speaker. The Prime Minister is well off the subject—

Mr SPEAKER: Order! The member will resume his seat. I think, on this case, there is a slight truth to what the member is saying. The answer went on for too long. I rose as the member rose to make sure the answer did not continue any longer. Does the member have a further supplementary question? [Interruption] Order! I have dealt with—[Interruption] Order! I have dealt with the matter. The member may not be satisfied, but I have dealt with it.

Mental Health Services—Funding and Staffing

Hon ANNETTE KING (Deputy Leader—Labour): My question is to the Minister of Health. What reports has he received—[Interruption]

Mr SPEAKER: Order! I am going to ask the member to start again. I do not think she had a fair go.

3. Hon ANNETTE KING (Deputy Leader—Labour) to the Minister of Health: What reports has he received, if any, on the pressures facing the public health workforce?

Hon Peseta SAM LOTU-IIGA (Associate Minister of Health): on behalf of the Minister of Health: I have seen a report saying that the funding for health has gone up by over $4 billion under this National Government and that only a National Government can both handle the country’s finances and deliver more health services.

Hon Annette King: Has he been advised of the huge pressure on staff working in emergency departments because of the increase in the number of mental health patients requiring care, a number that has doubled in some district health boards under this Government’s watch?

Hon Peseta SAM LOTU-IIGA: What I have been advised is that funding for mental health and addiction services has gone up from $1.1 billion in 2008 to $1.4 billion in the current financial year. The police and the Ministry of Health are working together to coordinate responsibilities around mental health services, and there is a stronger drive to encourage people who are experiencing mental health problems to seek help.

Hon Annette King: In light of the Minister’s consistent answer that there is more money in health, can he explain why the number of call-outs for adult mental health community services is spiralling out of control, and staff have reached the end of their tether?

Hon Peseta SAM LOTU-IIGA: I say again that the funding for mental health services has gone up from $1.1 billion to $1.4 billion. In fact, the proportion of police referrals against total referrals has actually dropped from 5.2 percent to 4.2 percent.

Hon Annette King: What impact does he believe giving mental health services a 0.52 percent increase in funding in 2014-15 is having on mental health staff’s ability to provide timely services?

Hon Peseta SAM LOTU-IIGA: I say to the member: verify those figures, because she has brought figures like that into the House that have clearly, patently been incorrect. But what I will say is that these services are being coordinated quite well between the Ministry of Health and the New Zealand Police. Again, as I said, $1.4 billion has been spent in this area.

Hon Annette King: Has he been advised that the number of call-outs for people needing mental health services in the community in just 12 district health boards has increased to 30,000 in this year to June alone, a record 20 percent increase?

Hon Peseta SAM LOTU-IIGA: Again, I do not have that member’s figures and do not know where that member gets the figures from, but what I can say is that $64 million has been invested over 4 years to support young people with their mental health under the Prime Minister’s Youth Mental Health Project—$1.4 billion has been spent on mental health services.

Hon Annette King: Does he think that it is appropriate for police to be handling up to 100 call-outs a day to manage mental health patients while the Government refuses to cover all the cost pressures in health that the Minister of Health has admitted in this House?

Hon Peseta SAM LOTU-IIGA: The police have developed new training resources to assist in developing their skills, and it has spent money to work alongside the ministry to provide these services.

Hon Annette King: I raise a point of order, Mr Speaker.

Mr SPEAKER: I can anticipate the point of order, and I will invite the member to ask the question again.

Hon Annette King: Does he think it is appropriate for the police to handle up to 100 call-outs a day to manage mental health patients while the Government refuses to fund all the cost pressures in health, which is something that the Minister has admitted in this House?

Hon Peseta SAM LOTU-IIGA: I dispute the second part of that member’s assertion because the cost pressures in terms of health have been covered in this Budget to the tune of $330 million.

Hon Annette King: I raise a point of order, Mr Speaker. Mr Speaker, you listened very carefully to that answer, and the Minister disputed that the Minister of Health had made that comment—

Mr SPEAKER: Order! No—

Hon Annette King: Am I required now to table the Hansard to show that that is exactly what the Minister said?

Mr SPEAKER: No. The member is certainly not entitled to even attempt to table the Hansard. The question when I listened to it a second time was probably answered the first time, in that the question alleged—according to the member asking that question—that the Government had refused to fund the increase, etc. The Minister certainly addressed that; he disputed it.

Technology Sector—Growth

4. BRETT HUDSON (National) to the Minister of Science and Innovation: What reports has he received on growth in New Zealand’s technology sector?

Hon STEVEN JOYCE (Minister of Science and Innovation): Good news. Last week I helped launch the Technology Investment Network’s 2015 TIN100 Technology Industry Analysis report, which shows New Zealand’s top 200 high-tech companies collectively grew to nearly $9 billion in annual revenue last year—a $600 million, or 7.3 percent, increase in 1 year. The report shows that our high-tech businesses are an impressive growth story that is helping to rapidly diversify the New Zealand economy. Export revenues are up to an all-time high of $6.5 billion, and a record 19 companies now have revenues of $100 million a year or more. Job growth is also impressive, with 2,410 new jobs created in the 2014-15 year amongst TIN200 companies. Total job numbers in the TIN200 are now 37,333.

Brett Hudson: How much is the technology sector investing in research and development?

Hon STEVEN JOYCE: Research and development is a critical part of high-tech companies innovating and staying ahead of the competition. The total expenditure on research and development across the TIN200 companies in 2015 will hit nearly $1 billion in 1 year, a massive 16 percent increase. The Government is working hard to continue to encourage more companies to invest more in research and development through the Callaghan Innovation grants system. We have moved away from research and development tax credits, which had companies merely reclassifying existing expenditure. The total cross-Government science spend has increased to $1.5 billion a year, and it is showing in sectors like the tech sector.

Brett Hudson: What else is the Government doing to encourage the growth of high-tech—[Interruption]

Mr SPEAKER: Order! I will be inviting the member to start again. If members here do not want to wait for supplementary questions, they do not have to stay in the House to do so.

Brett Hudson: What else is the Government doing to encourage the growth of high-tech and innovative companies?

Hon STEVEN JOYCE: The report highlights what New Zealand tech companies can achieve with the help of positive Government policies that remove roadblocks to their growth. For example, there is our ranking as a country, out last week, as second in the world for ease of doing business. We are investing more in skills and education, like the new ICT Graduate Schools in Auckland, Wellington, and Christchurch; also investing more in engineering and other ICT places at universities; working in the regions with Callaghan Innovation and New Zealand Trade and Enterprise and the new regional research institutes; and being open for business to the world, encouraging foreign investment, international education, and new trade agreements like the New Zealand - Korea free-trade agreement and the Trans-Pacific Partnership agreement.

Banking Sector—Overseas-owned Banks

5. JAMES SHAW (Co-Leader—Green) to the Minister of Finance: What specific steps will he take to minimise the economic effect from billions of dollars of bank profits being taken out of New Zealand by overseas-owned banks?

Hon BILL ENGLISH (Minister of Finance): The Government is focused on reducing New Zealand’s obligations to the rest of the world, and we have made some progress on this measure. The net international investment position is now 62 percent of GDP compared with minus 84 percent of GDP in early 2009—the lowest it has been since 1991. The Government has taken the specific steps of limiting spending increases and is moving to get on top of debt, and households have had positive net savings each year for the past 5 years, which is the first time that this has happened since the early 1990s. Of course, where profits are legally made by overseas banks, then we do not take specific action to take their profits off them, other than to tax them. Reserve Bank data shows that banks paid almost $2 billion in income tax in the year to June 2015, so that part of their profits was specifically not repatriated, because of Government action.

James Shaw: Would the Minister like to see more money staying in New Zealand, or is he OK with banks sending overseas the equivalent of almost $1,000 for every New Zealander?

Hon BILL ENGLISH: As I would point out to the member, they get to repatriate whatever is left over after they pay their tax, and, as I have pointed out, last year they paid $2 billion in tax. We are satisfied that New Zealand is making progress on gradually reducing its obligations to foreigners, and that is expressed through the measures that I pointed out before. Of course, individual New Zealanders have the choice of banks that they use, and should they use New Zealand - owned banks, then those profits are probably more likely to stay in New Zealand.

James Shaw: Is he satisfied that the Reserve Bank is adequately fulfilling its responsibility under Part 5 of the Reserve Bank of New Zealand Act to ensure that the banking system is efficient, given the sector’s record billion-dollar profits?

Hon BILL ENGLISH: I am pretty sure that the Reserve Bank is—in fact, I believe that the Reserve Bank is—fulfilling its obligations, which are, fundamentally, to have a stable banking system. If there is one thing that we have learnt in the past 7 or 8 years, it is that one thing worse than profitable banks is unprofitable banks, because that has dragged down economies ranging from the US through to Ireland and Iceland. The Commerce Commission plays a role in assessing the competitiveness of our banking sector, and in a number of reviews over the years it has indicated that, in its view, the banking sector is competitive. New Zealanders can, of course, vote with their feet. They can remove their business from banks that they believe are making excessive profits—if they are overseas banks—and join New Zealand - owned banks, of which there are a number that are quite successful.

James Shaw: Does he accept that bank profitability has nothing to do with the stability of the banking industry that he was just referring to, given that Lehman Brothers, Merrill Lynch, and Bear Stearns were all highly profitable in the years running up to their spectacular collapse?

Hon BILL ENGLISH: They were different sorts of banks from the big banks here in New Zealand—that is for sure. They tended also to make their profits by taking considerable risk—for instance, trading in derivatives, which our banks simply do not do beyond the absolute necessity to maintain their deposit-holding and lending functions. It is better to have strong banks. You cannot have a strong bank that does not make any money. These ones make profits under competitive conditions, and, as I said, New Zealanders who think that those profits are excessive can take their business elsewhere.

James Shaw: When farmers are struggling to meet their loan repayments and families in Auckland are being saddled with huge mortgages just to buy their first home, does he think that it is appropriate that the major foreign-owned banks are all making record profits?

Hon BILL ENGLISH: In the cases of both the farmers and the Auckland homeowners, it is “willing buyers / willing sellers”. We may have a view about the conditions that lead to high prices for farmland or housing, but they are choices made by sensible New Zealanders who understand the obligations that they are entering into. In fact, there are a whole lot of profitable businesses. In fact, if the businesses were not profitable, the banks would not be able to make profits either, and if households were not able to meet their obligations, the banks would not be able to continue to function as businesses. The member is putting forward an unrealistic choice.

James Shaw: Will his Government take action to keep more cash in the New Zealand economy and drive efficiency across the banking sector by investing in Kiwibank to compete properly with the big Australian banks?

Hon BILL ENGLISH: The best thing that New Zealanders can do to enable Kiwibank to compete more with the big Australian banks is to sign up to Kiwibank. In the end, that is what will make the most difference. The constraint on that bank is simply its ability to get customers. Of course, New Zealanders can also join the TSB Bank, or my favourite bank, SBS Bank, based on the Southland Building Society.

Employment Rate—Forecasts

6. GRANT ROBERTSON (Labour—Wellington Central) to the Minister of Finance: Is it correct that Treasury have advised him that they expect unemployment to rise above 6 percent in the coming months and that there will be “weak earnings growth over the rest of 2015”?

Hon BILL ENGLISH (Minister of Finance): Yes, and that is on the basis of the economy being a bit softer in the first half of this year.

Grant Robertson: What has gone so wrong with the economy that more than 150,000 people are expected to be out of work over the next year and expectations of wage increases are the lowest in more than a decade?

Hon BILL ENGLISH: It is not surprising that the expectation of wage increases is low, because inflation is low. In fact, in the year to September, Treasury expects average hourly earnings to increase by 2.5 percent—well ahead of inflation of 0.4 percent for that year. Households are getting bigger real-wage increases than they have for many of the past 10 or 15 years.

Grant Robertson: With unemployment going over 6 percent—meaning that over 150,000 New Zealanders will be out of work—can he tell the House one new thing that he will do to reduce unemployment, or does he not care about that?

Hon BILL ENGLISH: It is disappointing that unemployment has risen slightly off the back of a softer economy. One thing that we can do is protect innovative policies like the 90-day trial period from criticism by the Opposition, because that enables people who are on welfare and who may be penalised for that to have an opportunity to show an employer that they have got what it takes, but the Labour Party would want to stop that person from getting that opportunity.

Grant Robertson: In light of the Minister not having one new idea for what to do about unemployment, can he tell the House whether he thinks the economy is a success when growth is now slipping below 2 percent and unemployment is rising well above 6 percent? How is that a success?

Hon BILL ENGLISH: The economy has adapted well and quite rapidly to a sharp drop in dairy prices. One of the reasons they have confidence is that the National-led Government has now signed up to the Trans-Pacific Partnership trade agreement. A lot of New Zealanders are wondering whether the Labour Party can take the step of supporting that agreement, because that agreement will support new jobs. The Greens will oppose it, of course, because they are against jobs. New Zealand First members will oppose it because they are against jobs. We are hoping that the Labour Party members might support it, because, apparently, they are for new jobs.

Grant Robertson: If, as forecast, unemployment goes over 7 percent early next year, will he come up with one new idea to create jobs in New Zealand, or is unemployment of that rate acceptable to him?

Hon BILL ENGLISH: The Government does not wait around for unemployment to go up. We got on and negotiated—and were an integral part of negotiating—the world’s largest free-trade agreement. It will support, in the future, thousands of jobs in New Zealand. The only question mark over it is whether the Labour Party will support it or not. That is an idea from the Government. It will support jobs, and we invite the Labour Party to sort out its internal differences and support the Trans-Pacific Partnership.

Rt Hon Winston Peters: I raise a point of order, Mr Speaker. The policy of the Labour Party, or of any other party, has nothing to do with the answer—

Mr SPEAKER: Order! Can I have the point of order, please?

Rt Hon Winston Peters: The point of order is that he should have been brought back to the question to answer it.

Mr SPEAKER: No. As I have explained to the member on many occasions, the length of time and scope I give to any Minister answering a question depends on the type of question that was asked. In this case, the question asked probably was not strictly in line with the Standing Orders. I certainly allowed it, but I gave a very wide berth to the Minister in answering.

Grant Robertson: Is an unemployment rate of over 7 percent acceptable to the Minister; if not, what will he do to change that, given that his Government’s policies have seen unemployment continually rise over the past four quarters?

Mr SPEAKER: Either one of those two supplementary questions.

Hon BILL ENGLISH: A 7 percent unemployment rate is not the case, actually—it is nowhere near that. If it were there, it would be unacceptable. The next step that the House can take is to support the Korean free-trade agreement and the Trans-Pacific Partnership free-trade agreement, because that would show to business that this Parliament—not just the National-led Government—understands what it takes to get jobs.

Northland College—Procurement Process

7. Rt Hon WINSTON PETERS (Leader—NZ First) to the Associate Minister of Education: Is she happy with the process to find a contractor for the Northland College rebuild; if so, why?

Hon HEKIA PARATA (Minister of Education) on behalf of the Associate Minister of Education: Yes; because the procurement of the main contractor to undertake the rebuild follows well-established and transparent Government and ministry guidelines for procuring Government services. An open invitation to all organisations interested in undertaking the works was published on the Government Electronic Tender System, GETS. All organisations that responded by the close of 28 October were assessed against the published criteria. A shortlist of organisations to proceed was chosen by a panel made up of external experts as well as ministry people. I am advised that the ministry expects to make a decision and award the contract by the end of November. I have brought along a copy of the tender document for the member’s information.

Rt Hon Winston Peters: I was reading that before you left school. Of the Northland—[Interruption] Yes, I was, actually.

Mr SPEAKER: Order! If the member wants to ask his question, just proceed to do so.

Rt Hon Winston Peters: Well, I am going to do that. Of the Northland-based contractors that made expressions of interest, how many were approved to the next stage?

Hon HEKIA PARATA: I do not have that information because it is an operational matter and it would be inappropriate for a Minister to be intervening in it.

Rt Hon Winston Peters: What hope is there for regional economic development when at least one major contractor in Northland was never contacted after making an expression of interest?

Hon HEKIA PARATA: I have just outlined the process, and I have advised the member and the House that no final decision has been made, so I am not in a position to tell the member who is going to be appointed and whether or not they come from the local area or outside. But what I can tell the member is that this Government has invested $14 million—

Rt Hon Winston Peters: I raise a point of order, Mr Speaker. I asked a precise question with regard to the effect on regional economic development—

Mr SPEAKER: Order! But I will remind you that you are asking questions to the Associate Minister of Education.

Rt Hon Winston Peters: I beg your pardon?

Mr SPEAKER: The member is asking supplementary questions to the Associate Minister of Education. It is not a question about regional development. Would the member please ask a supplementary question in line with the Standing Orders. [Interruption] Order! Can we just have a supplementary question, please.

Rt Hon Winston Peters: Do you want me to repeat the question?

Mr SPEAKER: No, I want the member to ask a supplementary question, otherwise we can move on. [Interruption] Order! Ask your supplementary question, otherwise I am moving on.

Rt Hon Winston Peters: All right then. Does she agree—[Interruption] Well, we know what—

Mr SPEAKER: Order! Now that we have got the member ready to ask his question, can we have some silence on my right-hand side so I can hear it.

Rt Hon Winston Peters: Does she agree that it is common sense to award the building contract, and I emphasise the words “building contract”—peddled by the office of the Associate Minister of Education, I might add, just for clarity, so no one is in doubt—to a Northland-based contractor that will create more jobs for the region; if not, why not?

Mr SPEAKER: Either of the two supplementary questions.

Hon HEKIA PARATA: Can I repeat that I cannot answer that without the process having being completed and knowing who the main contractor is. But what I can tell the member is that $14 million for Northland College is a significant investment, and education alone has invested over $100 million into Northland over the last 5 years. That is—

Mr SPEAKER: Order! [Interruption] Order! The question has now been answered. [Interruption] Order! Question No. 8, Dr Jian Yang. [Interruption] Order! To both members, if you wish to have that conversation would you please go outside to do so.

Education Legislation—Review

8. Dr JIAN YANG (National) to the Minister of Education: What recent announcements has she made regarding New Zealand’s education legislation?

Hon HEKIA PARATA (Minister of Education): Yesterday I launched a public consultation document updating the Education Act 1989 and invited New Zealanders to have their say on the revamp of education legislation that will make it fit for the future. I encourage anyone—including the Opposition—interested in helping to create a world-class education system to participate. All of the information is online and easy to access and use, even for youth.

Dr Jian Yang: How important is the update of the Education Act 1989?

Hon HEKIA PARATA: When the reforms known as Tomorrow’s Schools were introduced in 1989 they transformed the way education was administered. For the first time local communities, through their boards of trustees, not a centralised bureaucracy, became responsible for running schools. That will remain. However, over the past 26 years the world has changed, as have the demands on our system and the responses that are required. This Government is clear that raising the achievement of all students should be the centrepiece of our Education Act. We know more now than we ever did about where kids are within our education system and we are concerned to ensure they get it through a lever of—[Interruption]

Mr SPEAKER: Order! I want to give my last warning to Ron Mark. If he is going to continue to barrack like that then he will not see the end of question time.

Ron Mark: I raise a point of order, Mr Speaker. I will draw your attention to an incident in this House a little while ago—

Mr SPEAKER: Can I just have the point of order please?

Ron Mark: The point of order is about the inconsistency of rulings from the Chair—

Mr SPEAKER: Order! [Interruption] Order! The member will resume his seat if he wishes to stay. Throughout the last two questions there has been a constant barrage from that member, making it very difficult for me to hear what was going on. I give the warning quite seriously to the member: if he wishes to stay I suggest he quietens down; if he does not wish to stay then I can assist him very quickly. Supplementary question—

Ron Mark: Point of order.

Mr SPEAKER: No, I have dealt with the matter.

Ron Mark: A new point of order.

Mr SPEAKER: A fresh point of order?

Ron Mark: Fresh point of order.

Mr SPEAKER: If it—correction. But just before—the member will take a seat. I am happy to entertain a fresh point of order, but if it is in any way relitigating the territory we have just covered I will then be asking the member to leave the House immediately.

Ron Mark: I raise a point of order, Mr Speaker. Does the ruling still stand that we should not read our speeches?

Mr SPEAKER: There has never been a ruling that you must not read a speech. It has certainly been an encouragement for people not to read speeches. Very often through question time, as the member will observe as he spends more time in this House, Ministers do read from a scripted answer.

Ron Mark: Speaking to the point of order.

Mr SPEAKER: No. We have dealt with the matter. The matter—[Interruption]

Mr SPEAKER: Order! Supplementary question, the honourable—[Interruption] Order! Can I just remind Ron Mark that that is the very last warning.

Chris Hipkins: If the review of the Education Act is so important—

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

Mr SPEAKER: Order! Again—

Rt Hon Winston Peters: A fresh point of order.

Mr SPEAKER: Order! Just a minute.

Rt Hon Winston Peters: I don’t need a ruling.

Mr SPEAKER: That is exactly what the member said last time on an occasion like this, but I still want to deliver it so he then cannot accuse me of acting precipitously. I have dealt with this matter. If the member wants to raise a fresh point of order I will hear it, but if I consider it is in any way relitigating the territory just covered by his colleague Ron Mark, then I will not hesitate to ask the right honourable member to leave the Chamber.

Rt Hon Winston Peters: The Standing Orders are very clear about members being referred to if they are not in the House. When you gave your reply to Ron Mark you used the phrase “if he spends more time in the House”. That is not allowed by the Standing Orders—

Mr SPEAKER: Order! [Interruption] Order! The member will resume his seat. I said “as he spends more time in the House”. As he becomes more experienced with the Standing Orders and watches question time more often, he will have—[Interruption] Order! Ron Mark will leave the Chamber. Ron Mark, would you leave the Chamber.

Ron Mark withdrew from the Chamber.

Chris Hipkins: If the review of the Education Act is so important, why has she allowed only a 6-week consultation period for New Zealanders to have their say, which coincides with senior exams, school prize givings, end-of-year results, tertiary education enrolments, and the end of the school year?

Hon HEKIA PARATA: It is because the period that we are consulting comes after 2 years of consulting by the task force on legislation and regulations. It comes after about 40 national and regional fora at which the proposed changes were discussed, and it comes at a period of time that having consulted with schools they have identified as a period in which they welcome consultation.

Chris Hipkins: Supplementary question. [Interruption]

Mr SPEAKER: Order! [Interruption] Order! Would Tracey Martin please settle down.

Tracey Martin: Point of order.

Mr SPEAKER: No. [Interruption] Order! The member will resume her seat. Again she is stepping in the same territory where one of her colleagues has just been. There was a question asked. It deserved an answer. I am trying to listen to it. If the member wants to take a supplementary question, do so, but do not interrupt the proceedings of my House and expect me to comfort the member. Supplementary question, Chris—

Tracey Martin: I raise a point of order, Mr Speaker.

Mr SPEAKER: If it is a fresh point of order I will hear it. Otherwise the member will get exactly the same treatment if she is relitigating the territory I have been through.

Tracey Martin: Is it still appropriate for a member to take offence when told to shut up across the House by another member?

Mr SPEAKER: I did not hear that, but with the amount of interjection from the member I am not surprised. It is unhelpful—[Interruption] Order! The member will resume her seat. It is not helpful for any member to my right to interject that way, but I can understand why a response may have been loosely given in that respect, because the level of interjection from the member was unacceptable.

Chris Hipkins: Why will not this review include the issue of the support that schools—[Interruption]

Mr SPEAKER: Order! Can the member please start the question again. If he is interrupted by a member—a particular member—of New Zealand First she will be leaving.

Chris Hipkins: Why will not this review include the fundamental issue of the support that schools receive from her department and whether or not it is inadequate, when the proportion of frontline staff at the Ministry of Education is declining and she confirmed yesterday that her ministry is planning to cut up to $23 million due to Budget pressures?

Hon HEKIA PARATA: This review is about the Education Act 1989. It sets out specifically what its themes are. If the member is interested in other elements in the wider education portfolio, then he should ask a primary question on those.

Early Childhood Education—Qualified Teachers

9. CHRIS HIPKINS (Labour—Rimutaka) to the Minister of Education: Does she stand by the statement made on her behalf regarding Early Childhood Education that “this Government believes firmly that it is not only about funding; it is actually about quality and participation”?

Hon HEKIA PARATA (Minister of Education): I absolutely stand by the Acting Minister of Education’s statement. We know that participation in good quality early childhood education helps kids achieve at school and beyond. This will be accomplished only if we focus on participation—kids actually being there—as well as the quality of services and funding. That is why this Government has not only invested so strongly in early childhood education—almost doubling investment since 2008 to $1.6 billion—but is also focusing on raising participation.

Chris Hipkins: Why did the Government reduce funding for early childhood education services that have 100 percent fully qualified and registered teachers?

Hon HEKIA PARATA: The Government made a decision in 2010 not to pursue a previous Labour Government policy, and that is what our Government did. In the meantime we have nearly doubled—we have not cut funding. Going from $790 million to $1.6 billion is doubling the investment. That is not a cut at all, in anybody’s language. And, moreover, we have seen a significant increase in the number of teacher-led, centre-based early childhood education providers in the 80-plus percent funding range, which means there has been an increase in teacher-led centred funding.

Chris Hipkins: I raise a point of order, Mr Speaker. I do not think the question could have been any more specific than asking why the Government decided to make—

Mr SPEAKER: I listened to the answer, and it was very clearly answered.

Chris Hipkins: Is she saying that the only reason that the National Government cut funding for services with 100 percent qualified staff is that it was the Labour Government’s idea?

Hon HEKIA PARATA: International research is really clear that quality is made up of funding, of parent participation, of qualified teachers, and of ratios. New Zealand is one of the top three—[Interruption] New Zealand is in the top three in the world for all of those things.

Chris Hipkins: How does reducing funding to early childhood services that employ fully qualified staff, like kindergartens, increase quality, particularly given those very kindergartens are now making teachers redundant and are reducing hours of staff because of funding shortfalls?

Hon HEKIA PARATA: It means that we can fund wider choice for parents. It means that parent-led centres, such as kōhanga reo and Playcentre, also can be funded, so parents can choose which ones they send their children to. Meantime, funding has not been cut.

Chris Hipkins: Did the National Government reduce the per-child funding rate for services that employ 100 percent fully qualified teachers?

Hon HEKIA PARATA: I cannot speak to the specific per-child funding rate in 2010. What I can tell the member is that the per-child rate has gone up—that for every dollar a parent pays, the Government pays $4.80. It has been increased. [Interruption]

Mr SPEAKER: Question No. 10, Dr Parmjeet Parmar. [Interruption] I did not hear the interjection, but they are to cease. I call question No. 10.

Children's Teams—Establishment

10. Dr PARMJEET PARMAR (National) to the Minister for Social Development: What initiatives has the Government implemented as part of the Children’s Action Plan?

Hon ANNE TOLLEY (Minister for Social Development): Last week I launched the Eastern Bay of Plenty Children’s Team, which will work with around 400 vulnerable children in its first 2 years. This new team will cover Matatā, across to Waihau Bay, down to Minginui, and includes Whakatāne, Ōpōtiki, Edgecumbe, and Kawerau. Last month I also launched the Tairāwhiti Children’s Team, which is expected to work with 430 vulnerable children in the first 2 years.

Dr Parmjeet Parmar: What Children’s Teams are expected to be up and running by the end of this year?

Hon ANNE TOLLEY: Seven Children’s Teams have been rolled out so far, and we are on track to have 10 teams launched and accepting referrals in the coming months. Children’s Teams are currently being established in Whanganui, Christchurch, and Counties Manukau. This is not about duplicating services but ensuring that vulnerable children are accessing the right services at the right time.

Business, Innovation and Employment, Ministry—Discretionary Spending

11. Dr DAVID CLARK (Labour—Dunedin North) to the Minister for Economic Development: Who is responsible to this House for spending at the Ministry of Business, Innovation and Employment?

Hon STEVEN JOYCE (Minister for Economic Development): I think I have answered this question for the member on at least two other occasions, but I am happy to go through it again. Firstly, I refer the member to section 34(1)(a) of the Public Finance Act, which states that the chief executive of a department “is responsible to the responsible Minister for the financial management, financial performance, and financial sustainability of the department;”. Secondly—[Interruption] Shh! I refer the member to section 3.5 of the Cabinet Manual: “Ministers decide both the direction and the priorities for their departments. They should not be involved in their departments’ day-to-day operations. In general terms, Ministers are responsible for determining and promoting policy, defending policy decisions, and answering in the House on both policy and operational matters.” Thirdly, I refer the member to my response to a question from him on the same subject on 3 June, when I stated that I am the Minister responsible for the Ministry of Business, Innovation and Employment.

Dr David Clark: Does he consider $500 plus GST for repairs to roughly handled model sheep good value for the taxpayer dollar?

Hon STEVEN JOYCE: The chief executive of the ministry has acknowledged that there was some discretionary spending in the last year that was inappropriate, and he has since been tightening up on—

Mr SPEAKER: Order! I am sorry, but I am having trouble hearing the answer. If members do not want to hear the answer then, instead of just interjecting, perhaps it would be better if they left the Chamber. Could the Minister start his answer again, please.

Hon STEVEN JOYCE: The chief executive of the ministry has acknowledged that there was some discretionary spending that was inappropriate in the last financial year, and he has since been tightening up on controls and delegations of expenditure. Although that particular item and other items the member has raised have been disappointing, it is important to know that the ministry overall is saving taxpayers $9.5 million a year on the cost of the four previous agencies, and a recent further consolidation will save a further $4 million a year.

Dr David Clark: Can the Minister assure the House there was no internal misallocation of expenses at the ministry hiding the true cost to the taxpayer of the ministry Christmas party?

Hon STEVEN JOYCE: The member knows that there was some misallocation of expenditure that has been identified and publicly disclosed. That is currently being reviewed by the ministry, and it has not found any evidence of misconduct to date, but it would, if it found any evidence of misconduct, take appropriate action.

Dr David Clark: When will he take full responsibility for the litany of gold-plated budget items at the Ministry of Business, Innovation and Employment when he signs off the budget, and he has admitted in this House that he carries responsibility for that spending?

Hon STEVEN JOYCE: Well, the member, I know, is focused on Christmas party planning. I am not going to get into the details of planning the Christmas parties for Government departments. I am focused on the overall cost of the ministry, and I note for the member again that it is saving taxpayers $9.5 million a year, and a recent reorganisation will save a further $4 million a year. Actually—

Dr David Clark: Skycity.

Hon STEVEN JOYCE: I am glad the member raised Skycity, because while he is sitting there focusing on party planning, Skycity, because of its work with the ministry, is actually setting up $700 million worth of investment in Auckland, a thousand jobs, and about 1,250 jobs in operation. I appreciate that the Labour Party is not focused on that.

Dr David Clark: Which of the following is he most embarrassed by—[Interruption]

Mr SPEAKER: Order! I am going to invite the member to start again.

Dr David Clark: Which of the following is he most embarrassed by: (a) the Ministry of Business, Innovation and Employment’s $140,000 TV screen; (b) the department’s $260,000 sun deck; (c) the hair-straighteners at the department, which he cannot use; (d) the Ministry of Business, Innovation and Employment’s $23,000 Sky TV subscription; (e) the Ministry of Business, Innovation and Employment’s $800,000 media monitoring bill—

Mr SPEAKER: Will you bring the question to a conclusion.

Dr David Clark: —(f) a 25 percent Budget blowout for the gold-plated Christmas party; (g)—

Mr SPEAKER: Order! Bring the question to a conclusion.

Dr David Clark: There is a whole lot more.

Mr SPEAKER: That is what I was worried about.

Dr David Clark: We are pretty worried about it too, to be honest.

Mr SPEAKER: Order! The question has now moved past the Standing Orders.

Hon STEVEN JOYCE: Aside from at least one or two inaccuracies—if not more—in that soliloquy from the member, I am proud of the fact that this department is saving $9.5 million a year. I appreciate that Dr Clark is way down there in the weeds, and that is where he should probably stay, but, actually, I am focused on not only what the department is saving but also the work that it is doing promoting New Zealand’s development of its microeconomy and more jobs.

Dr David Clark: I seek leave—

Mr SPEAKER: So this is a point of order?

Dr David Clark: Yes, a point of order. I seek leave to table Steven Joyce’s top 10 spending list compiled by my office today for the assistance of members.

Mr SPEAKER: Order! No. The point of tabling a document—[Interruption] Order! [Interruption] Order!

Pest Control—Northland

12. KEVIN HAGUE (Green) to the Minister of Conservation: What percentage of forest in Northland currently has multi-pest control operations by the Department of Conservation?

Hon MAGGIE BARRY (Minister of Conservation): The Department of Conservation is responsible for 40 percent of the Northland forests. The Department of Conservation administers, therefore, 104,000 hectares of forest in Northland. Approximately 60 percent of this is under some form of sustained pest control. We spend $3.19 million on multi-pest control in Northland, and if you add what we use in weed control, which is a big problem because it smothers all of the native seedlings, the total is $5.87 million each and every year.

Kevin Hague: I raise a point of order, Mr Speaker. This was a question on notice, and although that was a detailed answer, it did not actually address the question. The question asked what percentage of the forest was the subject of multi-pest control. The Minister told us what the budget was for multi-pest control and what proportion of the estate had some form of pest control but did not answer the point that was in the question.

Mr SPEAKER: Order! I did not listen in detail to the Minister’s answer—[Interruption] Order! I am on my feet. I think, in fact, the question has been answered, but the way forward is that I will give the member now an additional supplementary question and he can delve into the answer that was given and, hopefully, get more information to his satisfaction.

Kevin Hague: Thank you. In light of that answer, what is the number of hectares in Northland that is currently the subject of multi-pest control by the Department of Conservation?

Hon MAGGIE BARRY: For the purposes of clarity, I will spell it out again. The Department of Conservation is responsible for 40 percent of the forests in Northland. That accounts for 270,000 hectares, so the department administers 104,000 hectares, of which 60 percent is under some form of sustained pest control—and I will give you the numbers again if you like. [Interruption]

Mr SPEAKER: Order! I would be grateful to be without the assistance of the interjection to my left.

Kevin Hague: How in Conservation Week does she explain why large areas of kiwi habitat forest in Russell, Ōtānerua, and Whangaroa have been reduced to sticks because of possum damage that has occurred on her watch?

Hon MAGGIE BARRY: The only good possum is a dead possum. We do a great deal to control possums because they are the ones—the browsers—that destroy the canopy. So when you look at the way in which we increase our spending and how that protects the kiwi, there are a number of ways of measuring it. With 102,000 hectares of sustained stoat control undertaken by the Department of Conservation and community organisations as well, kiwi numbers, it may interest the member to know, are increasing by 2.8 percent per year across the whole of Northland.

Kevin Hague: How does reducing the budget for natural heritage protection by $7 million, as in Budget 2015, contribute to Conservation Week’s aim of getting New Zealanders out to enjoy nature?

Hon MAGGIE BARRY: The Department of Conservation’s natural heritage management budget has in fact stayed the way it has been. The member is pointing out an accountancy practice, which is that $6 million has been carried over. If you want to know the reason for the shortfall, it is usually to do with weather conditions and it is to do with other acts of nature, which mean that we are not able to spend that amount each year, but that is carried over until the following year. There is no reduction in spending.

Kevin Hague: Does the Minister consider it sufficient to increase multi-pest control by just 50,000 hectares a year, when at least 1 million hectares of indigenous forest is needed to achieve a predator-free New Zealand?

Hon MAGGIE BARRY: The Department of Conservation takes the pest control issue very seriously, and it would be most helpful if that party and that member stood up and actually made the point that 1080 is an essential ingredient in pest control. And we do this all the time. We have to increase our methods of using 1080. We have just in fact done a drop a couple of weeks ago. It is the first time that the department has been able to work collaboratively with Te Rarawa, and we have had 6,000 hectares of conservation land forest in these extremely steep, hard-to-reach places treated with aerial 1080, and a further 6,500 hectares of private land surrounding Warawara, which, as the member may or may not know, is extremely steep country and is unable to be trapped and poisoned in traditional methods, and that is treated with support from the regional council and with iwi. So in terms of what the department is doing with 1080 aerial use, we are doing our very best to get the possum numbers under control, because that is what needs to happen in Northland.

Kevin Hague: I raise a point of order, Mr Speaker. The question was whether a 50,000 hectares-a-year increase was sufficient, in the light of a million hectares nationally being required for indigenous forest multi-pest control. Again, it was a lengthy answer with a lot of detail about 1080 use in Northland, but it did not address the question I asked.

Mr SPEAKER: The difficulty is the question that was asked, which was not a straight question. Again, it was a lengthy question, and if the member wants to look at Speaker’s ruling 195/7—when a member asks a question that seeks an opinion, members cannot expect a precise answer. A straight question would be helpful.

Kevin Hague: Is it acceptable on her watch for more species in the north, such as kōkako and kiwi, to follow the kākāriki, which is now extinct north of Kawakawa because of inadequate pest control?

Hon MAGGIE BARRY: I can reassure the member and all other members of this House that as the Minister of Conservation I take very seriously indeed pest control. If we want to avoid silent forests, we need to use pest control and we need to use 1080 aerial drops, and that is what we are doing. The Department of Conservation has six regions throughout the country. The Northland region is one of them. It gets 17.6 of our natural heritage spending—so it gets more than other regions. We take it seriously. We are trying to convince iwi and other people who are 1080 sceptics that it is a very useful tool. The more we can use it, the more effective we can be in getting rid of the possums, the rats, the stoats, and the other creatures that are predating on our birds and killing them. This is not something I want to have happen on my watch or indeed in the history of this country.

Rt Hon Winston Peters: Given the very high unemployment levels in Northland, why have the unemployed not been enlisted in pest control operations against possums?

Hon MAGGIE BARRY: The unemployed, in their various ways, can choose the way the want to spend their time, and if they want to go out and trap possums, I would be very, very pleased to hear it. Once again, if this member is suggesting for one moment that we are going to be able to resolve the pest problem in Northland by letting a few people who are out of work go out and do some trapping, that member is delusional because it is not possible to do that.

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

Mr SPEAKER: Order! [Interruption] Order! This point of order will be heard in silence.

Rt Hon Winston Peters: With respect, I am asking the Minister a serious question about one of the alternative means of pest control, and the last thing I want is abuse from her, and nor will I take it.

Mr SPEAKER: On this occasion I think the member is quite right. The last part of that answer was completely unnecessary to the question. The first part of the answer addressed the question to my satisfaction—maybe not to the member’s—but, certainly, the last remark was completely unnecessary.

Bills

Riccarton Racecourse Development Enabling Bill

Riccarton Racecourse Bill

First Readings

Debate resumed from 22 October.

EUGENIE SAGE (Green): I am pleased to take a short call on the Riccarton Racecourse Bill and the Riccarton Racecourse Development Enabling Bill. The Green Party is supporting both of these bills at the first reading because the law changes that they will make will result in additional and much needed housing in Christchurch and there is a component of affordable housing.

We are disappointed that such a large area of green space in Christchurch is being sacrificed. Next week, of course, is cup day—a high point in the racing calendar in Canterbury—and it is certainly the majestic surrounds of the Riccarton Racecourse, with the big trees and the expansive open space, that adds to a lot of the enjoyment of that day. There has been increasing concern about nature deficit in children and the loss of access to wild nature and green areas where children can play. The loss of a quarter of the racecourse—some 38 hectares that were set aside as a reserve quite a while ago, back in 1878, for the racecourse, but that is now used for a variety of purposes: the Riccarton Market is, of course, at the racecourse. Some of the area that is proposed for subdivision has been made available by the racecourse trust board for community events: there was a big, very successful fracking-free festival and concert held there. It is this green space that is being lost through this bill because the bill revokes the reserve status that was established in 1878 that made the area a racecourse, to allow the subdivision and development to occur. We need green space in our cities because they make them attractive and pleasant places to live; they clean up air quality; they provide significant amenity values; and for neighbouring houses they often offer a place for people to go walking, to walk their dogs, and for children to play.

So we will be very interested in the development plans for the racecourse and the extent to which the trust board, working with Ngāi Tahu Property, provides for reserve areas and green space so that it is not just a mass of houses. This area is certainly within the city limits, but we have seen that a lot of the building that has occurred post-quake to accommodate people who had to move has been of mediocre quality. We have not seen high standards in urban design, and we have not seen a strong emphasis on medium-density housing. We have seen developments that encourage sprawl. You can go down to Rolleston, where a lot of people have moved. There are very few solar photovoltaic panels on the rooves of new homes there. We are losing an opportunity to promote good urban design and medium-density housing that is close to public transport links, that has good links to cycleways, and that is sustainable in terms of reducing energy costs for the owners and households that take over those homes.

So we want to see where we are, through this legislation, sacrificing open space and reserve land in Christchurch for housing that that housing development and subdivision is of very high quality. There is nothing in the bill that sets the standards for that. The one safeguard in the bill is that there is a requirement that the scheme for the development includes a significant percentage—at least 30 percent—targeted at so-called affordable homes, which will be around 180 houses. But “affordable” here is defined as the threshold for first-home buyers to access the KiwiSaver HomeStart grant, and that is currently $450,000 in Christchurch. That is within no one’s definition of affordable. It would require a major proportion of household income towards a mortgage for a house of that price. Certainly, if the development scheme does not proceed, there are penalties in the legislation, but we would like to see both the trust board and Ngāi Tahu Property, if it is the joint-venture partner, commit to providing homes at a more affordable price than that, as well as ensuring that the subdivision is of very high quality.

We have seen under this Government a major attack on urban trees and on green space in our cities with the changes to the Resource Management Act that require any urban tree to be specifically identified and scheduled and planned for it to have any protection and require resource consent before it can be trimmed or felled. We are seeing in places like Auckland significant loss of large urban trees. So here with this bill sacrificing the reserve land for housing, there is the loss of a quarter of the racecourse and the green space that that provides.

We will be supporting this bill to the select committee, but we will be very interested in submissions, particularly from the surrounding community, because this bill was promised by the Minister Nick Smith in May, and it has taken until now to be introduced. The racecourse has had these proposals for development for some time. We want to be assured that there will be the normal 6-month report-back period so that there is adequate opportunity for people to make a submission, because it seems that we are seeing quite a rush of bills in the last part of the year that affect Canterbury residents. We have seen the “Environment Canterbury (Half-pie Democracy) Bill”. We have got another bill being discussed this afternoon about changes to the way in which land title and surveying is done. We want to ensure that there is good opportunity for people, particularly for Riccarton and upper-Riccarton residents, to make submissions about what they think the implications will be of this loss of a quarter of the racecourse, and its designation and making it available for housing development, which will benefit the racecourse.

At the weekend the finance Minister, Bill English, talked about changes to both the Conservation Act and the Reserves Act to enable more housing development in our urban areas. We would view those changes with significant concern because it is not green space that threatens or impedes housing development, it is the failure of the Government to actually have the promotion of good sustainable planning and good medium-density housing; housing that is based around strong public transport connections and good cycleways so that community facilities and work environments are accessible. We need a promotion of sound urban design, not more urban sprawl. We will be very interested in the submissions on this bill. Thank you.

DENIS O’ROURKE (NZ First): First of all, I want to thank the Christchurch City Council for the very good information that it has provided in support of its promotion of this bill. As we who live in Christchurch know, the Riccarton Racecourse is a very important piece of reserve land for racing in Canterbury, but there is a lot of land there and I think it is quite appropriate that the surplus land should be available for housing because that is also a major objective in Christchurch these days.

The objectives of the bill are well set out in the city council letter of 14 September to members of Parliament, and it says this: “The objects of this bill are to: (a) identify part of Riccarton Racecourse to be available for housing development; (b) provide the Board of Trustees with the powers to prepare, finalise, and implement a development scheme in relation to the development land; (c) confirm that the balance of Riccarton Racecourse continues to be held by the Board of Trustees on trust for the purposes of racing; (d) provide for the continuation of the Board of Trustees in whom Riccarton Racecourse is vested …; and (f) otherwise provide for the administration of the Board of Trustees.” What that means is that we are going to get two important objectives achieved. One is racing, as it always has been achieved there, and the other is the provision of more land for housing, which is also an urgent priority in Christchurch.

So the key purpose of the bill is to increase the supply of affordable and market housing in Christchurch because, following the earthquake sequences of 2010 and 2011, the Christchurch housing market has faced significant challenges as far as both the availability and pricing of rental housing and new housing are concerned. In addition to that, there has been further pressure resulting from the influx of workers on the Christchurch rebuild. The pressures have resulted in high prices for houses and extraordinarily high rents for rental homes. So with this bill, the board of the Riccarton Racecourse will be making better use of land that is surplus to provide for that major objective in the greater provision of housing in Christchurch.

I am pleased to see that the proposal involves building at least 600 new homes on the site, with about 30 percent of those to be reserved for more affordable houses. Now, that is totally in line with New Zealand First policy—that is what we want to see, although I think we would prefer to see 50 percent as affordable homes, rather than 30 percent. Nevertheless, this is a pretty good effort. “Affordable” is actually defined in the bill as “below the threshold for first home buyers to access the KiwiSaver HomeStart grant”. Clause 6 actually says this in defining the meaning of “affordable house”. It says: “ ‘affordable house’ means a house that has a maximum sale price at the date on which the house is sold as required by section 9(a) of—(a) the amount at which a person eligible for a HomeStart grant in Christchurch City would be able to purchase the house and receive the grant; or (b) if the HomeStart grant scheme no longer exists as at that date, the last amount that applied under paragraph (a) when the HomeStart grant ceased; or (c) $450,000 if the amount referred to [in paragraph (a) or (b) (as the case may be)] is less than $450,000.” So I think that is a very comprehensive and very appropriate definition of what an affordable home would be for the purposes of this bill.

The bill would provide for a development scheme meeting specified minimum requirements to be submitted to the board by the Minister. In that regard, clause 9 says this: “Minimum number of affordable houses requirement—[A scheme submitted to the Minister must—] (a) require a minimum of 180 affordable houses on the land to have been issued with code compliance certificates …; and (b) provide for compensation payable to the Crown in accordance with section 14 if that minimum number of affordable houses requirement is not met.” That means that we will see at least 180 affordable homes—and I think that is a good effort—but, as I have said before, 50 percent or 300 affordable homes would have been better.

However, the whole development is very welcome in Christchurch where there is still a very significant shortage of homes, and what the Government has done is, I think, quite insufficient to meet that shortage, as in Auckland. But it is especially pleasing that this development is happening because it is quite near to the central city, and it is very proximate to excellent public transport, existing schools, shops, doctors, and many other facilities.

The enabling bill also provides for compensation to the Crown if affordable housing is not achieved within a specified time frame, as I have already mentioned. In that regard, clause 14 says this: “(1) A scheme submitted to the Minister must (a) provide for the compensation payable by the Board to the Crown if a scheme is approved and the Board fails to meet the minimum number of affordable houses [requirement] referred to in section 9(a) …; and (b) specify the amount payable, or the method to be used for calculating the amount payable, which must include or provide for the following: (i) monthly compensation, starting 5 years after the approval date, of $1,500 per month for each house by which the number of houses that meet the time limit in section 9(a) is less than 180; (ii) maximum compensation payable for each house of $17,000 …; (iii) the remission of compensation in part or in whole if, for reasons specified in the scheme, it would be unreasonable for the Crown to enforce the compensation …”. So there is a bit of a let out clause if it is unreasonable that that compensation should be paid. I think that is a very adequate way to ensure that there is a very firm incentive for the developer to ensure that the affordable houses that are to be built are actually achieved.

I very much approve of legislation that has teeth. This has teeth. I think it will mean that the affordable houses we want to see will actually be built. I think the bill is well drafted and well-thought-out. Indeed, it could be a good template for others in similar circumstances elsewhere in the country or, indeed, elsewhere in Christchurch, because there is actually a significant amount of other surplus land available, both in Christchurch and in Auckland where the shortage in houses is the most acute. This is one good way of achieving more affordable houses and more homes generally in areas where there is a housing shortage. New Zealand First is happy to support the bill and to congratulate those who have conceived it.

NUK KORAKO (National): Kia ora, e Te Mana Whakawā. It is indeed my pleasure to be able stand here today and talk about the Riccarton Racecourse Development Enabling Bill and the Riccarton Racecourse Bill. I do this as a member of this Government, as a Christchurch ratepayer, and also as a member of the Ngāi Tahu iwi. This is just great legislation, when we think back 5 years ago to the devastation that happened right across Christchurch and other parts of Canterbury. We are able to talk about legislation that really does give us a vehicle to be able to continue on with the great development that has happened to date under this Government. And, particularly, we are talking about the 13,000 houses that were lost and the incredible job that has been done to rebuild that housing stock and to make them very much warm, safe, and healthy houses. Just listening to a couple of the speeches from the other side of the House leading up to mine, the other thing is that in some ways I congratulate them, but in other ways some of the discussion is that the glass is half empty. I want to talk about the fact that the glass here is very much half full and continues to be topped up all the time, particularly with this legislation.

When we look at these two bills, I think the important thing—and it follows on from my speech 2 weeks ago now around the Greater Christchurch Regeneration Bill when I talked about this—is kotahitanga. I talked about how the major stakeholders who make these things happen in Christchurch actually do work very, very closely together and work in a sort of true partnership. So when we look at this bill, this bill is definitely about cooperation. It is a cooperation with the Crown, it is a cooperation with the Christchurch City Council, and it is a cooperation with the Ngāi Tahu iwi and also Riccarton Racecourse.

In that sort of cooperation, what are the benefits then, and what does it bring? What it does is pave the way for a really exciting, innovative new housing development in Christchurch—that is what it does. Then the other part of this is what those stakeholders actually bring to this development through this legislation. Looking at the Riccarton Racecourse first of all, what it brings is the land. In doing that, it will be able to ensure that it is actually able to generate income as well. The next one is the Ngāi Tahu iwi. What the Ngāi Tahu iwi will bring, through its property company, is specialist knowledge within property development. What that does in turn, particularly for iwi members, is generate income for those iwi members. It generates more income for them that gives them more education scholarships, it gives them more access to the fine savings scheme that they have called Whai Rawa—all of these sorts of incremental value things that are done through the various subsidiary companies of the iwi.

The other thing is the benefits that it also brings to the Christchurch City Council and to the Crown itself. Looking at the Christchurch City Council and then looking at the people of Christchurch themselves, what this does is give another 600 houses within this development. But the real unique thing about this development is the fact is that within it, they are able to include something that is actually possibly, in some of the other developments, something that has been very difficult to achieve. And what I am talking about here is affordable housing. Within this development—which, as I say, is very unique—is the fact that within the 600 houses there is going to be a minimum of 180 houses that are actually going to be classified as affordable housing. That classification works. The fact is that in practice this means that the houses need to be priced below $450,000 and then they are only for first-time homebuyers who can actually access the Government FirstHome scheme. So it all sort of really connects together on moving forward in partnership.

To me, though, this legislation also allows—as the previous speaker from New Zealand First, Denis O’Rourke, said—for a template to be developed by which we have legislation that allows land to be released, because originally it was actually tied in with these ancient laws as being about land use. So it is actually enabling land use to continue through using land not for the specific purposes that it was laid down for but for a more specific purpose now in the 21st century, and particularly around the aftermath of the tragic earthquakes in Christchurch.

I think that this legislation really does define the way forward, particularly with healthy homes. It goes forward, particularly when we talk about Treaty settlements and what could be, when we look at the template that it is developing. Ngāi Tahu also have the right of first refusal, and so they are able to sort of work that through where they are contributing to this development using that right of first refusal process. The other part is around those businesses, particularly the Riccarton Racecourse, being able to sort of shed some of that land, and even keep the original intention, which is the racecourse itself, but then be able to use a large part of that land for social development, particularly houses.

These bills are indeed part of an excellent process that is freeing up land for economic development in Christchurch, letting Riccarton Racecourse secure its own future through the assets it already controls and bringing in those partnerships that I have talked about. This is great legislation. This is really a way forward. It is an excellent template also for the future of freeing up land to do such excellent work as this legislation will allow it to do. I have no hesitation, and I would like to commend these bills to the House. Kia ora.

KEVIN HAGUE (Green): I think my colleague Eugenie Sage has already indicated that the Green Party will be supporting this legislation at first reading. We will then be very interested to hear the submissions that are made, particularly by local Christchurch people, and then determine what position we take on the legislation thereafter.

The earthquakes that devastated large parts of Christchurch, and indeed the wider Canterbury area, have, according to the ledger of effects, left a permanent and highly negative impact on those communities. If there is one positive thing to have arisen out of those terrible earthquakes, it must surely be the opportunity to make decisions about the future that are less constrained by poor decision making in the past; that the opportunity to reimagine what the city could be is in front of citizens of that city—and early on in the rebuild process it seemed as if that opportunity was going to be grasped. There was a process that involved a lot of public input into how Christchurch should be in the future. Unfortunately, it seems that some of the momentum behind that process—some of that opportunity—has been lost and is being lost. Our concern about the bills that sit before the House today is that this might be another case of a lost opportunity or an opportunity at least half lost.

The opportunity that arises from the need to build new houses is the opportunity to build houses in a different way—to build houses, as Bob Burnett has done in Christchurch, to a much higher standard of energy performance, for example. Why can these houses not be 10 Homestar - rated, for example? The opportunity arises to create medium-density housing that is clustered around public transport nodes. I am not sure that that is going to be the case with this housing development. Once again, possibly it is an opportunity lost—the possibility of creating housing development that sits in balance with the natural environment around it—and one of the unfortunate aspects of this legislation is that we are losing, as Eugenie Sage has said, one of the few areas of green space, aside from Hagley Park, that is available in the city. So that is the concern that we have.

Auckland is a city built on volcanoes, which gives us the opportunity to stand on top of some of those, and I invite any member of the House to stand on top of Mount Wellington and have a look at the housing developments nearby because they demonstrate pretty neatly what could go wrong with this development. What we see are cookie cutter mansions where developers have done the thing that is the logical commercial thing to do, which is to develop houses to the boundaries, or as close to the boundaries that they can, to create the houses that they can sell for the most. So what we end up with is a development that I believe may well come to be a slum in the future because it provides poor-quality housing, and we do not have to do that.

Other colleagues have spoken about the issue of affordability, and, yes, it is great to see a requirement for some of the houses, at least, to be affordable. Would it not be great to see them all being affordable houses or for it to have an affordability standard that actually relates to the real lives of the people who are actually in need? So there are some reservations. On balance, we support the legislation at this point, but we look forward to hearing what the people of Christchurch have to say about it.

KRIS FAAFOI (Labour—Mana): I note the coincidence of our debating the Riccarton Racecourse Development Enabling Bill and the Riccarton Racecourse Bill on the biggest day of Australasia’s racing calendar, Melbourne Cup day, and I think in about an hour all the competitors will be entering the gates. My money is on Who Shot Thebarman, and the lazy money is on the Prince of Penzance, which was paying about $97 when I last checked, so it has got absolutely no show. So that is money that is gone.

But, having said that, Riccarton Racecourse itself is an important piece of, I guess, social infrastructure for Christchurch, and about 138 years ago a piece of legislation was put in place to protect the land that is Riccarton Racecourse for the purpose of racing in Canterbury. I was not there, but when it was put there Riccarton Racecourse was out in the country. Because it was seen as an important piece of infrastructure that land was protected in legislation, and because of the events of an earthquake we are now here legislating to amend that legislation to release some of the land that has been protected under that legislation for much-needed housing in Christchurch. Obviously, there is high demand for more housing in Christchurch because of the events of the earthquakes in 2011 and in 2010, and 600 more homes will be built on these about 40 hectares, I believe, that will be released around the corner of Steadman Road and Yaldhurst Road.

I grew up in Christchurch. I spent more time at Addington Raceway, but Riccarton Racecourse for the gallops is obviously an important event, especially in the next coming week—show week—where cup day will be held on Saturday.

There is some debate, and that will be had at the select committee, as to whether or not there is enough housing set aside under this project that is deemed affordable in the quantum and also in the price. Colleagues have made the point in this first reading debate as to whether we think that the level of what we think is affordable in Christchurch, which has been set by the Government, is the right level. We will support the debate being had at the select committee. There is a line in the sand but, I think, given what has gone on there and the affordability of houses in general in Christchurch and the lack of affordable housing for those who are really struggling in Christchurch, whether or not we have got that setting right—as many of our speakers on this side of the House have said, we are supporting this piece of legislation so that that will be fully debated at the select committee.

I would like to congratulate all the parties involved in this, actually—the Christchurch City Council, Ngāi Tahu, the Canterbury Jockey Club, and the Riccarton Racecourse—because I think they have found a pragmatic solution to problems that they each have. Obviously, the housing issue will be addressed with bringing 600 new homes online—the city council, you know, freeing up land—but, as our racing spokesperson, it also addresses an issue that the Canterbury Jockey Club has. It faces issues, just like all the other racing clubs around the country—as do most sports clubs, actually—about how it raises money to run its operations and, importantly for racing clubs, about how it raises prize money. The ability of Riccarton Racecourse to release this land, to go into a partnership with Ngāi Tahu and to hopefully make some profit out of the development, will allow them to keep up the racecourse; to develop the sport in Canterbury, which is very important; but, also, hopefully, to generate some more prize money, because the racing industry, as we see it now, is struggling right around the country, with a lot of clubs really struggling to do the basics.

So in one way this obviously is designed to deal with a housing issue, but it also allows the Canterbury Jockey Club and the Riccarton Racecourse to deal with a serious issue around cash flow and making themselves fit for the future. So in that respect I think it is very forward-looking, from a racing perspective, to be able to let the Canterbury Jockey Club and the Riccarton Racecourse get some more revenue. They have struggled alongside the rest of the city to keep themselves going, and I believe my colleague Megan Woods said that, at the time of the earthquake, Riccarton Racecourse became a very important part of the community to farewell those who had passed away.

So to make sure that this racecourse stays strong—it is an important part of the city. Our forefathers knew that 140 years ago and protected it, but we do need to release some of this land now to make sure there is more housing and there is more investment for the race club to make sure racing is strong in Christchurch.

JOANNE HAYES (National): I stand to take a short call on these companion bills, the Riccarton Racecourse Development Enabling Bill and the Riccarton Racecourse Bill. I am very pleased about where we have got to with these, getting them into first reading and especially the fact that the Riccarton Racecourse board is allowing 33 hectares of the 123 hectares that it has to go into housing development. Many of the people here have already spoken about the type of housing development, but it really is a reflection of the way that the people of Christchurch and of Canterbury are starting to develop and are starting to move from the recovery stage into the regeneration stage.

In 2010 and 2011 we stood and we witnessed that about 13,000 homes were destroyed through those two earthquakes, and this Government has committed, where it can, to replacing as many of those homes as it can. In 2014 the Government built 4,400 homes in Canterbury. These particular companion bills will add another 600 new homes to the housing project in Christchurch City. I guess the beauty of these bills is that 30 percent of those homes are being set aside and priced on a cap of $450,000, which allows those homes to be set into the affordable housing category—something that was part and parcel of the Christchurch Housing Accord, which was signed with the Christchurch City Council. That accord increases the supply and the affordability of houses in Christchurch.

I too want to add my thanks to the Riccarton Racecourse board, to Ngāi Tahu, and to the Christchurch City Council for their foresight in this proposal for the development of these homes. I look forward to hearing the submissions from people in Christchurch over these particular bills, and I look forward to the full select committee process as we start moving these bills through into legislation. I have no hesitation; I am very proud to stand here and commend this bill to the House.

POTO WILLIAMS (Labour—Christchurch East): Tēnā koe, Mr Assistant Speaker. It has been well traversed, the history that sits behind this bill: that the racecourse, of course, was set up over 100 years ago. At that time it was actually countryside, and I think it might have been a day trip to get out there to watch the races. So it is certainly a facility that is well and truly rooted in the history of Christchurch, and the city and the suburbs have grown around it. It is a beautiful example of green space, open space, in the heart of Riccarton. I know that it was a difficult decision for the board to make to relinquish some of its land for this very worthwhile project, but it is a decision that the board has had to make, and we support it in doing so. But not only is it about the survival of the racing club; it is also around ensuring that the facilities, the buildings, the outbuildings, the stables—all of those facilities—are able to be maintained, not only due to damage from the earthquake but actually just over time and the maintenance costs, etc. So in that regard it is important for us to be supporting the club on this bill.

We do, however, have some concerns. The local community, when the bill was first promoted, of course spoke with the local MP, Dr Megan Woods, about the loss of use of the land. It is a piece of land that many of the locals walk through. They walk their dogs in it. It is a lovely park area, quite open, but also sheltered at the same time—beautiful trees. So they were concerned about the loss of that land, and I know that in discussions with the board at that meeting that Dr Megan Woods held and at other times there has been a lot done to reassure the community that the facilities and the ability to enjoy that part of the racing club will be protected and will still continue to provide some recreation for them.

I do want to say it is an important partnership, too, with Ngāi Tahu Property. It is a very interesting venture, and one that Ngāi Tahu are definitely in the right position to take advantage of, but I do recall when I and my colleagues Dr Megan Woods and the Hon Ruth Dyson went to speak with them about the development, I had some questions about the level of affordability they were predicting. I remember at the time suggesting that around $450,000 was out of the purview of many local Christchurch people, and at the time I did make the statement that for many people it is not affordable. The repayments on a 15-year mortgage with a 20 percent deposit would take 75 percent of the wages of a household on the median income before tax, and I think that is fairly significant, because it does suggest that affordability is a topic that we perhaps need to resolve at the select committee consideration. What is truly affordable for the people of Christchurch?

The other issue that we raised at the time was around the exemplar status. From what I recall, and I am happy to be corrected on this, I had believed that this particular development did not meet the criteria for exemplar, although I see that it is quoted as being one of the six fast-track exemplar subdivisions. I was of the view that even though it met most of the criteria, it did not meet all of them, and it was not actually an exemplar subdivision. An exemplar subdivision has percentages of affordable homes within the development. It has a certain level of urban design. There are many other criteria—the type of building materials that are used, etc. I am unsure, and I would like to have that corrected if that was the case, but I am unsure that this is actually an exemplar subdivision.

I am also concerned that property development in this city has tended towards the larger three and four-bedroom homes, where, really, a range of different types of properties—smaller properties, particularly—are really needed across the city. I know that this is a development that will require a certain look and has a certain price point, but I would be encouraging anyone who is listening to this debate who is involved in property development to really look at the opportunities that lie in providing homes for different family groupings—whether it is for single people, for couples, or for smaller families—because we have tended to go down the route of the larger four bedroom executive-type homes. A lot of the developments, of course, that happen on the North Island are on the very, very fringes of cities and have difficult transportation connections into work and schools, or very loose connections to major facilities.

I am not going to talk too much more on this bill. It has been well debated across the House. Just in reviewing, I am concerned about $450,000 being set as an affordability level. I think we could do better than that. As I say, I would hope that the concerns of local people are addressed during the select committee process. There is an awful lot of select committee work being undertaken in Canterbury over the next few months. I hope that the select committees and those who will be involved in hearing submissions on the range of Canterbury bills are actually given an appropriate period of time and that people who want to submit on a vast array of legislation—going from our local democracy, to housing, to the way the governance of our city and future developments will go into the future. Just on that final concern about the select committee process and the period for submissions, I hope that the public is given enough time and enough information to provide for the appropriate consultation of local communities. On that note, I commend the bill to the House. Thank you.

MATT DOOCEY (National—Waimakariri): I am rising in support of the first reading of the Riccarton Racecourse Development Enabling Bill and the Riccarton Racecourse Bill. As a Cantabrian, I can only but think, when I hear the name Riccarton Racecourse—I remember Reon Murtha with his catchcall: “Racing this time.” Every time I hear that phrase, I think of Riccarton Racecourse. “Racing this time”—I have great memories of Riccarton Racecourse.

When you think about the housing that we need post-recovery—losing about 13,000 houses—there are some real lessons that have come out from the earthquakes about how we deliver housing. It is very much a supply side issue. If you look at average house-price inflation, it is, roughly, probably about 7.5 percent—5.5 percent in Canterbury. But if you look in my electorate of Waimakariri, it is about 3.5 percent. The learning there is that if you free up land, you deliver housing, and that meets demand. I think this bill supports that philosophy. Around 600 houses will be built—this bill will free up around 33 hectares—and 180 of them will be affordable, as we have heard, costing around $450,000. That is also because people will be able to buy these houses and still attain the HomeStart grant that this Government has brought in, the KiwiSaver HomeStart grant. When you look at some of the developments in my electorate—around Beach Grove and Kaiapoi and Silverstream—that policy, that legislation, has incentivised the market to deliver at under $450,000, so that should be supported.

I think the racecourse is in a fantastic location for housing. It is about 13 kilometres to the central business district, but is also placed strategically for both universities, Canterbury as well as Lincoln. It is very handy to the shops at Church Corner and not too far from Riccarton Mall, as well. There are a lot of business parks around Rolleston, around Yaldhurst, and Russley, which many Cantabrians are working in now. So this housing stock will put them in a great place to access that, as well.

In summary, I wholeheartedly support this bill and commend it to the House, and am looking forward for it to go through to the select committee and to hearing the submissions. As has been spoken about, there are a lot of bills around Canterbury at the moment, but I think this demonstrates the commitment this Government has to rebuilding a city that is recovering. It is regenerating. Ultimately, what we are building is the best new city in the world. Thank you.

Bills read a first time.

Bills referred to the Local Government and Environment Committee.

Hon Dr NICK SMITH (Minister for Building and Housing): I move, That the Riccarton Racecourse Development Enabling Bill and the Riccarton Racecourse Bill be reported back to the House by 7 March 2016.

Motion agreed to.

Bills

Canterbury Property Boundaries and Related Matters Bill

First Reading

Hon Dr NICK SMITH (Minister for the Environment) on behalf of the Minister for Land Information: I move, That the Canterbury Property Boundaries and Related Matters Bill be now read a first time. I will be nominating the Local Government and Environment Committee to consider this bill. It is part of the package of practical measures that this Parliament needs to legislate to support the recovery from the earthquakes. It provides much-needed clarity and certainty for determining where the legal property boundaries are on land that has dramatically moved as a consequence of those earthquakes in 2010 and 2011.

Surveyors and others with interests in affected properties have been uncertain about the correct location of some legal property boundaries. This is because the common law in this area has been open to different interpretations under the extraordinary scale of land movements that have occurred in Canterbury. It is not directly on point with the type of land movements that were triggered by those Canterbury earthquakes. The generally accepted survey principle to date has been that legal boundaries do not move with the land. It has been difficult for surveyors to identify and interpret physical evidence of boundaries, all of which have moved with the land movement, in light of this principle. This uncertainty has resulted in surveys taking longer to complete, with reluctance by members of the surveying profession to undertake surveys in the worst-affected areas where the movements have been greatest, and more costs for property owners and delays in rebuild work.

The bill addresses this problem by providing, from the commencement of the new legislation, that legal boundaries of land in Greater Christchurch have moved with the land movements caused by those earthquake sequences. This means that all surveyors can apply the new boundaries moved principle with greater confidence and with certainty. The bill applies only to land in the Greater Christchurch area and to the movement that was caused by those 2010 and 2011 earthquakes. The bill’s approach may not be suitable for responding to future earthquakes in Canterbury or elsewhere in New Zealand or their impacts, which may differ from what occurred in Greater Christchurch. It is a pragmatic and specific measure for what occurred in that city.

Because of the uncertainty that has existed since the issue emerged following the Canterbury earthquakes, Land Information New Zealand has approved surveys by licensed cadastral surveyors on either basis—that is, on the basis that the boundaries did move or did not move—provided the surveys were otherwise compliant with the Cadastral Survey Act 2002. To avoid unfairly penalising surveyors and property owners who acted in good faith and reliance on those surveys, the bill validates surveys done on either basis, provided they were done by licensed cadastral surveyors acting in good faith and without negligence. The bill also confirms that licensed cadastral surveyors and the Crown will not be liable for surveys done and approved in the interim period just because they were done on the basis that the boundaries did or did not move with the land.

The overall impact of these measures is that property boundaries will continue to be located where property owners generally expected them to be, which will result in fewer potential conflicts and disputes than would have occurred under the status quo—that is, if a person has got a building on a property and the land has moved, and if we did not provide for this bill, we could end up with the inadvertent situation of the person having a legal contest with the boundary owner that their building was now incurring on to their title. The approach being provided gives greater certainty and fairness for those who carried out, approved, and acted in reliance of interim surveys.

However, it will result in some boundary conflicts between interim surveys done on the basis that the boundaries did not move and the surveys done after the commencement of the new legislation on the basis that the boundaries did move. The existing provisions of the Land Transfer Act provide sufficient mechanisms to resolve any title conflicts, including Crown compensation in appropriate cases, and the bill confirms that registered landowners, under the Act, continue to enjoy its protection. Other processes and mechanisms outside of the bill, such as private agreements and the Property Law Act 2007, are available to address those survey conflicts. To minimise the cost and inconvenience to affected landowners, boundary corrections made under this amended legislation for alignment with the boundaries moved principle will not be a subdivision for the purposes of the Resource Management Act. That would only add additional expense and uncertainty. Without this provision, landowners could be required to have to go away and get subdivision consent, and that would be unreasonable.

Finally, the bill will amend the Cadastral Survey Act to enable the Surveyor-General to issue voluntary guidance for surveyors. The guidance material is intended to promote consistent interpretation and improved compliance in relation to the mandatory rules and standards made under that Act. It would be good to get this legislation considered and passed promptly by the House to support Canterbury property owners and the rebuild programme faced by the uncertainty of the complexity of these survey title issues. I hope that our colleagues on the Local Government and Environment Committee will be able to seek submissions, consider professional advice, and report this bill back to the House with some priority. I must acknowledge the work of Louise Upston, the Minister who has been responsible for preparing this bill for the House. I would like to thank all the stakeholders who have contributed to the development of the bill, particularly those professional surveyors who have sought a practical solution to this problem through the various consultation processes over the draft bill.

I will conclude by saying it is essential that the people of Greater Christchurch whose property boundaries have been affected by the earthquake have this certainty over their property rights. It is also essential to maintain public confidence in the cadastre and to support the planning, rebuild, and recovery of affected communities, including the repair and rebuilding of land, of infrastructure, and of other property in Greater Christchurch. I consider that the measures introduced in this bill will achieve these objectives in a practical way and commend the bill to the House.

Dr MEGAN WOODS (Labour—Wigram): It is my pleasure to take a call on this Canterbury Property Boundaries and Related Matters Bill and to signal that Labour will be supporting this bill at its first reading and supporting its referral to the select committee so that we can hear the expert advice and the range of submissions that I am sure will flood into that committee for this piece of legislation.

As Minister Nick Smith, who has just taken his chair, has indicated, this is part of a suite of legislation that is currently going through this House that is about the recovery of Greater Canterbury and Greater Christchurch—about how it is that we enter this next phase. Although it is a very small piece of legislation, it is an important piece of legislation. Boundaries and how we record the boundaries round a property are actually incredibly important. For many people, their home and their property is the greatest asset that they will ever own in their lifetime. The legal definition of that plot of land is important for so many things, such as securing security from a bank over that piece of land and the ability to borrow against it, so it is important that we get this right.

What we do know is that the sequence of earthquakes that we experienced in Canterbury over the last 5 years has actually resulted in some quite significant shifts in our land and that we do have to now consider how it is that we are going to deal with this situation. The preferred option in the considerations that the Minister for Land Information, the Hon Louise Upston, gave was that we actually say that the boundary moved with the land. What we are talking about here are land movements over 20 centimetres. There actually were 11,000 properties across Greater Christchurch that fall into this category. So if we stop and consider the magnitude of that and the amount that the earth moved for everybody in Christchurch, we have had quite a 5 years on our hands.

The concentration of these properties is, not surprisingly, in the parts of the city where we had the greatest earthquake damage. So the concentration is in the eastern suburbs, particularly around the New Brighton area, with pockets in the Port Hills area and in Sumner. I am sure that will be of consideration to my colleagues the Hon Ruth Dyson and Poto Williams when they talk to their local constituents about how it is that we look at that. Because when we actually consider the magnitude of this problem—those 11,000 properties I am describing—that is actually excluding some of the worst-hit parts of the city because it is excluding the Crown-owned land in the residential red zone. So this actually is a significant problem that we do have to address, and we look forward to this legislation coming through the House.

There are some significant questions because this is so important. It is the basis of so many people’s security—their land—and where their land stops and their neighbour’s starts is incredibly important if we are going to avoid a number of disputes. We can see that a range of methodologies have been used over the last 5 years by surveyors. Because of this, the bill offers indemnity to the surveying profession under clause 10 of the legislation. This is something that we want to examine closely at the select committee. You can absolutely understand the rationale of why it has been put in the legislation, but we have to stop and ask some significant questions around this in terms of where liability will lie. If we are giving indemnity to the surveyors who carried out this work in good faith and in accordance with their profession, but, none the less, there is an error, where will the liability for those errors lie? That is something that I think the Local Government and Environment Committee will need to think about, will need to listen to expert advice on, and will need to give due consideration to.

We know already that there are 300 properties in the Greater Christchurch area that the Surveyor-General himself has identified, just through a desktop exercise, as being surveyed on a basis different than the preferred approach—that is the language that the documents are using. So we already know that there are 300 properties out there that have to go and have some fix-up work done to them. So we will be looking at that. We will be looking at the issues around liability and who is liable for what, because we know that there has always been a fund that does actually pay for fix-ups for the Crown on these issues.

Minister Smith in his speech asked that the Local Government and Environment Committee give this piece of legislation priority. The Local Government and Environment Committee is a very, very effective and efficient select committee that will give every piece of legislation priority. But one thing I do urge, and I want to put it on the record, is that we will give it priority, but it needs to be seen in the context of the other bills that that select committee is currently working through, and I am not referring to the workload of members here. What I am referring to are the two very significant Canterbury bills that are currently out for consultation at the moment, one of which puts in place our governance arrangements for our regional council—a very significant piece of legislation. It is our little bit of democracy back—that is not. That is something that Cantabrians want to submit on.

We also have a very fundamental piece of legislation that was heard in this House and has now been opened for submissions, and that is the Greater Christchurch Regeneration Bill, which itself is out for submissions at the moment and puts in place the transitional arrangements for how it is that we are going to regenerate our city and our province over the next 5 years. It is not work that can be rushed, but, none the less, the Government has put both of these pieces of legislation through with what I think are less than preferable consultation periods. We have moved amendments to both pieces of legislation, asking that we be able to give proper and due consideration to such important and fundamental legislation as it goes through. So the last thing that I want to see is any attempt to rush this legislation through, because it needs to be seen, just as the Minister described in his speech, as part of a suite of policies and not something—the Canterbury package of legislation—that we can just dump on the people of Greater Christchurch and Canterbury and say: “Submit—think about all these things.” They need to be able to think about these things with due consideration.

I notice in the regulatory impact statement that has come out with the bill that some consideration has been given to the consultation that this bill has gone through. So a sector group was formed, including representation from Land Information New Zealand itself, the survey profession, insurers including the Earthquake Commission, lawyers, Christchurch City Council, the Department of the Prime Minister and Cabinet, and the Canterbury Earthquake Recovery Authority, and that was convened in March of this year. I think, as my colleague the Hon Ruth Dyson has identified, we have to ensure that we are giving property owners and residents the chance to be heard on this. There can be no greater stakeholders in this legislation than property owners and residents, and we have to ensure, as a Parliament and as legislators, that we are properly engaging with this group and hearing any concerns that they might have.

I want to hear what they think about the fact that surveyors have been indemnified. It might not be a problem, but I want the chance to have, under that group, a conversation. I see in paragraph 96 of the regulatory impact statement that we have the feedback from CanCERN and the Canterbury Earthquake Recovery Authority’s public engagement team indicating that residents are primarily concerned that their property rights and physical property boundaries are maintained. Well, take Canterbury Earthquake Recovery Authority as the body. That is a Government department. This is not the way we go and talk to residents, and if you actually look at any kind of satisfaction ratings around that particular Government department, you will see that that is not really the way to gauge what Cantabrians and people in Christchurch are thinking. In fact, there could probably be a no more ineffective way to engage with the people of Christchurch and Canterbury than through the auspices of the Canterbury Earthquake Recovery Authority.

But this is the doozy; this shows how much time the select committee does have to spend on this. Direct engagement with property owners on the proposals will occur through the “In the Know” hub. The “In the Know” hub is a hub set up for people to go and seek advice around the Earthquake Commission and insurance issues. I say to any member on the Government benches that if you want to start having another conversation with someone who has been locked in a battle with the Earthquake Commission and their insurance company for the last 5 years, and start indicating that their boundaries might have to change as well, good luck to you. This is not an effective form of communication. We know how fraught this is. Only last week this facility actually had to be closed down because a resident threatened to go down there with a gun. This is not a place to start having other conversations; this is a place where very stressed and very fraught individuals are going to seek advice. To even suggest that this is a way in which we should be consulting on this legislation is just laughable and it is why the select committee has to be given good time to have proper consideration of this.

Labour will be supporting this bill at its first reading. We think it is important that we get the sequence of legislation right.

SCOTT SIMPSON (National—Coromandel): As chairman of the Local Government and Environment Committee, it is always a pleasure to take a call on the first reading of a bill that is going to be directed to the committee. This Canterbury Property Boundaries and Related Matters Bill is, as the Minister indicated in his opening speech, part of a suite of Canterbury-Christchurch legislation that goes towards the regeneration of Christchurch as we enter into that regeneration phase. I am looking forward to guiding the select committee through this bill through our scrutiny of it, and looking forward to hearing submissions from people from Christchurch and the Canterbury region.

The Canterbury earthquakes of 2010 and 2011 had, of course, an absolutely devastating impact, not only in a physical sense but also in an emotional sense, upon the lives of all Cantabrians. Initially, the responses in the first hours and days were, of course, to secure human life and maintain and protect human life, and then we moved into, in the days and weeks that followed, a period of time to clean up, to tidy up, and to try to gain some equilibrium again for those people who were so affected. Then, of course, we entered, in the months that followed and the years that followed—the 5 years that have followed since—a period of recovery, and we now come to this stage of the next phase, which is the regeneration stage. This bill is designed to assist in that process.

One of the very obvious features of an earthquake, and a significant earthquake of the sort that struck Canterbury, is that the land literally moves, and in some places the land has moved very considerably and very dramatically; in some places less so, but still importantly in terms of the legal approach to how we as a nation define land tenure and the ownership of land. And it is the very basis of our land, our property-owning democracy, that land is defined in a way that is measurable, that does have boundaries, so ownership can be well defined.

What has occurred in Christchurch is that there has been a situation that has arisen that makes, literally, a legal fiction of some of the basic premises of our land tenure system. Landowners have not had the much-needed security and certainty that they need in order to progress their way through this regeneration phase. They have not had the ability to rely accurately upon surveyed lines and boundaries in terms of wanting to re-landscape property, to rebuild dwellings and buildings, and to make sure that they could do so with certainty and a robust nature. The changes that the earthquakes have strewn upon the land literally made a lie of some of the boundaries. Surveyors, for instance, have not been able to rely accurately on the historic lines and they have not been able to exactly determine where new boundary lines should be. There has been an area of dispute, an area of concern, and an area of uncertainty that must have been very professionally challenging for those surveyors and those people involved.

It has been a very long time since I studied land law at Auckland University, but one of the things that I do remember as a basic principle of our land law is that the general rule is that boundaries do not move with the land. So, in most cases, for instance where there might be a slip or something of that nature, then the boundary line stays exactly where it is. The land falls where the land falls but the boundary line remains the same. That, of course, has not been able to be the case in Christchurch.

So this bill, as I read it and understand it—and I will look forward to getting into the nitty-gritty of it as it goes through the select committee—is a bill that would turn that principle on its head, so that it would be a common-sense recognition that in the case of Canterbury and in Christchurch the boundaries did move with the land. So that is a significant change to the basic principle of our land law, and that is why this piece of legislation, which is well defined in terms of its geographic application, is needed to ensure that certainty and structure can go on so that the people of Canterbury can continue with the rebuild in a way that gives them the knowledge and certainty that they need in order to do so.

This bill will bring, I think, some much-needed clarity to people who have not had that clarity until now. The bill will ensure that the boundaries reflect the actual land changes and the real land changes. The bill will reflect a situation where the boundaries will be as landowners generally expect the boundaries to be. I think that is a very good thing. Surveyors will be able to apply the new “boundaries move” principle with certainty, and they will be able to get on and do their job.

There is no doubt in my mind that this bill will speed up the regeneration and the rebuild of Christchurch. I want to assure the Labour member who has just resumed her seat, Megan Woods, that the select committee, under my chairmanship, will give this bill every thorough scrutiny. There will be plenty of time for submitters to make submissions, and we will be able to, I am sure, accommodate this bill, small though it is and important though it is, within the wider range of the suite of legislation currently before the committee. I commend the bill to the House.

STUART NASH (Labour—Napier): It is my pleasure to take a call on this bill. It is an interesting bill because, as the last speaker, Scott Simpson, alluded to, the fundamental tenet of property law is that boundaries do not change. But, of course, we are dealing with a very unusual situation in this case. Let me just give you a little bit of an indication of the situation we are dealing with. I was surprised when I read in the regulatory impact statement that there were just over 124,000 properties that moved between zero and 20 centimetres, but there were 10,000 properties that moved between 20 and 50 centimetres and over 1,000 properties that moved over 50 centimetres. So we are dealing with a situation here that is brought on only by the sorts of things you get in an earthquake, and it does have to be dealt with.

But I do have some concerns about this. Megan Woods alluded to the fact that we are going to support the bill going to the select committee, but let me run through a couple of issues that I hope will be addressed through the select committee process. First of all, let me say, and we know this, that New Zealanders have a love affair with property. I am not talking just about homeowners; I am talking about investors, I am talking about developers—in fact, I think we are trying to deal with one of these situations in the next bill on the Order Paper, when we bring the brightline test in. That is going to be a very interesting debate, but back to this one at this point in time.

What this bill, in my view, seeks to do is to minimise the risk of those who are involved in the business of cadastral surveying or who may have some sort of liability, whether that be the surveyors, whether that be the council, whether that be the Crown. In a way, that is most important because there would be nothing worse than a whole lot of cases being tied up in the courts for years and years and years as this sort of thing draws on due to a whole lack of certainty.

There are a couple of things in the regulatory impact statement that sort of caught my eye. I do not expect answers now, obviously, but, hopefully, these answers will come through in the select committee. We have got to remember that this has been going on now for 4 years. The earthquakes, as we know, were in 2010 and 2011. It is now nearly the end of 2015. This is a fundamental issue with regard to property—i.e., where is my boundary? Where can I build the fence? Where can I situate my property? Nearly everything to do with building a house or a fence has some reference to where the boundaries are, where you can situate a house, etc. We all know this.

What the regulatory impact statement did say is that some surveys have been undertaken and approved using a cadastral survey method inconsistent with the preferred approach. I am not too sure why this was done, keeping in mind that only licensed cadastral surveyors can actually undertake a survey. These are men and women who have gone through I think it is a 3-year university degree course—it might even be 4 years—and they are well versed in how this works. I would have thought that one of the first things that would be dealt with by the Canterbury Earthquake Recovery Authority, or the Crown, or Mr Brownlee was “OK, when we are looking at property boundaries that we know have moved, this is the method that must be used”—or, if not the Crown, then certainly the Surveyor-General.

This was always going to be an issue in Christchurch. The fact that it has taken so long to come here and the fact that some surveyors did use a method inconsistent with the preferred approach makes me wonder why this was done in the first place. Or if surveys were lodged with the council or with the Surveyor-General, with Land Information New Zealand, why were these particular surveys not pulled up, with someone saying “Hey Mr Surveyor, we have slight concerns about your methodology. Can you walk me through why you are doing this?”, so we would not end up with the situation we are in at the moment?

The other thing that concerns me a little bit is that in the regulatory impact statement it actually talks about the status quo, and I am going to quote this: “Under the status quo, case law will eventually emerge to establish the most appropriate approach to surveying within these areas. It is unclear whether the case law will produce a legal interpretation that best meets the Government’s objectives for the survey and land title system in Greater Christchurch in post-earthquake rebuild.” The thing that concerns me a little bit about that is that it talks about the Government’s objectives for the survey. It does not mention there at all the landholders’ objectives or the landholder outcomes.

Whenever there is a piece of legislation like this that indemnifies a profession or the Crown, inevitably there are winners and there are losers. If there was not a winner or a loser, then we would let case law deal with this. But, as mentioned, possibly due to the scale—there are over 1,000 houses that have moved by 50 centimetres or more. Again, I do not know how many of those are in dispute. One of the Christchurch MPs may know this. But there are obviously a number of houses or a number of property boundaries that are in dispute—

Hon Ruth Dyson: There may be 300.

STUART NASH: There may be 300. It is more than the courts can reasonably handle. Therefore, what we need to do to just expedite this is come up with a legislative solution where ideally a case law solution would be the preferred method. But with 300 or 400 houses, as mentioned, we cannot work through this.

But what we really need to understand with this is who are the winners and who are the losers. We cannot have a situation, in my opinion, where the Government is the only winner here and it is the Government’s objective to expedite these, at the expense of a fair deal for Christchurch landholders. We must get this right. Whatever the outcome, I think there will be aggrieved parties. Whether it is the surveying profession, which is indemnified, whether it is the Crown, or whether it is landowners, what the Government, what Parliament, needs to be able to do is to say we went through a very robust process, we understood the arguments, and, due to fairness overall, we came up with a solution that meets the requirements of all parties. That is my concern when I read this regulatory impact statement.

It does go on to say, and I understand the arguments about this, that until we get a piece of legislation—and, obviously, there is not case law because if there was, it would set the precedent—there is a level of uncertainty and cost for landowners. Goodness me, those Christchurch landowners who are still in boundary dispute—for how long has this been going on? It has been going on for far too long. They need a level of certainty. They need the ability to be able to move on, to build that house, or locate that fence, without having the fear or the uncertainty of having to rip it up again. There is no doubt about that.

What we also need is surveyors to be able to apply judgments that lead to rules and outcomes that are understood. As mentioned, at this point in time my understanding is that one of the main reasons for this is that there are inconsistent or conflicting boundary determinations. There is nothing worse, when you get one surveyor saying this and another surveyor saying something else, and where does that end up? If you are lucky, it is sorted in mediation; if you are unlucky, yet again it ends up in the courts, which is far from ideal, especially for residents who will have to foot the bill themselves and no doubt have faced immense cost just in the rebuild process let alone in taking a case to court where, like I said, there are winner and losers.

The other thing, also, is that there is the belief that there is a lack of clarity about whether the information provided by Land Information New Zealand is actually an accurate representation of the title. This is most important, because the Land Information New Zealand information is what lawyers, surveyors, real estate agents, and, of course, those who buy and sell houses, rely on. If we cannot rely on the Land Information New Zealand information, the cadastral maps that we see on the website or when we go to a legal office, then the whole system begins to fall down. Again, the last thing we need in Christchurch—and, as I mentioned, there are over 130,000 houses that have had some movement—is legal uncertainty—

Poto Williams: More.

STUART NASH: —more legal uncertainty—where people are reluctant to buy a house, or people cannot sell a property, or investors are unwilling to build the necessary rental properties, or developers are unwilling to put up a high rise, or basically anything that hinders the rebuild of this city. The risk of that must be mitigated.

But, as I mentioned, we are going to support this to select committee. Unfortunately, I do not sit on the select committee, but I will be watching this very, very closely because I think there are some precedents that are going to come out of this as well. But, as mentioned, there are some questions here. We do need to know who the winners are and who the losers are going to be, but most of all we do need certainty. I have no doubt there are going to be a lot of submitters on this. There will be great interest from a number of Christchurch landowners and the Crown. We will support this to select committee, and so let us see what comes out of that. Thank you very much.

MATT DOOCEY (National—Waimakariri): It is an honour and a pleasure to rise in support of the Canterbury Property Boundaries and Related Matters Bill. It is a bill at its first reading and I am looking forward to it being expedited to the select committee, to go through the legislative process, and to get the many submissions from Cantabrians. I think Cantabrians acknowledge the support that the Government is giving Canterbury post-earthquake—it is one of the top four priorities. It is a great day today with the announcement from the Minister of Health of extra funding for Canterbury District Health Board in responding to health care post-recovery. I know that constituents in my electorate of Waimakariri are looking forward to the opening of the new Rangiora Hospital in 2 weeks’ time. So we are committed to Canterbury, to rebuilding the best new city in the world.

When you look at that process we are going through at the moment, from response to recovery to regeneration, we need to ensure that there is legal clarity for the rebuilding. I am no surveyor, but when we ascertain that survey pegs are not matching up to survey plans, we need to ensure that we get systems right and to ensure that surveyors have the tools that they need to ensure the smooth recovery and the smooth regeneration of the city, because there is a range of issues affecting property owners in Greater Christchurch. I know many affected in my town of Kaiapoi around increased flood vulnerability, around vertical movement, but this legislation will focus specifically on horizontal movement, or lateral spread. That is something that many Cantabrians might not have known about a few years ago, but now the term “lateral spread” is very well known. We know about lateral spread in housing and this is to do with lateral spread in land, around the legal requirement. The surveyor’s threshold is up to 10 centimetres but we know many properties have stretched over that 10 centimetres—even in some cases up to 20 or 30 centimetres. This bill will provide clarity for laws relating to locating legal property boundaries themselves.

So I support this bill wholeheartedly, commend it to the House, and look forward to following it through the legislative process at the Local Government and Environment Committee. This is a select committee I am on, and there are many energetic and focused Cantabrians from all sides of the House on that select committee who will be ensuring the quality of that bill and legislation. Thank you.

EUGENIE SAGE (Green): I am pleased to take a call on the Canterbury Property Boundaries and Related Matters Bill. The Green Party will be supporting this bill partly because—well, obviously because—New Zealand’s whole land title system is very well regarded and it is long established. There needs to be certainty inherent in people when they buy a parcel of land, knowing that they are buying an area—its location, its shape, and its size—that has been marked out by a registered cadastral surveyor, and that title is guaranteed by the Government through the Land Transfer Act; the certainty that then provides to all sorts of transactions in relation to property.

So where you have had an earthquake and where the land has moved, there is uncertainty about property boundaries because of that land movement. This bill is sensible in addressing the issue that surveyors have faced where they have not known where to put the boundaries. In common law the boundaries do not move with changes in the surface of the land. What this bill is doing is recognising that nature is actually more powerful than the law, that the law needs to change, and that our common law understanding of boundaries needs to change in relation to Christchurch and the effect of the earthquakes, so that property boundaries do move where there has been substantial movement of the land.

This has affected a number of properties. As others have said, over 135,000 Christchurch properties have been affected by land movement and that has made it very challenging for surveyors, particularly in those worst-affected areas in the eastern suburbs and close to rivers: in Redcliffs, New Brighton, the lower slopes of the Port Hills, and Sumner. So the bill is, in a way, making the way in which land title is regarded and the way land boundaries are defined by law similar to what happens with water; because there boundaries do move where the waterway moves. I think it is a recognition that nature is more powerful than the law.

We do have some concerns about why it has taken Land Information New Zealand over 4 years to address this issue, because surveyors knew that it would be an issue immediately after the quakes, with the extensive amount of land movement. Certainly, there have been some guidelines that the Surveyor-General issued in, I think, February this year, but there was substantial pushback from the surveying profession because those guidelines confirmed the common law position that the boundaries stayed in the same place and did not move with the land. Surveyors came back and said that a much more pragmatic response was needed from Government, rather than just reasserting the common law position.

We are interested in submissions on the bill. As other speakers have pointed out, the fact that we have got three significant pieces of legislation affecting Canterbury all being pushed through at this late stage of the year and all being requested to have a truncated process by select committee really does undermine democracy because it reduces the time that the public have to make submissions. It reduces the time for officials to actually examine those submissions and analyse the points that are made. It inevitably reduces the time that the select committee has to consider changes to the legislation and to consider submissions. So, again, it is this Government not having a good sound legislative programme, coming up with things late when this could have been put into this House much earlier, and then reducing the opportunity for the public to have their say.

This is important on this bill because although there was a technical advisory group established to provide advice to Land Information New Zealand, that was made up of professionals; it did not include Ngāi Tahu, it did not include residents or homeowners. There was some discussion with CanCERN, but that was all. Yet it is residents and homeowners, particularly those going through settlement of insurance claims and settlements of claims with the Earthquake Commission, who are potentially disadvantaged by changes in the boundaries. So people need to have a say, and Government needs to gets its legislative programme in better order so that the select committee is not being forced to have hasty consideration of important bills such as this.

Nevertheless, we will be supporting it because it is a sensible measure to provide more certainty around land title and to recognise, where the land has moved, that boundaries should move in accordance with that because that is much more practical on the ground. But I would note to the Government that nature is more powerful than the law. The Government’s current approach to climate change is that it has got its head in the sand over the real consequences for Aotearoa New Zealand, both in terms of sea level rise and the incursions on property there and the impacts that there will be on property owners. The Government has got to address that too and address it by mitigating the effects of climate change and reducing our emissions so that in future we do not have to change the law to look at the encroachment of the sea on what people had understood was their property. Thank you.

DENIS O’ROURKE (NZ First): I am going to take only a relatively short call on this matter because I think that most of what needs to be said has already been said, and it is, in the end, a relatively simple issue, even if it does have some quite significant impacts. As others have said, the purpose of the bill is actually to clarify the law in particular circumstances, which are those that relate to locating legal property boundaries of land affected by movement of that land as a result of the 2010 and 2011 earthquake sequences in Canterbury. In addition to that, another purpose is to provide for guidelines to be issued about standards to assist with boundary determinations so that surveyors can do their jobs properly and people can rely on what they do.

It has been very difficult for surveyors to actually do that job in the circumstances that Christchurch and other parts of Canterbury are in at the present time. It is very difficult to identify and interpret physical boundaries, especially surveying pegs and the like, in the circumstances that have occurred. This bill addresses the problem by attempting to provide people, landowners, and surveyors alike with some certainty about legal boundaries of land in Greater Christchurch that have moved because of the earthquake sequences. It does that by providing some flexibility. So what we are going to get is certainty from some flexibility around the general rules that usually apply to the location and identification of boundaries. That is very necessary in the circumstances that have occurred.

So even though I am a lawyer who tends to want to stick by the rules, let me be the first to say this: in the circumstances that have occurred in Christchurch, there is a need to vary the usual legal rules relating to boundaries somewhat, simply to provide for the practicalities of what has happened and to provide certainty for people whose boundaries have moved with the land. That is actually what this bill does—it is as simple as that. It is not incredibly difficult to understand, and I was at a little bit of a loss when I heard some of the Labour speakers who tended to over-complicate what is actually a relatively simple issue.

I am not saying that there will not be anomalies that will occur, but those anomalies will happen whether we pass this legislation or not. The reason for that is that there is a whole array of different things that have happened in Christchurch and Canterbury that will affect property boundaries and their identification. So I agree that there does need to be some flexibility. It is not going to alter the long-term general rules about the location and identification of property boundaries, so there is nothing to panic about. This is simply a bill to assist in practice, with some sensible new legislation to assist people with their boundary identification in the particular circumstances of Christchurch and Canterbury. I welcome that kind of legislation because I approve of good, practical, sensible legislation, and that is what New Zealand First stands for. It is not usually what the National Government stands for, but in this case it has, possibly by sheer coincidence, got it right on this occasion. So I am going to support it and New Zealand First is going to support it with this particular piece of legislation for that reason.

I do think that people need to look to Parliament, when there are circumstances out of the ordinary, with the expectation that we will not simply say: “Well, sorry. That’s the law. That’s the way things are. Go away and deal with it.” I do think you need to have a practical approach, and I want to say this: I spent a long time when I was in legal practice doing work on the West Coast. If there is one part of this country where you need a practical and sensible approach to the law, and especially to property issues, it is the West Coast. There are things that happen there that are actually very—well, I can see Mr Hague nodding. He understands what I mean. What I am saying is that you do need in those sorts of places, those parts of the country, to take a practical approach. I appeared before many judges who took that approach because they knew that in places like the West Coast and possibly other places in this country—

Hon Ruth Dyson: Chatham Islands.

DENIS O’ROURKE: The Chatham Islands—yes, Ms Dyson—is another place. Those judges know that the strict application of the law actually causes so much injustice that they have to take a more sensible approach. This is that kind of legislation, and I commend it to the House simply because a Parliament needs to be responsive to a population that is under stress and needs a good, practical solution to what has happened. This a good piece of legislation. We should all vote for it and just get on with it.

JOANNE HAYES (National): I just want to say thank you to New Zealand First, because this is a sensible, practical bill with a sensible, practical approach. The bill does give much-needed clarity and certainty in determining the legal property boundaries of land that has moved because of the earthquakes. As a National list MP based in Christchurch East, I welcome the bill because the New Brighton area has suffered immensely from the earthquakes, and I believe that this bill will give the property owners there a lot of certainty around where their boundaries are, to make sure that where they want their gardens, their garages, and the places where they park their cars—that that piece of property they are utilising is truly theirs and will remain theirs.

I realise that some property owners have been through times where they have had their properties surveyed by a licensed cadastral surveyor, and we heard the Minister for Building and Housing talk a little bit about that in his speech on behalf on the Hon Louise Upston. This bill validates the surveys done by those cadastral surveyors in good faith and without any negligence prior to the passing of this bill. So it does give certainty around that. This bill also takes the Cadastral Survey Act and amends it—it amends it and enables the Surveyor-General to issue voluntary guidance material to the surveyors.

I believe that our Minister for Land Information, Louise Upston, has worked very hard for the benefit of Christchurch, and I welcome everything that is going to happen from here on out, from the time we move into receiving submissions, to the second reading, the Committee of the whole House, and right through to this bill being passed into law. I for one want to see this happen very speedily for the people of Christchurch and especially for those who live over on the east. So without any further ado, I look forward to the second reading of this bill and I commend the bill to the House.

The ASSISTANT SPEAKER (Lindsay Tisch): I call Mojo Mathers—5 minutes.

MOJO MATHERS (Green): It is my pleasure to take a call on the Canterbury Property Boundaries and Related Matters Bill. As a Christchurch list MP, I have seen firsthand the need for this bill, and I am very pleased to be supporting it. We regard it to be a sensible and pragmatic response to what is a very serious issue in Christchurch.

We are concerned that it took 4 long years for this bill to come to the House. It was apparent immediately after the quakes that there had been significant land movement and a significant impact. At the property that I was staying in at the time, you could walk out the door and see there was this massive shift of the land towards the river. It was very clear that because of lateral spreading, because of liquefaction, and because of the slumping of the land generally in many areas, this had affected the state and nature of the boundaries. So there are literally thousands of properties affected, some of them very significantly, with land movement of over half a metre—50 centimetres. That is quite profound in terms of the nature of determining the title to the land.

What this has meant is that some people’s lives have actually been put on hold. Their plans for their properties’ development or rebuild have been put on hold. Some have found that they have inadvertently built a property that is now technically on the adjoining title of land and so on, because of how the boundary appears to have moved. It is really important that we provide clarity to all of these hundreds of people affected because, otherwise, it is very clear that they are going to clog up the courts with endless disputes. We need a way forward to resolve that so that the rebuild can go forward on firm foundations, as it were.

It is really important that during the select committee stage we do hear from the people who have been affected. The last thing that we want to see is unintended consequences of this bill. We know that there is a problem and we hope that this will be a straightforward resolution to that problem, but it is such a complex issue. The last thing we want to see is, sort of, unintended consequences, and the way to identify that is to have a robust consultation process where affected people can have the time to have their say, to process the contents of this bill, to consider how that will affect them and their property, and then to have the opportunity to provide their viewpoint back to the select committee and for the select committee to consider that properly and get the appropriate advice. So I will be hoping that the select committee will do all of that in really good faith because this is the foundation for much of New Zealand property law and it is incredibly important that we have this result for Christchurch.

Previous speakers have already mentioned this, but there is some concern about the sheer number of bills that are affecting people in Christchurch and Canterbury that are out for consultation at the moment, whether it be the Environment Canterbury (Transitional Governance Arrangements) Bill or the Riccarton Racecourse Bill, or any of the different bills that are out for consultation. It is really concerning that so many are suddenly rushed in, put out, and sought feedback on at the end of the year when it is an incredibly busy time of the year for many people. I hope that that could have been avoided with better planning, and it is disappointing to have this situation in front of us now. Thank you.

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

POTO WILLIAMS (Labour—Christchurch East): Tēnā koe. Thank you for the opportunity to speak and to take this short call. There are really just a couple of points I want to make about this bill, and the first one cannot be emphasised too much, and that is about the rights of property owners in Canterbury and how those rights have been somewhat stretched over the last 5 years. Just to recall, it is not just the earthquake sequence that has impacted on the people of Canterbury, and it has not been just the several tons of liquefaction that they may have had to move off their properties; it is the fact that the latest rates valuations turned up in their letterboxes and there were some significant differences in property values that they had to contend with. There are issues around coastal hazards. There are issues around section 72 notices going on land information memoranda. There is issue upon issue upon issue for the people of Canterbury to deal with in terms of their property, and it cannot be stressed enough that they need to be given the appropriate time, full information, and due regard for their concerns in this process. I am not comfortable that that is actually occurring when we have four Canterbury bills before the people of Canterbury to make submissions on, two of them with quite significantly truncated select committee processes to deal with.

This is a group of people who actually deserve the time and the patience to have all the information presented to them and to be given the opportunity to consider it properly and to know that this House will actually consider their views—not give them a few weeks to consider a huge range of information that impacts many of their lives, impacts the way that the regional council will be made up, impacts the way that the regeneration will occur, and impacts on their property rights. If there is one thing that the people of Canterbury do not need, it is a Government standing over them demanding—

Nuk Korako: What?

POTO WILLIAMS: —that they actually engage in a process when they are not sure that they have full information in front of them. You can say “What?”, Mr Korako, from across the other side of the House, but I am sure that from your office you know as much as I do that our people are very concerned that they have full information.

Let us face it. We are not entirely sure that the surveying techniques that were used, which were out of normal practice, will not impact on boundaries of certain people and that those people will have the opportunity to have those disputes resolved appropriately because the surveyors are indemnified within this bill. There are some real, major concerns for Cantabrians, and I am really concerned that the list member across the other side of the House finds this amusing. I do not find it amusing at all. We currently have 300 disputes. As the process of rebuilding goes on there may be more, so we must give due regard for the concerns of the people of Canterbury, and we must get the assurance of the select committee that they will be given the information and the due regard that they deserve. There are issues, for example, right now where properties do not comply with planning laws, and it is really important that we get these matters resolved. I mean, I cannot state it more strongly.

The people of Canterbury and the homeowners of Canterbury deserve to know exactly where their property boundaries are. On top of everything else that is currently going on in Canterbury, we must make sure that they have all the information they need and that this information is given and their consultation is given due regard. Thank you.

NUK KORAKO (National): Tēnā koe e Te Mana Whakawā. That speech from the previous speaker, Poto Williams, was really interesting, but I want to give it to you from the Government’s perspective, I believe, and also from a Cantabrian’s, someone who has been there all of his life. The thing here is that it is, indeed, my pleasure to stand and speak in support of the Canterbury Property Boundaries and Related Matters Bill’s first reading. This legislation will actually not go down in history as a major piece of legislation; it is a relatively minor change. It is practical and common sense, and that change will let many Christchurch homeowners, who the previous speaker was talking about, get on with their rebuilds. This is good, practical legislation. This is a hallmark of this Government, and particularly around the Christchurch rebuild.

This bill is just the latest step in ongoing support that this Government has given to Christchurch. Last time we were here in this House we talked about the transition from rebuilding to regeneration, and that is the first part of this. During the other debate today we talked about the Riccarton Racecourse legislation and how that is actually going to really create a catalyst for over 600 houses to be developed, and 180 of them are affordable houses. This bill confirms that this Government’s commitment is to do everything it can to smooth the way for individual owners who are rebuilding, but also for the regeneration of Greater Christchurch as a whole. This is on top of a lot of things that we have done already as the National Government—$16.5 billion has been put into the Christchurch rebuild by this Government. Last year we heard from members on the other side of the House about how slow the rebuild has been. Where have you been? Go into parts of Christchurch; there were 4,400 new houses last year. I mean, there are incredible things that are happening, and within the central business district as well.

This type of legislation really is the type of legislation that is going to continue with the sorts of great things that the Government is doing within the Christchurch rebuild. Take the Hagley Oval and the Bus Interchange—they are open. We are now seeking proposals from design firms for the Metro Sports Facility, and 96 percent of the central city road and pipe repairs have been completed. That is something. The infrastructure is incredible. This is also part—

Stuart Nash: What’s this to do with cadastral surveys?

NUK KORAKO: It is directly related—just like you did. On an individual level, 162,000 Earthquake Commission claims have been resolved. Is that not incredible? I have listened to speakers who actually do not come from Christchurch or who have not lived there for a long time, and when you look at this side of the House, there are positive steps going forward to actually continue on with the Christchurch rebuild. Going for the common-sense option has always been what this Government does, and that is very much so within the Christchurch rebuild, and the option that causes the least disruption is the very important one with this issue.

So this is great legislation again, like the three other bills that have been presented to this House—the ones today and the one a couple of weeks ago. This bill does that, and, therefore, I commend the bill to the House. Kia ora.

Hon RUTH DYSON (Labour—Port Hills): I just want to change tack slightly and try to talk about the bill, actually, rather than listen to boastful, congratulatory messages from list MPs. This is a really serious issue and I am very pleased that the bill is before the House.

I want to commend the Minister, the Hon Louise Upston, for introducing it, but also commend her for the respect that she showed all the Canterbury members of Parliament by giving us a briefing quite early on in the piece about the proposal, and then a briefing again today before the debate that is about to conclude. I enjoyed that and I really appreciate her doing it. I want to commend Nick Smith for standing in for her today. He understands these issues, and I think his contribution to the House was worthy of a positive mention, as are a number of the others. But I just want to highlight two—not out of disrespect for the other contributors but because two of the earlier speakers made contributions that I want to respond to.

Scott Simpson is the chair of the Local Government and Environment Committee, and I want to thank him for what I believe was a genuine—and will be delivered—promise to the people of Canterbury that this will not be rushed legislation; that it will be taken at a pace that recognises that this issue needs to be resolved but will not be rushed through in a way that means that the people whose literal properties are impacted by this legislation do not get a fair say. I think we can meet what some may see as a tension between letting us get this through as quickly as possible, or as quickly as is sensible, and also the need to listen to peoples’ concerns, views, praise of it, or whatever their views may be. So I want to thank Scott Simpson for making that commitment on behalf of the Local Government and Environment Committee. I also want to acknowledge that he has done a bit of legal work. You would not really think that he was a lawyer—he seems like such a nice person. He has done land law as well, and he emphasised the fact that this is actually quite a significant change in the law.

I do not think we should just say, as the speaker before, Nuk Korako, said: “This is just a minor matter.” Actually, it is quite a fundamental change in the law—as it has always been, since the first time we had property boundaries recognised. So I want to acknowledge Scott Simpson’s thought about the significance of the legislation. I also want to acknowledge Denis O’Rourke, the New Zealand First member of Parliament. He is another person who has had experience and practice in the law, and he did comment that Labour members were overly complicating it; that this was straightforward and that it just needed sorting. I am not in agreement with the point that we were overly complicating it; I do think that we were raising concerns, but I also agree with his fundamental point that this is a matter that needs to be sorted.

In fact, the Law Society raised significant concerns about this right back in 2012. It is nearly the end of 2015 now. This is not a matter where the Government could say: “Oh well, you know, we need to push this through because it needs resolution.” For 3½ years surveyors and the Law Society have been raising legitimate concerns about what is happening to people’s property, their property rights, their insurance, and their rebuild; those concerns, properly raised, have fallen on deaf ears until now. So I do not want any members of the Government saying that this needs to be rushed through. I would like them to answer the concerns that we have.

I commented earlier that I was grateful for the briefing that the Minister, the Hon Louise Upston, gave to all of the Canterbury members of Parliament—I think that was a good thing. I asked her at that meeting to please ensure between that meeting and now—which is several months; it was not just last week—that homeowners who were impacted by this legislation were consulted and given an opportunity to say “This will sort it.”, or “This will cause more problems.”, or “Why don’t you think of that?”. I regret that despite me having a commitment by the Minister that that would be done, she unfortunately went to the Canterbury Earthquake Recovery Authority—not a highly recommended strategy for anyone who has had to deal with that organisation—and it recommended going to CanCERN. CanCERN is an advocacy organisation; it does not have the technical expertise or the background in this particular area. It has been a very valuable organisation for a lot of things, but it does not have the expertise in this area.

This is a legal matter about boundaries and the impact on homeowners—individual property owners or their neighbours—of what is going to happen now that we are going to clarify—actually, change—the law. Instead of what we have always done traditionally since the start of property boundaries, which is say that boundaries do not move with the land, we are going to turn that law on its head and say that in Canterbury they do. I do not know what that means for other parts of New Zealand. What about when there are huge floods; what about when there are cliff collapses; what about when there are other significant land movements? Will this just apply to Canterbury, and how will people who are negatively impacted in other parts of the country feel about that? I do not know.

In Canterbury, we have 124,000 people who have had small land movements of less than 20 centimetres. We have got 10,000 people who have had land movement of between 20 centimetres and 50 centimetres—that is not insignificant; that could have quite an impact on the boundaries. And we have got over 1,000 people who have had land movement of more than 50 centimetres—so that is 132,000 people. In the briefing that the Minister gave us today, she said that there are about 300 people who Land Information New Zealand know of for whom land movement and boundaries staying fixed—for instance, not moving with the land—are in dispute. That is a significant amount and this legislation does not make it clear if there is a fair, speedy process about how those disputes are going to be resolved if we change the law in the manner that is proposed in this bill.

So those are pretty significant questions, and they are layered upon a population who has been through a lot of stress. People went through a lot of stress through the quakes—I know some members are a bit over hearing about that, but tragically it is a reality for people living in Canterbury. We have also had significant floods of a different nature than we have had for many years; we have had thousands of homes identified as being on potentially contaminated land; we have recently had the coastal hazards notification by the Christchurch City Council talking about the increase in sea level and the increase in vulnerability as a result; and, because of the earthquake sequence, we have increased liquefaction vulnerability and increased flooding vulnerability caused not by sea-level change but by the land height.

The point of raising this is that these changes cannot just be imposed on a population. They need to be worked through sensitively and carefully, and with particular attention to detail about what impact this will have, perhaps, on individual property rights—I was hoping that the ACT member might take a call and raise that very point but he has not had an opportunity to do that so far—and also on the potential impact when people are currently planning either a repair or a rebuild of their earthquake damaged or destroyed property, or perhaps are looking to make an extension. What difference will this make in practical terms to people’s property rights?

I think that people need to know the answer to those questions before we progress to the final stages of the legislation, and that is the point of the select committee. I am sure that the select committee will be meeting in Christchurch. We need to remember that this is not Christchurch-specific; it affects our neighbours in Waimakariri and Selwyn District Council areas as well, and it certainly needs careful and sensitive thought.

I just want to conclude by acknowledging Adrian Cowie. Adrian Cowie is a licensed cadastral surveyor. He said—I think right back from 2013, but certainly consistently throughout 2014—that the incorrect legal boundaries that we were operating under were causing catastrophic consequences for Cantabrians. Those were the issues that were raised in personal letters to Gerry Brownlee and the Prime Minister, John Key. They have taken over 2 years to be responded to. I do not want us to now rush the outcome; I want us to get it right—

The ASSISTANT SPEAKER (Lindsay Tisch): Sorry, the member’s time has expired.

PAUL FOSTER-BELL (National): Tēnā koe, e Te Mana Whakawā. It is a pleasure to take a brief call on the Canterbury Property Boundaries and Related Matters Bill in this first reading debate. As my colleagues on this side of the House have commented, this is a very important and timely bill for the people of Canterbury. I have to actually disagree with some of what Ruth Dyson, the previous member, who has just resumed her seat, has said. The technical issues around the surveying of land and the legal definition of boundaries are technical—they are complicated—but this legislation does not need to be, necessarily, a highly complex and technical bill. So, actually, my colleague on this side Nuk Korako is correct in that it aims and seeks to be a very practical measure that will allow people to have the assurance that the boundaries of their land are known to them, and that they, by and large, will be what people already think their boundaries to be, taking into account the catastrophic effects of the seismic movement in the province of Canterbury.

I think we do have to draw a very clear distinction between the earthquakes, which have disrupted legal boundaries in the better part of one of New Zealand’s great provinces, and erosion of a certain coastal area or a flood that would affect a far smaller region. This is a far larger problem. As the member quoted, it affects over 130,000 property owners in some shape or form, and there are hundreds of people whose boundaries have moved as much as a metre—a very significant movement in the legal context. This is not a matter that this Government takes lightly. I sit on the Local Government and Environment Committee and I am sure, under the very wise chairmanship of our chair, Mr Scott Simpson, we will be paying very close attention to submissions from Cantabrians and seeking to ensure that this is the best possible resolution to such an enormous disruption of legal boundaries in that great province.

This is a bill that has been welcomed by stakeholders. The New Zealand Institute of Surveyors president, Mark Allan, said that in his view the current draft of the bill promotes the option that causes the least disruption and the least concern for landowners. Mr Allan is very well-qualified to comment on these matters. Surveying is a very important aspect of the service that the Government provides in terms of land information. It has come a long way since the early days of New Zealand, when the Surveyor-General, along with the colonial Governor, secretary, and treasurer, were among the very first four officials of the Crown appointed here. It has come a long way since the days of theodolites and measuring in yards and miles and feet, and we now have technical tools at our disposal such as satellite, geospatial information systems, and measurements with lasers that can give a huge degree of accuracy. But we have an unprecedented problem in that such a huge movement has occurred in the land itself.

So this is a very timely bill. It will be considered very carefully by the committee, and I commend it to the House.

Bill read a first time.

Bill referred to the Local Government and Environment Committee.

Bills

Taxation (Bright-line Test for Residential Land) Bill

Second Reading

Hon MICHAEL WOODHOUSE (Minister of Immigration) on behalf of the Minister of Revenue: I move, That the Taxation (Bright-line Test for Residential Land) Bill be now read a second time. The proposals in this bill, together with those contained in the new Land Transfer Amendment Act, are designed to improve compliance with the tax rules on the sale of residential land. The changes were well signalled by the Government in Budget 2015 as part of a package of proposals to improve compliance with the current land sale rules and help to ensure that people pay their fair share of tax on gains from property sales.

To recap briefly, the main feature of this bill is a new, easy-to-enforce brightline test to supplement the current intention test in the Income Tax Act. The intention test makes gains from the sale of land taxable if it has been bought with the intention to sell for profit. The test can, however, be difficult to enforce due to its subjective nature. To deal with this problem, the bill proposes a new brightline test that will require income tax to be paid on any gains from residential property purchased and sold within 2 years. The only exceptions are an owner’s main home, inherited property, and property transferred in a relationship settlement. The proposed test applies to only the disposal of residential land. It does not apply to business premises or farmland.

For further clarity, the bill also defines certain terms such as “residential land” and what a person’s main home is, so taxpayers understand their income tax responsibilities when selling a property or residential land that is subject to the new test. It also clearly identifies the start and end of the 2-year brightline period. The period will generally start when a person obtains registered title for the property and ends when the person enters into an agreement to sell the property, with an additional rule for sales made off the plan. The proposed test will apply to gains from residential property acquired on or after 1 October 2015 and disposed of within 2 years.

Those are the main proposals in the bill. For completeness, other measures prevent circumvention of the new test, in particular through the use of companies or trusts. The result is a straightforward, easy-to-enforce rule that will help improve compliance with the land tax rules for land sales. In bringing the bill to its second reading, I would like to thank the Finance and Expenditure Committee for its consideration of the bill and its recommendations on points raised by submitters, which have helped improve the clarity and workability of the bill. I refer, for example, to new amendments to ensure that land use for a genuine farming business that may have had a bad year does not come within the brightline rule. This is consistent with the policy intention of the brightline test. I commend this bill to the House.

GRANT ROBERTSON (Labour—Wellington Central): Thank you very much, Mr Assistant Speaker Tisch. I am sure, given—how do I say this diplomatically—the stature of Minister Woodhouse, who has just resumed his seat and, indeed, of the Assistant Speaker in the Chair, you will forgive my taking a moment to congratulate Michelle Payne, the winning jockey in the Melbourne Cup. She is the first woman to ride a winning horse in the Melbourne Cup in 155 years. I think it is a triumph worth noting.

Hon Michael Woodhouse: It would never be me. I’m about 25 kilograms too heavy.

GRANT ROBERTSON: I am sure that Mr Woodhouse, if he looks for an alternative career in the coming years, could find himself there—I do not know. But it was a wonderful effort by Michelle Payne—[Interruption] No, that is right. But it was a wonderful effort by Michelle Payne to win that race—and, yes, I also note that the Labour Party’s racing spokesperson Kris Faafoi did manage to somehow or other fluke a win by betting on that horse. Obviously, drinks are on Kris this evening—thank you very much, Mr Faafoi. We could actually put that as an amendment to the bill—to include Kris Faafoi’s generous contribution to our evening entertainment.

To return to the matters at hand, the Labour Party believes that this piece of legislation is a political response by the National Government to a very serious issue of speculation in the housing market. It is an inadequate response. It is a response that is driven by trying to look as if the Government is doing something without actually taking on this issue. It is a token gesture where something far more serious and far-reaching was needed, and if any proof of that was needed, we learned in this process that officials have said that the implementation of this 2-year brightline test will raise an additional $5 million per annum. That is it—that is it. That is the extent of how much this will raise, and we heard time—

Hon Phil Goff: And the extent of its effectiveness.

GRANT ROBERTSON: Of the effectiveness—that is right, Mr Goff. We heard time and time again in the Finance and Expenditure Committee, from every submitter bar one, that this legislation was inadequate, that it would capture the wrong people, that it was confused, and that it was incoherent. One of the senior partners at one of our largest tax accounting firms said he was “professionally confused” by the Government’s approach. That is one of the senior partners at one of our largest tax firms who said he was professionally confused by the Government.

Government members know that this is inadequate. Government members know that this is a political response, because we learnt that in the build-up to the Budget. When the Budget papers were released in July, we looked to what happened in the build-up to the Budget. There were no papers on this, because the Government rushed this through because it thought it had better look like it was doing something. And here we are in November passing the legislation for a bill that gets implemented on 1 October. It is completely hopeless. It is hopelessly implemented and it is hopelessly designed, and the Government really should hang its head in shame.

One of the core elements to emerge during the select committee process was exactly who would be captured by this legislation. Who would be captured? Is it the speculators whom we are really concerned about, who are driving up the cost of housing in our biggest city, Auckland, particularly? Today when we look at the price of houses in Auckland, we have Quotable Value telling us we have got an average house price of $980,000—essentially, a million-dollar average house price in Auckland—putting that out of reach for most first-home buyers. The data shows us that Auckland house prices have risen by $21,500 a month in this last year. There has been a 25 percent increase in the cost of houses in the last 18 months. This is an Auckland housing market out of control, affecting the financial stability of our country, and at the speculation end the Government arrives with a very damp bus ticket, because that is as good as this gets.

What the submitters told us was that if you are a person who is genuinely in there speculating, you will just wait out the 2 years. It is a 2-year brightline test. You will just say at the end of 2 years: “That’s right. I can now move on and continue with the behaviour that I would have indulged in.” The people who will be captured are the people who may have bought one property as an investment property and then something has happened in their lives. Something happens that means they have to sell it. Perhaps they lose a job, or somebody has to move, or somebody’s circumstances change, which means that they do not feel that they want to have that investment property any longer. They will be the people captured by this legislation. Every single submitter acknowledged that. Every single submitter came to the committee and said: “If you’re trying to get the real property speculators, you’ve got this wrong.” Two years is just a short amount of time to wait if you’re in that business. After 2 years and 1 day you are away.

No doubt Government members will get up and say that that is all right; speculators will be captured by the intention test. There is a logical flaw in that argument. The reason we are here debating this legislation is that the Government tells us the intention test does not work now. So why will it suddenly work at the end of a 2-year period? And it is not just the submitters who said this. When Treasury was asked for advice about this from the Government, it told the Government 2 years was inadequate. Actually, it said 3 years was inadequate, as well. It said it “should not be pursued as it is likely to yield very little revenue while generating significant behavioural distortions.”

Treasury went on to say it considered a 5-year period “would be the minimum at which the gains of taxing the income outweighs the costs that the test would incur through behavioural changes.” Treasury went on to say that if you look internationally, these kinds of rules and tests are applied and are useful at the 5-year mark, but that advice was ignored, because the Government was not really serious about this—because the Government was not really serious about dealing with speculation. It just wanted to look and appear as if it had done something. So that inadequacy around the length of time really does fundamentally undermine what the Government claims are its goals.

The other point that submitters to the select committee were at pains to make was that the legislation fails the basic test for tax law: to be clear and simple to implement. A number of submitters raised their concerns about the legislation being inconsistent with other aspects of property law in its definition and coverage. Why does this matter? It matters because that means that tax accountants—those who advise people, those who said that they were professionally confused by this legislation—will struggle to be able to interpret what it means, and loopholes will end up being created.

The legislation is beset with definitional difficulties, and in the Committee of the whole House stage we will work through these and, I hope, be able to improve the legislation that the Government has put up. But, obviously, there are concerns about the definition of “main home”, which arose from the previous legislation that this House passed. That definition of “main home” continues to be so subjective and so unrealistic and so easy—

Chris Bishop: Oh, rubbish.

GRANT ROBERTSON: Well, it is. It is so easy to get around. Everybody acknowledges that, and by putting that in and bringing that through into this legislation, that adds to the question.

Minister Woodhouse mentioned the question of the dates of acquisition and disposal of land being the bookends of this process. That is inconsistent with other aspects of property law and, no doubt, will cause problems. There are difficulties around the definition of “residential land”, which we will come back to, and also the questions around farmland.

This legislation could have been the beginning of something useful for Parliament to do to take to the speculation that is driving up property prices and that is causing those ridiculous prices that I talked about earlier in this speech, but it has failed. It was rushed. It was ill conceived. The finance Minister, Bill English, got up in this House and said he did not even know if it was going to work. That is as good as it gets from the Government when it comes to cracking down on speculation, because it does not want to crack down on speculation; it is not in its interests.

This is a half-hearted attempt. It is a token gesture when something comprehensive was needed to ensure that we clamp down on speculation. Speculation in the Auckland housing market, driven both from within New Zealand and by those who are offshore, is putting home buying out of reach of many New Zealanders. That is the issue that we are actually debating today: the opportunity for young New Zealanders to live out the New Zealand dream of buying that house, of having that security, and of being a part of their community, and today the National Government has failed. It has lost the opportunity to do this. This is a token gesture when something meaningful was needed. It is a huge disappointment.

DAVID BENNETT (National—Hamilton East): That last speech by Grant Robertson was by somebody who is completely out of his depth in the finance area and who should really just switch to being a lecturer in art history, because that seems to be about his level. He would have no idea about purchasing a property. Probably half his caucus would have no idea about purchasing a property. The speech was completely full of inaccuracies and it misled the New Zealand public, and I am going to put them straight now so that they know what is actually going on and do not listen to the waffle from the other side from somebody who has got no idea about finance. Everybody knows he is completely out of his depth and he is doing it to take down Andrew Little, to show how ineffective the Labour Party is.

Putting that aside, in New Zealand if somebody sells a property within 10 years there is an intention test, and that—

Grant Robertson: It’s not working. That’s why you put the bill up.

DAVID BENNETT: Just listen—just listen. As the member over there might want to do, just listen and learn. The thing is there is an intention test, and that test has a 10-year rule: if someone buys or sells a property within 10 years that person can be subject to tax on that sale. And there is the test around the intention at the time of purchase. Looking at the Taxation (Bright-line Test for Residential Land) Bill, we are clarifying that intention test and saying that if somebody buys and sells within 2 years without it being their main home, then they are automatically deemed to be selling within a taxable range. So there is no change to the existing rules. That speculators, as that member said, were exempt from this is not true. That is not the case. Speculators are caught under the intention test. That is the very nature of their business—they are speculators. They buy and sell, speculating on property, therefore their intention is such, and therefore they are taxable. Some members on the other side need to listen to the rules around taxation, and not put out to the public some inaccuracies around speculative rules around land sales.

If we look at what that member was really saying, he was saying that it could have been the beginning of something useful. It was a political response, he called it. Well, I remember the Labour Party, when it was the last election, with something it thought was useful, and that was the capital gains tax—a full-blooded capital gains tax. That member wants that capital gains tax. He does not agree with their leader, and he is saying that it could have been the beginning of something useful. That would have been the full-blown capital gains tax that the Labour Party members went to the last election with and, subsequent to the last election, have thrown out. They have decided that they are not going to do it, because, one, it does not work, and, two, the public does not want it.

The members opposite should not go around this country misleading New Zealanders and saying that this piece of legislation does not catch speculators, because they are caught under the intention test already, in reality. This legislation deems those purchases and sales within that first 2 years as being taxable. That is the effect of this legislation. There is an exemption for your main home, and everybody would want to see that exemption. Even if you had the full-blown capital gains tax that the Labour Party talked about, it would have an exemption for the main home. There are also exemptions for certain changes in circumstances: for example, a marriage break-up—something like that, that has not been anticipated. If the matrimonial property agreement, for example, comes into force, then this legislation would not affect that situation. So there are exemptions there, but they are for circumstances that would not be foreseen in the natural course of somebody’s life and would not be the intention of that person at the time when they purchased the home.

This is an important part of the suite of legislation that is looking at housing issues. It is an important part of sending a signal to New Zealanders around the treatment of housing tax gains and losses. And it is an important part of sending the right message out there, and it should not be used by the Opposition in this Parliament for political gain. It should not be used by the Opposition to mislead the public of New Zealand. It does not enable speculators to get away without paying tax. It does not, as the last member said, create a situation that is unfair to New Zealanders. The real message from the previous member is that he is firmly in the camp of having a capital gains tax. He wants a full-blown capital gains tax. That is what that last speaker said in his speech. That is what you can take out of it. The New Zealand First Party members can laugh, but they actually agree with that. New Zealanders, beware: the Labour Party still wants a capital gains tax. Its finance spokesperson came into this House today and said that he wanted a capital gains tax. That is what he said in his speech. New Zealanders beware of that, because that is the true message of what he said in that last speech. Thank you.

STUART NASH (Labour—Napier): I have had a lot to do with Grant Robertson, and I have read most of what he has written, and never once in his role as finance spokesperson has he ever said that Labour wants a capital gains tax. So let me put on the record now, for everyone listening, that Grant Robertson did not say Labour wants a capital gains tax. What he did say is that this is a very poor piece of legislation.

When you get the finance Minister admitting that he did not know what effect this legislation would have, we know that we are in trouble. There are a number of tests that define good legislation: fairness, but also ease of compliance; that it captures the right people; that it is hard to avoid. This test, this brightline test, just blows all this sort of stuff out of the water. It is a dreadful piece of legislation. It is a political piece of legislation, and David Bennett knows it.

This is a piece of legislation that is poll-driven, and it is not pragmatic. The reason I say that is that a number of submitters who understand the tax system a lot better than anyone who sits on the Finance and Expenditure Committee came and said: “This will not work, but we have some ideas that will make this a much better piece of legislation.” They were ignored. They were ignored, because this is what this Government wants to force through, and it is simply wrong. I think that the taxpayers actually expect more. The main criticism of this piece of legislation, from the experts, is that it is piecemeal, that it does not address the issue.

The last speaker talked about the intention test. We all know that the intention test is not working; it simply is not. What the intention test is—if an investor is buying a property for capital gain and they sell it, they have to pay tax. If they are buying it for rental yield and they sell it, they do not have to pay tax. It is about, literally, the intention of purchasing a property. But we all know, and certainly the members of the Inland Revenue Department know, that it is very, very difficult to enforce this intention test because all you need to do is you need to say: “Oh, well, shivers, I bought it for yield, but someone offered me a price I couldn’t turn down. I had no idea I was going to make a capital gain, and that was not my intention.” It is almost impossible to prove them wrong or to take a court case that the Inland Revenue Department will win. They know this because they have tried it. An investor would have to be a little bit of a fool to go and say to everyone “I’m buying this for a capital gain, but don’t tell anyone.”, and, then, when they make the capital gain, come and say: “Oh, no, it was about yield.” It is an extremely easy test to avoid.

We are supporting this legislation because we support anything that would have an impact on cooling down the market, even though—I must admit—this sort of legislation is not really designed, theoretically, to cool a market. What it is designed to do is bring taxpayers into the tax system who in fact are not in the system at this point in time. It is simply not fair that if people are buying and selling houses with the intention of making a capital gain—however difficult that is to prove—that they are not paying tax. That is what we need to sort out.

It is actually interesting. The Inland Revenue Department put forward two options. The first option was the 2-year brightline test, and that is what we are debating now. The second option that it debated in the regulatory impact statement was a 5-year option. The Inland Revenue Department admitted that that would actually make it fairer because it would capture a lot more people. What it said that the first option, the 2-year brightline test, would do, was: “This option creates an economic distortion as it creates a ‘lock-in’ effect. In other words, it creates an incentive for people to hold property for longer than two years to avoid the bright-line test.” The key word there is “avoid”.

What we are going to see, yet again, is people avoiding paying their fair share. All they need to do is hold on for 2 years. After 2 years and 1 day, they can sell the property. Of course, their intention was never to make a capital gain—it was about yield. They pay absolutely no tax on that property, yet someone who sells an investment property as a result of an unfortunate circumstance, like Mr Robertson outlined, is caught by this test. This is just not a good way to make tax legislation. There will be amendments to this bill, I have absolutely no doubt about that, in the future.

As we have talked about, the main home test is something that we debated substantially in the select committee. We went back and we asked for further definitions. We asked for a depth of information. It came out that the main home test was actually about the home you have the greatest connection with. There is no definition in law about what defines “greatest connection”. The classic case is actually that of a number of MPs ourselves. We could conceivably argue that we have a greater connection with our apartments, which we spend 2 or 3 or 4 nights a week in, than the family home. You could see how this is easily gamed. Taxpayers, especially property investors, are not stupid. They may say that their main home is the bach that is now worth $1 million versus the family home that is worth $250,000. How do they define that? “The bach has been in the home for a long time, it is part of my family, it is where I grew up, and it is where I feel the greatest connection.” Therefore, that is not the house that is caught in the 2-year brightline test. All I am highlighting here is that you could drive a bus through this piece of tax legislation—you could drive a bus through it, and that is not the way to make tax legislation.

The ASSISTANT SPEAKER (Lindsay Tisch): Order!

STUART NASH: But that is not me saying that; that is people from Chartered Accountants Australia and New Zealand, the New Zealand Law Society, and KPMG. There are a number of experts who actually said—

The ASSISTANT SPEAKER (Lindsay Tisch)18020151103 18:00:03The 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.

STUART NASH: I think what I was saying is that the Parliament needs to consider tax legislation very carefully before it brings it into the House and certainly before it takes it out to the general public. The point that I was making is that there were a number of submitters, including Chartered Accountants Australia and New Zealand, the New Zealand Law Society, KPMG, etc., who actually came and presented to the select committee and told us that this was not good legislation. They told us that this legislation was piecemeal, that it would not solve the problems, that better enforcement of existing rules would be preferable to the brightline test, that the burden of proof already existed with the taxpayer, and that the brightline test would tax only those who are forced to sell the property due to circumstances outside of their control.

The bottom line, as I have mentioned and as Grant Robertson mentioned before me, is that we are supporting this legislation, but we are very critical of the fact that this could have been so much better. In fact, the Inland Revenue Department, as I mentioned, put forward two options for consideration when they were deliberating on this bill. The first one is the one that we are debating at the moment, which is a 2-year brightline test. The second one is a 5-year test, and we think that that would have captured by far a much higher percentage of investors who are seeking to make profits in this market without paying any tax and, in fact, distorting the property market.

There is no doubt that something needs to be done about the Auckland housing market. There is no doubt—

Hon Maggie Barry: And we’re doing it.

STUART NASH: —it is out of control at this point in time. But if the honourable member believes that putting a 2-year brightline test is going to solve the problems of the Auckland housing market, then I suggest that she should stop taking as much 1080 as she is and start getting with the picture, because it requires a lot more than this sort of rushed, poll-driven, political legislation as opposed to a pragmatic solution that would have dealt with the problem we are facing—

Hon Maggie Barry: Where’s Maryan Street?

STUART NASH: —in Auckland at this point in time. It is good to see that that member reads the left-wing blogs. I would have thought she had a lot better things to do than that.

Part of the problem at the moment is that we have a test called the intention test. This legislation just goes to show that the intention test is not working. This piece of legislation is sort of a tarpaulin that is supposed to cover over the inadequacies of the intention test. What that test is about is that if an investor buys a property with the express purpose of making a capital gain, then they have got to pay tax when they sell it. But if an investor buys a property with the intention of getting a rental yield, then when they sell that property they do not have to pay tax.

Even though Labour is supporting this legislation, I hope the House does not view this as support for the measures that the Government is taking to do something to address the major issues that are affecting the Auckland housing market. Thank you very much.

CHRIS BISHOP (National): Look, it is a pleasure to take a call on this important bill, as part of the Government’s suite of measures to improve compliance with taxation law but also to deal with the issue of housing generally, and Auckland housing in particular. I was not on the Finance and Expenditure Committee, much to my chagrin, for the consideration of this important bill. I was doing other things at the various meetings we had on it, but I understand there was a robust discussion about this bill at the select committee, I think it would be fair to say. I think that as a committee we have landed generally in the right place on this bill, and I think that this is going to make a difference to the things that it is trying to do.

I want to briefly mention a couple of things in my remarks. The first is about one of the points of contention that came out during the select committee process, and it was adverted to by Mr Robertson in his remarks and then again by Mr Nash just a few moments ago. This is around the definition in the bill of the “main home”.

We heard some cantankerous and wild claims from Stuart Nash that MPs who come to Wellington and rent an apartment, buy an apartment, or buy a flat to be in Wellington while the House sits could classify this as the main home—that it was all about where you had the greatest connection to, and MPs could simply say “Oh well, I have got a great connection to my little Kelburn villa or my little Pētone cottage.”, or something like that. Then we also heard from Stuart Nash that MPs’ baches, or the baches generally of people—or cribs, as I understand they call them down south—could be classified as the main home. But, actually, if Mr Nash had bothered to read the bill or had bothered to read the piece of legislation, he would know that the main home is defined as the residence mainly used by the person as a residence and with which the person has the greatest connection.

I would suggest to the House that for MPs who come to Wellington for 9 days every month for 10 months of the year, that is not the main residence that people have in a city and they do not have the greatest connection, so it fails both limbs of the test. Likewise, in terms of a bach that someone might go to—as I am looking forward to doing at the end of year; heading away for the summer, heading away for a couple of weeks—that is not the main residence that people have, and, indeed, that is not, I would venture to suggest, the place that people have the greatest connection to.

There was a lot of hot air from Mr Nash, as is often the case, and a lot of hot air from Grant Robertson, who is a somewhat witty and good speaker. But, actually, when you look beneath the hot air, beneath the surface, there was not a lot of substance to that argument. It is true to say—

Clare Curran: So where’s the substance? Give us the substance.

CHRIS BISHOP: I have just given you 3 minutes of substance, Clare Curran, which is more than I think we have had from Clare Curran in 11 months of this year, I think it is fair to say. Anyway, I do want to address the issue of whether or not the test to do with “main home” is actually defined in the law at the moment, and it is true to say that it is not, but that is not unusual. We are making new law. That is what Parliament does. It makes new law. Oftentimes it will refer back to existing definitions and sometimes it will not, but I have actually taken the trouble to talk to the officials about this, and, actually, the phrase “with which the person has the greatest connection,” has been carefully chosen. Why? Because it reflects existing case law. So although it is true to say that this bill does not reflect existing statutory law because it is a new piece of legislation—it is like going back to Law 101, dealing with members opposite sometimes—it is true to say that this reflects existing case law. Judges in the courts will be applying this law, and obviously they will have reference to the existing case law that exists on this particular issue. So I think that deals with the issue of the “main home” definition.

Just in closing, what did Labour members say on this bill? What did Grant Robertson say? They said it was token. They said it was political to go into Parliament and advance a piece of legislation to make it political. Gee, what a shocker! They said it was half-hearted. They said it was half-measured. They said that we needed to go further and that something more must be done.

The only conclusion to draw from all of this, from Grant Robertson’s speech and from Stuart Nash’s speech, is that that Labour Party has yet to recant on its promises around a capital gains tax. The problem for the Labour Party is that Andrew Little won the leadership of the Labour Party, supported by three or four of his colleagues only, on the promise of getting rid of Labour’s capital gains tax policy. But now we find his colleagues Grant and Stuart—and no doubt Clare to come, and Kris Faafoi and Megan Woods and Rino Tirikatene, and maybe even the future Mayor of Auckland Phil Goff—are going to turn up and they are going to say: “This is a half-measure. We need to go further. We need to tax capital properly. We need to tax property. We need to attack speculators.” That is what they are going to say. They have not learnt the lessons of the last election or, indeed, the lessons of the 2011 election.

This is a good bill. It is a sensible bill, and I commend it to the House.

EUGENIE SAGE (Green): Tēnā koe, Mr Deputy Speaker. Yes, Mr Bishop, Parliament does make law, but it should make good law, not bad law like this bill. The Green Party is supporting the Taxation (Bright-line Test for Residential Land) Bill only because it is better than nothing and because we support the bill’s intention, which is to target speculators who are not meeting their income tax obligations and to ensure that the existing law on property sales is actually better enforced. But it has so many defects, which could have been corrected if the Government was not in such a rush to pass retrospective law and if it had not been in such a rush to push it through the Finance and Expenditure Committee with minimal time for submissions and minimal time for the select committee to consider the bill and actually improve it. So it is an example, Mr Bishop, of poorly made law that had the potential to be so much better.

It is another example of the National Party’s empty gesture approach to policy making and law making. National’s polling told it that it has a problem in Auckland with the housing bubble: that that is of major concern to voters, with the demand that speculators and offshore purchasers are putting on the Auckland housing market and how that is contributing to the soaring and unaffordable house prices in the city. So the Government stepped in to be seen to be doing something about it. But the step that it is taking is so small and ineffectual that it will not create real change. It will not cool the housing market in Auckland. It will not make houses more affordable. The Government had the opportunity to do so much more.

Hon Maggie Barry: Rubbish!

EUGENIE SAGE: In 2010 Treasury made strong representations, Minister Barry, to put in place a capital gains tax. National rejected that and so we have got this bill, which is another example of the Government just making a gesture and putting that into law.

If the Government had been serious, it would have done what the New Zealand Law Society suggested. If I could just quote from Stephen Tomlinson, the society spokesperson, he said that “the proposed test [in this bill] should not be enacted as it is unlikely to be effective in achieving its stated objective. If officials are concerned about difficulties in enforcing the existing land gain taxation provisions, then there should be a comprehensive review of those provisions, rather than the reform being made on a piece-meal basis.” That is what we are seeing with this bill and its companion bill. It is bad because it is retrospective law. The select committee had a very limited time to consider it. I think it called for submissions on 9 September, they closed on 17 September, and then the bill had to be reported back in mid-October. It is bad, too, because tax law should be simple, it should be coherent, and it should be comprehensive if it is going to be effective. But this bill is not those things, and many submitters said that it is overly complex and it is likely to lead to inconsistencies and difficulties in enforcement.

One of the first issues is that it applies only to residential land sales, with exceptions, obviously, for the owner’s main home, inherited property, and the transfer of property in a relationship settlement. But this application only to residential land sales is despite the fact that the existing tax rules around property speculation apply to all land. Most submitters agreed that it would be a much simpler, clearer piece of legislation if it applied to all land equally. It is also inconsistent with the intentions test that is in the existing law, because that applies to all land, not just residential land. So that is likely to create quite a significant problem for the Inland Revenue Department with enforcement and potentially creates a loophole. One of the other difficulties with this being confined to residential land is that by creating that loophole it may encourage speculation in non-residential land that is eventually used for subdivision.

One of the other issues is the 2-year period. Under the bill people must pay tax on any income they receive from the sale of residential land if they dispose of that land within 2 years. That holding period is far too short. It is quite likely that people will wait it out and then dispose of the land. Treasury recommended at least a 5-year holding period. Many OECD countries have a 5-year holding period. Yet again, the Government, in making legislation that is only a gesture, stuck on 2 years and did not go to the 5 years that was recommended by Treasury and applies elsewhere. And it is not fair when we have got nurses, teachers, plumbers—anybody who is paid for their work and receives a pay cheque pays tax. Why should it be any different for someone who receives income from buying and selling property? Why should they not have to pay tax if they sit on residential land for 2 years and then are able to sell it? They are earning income. They should be subject to tax in exactly the same way that other working people are.

Alastair Scott: They’re taxable already.

EUGENIE SAGE: Only by the intentions test, and that has been shown to be a problem, which is why we have got this bill.

Alastair Scott: That’s why we’ve got the brightline test.

EUGENIE SAGE: But the brightline test has got that 2-year holding period, and, as I have said before, that is too short. Other countries in the OECD have a 5-year period or longer.

So this bill is not really about addressing the housing crisis in Auckland. If the Government was serious about doing that, it would have adopted some of the Green Party’s solutions, which are to put in place a capital gains tax that exempts the family home, to restrict foreign ownership to reduce the inflationary impact that we are getting with foreign capital coming in, and to pass—

Alastair Scott: What inflation?

EUGENIE SAGE: He is saying: “What inflation?”. Why are we getting this huge increase in house prices in Auckland that is making them beyond the reach of most first-home buyers? If the National members are asking “What inflation in Auckland house prices?”, they obviously have got their heads in the sand on the issue. The Green Party would also ensure that we have a warrant of fitness for rental properties and much more protection of tenants in rental properties. We would significantly increase the State house stock, and we would ensure that our planning laws encouraged medium-density housing around public transport routes, instead of doing what the National Government is doing: encouraging more urban sprawl through the special housing areas and removing the provisions in the Resource Management Act to ensure that those subdivisions’ environmental effects are reduced. So this bill is too little, too late. It is retrospective, the process has been bad, and we are voting for it only because it is better than nothing.

FLETCHER TABUTEAU (NZ First): Mr Bishop, I have held you in too high regard for such a long period of time—either that or your heart just was not in it tonight. It just fell flat, mate. I can understand why. I can understand why. This is a terrible piece of legislation. It really is. I was waiting at the start of the contribution from the Minister—

David Seymour: So bad the Professor could tell.

FLETCHER TABUTEAU: Do not start, Seymour—you were saying the worst things about this during the select committee. I could not believe it. It was amazing. The Minister started off and I was waiting, I was listening, I was paying attention, looking for something I could comment on. But in the end, he just laid out the speech that was given to him and then spoke to the generalities and spoke to the executive summary about just how wonderful it all really is. And then I, at least, had the excitement of hearing Mr Bennett contribute to the debate. At least that was entertaining—it was not very good, but it was entertaining. His abuse of people never fails to entertain this House night after night. As the chairman of the Finance and Expenditure Committee, he will not mind if I do not refer from now on to a single word he said and instead refer to the experts who contributed to the select committee process.

Hon Maggie Barry: Winston Peters.

FLETCHER TABUTEAU: Miss Maggie Barry, $918,000 is the average price of an Auckland house as of today, according to the data.

Hon Maggie Barry: Did Winston tell you that?

FLETCHER TABUTEAU: So, you know, Miss Barry might be able to afford a property in Auckland, but new homeowners cannot. They are struggling. It is not even new homeowners any more—the reality is that it is harder and harder for everyday New Zealanders. This is intergenerational theft. She needs to acknowledge that, and National needs to acknowledge that and do something more meaningful and tangible than this vacuous and empty piece of legislation.

There were three minority reports written for the select committee report on this piece of legislation. I am sure there would have been a fourth, if Mr Seymour had been so inclined. But there were three, and that speaks to the majority that is written about in the select committee report. I am just going to take a snippet from the first reading of this bill to highlight New Zealand First’s stance. We would normally say to the House: “You’ve got it wrong. You’ve kind of missed the point. But what we’ll do is support it going through to the select committee, and let’s see if you take on what was contributed from the experts.”

What we found when the draft legislation originally came out was that there was nothing. There was absolutely nothing in this piece of legislation, which is so facile—I have said the word “vacuous” already—that it serves no point whatsoever. It will achieve none of the stated objectives so eloquently spoken to tonight by the National Government. This is another token gesture.

I will quote from some of the submitters, just to reinforce the point. This is not New Zealand First simply opposing legislation for the sake of it. Unlike Mr Seymour and the Government, we actually listened to the experts. Chartered Accountants Australia and New Zealand said, quite simply, that this is not sound tax policy. They recommend a stocktake or review and said that in the absence of this review the “overall package of reforms will lack the coherence it requires and will not provide taxpayers with an appropriate degree of certainty”. The New Zealand Law Society said that this legislation should not be enacted as it would not meet the stated policy objectives. One submitter, KPMG, stated categorically that the bill does not address many of their concerns. They further said that the brightline rule is not required, and that it should be sufficient for the Inland Revenue Department to enforce current legislation, which is what New Zealand First said right from the start. Chapman Tripp stated that there is no integrity in what is proposed and spoke specifically then about the avoidance rule for company or trust ownership structures. The New Zealand Property Investors’ Federation stated that there is no need for this bill. It will not change the value of house prices. It will not lower them. The federation then pointed out that it is possible that properties bought under a company or a trust ownership structure could circumvent the brightline test rule yet again. It noted that speculators will simply change their behaviour and that this is piecemeal, and the Government should simply enforce current legislation.

In my words, the Government should simply enforce the current capital gains tax, Mr Scott. National members and those sitting opposite deny there is one, but it is a tax that is enforceable, given circumstances where owners of property dispose of said property and make a financial gain on the sale of capital. It is a capital gains tax, and it simply needs to be enforced.

There is a real problem in Auckland, and it is not just local commentators. Commentators from around the world are taking time out to note the impact that the housing market is having. Let us hope that it is not too significant or bad, but if the pop of the housing bubble in Auckland comes about, it will not just affect those who have been buying homes in Auckland, speculating in property in Auckland, it will affect the whole New Zealand economy. This is the real problem, and this is why we need more than what is being offered by this Government tonight. These are empty words that will change nothing about the real problem that we have in the Auckland housing market.

The point is that this is a national issue, and the National Government refuses to do anything about it. I noticed on a news article tonight that Rotorua prices are increasing. For me, that feels good, being a Rotorua lad, and it is great to be a part of that. The difference is that the fundamentals in the Rotorua economy are improving, and people are making choices to not so much speculate in the Rotorua economy but to move there because of real job decisions and choices. So the market grows.

This is not what we are seeing in Auckland. We are seeing New Zealand speculators, and, more important and perhaps more disastrous, we are seeing overseas speculators coming in and compromising the lifestyle choices of everyday New Zealanders. That National does not want to bring this problem to a close, perhaps is a fair summary of this legislation. It does not seem to want to solve the problem. Is it that feel-good factor? National does not want its voters in Auckland to suddenly be worried about the prices of their homes, and so start to panic about what is going on there, and all of a sudden they are asking questions about what this National Government is or is not doing. It is an observation. Whether it is fair or not is another question.

Here is the lunacy of the situation, though. The current finance Minister said: “I am sure there will be discussions about how the brightline test actually falls. We would expect that. But people need to understand”—and this is where it gets good—“if it may be taxable under the brightline test, then it probably should be paying tax anyway, under existing law.” That was from the Minister of Finance. The irony of ironies is that I completely agree with him. He could not be more right, and yet the argument from that side of the House tonight is that it is not doing the job it was intended to do. Mr Robertson did speak to that with some eloquence, although I would suggest to Mr Robertson and to this National Government that there are fixes under the intention tax rule that would see it being enforced and applied in a fair and reasonable manner, so that we could actually fix the problem that we are observing in Auckland.

Ten minutes is simply not long enough to speak about all the problems in this legislation. People who simply buy property, do it up, and then flick it off are exempt. Trusts and companies are exempt. The definition of what is land or property falls within the purview of this legislation and is so vague as to be meaningless. New Zealand First has said it before and we will say it again. This legislation does not fix the housing problem in Auckland. We need something sound, we need something substantial, and we need it now. Thank you.

JAMI-LEE ROSS (National—Botany): As an electorate MP in Auckland, I can tell the House quite safely that this bill is a moderate and reasonable measure that is enjoying support from New Zealanders in Auckland because they are seeing that this Government is taking steps to try to get on top of many of the issues that they facing when it comes to housing. This is a good change that is being put forward, because it is important that those who are speculating on property do pay an appropriate level of tax and those who are wishing to engage in buying and selling property within a short space of time pay their fair share of tax, and that is what this bill aims to do.

We have heard from parties opposite that this measure is not enough and that we need more. Mr Tabuteau said it is empty words. Ms Sage said it was an empty gesture. I just want to outline to the House all of the things we are actually doing. In no way can the Government’s response to housing in Auckland be described as an empty gesture. We have changed legislation to allow the fast tracking of consents in Auckland to increase the supply of housing, and 47,000 potential sections are available to be built on in Auckland. That is not an empty gesture. We have sped up the unitary plan process in Auckland and taken 7 years off the process’s time frame. That is not an empty gesture. It will lead to better planning law and it will lead to changes that will open up land in Auckland much faster. That will help with housing.

We have changed the law in order to require all people entering into a property transaction that is not for their main home to provide an IRD number so we can effectively track them properly, particularly those buying and selling property from overseas. We have increased considerably the enforcement ability of the Inland Revenue Department by increasing its budget by $33 million several Budgets ago, which has brought in $8 for every $1 that we have given the department to enforce the current law.

We are also giving the Inland Revenue Department an extra $30 million to undertake more enforcement. That is not an empty gesture. We are going to be introducing fairly soon a withholding tax on those who are buying property from offshore, so that we can ensure that we capture the appropriate tax that they should be paying properly and effectively. That is coming in soon. Finally, this particular change, this legislation, where we introduce the brightline test, will ensure that any person buying or selling within 2 years a home that is not their main home pays tax on that appropriately. This is a programme of housing responses that is reasonable, and it is necessary to tackle the housing issues.

When the people on the other side of the House come up with great ideas, they have to remember that many of the ideas, such as a capital gains tax, have not worked in other countries. The most important thing we can do to deal with housing is to increase the supply and ensure that those speculating are taxed properly. The Government’s housing response is in no way an empty gesture. It is very comprehensive, and those sitting on the other side should recognise that New Zealanders expect us to have a reasonable response, and that is exactly what we are delivering. It supplements all of the things we are doing already in the housing space. It is not the solution all by itself but combined with many of the factors and many of the other measures I have outlined here today, it will help housing in Auckland and it will help housing in New Zealand, and that is a good thing.

Mr DEPUTY SPEAKER: This is a 5-minute call from the Green Party. I call Kevin Hague.

KEVIN HAGUE (Green): Why, thank you, Mr Deputy Speaker, and thank you to that last speaker, Jami-Lee Ross, for listing the Government’s package addressing Auckland housing affordability issues. I guess that ultimately the arbiter of whether or not the Government’s response to housing affordability in Auckland has been adequate or not will be whether or not people can afford houses. I noticed on the television news this evening that the average house price in Auckland has hit a new high of $938,000. I think that at this point—perhaps half-time in the contest—most spectators would probably conclude that the Government is not winning, that actually at this point its package of housing measures has not been adequate.

Maybe this brightline test will be the thing that actually starts to turn that round, but right now that average house price is far beyond the resources of the vast majority of New Zealanders who need homes. That is because it is a housing bubble, in which the market value of housing assets greatly outstrips their real or tangible value, and these dynamics, and particularly the use of mark-to-market valuation—an essentially unlimited supply of credit—are the classic dynamics that drive further expansion of asset bubbles. Professor Jane Kelsey most recently has written about what she calls the FIRE economy, an economy based on finance, insurance, and real estate, which is a pretty good depiction of what much of the New Zealand economy is about. But she is not the only person who has commented on that fact—on the fact that the speculative economy, if you like, has absolutely dwarfed the real economy in this country. Of course, that directly harms many New Zealanders, and it also creates very substantial risk to the overall New Zealand economy, putting our country at risk.

A capital gains tax is certainly not a panacea for asset bubbles, but the lack of a capital gains tax certainly takes that FIRE economy and throws petrol on it because what this Government effectively says to speculators is: “Please speculate in housing, because you not only get these massive windfall profits but you also get them tax free, unlike any income that you might get from investment in the real economy, in productive industry, or in your labour.” So National’s problem is that it has railed against capital gains taxes, and it probably also believes the economic theory that, actually, Governments cannot deflate asset bubbles. So it has got those problems, but stacked up against that is the realpolitik of voters—and its voters—being unable to afford houses in Auckland. It has to be seen to be doing something. That is why we are now experiencing this half-hearted measure.

Jami-Lee Ross and other Government speakers have said that it is not a capital gains tax, and, indeed, it comes nowhere close to the kind of capital gains tax that the Green Party has advocated, that Treasury has advocated, and that all of the experts have advocated. Instead, it is a half-hearted measure. According to Treasury we should expect that this will yield something in the order of $5 million in increased revenue. Well, $5 million is better than nothing, and the Green Party will be supporting this bill again tonight. But let us put that $5 million and stack it up against all of that untaxed windfall profit that so many speculators have realised on the Auckland housing market. I echo the comment of my colleague Eugenie Sage: once again this is a Government responding to a real, serious problem with nothing more than gesture.

Mr DEPUTY SPEAKER: I call David Seymour—a 5-minute call.

DAVID SEYMOUR (Leader—ACT): The German Chancellor Bismarck said that those who like public policy and sausages should not observe either being made—and is this bill not a prime example of that. I regrettably support the Taxation (Bright-line Test for Residential Land) Bill because it is part of a Budget and part of a confidence and supply agreement, and I have been wholeheartedly convinced by the Opposition that it is certainly in the best interests of New Zealand for me to keep that agreement going. However, make no mistake, this bill is mediocre and poor public policy, and let us count the ways and the reasons that that is the case.

First of all, it stems from a misdiagnosis of the reason that house prices are high. It stems from the belief that it is the demand side that is the problem not the supply side, and that a capital gains tax can successfully quell housing prices. Well, you only need to ask the people of Sydney, Vancouver, Los Angeles, or London whether or not a capital gains tax has any noticeable effects on price levels in housing markets. In actual fact, in large markets such as the US and Canada, where we have a range of land-use planning policies and yet the same tax monetary and foreign investment policy nationwide, what we discover is that it is the supply elasticity of buildable land that affects house prices. So the first problem is total misdiagnosis of the problem it seeks to solve.

The second problem is that it is politically foolish because it is the acorn that may grow into the tree of a capital gains tax. We have actually heard from the Opposition members who, given the opportunity, say the first thing they would do is expand 2 years to 5 years. Who knows, maybe that would not be enough, then it is 10, and all of a sudden we more or less have a capital gains tax on residential housing.

Not only have we planted an acorn of a capital gains tax—which I can tell you, as an electorate MP, Jami-Lee Ross, people do not want on their homes—but it actually will not achieve any of the outcomes that it is supposed to achieve. Kevin Hague did actually give us a number that tells us that that is the case: $5 million of revenue is expected per year. I know real estate agents who make more than that in royalties each year. It will make so little revenue because it will capture so few transactions, and, as the Law Commission, as the accounting firms, and as the major law firms of New Zealand told the Finance and Expenditure Committee, the reason for that is that anybody engaging in so-called property speculation with any kind of scale can very easily arrange their affairs so that they do not sell the same house within 2 years of purchase. It will be that very small minority of people, having bought an extra investment property, who find themselves overextended and find themselves forced to make a sale and having to pay this tax when they are in dire financial straits. So it will not affect real so-called speculators, it will affect those unfortunate enough to find themselves caught within this brightline test.

In conclusion, this is a fundamental misdiagnosis of the problem with the housing market, in Auckland in particular. It is, in addition to that, a dangerous precedent that will grow into even worse public policy in time to come. It is executed in such a way that it will have absolutely zero effect, if there was to be any at all.

In closing, I would like to pay tribute to the submitters to the select committee: the Law Society, the law firms, and the accounting firms. In many countries such people would quietly welcome a more complex taxation system because, of course, it fattens their fees. In New Zealand we have an enormous amount to be thankful for, because at very short notice we received very high-quality submissions from the very people who would stand, in a narrow, self-interested way, to benefit from this bill, and for that I think we should all be very grateful. Thank you.

ANDREW BAYLY (National—Hunua): It is a pleasure to be talking on this bill, the Taxation (Bright-line Test for Residential Land) Bill. There have been a number of speeches just before about why we are doing this, and I agree with the previous speaker, David Seymour. What this Government is having to do is deal with a market failure. Essentially, there has been a shortfall in the number of houses being built, particularly in Auckland. During the global financial crisis, when we should have been building, on average, about 10,000 a year, only about 3,000 to 4,000 were being built. Consequently, we have got this shortfall in houses, and that has led to an increase in prices.

What this Government has been doing through its 104 special housing areas in Auckland is helping to provide an additional number of houses to the market, and also this bill is one of three where we are trying to deal in another dimension, which is to make sure that the proper incentives for investment in houses are appropriate. So this bill amends the Income Tax Act 2007 by inserting a new section that requires investors and property owners to pay income tax on properties that they buy, from the date of registration, and to pay it if they sell within 2 years of that date. There is a slightly different commencement date for people buying apartments, which is actually the date they enter into the agreement to buy rather than the actual date of registration.

There are three exemptions where this tax does not actually apply: firstly, if you are buying and selling your main home; secondly, if you are buying or selling within 2 years a property that you got through inheritance; and, thirdly, if you are entering into a matrimonial dispute and you have to sell your property. So there are three very clear exemptions. What we have also done is limit this to residential land, so that it does not apply to farmland and so that it does not apply to business land unless the use of that business land for residential purposes is greater than 50 percent.

What we want to do is make sure that we have got a good basis. We have tried to ensure that we are not capturing every normal New Zealander who is buying and selling a house, so the exemption also means that unless you are foreigner or a non-resident, you do not have to put in place any requirement to get income tax registration or anything like that. We simply want to make sure those holding, selling, and trading property within a period of 2 years have to pay income tax. It is exactly the same if you are trading shares on the stock market—you will be deemed to be a habitual investor, and it is the same rules. It is absolutely consistent, and with that I commend this bill to the House.

Hon PHIL GOFF (Labour—Mt Roskill): I agree with the initial comment by Andrew Bayly that the source of the massive housing crisis we have in Auckland at the moment lies back in the aftermath of the global financial crisis. By 2010 this country was building 3,000 houses a year, when at the start of the 21st century it was building 12,000 houses a year. This Government should have been putting in place a counter-cyclical programme so that the construction industry was not crushed, did not lay off its apprentices, and did not run down its materials and its supply of land. We should have gradually been building up, and Andrew Bayly is right about that. To deal with the supply side problem, this Government, after the global financial crisis, should have been acting in a counter-cyclical way.

But the fact of the matter is that we have before us tonight a bill that will barely touch the housing crisis in the Auckland region at the moment.

Hon Maggie Barry: Much like that mayoral candidate.

Hon PHIL GOFF: Houses prices since 2009, Maggie Barry, have gone up by 83 percent, but in the last 3 or 4 years what was major inflation has become massive inflation. House prices in Auckland, Maggie Barry, went up by $150,000 in the last year—$150,000. That is $3,000 a week. What does that mean to the hard-working couple trying to save to get a home of their own? It means that they are not even earning as much as the amount that house prices go up by each week.

Because this Government has dealt with neither the demand problem nor the supply problem, we have a massive deficit of housing that has seen rents going up at three or four times the rate of overall inflation, and we have seen house prices go through the roof. The fact of the matter is that Auckland today is one of the top 10 least affordable cities in the world in which to buy a house—one of the top 10 least affordable cities in the world. We now have the lowest rate of homeownership in the lifetime of anyone in this House. It is the lowest in 64 years, and people have given up on the Kiwi dream of being able to buy their own home.

What have we got now? We finally have a bill that does one thing. It admits that there is a problem with speculation. After 6 years of denying that the problem of speculation had anything to do with the housing crisis, finally we have a bill that says: “My God! There are people speculating on housing and it’s pushing up the cost to the hard-working family.” But the bill then does not act in the way that it needs to act. This bill does not solve the housing crisis in New Zealand. It scarcely makes a difference. It is half-hearted.

Hon Maggie Barry: Much like that member.

Hon PHIL GOFF: It is half-hearted, Maggie Barry, because National has, as part of its core support, speculators in property, and they are whom you stand for. The people on this side of the House stand for the couples, the families, and the individuals who are working hard to buy a home—not to speculate on it and then not pay tax on it, but to actually be able to live in it as a home. Those are the people whom we stand up for in this country—the people who want a house to call their home.

What does this bill do? I will tell you what it does. It makes an admission that the Income Tax Act 2007 is not working in requiring speculators to pay tax on their speculation. I pay tax on every dollar I earn, my kids pay tax on every dollar they earn, and speculators can make more than most members of Parliament make in a year in the sale of one of their properties and not pay tax on it—that is what this bill says.

The regulatory impact statement says that the current test is that you pay tax only if you buy the property with the intention to sell it. So you could say: “Oh, I bought this property cheap. It’s gone up. It’s doubled in value in the last 2 years. I wasn’t intending to sell it, but I am going to now, and that is not income. I won’t pay tax on it.” Tell that to the cleaners who work hard cleaning your offices tonight and who pay tax and can barely live on the income they have got. They are paying tax and the multimillion-dollar speculators are not. This bill does not solve that problem.

In fact, the submitters, the people who were praised by Jami-Lee Ross, I think it was, for putting the work in—what did they say about this bill? They said that it is ill-planned and it is ill-considered. It left one of the tax experts “professionally confused”. Treasury said it will not work and it will not be effective. The brightline test is quite a good test compared with section CB 6, I think it is, of the Income Tax Act because it is objective. But the bill says that you have the brightline test for 2 years, and all the speculator has got to do is hold on to that property for 2 years and 1 day, and then they are off the hook.

If we wanted this legislation to be effective, we would do what they do in other countries and make it last for a reasonable period of time. If you look at Italy and Japan, the threshold is 5 years. If you look at Finland, Germany, or Korea, it is 10 years. In France and Austria, it is over 30 years. If you want to deal with speculation and if you are genuine about it, then you make sure that that brightline test lasts for a much longer period. Then I would be convinced that this bill was a genuine effort by the Government to stop speculators making a fortune while families have their dreams crushed. This bill will not do that because the Government has decided not to do that, and there are a lot of other things that need to be done as well.

I was waiting to hear one member of the Government say why it benefits New Zealand to have people who do not live in this country, and who never intend to live in this country, buy up land here and speculate on it. How does that help the homebuyer in New Zealand? Why is it that Australia banned people who have never lived in Australia, and who do not intend to, from buying up existing residential property? Because a conservative Government in Australia recognised that that did not help the ordinary Australian. It will stand up for the ordinary Australian in a way this Government will not stand up for the ordinary Kiwi.

Why is it that Hong Kong and Singapore put a hefty stamp duty tax on foreign investment? If you did not want to ban it, put a 40 percent stamp duty on, and that would kick the speculators out. That would be one factor in keeping the prices down for the New Zealand purchaser. But this bill does not do that.

This bill does not address the supply side. When I go around the major residential builders in Auckland and ask “What can we do to get up the level of building so that we can actually make the supply meet the demand so people can afford to buy their own homes again?”, do you know what they say? They do not talk about the Resource Management Act. They do not talk about anything that Nick Smith is spending his time on. They say: “Give our industry confidence and give it certainty.”

If you were to do the partnership that Labour Governments have done in the past to solve the housing crises, then we would gear up. Then we would build and we would resolve it. [Interruption] Those members can scoff as much as they like. I live in an electorate where the houses were built with a partnership of a Labour Government and the building industry so that people had warm, dry, stable homes, and a generation of New Zealanders benefited from that. Why not do that again? If it is market failure, as Andrew Bayly rightly said, why not make sure that the State works in partnership with the private sector to address that market failure? Then you would resolve it.

At the moment, the situation facing homebuyers in Auckland has never been worse—never been worse. The best this Government can do is to come in with a pathetic little admission that speculators are part of the problem, and then implement a measure that its own Treasury officials say is ineffectual, will not work, and should be for 5 years, and that every submitter, bar one, to the select committee from the law firms and the accountancy firms said was ill-considered and ill-conceived and was more in answer to the focus groups than a genuine effort to solve the problems of this country.

ALASTAIR SCOTT (National—Wairarapa): I was not quite sure what the last speaker, Phil Goff, was getting at. I think he was trying to talk the Auckland house prices down and he was trying to reduce the rateable value of the assets that any Auckland Council may want to rate and raise revenues against, which I would have thought would be in conflict with any potential mayoralty aspirations. Nevertheless, try to tell that to the Aucklanders whose house prices he wishes to be reduced, halved, or reduced by a third. I am not sure what sort of discount he wants to achieve. Nevertheless, I can say that there are Aucklanders moving to the Wairarapa because there is opportunity there. There is opportunity in the Wairarapa, there is opportunity in Wellington, and there is opportunity in Christchurch. Not everyone has to live in Auckland. Not everyone is forced to live in Auckland. They can choose to live elsewhere, and there are lots of places that Aucklanders can go to.

Mr DEPUTY SPEAKER: Wanganui. [Interruption]

ALASTAIR SCOTT: Even Wanganui, Mr Deputy Speaker. There are lots of choices and there are lots of opportunities, so I suggest that if one cannot afford a home in Auckland, a home in Auckland that is going to cost close to a million bucks, one should look elsewhere.

I return to the bill. This bill, despite what the Opposition says, is not confusing. It is actually very simple. It deals with two aspects: residential property and the fact that it is purchased and sold within 2 years. That is it. That is all that we need to talk about. It is that simple. It is part of a suite of legislation that this Government is passing to contribute to freeing up land to be part of the housing zones that are being nominated. This is sensible legislation that supports that initiative. It is not based on Chinese-sounding names. We do not develop property or investment policy based on Chinese-sounding names, unlike Mr Twyford, supported by his leader, Andrew Little.

Hon Member: Give it a rest.

ALASTAIR SCOTT: “Give it a rest.” is being shouted from the other side, but, unfortunately, that is the policy of the Labour Opposition, alongside a capital gains tax. Some Labour members will not support a capital gains tax—I know that. But some of them will, and, unfortunately, they need to get their house in order to come out with some sort of united policy.

I just want to help Mr Nash with the concept of the house with the greatest connection. If Mr Nash is really that confused and if he is unsure about the house that he has the greatest connection with, I suggest he just goes and asks his wife, because I think that it is so obvious where one’s home of greatest connection is that there is no debate. To suggest that it is confusing and difficult to understand is a nonsense. I am very pleased to support this bill.

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

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

Ayes 109

New Zealand National 59; New Zealand Labour 32; Green Party 14; Māori Party 2; ACT New Zealand 1; United Future 1.

Noes 12

New Zealand First 12.

Question agreed to.

A party vote was called for on the question, That the Taxation (Bright-line Test for Residential Land) Bill be now read a second time.

Ayes 109

New Zealand National 59; New Zealand Labour 32; Green Party 14; Māori Party 2; ACT New Zealand 1; United Future 1.

Noes 12

New Zealand First 12.

Bill read a second time.

Bills

Shop Trading Hours Amendment Bill

First Reading

Hon MICHAEL WOODHOUSE (Minister for Workplace Relations and Safety): I move, That the Shop Trading Hours Amendment Bill be now read a first time. I nominate the Commerce Committee to consider the bill. New Zealand has 3½ restricted trading days. They are Good Friday, Easter Sunday, Christmas Day, and Anzac Day until 1 p.m. On those days, shops are restricted from trading with the public. Some areas, and most know about them, like Taupō and Queenstown have an exemption from these restrictions, but there are others—Ponsonby Road. Even in my home city of Dunedin an exemption exists for trading in the Carnegie Centre in Moray Place, but “Only Arts, Crafts, Children’s Toys & Books (toys and books sold only while performances happening on the mezzanine floor)”. I think it is a very good example of an arbitrary and outdated exemption regime. Those exemptions predate the Shop Trading Hours Repeal Act 1990 and were made at a time when there were far more general trading restrictions on weekends.

Easter trading restrictions have been the subject of numerous debates, both in this House and around the country. The Government acknowledges that Easter remains a significant time for many New Zealand communities. New Zealand, like other comparable countries, provides for public holidays on Good Friday and Easter Monday. However, this Government also acknowledges that many New Zealanders want to be able to undertake a range of activities over the long weekend, including being able to shop. In addition, those involved in our retail and tourism sectors wish to be able to provide their goods and services. Tourists also come to expect it. A large and growing number of events are scheduled over Easter—for example, Warbirds over Wānaka International Air Show. It draws large crowds from New Zealand and around the world, and the inability to do a bit of shopping around those events is something of an anathema.

This bill provides a pragmatic solution to a problem that has been considered on numerous occasions by this House. One such consideration was of a member’s bill in the name of Todd McClay, narrowly defeated in late 2009, and I want to acknowledge the Hon Todd McClay and Waitaki MP Jacqui Dean for their advocacy on this issue on behalf of the communities they represent. Mr McClay’s bill proposed that authority be given to local authorities to decide whether shops should open on Easter Sunday, rather than have that dictated to them. I agreed with that sentiment then, as I do now, and this bill is modelled on that goal.

The bill will enable territorial authorities to create by-laws that will allow shops in their districts, or parts of their districts, to open for trade on Easter Sunday. The bill will also provide shop employees with the ability to refuse to work on Easter Sunday out of respect for the significance of that day for many New Zealanders. The use of by-laws will give communities the choice about whether shops will be allowed to trade. The by-laws would require territorial authorities to give consideration to community views. By-laws require community consultation, a review process, and a requirement that they be made available to the public. Providing territorial authorities with the discretion to lift shop trading restrictions through a by-law for their entire district, or parts of it, will enable them to give effect to the views of their communities.

The bill has a transitional provision for businesses operating shops in malls that have terms and conditions in their contracts or lease arrangements with the mall requiring them to be open during certain times. The transitional provision means that those terms and conditions will not apply to Easter Sunday. The transitional provision, however, will not apply to any contract or lease agreement entered into after the commencement of the amendment.

This bill will preserve the exemptions that have been in place for towns such as Taupō and for garden centres on Easter Sunday. I have maintained these exemptions to avoid any confusion for the public and disruption to the concerned businesses. The Ministry of Business, Innovation and Employment will continue to be responsible for the enforcement of all breaches of shop trading restrictions on Easter Sunday—local government will not be responsible for enforcement. This is consistent with the enforcement of shop trading rules on the other restricted trading days.

Easter Sunday has never been a public holiday. While some assert that Easter Sunday is a guaranteed day off, this is misleading. With the shops being closed and unable to trade with the public, shop employees may be required to do other work in the shop such as stocktaking. If workers do get time away from work they are entitled to be paid only when they take annual leave.

The bill introduces a new protection for shop employees. Employees of shops that will be able to open on Easter Sunday will have the right to refuse to work that day. This protects a shop employee—

Hon Members: Yeah, right!

Hon MICHAEL WOODHOUSE: You hear the cynics on the other side—they do not like choice. They do not like choice. This will protect a shop employee from being compelled to work on Easter Sunday or from being treated adversely for their refusal to work on Easter Sunday. Any such action by an employer would allow an employee to bring a personal grievance action against them in accordance with the Employment Relations Act 2000. This right to refuse to work on Easter Sunday will be extended to all shop employees who work in shops that can open on Easter Sunday under the Act. This includes employees who currently work in shops that are able to open on Easter Sunday, such as those garden centres, petrol stations, and dairies, and shops in places with exemptions from trading restrictions. The bill will also ensure that an employment agreement cannot require a shop employee to work on Easter Sunday. Any such provision in an employment agreement will be unenforceable.

The bill will require territorial authorities to inform the Ministry of Business, Innovation and Employment of the by-laws they introduce. This is for the purpose of enforcement and for information about by-laws that will be made available through territorial authorities and the ministry website. This will ensure that the ministry can enforce the shop trading rules and that the public is well aware of where shop trading is permitted through a by-law.

This bill will also simplify the name of the principal Act from the Shop Trading Hours Act Repeal Act 1990 to the simpler Shop Trading Hours Act 1990.

What I have proposed is a balanced package that provides choice to local communities regarding whether or not to trade on Easter Sunday, while also giving protections to all shop employees. I commend it to the House.

IAIN LEES-GALLOWAY (Labour—Palmerston North): Well, this bill has all the hallmarks of another Woodhouse shambles. We had the health and safety legislation shambles—it is going to be worm farms all over again. He is the Minister with the record for the most shambolic legislation. We had the worm farms fiasco, we have got a zero-hour contracts law that does not get rid of zero-hour contracts like he said it would—it actually enshrines zero-hour contracts in the law—and now we have got this. This is a ridiculous patchwork approach that we are going to get where if you live in one town, you may have to work on Easter Sunday, but if you work in another town 10 kilometres down the road, you may not have to work on Easter Sunday. It is ridiculous.

I have to ask why the Minister is sending this legislation to the Commerce Committee when it is quite clearly an industrial relations matter. The people who are going to be affected by this legislation are working people—that is where this legislation belongs. So the thinking behind this is completely muddled and completely shambolic—exactly what we would expect from Michael Woodhouse.

There are three main reasons to vote against this legislation, and that is certainly what I intend to do tonight. First of all, this is not local government’s responsibility; this is an industrial relations matter. This relates to workers’ rights. This relates to employment agreements. That is not the purview of local government. At a time when this Government keeps piling the pressure on local councils to cut costs and to keep rates under control, it is simply giving councils one more job to do.

My local council has just agreed to spend another $100,000 a year employing extra staff to deal with all the extra by-laws and regulations it has to process because of that Government. This is just one more thing that is going to add cost to councils and cost to ratepayers, and it is not their responsibility.

The National Government needs to take responsibility for this. If the National Government wants to get rid of Easter Sunday as a day that families can have together, it should do it itself. That is its responsibility, not local government’s responsibility. It is kicking the can down the road, and the buck stops over there. It does not understand that though. It does not want to take responsibility; it wants to push the responsibility off on to local government.

The second reason to vote against this is the fact that we are going to have a mishmash of rules and regulations across the country. As I said, you could work in Palmerston North and be compelled to work on Easter Sunday, and you could work in Feilding, 15 minutes up the road, and you might not be compelled to work on Easter Sunday. There is going to be patchwork across the country of irregular laws and irregular regulation. It is going to be a dire mess.

Thirdly, it is the fact that some workers are going to lose one of the few days we have left in our calendar where people—

Hon Maggie Barry: Aw!

IAIN LEES-GALLOWAY: “Aw!”, says Maggie Barry—“Aw!”. She is not interested in families; she is not interested in people actually spending time in their community, spending time with their families. Easter Sunday is one of the few days that we have got left when people can believe that they are going to have a day off and spend some time with their family. And, as the Minister pointed out, it is not a public holiday, so they are not going to get any extra compensation for it. So people are going to be expected to work on a day that has been a sacrosanct day for families and they are not going to get any additional compensation.

The Minister says: “Oh, you know, they can refuse to work if they want to.” What planet is he on? The man is in la-la land. He needs to actually go and spend some time with some minimum wage workers—people who are actually at the beck and call of their employer—and see what it really means to refuse work. Oh sure, you can challenge it. If the boss is actually silly enough to say “I’m reducing your hours.”, or “I’m dismissing you, because you turned down work on Easter Sunday.”, sure, they can challenge that. There will be myriad ways in which people can have their hours manipulated if they refuse to work on Easter Sunday and if that is what their employer demands.

They have no idea on that side of the House what it is like to be someone with insecure work—someone who is on a zero-hour contract, someone who is stuck in casual work, or someone who is stuck in fixed-term contracts or seasonal work. Those members have got absolutely no idea what that is like. They have got no idea what it means to struggle to put food on the table, and that is why they are prepared to support this legislation.

Actually, I think there would be a lot of members on that side of the House who, if they were not whipped into this, would not support this legislation. There are a few members who consistently vote against Easter trading. Sam Lotu-Iiga is one. I want to know why he has agreed to be whipped into supporting this legislation. Tim Macindoe is another one. Why has he agreed to be whipped into this? Chester Borrows—Chester Borrows is a man who has been absolutely consistent on this legislation.

Mr DEPUTY SPEAKER: The member will not draw the Deputy Speaker into this debate. Have another go.

IAIN LEES-GALLOWAY: He has been consistent though, I will give him that. Anyway, there are a number of members on that side of the House who have been dragged into this because the Government knows that if it gave the National members a free vote it would not have a hope of getting this legislation through.

When we talk about employment relations and when we talk about workers’ rights, what we are actually talking about is people’s ability to live a full life, to spend time with their family, and to be able to do things like join a sports team, which you cannot do if you cannot guarantee that you are going to be at practice or that you are going to show up for every game. You cannot be a volunteer in the community because you cannot tell them: “Yes, I’m definitely going to be there on the weekend to do my volunteering role.” You cannot guarantee that you are going to have time to be there for your kids and to go along to your kids’ school production and see them performing because you do not know whether you are going to be given extra work on, say, a Wednesday night or a Thursday night. You cannot guarantee those things, and that means people cannot live a full life.

I hear it often from the members opposite that the way out of poverty, the way to having a full, productive, fulfilling, and good life, is through work. Well, not if work is like this—not if work is low-paid and insecure and it dominates the rest of your life. Not if you cannot live the rest of your life because you are at the beck and call of your employer and you have got no rights because every year the National Government takes more and more of your rights at work away from you.

Those three reasons are the reasons why every single member of the National caucus should be considering voting against this bill. And I know some of them have been consistent—they have voted in favour of having Easter trading in the past, of making people work on Easter Sunday. I know some of them have been consistent on that, but a lot of them have not, and I want to know why those who have opposed this type of legislation before are not going to take a call and actually explain why this legislation is better than what they have had before.

And why are they not going to take a call and explain to the House why they think it is appropriate for local government to have to take up the slack? Why are Government members not prepared to actually make the decision themselves? Why is National, the party of personal responsibility, not actually prepared to make this decision itself? No, it is going to push it off on to the poor old councils, so they can deal with the politics of it. They can deal with the pros and the antis and they can go through the consultation process.

Every single territorial authority in New Zealand is now going to have to go through a full consultation process, spending millions in the process. What has the Taxpayers’ Union got to say about that, I want to know. The Taxpayers’ Union, which is so opposed to councils paying the living wage—I want to hear what the Taxpayers’ Union has to say about the Government causing local government to have to spend more because the Government has not got the guts to do this itself.

There are plenty of reasons to vote against this legislation, and I am surprised and appalled that the National members have allowed the whip to be applied in this situation. This has always been a conscience vote in the past. Where is your conscience, I say to the members of the National Government. Where have your consciences gone? Why are you not prepared to stand up for what you believe in and oppose this legislation?

MELISSA LEE (National): I would just like to thank the member Iain Lees-Galloway for pointing out that it is actually a conscience issue. I am taking a conscience vote and I will be voting for this legislation, and I would actually take issue with that member. If members of the public listened to that Opposition member’s speech, they would think that on Easter Sunday New Zealand was shut down—that everything was shut down and there were no hospitals, there were no police officers, and there was nobody on duty. They would think that we have turned the lights out and gone home for the day and that we do nothing as a family. They would think that spending time with our families does not mean that we actually travel to different parts of New Zealand—that as families, we actually want to go and do things together as tourists or that, within our own country, we also act as tourists and we do visit some cities that are actually not open to tourists.

But this is what we are trying to do. We are trying to give people the choice to open up for that tourist market. If those cities want to open up, then they can. I am really—

Kanwaljit Singh Bakshi: Enjoy it with their family.

MELISSA LEE: Then they can enjoy it with their family—that is right, Mr Bakshi. I am pleased—

Hon Maggie Barry: Go gardening.

MELISSA LEE: Exactly. Sometimes, as a migrant—well, not a new migrant; I have been here for nearly 30 years—it used to really surprise me, having grown up overseas and come to New Zealand, to see New Zealand shut down at a particular hour. That was really, really surprising. You know, we were closing shops at 5 o’clock when, in other cities, shops were open to 10 or midnight, or all night—

Hon Member: 24/7.

MELISSA LEE: —and 24/7. It is about choice. It is about people wanting to have that choice to either go and spend their money—go shopping and do touristy things—or to go and spend time with their family and have meals at a restaurant. Whatever it is, it is their choice.

So I am really pleased to be able to take a call in the first reading of the Shop Trading Hours Amendment Bill, and I commend the Minister for Workplace Relations and Safety for bringing this bill to the House. Do you know, just in the last few years, as the Minister pointed out, there have been a number of debates about the Easter trading law, including debates on the member’s bill of my colleague and my next-door neighbour Jacqui Dean, and on the Hon Todd McClay’s bill as well. Each time that legislation was debated in this House it fell short of the mark due to an odd amalgam of voting behaviour and a mix of reasons by MPs for their opposition to the change.

I think, you know, today we are able to see the beginning of the end of the debate for New Zealand shopkeepers and businesses. This House will give back to communities the decision of when and where and how their ratepayers want to operate their Easter period.

When my colleague Jacqui Dean, the member for Waitaki, spoke on the legislation, she said: “Easter trading is just such a contentious issue, and any proposed change always gives rise to questions about how to strike a balance between the interests of businesses and the interests of employees, alongside public recognition of … activities.” I would like to add my own words by adding the religious and cultural significance of that date as well. For Christians, Easter Sunday is the foundation of our faith. It was when Christ died on the cross, and his resurrection proved Him to be the son of God.

But modern-day New Zealand is actually a multicultural country. It is actually a multi-ethnic one and it is actually a multi-religious one. It is secular, and the needs of one should not overweigh the needs of another. I believe that. The law changes that we are proposing today, that we debate today, seek to address the balance. This law will give the decision-making powers back to the people. It is a long-term, fair, and appropriate solution that will not burden communities with a law that they do not actually want.

Earlier, I think it was Mr Iain Lees-Galloway who was actually saying that he wants one law for all—is that right? But Easter trading is actually not about central planning. We have different rules for different cities, and there are some cities in New Zealand that can actually trade during Easter and there are some where you cannot. What we are trying to say is that we actually need to give the decision back to the people for them to decide, because they can have the choice.

Andrew Bayly: We trust them, Melissa—we trust them.

MELISSA LEE: And we do actually trust them. This is a great bill, and, as chair of the Commerce Committee, I look forward to the submissions on this bill. Thank you very much. I commend the bill to the House.

SUE MORONEY (Labour): It is a very great pleasure to stand and speak on the Shop Trading Hours Amendment Bill at its first reading, because this is one of those rare moments where my Catholic upbringing and my trade union principles absolutely intersect and guide my conscience. My party is allowing me to use my conscience and cast a conscience vote on this bill. I am very confused—and I think that Melissa Lee is very confused, actually—because Ms Lee seemed to be in front of this House telling us that the National members will have a free conscience vote on this. Is that correct?

Melissa Lee: We always do.

SUE MORONEY: So they are. So this means that the National Government has flip-flopped again. Melissa Lee tells us that National is now going to be having a conscience vote on this issue. That is what she has just clarified for us. That is great. That is what we have been calling for. We have been calling for the National Government to truly make this a conscience issue so that we can test the conscience of the Parliament on this. Now that Melissa Lee has clarified that issue for us, I know it means that this bill is unlikely to proceed past its first reading. I know that a number of Government MPs will use their conscience votes to vote against this bill. They will use their conscience votes to vote against this bill if they are not whipped into doing otherwise.

We know that Bill English has a track history of voting against measures that take Easter Sunday away from working people. We know that Gerry Brownlee has a track record of voting against bills that take Easter Sunday away from working people. Nick Smith is another one, as is Chester Borrows, whom I can now speak about. He is another person who has regularly voted against these measures, so he will be able to use his conscience to vote against it again, will he not? I am not so sure. Now that Melissa Lee is not here to answer, those members do not seem so sure any more. They are now starting to scratch their heads, but here is the really interesting thing—

Hon Maggie Barry: I raise a point of order, Mr Speaker. The tradition continues, I think, that members who are not present in the House do not have that drawn to—[Interruption]

The ASSISTANT SPEAKER (Lindsay Tisch): Order! I am dealing with a point of order. [Interruption] Order! I am dealing with a point of order. That is not a point.

SUE MORONEY: Thank you, Mr Assistant Speaker. But here is the really interesting thing. Tim Macindoe is the senior Government whip, and he has voted against these measures to take Easter Sunday from working people on two occasions since he has been in Parliament, and yet he is now going to be the whip requiring all of those other MPs I just talked about to vote against their conscience. How ironic is that? I think that the churchgoing people of Hamilton will have some questions for their local MP Tim Macindoe if he exercises the role of whip in a way that forces him and other MPs who do not agree with this piece of legislation to actually vote for it. Now Chris Bishop is looking really confused. He is not sure whether it is a conscience vote or whether it is not, so can we have some clarification, please, from the whip in the House at the moment, Joanne Hayes? Is it a conscience vote or not for the National members? They are really unclear about that—there is no answer. I would like that to be clarified by the end of this debate.

I want to put on record my conscience vote. It will be recorded in opposition to this legislation. What both my Catholic upbringing and my trade union principles tell me is that the economy is here to work for people—the economy is here to work for people, not the other way round. That is where the National Government has got this so badly wrong.

We are debating this on Melbourne Cup day. The reason I refer to that is not just that I like to say “Melbourne Cup day” rather a lot. The reason I refer to it is that, actually, it is the race that stops a nation. Why do they call it the race that stops a nation? Because it is a public holiday in Victoria, and there they celebrate that. They do not quiver in their boots about it and get frightened about it and run and hide from it. They proudly say “This is the race that stops a nation.” because people have the day off. They have the day off to celebrate and go to events together.

Minister Woodhouse talked before about the events that happen over Easter. He talked about them as if they are reasons why we have to have shops open. Actually, those events are the reason why we should not have shops open. They are the reason why those workers should be free to go to the Easter tournaments. Those workers should be free to go with their families to family gatherings. Those workers should be free, if they choose, to go and celebrate Mass on Easter Sunday. These are the events that happen on Easter that make it important that working people have the right to actually go and participate in those events. What is it that this National Government has got against families? This is another piece of legislation where those members are voting, I think, in a whipped manner—Melissa Lee seemed a bit confused about that—against families having this time off. And what is the harm? What is the harm of families being able to actually get together over Easter?

In my family, traditionally, because my children are involved in basketball, it has become the weekend that we do the basketball Easter tournament, because it is always at Easter. The Easter tournament is a big thing in my family, and the ability for me as a parent—and for me as a parent if I happened to be working in a shop—to accompany my children and be courtside while they play their Easter tournament in basketball every year is something that I want other families to have the ability to do also. Those are the sorts of things that happen over Easter.

There are not many of these days. In fact, I think there are about 3 of them.

Denise Roche: 3½.

SUE MORONEY: There are 3½ days every year when shops are not able to open. Is that too much to ask? This is the green space—the time that is put aside for family time. And, yes, there is, for many people, a religious component to this. This is about prioritising the things that are important to New Zealanders, but that National Government cannot stand it. It cannot stand for people to be able to prioritise their families or their religious events. Whatever occasion they choose to celebrate together over a long weekend, that National Government has got to take it away from them.

Melissa Lee in her contribution—which I think was a confused contribution; almost as confused as this legislation is—talked about wanting to stop certain voting behaviours over Easter Sunday trading. Well, what are those voting behaviours that she wants to stop? Are they the voting behaviours of Bill English; Gerry Brownlee; Nick Smith; Chester Borrows; Chris Finlayson, on the odd occasion; Michael Woodhouse, the Minister himself; Alfred Ngaro; Tim Macindoe; and Sam Lotu-Iiga? Are those the strange voting behaviours she wants to stop? They are National MPs who, if left to their own conscience—when allowed to actually exercise that—would vote against this bill, and I would encourage them to do so.

I would particularly put the challenge out to Tim Macindoe. I particularly put the challenge out to him to stand on his principles and not allow his colleagues to require him to force everyone else into voting for a piece of legislation he does not even agree with—going by his former voting record, if that means anything at all.

I am proud to be standing here to say that I will use my conscience to vote against this bill. It is anti-worker. It is anti-family. It is all those things that the National Government is known for, and it does not take New Zealand forward. It certainly does not fix the 150,000 jobs that the Government is losing in the economy as we speak. It does not address any of those issues. What it does is make a shambles out of industrial legislation, and it puts it on to local government—and local government does not want this responsibility.

BRETT HUDSON (National): I rise in support of the Shop Trading Hours Amendment Bill. On this side, we believe in choice. We believe that customers should have the choice to go and shop when they want. We believe that businesses should have choice whether they want to actually serve their customers and that employees should have the choice to either work or not work on days such as this and have protections under law for that. This bill will offer just that.

What is stunning, sitting in this House tonight, is to hear, particularly in the contribution from Mr Lees-Galloway, just how out of touch Labour is with New Zealand. The first point Mr Lees-Galloway made was that he did not feel this bill should go to the Commerce Committee but to the Transport and Industrial Relations Committee. Well, here is a little bit of edification for Mr Lees-Galloway: businesses do not open for their employees. Their employees are worthy of protection under the law, but businesses do not open for employees. They open for customers—they open for customers. That is commerce. That is the reason businesses are trading.

Of course, it got worse, because we have seen on so many occasions that the Labour Opposition will rail for more legal protection for workers, and then Mr Lees-Galloway stood up here tonight and said that legal protections do not work and the ability of employees to take action against employers, such as are being provided in this bill, does not work—somewhat in contradiction, some would argue, with those members’ normal line. But it gets worse. It gets worse because Mr Lees-Galloway said that local bodies should not have to consult with people in their areas and that local communities should not have choice. Well, on this side, we think the opposite.

Iain Lees-Galloway: I raise a point of order, Mr Speaker. The member is misleading the House.

The ASSISTANT SPEAKER (Lindsay Tisch): No, no. These are debating points. It is a matter of interpretation.

BRETT HUDSON: The public can listen to what Mr Lees-Galloway said and they will hear it loud and clear.

What we are proposing here is that local communities have the choice to do what is right for their communities. In New Zealand, we know that Queenstown and Taupō can open for Easter, but just a few tens of kilometres away, Rotorua and Wānaka cannot. We have a mismatch of situations today. Why not give the communities the choice to serve the interests of their communities best, to their best judgment, and for the authorities that have been elected for that purpose? I commend the bill.

DENISE ROCHE (Green): I rise to take the first call for the Greens on the Shop Trading Hours Amendment Bill. I am really pleased to see that the Speaker has responded to the letter that I sent to him yesterday, asking that members be able to exercise a conscience vote on this bill, even though it is a Government bill. I am really pleased that he has responded to us and said yes. That is great. I, like other people in the House, hope that that is what will happen.

We have got to wonder where this bill came from. It kind of just got announced and put on to the Order Paper, but it came out of nowhere. Even the regulatory impact statement suggests that this bill was scrambled together in a hurry. The covering note from Gerald Clark, the manager of employment standards policy for the Ministry of Business, Innovation and Employment, said in his last point that the regulatory impact statement “included consultation with government agencies and Local Government New Zealand.” He goes on to say: “MBIE has not been permitted to consult with other stakeholders, or to consult more widely about shop trading [hours].” It seems highly unusual, to me, to not consult other stakeholders. Business New Zealand, for example, would be a classic one that you would want to consult with. The Employers and Manufacturers Association would be another group that you may want to consult with, and, certainly, the New Zealand Council of Trade Unions and FIRST Union, which represents shop employees—they would be very clear stakeholders that you would probably want to consult with, if you were not in a dreadful hurry to get this through and on to the Order Paper. But I would certainly think that the trade unions should have been consulted, given that we are talking about workers, shop assistants, who work on Easter Sunday.

Back to the regulatory impact statement—it basically confirms that this bill was put together in a rush. It says that the bill was based on Todd McClay’s 2009 member’s bill. That is quite handy, if you are in a rush—there is one just there, really handy, for you. The fact is, though, that it failed then. The Government members voted against it, and this was in 2009. It was National that was in power, and it was a National member’s bill. So it will be interesting today to see whether Chester Borrows, Bill English, Peseta Sam Lotu-Iiga, Tim Macindoe, and Jonathan Young actually utilise their personal vote to oppose this bill this time, because, essentially, it is the same bill. One would expect the same response—wouldn’t one—particularly if they voted against their own colleague’s bill because of strongly held Christian beliefs.

There is no reason to suppose that this bill will pass its first reading. If MPs across the House do have a genuine personal vote—and given the number of times that this House has discussed liberalising Easter Sunday shop trading hours and voted against that proposition—we may not pass it tonight. The haste with which it was developed really makes me question why it is before the House at all.

I think the reason that it has been put is that—really, we should go back and consider what was happening at the time that the Minister for Workplace Relations and Safety, Mr Woodhouse, announced the bill to the media, on 24 August. Interestingly, that announcement about this bill coincided with the debate in the Committee of the whole House on his Health and Safety Reform Bill. In fact, just a few days before it the Minister was facing severe criticism with the release of the list of low-risk industries that would be exempt from requiring a health and safety representative. We must remember that those low-risk industries included dairy and cattle farming and high-risk industries included minigolf and worm farming. It was also at this time that the families of the men who had been killed at work in the forests and at the Pike River mine were attending Parliament and were calling on the Government to strengthen the law and deliver legislation that would actually ensure that other people’s sons and partners and fathers would make it home from work alive. If we think of this bill within that context, I guess we could say that at the time the Government was really keen to look for a distraction from those crucial and really emotive issues.

Let us talk about this bill. This is the 10th attempt since 1996 to liberalise Easter Sunday trading hours—that is, once every 2 years, on average, there is a bill in the House about Easter Sunday trading hours. Green MPs have opposed these bills and we have exercised our consciences because Easter Sunday, whether it is observed as a religious holiday or not, is one of only 3½ days that gives shop assistants a guaranteed day off, and one of only 3½ days a year that gives everyone else a break from the mad drive to consume—goodness knows, we sometimes need a break from that.

It strikes me as kind of strange that this bill liberalises only Easter Sunday when one could really argue—and I guess it falls back to the argument that Melissa Lee was putting forward—that if the religious ceremony of Easter Sunday can be ignored by commerce, then why not Christmas Day or Good Friday. But this bill does not look at those other days. Actually, this is one of the comments that was made in the regulatory impact statement—that maybe they should be reviewed, really. Where the Greens come from is that we support having more public holidays. We would consider supporting making Easter Sunday a public holiday to increase our annual total to 12 per year, and to actually enable those shop assistants, if this bill went through, to get paid without having to take annual leave. We would support that. We would consider supporting that. But this is not what this bill does.

The other thing that concerns us is that this bill essentially gives local councils the bylaw-making power that means they can decide whether they have shops open in their areas if they wish. I have to say that this seems to be a fairly inconsistent approach, given the way this Government has treated local government and the centralisation of an enormous number of local powers—things around housing, things around annual plans, and things around water. Those sorts of decisions seem to be taken away from local councils, but, hey, they can have a say and bear the costs of creating a by-law so that they can have Easter Sunday as a shop-open day.

The whole area around Easter Sunday trading hours is kind of a dog’s breakfast. There are already exemptions in place, and this bill will keep those exemptions in place, for Parnell Road in Auckland, the Arts Centre in Christchurch, Carnegie Centre, Moray Place in Dunedin, Market Place only on Collins Road in Hamilton, Harbour Market in Napier, Nelson, Paihia, Mariners Mall in Picton, Taupō central, Richmond Court in Thames, and Wānaka—you can shop in Wānaka on Easter Sunday—at Pembroke Mall, Stage I only. What I am saying is it is a heck of a dog’s breakfast because these exemptions were not made by local council; these exemptions were made by central government. So you have to wonder whether this Government is abrogating its responsibility about having a consistent approach to shop trading hours on Easter Sundays. I certainly think it is.

Finally, the other area we are dreadfully concerned about is this idea that employees can say that they are not going to work on Easter Sunday and suffer no consequences for it, which is ridiculous in this current environment of industrial relations, which has tipped the balance in favour of employers in terms of—

The ASSISTANT SPEAKER (Lindsay Tisch): I am sorry, but the member’s time has expired.

RON MARK (Deputy Leader—NZ First): It is wonderful, actually, to be back in the House, with the opportunity to speak, and on a piece of legislation, the Shop Trading Hours Amendment Bill, that raises some curious ironies, just having listened to the debate here this evening. I have to say from the outset that New Zealand First will support this bill through to the select committee. We do so, because we understand the realities out there in terms of the economy and the opportunities that exist for people to create a living, but with some reservations. Those reservations lie in the areas of employment, and the way in which some employers behave. It is our desire that the rights of employees not be undermined through legislation that aids and abets unscrupulous employers who wish to create circumstances in the workforce where, if a person chooses not to work on a day that they do not wish to work for religious or other reasons, that employer may choose to constructively orchestrate that employee’s dismissal or orchestrate a reduction of hours or, by other means or other measures, make their continued employment there untenable.

We would like to put very clearly on the record that we support this legislation through to the select committee for a constructive analysis, for a constructive examination, and for thorough public consultation, and we will make our final decision once all of those things have occurred. But I cannot allow some of the comments and some of the hyperventilating that I have had to bear witness to this evening to go without some comment.

I would have thought, actually, that if the Government wanted this legislation to go through, it could have done it quite some time ago at far less cost to the taxpayer. I get a little bit nauseated by hearing lectures from members of the National Party both here in the House, out on the hustings, and through the media about how concerned they are about taxpayers’ money and the expenditure. Well, we have wasted how many hours and how many tens of thousands of dollars seeing Mr McClay’s bill go through unsuccessfully when, in actual fact, this Government is just demonstrating what it could have done right from the outset. It could have taken the bill up as a Government bill, put it on the floor of the House, and rammed it through, as it probably intends to do anyway.

The other thing that I have got to comment on is Mr Hudson’s comments about choice. What a farcical speech that was. If the member truly believed in choice he would explain to the House why there is no choice—

Brett Hudson: Good choice.

RON MARK: Mr Hudson, you have had your say, so now it is our turn. If the member truly believes in freedom of choice, then explain why all the members of his party are being whipped tonight.

Mr Hudson, let me take one back to the smacking legislation. The choice in the National Party ranks was so clear that members of the National Party back in the old days—you know, when Helen Clark was the Prime Minister and John Key was in Opposition, ranting and raving about what he was going to do in Government and how appalling the anti-smacking legislation was. That was not choice. They were whipped like a bunch of little puppies—puppies. So, Mr Hudson, can it. Can it because, actually, Mr Hudson, you are like that old Hudson car—slow, smoky, rather rounded at the edges, and going nowhere fast. And no one buys the crap we just heard this evening, thank you.

I want to go on to the other comments of Melissa Lee, one of these other wonderful National Party members. She is from Korea, as Wikipedia says. Melissa Lee told the House in her rather condescending manner, which she is becoming renowned for, that we need to grow up in New Zealand. Well, I have got a short message: if you do not like New Zealand, go back to Korea. That is the first message.

The second message is—[Interruption] That got them going. The second message is let us look at public holidays in Korea—let us look at public holidays in Korea. So in Korea we have the Korean New Year. Do they work on the Korean New Year? No. Let us look at the independence day movement—[Interruption]

The ASSISTANT SPEAKER (Lindsay Tisch): Order! I would like to hear what the member is saying.

RON MARK: Thank you, Mr Assistant Speaker. So let us look at the public holidays in Korea, where nobody—

Hon Amy Adams: Racism and vitriol.

RON MARK: Oh, the Minister is upset. This is one Minister in the House who, when she gets her little dander up, cannot resist having a slap. Well, Amy, listen up—

Hon Amy Adams: Only at racist comments.

RON MARK: Oh, I am a racist? Well, telling the—[Interruption] Thank you, Mr Assistant Speaker—

The ASSISTANT SPEAKER (Lindsay Tisch): No, no. Look, this is a robust debate, and I will just ask you to calm things down. So, Ron Mark, you have the floor.

RON MARK: Thank you, Mr Assistant Speaker. Without any overtures of racism, let us look at the holidays in Korea that are public holidays that people do not work on. Coming to New Zealand and telling us we should grow up, in our House, where we allow freedom of speech, is a little different to what we see. Buddha’s birthday—holy heck! So now we say that New Zealanders should have to work on a religious day, but in Korea, where Miss Lee comes from, Buddha’s birthday, on the eighth day of the fourth lunar month, is a public holiday when no one works.

So let us look at another National Party member. Oh, jeepers—Kanwaljit Singh Bakshi. This gentleman also understands and respects the value of religious days and the need for public holidays, but he sits in this House ready to take a call—I guess—to support this legislation. But let us have a look at India. There are so many, I just could not read them out in this time that I have available, but one of the religious holidays in India is Easter—Easter—when people do not have to work. And there is Good Friday, Easter Sunday, St Thomas the Apostle, the Blessed Virgin Mary, the feast of St Francis Xavier, and Christmas Day. And let us have a look at a few others: Eid ul-Fitr, Eid ul-Adha, Eid al-Ghadeer, and let us not forget Mahatma Gandhi’s birthday.

Do not come into this House preaching and telling New Zealanders to grow up. Do not give us the condescending rhetoric, because on one hand we know that although certain people are towing the National Party line like a bunch of little whipped puppies, back in their own world they would never ever dare stand up and say this.

So I come right back to where I started. New Zealand First is happy to support this legislation going to the select committee for a constructive debate and for a constructive analysis. We actually differ from Labour. Being a former mayor and a member of Local Government New Zealand, I talk regularly and frequently with those people. They have no objection to Local Government New Zealand making that decision within the territorial authorities. They do accept that it will incur costs.

I would remind this Government that Local Government New Zealand has said time and time and time again that every time this Government passes on a new responsibility to Local Government New Zealand, it puts costs on ratepayers, and then the next thing we hear is Nick Smith standing up blasting local government for increasing rates. Well, this piece of legislation will, in Carterton, probably cost the Carterton ratepayers around 100 grand a year, just to go through the consultative process. That will put a 1 percent increase on rates just to cover this off. So my point I would make to the Government of the day is that when you are looking at the papers coming from Local Government New Zealand contesting and proposing other ways it may be able to raise revenue other than through rates, think of this bill. Think of the compliance costs that this Government is foisting upon ratepayers of territorial authorities, and address, with an open mind, that issue of revenue collection funding for local government.

Every time this Government puts through legislation that passes on a responsibility, along with compliance costs, to territorial authorities, it then sits there, washes its hands and says: “Oh, we’ve done a good job and now it’s up to the ratepayers to decide.” Well, the bottom line is that ratepayers have no problem deciding themselves whether or not they want trading on certain days, whether they see an economic advantage, whether they see employment opportunities that they may lose, and whether they see that it will be good for them.

If we had a port like Tauranga with cruise ships coming in, we may well want, in Carterton or in Masterton or in south Wairarapa, to service those cruise ships and have people working. But that is a decision we should make, and that is a question we should analyse thoroughly at the select committee. But we in New Zealand First will not sit here and allow other members who come from different countries that actually do stand steadfastly by their religious holidays to sit here and preach to us and tell us that we should grow up.

KANWALJIT SINGH BAKSHI (National): Thank you for the opportunity to speak on the Shop Trading Hours Amendment Bill. First of all, I would like to clarify a few things that the previous speaker, Ron Mark, has raised. On any religious day in India, if there is a public holiday, every business is open and they trade. They do not—

Ron Mark: No.

KANWALJIT SINGH BAKSHI: Your knowledge is totally zero. The only two holidays—yes, I am from India; I lived over there for 35 years. I can tell you that on every religious day, every shop is open; every shop is allowed to trade. The only 2 days when the whole of India is closed are not religious days. They are the Republic Day of India and Independence Day. So, for your knowledge, clarify it for yourself before you speak, and do not try to be racist.

The previous speaker talked about how we are puppets. You are a puppet of your leader. You stand up every day and talk about regional growth. While this Government is doing something for the regions to grow, your party is objecting to it. So I tell you to grow up and allow other people to live over here.

Let me say one thing: this bill will allow the regions to grow. This will give them the opportunity to trade on a holiday, Easter Sunday. Every long weekend we see long queues going out of the main cities to the regions, where people go and spend family time. When the family is together, the only things that they can do are go out and eat or fuel their cars and come back. But if the businesses are open and shops are allowed to open, then they can go and do some shopping together with the family and spend some quality time in the regions.

New Zealand First keeps on talking about the growth of regions. This Government is very focused on putting up legislation that will help the regions to grow. With these words, I commend this bill to the House.

The ASSISTANT SPEAKER (Lindsay Tisch): I call Mojo Mathers—5 minutes.

MOJO MATHERS (Green): The Green Party will be opposing this bill, which opens up trading on one of the very few days of the year when trading is currently restricted. I have to say I do not understand the obsession of some people with liberalising trading on Easter Sunday. This is something like the ninth or 10th attempt to do so in the last 9 years. I just think that this is inappropriate.

Easter Sunday is one of only 3½ days in the year that offer Kiwi families a day where they have some protection from work commitments and from the constant pressure of mass consumerism. Of course, there are many exceptions. There are many service industries, emergency services, and utility operators whose employees are obliged to work or be available for work 365 days of the year and may be required to work on Christmas Day, Good Friday, Easter Sunday, or Anzac morning. But retaining a few special, precious days of the year that are free from the expectation that retail shops will be open—for the people who work in the retail industry, that is incredibly important.

When you talk about choice—for people to have the choice to shop—what about the people who work in the retail industry having the choice not to work, and to be with their family and to have a family gathering without having to juggle around these work commitments in the retail industry? These people are some of the lowest-paid people in the workforce. These are the ones who most need this protection because there is an incredible power imbalance in negotiating around taking leave from work. If the shop is going to be open that day and you work for that shop, you are going to find it very difficult to say: “No, I would rather spend the day with my family on Easter Sunday.”

These days stand as significant symbols of freedom from a culture of unfettered, unconstrained, unbridled consumerism at all expenses, and we need to value and encourage such days that are free from these pressures because it is that pressure of mass consumerism that is destroying our planet. They are also incredibly important symbols of valuing family life and work-life balance. We need to protect these 3½ days. We need to grow and expand them, not constrain them, because it is a struggle already for many families to get together and have genuine family time.

For personal reasons Easter Sunday is of personal significance for me and for many other hundreds of thousands of New Zealanders who will use this day to go to church to celebrate. That is important and we should honour that. Yes, there are other days that are equally important to other groups of people, but we should be looking at those and making more public holidays. We should be expanding them, not reducing them.

We need genuine public holidays, and it is Green Party policy that Easter Sunday would be a public holiday, so that if you are expected to work on that day, then at least you can have a day in lieu. But this is a dog’s breakfast of a bill, and we will not be supporting it. Thank you.

The ASSISTANT SPEAKER (Lindsay Tisch): I call Marama Fox—5 minutes.

MARAMA FOX (Co-Leader—Māori Party): Tēnā koe, Mr Assistant Speaker. Nei te mihi atu ki a koe. I came to the House this evening interested in the debate. When I heard that it was going to be a conscience vote, I took out the bill and had another look at it. I wondered to myself—we had made a decision as a party where we would sit on this, because the bill gives people the choice to not have to go to work. But most people in the House understand that I am a deeply religious person, and if I had to do this on conscience, based on my faith and my religious practices, I could not, in all fairness, stand up and vote for this bill.

But I did not intend to speak to it. I came merely to listen to the debate and then to cast our votes, until I heard the member from New Zealand First deliver a borderline racist diatribe about the members of this House and their ability to cast their vote or not. In fact, I was embarrassed to have to sit here and listen to that. These members who come to Parliament do so because they have been voted in and are New Zealand citizens. To make assumptions about their religious practice and to make assumptions about their ethnic practice and their cultural practice is, to me, abhorrent. I could not sit here and abide to listen to that type of drivel any more without standing up and saying my piece.

I would like to think that if I cast a conscience vote here tonight based on my religious practice and on the faith of the other thousands of people just like myself in this country who would like to have their voice heard, I will not be belittled for that and I will not be treated less than fairly for that. I would like to think that here in this Parliament we would have the freedom to speak, and that here in this country, where we value our freedoms, we would have the freedom to assert our opinions without threat—

Ron Mark: Without being condescending.

MARAMA FOX: —thank you to the member—of being treated as a lesser citizen for doing so, of being disparaged, and of being spoken down to in the way that was demonstrated here tonight. The member might think that he was listening to someone who was being condescending in voicing her personal opinion, but she made no personal attack on any of the other members in this House in doing so. What I had to listen to was a personal attack based on someone’s cultural, religious, and ethnic background, and I object to that.

So tonight I will stand and deliver the conscience votes of the Māori Party—one for and one against—as per my religious practices and as per the discussions that we have had with the rest of our party membership. I stand tonight to support the voice of freedom, the right to choose in this country, and the right to speak freely without fear of being belittled, without fear of racial prejudice, and without fear—unfortunately, that does not seem to be the case in all circumstances—of having your words used against you in unfair and abhorrent ways. Thank you.

ALASTAIR SCOTT (National—Wairarapa): Thank you for the opportunity to speak briefly on this bill. Firstly, I would like to endorse the speech of the previous member, Marama Fox. I too was disgusted to hear the criticism of members in this House based on their religion, their colour, and the place where they were born. That is very disappointing, and the member has cast a shadow across his own party. He has done it to himself, and it reflects on him only.

This bill gives people choice. It is quite ironic also that a former Mayor of Carterton is voting against this bill, because he has been, I thought, a strong advocate—

Ron Mark: I raise a point of order, Mr Speaker. I have already signalled in my speech that we are voting for the legislation.

The ASSISTANT SPEAKER (Lindsay Tisch): These are debating points. It is a matter of interpretation. I heard what the member said. This member has a different view. He can express that view.

ALASTAIR SCOTT: The former Mayor of Carterton was criticising the bill in that he was not sticking up for local government. He complained about the costs of putting democracy to local government. This is a man who has been advocating for giving power to the people—power to local government—for a long, long time, yet he criticises the same bill because of the cost of democracy.

This bill does give local government bodies the choice to open up stores and allow people to trade on Easter Sunday. It is not even across the whole district; they are able to specify particular areas that can and cannot be open for trading on Easter Sunday. I suggest to the previous Green speaker: put yourself in the shoes of a business operator—a business operator in Rotorua who cannot open on Easter Sunday and who wishes to take the opportunity to trade in order to turn a few bucks through the till so that the family and the community can prosper and better themselves.

The opportunity to trade on Easter Sunday should be available to people in this country if they choose, and, similarly, employees will have the choice as to whether or not they wish to work on this day without fear of being sacked or pressured. This is a good bill because it allows local government bodies to be consistent across the whole country, giving them the choice to trade or not trade. I support this bill.

The ASSISTANT SPEAKER (Lindsay Tisch): The next call is a split call. Dr David Clark—5 minutes.

Dr DAVID CLARK (Labour—Dunedin North): I want to invoke in this debate the famous sermon of Rutherford Waddell, known as the sermon on “The Sin of Cheapness”. It was a sermon that transformed working and living conditions for a swath of working New Zealanders a century ago. It was delivered on a Sunday morning in early spring 1888 by a Dunedin church minister who spoke to his congregation about sweated labour and the sin of covetousness.

Reverend Waddell was a skinny Irish Presbyterian minister with a slight speech impediment, but he brought about some significant social change. He did it from the context in which he worked, in an area known as the Devil’s Half-Acre back then. It is actually in my electorate, where Princes Street, Maclaggan Street, and Maitland Street align. It was an area of poverty, cheek-by-jowl bars, gambling, opium dens, and the like. People were brought together by poverty—that was what they had in common. In 1880 he started work in that area and set up a food bank—an association to run a food bank. A decade later he had set up a free library, a savings bank, and New Zealand’s first free kindergarten, with the help of a parishioner. He was a man who talked, but his actions spoke louder still.

It is his spirit that I believe was captured in what the founders of the Labour Party called applied Christianity. He was concerned particularly about the wages, which were less than subsistence wages, that were being paid to seamstresses in his area, and they were the topic of part of his sermon. He believed that there was both a spiritual and a moral imperative to fight against the evil of forcing down wages below what people could live off in order to ensure the profitability of manufacturing.

The claims he made in his sermon were picked up by the Otago Daily Times. The editor of the day sent along his chief reporter, who investigated those claims and found that they were perfectly true. From there a royal commission was established—or subsequently, at least—and Mr Waddell was appointed as one of its members.

The reason that I bring this up here today is that he challenged the working conditions of the day that were driving down and down and down and down and were not allowing for sufficient income for those families living in poverty to live in dignity. This is part of an ongoing battle in our society. Back then Mr Waddell recognised that New Zealanders did not want the wealth and poverty extremes that they had experienced in the countries they had come from, but that is the direction we are heading in again, and with much of the legislation coming to this House we see employment conditions further undermined.

With that invoking of “The Sin of Cheapness” sermon in mind, I see that today we have a bill before us that wants to promote consumerism at any cost. It wants to make everything available all the time at no extra cost, and those who will be forced to respond as workers to the Shop Trading Hours Amendment Bill—the people who work and live on low wages in New Zealand—will have few choices. We know that is their reality. They have to work the hours that their employers ask them to, to meet rent, to meet power, to preserve their employment, to meet family obligations, and so on.

We have a problem ongoing in this country. There is a cost from this kind of legislation that falls on families, that falls on human dignity, and that falls on social engagement and social capital. We as New Zealanders, I believe, have to challenge this kind of legislation when it comes to the House. This is not the New Zealand that we want—the New Zealand that undermines the few days that are left for people to be sure that they can spend time in common with friends and family, that they can maintain social bonds, that they can build social capital, and that they can create the kind of society that I wish to live in and that I am sure many New Zealanders wish to live in.

In the 1950s an ordinary storeman—and they mostly were—on the shop floor could earn enough with a weekly wage packet to support a family on his own and also to hold down a mortgage. A storeman in Mitre 10, I suggest, today would not be able to manage that. We live in a society where zero-hour contracts are maintained and where precarious workers are forced to do things they should not do. I will be voting against this legislation and I encourage others to do so.

Hon DAMIEN O’CONNOR (Labour—West Coast - Tasman): I would just like to acknowledge the previous speaker, David Clark, for allowing me the opportunity to say a few words. We have heard from speakers on the other side of the House that this bill will provide choice. How ironic when it does not provide choice to MPs in this House, because on what has always been considered an issue of conscience, National has refused to allow its own MPs choice. Just as there is the reality of their not being allowed a choice in voting on this bill, the reality for workers over whether they will be able to choose to work on Good Friday or Christmas Day or Easter Sunday is that they will be told by their employer, just as John Key has told members of the National Party that this is what they will do. Let us not kid ourselves here.

I was brought up a Catholic. I guess I had the privilege of being taught some Christian values, many of which, I think, underpin many of the laws in this country. I am not saying that we are in any way any better than any of the other religions, and I think that we have a wonderful and a diverse country that is evolving. But at this point the 3 days of Christmas Day, Easter Sunday, and Good Friday have been respected by the law and by the country as being days that should be held for family. What this National Government is determined to do is to put commerce over conscience, to put values after value, because it thinks we should all be working every day to generate the economy. It is failing to uphold the family values that were and have been preserved on those 3 days—just those 3 days out of 365. It is not too much to ask.

What I say to the members on the other side of the House, who I think will be struggling a little bit with this one, is stand up for yourselves. Stand up for the people you represent and the values you have been taught. I ask them to stand up for their own consciences and vote for the reality, which is that when it comes to whether a worker will be able to choose to work or not, they know that the worker will have no choice, just as the National MPs have been given no choice. It is outrageous.

I have been in the House longer than quite a few around here and I know the issues on which we are privileged to have a conscience vote, and when it comes to issues like this we have been—

Hon Simon Bridges: Oh, you guys have been whipped by the unions.

Hon DAMIEN O’CONNOR: Not that righteous Minister there—he is a johnny-come-lately. Ask what the issues of conscience are. You would not know, because you have not got one. You have not got one. Can I say—

Hon Simon Bridges: I raise a point of order, Mr Speaker. I take personal offence at that comment, and I ask that it be withdrawn.

The ASSISTANT SPEAKER (Lindsay Tisch): Yes. I ask the member to withdraw that comment.

Hon DAMIEN O’CONNOR: I withdraw. All I ask is that the members on the other side who have a conscience are given the right to exercise it, just as we are saying that workers should be given the right to genuinely say whether they want to work or not. We know—and it is no good pretending otherwise—that when it comes to asking a worker to work on Christmas Day, Easter Sunday, or Good Friday, they will have to work and their families will suffer.

So where is the conscience of the righteous members? I listened to their rantings, quite frankly, on legislation like the smacking bill, like the Civil Union Bill, and like the gay marriage bill. They demanded—in fact, they insisted—that members have the right to a conscience vote, to be allowed to do what they like. Indeed, that is what happened on this side of the House. I respect my colleagues for whatever decision they made. But on this piece of legislation, let us be clear: National has overridden the conscience of its members of Parliament, to say—

Paul Foster-Bell: Not true.

Hon DAMIEN O’CONNOR: Yes, it has, and it has removed the right for them to uphold the values—not just spiritual values but community and family values—that have always been a part of New Zealand in upholding Christmas Day, Easter Sunday, and Good Friday as days that should be for family first and not for commerce. The National Government has put commerce over conscience and it is outrageous, and people should know that.

STUART SMITH (National—Kaikōura): I would like to start by acknowledging Marama Fox from the Māori Party. Kia ora, Marama. That was a very heartfelt and thoughtful speech, and I am really pleased that I was here to witness it, so thank you for that.

I am used to working on Easter Sunday, as a grape grower and a winemaker. If we were not out there harvesting grapes or bird scaring and we happened to be finished early, I would be down at the Classic Fighters air show in Marlborough, which is on every second Easter. In the alternate years, it is at Wānaka, which has its own version of it—Warbirds over Wānaka. Thousands of people travel to both those places in alternate years to go to those air shows, and the number of people who complain because they cannot shop when they are in those areas is phenomenal. The retailers and the people who work in those shops actually want to work. They want to be able to open. They want to be able to provide a service, and there are plenty of people there who want to utilise that service.

I am somewhat of a lapsed Anglican, and I do not have any particular strength in my religious views. I think that we have to acknowledge that in modern New Zealand there are many, many religious groups of different faiths with different religious days that they wish to mark. If we go down the path of having no flexibility in this area, it would be quite unjust to not recognise those other religious faiths’ particular days.

This is a great bill. The bill gives the choice to the local people, and I commend it to the House.

The ASSISTANT SPEAKER (Lindsay Tisch): Members, this debate has concluded. The Speaker has determined that the subject of this vote will be treated as a conscience issue. In this case, I know that there are members who want a personal vote, and I am prepared to accept one. This is the process that we are going to follow: I am going to put the question, and I am going to announce the result. At that stage, any member can ask for a personal vote.

A personal vote was called for on the question, That the Shop Trading Hours Amendment Bill be now read a first time.

Ayes 75

Noes 45

Bill read a first time.

Bill referred to the Commerce Committee.

The House adjourned at 10.04 p.m.

Tuesday, 3 NOVEMBER 2015

(continued on Wednesday, 4 November 2015)

Bills

Radiation Safety Bill

Second Reading

Hon PAUL GOLDSMITH (Minister of Commerce and Consumer Affairs) on behalf of the Minister of Health: I move, That the Radiation Safety Bill be now read a second time. Members will no doubt recall that this bill will repeal and replace the Radiation Protection Act 1965 and its regulations. This will provide a much-needed update to our 50-year-old legislation by introducing best-practice principles in radiation safety to New Zealand law. The bill also enhances security measures that will provide a means for New Zealand to meet its international obligations relating to radioactive material. The bill will regulate the many beneficial applications in which ionising radiation is used on a daily basis in this country. In this respect the bill remains broadly similar in scope to the legislation it is replacing.

I would like to thank the Health Committee for its work on the bill. The committee received 14 submissions, including considered comment from the Regulations Review Committee, and heard three oral submissions. As members might expect for a bill of this type, some of the submissions and advice considered by the committee was of a highly technical nature. The committee has recommended a number of improvements. The reported-back bill clarifies the separate roles that codes of practice and regulations will play under the bill.

Codes of practice have become the only means of specifying how the fundamental requirements of the bill must be met. Members may also recall that the fundamental requirements of the bill specify that ionising radiation can be used only where a justified benefit can be demonstrated. Where this is the case, planned radiation exposures must be as low as are reasonably achievable. In all cases, radiation exposures must not exceed the limits specified in the bill. The fundamental requirements also deal with other aspects of safety, security, transport, storage, and disposal of radiation sources. Codes of practice will be issued for the different practices that involve radiation use. These practices occur across the fields of medicine and in other health services, veterinary medicine, science, research, and industry. Regulations have become the means for specifying how the other provisions of the legislation must be met. These include licensing and consent processes, record-keeping, safety planning, and the setting of fees, for example.

Improvements to the bill also introduce the requirements that codes of practice are reviewed at least once every 5 years, consulted on during introduction or review, and provided to Parliament for consideration as disallowable instruments under the Legislation Act 2012. Because codes of practice have become the only means of specifying how to comply with the fundamental requirements, the regulation-making provisions on fundamental requirements will no longer be needed and have been removed. Some of the regulation-making provisions have benefited from additional clarification of their intended purpose. These include provisions to make regulations to exempt very small radiation sources from authorisation and registration requirements, providing the resulting radiation exposures are below specified levels. This will allow, for example, for the continued beneficial use of household smoke detectors without the user being required to obtain a licence to do so.

The bill’s approach to ensuring appropriate standards are met by radiation ancillary service providers has been altered. These service providers help to ensure the fundamental requirements are being met by calibrating equipment used to measure radiation and assessing radiation exposures received by radiation workers. It was intended to regulate these services provided, using an approvals regime. However, to complement other changes to the bill, these services will now be specified in codes of practice and will become the responsibility of owners and managers of radiation sources as part of their licence conditions.

The bill has been amended to make it clear that a single source licence and a single radiation safety plan can apply to more than one radiation source where this is appropriate. A source licence is a licence to own or to control and manage a radiation source. Some owners, such as district health boards, for example, have control and management of a number of radiation sources. This improvement will help keep the administrative burden of managing radiation risks as low as is reasonably possible without compromising safety or security in any way.

The bill contains a provision to allow unlicensed persons to use radiation under the direct supervision of an authorised person. Further provisions have been added to allow an unlicensed person to use radiation sources, providing they are acting under the written instruction of an authorised person. This will apply to only those uses of radiation that are mechanical or procedural in nature. An example of such a situation might be the operation of baggage X-ray equipment at airports for security purposes. This amendment makes the bill more usable in these lower-risk situations.

The provisions to act under written instruction are not intended for higher-risk users of radiation or for clinical procedures that involve intended exposure of people to radiation. In these situations, high standards of safety training, day-to-day practice, and decision making are expected. Therefore, a licence exception in lieu of designated radiation safety training continues to be the only means of meeting radiation safety standards allowed for under the bill.

The fees charged under the bill are to recover the costs of administrating the bill. Fees will vary to a high degree depending on the size of the risk that is being managed. For some activities, fees will be high. Principles and safeguards have been added to the fee-setting provisions to ensure that suitable consultation is undertaken, that fees are justifiable and as low as possible, and that the fee-setting process is transparent.

Some scientific and technical terms have been clarified in the interpretation section of this bill. An oversight has been corrected to ensure that the Radiation Safety Advisory Council established by the bill will be subject to the Official Information Act 1982. Provisions have been added to clarify safety requirements for volunteers—often family members—who provide comfort and care for people who are being treated with radiation. Also, the committee has taken the opportunity to simplify some of the drafting in the bill.

The bill regulates ionising radiation only, and no changes have been made on this particular matter. I am advised that the committee discussed in its deliberations the potential health effects of exposure to non-ionising radiation. I am also aware that the committee received both submissions and technical advice on the nature of, and differences between, ionising and non-ionising radiation. In retaining the bill’s focus on ionising radiation only, the committee has unanimously reported back a bill designed to regulate the unique phenomenon of ionising radiation.

The reported-back bill meets its stated purpose of establishing a legislative framework to protect the health and safety of people and to protect the environment from the harmful effects of ionising radiation while allowing for its safe and beneficial use. I commend the bill to the House.

Hon ANNETTE KING (Deputy Leader—Labour): The Labour Party supports the second reading of this bill. The Radiation Safety Bill will repeal and replace the existing Radiation Protection Act 1965, and I think all would agree that an update of this Act is long overdue. In fact, in 2004 the Ministry of Health held a review of the Radiation Protection Act and held public consultation. At that time, a regulatory impact statement was prepared for a radiation safety bill, and that regulatory impact statement identified that there would be net benefits in drafting new legislation. So the intention was to extend the scope of the legislation to include harmful non-ionising radiation, but the Government decided in 2009 that the current regulatory regime was satisfactory. So that is a little bit of the history behind it.

This bill was introduced this year and it has been to the Health Committee, which has held submissions on it. I have to say that it is a very complex piece of legislation, in effect, and we were very, very well served at the select committee by a team of experts from the Ministry of Health. I want to commend them today for the way they went about explaining to lay people like ourselves how this legislation would work and what ionising radiation and non-ionising radiation was as we investigated and tried to understand exactly what should be in and what should be out of this legislation. It shows the value of having highly skilled professionals working within the bureaucracy, so I just want to put on record that we really did appreciate their support in this respect.

I think if there was going to be any disagreement on this bill—and it is not disagreement from the Labour Opposition, but I know that there was some discussion and some disagreement about whether we should include non-ionising radiation, and that perhaps this should have been included in this legislation. For those who are wondering what the difference is—and it was something that we needed to understand—ionising radiation is high-energy radiation. It includes X-rays, alpha particles, beta particles, and gamma rays that have ionising capability by removing atomic or molecular electrons, and hence can cause chemical or molecular changes to the interacting bodies. You can see it is quite complex. Non-ionising radiation is electromagnetic energy, which includes laser lights, electromagnetic fields, and radio waves. So non-ionising radiation produced by electromagnetic fields—and examples are cellphone towers, Wi-Fi, microwave ovens, ultraviolet tanning machines, and power lines—are not addressed in this bill, and they will continue to be regulated under New Zealand standards.

I think one of the reasons why we were convinced that we ought not to include them in this bill is that there is a variety of ongoing research about the possible health effects of non-ionising radiation. The reviews conclude that overall the results show that exposure that complies with the current limits does not cause health effects, and also the World Health Organization has said there is no accepted biophysical mechanism that would suggest that low levels of exposure involve cancer development. It was going to be incredibly complex to include non-ionising radiation, and so this bill does not, and we agree with the decision that was made for that to continue to be regulated by Standards New Zealand.

So what does this bill actually do? We have heard a very good presentation from the acting Minister, Paul Goldsmith. One of the purposes of this bill is to enable us to meet our international obligations under a range of international treaties relating to radiation protection, radiation safety and security, and non-nuclear proliferation. We certainly acknowledge that we needed to update legislation so that we could keep up with those treaties but also with technological changes, and there are many technological changes in an Act that is so old. 1965—if you think back to what life was like in 1965, there would be many people who did not have internet. There would be many people who did not have—

Hon Member: It didn’t exist.

Hon ANNETTE KING: Yes, they did not have it. Many people did not even have colour TV in 1965. I could tell you there would have been very few people on the Chatham Islands who had colour television. But, seriously, if you think back to 1965 and go forward to 2015 and think of all the technological changes that have occurred, you will see that legislation must constantly keep up with such changes. It will not actually be only in this bill where we need to be constantly looking at legislation, because we will find very quickly that legislation on our books will become outdated because of the rapid technological changes that are being made.

We also support this bill because we want a high level of compliance and we want international best standard and practice in this country. We pride ourselves on being a country that wants to meet international treaties and standards, and we want a high level of best standard practice. Of course when you are talking about things like X-rays, there is a certain amount of fear in the public about the impact on them anyway, and about whether they have to have a lot of them and what does it do to them. You need to ensure that those who are providing X-rays and other services are reaching the highest standard, so this bill is one that does, in fact, lift our standards and it brings us in line with best international practice.

One of the parts of this bill that I think is also important is it covers the use, the transportation, and the disposal of ionising radiation, which includes man-made cobalt-60 and naturally occurring uranium in quantities above stated levels. It also is a fundamental requirement—it stipulates that radiation use occurs only where the expected benefits outweigh the risks, that exposure must be kept as low as reasonably possible to achieve the results that are wanted, and that the doses must not exceed the limits. So we asked quite a number of questions about how this would work and what impact this would have—if a person did receive too much, what track would they go down to address these issues—and we got, I think, some very solid answers in the way that this bill would work.

In terms of the implementation of international conventions, it does mean that we will complete New Zealand’s domestic implementation of the International Convention for the Suppression of Acts of Nuclear Terrorism and the Amendment to the Convention on the Physical Protection of Nuclear Material. It also allows for the International Atomic Energy Agency international inspectors—as you heard from the Minister—to be appointed by the Director for Radiation Safety to undertake activities in New Zealand, and these international inspectors must be accompanied by an enforcement officer appointed by the director under a clause in this bill.

So the bill has a lot of complicated pieces to it, but it is a big move forward in terms of our approach to radiation protection in New Zealand, so the Labour Party supports this bill. We thank the chair of the select committee for the very good way that the inquiry and evidence on this bill was heard—the length of time that we were given to be able to understand it, as much as lay people like ourselves can understand these issues—but why I feel very assured that we are making the right moves here is the calibre and quality of those who were providing advice to us at the select committee. We will be supporting this bill in the House.

SIMON O’CONNOR (National—Tāmaki): I am pleased to take a call in this second reading of the Radiation Safety Bill. Can I begin by acknowledging the speaker who has just sat down, Annette King, but also other members of the Health Committee. I have often said that we are quite collegial in our proceedings, and I think this bill is a good example of working together. Perhaps there was a point of commonality—and certainly with regard to me—of complete and utter lack of knowledge in this space. I am not an electrical engineer, physicist, or anything, so—

Stuart Nash: Or anything at all.

SIMON O’CONNOR: Oh, that hurts—that hurts.

Stuart Nash: You said it.

SIMON O’CONNOR: I know. It is just so hurtful, really. You know, we work very well together in this space, because, actually, it was, as both previous speakers have mentioned, a very, very technical piece of legislation. I too want to thank the officials who led us through that, articulating these concepts so that lay people could understand and at times, I suspect, displaying great patience as we continued to ask the same questions over and over as we tried to get our heads around them. But I think, for those listening to understand, that although lay people might sit on this committee, we work very hard to understand the concepts that we are ultimately putting into law. So my thanks go to the officials and my thanks go to the committee.

One of the things that keeps coming up and that I want to assure the public about is, again, that distinction between ionising and non-ionising radiation. I think often when there is a little bit of uncertainty in these spaces it generates a lot of concern for people. Look, this bill deals with ionising radiation. As the Hon Annette King mentioned, we are dealing with things like gamma rays, beta rays, X-rays, and so forth. It is energies or particles of energies that make material and substantial differences, and that is distinctly different in a physical sense from what you would expect from visible light sources, ultraviolet light, radio waves, what is coming out of your cellphone at the moment, TV screens, and the like. We are not, in this bill, wanting to regulate the latter.

There is one that is not so much an exception, but I recall that one submitter—in fact, the first gentleman who submitted—pointed out the issue of smoke detectors and where they fit. In fact, that was something that we have very quickly looked at and come to the right space in that area. Those of you who may, you know, take the time walking through the corridors of your house will note that, actually, we are using ionising radiation in that space, so how we deal with that appropriately is important.

As has also been mentioned, this is about bringing the legislation up to speed with current practice. I have to admit, I was not around in 1965. I will have to turn to some older members—I will not mention which party—[Interruption] I know—experience. But we are also bringing ourselves towards those international obligations.

Andrew Bayly: You were born then?

SIMON O’CONNOR: No, look, the milkman had not even turned down the street in 1965. That said, I was born in an era where we still had black and white television and only two channels. We are also here to bring ourselves in line with international obligations, and that is quite important.

A couple of things I think we need to very quickly touch on—this bill ensures that appropriate security measures are in place when handling radiation. This is not opening the door to some sort of carte blanche approach. It is also about setting codes of practice that will ultimately guide the way we deal with radiation, and those codes have to be renewed or reviewed every 5 years. One really important element is that an institution now using ionising radiation needs a single source licence. So the Minister talked about district health boards, where they might, of course, have an X-ray machine, a CT scanning machine, magnetic resonance imaging, and so forth. We are not expecting the district health boards to hold a licence for each of those items; they themselves can hold a source licence to be able to use ionising radiation, and very much the same is true for universities.

The other thing I will touch on, because there are a lot of technical changes we have made, is about ancillary services. So you might have a magnetic resonance imaging machine, and there is a source licence, obviously, to use it, but you may need at times to send parts overseas, in particular to get the ancillary or support services. In the original drafting of the bill it looked like we might have to regulate or provide some sort of approval for people outside New Zealand to actually help support the work of those magnetic resonance imaging machines. We have decided that does not really make much sense, practically speaking, so we have tightened up the regulations to make it very clear that the source licence will also enable people to use ancillary services overseas to help with those machines.

There are a few exceptions around our Defence Force and its use of radiation as well—I think that is important to note. But look, overall, this is a very good bill. I thank members again for their overarching support and look forward to it moving to Committee stage.

LOUISA WALL (Labour—Manurewa): Kia ora, Mr Assistant Speaker, tēnā koutou katoa, manako hoki ki a Aotearoa tātou All Blacks.

[Thank you, Mr Assistant Speaker. Greetings to you all and the desire to return to New Zealand of our All Blacks.]

Welcome home. It is my pleasure to speak on this, the second reading of the Radiation Safety Bill, as a member of the Health Committee. I just want to reiterate some of the sentiments that our chair, Simon O’Connor, has shared about how well our committee gets on and how collaborative it is. This bill was really interesting because the main focus was actually about radiation, and we discussed whether this bill actually should include non-ionising radiation and, in fact, whether we should have renamed this bill the “Ionising Radiation Safety Bill”.

What I really want to highlight is just some of the comments that have already been made, including that this bill will repeal and replace the Radiation Protection Act 1965—so it is a long time since we upgraded and updated this legislation—to enable New Zealand to meet its international obligations relating to radiation protection, radiation safety and security, nuclear non-proliferation, and a range of international treaties, as my colleague Annette King articulated earlier.

The bill also provides that radiation use may occur only where the expected benefit outweighs the risks, and, actually, I want to focus on that sentiment for a while. Radiation and ionising radiation is radiation consisting of particles, X-rays, or gamma rays with significant energy to cause ionisation.

For people who do not know—and we had to do a lot of looking up in the committee to understand what that actually means—ionisation means that the medium through which those X-rays, gamma rays, etc., pass actually acquires either a positive or a negative charge. I think the significance of that particular definition for us in deciding that this bill was actually just about ionising radiation is that we know that ionising radiation causes leukaemia, and it causes cancers like lung cancer, skin cancer, and bone cancer.

So, actually, what this bill is trying to do is ensure, as I said before, that radiation use may occur only where the expected benefit outweighs the risk. So the intention of this bill is to ensure that exposures are kept as low as reasonably achievable, that prescribed dose limits must not be exceeded, that all reasonable steps to ensure safety must be taken, and that the likelihood of an emergency must be minimised through planning and preventing unauthorised access to radiation sources. So that is what this bill is trying to achieve.

I think the preoccupation that some of us had about the difference between ionising and non-ionising radiation actually was coupled with the fact that our select committee had been looking at the Health (Protection) Amendment Bill. That was a piece of legislation that we considered earlier, but within the scope of the Health (Protection) Amendment Bill there is quite a bit focus on ultraviolet tanning services, or sunbeds. The decision that our select committee made in support of that particular legislation was to ban sunbed use for under-18-year-olds. Why did we do that? We did that because, based on the evidence, it is actually unsafe. We do not want to put under-18-year-olds at risk, and so it does actually overlap with this Radiation Safety Bill because—and I will go back to my original point in terms of the purpose of this bill—radiation use may occur only where the expected benefit outweighs the risk.

So for some of us trying to, I guess, marry up those two pieces of legislation that were before our select committee, and trying to understand the difference between ionising and non-ionising radiation, it was actually that we were trying to understand why in the Health (Protection) Amendment Bill we have only banned UV tanning services for under-18-year-olds. The overwhelming evidence that we heard from submitters on that piece of legislation before our select committee was that they should be banned for all, irrelevant of age.

So we thought that if non-ionising radiation was actually part of this Radiation Safety Bill, then, in fact, based on radiation use occurring only where the expected benefit outweighs the risk, this could be another area where we could highlight the fact that, actually, we think—as the other members of the select committee and the Opposition do—that sunbed use should be banned for everybody. So we were not able to make that link. We are quite clear now on the distinction.

I think there is still some merit in calling this the “Ionising Radiation Safety Bill” so that everyone is clear, but we are yet to, I think, fully explore that option. Obviously, through the Committee stage there may be an opportunity for us to propose a Supplementary Order Paper, but the debate that we have had within the committee, I think, has been incredibly robust. I too would like to thank the officials and the level of expertise that was provided to our select committee so that some of us could understand what this bill was trying to achieve. I think that we have managed to achieve that.

I think that where we have come to in terms of this piece of legislation now means that, as my colleague Annette King has said, we will support this piece of legislation. So I will not take much more time because we have got a Health Committee meeting at 10 a.m. Nō reira, tēnā koutou, tēnā koutou, tēnā tātou katoa.

BARBARA KURIGER (National—Taranaki - King Country): It is a pleasure to be taking a call and speaking on this second reading of the Radiation Safety Bill. I can remember when I stood up to speak on the first reading. I came into work that day and my executive assistant said to me “You’ve got to speak on the Radiation Safety Bill for 10 minutes.”, and I was there thinking: “Oh my goodness, how on earth? I know nothing about radiation.” As others have said, it is a very complex issue. I do remember going to Wikipedia and ending up more confused than I was when I started.

I do want to endorse the advice—and others have spoken of it—that we did have at our select committee, explaining the differences between the types of radiation, and giving us very clear charts and graphs about how it works. It is about modernising an outdated piece of legislation. I am one of the people on the Health Committee who can remember 1965, so I will make that admission. When you go back to 1965—it was actually when The Sound of Music was released, and I can remember trotting down from my school to the picture theatre. When we think about technology now and the things that we are streaming in in terms of movies, and then go back to 1965 and think about the way we did things then, we just know that the radiation protection that we had back in those days is not going to cover what we have got today.

There are about 4,300 licensed users of radiation sources in New Zealand, and although the majority of them are in the medical industry, we have actually also got veterinary medicine, we have got research, and there are a number of others who are also using it. As other speakers have alluded to, it is about the benefits outweighing the risks going forward, and making sure that the level of exposure, not only to those who are being treated but for family members and all those people around them, is absolutely limited to the minimum needed. It is also stating in this piece of legislation that no one is allowed to use a radiation source other than for its intended purpose. You have to have an authorisation before you can manufacture, possess, or control a radiation source. You have to have authorisation to use a radiation source, to import or to export, or to perform a radiation ancillary service. It is really, really tightening up those rules. It is tightening up the technology as we know it today.

We all know that radiation services are really important for our medicinal purposes. It is about delivering better cancer services—one main use that we use it for. It is a top-priority service. We have come a long way in terms of the treatment that people are getting, if it is caught early and it is treated early by safe, solid services with radiation. So it is a pleasure to support this bill today.

It has been a pleasure, again, to work with the Health Committee. We have had some great discussions. We have learnt a lot. While I am not now an expert on radiation, I have a much wider and broader understanding of it than I did when we began. Thank you.

KEVIN HAGUE (Green): I begin, as some others have, by thanking the officials who served the Health Committee, and the other select committee members. I thought it was a very useful and collegial way of approaching the bill. I will come back to the contribution made by the officials towards the end of this contribution, but I also want to say thank you to the submitters. The submissions were small in number, and my experience is that that usually—not always, but usually—indicates a fair degree of satisfaction with the content of a bill. Indeed, most of the submissions were, at least broadly, very supportive of the bill, with some minor amendments.

The bill sets out to do three main things. It does some modernising, and the changes made to the penalty regime, for example, are an example of that aspect of the bill. It brings New Zealand’s domestic legislation into line with international agreements and standards to which we are party—in fact, to which we have been party for some considerable time. As Annette King has noted, the reform is indeed somewhat overdue. The other thing that it does is reflect the changing circumstances. In 1965, as others have spoken of—it was a major theme, as I recall, of the first reading debate about this bill, as to what 1965 was like. But at that time, in relation to radiation safety—actually, I went to The Sound of Music, the movie, as well. It is a great film, and I heartedly endorse it for your education.

The ASSISTANT SPEAKER (Hon Trevor Mallard): The member will get out of the hills and back to the bill, thank you.

KEVIN HAGUE: So in 1965 the sources of ionising radiation were generally in the control of easily identifiable individuals. One of the things that has occurred in the intervening time is that that is less and less the case. And, in general—

Hon David Parker: General MacArthur.

KEVIN HAGUE: As I continue, the suggestions of themes from 1965 are flooding in from other members around the House, but I will not be distracted by that. I am going to focus on the bill. But one of those changes has been the change from identifiable individuals to institutional settings: hospitals, universities, and research institutions. One of the things that this bill does is create a machinery for accountability in those circumstances.

My major concern with the bill has been over this issue of whether it should also continue to include only ionising sources of radiation or also non-ionising sources in its scope. I guess there are a number of reasons why I was concerned about that issue. First of all, the original recommendation, as Annette King has said, was for both ionising and non-ionising radiation to be covered by the bill. So it seems, prima facie, that that is what we should be considering.

Secondly, the Health Committee, in particular, as Louisa Wall has mentioned, has been particularly exercised—and was at the time that we were considering this bill—by sunbeds and solaria, which are sources of non-ionising radiation that clearly were the source of considerable harm. And, of course, non-ionising radiation covers a variety of sources. It covers visible light, ultraviolet light, radio frequencies, and, indeed, some other parts of the spectrum. So the potential harm from those sources suggested that non-ionising radiation should also be in the scope of the bill.

I guess the other reason that I was inclined to think that both should be included was one of administrative efficiency. My background is in hospital administration. It is regular for a magnetic resonance imaging machine to be in one room and to have X-ray machines in the room next door. One is the source of ionising radiation and one is the source of non-ionising radiation. It seems inefficient to have totally different regulatory regimes to control the use of the radiation sources in those machines. I was very interested in the evidence that the committee heard on that topic. I guess I was reassured somewhat by the fact that the submissions that we did receive did not suggest that it was necessary to combine the two into one Act. In fact, there was only one submission that made that suggestion, and that submission seemed to being a little off beam in its contents, whereas all of the authoritative submissions that we received agreed that the scope was correctly restricted to just ionising radiation.

There are, effectively, two options for regulating both ionising and non-ionising radiation. One is to have a single Act that covers both in its scope, which would then have to have separate regimes covered under the umbrella of that Act to cope with the different effects of the different types of radiation. The other approach is to take the one that we currently have, which is to have an Act that deals with ionising radiation only and have other regimes—through standards and regulations and, in some cases, other statutes—to deal with the non-ionising sources. The committee has chosen to go down the second of those, and there are several reasons for that.

Others have spoken about the difference between ionising and non-ionising radiation, but what I particularly want to highlight, having perhaps been the one who most strongly raised these concerns in the first reading debate, is that the effects of the different types of radiation are so strikingly different. In particular, ionising radiation interacts with the body by penetrating the body and producing large numbers of ions, or charged atoms, and in consequence we measure ionising radiation by the absorption of energy by body mass. Mass is the unit we use to describe ionising radiation. On the non-ionising side, we measure the impact by the heating effect on the surface of the body, and that is where the risk of non-ionising radiation lies. These are quite different types of effects, and so if we were to combine them in a single Act we would still need entirely different regimes within that Act to accomplish the regulation that we need.

That is not to say that the standards and the regulation that we have for all sources of non-ionising radiation are fit for purpose, and I certainly want to see a programme of modernising of those also. I would support Louisa Wall’s suggestion—which the Ministry of Health had no objection to, in fact—of relabelling this bill the “Ionising Radiation Safety Bill”. I think that that would provide some clarity.

It is this point of clarity and education that I want to finish on. As other members have said, the Health Committee was extremely well served by the fantastic advice that we had from health officials. But the New Zealand public also needs that same level of education and science literacy that was delivered to the Health Committee. I am a person who does have a physics degree, and the thought of speaking in the second reading and revisiting this legislation and rereading our report makes my head hurt, so let us think about the New Zealand public and actually put our minds to educating them about scientific principles. Thank you.

BARBARA STEWART (NZ First): On behalf of New Zealand First, I am very pleased to rise in support of the Radiation Safety Bill. As other speakers have said, this bill sets out to repeal and replace the 1965 Radiation Protection Act. We all know that society, science, and technological advances have come a long way since then—The Sound of Music was a long time ago. But the best news about this particular bill is that it will bring us into line with international best practice and the latest principles of radiation safety, which is important.

We support this bill because it brings dose limits for ionising radiation into line with the recommendations of the International Commission on Radiological Protection. It is absolutely critical to balance the benefits of ionising radiation with the health and safety of people and our environment, and we believe that this bill successfully does that. And, of course, this bill also helps New Zealand to meet its international radiation protection obligations.

I must say I was very pleased to be the New Zealand First representative during the select committee process as we closely examined and refined the bill. Like others, we must compliment the people from the Ministry of Health, who ensured that we knew far more about the bill and ionising and non-ionising radiation as we went through the various stages in the bill. We received a lot of submissions and we heard from a number of people, all of which only added to our understanding of some very technological issues. This was a very technical bill, so we are very grateful to the people who took the time to comment on the bill, because this ensured that the content of the bill was appropriate and practical.

The bill focuses on providing a framework for the safe use of ionising radiation. We learnt that ionising radiation is irradiation that has enough energy to remove electrons from the orbit of an atom, causing the atom to become charged, or ionised.

Scott Simpson: That’s right.

BARBARA STEWART: I know. We did not know that before. We also know that ionising radiation can easily penetrate the body. We learnt too that if an atom in a cell’s DNA is ionised, this can trigger chemical reactions that can damage our DNA and can lead to either death or mutation of the cell, which can eventually lead to cancer. We want exposures kept as low as possible, and we need to ensure that they are kept in line with, right around the world. But we can reassure Kiwis that the dose limits of radiation that are listed in this bill are safe and people will not be harmed in any way from this.

We also know that certain parts of the body are affected differently by radiation, and, of course, we were very interested in it because of sunbeds, which we had actually looked at previously, and whether or not they should be banned for people under the age of 18. Being fair-skinned myself, after hearing all of the evidence, I was quite happy to go along with that. So for children and for young people, the limits for ionising radiation need to be very different.

We are pleased too that the security measures have been tightened up by making it a requirement that every person who deals with a radiation source must ensure that there are appropriate security measures in place. This will ensure that everyone takes responsibility for the security of the radiation source, which is vital. A very important revision has been made to clause 22(4) allowing an unlicensed user to use a radiation source under the direct supervision or written instruction of an authorised person. We know that under current law, use is permitted only under the direct supervision of an authorised person, and the bill as it was presented stated quite categorically that no person could use a radiation source without a source licence. But, in reality, it is not possible for this to happen at all times.

I was particularly interested in the case of dental therapists who take X-rays of children’s teeth. It is just not practical for a dentist to be at the dental clinic every time an X-ray is taken of children’s teeth, so they cannot physically be there for every consultation. We believe that a better solution to this would be to allow dental therapists to be able to operate a licence under the Act for our children.

We also believe that there are a couple of items that still need addressing in the bill. The current draft of the bill states that the Director of Radiation Safety “may require an applicant for a source licence to submit a radiation safety plan”. We are of the opinion that it should be mandatory for every organisation that applies for a source licence to submit the plan.

We also fully support the need for a source register. This will allow better monitoring of what is happening in this particular area, but we are very keen to hear how this register is actually going to be controlled to ensure that only authorised persons can access it. We note that the regulatory impact statement says that the Ministry of Health will be able to support the bill within “current departmental appropriations”. We are keen to ensure that appropriate resources are available to ensure that other services do not deteriorate as moneys are used to ensure that this register is kept up to date.

So, although clarity is required on some issues, New Zealand First supports this bill. Thank you.

JACQUI DEAN (National—Waitaki): A lot of the debate in this Chamber has been around the difference between and the nature of ionising and non-ionising radiation, and they are important distinctions to be made clearly in this bill. The Radiation Safety Bill applies to ionising radiation, which of course is X-rays and gamma rays.

I just want to refer to some of the comments around non-ionising radiation that have been made by other members throughout the House, and their reference to sun-tanning beds and how, in the context of another piece of legislation, some members were calling for the complete ban of the use of sun-tanning beds in New Zealand. We did arrive at a different position in the Health Committee. I want to sound just a slight note of caution around that total prohibition position, because for sufferers of skin conditions such as psoriasis, which is a very common and upsetting skin condition—

Louisa Wall: That’s medical. That’s not about cosmetic use. It’s not even relevant.

JACQUI DEAN: The member opposite says it is not even relevant, but I contend that it is indeed relevant to those people who have several choices when dealing with the treatment of psoriasis. They can, if they live in Wellington, make an appointment to go to Wellington Regional Hospital. They can take the bus or they can walk or whatever to get to Wellington Regional Hospital, park their vehicle, pay the fee, wait in the waiting room until it is their turn, go into the non-ionising radiation facility, get their 10, 20, 30, or 1 minute session of radiation for their psoriasis, then repeat the procedure, having taken half a day off work and losing income. Or they can go down to Courtenay Place or Lambton Quay and go and treat themselves for their psoriasis. I think that is a valuable option for people to have. That is my position on it. I see it as being a very valuable alternative. However, we can have that argument and we will have that argument in the Health (Protection) Amendment Bill, perhaps later today.

The Radiation Safety Bill is not actually really about the difference between ionising and non-ionising radiation. It is actually about modernising the framework around the use of X-ray and gamma ray facilities. If one thinks about it, there are X-ray suites and gamma ray suites and radiation therapy suites up and down New Zealand, and also in dental surgeries that, indeed, take films of schoolchildren. What this bill does is it brings the legislation around the use of those facilities in line with modern practice. That is what it does. It does it very well. I commend the bill to the House.

MOJO MATHERS (Green): The Green Party supports the Radiation Safety Bill. I agree with my colleague Kevin Hague when he said that maybe it should be called the “Ionising Radiation Safety Bill”, because that is the focus of this bill.

Obviously, it is an important bill, because it is going to update and modernise the regulation of ionising radiation in New Zealand. This is important because not only is this radiation used in a wide range of applications but the use of it does carry with it a certain level of risk. It is one that the public is not able to assess for themselves. When they go for an X-ray, whether it is a dental one or at the hospital, they need to have trust that the regulatory regime is robust enough that they will not be exposed to more risk from that radiation than would be acceptable. Obviously, all exposure has the potential to cause harm, so what this bill is trying to do is balance the benefits of the use of being exposed to damaging ionising radiation with the harm that can result from that, and to ensure that that exposure occurs only when the benefits are greater than the risk of harm, which includes the increased risk of cancer and other damage as a result of that exposure.

I was one of those who would have liked to see a single regulatory framework that covered both ionising and non-ionising radiation. Obviously, the way that they affect the body and the way that they cause harm is different, but the reality is that exposure to both can cause harm. The exposure to ionising radiation carries with it, in most cases, a much greater risk of harm, and therefore the priority is to make sure that our regulatory regime for ionising radiation is robust and strong, because the risk of harm is very well known and very well quantified. That does have to be the priority, and that is why we need to support this bill, because it is finally updating the laws to meet international standards and ensure a higher level of compliance, which is absolutely what we need to see in New Zealand.

However, it does not therefore follow that our current levels of regulation around non-ionising radiation are adequate. I would hope that further down the track the Ministry of Health will look at and review the regulations and standards that govern non-ionising radiation, because there is greater and greater exposure to non-ionising radiation from a very wide range of sources, and there is greater public concern about this. So we accept the recommendation of the officials that we do not try to incorporate it into this bill, but it does not therefore follow that that is an issue we should ignore altogether.

The Green Party supports this bill. We support a robust regulatory regime for ionising radiation, we support compliance with international standards, we support the high levels of compliance that we hope will arise out of the bill, and therefore we are pleased to be supporting it. Thank you.

SUE MORONEY (Labour): I rise to take a call on the Radiation Safety Bill at its second reading, and I am pleased to do so to offer Labour’s support also for this bill. I did not have the benefit of being on the Health Committee and of hearing all of the submissions that previous speakers have referred to. It sounds like it was a very thorough process—albeit technical at times—and has really challenged both the officials and the members hearing the submissions on the bill in order to ensure that they have got this right. It is interesting to note that this bill has support right across the House, and, therefore, I think that is an indication that the select committee has indeed done its work well and has got the technicalities of this bill correct.

This appears to be a bill where the Government is responding—one of those few times that this Government is responding—to recognise international best practice, and one of the few times that the Government is actually looking at the research and evidence and is making good, sound policy and legislation based on research and evidence.

I want to encourage the National Government to learn from what it has done here and apply it in a range of other settings. There is a bill that went through this House in the not too distant past where the Government ignored international best practice when it came to safety, and it ignored the research and evidence. It went looking for a political solution, and ended up telling us that worm farms are more dangerous than cattle farms. So I think this is an example that the Government should learn from, about how to do it properly if it really is concerned about safety issues. If it is genuine about it and it wants to make progress on it and it wants to have the full support of this Parliament, then actually looking to international best practice, learning from it, hearing the research and evidence, and acting on it properly without the political overlay and the political undermining of genuine safety—that is the way that this Government needs to continue to proceed. And this bill is an example of how it can be done well.

The Radiation Safety Bill will repeal and replace the Radiation Protection Act 1965, and having been born just a year prior to that Act I can actually track the technological advances there have been in the course of my lifetime and I think that that probably therefore tells us that it is well and truly time to revisit the way in which we deal with radiation safety because of the changes that have occurred over the course of that period of time—some 50 years since this legislation was originally put in place.

I hear the calls from members who were on the select committee to ensure that the public do understand that this is really covering one aspect of radiation—not the entire spectrum. It covers ionising radiation and does not attempt to cover non-ionising radiation. I know that there is a range of views from members on the select committee about whether it ought to have attempted to do that or not. The consensus appears to be that they are different, and that they are so different that they are better dealt with in separate regimes, and I accept that from those who heard all the evidence. However, it appears to be, I think, unanimous—although I have not heard the National Party members speak on this issue—that there is a need, and an urgent need, for the non-ionising radiation standards to be updated. They also have not been updated for some period of time. It makes absolute sense to me that if this House is investing its time in updating the ionising radiation safety legislation, then it needs to very quickly turn its attention to the non-ionising aspects that are not covered by this bill.

So, in summary, Labour supports this bill. We congratulate the Government on recognising international best practice, on addressing the research and the evidence in front of it, and we encourage it to do that in all fields with regard to safety.

SCOTT SIMPSON (National—Coromandel): As a member of the Health Committee, it is a great pleasure to speak in the second reading debate on the Radiation Safety Bill in the name of my friend and colleague Jonathan Coleman, the Minister of Health.

When the speeches leading off this debate were made earlier on by colleagues on the Health Committee, I was impressed with the range of knowledge and depth of understanding that my colleagues had absorbed from this bill and our hearings into it at select committee. One of the great things about being a member of this Parliament is that even though you have no particular expertise—and as members we may not have a particular knowledge of a subject area or a piece of legislation—when a piece of technical legislation such as this comes before a committee such as the Health Committee, which is a collegial and well-chaired committee and one that works hard and diligently, you do learn things as a member of a committee like that. That certainly has been my experience on this piece of legislation. It is something that has been, I think, an exemplar in terms of how a select committee process should work, and I want to acknowledge and also thank the Hon Annette King for the comments she made during her contribution with regard to the very competent level of advice and professionalism received from officials and staff during the select committee hearings and process.

This is a technical bill. It is a bill that replaces legislation that dates to the mid-1960s, and the amount of technological advancement, medical advancement, and improvement in science and knowledge that has occurred in those intervening years is hardly necessary to explain. However, it is important that our legislation improves and keeps up with modern technology and new ways of doing things. This bill does that, I think, in a very good way. It is a way of ensuring that medical professionals are secure, that the users of these types of rays and radiation are secure, and that the beneficiaries of treatments that are achieved from that medical use are also protected.

But it goes further than that, and it is not going to be something that I want to get into, in terms of making great proclamations as to the definitions of the technical aspects of this bill, other than to say that I think the select committee has done an extremely good job. All members of the committee worked very well. I am delighted to hear that there seems to be unanimous support for this bill across the House, and so I commend it to the House.

Dr SHANE RETI (National—Whangarei): It is a pleasure to speak to the Radiation Safety Bill, which provides a modern framework to the safe use of ionising radiation. We have heard that ionising radiation is used most frequently in the health space, and that sits in the speciality of nuclear medicine. It is used most frequently for cancer treatments. When we use radioactive material in medicine, there are generally two pathways that we apply. There is a diagnostic pathway and a therapeutic pathway.

Diagnostically, what we often do is attach a radioactive isotope to a molecule and look where it goes. We are primarily looking for cancers or over activity, because cancers metabolise. They take in nutrients twice as fast—sometimes faster—than other tissue and they metabolise it and catabolise it as well. So we attach a radioactive isotype, and for people who have thyroid disorders we attach a radioactive isotype to iodide. You take it as a pill and the radioactive material goes into the thyroid gland and accumulates in places that are overactive.

We also very commonly do it with what are called PET scanners—positron emission tomography—and that is when you think there is a cancer in the body but you just do not know where it is. That is because in the early stages of cancer, it can actually be too small to see with a CT scan or magnetic resonance imaging, but the cancer is there and it is growing fast, and what it is doing is it is eating nutrients twice as fast. Well, one of those nutrients is glucose, so what we do with a PET scan is we put a radioactive isotope on to the glucose, the patient drinks it, and 45 minutes later we do a CAT scan. Over those 45 minutes, the cancer in the body—if there is a cancer—has taken up the radioactive glucose, and when you scan for it, you see what is called a hot spot on a film. It is a very important part of diagnostics for cancer, and we are really focused on cancer.

We also use radioactive material in nuclear medicine therapeutically. That is, once we have made a diagnosis, once we have found a cancer, we can use radioactive material to kill that cancer—to obliterate it, if you like. That would be very common, of course, for breast cancer, also for cervical cancer, and also for prostate cancer. So it is a very important part. This bill really solidifies and provides a really robust framework around the use of radioactive material in nuclear medicine and in medicine generally.

This bill is also a very important step in advancing our international responsibilities. Some of the conventions that this will help us deploy towards include the Amendment to the Convention on the Physical Protection of Nuclear Material. This comes under the auspices of the International Atomic Energy Agency, and it is a convention that talks about the safe use, storage, and transport of nuclear materials, and the facilities that are involved. So this bill assists further progress towards that implementation. The second major convention that this bill assists is the International Convention for the Suppression of Acts of Nuclear Terrorism. This is under the United Nations. New Zealand signed this in 2005, and this has a broader application than the previous convention. It is more applied to a definition of materials and facilities, and it covers both military and peaceful applications. It talks to the criminalisation of planning, threatening, or carrying out acts of nuclear terrorism, and it also requires international cooperation.

So this bill assists further progress towards implementation. On that subject, I would like to conclude with what the Minister led off with in the introductory speech to the first reading, and that is to reassure people and reiterate the comments around nuclear materials in New Zealand. He commented that this bill does not in any way alter the New Zealand Nuclear Free Zone, Disarmament, and Arms Control Act, the Nuclear-Test-Ban Act, or the Atomic Energy Act. These are well-established laws. They deal with nuclear weapons and atomic energy. These matters are outside the scope of this bill, and this bill has been drafted to ensure expressly that there is no doubt that these Acts are not offended. So on that note I would like to commend this bill to the House.

Bill read a second time.

Bills

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

In Committee

Part 1 Child support remedial matters

GRANT ROBERTSON (Labour—Wellington Central): I am pleased to take the first call of what I am sure will be many on the Taxation (Annual Rates for 2015-16, Research and Development, and Remedial Matters) Bill. As the title of the bill, as exciting and interesting as it sounds, indicates, the bill covers a wide range of topics. Part 1, which you, Mr Chair, have called us on, deals with the matter of child support payments.

It is important when we look into this part that we know what the context of this is, and it is very well covered, I might say, in the regulatory impact statement for this particular piece of legislation. I want to cover, in my first contribution on this part, the background as to why these amendments have been put up, and then I want to look at three particular areas that the Minister and the Finance and Expenditure Committee have both looked at and recommended some amendments to. They are around the question of relief from payment, the question of the timing of the implementation of various parts of this part, and the changes around sole parent students.

Before I do that, though, I do think it is important to understand the context of these changes. There will not be many members of Parliament, either in their role as MPs or as individuals, who have not had issues raised with them about child support payments. It is a regular topic. I can see Mr Barclay nodding; in his various constituency offices across the lower half of the South Island he will have had people come into his offices with concerns about aspects of child support payments. Certainly, nobody on this side of the Committee, I am sure, will be saying that the child support payment regime is perfect. It does need change, and the review that was undertaken that built up to this legislation was needed and timely.

Generally speaking, I would characterise the issues and complaints that have come to MPs or that have been raised in public as being in the category of those who are the paying parents feeling that they are unfairly contributing and that they are contributing above and beyond what they should be, relative to the amount of time they spend caring for children, and those on the receiving end being concerned about the level of payment that they are receiving and the times and occasions when people do not make the payments that they should make.

It is worth noting that there is around $3 billion worth of child support debt at the moment in New Zealand; 75 percent of that debt is actually in penalties, and a big chunk of those penalties are of more than a year’s owing. So that represents, clearly, a system that has not been working properly, if you just look at it in terms of the amount of money that has been paid over and the number of people who are failing to meet their obligations. So, as I say, there was absolutely no doubt in my mind that the review around these issues was timely.

Where concerns were raised with me, and where, I think, the Minister in the chair may care to take a call to help explain whether or not this legislation will deal with these problems, was in the process of change. So what we have got is that everything is out of kilter in terms of dates because of the complete disorganisation of the Leader of the House, failing to get legislation flowing through this House in order to meet time lines—

Hon Clayton Cosgrove: Really?

GRANT ROBERTSON: I know you will be surprised by that, Mr Cosgrove—failing to meet time lines that have been set. Most of the reform package has actually been in operation since 1 April this year, and we are now, today, in the Committee, passing the legislation to try to make that work.

There are other elements of the legislation that come into force on 1 April 2016, and that is a timely intervention, but a big chunk of the reforms have already been implemented. I will give the example of a case that came to me in my electorate office where the change in criteria, the change in process for child support payments, led to a situation where there was a rebalancing of who was paying in a relationship, and I believe, on balance, that was a fairer rebalancing. We had a person who had traditionally been the total payer to somebody, becoming only a part payer, and the person who had previously been receiving taking more responsibility. It was a complicated situation. Each of the parents had new partners, and that then led to other considerations that came into play there.

But that particular person who came to see me in my office came because, as part of this new process—she had a protection order against her former partner—her former partner was now in possession of all of her income details, because that was part of the new process. And she said to me: “How can one part of the State want to protect me from my partner but the other part hand over my income details to that person?”. That is a system that still needs work. And there have been others who have come in with very strange calculations based on the new criteria.

So I think it would be useful to the Committee for a member of the Government to get up and talk about what lies behind these changes and whether they are satisfied that we now have a fairer system, because I am not yet certain of that. What I can say, and what the Finance and Expenditure Committee considered, were some changes that I think are useful, and here I would like to refer to new clauses 44A to 44D proposed to be inserted into the Child Support Act. This means that the regime around penalty payments now includes the ability for the Commissioner of Inland Revenue to consider a wider set of measures as to whether or not there should be write-offs. This is a good thing, because up to now it has effectively been a question of the efficient use of resources, as opposed to the position that a parent finds themselves in or, more important, what that means for the child in this case.

So clause 44A now includes the idea of whether the recovery of incremental penalties would place the liable person in serious hardship. That is actually an important factor to be able to put into play. It will, I hope—if it is implemented properly—actually mean a more realistic assessment of the penalties. As I mentioned before, 75 percent of the $3 billion child support debt in New Zealand is made up of penalties, and, hopefully, this will actually create a more reasonable place. So I think, under new clauses 44A to 44D, we can say that that is a useful thing.

But I want to, in the remaining part of this call, just come back to the wider context of these child support changes. We are talking about—and the Committee has been told that we are now talking about—approaching $200 million to implement these changes. The original costing was $30 million. Remarkably, the Inland Revenue Department did not consider that there might be a capital cost with these changes. The department thought it would all be operational, and then it realised it was actually fundamentally changing the system and it actually needed to budget for capital, and it blew out. It actually blew out to $200 million. It has done some phasing, a little bit of jiggery-pokery, and it is back to $163 million, but that is still a massive, massive blowout. And let us bear in mind that Treasury and the State Services Commission said to the Government: “You should align these child support changes with the overall business transformation programme at the Inland Revenue Department.”—a nearly $2 billion programme, I suspect, by the time that actually comes into place.

Hon Clayton Cosgrove: And counting.

GRANT ROBERTSON: And it will continue to rise—that is right, Mr Cosgrove. What we have not seen from the Government is a realistic assessment of whether or not these child support changes should have been put through at this time, or whether they should have been aligned with the overall business transformation programme, and I think it is incumbent on the Government to get up in this Chamber and tell New Zealanders why it has overseen a massive blowout of over $100 million in the cost of these child support changes that are being implemented in Part 1 of this bill. That is actually poor government, it is inefficient, and it is a waste of money, at the same time that the system itself is still creaking along. Make the changes—by all means, let us improve this part of the system; everybody in New Zealand can see that it is not working properly—but do not do that in a rushed way to look good, and then have a massive expenditure blowout.

It is hugely disappointing when the Government has its advisers from Treasury and the State Services Commission, who are supposed to provide it with the advice about good government and about efficient government, and what it actually ends up doing is to say: “No, we’re going to ignore that for political reasons. The blowout has happened under our watch. We want to make sure it doesn’t look as bad as that. We’ll phase the expenditure with a bit of creative accounting.” But, actually, in reality the child support system is struggling, and the taxpayer is going to find themselves severely out of pocket as a result.

So I would like some Government members to get on their feet and address those two issues: have we now got child support right—

FLETCHER TABUTEAU (NZ First): Mr Chair, I ask for your forbearance. I will rise many times to speak to this piece of legislation, but I just wanted to lay out some generalities.

When I last spoke on this piece of legislation I said to the Minister of Revenue that consultation for this type of legislation is essential, and not just consultation at this phase. The experts came to the Minister and said “Actually, what you need to do for these large, omnibus pieces of legislation and these remedial matters pieces of legislation, and what would be wise, is to come to us early with a draft form of what it is you are trying to achieve, so that our industry experts can come in and make fair and reasonable submissions on that draft.”—so that we are not in the position that we are in right now, for example.

The Minister’s Supplementary Order Paper for the day is about 20 pages of minutiae—changes to clauses and information within the bill. It is a tidy-up. I acknowledge it is fixing up a lot of the changes that have been made subsequently, but we continue down a road of necessitating fix up after fix up, and we have spoken about unintended consequences on numerous occasions.

Speaking specifically to Part 1—I will go straight there—I just want to acknowledge the contribution from the previous speaker, Grant Robertson. And actually, to be fair, I would like to acknowledge the National Government, specifically the Minister, who is genuinely trying to fix up this large, large issue when it comes to the child support payments issue. I acknowledge that he is genuinely trying to fix up this situation.

It is a big concern for all New Zealanders, and the numbers have already been put to us—70 percent of that debt is kind of backdated penalty fines—

Hon Clayton Cosgrove: 75 percent.

FLETCHER TABUTEAU: —70 to 75 percent are backdated penalty fines. So when you look at that, you understand that there is a problem—there is a problem and it needs to be addressed. But it is a balancing act.

I wrote down a few notes, and I want to just bring to the Committee’s attention a few issues that would be good to have some clarification on, and perhaps the Minister can get up and address it. I noted down clause 57(1). It empowers the commissioner to make what seems to be very arbitrary decisions on the chasing of debt.

The problem with this clause is that it allows the commissioner to pursue debt or not based on his call of whether or not the cost of the chase is too great, or, more specifically, relating to the legislation, if the pursuit would be an inefficient use of resources.

Although that sounds good on paper, and when you look at it, what is the objective measure? That is New Zealand First’s concern. It makes sense and it looks sensible on paper, but what is the objective measure?

There was the same concern with the ability for the commissioner to write off debt if he decides it is fair and reasonable to do so. Will the level of what is fair and reasonable change from commissioner to commissioner and, dare I say it, from case to case? There are some issues there about objective measures, and I have spoken previously on that specific issue about exemplars and definitions and the argument of objectivity.

I just want to touch on the issue around costs with this specific issue, because it is incredibly important to acknowledge that this current Minister has picked up a huge, huge issue from the Inland Revenue Department.

Hon Clayton Cosgrove: A big bag of steamy stuff.

FLETCHER TABUTEAU: I will not go so far as to use that language, but it is a big bag of something. The irony of it is that our financial experts did not really factor in that capital cost of implementation, and so now we are in that catch-up mode. We are writing—I am not going to say writing off, that is the wrong phrase—but we are moving from quarter to quarter kind of adjusting the budgets on the run. So we in New Zealand First acknowledge that there is—

Hon CLAYTON COSGROVE (Labour): I have got to say I do not share the total enthusiasm that my New Zealand First colleague Fletcher Tabuteau has for commending the Government on this one. I want to deal with the child support matters, and place on record that the Opposition will support the bill. There is an issue in Part 4, which we will come to, but in terms of the child support issue, I think what the New Zealand First colleague neglected to mention, of course, is that it is true that Mr McClay, who is the Inland Revenue Department Minister, and presumably will be vociferously answering all the questions that we put to him today, did pick up a steamy political issue, shall we say—if I can put it delicately, Mr Chairman, for your sensibilities—from his previous Minister, Peter Dunne. To put it bluntly, he inherited a major cost blowout.

As my colleague Grant Robertson has said, this was costed originally at $30 million—that was in 2011—then in 2014 the estimate blew out to $210 million. Then, to give credit to Mr McClay, I think he must have hauled in the officials and got down on bended knee and begged them to do something creative to phase it, to do something to smooth the books so that the mountain of budget blowout would go down to around $163 million. But, of course, the balance is in suspended animation—it is yet to come, as it is phased in. The point being that if we are asking liable parents to be accountable for the expenditures and to be accountable and ensure that they pay their way for their family members, and to be accountable for us to chase them up, then I would have thought it would be, on principle, pretty realistic to expect the Government, in the form of the Minister in the chair—who is not the portfolio Minister, with respect, but the Inland Revenue Department Minister, either former or present—to provide us with some sort of explanation as to why, particularly, Mr Dunne was asleep at the wheel.

When a department comes to you and it has not factored in capital expenditure, then anybody, I would have thought, with half a brain awake behind the ministerial desk would say: “Now hang on, are we sure there is not a capital expenditure component in this?”. Well, Mr Dunne just sort of floated along, and when he relinquished—I think he is the longest-serving revenue Minister in any parliament within the Commonwealth; that is some sort of record, dubious though it may be. But you would have thought with that wealth of experience—[Interruption] Well, I stand to be corrected. But I would have thought that Mr Dunne, when presented with a project like this, on the back of, of course, the Business Transformation project, where the money is just flowing like the Nile River, just flowing out the door—you know, raking in the sheaves, as it were, to use the biblical expression—would say: “Now hang on, have we got the figures right?”. Because we know with these sorts of processes that there are always movements and costs, but to sit there blindly and not even ask the question in respect of capital expenditure, and then the department has got to paper over the cracks, is astounding.

Mr McClay, of course, then inherits it and tries to sort of fix it up, but for those liable parents and others sitting at home who are expected to—and they should—pay their bills, pay their way, and look after their family, I would have thought that those parents would be sitting back, saying: “Well if it is good enough for us, it is good enough for the Government that expends this money on our behalf to be at least half awake, and to ensure that these blowouts do not occur.” But to date we have had zero explanation—zero explanation—in any stage through this bill. I see the Minister in the chair has changed again, not to—with respect—the portfolio Minister. We have had no explanation, and no accountability. The previous Minister just wrung his hands and said “Well, I’m not there now. Game over.” and passed the baton to Mr McClay, and he has been relatively silent, if not totally silent, on the matter.

But I am interested, as Grant Robertson said, in clause 44, where the commissioner is given discretion to look at other appropriate mechanisms and payment methods in respect of liable parent contributions. It harks back to a previous tax bill that Michael Cullen, I recall, introduced. It had a similar principle where, if a small business had a difficulty—there was a mistake in GST, or income tax, or whatever—in the old days the penalties in interest would flow, as I say, like the Nile. A mountain of debt and a mountain of penalties would be put upon those small-business people. OK, some may have cooked the books; most—90 percent, I would argue—were cases where an innocent mistake had been made. We changed the law to allow that, once an intervention was called for, everything froze. Then you could examine it in a logical way, and deal with it.

So I do support this measure, because—as Grant Robertson has said, and all of us who have dealt with folks on both sides of the equation in respect of child support—it is an extremely difficult position. To be fair, the Inland Revenue Department is only the referee, and it intervenes, in theory, only when there is a dislocation or where agreement cannot be reached. It has to deal with this in a formulaic way, and that, in itself, is inflexible. But there are no better ways. That itself is inflexible and does not allow for a whole lot of the subtleties and nuances that we see within the liable caring parent relationship. I think this clause, to be fair, goes some way to looking at those issues.

Where you have got—is it $3 billion worth of outstanding payments—and, as Mr Robertson said, 75 percent being penalties, the system, obviously, is not working. Obviously, what the State wants is for the parents to ensure that those children are looked after. They are, irrespective of the relationship breakdown, the responsibility of the biological parents. They should be catered for. In good grace, I would argue that most Kiwi parents would do that regardless of whether we had an Inland Revenue Department mechanism such as this, but there are difficulties in relationships, as we know. There are disagreements. There is all sorts of leverage, occasionally, that certain partners try to put upon others. It is called life. There is a whole representative set of issues, and at that point the State, in its own inimitable way, has to intervene.

If one can build in some flexibility like this clause, where mechanisms—you could look at other methods to ensure that that money gets to where it is supposed to be going, and ensure that those liable parents are accountable without burying them, as we have, under a mountain of debt, but ensuring that they meet their responsibilities. That has to be the No. 1 priority—but, basically, ensuring the system works. I think this is something that common sense would say one should support.

But I do go back to the costs around this. It appears, and it worries me, that since the retirement of some very, very venerable Inland Revenue Department officials—I went to the awards of the trust that has been launched in Rob Oliver’s name last week. He was a very venerable official. He is not the only one of the very experienced officials in the Inland Revenue Department who have now retired. It does worry me that we are getting these sorts of mistakes flowing through. Go back a year or two, and we had the computer issue, the car parks issue—again, Mr Dunne was in charge of that.

There are two things that concern me. One is that a Minister should be on top of their game, especially if they are in the Guinness Book of Records for being the longest-serving revenue Minister in our history. But, secondly, Ministers have to be on top of their game and read the papers. When stuff comes through and up on a Minister’s desk that does not add up, they need the presence of mind to shoot it down. Secondly, it does concern me that some of that long-term policy advice and experience that we have had for many, many years is no longer there now. It worries me that the quality and high level of advice may be depleted. There are things that one would have expected would not make a Minister’s desk, ideas that would not make a Minister’s desk, because, as we have shown in the past, they have not added up.

Finally, the concern about the cost blowout flows across the Business Transformation project. Again—and I did say this to the Inland Revenue Department commissioner at a function the other night—we want the Inland Revenue Department to work. We want the system to be the best in the world, but we also, because we have been through INCIS and other IT blowouts throughout our history, want to know that those collecting the money, especially, are also accountable for its expenditure and are treating the expenditures of public moneys as if they were their own, and being as accurate and detailed and focused on ensuring that those expenditures are executed correctly—because it seems to me that we have not had the explanations to justify this blowout. That would suggest that we are not likely to get the explanations to reassure us that the expenditure around the Business Transformation programme is warranted. That leads to questioning the whole set-up.

We want to have confidence in this. A good tax system must be simple. It must be clear for people, and people must be confident in it. It is the confidence in it and the confidence, especially, in terms of those who are collecting money being accountable for its expenditure within their own department, and Ministers being on top of that regime, that we will be focusing on and monitoring very closely, even outside the parameters of this bill as it proceeds. So we support the bill.

STUART NASH (Labour—Napier): This bill is quite a wide-ranging bill. The thing around child support did not actually receive much attention in the Finance and Expenditure Committee, but I actually think it is a very important part of the legislation and will take a few calls on this. Part of the reason for this is to put things into perspective. As of 31 March 2014, there are actually over 203,000 New Zealand children receiving child support. There are 134,000 receiving care, and 36,000 liable parents. But as has been mentioned, we have got to a stage, at the moment, where child support debt exceeds $3 billion. It is excessive, and it gets to the point where it is just not payable.

I remember one of the first cases I ever had when I became a list MP in Napier in 2008. There was a gentlemen who came in who wanted to pay child support for his son, but what had happened was that his penalties had got to such an extent that he could not see a way through. What he asked me to do was advocate and say that he was prepared to pay what the Inland Revenue Department was asking him to pay in support, if he could get away from paying the penalties. We tried, but the Inland Revenue Department would not budge on this. In the end, this gentleman went to Australia because he said he could not get a job—whenever he put his IRD number in then a good chunk of his salary was whacked out by the Inland Revenue Department in support payments. That is not the sort of system that is fair. It does not help parents, it does not help children, and it certainly does not help the system in any way, shape, or form. But the thing about this—and I will get on to the bill in a quick second—

The CHAIRPERSON (Hon Chester Borrows): I hope so.

STUART NASH: —yes—is that Minister Dunne, as the last speaker, Clayton Cosgrove, alluded to, started a review of this system in around 2008. I remember—I was the revenue spokesperson for Labour at the time—the Minister said it would be over in 12 months. It has taken a long, long time to do this. Part of the reason is it is fraught with difficulty because it affects so many people and the law is quite complex, even though it says in the regulatory impact statement that it is not. It is quite complex. But it took so long to the point where, 6 years later, we are still going through this whole process.

The Act that set this up was the 1991 Act. The world has moved on since 1991 but the legislation has not reflected that until now. Let me talk about a couple of points. There is a new section 13A. I would say that part of child support—a good chunk of child support—is about perception. It has got to be perceived to be fair by caring parents and also by liable parents. There was a case, actually, of a high-ranking National Minister at this point in time—and I remember talking to this Minister, and she told me about her father, who actually managed to put a whole lot of his income through a trust and therefore avoided paying child support. He was living the life of Riley and this Minister and her family were living close to poverty because this man, her father, was managing to avoid his responsibilities, let alone his liabilities. And this is the sort of stuff we have got to change.

There are some things that were perceived to be unfair that have been changed. For example, there is a new section 13A, which introduces the rule that the Commissioner of Inland Revenue must refuse to make a formula assessment if the applicant is a non-parent carer of the child and the commissioner determines that the applicant is the non-receiving carer. Let me give you an example of where this was happening before. Again, I dealt with a couple of these. There was a case where, for example, a gentleman married a lady and that lady had a couple of kids from a previous marriage. He was perceived—in his mind and also in the law—to be the non-receiving carer. However, because his income was of a substantial amount he was forced to pay child support for his wife’s children as well as for his own children. That was perceived in his mind, and also in mine, to be unfair. But let us get a definition of this. A non-parent carer of a child is the receiving carer—so with the non-parent carer we are talking about the stepfather or stepmother usually—for the purposes of a formula assessment in respect of a child if he or she provides at least 35 percent of ongoing daily care for the child. These definitions are actually quite important because what they do is clarify the increasing role of step-parents in managing the financial relationships between their new wife or husband.

Sections 13, 14, 17, and 22 of the new Act basically relate to the calculation of a parent’s income for the child support year. There are a number of changes here that again just make it a little bit fairer. If we have a look at clause 14 in Part 1, a person’s adjusted taxable income is the person’s income from the year immediately preceding the start of the child support year if that is the most recent tax year. I am dealing with a case at the moment where the Inland Revenue Department has assessed a gentleman’s income for about 4 years previous. This guy has brought in all his tax slips—actually, I should talk to the Inland Revenue Department about this—saying that it is assessing him on an income of $120,000, but for the last 3 years he has earned $50,000. He is not hiding it in trusts in any way, shape, or form. He loves his kids dearly, but he says he just cannot pay this. He said that at the end of the day he takes good care of his kids, but he simply cannot pay it.

So what this bill is doing is saying the tax year immediately preceding the year child support is calculated will be the one upon which his or her payments are assessed, but if it does not apply, the person’s taxable income—we are going to amended section 35(1)(b) here—is from the year immediately preceding the most recent, inflated by inflation percentage for this child support year. It just clarifies a lot of this stuff.

Another thing that I am very happy that we put in here is that the commissioner may take overseas income into account. Again, what was happening in my experience is that men—and, let us be honest, it was usually men, but I suppose there were cases where women were avoiding responsibilities—were hiding income through trusts or not counting overseas income, etc., etc., and were therefore not living up to their responsibilities.

The one thing also that has been mentioned by Grant Robertson, which I think is actually fantastic and something that we mooted going into the 2011 election, is almost having an amnesty. I remember when I asked the officials in the Finance and Expenditure Committee whether this in fact amounted to an amnesty—i.e., if a liable parent starts coming in and paying their dues, will they be able to wipe penalties off? They said in essence that this is what it is. Because what we want is for liable parents to start paying their penalties.

I remember, and I do not think the statistics will have changed, that in 2011 there were about 97 percent of parents who were operating under the scheme administered by the Inland Revenue Department—as opposed to a private scheme negotiated between parents—who had suffered some form of penalty at some point in time. In the end, it is actually not in the best interests of the child if a liable parent is paying, let us say, $100 a week and they are paying $75 of that to child support and also paying 25 percent of that or whatever the fee is to pay off penalties on support. I think we all acknowledge that the ideal situation is that all the money that a liable parent is paying goes to the support of the child. If there is a scheme that can be put in place where penalties can in fact be written off if a parent comes in and comes to an arrangement and starts paying their fair share, then everyone wins, including the Inland Revenue Department.

The bottom line is that it is $3 billion we are talking about, and that actually is unworkable. I remember having a look at the fees, and even in Hawke’s Bay itself there was around about $49 million in penalties and interest that was owing due to child support. As mentioned, no one wins in that case. That is all I have got to say on this at this point, but I am going to take a couple of calls soon, after a couple of my colleagues have decided to have their say. Thank you.

Hon DAVID PARKER (Labour): I want to carry on in respect of one of the aspects of Part 1 relating to child support payments. It is the issue that my colleague Stuart Nash has just been talking about, which is the influence of penalties on the total liability that is owed to the Crown, which is made up of the individual liabilities of thousands of New Zealanders who have fallen behind in their child support payments.

I do not think that anyone on either side of this House thinks it appropriate that parents avoid their primary responsibility of paying for the care of the children by not making payments when they should, or that they, as the parents of the child, do not have the first and foremost responsibility to pay for the care of that child even when that child is not in their custody. Therefore, they should meet their obligations of child support. But as Stuart Nash has said, the total amount of arrears in respect of child support is now about $3 billion—an enormous amount of money. We know that for some people, whether it is with child support payments or when they get behind in their student loan repayments, the amount of penalties starts to compound at a rate that is just intolerable for them. They give up, and not only does the amount that is shown as a liability to the Crown actually becomes a fiction because it can never be repaid, but it becomes an impediment to them paying anything because the arrears seem to be so intolerably large.

In that regard, I want to know why the interest rate that is charged on these debts remains so high in this low interest rate environment. I think it is a bit of a one-way street when it comes to the Inland Revenue Department as to when it adjusts the rates. Interest rates have dropped to the lowest that they have been around the world for, well, really, in everyone’s lifetime and the lifetime of people before them. Interest rates are historically low around the world. In fact, I think we heard the Governor of the Reserve Bank saying that English interest rates are the lowest they have ever been in 400 years. New Zealand interest rates are no different; they are very low by historical standards. They are still higher than they are in some other countries, which sort of jacks up the New Zealand exchange rate to the detriment of the economy, but they are still lower than they have been historically. I want to hear from the Minister in the chair, the Hon Jo Goodhew, one, what the current rate of interest is, and, two, how it is justified.

My understanding is that this $3 billion that is owed in arrears—if interest on that is at 5 percent, that is another $150 million that those liable parents collectively owe by the end of the year. If it is at 10 percent, that is $300 million. If it is 3 percent, it is only—it is a lesser amount. I think that the Government kids itself when it adds these amounts to the penalties and does not properly provide for the fact that a lot of these amounts are not ever going to be paid because the penalties have become so high. I know that some provision is made by the Government in the books as to—in fact, I would like to hear from the Minister as to what amount, if anything, is provided for in the Government’s books to show that these amounts are not going to be repaid. I would like to hear why it is that in this tax and remedial matters bill, which has a whole section on amendments to child support matters, we do not fix this issue of interest rates, and why we continue to charge penalties at such a high rate in this low-interest environment.

Dr DAVID CLARK (Labour—Dunedin North): I want to speak in support of this bill, but I also want to bring some words of caution. It is, of course, a bill that addresses many things, and we will be supporting it precisely because it makes sure that our tax system is robust, and we need a robust tax system in order to ensure that as a country we have income that pays for those assets that we need in common—things like roads and hospitals and schools. Across this Parliament, of course, we will find people who agree that we need those things. We might debate to what extent some of these things should be publicly or privately provided. We, certainly on this side of the House, think we need more investment focus in the area of things like schools and hospitals so that these things can be available and accessible to all citizens at affordable rates. Court houses are another example, and roads certainly need to be maintained to a level where anybody can drive on them without requiring some kind of Hummer or four-wheel drive vehicle.

These are the basics of a Western democracy, and around the world people agree that common infrastructure is needed to fund those things that we individually could not purchase for ourselves. I certainly cannot afford to retain the world’s best oncologist at my beck and call. We all need to be able to access those people in our times of need, and so the system provides for that. A robust tax system ensures that we have that income to afford those very things that we all need. So we support the maintenance of the tax system, and this bill, at its most basic, is actually about ensuring that the tax system remains robust for another year. There are always loopholes in every tax system. There are changing patterns of investment. There are new laws that are brought into place that introduce the possibility of different workarounds or incentivise different behaviours in response to the tax system of the day.

We, however, will have some challenges supporting parts of the bill, because, for example, we know that the child support initiatives that we find in the bill will be very difficult to implement. We know that the department implementing them has been forced to come back to this House to amend legislation that has been put through before in respect of child support legislation because it was unable to implement it, and that is because the Inland Revenue Department’s computer system is so out of date. It has not been repaired as recommended to the current Government. It has been neglected, and we know now that a $1.5 billion price tag is expected to be attached to the department’s computer rebuild, and that that has been on the go-slow for quite some time.

So we are apprehensive about the Government’s ability to actually implement some of these changes, and we are concerned that we spend time in a Parliament pushing through changes that cannot be backed up and that are going to require subsequent legislation in Parliament to correct them. That is unfortunate, and speaks to a Government that has got its priorities wrong. The intention or the good words may be there, but often the action is lacking. And that carries a cost to the taxpayer, which I guess is the point that I am making, and that is a lost investment if we make things that look good on the surface and then have to revisit them. It costs money to put bills through Parliament. All of the people sitting in Parliament today are paid and they have support staff who are also paid. That is proper and right, but we should not duplicate our efforts when we could do something right once and get it right, and that is the most efficient way of doing it.

One of the other issues that we have with the bill is the acknowledgment that the existing tax rates will stay in place. I want to take us back to when they were implemented in 2010. This bill confirms the existing tax rates. When these tax rates were brought in in 2010, they gave a huge wealth shift to the wealthiest 1 percent of New Zealanders. There was a big tax break—40 percent of the value of the tax cuts brought in in 2010 went to the top 10 percent of earners. The bottom 20 percent of earners got just 2 percent of the cuts, and they were swallowed up immediately in a GST increase that John Key had not signalled in advance. In fact, many have called that a broken promise. That GST increase swallowed up any tax benefit that those lower-income earners got in those tax changes.

It is since that time that we have seen a dramatic increase in inequalities in New Zealand. We have seen housing become the least affordable it has been in 60 years—in 60 years. We have seen people who work hard every day unable to afford to buy a house in Auckland and, in fact, now unable to aspire to own a house in Auckland. And this is as Kiwis and as New Zealanders. This is not the vision for New Zealand that we have, where housing is so unaffordable that working people cannot even aspire to own a house. In these tax changes that were brought in, a wedge was driven in that has grown that inequality, and to afford these tax changes the Government has been borrowing year after year after year. It has now borrowed $100 billion, this Government, to afford to give the very wealthiest New Zealanders this big tax break.

Tim Macindoe: Oh, nonsense. You know that’s nonsense.

Dr DAVID CLARK: I hear a member opposite say that is nonsense. I mean, if they are not borrowing, what are they doing? Why is that big liability sitting on the Government’s balance sheet? This Government has borrowed more money than Sir Robert Muldoon’s Government. It is the biggest-borrowing Government in New Zealand history, and that means that every New Zealander born today carries a liability of thousands and thousands of dollars, or the Government carries it on their behalf. They are mired in debt. Future generations will be paying back the debt borrowed by this Government to afford these tax changes that we are affirming in this bill today.

We cannot not support the bill, because we need a robust tax system, but it is a bitter pill to swallow that we are supporting, effectively, the Government’s borrowing to afford tax cuts for the very wealthiest New Zealanders as a part of this package. Of course, that is a cunning political presentation. It presents it all as one package because the Government does not want to be challenged on its prejudice for supporting the wealthiest 1 percent of New Zealanders at the expense of those in the middle. And let us not forget that it is those in the middle who are suffering the most. Those, of course, who are most hard-pressed, those on the modest incomes, often receive some child support from that wonderful tax package that the previous Labour Government put through—the Working for Families package, which ensures that the hard-up are supported by the State. Those in the middle, those ordinary kind of Kiwis who have some skills and are the tradespeople, who work hard all their lives, used to think that they could get ahead, and today the prospects are far, far, far worse for them as a result of this wedge that has been driven between the wealthiest 1 percent and the rest of New Zealand, who are supporting that wealthiest 1 percent in getting these tax cuts.

As I have said, just to sum up, we will support the bill because we support a robust tax system and we support the changes necessary to achieve that. As a Labour Party, we always believe in providing for that common infrastructure, the decent and affordable schools, access to good health care, even though this Government has underfunded it. We support the robust tax system needed to provide at least some level of affordable health care, and we support, of course, the infrastructure, the courts, the roads, the rail—the necessary infrastructure to ensure that we have a functioning democracy that is safe and that provides for all of its citizens. But we are uncomfortable, of course, affirming those tax changes that mean that the very wealthiest 1 percent are supported whilst the rest of us and future generations are mired in millions and millions and billions of dollars of debt. Thank you.

KANWALJIT SINGH BAKSHI (National): I move, That the question be now put.

Hon DAVID CUNLIFFE (Labour—New Lynn): This is the first opportunity that I have had to make a contribution to the Committee stage of the Taxation (Annual Rates for 2015-16, Research and Development, and Remedial Matters) Bill, and, in particular, to Part 1, which deals with child support. This is a very important part of the bill because it goes to real life for real Kiwis, which is not always what people expect it to be.

The law, as they say, is an ass. The law is never able to fit itself to each individual’s personal particulars. So today we are here, in the Committee stage, to try to tweak, mould, and update this very complex piece of legislation about child support to ensure that it is fit for purpose and that it meets the needs of New Zealand families, which come in all shapes and sizes.

I propose to structure my remarks for the Committee as follows: a couple of general comments about the tax context of this bill, as set out more broadly with the confirmation of annual rates—a very passing comment there; a recap on the objectives of child support policy, diving briefly into some of the core implementation issues; and then there are some specific clauses in Part 1 that I wish to draw the attention of the Committee to and seek the Minister’s clarification on. Her officials are busy and ready to brief her, and we will be looking for some comment from the Minister.

Firstly, I will just briefly reprise the context. This is the annual rates tax bill. For people out there in New Zealand, this is the annual instrument that is brought to the House to confirm the tax rate. This one, of course, comes after what the Government called the tax switch, and it was, essentially, a switch of the burden from the top to the middle. So middle-income New Zealand has been squeezed, as 40 percent of the tax remission in the Government’s first term went to the top 10 percent of earners. That has laid the foundation for a period of relative hardship for middle New Zealand families, some of which, of course, are not in their original nuclear structure. People are having to make do even though they have separated, or they are divorced, or they are in blended families, or they are having to take care of child support. But it is against that background of the widening gap between rich and poor, which this Government has overseen, because of the annual rates reconfirmation.

It is a longstanding objective of child support policy that children come first. The law is written around the primacy of the interests of the child and tries to get an equitable formula for the contribution to the upkeep of the children from both parents. Whether one is the primary custodial parent and another one is not principally living with the child, or whether they are both sharing parenting, the formula has to be flexible enough to cope with a wide, wide range of situations, and it is never easy when you are writing legislation to take account of the multiplicity of people’s personal situations.

It is well known, I think, in this House and it is part of the context of Part 1 of this bill that there have been major issues with child support over the years. When the current Government took office the debt mountain of unpaid child support and penalties was, from memory, in the order of something like $500 million or $600 million. It is now around $2 billion.

Hon David Parker: $3 billion.

Hon DAVID CUNLIFFE: It is $3 billion. Well, is not that a calamitous rise in debt. Part of that debt is payments that should have gone to the children in their new family situations, and part of it is, of course, the penalty regime.

A quick word on child support penalties. It has been well known that they have been too onerous, and that has, unfortunately, locked a lot of non-custodial parents, usually dads, out of a situation where they are having ongoing contact, because they are so far behind in their debt, relative to their earning ability, that sometimes they are forced offshore or, essentially, into hiding. That is bad for the children and it is bad for them, and it is an ongoing human tragedy that is going to cost New Zealand for generations to come. So it is really essential when we look at Part 1 of this bill that we have this as a lens on it: are we doing enough to ensure that all parents, whether they are the primary custodial parent or the more remote parent, are able to contribute and that when they do get behind they can catch up again without a penalty regime that are so onerous that it locks them out of the system? Just imagine the guilt and the grief that that leads to.

I wish to turn, if I could, to several of the clauses that are embedded in Part 1 that I think it would be very helpful to get some clarification from the Minister on. Firstly, in clauses 4, 5, 6 and 8, the bill is updating the definitional language in the Child Support Act. It redefines the benefit types—in terms of the reference to job seeker support—in subsection (1A) in clause 4(4). It is updating language around transitional applications, etc., in clause 5. It is reaffirming, in clause 7, that any parent or carer of a qualifying child can apply to the commissioner for a formula assessment. The restating of that in clause 7, which replaces the old section 8(1), I think is very, very important. Circumstances change and, oftentimes, separating parents will be able to enter into an agreement not necessarily foreseeing all future changes, and, of course, the law provides the ability for either parent to return to the court, return to the law, and to request a formula assessment.

The nature of that assessment therefore becomes as important as the process by which it is conducted. So the bill goes on and in clause 9 it inserts new section 13A, which states that the commissioner must refuse to make a formula assessment in respect of a qualifying child old enough to demand in their own right an assessment if subsection (2) or (4) applies. That means if they are already covered, I think, by a receiving carer. But the Minister might wish to comment on the application of subsections (2) and (4), because it is a very confusing reverse link and we would like clarification of how that impacts and the precise grounds, in summary, on which the commissioner must refuse an application from a qualifying child. The qualifying child definition, in itself, is a complex one.

New section 13A goes on to say, in subsection (3), that subsection (2) does not apply if the applicant is a parent and the child has “a parent with whom the applicant is not living in a marriage, civil union, or de facto relationship; or (ii) a non-parent carer with whom the applicant is not living in a marriage, civil union, or de facto relationship.” So if the application is made by a parent, and the child has a parent or a non-parent caregiver who is not living with them, then the subsection applies.

It is a complex piece of law because you have got several tiebacks, if you like, to earlier sections, and I would really appreciate it if the Minister would take a call and just clarify, in summary, what the criteria are for the very strong language in section 13A(1)—“The Commissioner must refuse to make a formula assessment”—because prima facie it seems to lean against the principle that either parent or a qualifying child can request one. So it is rather important to be clear about when and why the commissioner must refuse—because it is a “must”.

Clause 10 of the bill amends the original section 25, and notes when liability to pay child support ceases. That is important, again because it is impossible to foresee every particular circumstance, but we need to have general rules. It is possible, under new section 27, in clause 11, for the receiving carer to elect to end a formula assessment. The law is, I guess, attempting to provide for a basis where a child support agreement can be updated by either party, both to bring in a formula assessment, or if circumstances change, to end it.

So, for example, a custodial parent—often the mother—may re-partner or may enter into a relationship where there is sufficient material support for all of the children of that blended family, and the previous formula assessment no longer applies because it either does not fairly reflect the balance of income of the two originally separated parents or it is not needed at all because, frankly, the new blended family is materially well enough resourced and the non-custodial parent’s contribution becomes unnecessary. These are difficult and complex matters, and it is well known that there have been multiple iterations of tax law.

TIM MACINDOE (Senior Whip—National): I move, That the question be now put.

STUART NASH (Labour—Napier): There are just a couple of things that I would like to talk about, concerning a couple of clauses. One is clause 57, and this relates to an amendment to the Child Support Amendment Act 2013. This is quite important, because what it says is—obviously 2013 legislation is rather new, so to be amending it now is not ideal—that we replace a new section with this, and this allows the commissioner to determine when he or she would write off penalties. And the replaced new section 135GA(1)(b) says: “the Commissioner is satisfied”—this is the ability to write off; they will not collect penalties—“that recovery of those penalties would do either or both of the following: (i) place the liable person in serious hardship …: (ii) involve an inefficient use of the Commissioner’s resources.”

First of all, let us have a look at the definition of “serious hardship”, because it is defined in section 226C(5) of the Child Support Act 1991. And this is quite important—as MPs, we will have dealt with constituents who are paying Child Support who believe that it is too high because of serious hardship. That is actually defined by the Act as the liable person’s “inability to meet minimum living expenses according to normal community standards”. And I wonder whether “minimum living expenses according to normal community standards” have actually changed between 1991, when this piece of legislation came forth, and 2015, when we are dealing with it today.

Another part is the cost of medical treatment for an illness or injury of the liable person or the liable person’s dependant. What we are saying here is that the commissioner may write off penalties if, in fact, the liable person has an illness, or their wife or husband or partner has an illness that is incurring significant expense, which I think is very fair. Or the other one is a serious illness suffered by the liable person or liable person’s dependant. And this is an interesting one, because this debate has been in the news recently—so this is defined as “serious hardship” under the Child Support Act 1991, which is still relevant to the legislation we are talking about today: the cost of education for the liable person’s dependant. So if someone is having difficulty meeting the cost of their dependant, then they are judged as being under serious hardship. And I wonder, because we have heard about this recently—the case of New Plymouth Boys’ High School going very hard trying to collect donations from parents—whether, in fact, the inability to meet the cost of a donation to a school, and I use “donation” in a very wide brief, is actually classed as serious hardship.

The other thing is, of course, that what is not included in “serious hardship” is the person’s ability to pay tax or financial support; or if they become bankrupt, for example, or if the liable person or liable person’s dependant’s social activities or entertainment may be limited, which sounds pretty fair. There is no way that a taxpayer or a liable person should be able to claim hardship because they have not got enough money to go to the pub 3 nights a week. But the other one—and this is where I would not mind the Minister just perhaps providing a comment—is that, as mentioned, the commissioner is satisfied that the recovery of penalties would be harmful; that would “involve an inefficient use of the Commissioner’s resources”.

We have heard that 97 percent of parents under the Inland Revenue Department scheme end up, at some point in time, coming under the penalty regime because they have missed a payment here, or whatever. Now, I just wonder what that limit is. Is it $200? Is it $2,000? How much money does the Inland Revenue Department spend in collecting penalties? For every dollar it collects, how much money does it spend? Where is that point? If it is after $100,000, does it say it is going to go hard? Whereas, if it is $20 or $200, does it decide to pull back? But the corollary of that, and I have talked about this case earlier, is that if a liable parent owes $100,000—and this is not uncommon; it is a lot more common than we would think—would the Inland Revenue Department say that there is no point in going after this person because the only outcome is to send this person into bankruptcy? So I wonder what the definition of “inefficient use of the Commissioner’s resources” is?

The other clause I would like to talk about is clause 23 of this bill. It repeals section 45 of the Child Support Act 1991. What section 45 did is it related to—and I actually thought it was not a bad idea—

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

The CHAIRPERSON (Hon Trevor Mallard): I am tempted but this is an important part in an important bill.

GRANT ROBERTSON (Labour—Wellington Central): Thank you, Mr Chair, and I take on board your words that Part 1 is indeed an important part of an important bill. In my earlier contribution I set what, I guess, was the context of Part 1, which is the review of the child support system. I raised a number of questions. I have been in the Chamber as members of the Labour Party and other parties have raised questions, and I do want to just note at the start of my contribution my disappointment at the lack of any substantive replies. These have been genuine questions about a very complex area of law.

As I said in my first contribution, everybody in this Chamber understands that there is a need to review child support arrangements, that there are inequities, and that there is unfairness. What we are asking of the Government is whether or not the proposals here in Part 1 actually deal with those inequities and that unfairness or do they, in fact, create potentially new inequities. It is very, very disappointing that we will inevitably reach the end of Part 1 without a substantive contribution from a Government member on these questions, which have been genuine questions.

But I will forge on and ask two or three questions about elements contained mostly in the Minister’s Supplementary Order Paper 77 on this bill. Actually, the first one will not be on that—I will come to those in a moment. The first question is one that has not been raised so far and that is in clause 4(3) and (4) around the amendment of the definition of “social security benefit” in the Child Support Act. The goal here is to exclude full-time students who are receiving job seeker support on the grounds of student hardship between academic years. The effect of that for sole parent students who are on a form of student hardship benefit during the summer break would be to be treated as being off benefit for child support purposes.

I can understand the logic of that particular situation and I do know for people who intend to continue being full-time students who are parents that the period of time outside of when they are eligible for student allowances can cause them financial issues and difficulty, because you go from a relatively generous student allowance as a parent—because it takes into account the number of children you have—to transitioning to other types of benefits. Most recently a payment has been available for those parents over the summer break where they had the intention of returning to study the next year, which is called the student hardship support, effectively.

What I think these clauses are doing is allowing a person to be said to be earning sufficient income to be still meeting their responsibilities for child support payments, but I am actually not sure about that, in all honesty, looking at the definition. It is a change that we did not dwell on in the select committee. It would be fair to say that most of the select committee’s time was spent on other parts of this bill, so I would like some clarification that the effect of this change will not be to penalise those parents. That is the main point that we need to make sure we are being clear about here.

Administratively, I can see that it would make sense but we do need some assurance that parents who are in that situation, who are potentially having slightly shifting levels of income, are actually now going to be treated more fairly, more sensitively as a result of this change. I just do not know, reading it the way that it is written here. It is partly because it is a definitional question within that part of the bill rather than a substantive one but it was not something we covered, but it does get a mention in the Minister’s Supplementary Order Paper.

The other matter in that Supplementary Order Paper that I am looking for some further answers on—and other members have raised this point; I acknowledge that, but we have not had an answer—is the question of the change from it being the commissioner defining whether or not there should be relief on the grounds of efficiency of use of resources versus the commissioner now having a wider set of criteria to judge whether there should be relief from payments; in particular, the question of serious hardship. I have several questions on this front. “Serious hardship” sounds like a term beyond “hardship”. I do not think there is anyone in this Chamber who would want to see children in hardship as a result of a decision that we were to make in this Committee. So putting the word “serious” in front of the word “hardship” in these changes is pushing out where the commissioner could intervene and say “Actually, no, I want some relief from penalties for this family because the children of this family will suffer if that parent is in hardship.”

IAN McKELVIE (National—Rangitīkei): I move, That the question be now put.

The CHAIRPERSON (Hon Trevor Mallard): I am not going to take it now; I am going to make it clear why. I have been listening to this debate from outside the Chamber and I have been listening to it now. The purpose of the Committee stage debate is for the principles accepted in the second reading to be checked against some technical details of the bill. An important part of that, from my perspective, is the ability for members to have an interchange with the Minister in charge of the bill and to ask questions. Clearly, if the Government declines to take part in that, it will not go on for ever, but I want to reiterate the message that I have previously given to the Committee and that is that closure motions are more likely to be accepted in a shorter time period if Ministers have engaged in a positive manner to non-political technical questions.

GRANT ROBERTSON (Labour—Wellington Central): This is a genuine question and it has been asked not just by me but by other members. I will just finish the point I was making before the end of that last call, which is that there is a significant change here in the way in which the Commissioner of Inland Revenue can decide whether there should be some kind of relief from penalties. That, in principle, sounds fine to those on this side of the Chamber. What we are now trying to endeavour to understand is what the meaning of that is and what the extent of that is.

Firstly, we have got the change from the question of efficient or inefficient use of resources through to the question of serious hardship. And there is a second part, which also requires some clarification: “or that it would be fair and reasonable to grant relief.” That is actually quite a different matter from the question of serious hardship—and this was the concern raised by one of my colleagues—and is that we now have, effectively, quite a subjective test around what is fair and reasonable and also what is serious hardship. So I would like a member of the Government to be able to get up and describe to this Committee why, for instance, the word “serious” appears in there rather than just the word “hardship”, because, as I say, I do not think any member on either side of this House would be wanting to pass legislation that, effectively, forced hardship upon children.

The second point I want to make around this change is the focus on the role of the commissioner in doing this and what resources and what information the commissioner uses to make these decisions. Bear in mind that we have moved from something that is within the commissioner’s purview—the question of the efficient use of resources—to something that is much more now about the family. It is about the circumstances of that family. I do not think that the Government should necessarily have to put this in the law, but what I am not clear on from the lack of response from the Government is what information the commissioner will be using, what access to information the commissioner will have, and whether they will be enabled to effectively investigate and work with those families.

That has actually been one of the criticisms of child support up to now: that just applying very mechanistic criteria has meant that you miss out on a lot of the things. My colleague David Cunliffe was mentioning before what happens when you have got a blended family, and that we have not in the past taken into account the change in circumstances. Good—that is good—but what we do not know, with such a significant change in the criteria for this, is exactly what information will be used and how the commissioner will go about their jobs. I think it is important for this Committee to be able to understand that.

We appreciate the idea here that this will help reduce the amount of debt owed from penalties. Of the $3 billion debt, 75 percent is penalties. We can all see the penalty regime is not working, because people are not actually paying it back. Let us get a fairer system in place. Let us give the Commissioner of Inland Revenue some more tools in order to be able to do that. But I am not clear today, as a responsible member of this Parliament, about exactly how the Commissioner of Inland Revenue will go about implementing this, what information she will have, or what tools will be at her disposal, and then I am not confident about the definitions that are being put in place.

I do not want to stand up in my constituency after this, when there are already enough concerns about the child support regime, and be so unclear. We are not, I predict, in a Nostradamus-like way, going to get a detailed response to this matter from members opposite, and the National Government needs to ask itself: if it is going to bring legislation to this House that makes major changes to the way child support works that its members are not prepared to back, what does that mean? Does that mean those members are really committed to these changes? Does that mean they actually want to see a fairer system? Or is it once again another one of those bills papering over the cracks? I offer the opportunity now to National members to stand up and defend this legislation, define what these terms mean, and reassure New Zealanders that this will still be a fair system.

Hon CLAYTON COSGROVE (Labour): I want to take up where Mr Robertson left off, because one of the points that I made in a prior contribution, one of the difficulties that we have had with child support in the past—and it is not levelled as a criticism of the Inland Revenue Department—is its inflexibility. Where you have relationship breakdown, where parties to the relationship, the parents, cannot agree on the best way in a monetary sense to ensure the kids are looked after, then the State has a role to intervene. That role is pretty inflexible, because until somebody invents a technology that determines the definition of a good parent, as it were, a formulaic response is our next best option.

Clause 44, as Mr Robertson said, has introduced—and I think it is a good thing—an element of flexibility, but in doing that, and because we have had no clarification from the portfolio Minister, Mr McClay, or non-portfolio Ministers in the chair, such flexibility, although on the one hand being very positive, also creates uncertainty on the other. So as Mr Robertson and others have asked, what is the definition of inappropriate? Clause 44(b) states: “(ii) if the Commissioner considers automatic deduction inappropriate in the person’s case,” they may consider “another payment method acceptable to the Commissioner.” That is great. As I have said in a previous contribution, the last Labour Government did a similar thing in respect of small businesses. When the Inland Revenue Department was advised there was a difficulty everything froze, and a repayment deal, if you like, was worked through so that the business could hopefully survive and meet its obligations. The Crown would get its money and the taxpayer would be recompensed, and the deal was done, if you like. On the surface it may well be that this provides a similar benefit, ensuring the liable parent meets their obligation, which is paramount, but ensuring that it can be done in such a way that they are not buried in penalties.

This is a good thing, but, as Mr Robertson said, it would be helpful if we could get some clarification around definitions. What does appropriate mean? Is it a “finger in the air”? Is it the amount of income that somebody receives? It could be a multitude of things, because it puts the commissioner—although you do not want to overly define it, because that is actually defeating the purpose of the nature of flexibility. I would have thought that there would need to be at least on the record of the House, which is often quoted in courts in New Zealand, some sort of clarification as to the parameters of what would be considered appropriate or not. Otherwise it just simply becomes arbitrary.

I see, if you go to the regulatory impact statement around this particular issue on page 8, “Objectives”, the objectives of this section, of course, are to “a) reduce child support debt”, “b) reduce the implementation costs of the reforms;”—well, I have to say that has come a gutser completely, given the blowout that has occurred, but we will write that one off for the moment—“c) improve the fairness of the child support scheme so that it reflects social and legal changes which have occurred since its introduction in 1992;”, and “d) promote”, indeed, “the welfare of the children, in particular by recognising that children are disadvantaged when child support is not paid, or not paid on time.”

The question is, the payment of child support on time—because often payments are made but there is substantial delay, often for genuine reasons, often for reasons of unfair leverage from one partner on the other, and a whole range of other things—is that going to be considered in terms of the factors that the commissioner would consider in respect of altering automatic payments?

I think these are really important issues that will end up, I suspect, challenged in court. And, as I say, Hansard is used as evidence in court from time to time, and it would, I think, help—and presumably the Inland Revenue Department will put out guidelines, which do not have the weight of legislation, around this, or maybe it will not. We do not know, but if you are sitting there, just looking at this bill now, we commend the Government for clause 44 but we have no idea, actually, what the parameters of those decisions will be and how they will be made. Will it be a set of criteria drawn up by officials and put to the commissioner? Will the Minister have any role in that? I presume not, because the commissioner is independent.

But I think, as others have pointed out, these are not actually political issues. They are really serious issues if we want to get this thing right, and child support has been and continues to be extremely complicated.

STUART NASH (Labour—Napier): There are just a couple of clauses that I would like to talk on, and one is clause 14, “Section 35 amended (Adjusted taxable income)”, which talks about adjusted taxable income, and the other one is clause 16, which amends section 39A, and that talks about the fact that the commissioner may take overseas income into account.

The reason why I have a couple of questions on these clauses is that it seems that the language in the bill is a little bit arbitrary, and whenever I see the word “may” or “might” as opposed to “must”, I wonder under what circumstances the commissioner is actually going to exercise his or her judgment. As a number of colleagues have alluded to, we need a system that is robust, and we have to ensure that liable parents are actually meeting all of their responsibilities with regard to the children they have got. So this is why I wonder why the heading of this clause is “Commissioner may take overseas income into account”. Under what circumstances would the commissioner not take overseas income into account?

What I actually would have liked to see here is “Commissioner must take overseas income into account”, because if it is only a “may”—if it is only an arbitrary decision about whether the commissioner will or will not—there are two implications here. The first one is that it can be challenged in court, and what could possibly happen is that a wealthy taxpayer, a liable parent, may start transferring income overseas or come up with some fancy scheme where it is deemed to be overseas income, and then he or she may actually take a case against the commissioner to court, because there is no obligation to count that overseas income as income, as calculated for his or her liability under child support. So under what circumstances would the commissioner look at overseas income, or take overseas income into account, and under what circumstances would the commissioner not take overseas income into account? I just think it would have been a lot clearer if there had been an obligation on the commissioner to take overseas income into account.

The second clause I would like to look at is clause 14, and this talks about a person’s adjusted taxable income. The term “adjusted taxable income” was actually amended in 2013 to bring it in line with Subpart MB of the Income Tax Act, and this relates to family scheme income, for example—and it says here that income from certain trusts is included. Again, what brings a trust into the scheme and what keeps a trust out of the scheme? I think we are all well aware—or if we are not, then I certainly can make people aware, because I have come across this a number of times—that people hide income in trusts. In the past, I remember in 2008, the Inland Revenue Department did some work and it had determined that about 10,000 New Zealand families were getting Working for Families because they were not declaring income that was derived from their role as a beneficiary in a trust, and therefore they were entitled to it. We changed the law because of that, and as a consequence it made it a lot fairer, and it made it harder for people to hide income in trusts and therefore avoid their tax responsibilities.

But why have we included here only certain trusts? I would have thought that if you are drawing income as a beneficiary from a trust, it is pretty clear. It does not matter whether that trust is income you have received from a business venture or whether it is money you have received because you have been lucky enough to inherit it, or whatever—it is still income. I would have thought that if we wanted to make this scheme fair and if we wanted to ensure that it is, in fact, the children who are benefiting out of this, we would eliminate any scheme or trust income that is allowed to be hidden or not taken into consideration when determining someone’s liability. I am unsure—the Minister in the chair, Jo Goodhew, may have some thoughts about this. I am sure she has some private thoughts about this, because I am sure, like most MPs, that she would be disappointed, if not disgusted, to learn that there are actually still legislative means to hide income for the purposes of assessment for child support.

So they are just a couple of quick questions. They are quite relevant because in this day and age there are a number of Kiwis who are earning overseas income. It is easy to structure your affairs. There are a number of Kiwis—and we know this—who are deriving income from trusts.

Hon JO GOODHEW (Minister for the Community and Voluntary Sector): I want to respond to a couple of the questions that have been posed by Opposition members during this debate, insomuch as I have sought some advice on answers to them.

In terms of serious hardship, which is a question that has been raised, it is already defined in the Act and it has been in place for a number of years. With reference to Supplementary Order Paper 77, this ensures that the serious hardship provision can be used in a wider range of situations, alongside the “fair and reasonable” test, in order to write off penalties. So that is some clarification that I have been advised on with regard to that question.

The question “Does the change to the student hardship benefit definition penalise the student?” has also been raised. In answer to that question, the answer is no. The change in the definition will mean that sole parents who are students and who go on a benefit for student hardship are not forced to apply for child support; they can continue with any private arrangement. So I thank the members opposite for their questions, and I hope that adds some clarity to the discussion.

TIM MACINDOE (Senior Whip—National): I move, That the question be now put.

A party vote was called for on the question, That the question be now put.

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.

Motion agreed to.

The question was put that the amendments set out on Supplementary Order Paper 129 in the name of the Hon Todd McClay to Part 1 be agreed to.

Amendments agreed to.

Part 1 as amended agreed to.

Part 2 Annual rates of income tax

GRANT ROBERTSON (Labour—Wellington Central): I want to thank the Minister in the chair for taking a call, and I am not supposed to refer back to the last part, but it was useful to have those reassurances, and I do think it would be good as we go through the remaining parts of this bill if we could have that continuing dialogue. I am not wholly convinced, I have to say, by the Minister’s answer, but at least we got one.

Part 2 of the bill is a relatively simple part, but it is one I think that members of the public will be very interested in because this is the bit where we set the tax rates—the rate of tax that New Zealanders actually pay in a given year. These are the annual rates for the 2015-16 year. It was not a subject of massive debate when the Budget came before the House because the Government did not propose to make any significant changes to those tax rates, but they are a matter of significant public interest for two reasons: one historical and one looking to the future, and that is what I want to talk about in this call.

The tax rates as prescribed in Part 2 of the bill are those imposed by section BB 1 of the Income Tax Act 2007, and they must be paid at the basic rates specified in the schedule of that Act. What those rates are, which I am sure most New Zealanders know, is that from $0 to $14,000 your marginal tax rate would be 10.5 percent; from $14,000 to $48,000 it is 17.5 percent; from $48,000 to $70,000 is it 30 percent; and from $70,000 upwards it is 33 percent.

It is that point that I want to note because each year, as the House comes to this particular clause or part in a bill, it is the bit where we remember what happened in 2010. It is when we remember that a National Government, faced with an economy coming out of the global financial crisis—still in it in terms of the effect on most businesses—made the remarkable decision that the best thing it could do with the resources of the Government was to give tax cuts that benefited the highest income earners. That was the best thing that the National Party could come up with: a set of tax cuts where 43 percent of the benefit of those tax cuts went to the top 10 percent of earners. That was the effect of those tax cuts. The effect of those tax cuts was to widen inequality in New Zealand.

The Child Poverty Action Group has a wonderful graph, and it actually shows that inequality started to reduce once Working for Families was brought in, and it continued to reduce until we get to the point of these very tax cuts, when it clicks back up again. So that was the effect of the tax changes, enshrined now in what we are doing in Part 2 of this bill, because Part 2 of this bill reaffirms that decision. It reaffirms the decision taken by this Government to say: “We think the wealthiest of New Zealanders need a break. We are not so concerned about those on low and middle incomes—they can make do for themselves—but if we give that tax break to the wealthiest New Zealanders it will trickle down.” It has never changed—the National Party’s view that that wealth will eventually trickle down. Well it has not happened—it has not happened.

Then, rather than come back to this House and, in this piece of legislation, as it could be doing in Part 2—and actually Part 2 would be much longer if it had—prescribe new rates for schedule 1 of the Income Tax Act, but it does not because those rates are not changing because this Government is prepared to let inequality grow. If we look to the future, as I said I would do, we now have the prospect that we will have a longer Part 2 in the version of this bill that will come before the House in a couple of years’ time, because the tax cut carrot is being dangled out again by Bill English, the finance Minister, only just a couple of weeks ago. He is dangling out tax cuts as the economy slows down. We hear this morning that unemployment has gone up to 6 percent; there are 11,000 fewer people in work; there are 151,000 New Zealanders unemployed.

And what could the Government do? It could invest in the regions, support research and development, support diversification of the economy—but no, it wants to dangle out tax cuts again, no doubt again weighted to the wealthy. It wants to dangle out a change to the provision in the Income Tax Act that Part 2 of this bill amends, because that is its real goal: to reduce that heavy, heavy burden on the top income earners in the vain hope that somehow that will trickle down to hard-working, ordinary New Zealanders who go to work each week and pay the taxes in the middle bands that are here in Part 2 of this bill, and who do not feel themselves getting ahead. They have not been given a break by this Government. This Government does not care about them; it only cares about those people at the high end. Part 2 of this bill entrenches that.

Hon CLAYTON COSGROVE (Labour): Like Mr Robertson, I am grateful to the Minister in the chair for answering some questions on the previous part, and I hope that that will continue as we go on.

In respect of Part 2—confirmation of the annual income tax rates—it is interesting to note, as Mr Robertson has said, that it raises an interesting question: as these rates are confirmed, what could have been the alternative? I was debating with one Nicky Wagner on radio on Monday—

Grant Robertson: A meeting of minds?

Hon CLAYTON COSGROVE: —pass—about the skilled jobs that do exist in Christchurch in the private sector that are required. There are quite a few opportunities, despite unemployment moving up—to 6 percent, as Mr Robertson said—but the real gap in the whole system is training: training for those young people in apprenticeships and in other ways, so that they can fill those jobs.

The question that arises, as we yet again reconfirm what happened when the Government took office—as Mr Robertson has illustrated—is one could look at the alternative and say that the money could have been redeployed, and instead of providing tax cuts that enable the top 10 percent to reap the benefits of 43 percent of those tax cuts, it could have gone to reducing unemployment and upskilling our young people and others. The earthquake then, sadly, rolls through and those young people are there, ready, willing, skilled, and able to fill those job opportunities as we go through. That is one alternative that could have occurred.

If you look across at Australia at the time, of course—unlike what this Government did and reconfirmed every year—during the global financial crisis they targeted their tax cuts at middle and low incomes, at those people who cannot actually afford to save it. They have got to spend it, and they have got to spend it on the basics of life. That allowed money to flow through the lifeblood of the Australian economy. Yes, some people spent it on the odd Lotto ticket, but, in general, people had to spend that money.

If you are in the top 10 percent, I would argue that, well, there might be a fair few cases of extra wine and a few other things, but you will either retire debt generally or you will save it. It does not allow that money to flow into the lifeblood of the economic system. If Part 2 was to be amended to differing tax rates, then those tax rates targeted at low and middle income people—they cannot afford the luxuries of life. They have to spend the dough. They have to spend it, and that, of course, engenders money flowing through the system.

That could have been an alternative, but we sit here today looking at Part 2. As Mr Robertson has said, we may as well get the rubber stamp out and bang it on. That Part 2 is sort of xeroxed out every year. It is just reconfirmed and reconfirmed, and the Government is quite happy with the policy it has. However, as has been stated—and I think people are getting a wee bit cynical with this—as we move to an election in another 24 months, out comes the spectre of tax cuts. But the interesting thing will be whether, as we revisit Part 2 prior to the next election—whether those tax cuts, if they are going to be put in a bill like this, will actually be targeted at people in need. Will they be actually targeted at folks who need them? I am sure that a number of people around here have studied history, a bit of political science, a bit of theory, a bit of practical. I would have thought that the trickle-down theory was discredited 20 or 30 years ago. Maggie Thatcher tried it. Ronnie Reagan tried it. I think most people looked at it and went: “Well, it doesn’t really work.” But these guys, these geniuses on the Government benches, feel that they can just reinvent a tired and discredited old political theory.

Every year we come back and we have a Part 2, and they do it again, and they compound it again and again and again. This stacks up against evidence, as others have said, of an income inequality gap that widens and widens and widens, and the Government simply fails to acknowledge it through any change through a part like this. They seemed very, very comfortable, and they seemed extremely comfortable with spending the original tax cuts, as we reaffirmed in this part. The top 10 percent gets a big whack. Not spending tax cuts on infrastructure and hospitals and capital expenditure, putting value into the economy, creating jobs—no, simply lining the pockets of those folks who are the recipients of 43 percent of the tax cuts: the top 10 percent of the population. I would be really interested in a response from the Minister on those few points.

The CHAIRPERSON (Hon Trevor Mallard): I have probably been negligent, in that I did not intervene during Mr Robertson’s speech or at the end of it. I just want to remind members that this is a very narrow debate. The two speeches that we have had so far would have been marginal for a second reading, and were certainly outside the scope of this debate. I just want to warn members that we have accepted the principles here, and it is now just a question of whether the bill actually does what has been accepted or not. If members have not got some point to make on either side of that, then they had better not talk.

GRANT ROBERTSON (Labour—Wellington Central): I raise a point of order, Mr Chairperson. Thank you very much for that clarification and somewhat pejorative explanation of my speech. Can I ask you a question—a point of clarification? When we are debating Part 2, are we able to draw in material relating to the commencement date of that part, or would you rule us as not able to do that, as a result of there being a separate debate on clause 2 of the bill?

The CHAIRPERSON (Hon Trevor Mallard): I think that if members made passing reference, it would be acceptable, but if people try to focus their entire speech on something that is actually part of a later part of the bill, then I will rule them out of order.

STUART NASH (Labour—Napier): I would like to stand up and talk to Part 2 of the bill. The wording around this is actually quite interesting, because what this relates to is schedule 1 of the Income Tax Act 2007. The wording in that Act is actually quite humorous, because what it says is that a person’s taxable income—this is the formula for deriving a person’s taxable income: “tax under table 1 ÷ taxable income;”. You read that, and you go: “‘tax under table’, well, goodness me, are we including that now?” Luckily, they define ‘tax under table 1” as the “Table 1” below that formula, so it is not actually “tax under table, 1”, it is actually “tax under table 1”, which specifies the rates. But I suppose that if you read that in a particular way, you may be talking about the tax you have received under the table, and that is what you are eligible for.

This is an interesting part of the legislation, because, not surprisingly, no one submitted on Part 2 to the Finance and Expenditure Committee. But I suspect that if they had submitted on Part 2, on the rates, and if it was open to debate, then it would have been quite a robust debate. I suspect there would have been a whole lot of submitters who argue that the tax rates, as they stand under Part 2, are unfair and are wrong. I suspect that what they would have done—because we debated tax legislation last night; all submitters but two said that the legislation was rushed, it was not fit for purpose, and it will only cause a whole lot of problems going forward. I suspect that if we had called for submissions on Part 2—and, of course, the reason we did not call for submissions—

David Bennett: You were only meant to talk about the bill.

STUART NASH: —on Part 2, or the reason no one submitted on Part 2 of the bill as on page—I am talking about clause 65, Mr Bennett. The reason no one did put submissions on this is that they knew it would be a complete and utter waste of time. They knew it would be a waste of time submitting on clause 65, because the Government would not have listened. It has gone through anyway. It is actually retrospective, and so what is the point? I wonder whether the next time that this comes up, because it comes up every year, clause 65, or whatever the name is on the particular bill—I wonder whether we call for submissions on this, knowing that, of course, it will not have any impact. But then again, the Government is not listening to submissions on a whole lot of this stuff. What sort of submissions we would get, and how long—

The CHAIRPERSON (Hon Trevor Mallard): Order! I am now going to draw the member back to the bill. Submissions that were not made are certainly not part of the debate at this stage of the bill.

STUART NASH: OK. Well, I was trying to do that. Part 2, as has been alluded to, is under the Income Tax Act 2007. By and large, the Income Tax Act 2007 and all tax legislation made before 2008, of which this is a piece of legislation, was very good tax legislation. What it actually did is set up the country and New Zealand’s families to reap the rewards of a prosperous economy. That is what the 2007 Act did.

Unfortunately, this amendment to the 2007 Act—because, of course, these figures have to go into an amended Act, and they are not changing, but if they did change, they would have to go into an amended Act. What it does, unfortunately—and the former Minister of Finance, the Hon Sir Michael Cullen, would be disappointed, I suspect, if he saw that a piece of legislation under his name from 2007 carried tax brackets that in fact defied or undermined the philosophy that he took as the finance Minister when shepherding this 2007 Act through the House. I know that Michael Cullen really took great care when he put tax legislation forward to make sure that it was fair for all New Zealanders, not just the top 0.1 percent. He made sure that the tax burden carried by New Zealanders was done in a way that was fair for everyone. He made sure that the tax system was equitable. He made sure that it was fit for purpose. That is what this 2007 legislation did.

However, amending the 2007 legislation to put in the tax brackets or the tax burden put forward by the Key Government in fact undermines, I believe, the purpose and the philosophy that Michael Cullen and that Labour Government, of which the Chair was an integral part, of course—

The CHAIRPERSON (Hon Trevor Mallard): OK, that is enough.

KANWALJIT SINGH BAKSHI (National): I move, That the question be now put.

A party vote was called for on the question, That the question be now put.

Ayes 63

New Zealand National 59; Māori Party 2; ACT New Zealand 1; United Future 1.

Noes 58

New Zealand Labour 32; Green Party 14; New Zealand First 12.

Motion agreed to.

Part 2 agreed to.

Part 3 Amendments to Income Tax Act 2007

The CHAIRPERSON (Hon Trevor Mallard): The question now is that Part 3 stand part. Just for clarification, this is debate on clauses 66 to 220 and on schedules 1 to 3.

GRANT ROBERTSON (Labour—Wellington Central): I was just pausing briefly there to see whether any member of the Government would like to stand up and talk about substantive changes to the Income Tax Act that are all about, according to the commentary around this bill, improving research and development, making the taxation system more efficient, dealing with GST and bodies corporate, changing Working for Families tax credits—anything? Nothing at all from the Government. It is absolutely remarkable, Mr Chair, that, as you yourself have just alluded to, there are 150-odd clauses—or something more than that—in this particular part of the bill. The Finance and Expenditure Committee spent significant time going through a number of issues within this bill, checking and then rechecking as to how it would be implemented, and not one member of the Government wants to get up on their hind legs and tell us why they are doing it.

What does that tell us about what those members are doing here? What does that tell us about their commitment, in particular, to research and development, which is one of the major issues dealt with in Part 3?

Dr David Clark: All for show.

GRANT ROBERTSON: All for show—that is what it is, because if they actually wanted to do something substantive about research and development, we would actually be hearing from them about research and development tax credits, because that is actually something that the sector wants. It would give some certainty for investment in research and development, but there is nothing about that here.

One of the main features of Part 3, and the one that I want to talk about in this first of my calls, is around the cashing-out of losses for research and development expenditure. There is no doubt that there was a considerable level of sympathy inside the committee for this particular clause. Everybody knows, particularly when you are starting a business, that being able to invest the money into research and development that you need to create the value in your business, to build it, and to bring on new products is difficult at the start when cash flow is tight, when you have got other things on your mind, and when you have probably financed the business out of an extra mortgage or something like that. That ability to be able to deal with research and development or actually get into research and development is limited.

So we all know that in the first years of life of companies in New Zealand most of them make losses. It is one of the things that, when you do not follow closely the fortunes of particularly small businesses, a lot of New Zealanders would not understand. Actually, the hard graft of the early years of a business includes, almost inevitably, making losses year on year at the beginning. It is very difficult at that point to be able to put that money into research and development that is required. So the idea of cashing out losses for research and development expenditure is something that we would certainly support.

What this bill does and what this part does is allow certain loss-making companies—and we will come back to that in a minute—to cash out tax losses for research and development expenditure to a limit of $500,000 in the first year and $300,000 in subsequent years. The important point here is that although those losses can be cashed out and repaid, once the company makes a return on its research and development investment it does have to repay it. So that is the point. Companies can cash it out at the point at which it is a cost to them—it is part, in effect, of the fact that they have made a loss—but then they have got to return it, and this to me is the weakness in the National Government’s regime that is being put in place here. By all means have that as part of the process by which companies can make investment in research and development, but where is the other end of the equation? Where is the ability of all companies to have some certainty that they can invest in research and development? Because it is not here.

It is, in fact, a deficit model in all respects. It is a deficit model in the sense that it deals with losses, but it is also a deficit model in terms of the value of research and development. It is just the smallest of possible gestures that could be made to support research and development. Yes, it is welcomed by those companies and those firms that will inevitably take it up and cash out the losses, but where is the imagination? Where is the vision for really kick-starting research and development? One of the lowest levels of private sector research and development expenditure in the world is in New Zealand, and this legislation says: “Well, we’ll do this small piece of tinkering that will help a few companies deal with their inability to really invest in research and development in the early stages of their business.” So I would welcome a member of the Government getting up and telling us—is this it? Is this it in terms of research and development? Is this as good as it gets in terms of how the Government thinks we should be encouraging and facilitating one of the things that will truly drive economic growth in New Zealand, and that is investment in research and development? So that would be one particular area that I think we do need a little bit more work on.

We certainly got submissions at the select committee that were concerned about issues like the thresholds, how the thresholds could be increased over the years, and how we were making assessments about whether this really was research and development. One of the things that the committee dwelt on was who would be brought in to make the decisions about this. It will be—I can say that the Inland Revenue Department told us at the select committee—Callaghan Innovation that will play that role. The committee members were relatively assured of that. Callaghan Innovation has a broad range of experience when it comes to research and development.

There were some concerns raised at the committee as to whether or not Callaghan Innovation has the capacity for this in terms of its own work. We were assured that, effectively, the Inland Revenue Department would be paying for the services. There would be a retainer, in effect. The other concern that was raised by committee members was the timeliness of Callaghan Innovation’s ability to actually be there, make the decisions, and enable a business not to have to sit around and wait to see whether or not the work it was doing or the expenditure it was undertaking really was research and development. Again, we were assured by Inland Revenue Department officials that that would be dealt with. But I do think there is a real cause here for a Government member to get up and tell us how this in effect does improve research and development in New Zealand and what else the Government may have planned, because, goodness, there had better be something other than this.

There are several other issues in this part that I will come to over the next couple of calls. The next thing I want to do is talk about the question of “black hole” expenditure, which, again, the committee spent a little bit of time dealing with. The bill amends the rules relating to “black hole” expenditure, and for those who want a definition of that, which the committee itself did when we were dealing with it, “black hole” expenditure is business expenditure that is not immediately deductible for income tax purposes and cannot be deducted over time as depreciation. The proposals are, effectively, dealing with a number of anomalies under the current rules that were to be fixed. I guess where the committee got to was around questions like patents, trademarks, and how we deal with those from a tax deduction perspective. What we got in terms of submissions was that there had been a lot of uncertainty in the accounting profession around exactly what was covered and what was not, and the amendment of these rules effectively allows an extension of an asset’s cost to include the underlying item of what is called “depreciable intangible property”. That sounds extremely technical, but it was, from the submitters who came to us, a point that they wanted some clarification on.

I will be frank. I do not think committee members across the parties when this was being raised were able to be completely assured that there would not still be loopholes, because it is such a technical area. The idea that accountants will now scour through this to see whether there are loopholes and whether things can and cannot be taxed within those areas like patents, and particularly when patents are looked at versus knowledge that already exists—how do you construct a taxation regime around that? We have to have some confidence in the officials here that the treatment of “black hole” expenditure is now going to be clearer, but I think it does draw to the attention of the House the importance of definition in making sure that taxation law works. We have been assured that we have got that here, and I hope we do.

The final area I want to talk about in this call—and I definitely want to hear from a member of the Government on this—is the question around GST and bodies corporate. What the amendments here are slated to do is to clarify that services provided by bodies corporate are supplies for consideration for GST purposes and give bodies corporate the option to register for GST. This is, effectively, about rules that protect the tax base from the adverse consequences of allowing this choice.

Dr DAVID CLARK (Labour—Dunedin North): In rising to speak to Part 3 of the bill, I acknowledge that it is the substantive part where all these changes are made. I join my colleague Grant Robertson in challenging Government members and Ministers to speak on this bill. I too find it odd that there was not great competition for calls to speak about these changes.

The Income Tax Act is a very important Act we are amending. It is the Act that provides us as a country with the resources to afford the assets that we hold in common—the hospitals, the schools, the roads, and the courthouses. Without a robust tax system that promotes enterprise and ensures people pay their fair share of tax from the profits of those enterprises towards the common good, we as a country will not go forward, we will not grow, and we will not maintain the level of services that we have come to expect as a country and the growing level of services we will look forward to in the future.

For example, in the health sector, where the cost of health care goes up and up every year due to new technologies that enable better quality of life in old age—we on this side of the Chamber want a robust tax system that can support those standards of living that we all want. The Government has acknowledged that it has not funded the health system to meet inflationary pressures. The $1.7 billion estimate that Infometrics has put on the underfunding of the health system has a very real consequence for New Zealanders. So I would challenge those members opposite to get up and say why it is that they want to make these changes, why they do not want to make the bill more robust still, why they do not want to promote enterprise more, and why they do not want to have research and development tax credits in here in a way that is readily available to all businesses so that we can actually grow the economy.

The current situation, where we pick winners and have, in this piece of legislation and in this part of the Act, clauses that promote a very narrow type of research and development that may benefit the Minister when he wants photo opportunities but does not actually benefit the country in the way that it should, is something that needs to be debated. The Government members opposite should justify why it is that we have these narrow research and development provisions in the law, and not much broader ones. I expect that the Minister in the chair, Nicky Wagner, will have some thoughts on that. I look forward to the Minister speaking a little bit about the vision for research and development that she has that we all should buy into, because at the moment it is not obvious why it should be so narrow, and this is a very important part of the bill.

In this contribution I want to speak about some very specific points, and the first of those is the exception for overseas accommodation, and the second is the exception around accommodation provided to ministers of religion. I think that both of these things are worthy and should be supported, for very different reasons.

The overseas accommodation exemptions aim to include in calculations, at a reasonable level, the benefit derived from allowances or payments. I refer members to clause 69B of the bill. These changes are an attempt to ensure that overseas accommodation is supported. So when enterprises are moving out overseas and are expanding their businesses, they will have the support necessary to do that, in a manner that ensures that they can go about their business in a reasonable way without a great big payment exemption or luxuries being carved out that would stop us getting our fair share of tax from companies, and that actually promotes enterprise. I think that one of the basic principles of tax policy is to ensure that it is fair, but also to ensure that it promotes economic development in a way that, certainly, I care about and members on this side of the Chamber care about. Of course, we know that Labour Governments historically have had much higher growth rates than National-led Governments. Since World War II, National-led Governments have grown the economy, on average, by 2.9 percent—not bad in itself—but Labour Governments have grown it by 3.7 percent. So we need provisions like this in the law that ensure that enterprise is promoted.

The second area I want to speak about specifically is the exception for accommodation provided to ministers of religion. This has been a little bit contentious. I think, though, that the contentious aspects of this seem to have gone away, in the way that it has been resolved in clause 70 as we have here in the bill. We eventually amended the laws around this, if memory serves me correctly, in the last annual rates and remedial matters legislation that went through for the 2014-15 year, in order to ensure that remuneration for accommodation was not calculated in the tax—and the Minister will correct me if I am wrong, I hope, or the members opposite may rise to their feet and take a call. The attempt was being made to ensure that the remuneration given to ministers for their accommodation—recognising that they are sent places, that it is a calling, and that it is not necessarily a benefit of a luxury nature—not be counted in their salary. Effectively, at one level you could say it is a kind of perk and at another level it is an attempt by the State to support the work that traditional ministers of religions do in small communities around the country.

In many small communities, particularly those struggling to get new enterprises off the ground—those that were once thriving communities and industries that have struggled in recent years, for which we could lay some blame at the foot of the Government for its lack of regional development policies, but let us talk about the principle here—those communities often have, as the last remaining professional member in them, a minister of religion. This is somebody who has a level of education and has been trained in critical thinking in a way that enables them to act in those communities as counsellors or as peacemakers. Often they are the people who will sign official documentation, because there is no other professional person in town to witness documents. These are simple, everyday matters. They, of course, bury people, and they marry people, and so on. The “hatch, match, and dispatch”—I have people heard people talk of that in those regional communities. That is part of the role of those ministers of religion.

But recognising that they are those people who do those duties in those towns, and that they actually provide a valuable service, and that the State wants in some way to recognise that through trying to ensure that the tax system does not overly penalise them for that accommodation that they have, was the intention of the changes last year. The amendments here—I assume, having not been a part of that particular debate on the Finance and Expenditure Committee—are aimed at ensuring that the principle that sat behind the amendments we made last year are effective in this law. I refer members to clause 70(3B) , where it says: “For the purposes of subsection (3)(a), the calculation of the amount of the item remuneration excludes the value of accommodation described in subsection (1) that is provided to the person.” That to me, as I read it, is a clarifying statement to make that absolutely clear. We can only assume that there had been some disputes as a result of the annual rates and remedial matters legislation last year, and that therefore the officials have come back in order to make that abundantly clear. I hope my memory of that is correct.

I see many officials here who will be available to brief Government members, should they have questions, or the Minister in the chair, if she is not clear on the issue. I think it would be good to clarify for the Committee whether this clause is designed as a clarifying aspect or if indeed it does in some way alter the purpose, which I have not captured. I am interested to hear that. I think it is a principle that this Committee should understand, so I expect the Minister in the chair may wish to address that—certainly if I have misunderstood it.

The other matter I wish to address in this contribution—sorry, I am just finding my page. It was around the research and development tax credits—there is a specific paragraph. I have taken my finger off the page. I got so wound up in my exposition around overseas accommodation and the exemption of property provided to ministers of religion that I have lost my place. I might wait for that contribution to be made in another section of the bill, because I have lost the page and I do not wish to delay the matters progressing in the Committee.

FLETCHER TABUTEAU (NZ First): I just want to continue down the line of tax incentives for business. Originally, the legislation spoke about incentivising research through tax write-offs. It is a tax remedial bill. New Zealand First looked at that in some detail. In our contributions we noted that the issue with that was it was not actually supporting 98 percent of New Zealand businesses. It seemed to disincentivise or, even more than that, prevent small to medium sized enterprises from using the tax claim procedures so that they themselves could use the tax write-offs as an incentive to encourage research. It is a small part of it, and I acknowledge that the officials have done some work and we are moving in the right direction.

But I just wanted to put some context in and around the bigger picture of research in New Zealand. The slump in dairy prices of over 10 percent today just highlights New Zealand’s hang-up with commodities. What we see is a kind of cycle, not just in New Zealand but around the world, where we invest, and then we do not, because the prices drop, and then there are fewer players in the market, so the prices go up, so we invest—and so the vicious circle goes on. I know a lot of farmers in New Zealand are quite anxious about the intellectual property that has been sold to overseas dairy interests, and so we are kind of competing to provide the lowest price to the world market. That model just cannot carry on for an extended period of time. What I am saying to the Committee today is that you have some very small, micro opportunities here in terms of incentivising research. The Government needs to acknowledge this and move our economy out of that commodity conundrum.

I was looking at some research, and I would like to bring it to the Committee’s attention. New Zealand exported $50 billion worth of goods in March this year. This was the total annual amount: $50 billion—fantastic. It sounds fantastic. We are a population of 4.6 million people. If you contrast that with Singapore, that country exported $410 billion worth of goods or commodities. That is about $10,500 a person for us, and for Singapore it is $113,000 per person. I want to highlight the fact that Singapore is an economy that incentivises research. Singapore is meaningful about it and it takes it beyond the tax breaks. Only one of its top 10 exports is actually a commodity, and that just happens to be oil. The rest are goods that have intellectual property in them; they have value added. That is a conversation that has been had in New Zealand for decades, on so many of the products that we sell abroad—that value-added conundrum. I suggest, and I assert, actually, that this legislation is just a tiny step in the right direction. Research and development expenditure in New Zealand, for example, is 1.6 percent of GDP. That is tiny, and compared with the OECD average it is about half of that. So we have real issues that need to be addressed.

This is a start, as I have said a couple of times, and I will make reference to some of the clauses that I am referencing. So I will speak specifically to clause 192, new Subpart MX in the Income Tax Act 2007. As I said, we spoke insistently and strongly about the tax incentives needed for small to medium sized businesses. We noted that the original drafting of the bill did not even acknowledge small to medium sized businesses—well, it did, but it did not really give them the opportunity to write off those costs because it was kind of post or after the fact. A lot of them were running losses. They were not making the profits that would enable them to compensate, as it were, for those losses in terms of research.

The section I am speaking about is MX6(4): … “the company is liable for an amount of R&D repayment tax equal to the total of the company’s R&D loss tax credits for the tax year corresponding to the reinstatement year and earlier tax years minus the total amount of—”. It explains it in detail. It is hard to summarise it because it is so complicated, so with your forbearance I will just read out the paragraph that I think is particularly pertinent: “(a) the company’s terminal tax, plus tax credits giving rise to imputation credits, minus refundable tax credits giving rise to imputation debits, for tax years in the period beginning with the earliest credit year and ending with the tax year corresponding to the reinstatement year:”. It is incredibly complicated language, but what I wanted to acknowledge is that that part does mitigate somewhat New Zealand First’s concerns around small to medium sized enterprises being left out.

But I ask the Minister—and I ask this earnestly—if this is what was actually wanted, what was the subsequent consultation to reaffirm that that was the outcome from this altered clause? Are you getting what you intended from it, and are our small businesses able to benefit from it?

Just to finish off, I keep raising the point—I have in the past—about unintended consequences. Some analysis on this would be hugely helpful. It will be important to understand just how that works in practice. Perhaps if I just leave my contribution there and wait for my next contribution, to be able to take on another part separately. Thank you.

STUART NASH (Labour—Napier): Research and development tax credits and black-hole expenditure were a big part of this bill, and I will talk about those in a second, but there is one clause that I would like to talk about, which has sort of flown under the radar but I think deserves a bit of attention, and that is clause 69. What this clause does is it amends the available capital distribution amount, and it is actually to do with the buying and selling of livestock—around the capital gains and capital losses associated with the buying and selling of livestock. The interesting thing about this clause is that it actually comes into force on 28 March 2012.

Now, as we know, there are a number of pieces of tax legislation that are retrospective, for a number of very good reasons, and we accept that, even though one of the underlying principles of tax legislation is that it is not ideal to have retrospective legislation because people have tended to make decisions based on the current law—as they should.

This has eluded my attention, I must admit. Maybe I was a bit remiss at the select committee when I looked at this. I am not too sure why we have got a piece of legislation that is actually retrospective for what will end up being about 3½ to 4 years. That is a long time. I am assuming that there is a reason behind this—whether that is case law, and I suspect it must be. I am assuming what happened is that a farmer went to court because he or she was very dissatisfied with the outcome of a decision that the tax department had given, was taken to court, and the court made a decision. That decision has to be ratified through legislation, and that is why it has gone back to 2012. But it is rather unusual.

I must admit that in my short time in this House, including my time as Labour’s revenue spokesperson, I have not come across a piece of legislation that is so retrospective. I wonder whether it has any implications for farmers or Queen Street farmers and the dealings they have had over those last 4 years, or whether there are going to be any unintended consequences. I suspect there are not, but it is just worth noting that it is reasonably retrospective. I wonder whether the chair of the Finance and Expenditure Committee, David Bennett, has anything to say on that, considering he must have bought and sold quite a lot of stock over the last 4 years.

What I would like to talk about—and this came up a lot in discussion, including in submissions—is the eligibility of the research and development credit. As mentioned, we talked long and hard about this. We believe, on this side of the House, that we need a regime for rewarding research and development. The last speaker from New Zealand First talked about New Zealand’s research and development spend at 1.5 percent of GDP. I suspect that it is actually a lot higher than that. The reason I say that is that in this country you have to capitalise research and development. I believe that if we change the law—and this bill does not do that—to allow people to expense research and development, then I think you would find it went through the roof. I suspect that at the moment there is a lot of research and development undertaken that is not counted as research and development but is expensed in some way, shape, or form. But that is a point for another day.

I want to talk about Subpart MX2, the corporate eligibility criteria. In the select committee what we were really keen to ensure was that only New Zealand companies took advantage of this, because the purpose of this is to grow New Zealand companies to the point where they can take on the world. Certainly there is a recognition that early-stage companies are often the ones that are the shortest of cash or suffer cash-flow crises, but that they are also the ones that are spending a lot of money on research and development. So what we wanted to ensure was that a big corporate did not set up in New Zealand simply for the purpose of leveraging off this research and development tax credit. This is Subpart MX2.

We had a definition of corporate eligibility criteria, and, excuse me, but I am just going to read this out because I do think it is quite important just to clarify what we are talking about with eligibility. The first point is that the person is a company that is resident in New Zealand and that there is no double tax agreement under which, for the purposes of this, a person is treated as a resident of a foreign country or territory. This comes back to the point I was making: we did not want a large corporate to set up a subsidiary here, with a view to claiming this research and development tax credit.

The third point—this is an “and”, not an “or”—is that the person is a member of a group of companies, and the group does not include a company that is not resident in New Zealand. We talked quite a lot about this and determined at what level we should take this. There was an agreement that, in fact, what happens with a lot of these early-stage companies is that they set up offshore marketing or sales forces or incorporate small companies to actually commercialise or sell the research and development in another country. We needed to make sure that we allowed that but, however, avoided the circumstance I was talking about before. We said also that the company cannot be a company that is treated, for the purposes of a tax double agreement, as a resident of a foreign territory. And, of course, that the person is not a special corporate entity, that the person is not a qualifying company, and there are a number of other provisions.

I suppose what the select committee wanted to do was to make sure that we set up a regime that was easy to implement. We talked about the cost of setting this up, and we did not want a regime where the cost of setting it up was actually greater than the benefit received, which would have defeated the whole purpose, obviously. But it needed to be easy to access, it needed enough money so that it was worthwhile, but the costs and compliance needed to be such that the benefit created was way above that.

There were thresholds on this. For example, if I am right in saying this—Mr Bennett might be able to correct me on this—and if my memory serves me, you can collect only $500,000 per year, up to a total of $2 million. So again we are talking about really the small and medium enterprise sector. If we say the small and medium sector is defined by having 19 employees or fewer—there may be some companies that go above that, but by and large we are talking about small growth companies—it is up to a maximum of $2 million.

What the commissioner can do is stated in Subpart MX 5: “The Commissioner must extinguish the person’s tax loss for a tax year to the extent of the amount given by dividing the amount of the tax credit for R&D tax losses for the tax year by 0.28.” So we are using the corporate tax rate on that. There are a lot of clauses that talk about how this is going to be administered, and how much is available, but I think I will let my other colleagues talk about this. I just want to say that we do believe there does need to be a research and development regime in place, implemented by the Inland Revenue Department, but we think it could have gone a whole lot further. Thank you very much.

Hon DAVID PARKER (Labour): I want to carry on while we are debating this part with the discussion that we have just commenced through Stuart Nash on tax credits for research and development tax losses. The history of research and development tax losses in our tax legislation needs to be referred to. For many, many years New Zealand has had a low level of expenditure on research and development in the private sector relative to other OECD countries. Stuart Nash is quite right when he points out that the incentive to under-report research and development expenditure is higher in New Zealand than it is in other countries because you cannot claim a tax deduction for a lot of that expenditure and you are meant to capitalise it and then amortise it. If as a taxpayer you can categorise that as another category of expense and therefore get a tax deduction in the year it is spent, you are better off to do that and, as a consequence, there will be some areas of research and development expenditure that are reported as research and development expenditure in other countries that actually are appearing as other categories of expenditure in New Zealand in order to get that tax deduction.

Notwithstanding that there is almost universal agreement in New Zealand that levels of research and development expenditure in New Zealand are lower—that is, private sector research and development—than in other countries even when you adjust for that anomaly and that that is one of the reasons why New Zealand’s export performance is worse than it would otherwise be. Because of that historic under-investment in research and development the last Government in the last term of that Government introduced a research and development tax credit of 15 percent qualifying expenditure. The current Government came to power and axed it, and it axed it in order to fund amongst other things a decrease in the corporate tax rate, I think, to 28 cents in the dollar—was it 30 to 28 or did it go down in two stages; I forget the history but it went from 30 down to 28 percent—and it also funded income tax cuts, which were, as other people have said in other parts of this debate, weighted to those who were at the higher end of the income spectrum, with 40 percent of the income tax cuts going to the top 10 percent of income earners.

The Labour Party at the time was critical of that because we thought that although it was true that some of the money that was received by companies for research and development tax credits would, effectively, be a tax credit for what they already spent, albeit characterised as other sorts of expenditure, overall it would have lifted the increase of research and development tax expenditure, and that was modelled by Treasury. Treasury opposed the abolition of the research and development tax credit and said that New Zealand’s economy would be weaker as a consequence. The Inland Revenue Department at the time opposed a research and development tax credit and I think it is a matter of public record of a lot of those people who went through the initial stages that they actually found the Inland Revenue Department at that stage quite unreasonable in the way in which it implemented the controls around the research and development tax credit and made it difficult to access.

In any event, what happened subsequently to that was that the Government found that its export target of increasing exports from 30 to 40 percent of the economy went wrong. Indeed, exports as a percentage of the economy, instead of increasing from 30 towards that 40 percent target, have gone backwards, and have dropped to under 30 percent of the economy—to around 28 or 29 percent of GDP, and still dropping.

As a consequence of that the Government says “Well, we’ve got to do more than we’re currently doing in respect of research and development incentivisation.”, and it has, in new Subpart MX inserted by this bill, introduced these new rules in respect of smaller entities that are intensively investing in research and development that do not have other areas of income that they can take advantage of and that they can offset their qualifying research and development expenditure against, and therefore ought to be able to get it paid out to them as a credit, particularly when they are small companies and they are cash-flow negative.

The Labour Party supports that, and that is why we are supporting this part of the bill, but I do want to highlight what I think are the inconsistent arguments that are being run against research and development tax credits generally by what is happening here. The Government said that research and development tax credits were too complex to operate, and yet it has actually got a system here that is more complex than you would have if you had universal rules. Stuart Nash has gone through some of the definitions of the eligibility criteria to determine whether you come within these rules.

Look, I want to incentivise research and development tax expenditure in New Zealand, and I do not object to it being done for these companies, but it is somewhat ironic that the Government said that it opposed these sorts of initiatives because of complexity, and yet the rules surrounding this bill include rules relating to the research and development intensity of a firm in order for it to qualify. New section MX 1 says that Subpart MX applies to a person—which includes a company; it is a corporate person, as well—only if “the wage intensity criteria in section MX 3 are met;” and there are intellectual property outcomes that are intended for the benefit of the company.

To get to what that means, you then have to look at new section MX 3, which sets out the wage intensity criteria, and it is complex. It sets out a formula that has a different rate, for example, that you can claim in respect of contracted-out research and development expenditure compared with that which is done internally. That is in subsection (3) of the formula in section MX 3. Then it sets out proportions that you can claim for each of them. It then, in the next section, new section MX 4, sets out that there has to be a tax credit equal to at least the amounts that are set out for various years—very, very complex.

Then there is section MX 5B, which I do not quite understand, and I would be interested to hear the Minister explain it. Section MX 5 says that you have got to extinguish your tax loss to the extent that you have had a research and development tax loss credit. That is fair, because you do not want the Government paying out a tax loss credit and then people carrying forward a research and development tax loss that could then in a future year be used to reduce your income tax when you were in profit. That would not be fair, so they are stopping double-dipping there, but then section MX 5B is titled “Deduction if increase in basic tax rate for company”. When this section applies, it says that if the person “has an R&D loss tax credit for a tax year”, which they call the “credit year”, before the current year “for which the basic tax rate for a company is increased (the rate increase) if the rate increase results in a basic tax rate for a company that is greater than the basic tax rate” for the latest year, or the credit year, then various formulae apply.

Again, the complexity of this is extraordinary. For the Government to persist in pretending that its mistake in abolishing the research and development tax credit was not a mistake, and to come back with this narrower version of a credit for a research and development tax credit—in terms of the ambit of the economy to which it applies, which is narrower than the former research and development tax credit—and pretend that, 7 years into its Government, with exports going down as a percentage of the economy instead of up, as it promised, is galling. I would like the Minister to take a call and say how the Government can support this provision in respect of a narrow set of research and development and logically oppose broader research and development tax credits. If this sort of tax credit is accepted as stimulating research and development effort in a way that benefits our economy, grows the breadth of our exports, and grows the sophistication and value of our exports, why does that same argument not hold true in respect of other areas—

MARK MITCHELL (National—Rodney): I move, That the question be now put.

FLETCHER TABUTEAU (NZ First): I just wanted to carry on from one of the contributions earlier around the ”black hole” expenditure issue. It is a question of appropriateness and fairness, and so the question needs to be put to the Committee: what is this black hole expenditure? It is defined as expenditure that is currently neither deductible nor depreciable over a financial year, or, in fact, at all.

And, speaking specifically to new section CG 7C of the Income Tax Act, inserted by clause 73, and section DB 34(3)(a) of the Income Tax Act, in clause 85, what they are trying to do there with this tidy-up of the legislation is to remove—or it is probably best to describe it as reduce—distortions that discourage investments in research and development. So New Zealand First wholeheartedly supports the intent there. There has been a lot of ambiguity, and a lot of accountants going back and forth—in fact, I think one of the earlier contributions mentioned court cases around what is involved, and how we resolve these issues and come back with clear and meaningful definitions.

The black hole exemptions have been issues going forward. But what I want to say—and the example I want to use—relates to expenditure on derecognised non-depreciable assets, so it is a person incurring expenditure specifically on the development of an intangible asset. I just put it to the Minister—and it is a short call, Mr Chair. But when you look at that language—and I will just say again that it is specifically on the development of an intangible asset in terms of a person incurring an expenditure—I put the question to the Minister: will the issue be resolved?

New Zealand First acknowledges that the black hole exemptions from items that are neither deductible nor non-depreciable have created an issue in the past. We do want to incentivise small to medium sized businesses, particularly, in terms of giving them a chance to claim those tax credits, but the problem is, does this now not create just a different issue of ambiguity around the black hole exemptions? So some clarification is what New Zealand First is seeking there, because when you read the legislation the ambiguity is still there, to be fair, and it is simply a matter of the need for clarification. Thank you.

Hon DAVID CUNLIFFE (Labour—New Lynn): I would like to pick up some of the themes that have been echoed by my colleagues Mr Parker, Dr Clark, and Mr Nash, because we are at the heart of the bill, and, Mr Chairman, I know that you know that the previous Chairman guided the Committee to this part of the bill for the substantive part of the debate. This is where the meat of the legislation is, and it is very, very important that we deal with it substantively.

I want to turn in this particular call to the cash-out provisions, which are contained in clauses 192, 213, and 217, in particular. Let us give context to the public as follows. There was a heated economic and political debate about how we tilt our economy towards more value-added—how we get away from being just a commodity exporter of fairly unprocessed red meat or unprocessed logs or pretty unprocessed milk powders— and how we allow our economy to earn more value so we can pay higher incomes to New Zealanders.

Inherent in that strategic transition is the need for doubling if not tripling the level of research and development investment in this country—probably doubling the Crown’s investment but at least tripling the private sector contribution, which is derisory. It is in the bottom quarter of the OECD and it is not improving, and a key reason for that is the structure of the tax system, which gives a real estate speculator a tax break and an innovator in a start-up a tax penalty. That is nonsense. It is so bad for our economy. Is it any wonder that today unemployment has reached 6 percent again and growth is no better than 2 percent?

We are in trouble. We are not moving from the pathway to mediocrity, at best, that has characterised this economy, and, actually, it is in technical stuff like this bill, in these clauses, that we see the problem. The Government has been too scared to take on the real estate speculators. Money talks and National walks.

The CHAIRPERSON (Lindsay Tisch): Order!

Hon DAVID CUNLIFFE: In this bill what National is trying to do is get the tax credit, which Labour proposed and National cancelled, by another means, but it has gone in such a roundabout route that it is so cumbersome, so detailed, and so complex that start-up businesses probably will not be able to access it reliably. We are supporting the bill only because it is better than nothing, and only because it is a timid step towards what Labour proposed, but it is not good enough.

Here is the problem. For example, the cash-out provision for research and development expenditure contained in clauses 192, 213, and 217, and schedule 1 is designed to provide a temporary tax-flow relief to companies that are high in specific kinds of research and development, and then once they are over the cash flow crunch, they have to pay it back again. So the first point is that under these clauses it is very different from a proper tax credit—say 12.5 percent, as we proposed—where the company gets to keep the tax remission and put it on its balance sheet because it is a legitimate recognition that there is a public interest as well as a private interest in that research and development. Yes, it helps the company, but it also helps the economy and the whole country, and it never works, anywhere in the world, for the innovator to take all the risk if they cannot keep all the reward. That is why tax credit systems give a permanent remission, but this does not. This is only a cash loan. It is a timing change, and the company has to pay it back. That is the first problem.

The second issue is that when you take this alongside the structure of the Callaghan Innovation growth grants, which are not available to companies that spend less than $300,000 a year, or 1.5 percent of their revenue, on research and development, and thus are not available to start-ups, and have mandatory non-discretionary disbursement criteria so that they are funding—

Hon NICKY WAGNER (Minister of Customs): I would like to take just a short call to answer one of the queries that David Clark put up to the House. He was concerned about the accommodation for ministers of religion, and this is clause 70 of the bill. Yes, I can confirm that this is a clarifying amendment, and it is to ensure that the original policy intent is met. The change ensures that the value of the accommodation is not double-counted when accommodation is part of the minister’s remuneration. So it is not double-dipping; it is a clarification.

Hon DAVID CUNLIFFE (Labour—New Lynn): Thank you very much, Mr Chairman—I appreciate it, because we are getting near the heart of the matter here. As I said, the Callaghan Innovation grants are not available to start-ups, because they have not got $300,000 to invest in research and development; they are absolutely scraping by, and they do not have a 1.5 percent of revenue - track record that would allow them to get these non-discretionary grants. In the Callaghan system, they are giving grants to foreign multinationals like, for example, Bayer and the Oracle America’s Cup syndicate—can you believe that? But in the detail of this bill, in clauses 213 and 217, the excluded activities from this complex halfway house take an opposite approach and—quite rightly, I think—exclude activities performed outside New Zealand.

If you go down the list of exclusions in this bill, there are some that we would agree with, such as why would we give a tax credit to research and development done outside New Zealand? Fair enough—good move. Why would we give a tax credit to the acquiring or disposition of land unless it is directly related to the research and development? Good move; I agree with that one. However, here are some that we certainly do not agree with: acquiring, disposing of, or transferring intangible property, core technology, intellectual property, know-how, or related activities. So when you are transferring—for example, if you are in a high-tech cluster—intangibles or intellectual property from one part of the innovation chain across a company boundary to another, you cannot claim the tax credit.

Dr David Clark: Which clause is this?

Hon DAVID CUNLIFFE: This is in clauses 213 and 217. This is a very unusual move, because, frankly, it shows a misunderstanding of the nature of high-tech clusters, where, typically, you have multiple firms working together to solve complex problems, often taking specific parts not only of a business value chain but also of a software process, even. So this makes no sense. What is really ironic, of course, is that at the same time, the same Government, in the Trans-Pacific Partnership negotiations, is making it—

The CHAIRPERSON (Lindsay Tisch): Order! That is not part of this bill.

Hon DAVID CUNLIFFE: Mr Chairperson—

The CHAIRPERSON (Lindsay Tisch): No.

Hon DAVID CUNLIFFE: It is directly relevant.

The CHAIRPERSON (Lindsay Tisch): We are not talking about the Trans-Pacific Partnership.

Hon DAVID CUNLIFFE: I am not challenging your ruling. OK—I will come at that issue in a different way. Were it the case that while excluding a tax qualification for intangible property and intellectual property here, somewhere else the Government was extending the life of the same forms of intellectual property protection and was making it harder for small businesses to get one and defend one, then there would be a double jeopardy. It is excluded here, and it is more difficult there. So, again, the gestation—the history—of this bill shows the Government tripping all over itself. It would have been so much simpler, so much better, and so much cleaner to have an across-the-board research and development tax credit properly defined, with appropriate exclusions, and to have it across the board and bankable rather than this cash-out loan, which is so complex that most small businesses will not ever access it. One wonders: is it bad policy design or a deliberate public relations spin so that it looks like a proper tax credit but is in fact not one, because it is not fit for purpose and is too complex for start-ups to use?

Once again, it is a bit like Child Support - lite or Working for Families - lite—or this lite or that lite. The Government has signed up to a concept that the Opposition has been evoking—finally. It brought something in that looks like half a loaf, but it just will not work. It is just not good enough. What about the idea of having an accelerated depreciation rate for short-life high-technology plant and equipment? It sounds sensible—there is a body of international literature around that—but it is not in this bill in the same way. In fact, the exclusions here include things like the acquisition or disposal of the intellectual property, the commercial legal aspects of the patenting and licensing, the excluded use of the services of developing through an external contractee the acquisition of intellectual property, and excluding the cost of acquisition or transfer—again, making it very difficult for small companies working in a cluster to access these benefits.

The reinstatement of losses is contained in clauses 99, 117, 119, 192, 194, 195, and 213—

The CHAIRPERSON (Lindsay Tisch): I am sorry to interrupt the honourable member. The time has come for me to report progress.

Progress to be reported presently.

House resumed.

The Chairperson reported progress on the Taxation (Annual Rates for 2015-16, Research and Development, and Remedial Matters) Bill, no progress on the Weathertight Homes Resolution Services Amendment Bill, no progress on the Radio New Zealand Amendment Bill, and no progress on the Health (Protection) Amendment Bill.

Report adopted.

The House adjourned at 12.56 p.m. (Wednesday)