Tuesday, 1 December 2015

TUESDAY, 1 December 2015

TUESDAY, 1 December 2015

Mr Speaker took the Chair at 2 p.m.

Prayers.

Privilege

Reflections on the Speaker—Comments by the Hon Ruth Dyson

Mr SPEAKER: I propose to vacate the Chair in favour of the Deputy Speaker, in order that he might rule on a matter of privilege.

Mr DEPUTY SPEAKER: A matter of privilege pertaining to comments about the Speaker reported to have been made by the Hon Ruth Dyson have been raised as matters of privilege by Tim Macindoe. Because the—[Interruption] I am on my feet. Because the matters relate to the Speaker, he has asked me to consider and rule on them. It is suggested that the comments complained of could each amount to contempt of the House, in that they reflect on the Speaker in his capacity as Speaker. On Twitter, comments from an account in Ms Dyson’s name say the Speaker is “Incompetent. Biased. Doesn’t like job. Lazy. Sexist. Doesn’t give a toss.” The matter of privilege raised is significant.

In a recent report, unanimously supported by members, the Privileges Committee stated that “Reflections against the Speaker or other presiding officers, and in particular any comment that alleges that they have been biased in performing their duties, are among the most serious reflections that can be made about members.” I have considered the matters raised and considered their degree of importance. The member concerned clearly does not consider the comments to be serious, though she stated in a letter to me that the Standing Orders exist to prevent personal attacks on members. It is for the Privileges Committee to determine whether the comments, in this instance, amount to contempt. Consequently, I rule that a question of privilege does arise from the comments made from Ms Dyson’s Twitter account, in that they may constitute a reflection on the Speaker in his capacity as Speaker. The question therefore stands referred to the Privileges Committee.

In recent weeks I have been in the unprecedented position of referring three matters to the Privileges Committee, each relating to reflections on the Speaker in his role as Speaker. This House has long considered the Speaker to be in a special position and that attacks on the Speaker have been thought to undermine the integrity of the House. The Speaker does not participate in debate and cannot respond to criticism or personal attacks in the way that other members can. It is not reasonable for members to take advantage of that fact, even when they strongly disagree with a decision of the Speaker. Members are entitled to disagree with a ruling and are free to say so. However, they should not turn that disagreement into a personal reflection. [Interruption] And you are out of order, and I am on my feet. It makes it difficult for the Parliament to function effectively and lowers the public opinion of this place even further. I recognise that the previous matters that I have dealt with were activated and responded to as strategic party political decisions.

On receipt of these latest complaints I sought to initiate a more restorative and conciliatory approach than a simple ruling, in order to gain some consensus. This required all parties to agree to take their guns off the table and discuss matters around the table. But I could not get agreement from parties—

Grant Robertson: Point of order.

Mr DEPUTY SPEAKER: I am speaking. You cannot raise a point of order while I am on my feet. Sit down. [Interruption] Order! The member cannot raise a point of order while I am on my feet, and he knows that. [Interruption] You continue to do the same thing. You cannot speak while I am on my feet, and you know that. I ask the member to desist. I could not get agreement from the parties involved. I repeat that the public will not respect an institution that continues to play brinkmanship by ramping up accusations that lead to the expense of members’ time in the House and in committee making determinations against each other. I will now vacate the Chair for Mr Speaker to conduct the general business of the House.

GRANT ROBERTSON (Labour—Wellington Central): I raise a point of order, Mr Speaker. During your ruling you, effectively, predetermined what you consider to be the outcome of the Privileges Committee complaint that you have just referred. You went into some depth, well beyond what would normally be required and what would be desirable when you are referring a matter to the Privileges Committee. You made accusations about the intent of members of this side of the House—another matter that would be considered by the Privileges Committee. That speech you have just given will in itself lead to disorder and undermine the work of the Privileges Committee. In fact, it makes it very difficult for Opposition members going into that Privileges Committee, knowing that you have predetermined, effectively, the outcome.

Mr DEPUTY SPEAKER: Of course, this is not question time in respect of the Deputy Speaker, but my response is that I have given a clear ruling. I have, hopefully, given the House a clear understanding of how I ended up making that ruling and given some transparency to the process I have gone through. I am not a member of the Privileges Committee, and I stand by the ruling. I will now vacate the Chair for Mr Speaker to conduct the general business of the House.

Voting

Correction—Local Government (Auckland Transitional Provisions) Amendment Bill

Mr SPEAKER: On 17 November when the House was considering the Local Government (Auckland Transitional Provisions) Amendment Bill, the result of the vote on the Part 1 closure motion was incorrectly announced as Ayes 63, Noes 58. The correct result is Ayes 63, Noes 56. The results of the votes on the amendments to clause 5 and clause 7 were both incorrectly announced as Ayes 58, Noes 63. The correct result is Ayes 56, Noes 63. The record will be corrected accordingly.

Oral Questions

Questions to Ministers

Business Confidence—Reports

1. MARK MITCHELL (National—Rodney) to the Minister of Finance: What reports has he received showing a recent lift in business confidence supports an outlook for continuing moderate growth and a more diversified economy?

Hon BILL ENGLISH (Minister of Finance): Yesterday ANZ published its Business Outlook survey. Business sentiment continued to improve in November, with net 15 percent of businesses being optimistic about the economy for the year ahead. Thirty-two percent of own-activity expectations are positive; profit expectations, investment intentions, employment intentions, and export intentions all improved.

Mark Mitchell: What reports has he received showing that strengthening activity in sectors of the economy, besides dairy, is expected to underpin higher growth in 2016?

Hon BILL ENGLISH: The New Zealand Institute of Economic Research quarterly predications say that stronger activities in sectors of the economy outside dairy, including services, will underpin a pick-up in growth towards 3 percent over 2016. The current account deficit is expected to stabilise at around 3 to 3.5 percent over the next 4 years, well below the record 8 percent current account deficit back in 2008, and they forecast around 160,000 jobs will be added to the economy over the next 5 years, so this suggests some confidence in the future of the economy.

Mark Mitchell: What factors does the New Zealand Institute of Economic Research point to as supporting increasing diversification in the New Zealand economy?

Hon BILL ENGLISH: Tourism is now New Zealand’s second-largest export, and probably at the current rate of growth it is expected to overtake the dairy industry. There has been particularly strong growth in interest from international students coming to study in New Zealand, which accounts for some aspects of the currently very high migration numbers.

Mr SPEAKER: Supplementary question, Fletcher Tabuteau.

Fletcher Tabuteau: Thank you—[Interruption]

Mr SPEAKER: Order! David Bennett will cease his interjection across the House.

Fletcher Tabuteau: Including dairy, what reports have you seen on the impact on future New Zealand business confidence should the El Nino drought be as bad as predicted, and what plans are being made?

Hon BILL ENGLISH: I have seen some reports that the prospects of an El Nino - induced drought could have an impact on the growth rate of the economy. The IMF, which was here recently, forecast it would knock off around half a percent of GDP; that is, where the economy may have grown at 2.5 percent, it might end up growing at 2 percent. The plans that are being made are being made by the businesses that will be directly affected by it—for instance, farmers may be choosing to destock earlier in the summer.

Mark Mitchell: What reports has he seen on trends for economic growth in regional New Zealand?

Hon BILL ENGLISH: ANZ has released its quarterly review of regional trends. Activity rose in eight of the nine North Island regions and in four out of the five South Island regions, with the strongest activity growth occurring in Northland, Auckland, Bay of Plenty, Gisborne, and Otago. It is particularly pleasing to see Northland and Gisborne showing some signs of strong growth. Economic activity increased by 0.3 percent in the last quarter in the North Island, taking it to 3.1 percent for the year, and 0.9 percent in the South Island. All of these are forward-looking indicators suggesting that a solid pace of expansion will be sustained in most regions.

Emissions Reduction Targets—2016 Paris Climate Change Conference

2. ANDREW LITTLE (Leader of the Opposition) to the Prime Minister: Does he stand by his statement that New Zealand “shouldn’t be a leader in climate change”, given that New Zealand was awarded the “Fossil of the Day award” following his speech on the first day of the Paris climate talks?

Hon BILL ENGLISH (Deputy Prime Minister) on behalf of the Prime Minister: Yes. New Zealand is committed to doing its fair share on climate change, but the cost of a further reduction in carbon emissions is more expensive for New Zealand than for any other developed country. Overall leadership needs to be provided by the major emitting nations of the world. New Zealand provides leadership in areas where we deliver the most impact, such as research into agricultural emissions, support of our Pacific neighbours, and leading the charge on reform of fossil fuel subsidies.

Andrew Little: Why is he being a “fossil fool” by proposing only an 11 percent reduction in carbon dioxide emissions, while people who take climate change seriously, such as the EU and the New Zealand Labour Party, are proposing a 40 percent reduction?

Hon BILL ENGLISH: Because we are reasonable and pragmatic, and we set targets we would expect to be able to achieve. Any number of targets can be set over the next 20 or 30 years, but we are practical about what can be achieved and take a balanced approach.

Andrew Little: Why is he embarrassing New Zealand on the world stage by saying we should reduce per person emissions only a quarter as quickly as Europe?

Hon BILL ENGLISH: I do not think there is any embarrassment whatsoever. New Zealand has been a long-time participant in the global discussions about climate change. We have credible targets that take into account the real cost to our economy. If the Labour Party wants to get up and say it is going to shut down all the major emitters—the aluminium smelter, New Zealand Steel, and the refinery—then it is welcome to do so, but we do not agree with that approach.

Andrew Little: Why will he not follow Labour’s lead, match Europe’s proposal, and make a real commitment to tackle climate change? Why are you sticking your head in the sand?

Hon BILL ENGLISH: Because, in general, following Labour’s lead would lead to 30 percent support among the public and a lot of contradictory and difficult policies.

Andrew Little: Given his Government’s claims about being concerned by climate change, why is his Government spending more on subsidising foreign oil companies than on climate change research?

Hon Dr Nick Smith: Rubbish.

Hon BILL ENGLISH: That is rubbish. In respect of the statements that have been made about fossil fuel subsidies, the World Wildlife Fund for Nature New Zealand assessment is based on what one would describe as fine-grained interpretations about tax law—that is, the treatment of development expenditure as to whether it is capitalised or deductible. The assessment done by APEC and one other international body says that New Zealand has no fossil fuel subsidies. The Labour Party should be supporting New Zealand’s effort to lead the reform of fossil fuel subsidies around the world, because if all countries eliminated the subsidies, we would reduce carbon output by 12 percent.

Andrew Little: When the Parliamentary Commissioner for the Environment says that rising sea levels will cause billions of dollars of damage, does he really think that $20 million a year for research is an adequate response?

Hon BILL ENGLISH: New Zealand has committed itself to research related to livestock emissions because that is a unique aspect of our carbon emissions profile. We have had international success in attracting the interest and the funding of a range of countries. It has been a very successful exercise. But I do not know of any research programme that is based around the idea that it is going to be able to prevent a rise in ocean levels. We focus on researching where we can have an impact.

Andrew Little: When future generations ask what he did to tackle climate change, will he proudly say “I took greenhouse emissions to record levels.”, or “I gutted the emissions trading scheme.”, or “I failed to get agriculture to get cleaner.”, or “I increased oil imports.”, or “I did the bare minimum to look like I was doing something.”?

Hon BILL ENGLISH: I think we would say one of the successful things we did was keep the Labour Party out of Government, so that it did not pursue a reckless climate change policy that was bad for the economy, that shut down our major emitters, and that hobbled our farming sector so it could not compete.

Health Services—Elective Surgery

3. Dr SHANE RETI (National—Whangarei) to the Minister of Health: Can he confirm that as at September 2015, 99.31 percent of patients waiting for elective surgery received their treatment within 4 months?

Hon Dr JONATHAN COLEMAN (Minister of Health): Yes, I can. In September 99.82 percent of patients received their first specialist assessment within 4 months of referral, and 99.31 percent of patients waited no longer than 4 months for their surgery. These statistics were published last week by the Office of the Auditor-General. The Auditor-General also noted in its report: “From 2011 to 2015 more people per 10,000 of population had access to scheduled surgery.” In plain English, the growth of elective surgery delivered has exceeded population growth.

Dr Shane Reti: What did the Auditor-General’s report state about hospitals delivering more elective surgeries year on year?

Hon Dr JONATHAN COLEMAN: The Auditor-General noted that as well as delivering shorter waiting times for first specialist assessments, district health boards are increasing the volume of elective surgeries they deliver by at least 4,000 per year. In fact, they “exceeded this target in all years from 2008-09 to 2014-15.” That is a fantastic result and underlines the commitment of our health workforce to provide for patients, as well as the Government’s $4.1 billion increase in health funding over the last 7 years.

Hon Annette King: When he said on 17 November, in answer to a question from Dr Reti, that there had been a one-third increase in elective orthopaedic surgical discharges under this Government, did he include operations undertaken under two Labour health budgets, 2007-08 and 2008-09?

Hon Dr JONATHAN COLEMAN: What I was including is the increase of 50,000 operations a year under this Government and 100,000 specialist appointments. You cannot beat that.

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

Mr SPEAKER: I will invite the member to ask the question again.

Hon Annette King: When he said on 17 November, in answer to a question from Dr Reti, that there had been a one-third increase in elective orthopaedic surgical discharges under this Government, did he include operations undertaken under two Labour health budgets, 2007-08 and 2008-09?

Hon Dr JONATHAN COLEMAN: What I included is the 50,000 extra operations per year that this Government is delivering—50,000 more each year.

Barbara Stewart: Can the increased percentage of Northland District Health Board patients receiving elective surgery within 4 months be attributed to the 30 percent blowout in Northland District Health Board’s current financial budget?

Hon Dr JONATHAN COLEMAN: There is no 30 percent blowout in the budget. The member has got the facts wrong.

Canterbury Earthquake Recovery—Treasury Report and Progress

4. GRANT ROBERTSON (Labour—Wellington Central) to the Minister of Finance: Does he agree with the Minister for Canterbury Earthquake Recovery that Treasury has an “arrogant bureaucratic attitude” to Christchurch and that the report he released yesterday is “utter tripe”; if not, why not?

Hon BILL ENGLISH (Minister of Finance): To some extent, and I can understand the Minister’s view. He has dealt with the expenditure of over $15 billion, in what would be the most complicated set of decisions that any Government or Minister has had to make. Treasury measures these projects against a theoretically perfect yardstick, and, of course, in Christchurch almost no project has been able to follow the theoretically perfect yardstick. The Minister has, of course, been able to cut through a lot of bureaucratic process, make decisions, and get things done, and that is why Christchurch is in such good shape.

Hon Gerry Brownlee: Another patsy.

Grant Robertson: It is all about you, Gerry. Is Gerry Brownlee correct when he told Radio New Zealand that Treasury, which prepares the Government’s Budget, “did not appreciate the amount of money the Government was spending in Christchurch”?

Hon BILL ENGLISH: I think that is probably right. There are parts of Treasury that do the accounting, and parts of it do the project monitoring. It is possible that the people who monitor the projects are not aware of quite how much money is being spent there. Of course, you have to go to Christchurch to be aware of how effectively it has been spent.

Grant Robertson: In light of those two answers, why is he, as Minister of Finance, overseeing an agency that does reports that he has accepted are “utter tripe” and that does not actually understand how much money the Government is spending in Christchurch; why is he allowing those kinds—

Mr SPEAKER: Order! The question has been asked.

Hon BILL ENGLISH: The member needs to understand the context, which is that the Government is issuing reports on—

Hon Members: The context—oh, the context.

Hon BILL ENGLISH: We have issued reports on 409 projects, costing $6.5 billion this year, and further detail on 38 projects with more complexity, of which the Christchurch project is just one. We are bringing more transparency and accountability to the expenditure of the Government’s capital budgets than has ever been seen. In that context, if Treasury made one mistake, it would be that the red rating should not actually indicate that the project is unachievable, because these projects are being achieved.

Joanne Hayes: What reports has he received on the performance of the Government’s most complex investment projects?

Hon BILL ENGLISH: As I said, we have just released the first report, Managing Government Investment Projects—an annual report. The $6.4 billion worth of projects will cost, over their lifetime, $74 billion. We also released the first 4-monthly Major Projects Performance Report, which includes our 38 most complex investment projects and the ratings for how they have been conducted up to June last year. As I said, the use of the term “unachievable” is not correct, because, actually, the half a dozen projects that had some red rating at some stage will all be achieved—particularly those in Christchurch.

Grant Robertson: Can he guarantee today that there will be no further slippage in the time line for the delivery of the convention centre and Metro Sports Facility projects—one of the main concerns raised by Treasury?

Hon Gerry Brownlee: What time lines are we talking about? There are no time lines.

Hon BILL ENGLISH: As the Minister has said, time lines had not been set for those projects, which, according to Treasury’s perfect benchmark, is one of the reasons that they were rated with some uncertainty. Both are now involved in detailed commercial discussions, and the member can be reassured that those projects will be completed and that the funding is readily available for them.

Joanne Hayes: What steps has the Government taken to improve transparency around the performance of the most complex of these projects?

Hon BILL ENGLISH: The reports that have been issued are a major step forward in transparency over the expenditure of billions of dollars, because this information had not been available to the Government until recently, let alone to the public. We expect that it will continue the pressure for improved performance in delivering projects across the public sector.

Grant Robertson: Is not what has really happened here that Treasury has said what most Cantabrians have known for some time: that the rebuild of Christchurch under his and Mr Brownlee’s watch is a complete mess and that the promises of the project will continue to be delayed and fail to deliver?

Hon BILL ENGLISH: The member does suffer from the political problem of being completely Wellington-bound, and these statements make it evident. I invite the member to visit Christchurch, which is—[Interruption]

Mr SPEAKER: Order! Less interjection please. It was a political question that was asked. The Minister can answer it.

Hon BILL ENGLISH: I invite the member to visit Christchurch, which is in the South Island—[Interruption]

Mr SPEAKER: Order! [Interruption] Order! I rose to my feet a minute ago. There was very loud interjection coming from two members particularly. I asked that it cease. It has not ceased at all. The question has been asked; the Minister now has a right to answer it. Members may not like the answer they are getting, but he still has a right to deliver it without the level of interjection that is coming from my left. If it happens again, I will be asking a particular member to leave.

Hon BILL ENGLISH: I invite the member to visit Christchurch, which is in the South Island, and the Minister will give him a free, lengthy briefing. I also invite him to visit Reg, whose house was the 5,000th State house repair. He is a very happy customer—one of 5,000 in Christchurch who have had their State house all done up.

Oil and Gas Exploration—Tax Revenue

5. METIRIA TUREI (Co-Leader—Green) to the Minister of Revenue: What has been the overall impact of tax deductions for petroleum and mining expenditures on the level of oil and gas exploration and prospecting in New Zealand since 2012/13, and how much revenue has the Government forgone as a result of these tax deductions in this period?

Hon TODD McCLAY (Minister of Revenue): I am advised that the Inland Revenue Department does not collect data on tax deductions for petroleum mining or any other industry. However, I can confirm that the petroleum industry is treated the same as other businesses in New Zealand in respect of deductions. It is therefore not possible to ascertain what the impact of tax measures is on the level of prospecting and exploration. However, other factors such as prospectivity and global commodity prices are likely to have a greater impact on petroleum investment decisions in New Zealand. I am advised that the Government has not forgone any revenue based on tax measures in place for the oil industry.

Metiria Turei: Can the Minister confirm that the tax breaks his Government has given to the oil industry are more or less than the estimated $36 million that the previous Minister of Revenue, Peter Dunne, confirmed in 2012?

Hon TODD McCLAY: In my answer I said that the industry is treated the same, and so I cannot confirm that, because it is not correct. There is, however, one exemption that is in place for the prospecting industry for oil. I am advised that this is either neutral from a tax sense or that it is slightly tax positive, and it is a result of our double tax agreements, which mean that any non-resident who has things in place in New Zealand for more than 183 days must pay tax in New Zealand. We found that there was a churning, where items used for exploration could be exported out of the country and brought back in, and deductions therefore would be available. This has been rectified so that they do not have to be taken out of the country. It actually is good not only for the economy—

Mr SPEAKER: Could you bring the answer to a conclusion.

Hon TODD McCLAY: —it is very good for the environment.

Metiria Turei: Why is it that his department is not now calculating how much the Government is losing in tax breaks to oil companies, when the previous Minister of Revenue, Peter Dunne, could when he was the Minister?

Hon TODD McCLAY: I am not sure where the member gets her figures from, nor whether she is making a reasonable or fair comparison. The Inland Revenue Department does not collect information on deductions. There are no special deductions for the industry she has raised, or for any other industry in New Zealand. All companies are treated the same. We expect everybody to pay their fair share of tax. We expect that where there is a deduction that is allowed under law, they may use that on their profits. They must also pay tax.

Metiria Turei: I seek leave to table a letter from the office of Peter Dunne, dated 19 June 2012, which answered the exact question—

Mr SPEAKER: Order! The letter has been described. I will put the leave. Leave is sought to table that particular letter. Is there any objection? There is no objection. It can be tabled.

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

Metiria Turei: Can the Minister confirm for this House that he does not know how much public money is being lost to the public purse on tax breaks to oil companies?

Hon TODD McCLAY: No, no, it is not that I do not know; what I am saying to that member is that, in as far as revenue collection is concerned, all businesses in New Zealand are treated the same. Where there is a business activity, then there is a cost that is allowable for a deduction under the Income Tax Act, the business can have that deduction. There is nothing special about the oil exploration business, or any other business in New Zealand, when it comes to the way that we apply proper tax policy.

Metiria Turei: Are the tax breaks that are given to the fossil fuel industry by this Government more or less than the tax breaks given to the clean-energy sector?

Hon TODD McCLAY: I refer to my earlier answers, but will be as clear as I can—there are no tax breaks, in as far as tax deductions are concerned, for the oil industry.

Metiria Turei: Does the Minister believe that he has a better understanding of what constitutes a subsidy or a tax break than the OECD, which has said that New Zealand’s tax concessions “distort investment decisions in favour of fossil fuel production … and counteract New Zealand’s efforts to address global climate change, and thus should be discontinued.”?

Hon TODD McCLAY: No, but what I would say is that the Government is very open and transparent. I note that the APEC inefficient fossil fuel subsidy peer review found that as well as being fiscally neutral or positive for the taxpayer, the policies in place actually reduce greenhouse gas emissions and did not encourage wasteful consumption. Further than that, we volunteered to have our policies on mining and extraction and the oil industry reviewed by independent energy and climate change experts at APEC and by the Friends of Fossil Fuel Subsidy Reform. They looked at eight key policy areas, including the four related to oil and natural gas production and four relating to consumption and Solid Energy. New Zealand’s position was completely vindicated this year when the reviews concluded that New Zealand has no inefficient subsidies that encourage wasteful consumption.

Metiria Turei: Can the Minister not see how his failure to reveal to the New Zealand public the tax breaks for the fossil fuel industry makes the Prime Minister look hypocritical when last night he demanded that other countries reveal their subsidies for the fossil fuel industry?

Hon TODD McCLAY: No, quite the contrary. The Prime Minister has shown exceptional international leadership on this issue when today he presented a message, along with 40 nations, calling for the removal of inefficient fossil fuel subsidies. He said: “Phasing out fossil fuel subsidies is absolutely vital if the world is to succeed in substantially reducing emissions.” He went on to say: “Countries subsidised fossil fuels to the tune of US$500 billion in 2014.” I note New Zealand is not one of those, but I have seen a report that was on the TV this morning from Green Party MP—

Mr SPEAKER: Order! That part of the answer is not going to be necessary.

Trades Academies—Southland

6. SARAH DOWIE (National—Invercargill) to the Minister of Education: What announcements has she made recently on trades academies?

Hon HEKIA PARATA (Minister of Education): Together with my colleague the Minister for Tertiary Education, Skills and Employment, I was pleased to announce a new trades academy for Southland. This means that next year, school students in every region of the country will now have the opportunity to gain practical skills while studying towards NCEA credits and tertiary qualifications. Southland, up until now, has been the only region in New Zealand without a trades academy, and the recognition of the Southland Institute of Technology as a trades academy lead provider will be a big boost to the skills pipeline for Southland employers. The new academy, to be known as the Murihiku Trades Academy, will begin operation next year and will initially have places for 40 students. The new academy will work closely with local secondary schools to offer these places to their students.

Sarah Dowie: How do trades academies benefit students and the local community?

Hon HEKIA PARATA: Trades academies are proving to be a popular and successful learning choice for many students, and are helping to lift achievement. Young people are highly motivated by applied learning and trade pathways. As well, more of those who were at risk of dropping out are staying engaged in education, and gaining qualifications. Last year about 1,200 18-year-olds achieved NCEA level 2, through trades academies and Youth Guarantee fees-free places, who otherwise would not have gained these qualifications. Trades academies help address skills shortages in many communities. For example, in Southland there are a number of labour shortages in trade-related industries, and the new academy will provide secondary school students with an opportunity to transition into these industries with good career opportunities.

Quantum Education Group—Funding and Completion Rates

7. CHRIS HIPKINS (Labour—Rimutaka) to the Minister for Tertiary Education, Skills and Employment: Is he satisfied with the oversight he and his officials have of spending on tertiary education programmes?

Hon STEVEN JOYCE (Minister for Tertiary Education, Skills and Employment): Thank you Mr Speaker, and congratulations to the member.

Hon Member: Ha, ha!

Hon STEVEN JOYCE: Well, it is important—

Mr SPEAKER: Order! Just answer the question.

Hon STEVEN JOYCE: Overall, yes. There is always room to do more, but there have been a small number of providers out of the 730 funded each year that have not been meeting their funding obligations. When that occurs the Tertiary Education Commission does and will take the appropriate steps to recover any funding shortfall. It is certainly better now than in the bad old days when it was all about getting enrolments in the door and not worrying about what happened once they were in there.

Chris Hipkins: What action did he or his officials take when they became aware that Quantum Education Group reported a 91 percent completion rate in 2012, despite over 1,500 of the 3,700 students who received student loans to study at Quantum that year dropping out, making the true completion rate more like 47 percent?

Hon STEVEN JOYCE: My understanding is that the member’s characterisation of that may not be correct, but, nevertheless, in answer to his question, the agencies are conducting some inquiries into that matter; in fact, not just the tertiary agencies but also, I understand, the Financial Markets Authority.

Chris Hipkins: Why is he satisfied that he has adequate oversight of spending in tertiary education when Quantum Education Group received student loan fee payments from over 3,600 students in 2013, although the Tertiary Education Commission records enrolments for only half that number?

Hon STEVEN JOYCE: I just repeat the answer that I gave to the previous question.

Mr SPEAKER: No. I think you have got to do better than that. The question is quite a different question that requires—it may be a similar answer, but it requires an answer.

Hon STEVEN JOYCE: Well, as I said, those matters that the member refers to—I am not sure that he is characterising them correctly, but in any event they are under investigation by the relevant agencies, including the Financial Markets Authority.

Chris Hipkins: Why does he believe it is acceptable for a tertiary institution to enrol and receive student loan tuition fee payments from thousands of students, only to have half of those students drop out within a month of the course starting, before they were even counted for Tertiary Education Commission enrolment purposes?

Hon STEVEN JOYCE: Nobody is saying it is acceptable—nobody is saying that.

Chris Hipkins: If it is not acceptable, why did he continue to allow it to happen for at least 3 years: in 2012, 2013, and 2014?

Hon STEVEN JOYCE: Well, the member is incorrect. I did not allow it to happen at all. There are 730 institutions that are funded in this country. They are required to follow funding rules. If they do not follow the funding rules, they will be taken to account by the Tertiary Education Commission, as the member may have learnt in recent weeks and months. He has seen a couple of high-profile examples of institutions that have either gone out of business or, in fact, had to repay large amounts of money because they broke those funding rules.

Housing, Auckland—Building Consents

8. JAMI-LEE ROSS (National—Botany) to the Minister for Building and Housing: Can he confirm that the number of building consents issued for homes in Auckland in October 2015 was 805 as compared with 205 in October 2008, and that the yearly total is the highest in 11 years?

Hon Dr NICK SMITH (Minister for Building and Housing): Yes, I can confirm that the latest rate of monthly home construction is nearly four times what it was when the last Government left office. The annual figures are equally strong, with 8,900 new homes consented in Auckland in the last year—the highest annual total in over a decade. The last 4 years of home construction has seen annual growth of 19 percent, 32 percent, 28 percent, and 23 percent—the longest and strongest period of growth on record, confirming our policies to grow supply are working.

Jami-Lee Ross: What advice has he received on the impact of growing supply on prices, and are there any lessons to learn from the experience in Christchurch?

Hon Dr NICK SMITH: The Government’s advice is that house prices will ease in Auckland when supply matches demand. The experience in Christchurch has been where it had house price inflation of 21 percent in 2012, 2013, and 2014. We had a massive residential construction programme with Minister Gerry Brownlee, and 10,000 homes were built over the last 3 years. We have seen house price inflation in Christchurch drop to just 2 percent, and rents there in the last year have dropped by 7 percent. The Auckland housing market is four times the size, and so it will take longer to get supply and demand in balance. I note that the auction clearance rate has dropped from 85 percent to 30 percent, indicating that things are coming better into balance.

Jami-Lee Ross: What comments has the Minister seen on the connection between the Resource Management Act and housing challenges in Auckland?

Hon Dr NICK SMITH: I have read a range of comments. In March this year I read a statement saying: “You cannot blame the RMA for the housing problem. It’s nuts to claim they are connected. It is just a scapegoat.” I have also read a statement last week: “The way councils regulate housing under the RMA is the root cause”—

Mr SPEAKER: Order! [Interruption] Order! I know where the—[Interruption] The member can resume his seat.

Phil Twyford: Why does he pretend that the current consenting rate is some kind of success when Auckland needs 14,500 new builds a year just to keep up with population growth, and, at the current rate of 8,900, the 25,000 shortfall of houses built up under his watch is getting worse, at a rate of 5,600 houses every year?

Hon Dr NICK SMITH: The member’s numbers are dodgy, just like his position on the Resource Management Act. The fact is that when Labour left Government, we were building 200 houses a month. We are now building over 800 a month, and that is huge progress. [Interruption]

Mr SPEAKER: Order! [Interruption] Mr Brownlee. Order!

Government Financial Position—Return to Surplus

9. FLETCHER TABUTEAU (NZ First) to the Minister of Finance: Does he stand by all his statements?

Hon BILL ENGLISH (Minister of Finance): Yes, in the context in which they were made.

Fletcher Tabuteau: Does he stand by his statement that “… it does not matter that much whether there is a small surplus or a small deficit—it is the fact that Government finances are headed, broadly, in the right direction.”?

Hon BILL ENGLISH: Yes, that sounds pretty sensible. Getting the Government back to surplus is a very important symbolic target to achieve, but in the long run it is a matter of whether we have good disciplines around capital spending and a strong focus on getting results for our social spending. Those are the things that determine Government spending in the long run.

Fletcher Tabuteau: How can he assure the New Zealand public that the September quarter’s $545 million deficit is heading in the right direction?

Hon BILL ENGLISH: I am not sure what the member is referring to; it may be the first 3 months, the first quarterly accounts for the Government. The Treasury does do some quarterly forecasts about where the accounts will be, and generally it would expect them to track towards the number that was estimated in the Budget. That will be all updated in the next few weeks, when the Government issues the Half Year Economic and Fiscal Update.

Fletcher Tabuteau: Would he acknowledge that the whole surplus reported in the June quarter arose simply due to a very artificially manufactured exercise in creative accounting; if not, why not?

Hon BILL ENGLISH: No, I certainly would not acknowledge that. The Government accounts are signed off by the Auditor-General according to, really, the strictest standards of public sector accounting in the world. The number is what the number is. Of course, getting to a deficit or a surplus is a result of a whole lot of decisions, not just one decision, but there is no question of the member’s assertion of dodgy accounting.

Fletcher Tabuteau: How can he say he is confident about Government finances given that he has cut departmental budgets, resulting in cuts to SuperGold card travel entitlements, cuts to support to rural ACC clients, and abandoning payments into the Cullen fund, for example—I could go on, but how can he be confident?

Hon BILL ENGLISH: The public seems to have confidence, because the most recent Kiwis Count survey shows that members of the public rate their public services higher than ever and as continuing to improve. So if the measure is not what politicians like going on about—that is, whether the Budget was cut or expanded—but what the public cares about, which is the quality of service, then I think we can have growing confidence that we are getting value for money.

Fletcher Tabuteau: Would he concede that the Government finances are heading in completely the wrong direction, given that the last four consecutive financial quarters combined show a huge deficit? Minister, you do not have a surplus at all, do you?

Hon Member: That’s not a question.

Hon BILL ENGLISH: In answer to the part of the question that was a question, no, I do not agree with the member. The Government has got its books, basically, back to balance. It has done that through a combination of some growth in tax revenue from a growing economy and from a strong focus on the quality of spending. I suspect it will be a matter for public debate, because New Zealand First and Labour have a track record of throwing money at every problem and making no difference to those problems. We have a track record of being much more thoughtful about how the money is spent, and actually are now starting to address some of the hard-core social problems in New Zealand that generate a lot of Government expenditure.

Food Safety Incidents—Imported Frozen Berries

10. Hon DAMIEN O’CONNOR (Labour—West Coast - Tasman) to the Minister for Food Safety: Is she satisfied by all the advice she has received from the Ministry of Primary Industries on food safety?

Hon JO GOODHEW (Minister for Food Safety): Yes.

Hon Damien O’Connor: When was she, or when were her officials, first alerted to the possible risk of hepatitis A associated with imported frozen berries?

Hon JO GOODHEW: The medical officer of health made the Ministry for Primary Industries officials aware late in October of a case, which subsequently became four cases, of hepatitis A. There are about 20 cases in New Zealand a year. What happens after a case is notified to the medical officer of health is that exhaustive questioning is undertaken to determine what the evidence might be for where that case of hepatitis A was contracted. In this case, it has taken until late last month for the questions to be answered and for there to be genotyping established that shows evidence that it could be from frozen imported berries.

Hon Damien O’Connor: Why did the Minister not act and ask retailers to remove products that are possibly contaminated, as happened in Australia 9 months ago?

Hon JO GOODHEW: The answer to this question may be a little longer than normal, but I want to make it clear to the House exactly what the complete answer to the member’s question is. In Australia, some 9 months ago, there were 31 cases of hepatitis A. As is always the case when looking for evidence of where the disease may have been contracted, genotyping exists. In all 31 cases in Australia, the genotyping was the same for all of the 31, and was able to be traced to a single product, which was able to be recalled. Here in New Zealand, three of the four cases have had the genotyping completed. The fourth is still under way. For the three cases that we have genotyping for, we know that they are from the same source—the fourth, maybe not; but maybe it is. What we know is that it is a different source to the Australian cases—[Interruption] I am giving a straight-up answer; it would pay the members to listen. [Interruption]

Mr SPEAKER: Order! A straight-up answer has been given.

Hon Damien O’Connor: Why will the Minister not name the products affected and offer consumers at least the option of identifying for themselves products that might potentially give them hepatitis A?

Hon JO GOODHEW: The answer is that we do not have evidence that it has come from one product; therefore, we want to protect all New Zealanders from the possibility of getting it from any frozen imported berries. I can advise the House that what people need to do if they have frozen imported berries, which have a 3-year shelf life, is bring them to 85 degrees for 1 minute or bring them to the boil. We do not have evidence of one product. The member is being overly simplistic in his response. That would not protect New Zealanders; we will.

Hon Damien O’Connor: Does the Minister realise that a huge number of frozen berries are never taken to 85 degrees and are, in fact, put directly into drinks around this country and that anyone consuming any one of those berry-flavoured drinks or buying products from a supermarket where frozen berries are in a bag is potentially at risk of catching hepatitis A; why will the Minister not take a precautionary approach—

Mr SPEAKER: Order! The question has been asked. The question has been asked.

Hon JO GOODHEW: This is absolutely not a revelation to anyone on this side of the House. That is why the statement was made by the director-general yesterday and why the advice has been given that a product that is processed, like ice cream with berries in it, will have been raised to heat. However, for a product that is put together in a cafe with frozen berries—in fact, the advice is there. If the member chose to read the privileged statement or chose to read the Q and A, then the member would know that we have given the advice to New Zealanders that will keep them safe. I urge the member to read the Q and A and to read the advice, rather than pretend that we have not given that advice.

Border Control, SmartGate System—Efficiency

11. DAVID BENNETT (National—Hamilton East) to the Minister of Customs: How will the Government’s investment in new SmartGate border processing technology make travel easier for passengers this Christmas?

Hon NICKY WAGNER (Minister of Customs): This Thursday is the sixth anniversary of SmartGate in New Zealand. I am looking forward to using the new next-generation SmartGates in Auckland Airport. The Government has invested $6.6 million in 29 additional new SmartGates, which will double the number of SmartGates in New Zealand airports. The first nine new SmartGates at Auckland are up and running, and they will be ready to process the increased numbers of people over Christmas.

David Bennett: How are the new SmartGates faster and more efficient than the current ones?

Hon NICKY WAGNER: The new SmartGates are a one-step, integrated process, which means that you can put your passport into the scanner at the gate, which eliminates the option of having to go to the kiosk for a ticket. The New Zealand Customs Service has increased the SmartGate capacity at Auckland Airport both on arrivals and departures, and I encourage all New Zealanders to enjoy the use of them.

Richard Prosser: How will the Government’s investment in new SmartGate border processing technology improve border security this Christmas, in terms of preventing the entry of contraband items and biosecurity threats such as the Queensland fruit fly, didymo, black widow spiders, redbacked spiders, the bee parasite lotmaria passim, Chilean needle grass, noogoora burr, myrtle rust, the mountain pine beetle, needle blight—[Interruption]

Mr SPEAKER: Order! The question has been asked at the start.

Hon NICKY WAGNER: The SmartGate technology is for the use of identifying passengers with their passports. The Ministry for Primary Industries has the processing to keep our borders safe, and we have increased funding for the ministry for biosecurity.

Primary Industries, Ministry—Animal Cruelty Prosecutions

12. MOJO MATHERS (Green) to the Minister for Primary Industries: What percentage of complaints made to the Ministry for Primary Industries about animal cruelty result in prosecutions?

Hon NATHAN GUY (Minister for Primary Industries): I am advised that last year the Ministry for Primary Industries prosecuted 26 individuals, or around 5 percent of the 698 animal welfare complaints received. Every single one of these animal welfare complaints was followed up. Prosecutions are only one outcome of animal welfare complaints; for example, some complaints are unable to be substantiated, and for others, if the non-compliance was relatively minor, individuals may be issued with formal warnings and/or fines. In Budget 2015 the Government allocated $10 million over 4 years to boost the ministry’s animal welfare compliance and enforcement capability, and to develop more transparent and enforceable animal welfare regulations.

Mojo Mathers: Is the Minister confident that the Ministry for Primary Industries undertakes enough prosecutions, given that last year farm workers who stomped on and killed piglets were not prosecuted and a farmer who deliberately rammed cows with a quad bike was not prosecuted?

Hon NATHAN GUY: Indeed, the Ministry for Primary Industries has a real focus on animal welfare issues. It needs to have the evidence to bring a prosecution through the New Zealand judicial system. The member will be aware that there was a shocking case of a West Coast farmer who recently went through the court and as a result received 4½ years’ imprisonment, and, from memory, that individual will not be able to own or be near any livestock for 10 years. The Ministry for Primary Industries does take this issue very seriously.

Mojo Mathers: Will the Minister direct the Ministry for Primary Industries to undertake more prosecutions of people who abuse animals, as a result of the publicity from the Sunday programme that showed calves being left in the hot sun, thrown into trucks, and kicked and beaten to death?

Hon NATHAN GUY: Like, I am sure, the House, I was very disappointed in that footage on the Sunday programme. The Ministry for Primary Industries stepped up the investigation on 14 September, which was the day it was provided with the video footage. The ministry will take this particular case very seriously, as it does in all other cases. Because of the investment that the Government has made in terms of Budget 2015, we now have more animal welfare compliance officers to do the job that is needed.

Mojo Mathers: How will the Minister ensure that our international reputation will not continue to be harmed by these horrific cases of animal abuse on farms, on trucks, and in slaughterhouses?

Hon NATHAN GUY: The footage that we saw on the Sunday programme, in my view, was extremely disappointing. In my view it is the action of a minority—a small number of cowboys—in the industry. As I mentioned before, the Ministry for Primary Industries will be very thorough in its investigation. The member will also know that we have brought in the new amendment Act and regulations, which we will be consulting on, which will further strengthen the overall enforceability of the Act and the code.

Hon Damien O’Connor: Has the Minister instructed the Ministry for Primary Industries to hand over the video to the police to assist them to catch and prosecute that rogue operator who has put New Zealand’s reputation at risk?

Hon NATHAN GUY: These investigations are completely separate of Ministers or the executive. These are very similar to a police investigation. I am not briefed on the detail of them. It is a decision for the ministry to make. That is a decision that I am sure the ministry will take into account when it gets more information. At the moment, instead of the member scaremongering, he should wait for the ministry to do its job. The ministry has stepped up an investigation on 14 September. Instead of the member scaremongering, let us wait for the investigation to conclude.

Urgent Debates Declined

Primary Industries, Ministry—Animal Cruelty

Mr SPEAKER: I have received a letter from the Hon Damien O’Connor seeking to debate under Standing Order 389 the revelations made in the media regarding the mistreatment of bobby calves and the potential damage to New Zealand’s international reputation. This is a particular case of recent occurrence involving ministerial responsibility. The big hurdle to get over in an urgent debate application is whether the matter has reached the stage where the business of the House should be set aside. The test is a high one. The Ministry for Primary Industries has stated that it is investigating the alleged mistreatment. The investigation has not yet concluded. Potential loss of confidence in New Zealand’s animal welfare regime is important, but I am not convinced that I would be justified in setting aside the business of the House today on the basis of recent revelations and the current investigation. The application is therefore declined.

Bills

Support for Children in Hardship Bill

In Committee

Debate resumed from 10 November.

Part 1 Amendments to Social Security Act 1964 (continued)

POTO WILLIAMS (Labour—Christchurch East): When we were last debating this bill, I was speaking, I believe, on Part 1, clause 4, and in subclause (1) is the definition of “part-time work”. This bill seeks to change the definition from what is currently standard—around 15 hours a week—to that of 20 hours a week.

I want to refer the Committee of the whole House to some submissions that were made regarding those particular changes, particularly with regard to the Council of Trade Unions submission. It has some very clear views about the change from 15 to 20 hours, and I just want to quote that submission: “Single mothers in particular face a range of economic penalties as well as social difficulties. They are more likely to find only unpredictable, part-time work, making it hard for them to access the childcare and other support they need in order for work to be feasible.” It makes a really valid point, which other submitters spoke to, and that is about the precarious nature of part-time work for some of these mothers, who are forced to also look for work that will satisfy the 20-hour definition. That often means transport to and from—and I know that this bill does make some provisions around providing some support for that, limited though it is.

But that also requires mothers, potentially, to be working during standard working hours, which would be during the day. That does not take into account that many part-time jobs might occur in the evening, which would require childcare services, which are not currently delivered as a norm in this country. It is not easy to access childcare outside the normal hours—after hours—in the evening, or overnight, where there may be jobs, for example, in the retail sector, stacking shelves at supermarkets, or working at services that operate overnight. That might be at gas stations or the like. We are talking, generally, about a group of workers who have limited skills and are not generally able to access work that would provide them with enough resources to attend to that childcare.

I also want to talk about clause 4(2) and (3), which change the age at which your youngest child should be before you are then required to seek work from the age of 5, which we all know is the age where most children will be attending school, to the age of 3. That does apply some pressure to parents to actually find that childcare.

I also want to go back to the Council of Trade Unions submission and just talk about what it says about this. It states that “The Bill requires solo parents and partners of beneficiaries to be available for part time work once their youngest child turns three rather than five …”. The Council of Trade Unions did not support these provisions in the bill, because they: “impose stronger work-testing which will heavily impact on sole parents. The stricter work testing obligations and sanctions regime will cause hardship and deprivation to already disadvantaged people and force sole parents into work when they and their children are not ready for it.”

We could not find any evidence—there was no evidence that was brought to the select committee—that could really rationalise dropping the age from 5 to 3. Not even the Children’s Commissioner could provide sufficient evidence to that fact. In fact, the Children’s Commissioner said that the basis on which the change should be made was really around the fact that, on average, when parents return to the workplace, their youngest child is 3. We are talking, on average, about all parents. They will be parents who have got resources to support them to stay at home for longer or they may be in different types of jobs. But the Labour Party members on the committee felt that that was not sufficient justification to require parents to return to work when their youngest child is aged 3. It just did not give us sufficient comfort that there was good evidence that that should happen.

In relation to that, the National Council of Women also raised the point that childcare would need to be available for shift workers and weekend workers, as well as being available during the standard working week. That is also required for these children who are aged from 3. When you are aged 5, I guess you are far more developmentally advanced. When you are aged 3, you are still in a particularly vulnerable age group. We were unconvinced by those aspects of the evidence that was given. As I said earlier, we could find no justification—no evidence was provided to the committee that could make us feel comfortable that dropping the age was in the best interests of the children.

Hon ANNE TOLLEY (Minister for Social Development): I thought I would take a call in this debate to answer a few of the issues that have been raised to date by the Opposition, in particular. First of all, quite early on in the debate a number of people talked about no evidence being used to support the changes that we were making around the social obligation, but I refer those members to the very compelling evidence of the effects on families, and particularly on children, of long-term dependence on benefits. That evidence is very clear. It is accepted evidence both nationally and internationally. Right across the OECD, countries are working in the best interests to make sure that they get the best life outcomes for children, and getting their parents back into paid work is one of the best ways to ensure that children are able to live successful lives. The evidence is very clear, and that has been the basis on which this Government has supported getting parents back into work as quickly as we possibly can, for their benefit and for the benefit of their children.

Secondly, there were some issues raised around the requirements that Work and Income will have for mothers of children by reducing the age to 3, and there have been some outrageous claims made. I can say with absolute confidence, having talked to people all over New Zealand in Work and Income, which is working with these families, that it does not have hard and fast rules. Each case is considered individually. The circumstances, the job, the work that is available, the childcare arrangements—all of those are taken into account because the Work and Income staff are just as concerned to make sure that the children are safe. They really want to help those parents into sustainable work. Those two points I think are important.

That brings us to this talk about reducing the age from 5 to 3. In fact, the statistics support the direction that this Government is going in. By the time their youngest child reaches 3, half of all sole parents—half of all the existing sole parents—and two-thirds of partnered mothers are in paid employment in New Zealand. That is the reality that we have now. In fact, over the last 20 years the largest gain in employment for all mothers has been in the group where their youngest child is aged 3 to 4.

I was interested to hear the member Poto Williams, who has just resumed her seat, talk about the Children’s Commissioner during the select committee consideration. In fact, his very words, and I quote them, were: “I can’t see a good reason for the age of return to the workforce being different to people”—I would have said “from people”, but, however—“who are currently working than parents who are going into work for the first time from a benefit. And so 3 is a reasonable choice, and 20 hours of work will increase that connection to work. So I think that those are appropriate so along as obviously the work is child friendly and the Early Childhood Education and care is accessible and high quality.” So that was the Children’s Commissioner’s comments to the select committee.

I asked for a bit more information, because people are asking “Where’s the evidence? Where’s the evidence?”, and, actually, when you look internationally, work obligations for parents do vary. But it was quite interesting. The Opposition often talks about Norway, and how they do things in Norway. It was interesting to see that France, Germany, Norway, and Switzerland have a work expectation for people receiving a benefit when their youngest child is 3 years of age. A range of other countries have work expectations at an earlier age, including Sweden, Japan, and Denmark, which is another country that is often quoted to us as one that we should take notice of. In Belgium, Denmark, Finland, Japan, and Sweden all sole parents are subject to a work test, regardless of the child’s age. So, actually, what we are doing here in New Zealand is consistent with international practice.

Finally, I refer to the Welfare Working Group from 2011, which recommended that sole parent beneficiaries should be required to seek part-time paid work of at least 20 hours per week once their youngest child is 3 years of age. Of course, we did not implement that—we did not go as far as that. But having seen, then, the success and the number of sole parents with children younger than 5 going into part-time work, we are very confident that the obligations we are placing in this bill will have a great long-term effect for those families—for both the mothers and for their children, long term. So I think the evidence has been well presented. It is very clear. It is well supported.

I refer the Opposition to the comments of Dr Lance O’Sullivan, who was last year’s New Zealander of the Year, who supported the proposals from the Government at the time they were announced. He stated—and, again, we have good evidence that shows it—that children from vulnerable families at risk, which we know many of those children in sole parent, benefit-dependent homes are, will benefit the most from having access to early childhood education. So the 20 hours’ early childhood education will provide those children with learning opportunities and with socialisation, and we think that that has good long-term benefits for those children.

So I repeat that I think the evidence is very clear that the direction that this Government is taking with this bill is consistent with international practice and evidence. It will have good, long-term outcomes for the children.

JACINDA ARDERN (Labour): It is a real opportunity, actually, to take a call immediately after the Minister for Social Development to speak to some of the points that she has raised. She is right to point out that on this side of the Chamber we take our role as Opposition very seriously. We use evidence as the basis of our positions and as the basis of the arguments that we make in this Chamber. So of course it was to the evidence that we looked when we formulated our own plans around child hardship.

So when it comes to Part 1 of the Support for Children in Hardship Bill—because of course we need to keep in mind that this is a bill whose purpose is packaged up as reducing hardship for children—when we look at the evidence base around that, what does it tell us that we should be doing on behalf of those children? Well, clause 4 in Part 1, as the Minister has rightly pointed out, changes the definition of “part-time work” to 20 hours. The argument being made by the Minister, of course, is that by increasing the threshold of hours that are expected to be worked by families who are on benefits we increase income, we increase engagement in the workforce, and, therefore, we presumably reduce hardship in the home. That is not always going to be the case.

Firstly, we need to take into account, of course, the abatement regimes that apply to households that are benefit households. If the Government truly wanted to focus on increasing the income of these homes, then it would also be looking at abatements and the impact of abatement on families who are in part-time work while also receiving a benefit. That would have been a useful combination of issues to look at, because simply increasing the hours required in the threshold test does not necessarily have that wider impact. We as a party have looked at that. We have got a very clear view on the need to increase the number of hours that a benefit family can earn and keep before it starts seeing its benefit abate. So that would have been a useful thing for the Government to do—

Carmel Sepuloni: They could have voted for the bill.

JACINDA ARDERN: And, in fact, it could have voted for our bill, which was before the House not too long ago. So that would have been a nice thing to add to clause 4, if it was going to increase those hours.

The second claim that the Minister has made is that when you look at the evidence around benefit households and their transition back into work—obviously we are primarily talking about sole parent households—they tend to transition into work at the time that their child turns 3 or 4 already, before a law change. Of course, this piece of legislation, in clauses 4, 6, 7, and 8, reduces the age of children at which the work requirement kicks in for their parents from age 5 to age 3, and the point that the Minister just made herself was that, actually, by and large, parents are already doing that. Why? Because they want to work, because they know that in the longer term—even if in that moment, with abatement regimes being what they are, they are not better off—they end up being better off if they are able to put themselves back into stable employment. Those who can, do, when the child is at that age—3 and 4.

That is the point that we are trying to make on this side of the Chamber: those who can, do, but it is not a given that that is going to be the best thing for every single family. You may have a family with a child, or children, who has special needs. You may have a situation where a family is able to find 15 hours that work around early childhood education, but it is unable to find 20 hours. It will tack on an extra bit of after-hours cleaning that does not quite work but it juggles it to try to reach the requirement set out by the Government, and it then has a wider negative impact on that family’s make-up. Those who can, do, and those who cannot often have a very legitimate rationale, and all that we are saying is that for those extra 2 years—those extra 2 years of making it mandated—what gains are we making if, predominantly, those families who can are already moving into work?

What might be some of those barriers to clauses 4, 6, 7, and 8 being complied with? Well, we have covered some of them off already—the availability of work at hours that are conducive or sit in alignment with early childhood education hours is one of them. Again, another thing that the Government could have done in Part 1, if it wanted to ease the pain of trying to find work that worked around early childhood education, is it could have increased the hours. It could have increased the hours—the free hours available to families—from 20 to 25.

That would mean that even if the Government was then bumping up the hours of work required, there might be a bit of buffer for travel time. That might have been a buffer. If it was going to mandate that you be required to work for 20 hours, by giving 25 free hours for early childhood education, that would have allowed even perhaps a little buffer time for parents to drop off their child and pick up their child around that part-time work. Again, something that Labour has promoted is that increase in hours, because there is nothing to suggest that increase will have a detrimental effect but it could ease some of the difficulties for those families. So, again, another missed opportunity.

Abatement, increasing the early childhood education hours—those would all make a difference for those families if truly it was hardship that this bill was genuinely focused on and not, as I am afraid I have come to conclude, simply that the Government is giving with one hand and wants to look like it is waving a stick with the other, rather than looking at reality. When I say “looking at reality”, again, when Labour designed its package to try to ease poverty amongst children we did look at the evidence. We looked at where children in poverty can be found. The Child Poverty Monitor 2013 is a really good start for telling us where we need to target. We know now that there are 305,000 children living in poverty. That is based on income measures, so that is the number who are living on 60 percent or less of the median income. Those in severe poverty—those living on 50 percent or less, those in the hardest end of poverty—were, at the time that the Children’s Commissioner did this report, roughly 10 percent. We know that those often tend to be families who are benefit-reliant and who have younger children, and those are the ones who are living in persistent poverty as well. That exists from the age of zero to 4—roughly, if we want to take an age range.

So if the Government was trying to create a targeted package, rather than make, necessarily, a generic payment of up to $25 per family across the board, what it might have done was be more generous in the package but target those families with children under, say, the age of 3 or 4. That would make the fundamental difference to children living in poverty. How I know that would make a difference is that we did the exact same modelling the Government did when we came up with our own package. We worked out that if you genuinely wanted to make a difference to children living in poverty, 25 bucks per family was not going to cut it. The gap between what these families are living on and where our average incomes are required to be to survive has grown so much that, as Jonathan Boston has modelled, you need payments that are as generous as an increase of roughly $60. So that is why our Best Start package was modelled around a $60 payment per child, and I would love to hear the Minister’s view on why she went for a per-family payment rather than a per-child payment, which was the recommendation that was set out by the Children’s Commissioner and the Expert Advisory Group on Solutions to Child Poverty.

In fact, I would be really interested in the Minister’s views on some of those recommendations generally, which again suggested that those payments be heavily weighted towards children on the younger end of the spectrum, rather than our current regime, which tends to weight to older children and makes assumptions about the cost of feeding and clothing and so on, and does not take into account that it is easier for caregivers to work part-time or full-time at that point in the child-rearing stage. So we should be weighting the payment towards younger children also, not only because it is harder to be in work and care but also because those are the most critical child-rearing periods. The first year—or first 3 years of life, in fact—is the most critical in terms of attachment, brain development, and so on. So that is where our support should be targeted.

Those are some of the reasons why the evidence base, in our view, around clauses 4, 6, 7, and 8 is contradictory and, in fact, could have the counter-effect of doing more harm than good, even though there is some good in this bill. The increased payment is good. We are pleased about that. Our concern is the generosity, and if, of course, there was a limit to the amount the Government was going to spend, it could have made a trade-off and really weighted it at one end of the spectrum.

I want to use my final contribution to support Supplementary Order Papers 135, 136, and 137 in Carmel Sepuloni’s name. One amendment makes part-time study an alternative to part-time work. That gives longer-term options for families. The other is to retain 5 as the age, and the other is to make the work requirement for parents of under-fives dependent—dependent—on access to early childhood education. The Minister has mentioned that. If it is her view that that is what is needed to make the bill work, why will she not legislate for it and give that discretion in the legislation to allow parents, if they cannot find adequate early childhood education, to not have that requirement mandated upon them in the absence of that?

JAN LOGIE (Green): There are quite a few points to make on Part 1 of the bill around the children’s hardship package. I think the Committee does need to remember that this was the bill that the Government said was its ambitious response to child poverty in this country. The most recent data tells us that over 305,000 children are living in relative poverty in this country. That is not too far off one in five children living with significant deprivation in this country. Research has told us that around a hundred children a year die in this country from low-income - related diseases—children who would not have died in other countries—because of our policy settings. I would like to just frame this whole discussion in the context of that being the problem that we should be addressing with this bill, which I do not believe is being addressed by this bill.

I would also like to challenge the Minister’s very strong assertion that it is very clear that there is harm from benefit dependency, and the fact that the Government defines benefit dependency—this is my understanding—as 6 months, when anyone who is managing a child with a disability would recognise that 6 months on a benefit is not something they may term as dependency. The other assertion from the Government is that it is always going to be better to be in work. Actually, the research is contested around that point, and I would reference a Ministry of Social Development report. It is from a few years ago now, but I will quote it. It was looking at research from around the world: “Overall the literature would suggest that while there is a range of potential benefits from being in paid work for both individuals and households, for many households, a shift from being work poor”—not having enough work—“to becoming part of the working poor provides few gains in wellbeing.”

This is a really key part, and this is also backed up by the Marmot Review from the UK, which was a very comprehensive look at income and health. When we do not have really strong employment settings that provide for stable hours, good work conditions, remuneration that reflects your work, and flexibility for families in our workplaces, actually pushing people into work against their own judgment about what is best for their family is not going to deliver the well-being outcomes. This bill is operating in a context of very, very weak employment legislation. We have to actually look at the whole picture, and that was a substantive message from a large number of submitters on this bill. They wanted more. They wanted a comprehensive response to child poverty, which deserves a comprehensive response, and this is not it.

I would like to point out some of the specifics that are so deeply disappointing to me in this bill. One is that the increase in the base benefit rate will come into effect from April of next year. This was a Budget initiative for this year, but it will come in next year, while all the time we know that children are being hospitalised because of that lack of income. The Government, because of its insistence on bringing its Budget back into surplus, prioritises that political measure over delivering to our families now, and to me that is not good enough. That is not us doing our job and providing leadership and looking after everyone in this country.

The Government has been saying that it is increasing benefits by $25 a week to these families. Actually, the average increase is $23.10 a week, and Jonathan Boston’s research around what was needed to actually reduce child poverty showed that there was a really significant range. Some families may need an increase of well over $100 a week because they are in such a tough position right at the moment, but the absolute minimum that was needed was $30 a week. That is only a few more dollars compared with this, and this Government could not even bring itself to just make that the base, to get just one small group of people over the line and out of relative poverty. That to me is embarrassing, to be honest.

The point has already been raised about the fact that this payment is per family. It is not per child. We do know that the families that are experiencing some of the toughest challenges of poverty are our larger families. You can imagine that being a parent juggling several kids and getting back into work is a tougher thing—it is harder to do the more kids you have got. Anyone can work that out. So by making this a per family increase, we are actually entrenching inequality so the families that are struggling the most now are the ones whose children will get the least out of this measure, and that was a policy choice of this Government. It made the decision to make this a per-family increase so that our children who are struggling the most right now will get the least, and they are most likely to be Māori and Pasifika families, and they are the families that protect us from an ageing population struggle in the future. They are the families that we would benefit most from protecting, and yet this Government has chosen to leave them out or penalise them.

I think we also need to look at some of the facts. Around 40 percent of children of sole parents who have part-time work—and this is still entrenching that, though they will be off a benefit and be in part-time work—live in poverty. Is this the solution for our children? I do not believe it is. When we know that we can address housing and we can address employment laws and we know that a lot more is needed in terms of income, this bill is not the answer.

There were concerns raised by one of the submitters that, in fact, they believed that this breached the UN Convention on the Rights of the Child, in terms of article 27 and the assurance for States parties’ Governments to ensure adequate standards of living. So this Government had a choice to bring legislation to the House that would have guaranteed our children the right to an adequate standard of living. What it has brought to us instead is a conscious choice to leave our children in poverty, not to reduce the number of those children or to lift them out of relative poverty.

The Minister for Social Development said about the work testing and the requirement to go to work when the youngest child reaches the age of 3 that “Well, half of sole parents do that anyway, so, yeah, it’s OK to do this.”, which is basically taking the choice away from parents. And she is saying: “Well, Work and Income officers care about the families. They will take a lot of discretion into account.” These are people who are being paid to work for Work and Income and have got extraordinary caseloads. They are being expected to make the decision on what is best for a family and take away a parent’s own ability to choose the needs of their child. That is bizarre to me—that we would take that choice away.

We also really need to be reminded that a significant number of these children have disabilities. I think two out of five children who get the disability allowance have a parent on a benefit, either sole parent support or superannuation, so we know a lot of these parents have children with disabilities who will have significant needs. I have already mentioned that it is likely that about 70 percent of these families are leaving violent relationships, and their children will have very significant attachment needs, and we are expecting the Work and Income staff to be able to have the medical knowledge, the social work knowledge, or the family knowledge to make that decision. They are not living with those kids. They are not living in that family. How can we expect them to make the right decision? I think it is asking too much, and I think it actually just becomes punitive and unconstructive.

CARMEL SEPULONI (Labour—Kelston): I want to continue where the Green Party member Jan Logie left off. I just want to refer back to the main issue here, which is that we have 305,000 children in New Zealand living in poverty, and I think that is something that all of us in this Committee should be ashamed of. The reality is, though, that we do not have the numbers to make legislative change like members on that side of the Chamber do. Of the 305,000 children who are living in poverty, 60 percent of them are in beneficiary households and 40 percent of them are in working households. Forty percent of them are earning so little money that they are also living in poverty, and we need to make that connection. If we care about children living in poverty, then we also have to care about the people who are looking after those children living in poverty.

I have put forward a number of Supplementary Order Papers to amend this bill. We support any increase that will go to our poorest families. Of course, as my colleague Jacinda Ardern pointed out, we do not understand the science behind how the Government assessed $25 per family as being the right amount. We know that that will do very little to actually address the poverty issue, but it does do a little bit, and so we cannot deny our poorest families that. But we do have some concerns, and those concerns are addressed by the Supplementary Order Papers I have put forward.

One of the concerns is about the extension of the work obligation from 15 hours to 20 hours per week. We had the Minister for Social Development stand up before and tell us that there is evidence to support that. The Minister cited Norway and other European countries as examples of where there is a 20-hour work obligation for parents with a youngest child of 3. I just want to point out to the Minister that, actually, in countries like Norway, work is readily available. That is not actually the case here. In fact, we currently have 58,000 people actively seeking part-time work. So to place the expectation on these sole parents when, actually, the work is not available is a little bit unrealistic.

We had the Minister saying that people would not be pressured into taking up work that was inappropriate, but I have had so many stories told to me by sole parents undertaking employment courses through Work and Income where they are getting pressure put on them to take up work that is inappropriate. In fact, I spoke to two sole parents who were both doing the same course. They were both articulate, educated women and each was a solo mother with one child. Both of them said that they felt for the other women undertaking the employment course because of the fact that if they were vaguely passive, or passive in any way, then, despite the fact that the work that was being pushed on them was inappropriate, they would often end up saying: “OK, I’ll do it.”

This topic actually raised a really interesting conversation in the Social Services Committee, and that conversation was around the availability of early childhood education outside standard working hours. A concern that was raised at the select committee was whether we as a country are moving down the track where we would think that night care for children is actually acceptable. I think the general public would agree that early childhood education—and I do not think it can actually be deemed that if it is just a babysitting service at night time—is not appropriate at night time. I think most New Zealanders would be fearful of that becoming commonplace in this country.

So we did put up amendments, with one to say that, actually, the work obligation should not be moved to 20 hours and it should remain at 15 hours. The evidence that we found was that, actually, in countries like the UK and the US where work obligations like this were imposed, unfortunately, the reality for these sole parents was that they often ended up having to take up the lowest-paid work and they ended up worse off than they were when they were just accessing welfare full time. That is the risk that I think we are running here.

The other risk is that we have seen so many media reports, and so many reports out in general, about the quality and availability of early childhood education. So the assumption is always “Oh, you can put your child into an early childhood education centre and go out and work.”, but, actually, sometimes there is no early childhood education available and sometimes there is no quality early childhood education available. Why should parents be put in the situation where they are forced to put their children into care when they are not confident that that level of care is appropriate for their children?

One of the Supplementary Order Papers that I have put forward actually also adds study as an option, alongside part-time work. I really want to talk a little bit about that because that Government, the National Government, has talked about being aspirational for New Zealanders on so many occasions, but I really feel that where it is clear that it is not is when it comes to beneficiaries. Supplementary Order Paper 135 is aspirational. We do not want to just force sole parents into any old job. We want them to be better equipped to increase their earning capacity and to increase their chances of being able to get into long-term, secure work, rather than just push them into whatever minimum wage job is available. We think that the National Government should support this because it is aspirational.

We had some conversations about this in the select committee as well, and what came up was: “Well, actually, they can access the student allowance.” There are issues with that. The issue with that is that you have to be in full-time study to access a student allowance, or be doing 32 hours a week. Any parent who might want to access, say, 20 or 15 hours of study will not be supported to do so with all of these measures in place. They will not be able to access a student allowance, work obligations will kick in, and, therefore, study will basically be denied to these parents.

Why would we deny the opportunity for these parents to take up study? We know that all of the educational research out there supports them doing this. We know the impact that it can have on their children in terms of their children’s own academic attainment. So why would we not support this happening? I really urge all parties in the House to look carefully at that Supplementary Order Paper and to take seriously the option of study alongside part-time work. I—like a number of other MPs in this House, I know—as a sole parent actually studied and was able to access support, so why would we deny that to others, given that there are so many in this House who were accessing support from the State whilst raising children by themselves in order to take up study and better their own lives and the lives of their children?

I just want to go back to my other Supplementary Order Paper, Supplementary Order Paper 136, which deletes clauses 4, 6, 7, and 8. One of those clauses is to do with changing the age for when work obligations kicking in from the current age of 5 to what is being proposed by the National Government—that being 3. We did have a discussion at the select committee. This came through in many of the submissions. Many parents do go back to work when their youngest turns 3. That is OK. That is OK if that is the choice, but different parents have different circumstances that need to be taken into account.

One of the topics of conversation in select committee was: “Hey, you know, that might be OK for the parent who has one or two children, but what do you do with the parent who has four or five children? Perhaps it is a little bit harder for that parent to go back to work when their youngest turns 3.” I just want to point out that all too often when we are talking about those parents who have four or five children, we get this kind of attitude and stigma that comes with that, as if they did something wrong by giving birth to all these children. Well, actually, I just want to say that for members on this side of the Chamber there is no stigma or judgment attached to it. All we care about is the well-being of those children, and if it is in the best interests of those children for that parent to stay home with them for a little bit longer, then why would we not support that?

Many of those making submissions on this bill supported the additional $25 per week despite the fact they felt it needed to be more. Many of the submitters pointed out the fact that parenting actually needs to be valued as well, and the fact is that we are stigmatising these parents to the point where we are assuming that they do not want to go out and work when, actually, the evidence suggests otherwise—many of them do. But if they need to, we should be responsible and actually support them to be the stay-home parent that they need to be in instances where it would be better for their family.

I have had a lot to do with the team from the Growing Up in New Zealand study in respect of teasing out some of the research that it has done that is relevant to this bill. I just want to clarify for the Committee that all of that research shows that, actually, these sole parents—sole mothers, predominantly—do want to work. In fact, this research shows that they have got more of a desire to work than the parent who is in a relationship.

ALFRED NGARO (National): I just want to make some remarks in regard to the Support for Children in Hardship Bill, and the comments from the previous speaker, Carmel Sepuloni: she talked about the 305,000 children in poverty. We know that the indicators for that—approximately 20 indicators—have a broad sort of reach inside that. Inside those indicators there is a continuum of those who are captured under what we would call children in hardship.

That is recognised because just last week there was in fact a cross-party hosting of Unicef. It was called Make My Future Fair. While we were there it talked about the factors. It has got a new website, and what it has done is it has captured the 100,000 kids that it believes are captured under what it would call hardship. So when the member opposite talks about the 305,000, we have got Unicef, which has defined the true number of those in true hardship in that continuum as being 100,000. The Opposition can talk all it likes, but go on to the website and have a look for yourself. You will see it there indicated: 100,000 kids. We think that is further evidence, right across the sector, that these are the kids that we need to focus on. So that is a little bit of evidence just to put out there for the member as well.

There were some comments around social obligations. I would like to ask the member also, if she does a bit of research, to see that in 1998 the Hon Roger Sowry, who was the Minister for social development, included inside that an amendment to the Social Security Act 1964. Under that amendment was the talk about work obligations. I can tell you this: Steve Maharey was in the Opposition, Annette King was in the Opposition as well, and they also contested this issue, but since that time when it was introduced there has been no change under the Social Security Act. Even in the 9 years of a Labour Government—if it thought it was the beast of burden and if it thought it was the issue of contention, why did it not change it? I will tell you the reason why: even Labour knows that work obligations are important. In fact, if it looked at the primary section under the Social Security Act 1964—yes, Michael Joseph Savage was the founder and the father of this Act—what does it say? The primary clause talks about the fact that work is the best opportunity for those to further themselves out of that vulnerable circumstance. Work obligations are not an evil; this is a necessity. However, what is important is the way in which we ensure that we wrap around support for those who are much in need in that sort of situation.

There were also comments about the question of where is the evidence. The Minister has talked about international evidence, and the Opposition said there was a lack of evidence. We have heard from the Children’s Commissioner, Dr Russell Wills. I actually saw him in Copperfields this afternoon and had a chat with him there. But even in his comments he did not go against the issue. In fact, he said it is actually a common trend—it is happening. In fact, if the member had actually read the regulatory impact statement, on page 29, this is what it says: “The children of beneficiaries face a greater risk of educational underachievement and are more likely to benefit from quality ECE from an [early age].”

From a career perspective, women are probably best advised to go back to work around 6 months after childbirth—so it talks about this. The international evidence that it comes from is the OECD report. You can download that, and you can read from the report. The OECD report adds further evidence to the fact that the growing trend around fertility rates and around workforce placement for women internationally is that more of them are heading back to work when their children are between the ages of 3 and 5. We believe that not only is this piece of legislation in line with international evidence but it is supported very much there.

We can talk about international evidence, but let us talk about our own evidence. If we talk about the census, Statistics New Zealand talks about this: “This reflects significant changes in employment patterns over the past two decades. As Figure 6”—on page 29—“shows below, over the last 20 years the largest gain in employment rate for all mothers has been in the group where the youngest child is aged 3-4 years.” This is evidence, not only from our own census and statistics, not only from international evidence, and not only from organisations like Unicef, that has said that we are talking about those who are most in hardship being at around about the figure of 100,000. We believe that is the evidence that supports, even in Part 1 of this bill, the Support for Children in Hardship Bill. Thank you.

DARROCH BALL (NZ First): It is my pleasure to rise on behalf of New Zealand First to speak in support of this bill, the Support for Children in Hardship Bill. But the problem, and I have spoken about this before, is that this is not actually focused on the children at all. It is actually—and we have heard it from different members of the House today—focused on the main benefit holder.

I would just like to pick up on something that Alfred Ngaro said. Just looking at the introduction to the commentary on the bill it says: “This bill is intended to implement several initiatives for helping children who are living in severe material hardship.” Alfred Ngaro was talking about the spectrum that this bill was supposed to be targeting. But if we are talking about children who are living in severe material hardship, and this bill is purporting to target sole parent beneficiaries and beneficiaries in general because they are down at the most severe end of poverty, there are far more than just the 100,000 children in that cohort targeted. Like I said at the start, the problem is that this bill is not actually targeting those children; it is targeting the main beneficiary holders. So it is quite contradictory in the title in itself, and I have spoken about that previously.

Actually, there are a couple of points I want to make. The first one is that one of the effects of this bill and this legislation is that it actually creates inequality with larger families. Because it is not concentrated on specific individual children, like Jacinda Ardern pointed out earlier on, the families with more children will become more unequal than those with just a single child. So it is actually creating inequality.

I would like to look at a submission that was made by Susan St John, who is an associate professor in the department of economics at the University of Auckland. It is quite a good report, but I would just like to highlight one thing that she said. She talked about the new approach to welfare, and she said that “This sees an intensification of the relentless focus on paid work as the solution to poverty, including child poverty. Investment in this approach since 2012 has been about not more money for families but more money for the infrastructure of management of beneficiaries into work.” That is true with this bill, and that is the problem that New Zealand First has with this bill.

In fact, the consequence of that approach is that there is an increase in the sanctions that are applied. So the administrative costs, when applying new legislation like this, can get quite high. In fact, there were over 80,000 sanctions applied between 2013 and 2014. So, like I said, if you are looking at the intent of the bill, it is not achieving that. In stages, it is actually creating inequality for the larger families and it is not actually focused on child poverty at all.

One of the focuses, as I stated, was the sole parent benefits, and it states in the general policy statement that there are a couple of points why children live in poverty. One of them is that the household income is too low, even with good budgeting and discipline, and another one says that the special demands on its budget are too high. But if we are looking at the sole parent benefit itself—and we are looking at it from 1990, I think it was—the sole parent benefit was around 75 percent of the average wage. And, as we know, what happened in 1991? It got cut quite dramatically, by about 25 to 30 percent, and ever since then, down to 2015, it has consistently dropped from around 75 percent in 1990 to around only 50 percent of the average wage today.

That is the kind of issue that this Government is trying to remedy by throwing not $25 per child, and not even $25 per family, but $23, on average, per family. That is not going to create a solution for the massive gap that has been created over the last 30 years. That is why New Zealand First is concerned about this bill, because the bill has the opportunity to do some good and focus on the children, but—it is a step in the right direction. New Zealand First will support anything that is increasing the financial benefits that look after children, but—

POTO WILLIAMS (Labour—Christchurch East): Let us look first at the primary legislation that this bill seeks to amend, and that is the Social Security Act 1964—1964. It is a long time since the primary legislation was enacted. There have been many and significant changes to it over that time, and one would argue that, in terms of its ability to continue to deliver the intent, it may be time to be looking at it much more widely.

I want to refer to some of the comments that the member Alfred Ngaro made about the number of children in hardship, or the number of children in deprivation. However you slice it or dice it, you cannot get past the fact that there are 305,000 children living in poverty, and Unicef—which Mr Ngaro did quote from to the Committee—on the very front page of its website, quotes that figure. So whether you are talking about hardship or poverty or deprivation, or whatever you are talking about, you cannot get past the fact that we are talking about 305,000 children living in poverty. Are there children who are more deserving than those living in poverty?

This bill, obviously, is going some way to address some of those families, but we are talking about a small percentage of children who live with poverty every single day. That includes not being able to have their nutritional needs met, not being able to have their housing needs adequately met, and probably not even being able to have their educational needs met. That is a significant proportion of our future that is dealing and struggling with these issues every single day, so, although Mr Ngaro might have a point about slicing and dicing the numbers, it does not go past the fact that we have hundreds of thousands of children who are living in poverty.

When we look at this bill, clause 10 gives us the enabling provision for the $25 a week per family. It has already been said across this Committee that, in actuality, that probably amounts to about $23 in the hand. We are talking about $25 per family. The size of your family does not determine how much money you get, so if you are from a family of three or four or five children, you are looking at a couple of dollars for each child per week extra, which is, really, what? A loaf of bread, but probably not even a bottle of milk. So we are not talking about a huge amount.

Do not get me wrong. I am very, very happy that there are families that are going to get a little bit extra, but if we are actually going to deal with the issue of children in hardship we should be making significant resource available to those families, and it should not just be about money. We all know that the level a mother’s education reaches has a significant impact on how well her children do. However, there is no provision within this bill to actually support parents, mothers, to upskill and to utilise the time on a benefit to do further training to provide themselves with better skills, which, actually, at the end of the day, would probably have more impact on the well-being of those children and those families.

But I want to get back to the point of paying $25, or $23, in actuality, to that family. When we are talking about some families, we are talking about beneficiary families tending not to be one-child families, but families with two, three, or four children. So if we are looking at supporting those families in hardship better, why have we not looked at the recommendations from other experts in the field, who ask us to consider amounts of around $60 to $80 to around $100 per week for families, as opposed to $25? What would that do? That would make a significant difference, particularly if you were then requiring those beneficiary families to get out and get to work. It would make a significant difference—

JONO NAYLOR (National): I move, That the question be now put.

The CHAIRPERSON (Hon Trevor Mallard): Annette King—and I will warn Poto Williams that she has had her four calls.

Hon ANNETTE KING (Deputy Leader—Labour): This is my first speech on this bill. First of all, can I say that I welcome any improvement that can be afforded to families living in hardship. So I say to the Government, thank you for recognising that there is a problem, but then I will go on to say that it is only partial recognition of that problem.

I think it is beholden on a Government to listen to the very best advice that it can receive when making policy, and there has been some extremely good advice proffered to this Government on the state of families and children living in hardship in this country. I would reference the Children’s Commissioner. The Children’s Commissioner is a very highly regarded man. He was chosen by this Government to be the Children’s Commissioner. He has decades of experience as a paediatrician. He was chosen because of his experience, and we supported the appointment of Dr Russell Wills as the Children’s Commissioner. He is independent—probably more independent than many Children’s Commissioners we have had in the past. He has been advising the Government on a number of issues, and he has certainly made it clear to this Government that the changes it is making in this bill mean there will be small average gains for a family. He says that it will not incentivise parents to leave a benefit, given that the high cost of quality childcare is a barrier for many families entering employment.

So I wonder why the Government has not listened to some of those who live and work in the community every day with children who live in hardship. The fundamental issue here is the problem that the Government is having grappling with the meaning of hardship. It has danced on the head of a pin on the meaning of poverty and hardship for years now. “Poverty” is a word that is not allowed to be said. You can use any other word, but do not use “poverty”; so the word that is used is “hardship”, and these families are living in hardship. From the Minister’s own figures we are told that the number of children living in poverty—in other words, in hardship—has increased to 305,000 children. But the Minister’s bill assists only 18,000 families with children, a smidgen of the 305,000 children living in poverty. I wonder why the Government does not want to have a comprehensive approach, to lift all children out of poverty/hardship. Why has it decided to choose such a small number? Do those other children not count when it comes to this bill?

When I look at what the increase is going to be, how much these 18,000 families get, it is around $23.10 per family per week. Not per parent and not per child, but per family; so it could be a family with six kids or it could be a family with one. I know that the Minister for Social Development is a very practical woman. She does her own shopping, she prepares her own meals, and she must know that a block of cheese in New Zealand costs $10, a dozen eggs are $4.86, 2 litres of milk is close to $5, and 2 litres of petrol is close to $4. So when I add that up, that is what a family can look forward to from the increase that is being provided to a family. The Minister will know that is not going to make a huge difference to a family, depending on its size. Maybe it would make a difference if you were a single person, but if you are a family with children, and particularly if you have got some growing teenagers and they happen to be boys, then you know that they would probably eat the block of cheese in a couple of days. Those of us who have had teenagers know that a loaf of bread would be lucky to last for 1 day after school.

I have watched and listened as Government members in speech after speech have crowed about how it is the first Government in 40 years to increase benefits.

Jono Naylor: Because it’s true.

Hon ANNETTE KING: But I say that they have got—yes, it is true, but they have got very selective memories, I say to the member Jono Naylor, and maybe I could remind you.

Jono Naylor: Please do.

Hon ANNETTE KING: The first Government, I remind the member, in 40 years to cut the benefit was a National Government. Some of us can remember the benefit being cut, and this increase in the benefit does not even restore it to what it was. So when the crowing is finished, just take a hard look at the fact that benefits were cut by the very same Government.

We set about to help restore some of that through Working for Families, something that National called “communism by stealth” but has not got rid of. We went about supporting families with income-related rents and a number of other issues to help lift those families out of poverty, and those members crow about how they lifted the benefits—the very benefits that they cut. So I say to the members opposite: get that in the head. Remember that because that is the truth.

I have to say that I support the Supplementary Order Paper put up by my colleague Carmel Sepuloni. This is Supplementary Order Paper 136, where she is saying that she would like to ensure, by deleting clauses 4, 6, 7, and 8, that “parents of children under 5 are able to care for them full time if appropriate and affordable early childhood education is not available to them.” Many members opposite live in provincial and rural New Zealand, and full-time, affordable, and appropriate early childhood education is not always available. Why would we not choose to have parents—whether it is a sole father or a sole mother—looking after their children in those first 5 years? Is that not the gold standard that we would all like? How many of us had our mums at home for the first 5 years of our lives? Everybody in this room, mostly, I would think.

Then there were others of us, myself included, who were sole parents. I went back to work when my daughter was 3 years old. I would have liked to have had 5 years at home. It was not possible, but that, to me, is the gold standard—that you give children the best start in life by giving them as much care as possible by their parents, whether it is one or two parents. So I wonder why the Minister would not accept what I think is a very good suggestion in this Supplementary Order Paper: ensuring, if there is not affordable and appropriate early childhood education available, that parents of children under 5 can stay at home and look after them and care for them. You see, I have always thought of that as real work. It is not a “nice-to-have”, or something that is just done; it is real work, and valuable work. It is unpaid work—work that if we had to pay for we could not afford. So I say to the Minister why not consider this Supplementary Order Paper?

I also think that the definition of “part-time work” should be 15 hours a week, which is in Ms Sepuloni’s Supplementary Order Paper 135—not 20 hours a week; 15 hours a week—because who is going to be at home when children get home from school at 3 o’clock in the afternoon? If parents are not home, there is criticism of them for not caring for their children and not taking enough account of their children’s needs. Why not 15 hours a week? It is a great start for them, and as their children get older and they can move into more employment because they have got a foot in the door—well and good. So I say to the Minister, why this 20 hours a week? If the Minister looks at reality out there and what really happens to families, the Minister would know that 20 hours a week makes it incredibly difficult to be a parent, particularly a parent on your own—a good parent doing the best job possible, but—

Dr SHANE RETI (National—Whangarei): I move, That the question be now put.

The CHAIRPERSON (Hon Trevor Mallard): I think we have been going for 2¼ hours. A number of members have had four calls. I think we are probably in a position where the Committee can decide whether it wants the question to be put or not.

Motion agreed to.

The question was put that the amendment set out on Supplementary Order Paper 135 in the name of Carmel Sepuloni to clause 4 be agreed to.

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

Ayes 58

New Zealand Labour 32; Green Party 14; New Zealand First 12.

Noes 63

New Zealand National 59; Māori Party 2; ACT New Zealand 1; United Future 1.

Amendment not agreed to.

The question was put that the amendments set out on Supplementary Order Paper 136 in the name of Carmel Sepuloni to clauses 4, 6, 7, and 8 be agreed to.

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

Ayes 58

New Zealand Labour 32; Green Party 14; New Zealand First 12.

Noes 63

New Zealand National 59; Māori Party 2; ACT New Zealand 1; United Future 1.

Amendments not agreed to.

The question was put that the amendment set out on Supplementary Order Paper 137 in the name of Carmel Sepuloni to insert new clause 9AA be agreed to.

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

Ayes 58

New Zealand Labour 32; Green Party 14; New Zealand First 12.

Noes 63

New Zealand National 59; Māori Party 2; ACT New Zealand 1; United Future 1.

Amendment not agreed to.

Part 1 agreed to.

Part 2 Amendment to Education Act 1989

CARMEL SEPULONI (Labour—Kelston): Speaking to Part 2, Part 2 amends the Education Act, and, I guess, basically brings it into line with what is happening to the Social Security Act changes, in relation to supporting children in hardship with the actual student allowances section of the Education Act, which, of course, we do support. It is making sure that anything that they were able to get via these changes—so the $25 increase—will actually apply to those who are on the equivalent student allowance. So we do support that.

I just want to say that we support in general the idea of parents not only being supported in a positive way to go back to work but also being supported to return to study. So we think there should be no difference in the amount of money that they are able to access for support if they are in study compared with, say, being on a benefit.

I will, though, just reflect on the Supplementary Order Paper that the National Government voted against that went through during Part 1, which is relevant to this—

Matt Doocey: Ha!

CARMEL SEPULONI: —in many ways, Mr Doocey, because it is about support for sole parents to be able to go back and study. So let us keep in mind here that when we are looking at student allowances, student allowances can be approved only if the person is studying for 32 hours or more a week. They have to be in full-time study to access a student allowance. The difference here, I guess, is that when we are talking about the work obligations, the National Government is talking about 20 hours. What we were trying to say with the Supplementary Order Paper is that, actually, parents should be given the option of either studying for 20 hours or working part-time for 20 hours.

The National members of the Social Services Committee, in discussions on that, said that actually they can access student allowances, but they cannot access student allowances if they want to study part-time—say, 20 to 31 hours. You can get limited full-time study approval at universities, but, having worked there for 5 years supporting students, I know that actually this would not be a reason to get approval for limited full-time study. So there is going to be this small gap where, unless you want to go full-time into study, then you actually will not be able to access study at all once work obligations kick in, because the expectation will be that work obligations take precedence over everything else.

So that is a real concern for us, despite the fact, like I said, that we do support the amendments to the Education Act for the purpose of this bill. They need to be done because we do not want our students who are sole parents to be disadvantaged in any way. There were a few submissions that came through to the select committee that touched on the importance of this. One of those submissions was from the National Council of Women. It talked about how clause 10 amends various schedules, which is also reflected in an amendment to the Education Act 1989 to cover students with dependent children. The council’s concern was that students with dependent children would be covered. Caritas also pointed out the importance of ensuring that this allowance carried over to students who are supporting children.

The Child Poverty Action Group also pointed this out. The group noted the intention to allow student parents on allowances to access the $25 increase in benefit. The Child Poverty Action Group said that, given this intent, it was actually concerned that if this was done in terms of the $25 increase, there could be no justification for denying students the in-work tax credit for their children as well, which I think was a really interesting argument. I wonder whether or not the Minister for Social Development took that into consideration when reading that submission from the Child Poverty Action Group.

We had another submitter, Graham Howell, who talked about the importance of ensuring that this $25 was made available to sole parents on a student allowance. Law for Change, which represents a whole lot of students—a large number of whom, it says, are concurrently not only studying but supporting children—was pushing for the fact that this needed to be reflected in student allowances. I think it is still an area that we do need to look at. I know that the Government has made changes with things like the accommodation supplement, so that applies to students who are on student allowances and to sole parents. I have been told that there are still other areas—

JACINDA ARDERN (Labour): Coming to Part 2, this amends the Education Act 1989, as my colleague Carmel Sepuloni mentioned, and also ensures, via a number of technical amendments, that adjustments made as part of the legislation do not allow duplication in Consumers Price Index adjustments.

I just want to come to that point. If I am reading Part 2 correctly, via using the regulatory impact statement, it talks about the way that generally, within the bill, benefit indexation and the annual Consumers Price Index adjustments will apply to this new $25 increase. I just want to reflect on the statements made in the regulatory impact statement. Paragraph 193 states: “Annual increases to benefit rates to reflect upward movement in the Consumer Price Index (CPI) were legislated for in 2010, and occurred prior to that by convention.” That is a point I think is important to make. So we legislated that Consumers Price Index adjustments would be made to benefit rates in 2010. It continues, saying “[t]he Bill does not amend the legislative requirement that base benefit and student allowance rates”—which are talked about in Part 2—“must be adjusted by any upward percentage movement in the CPI.”, so it does not change that legislation.

There was some discussion, as discussed in this summary—actually, I think it is the departmental report I am referring to, excuse me, rather than the regulatory impact statement. It states: “[i]ndexation to wages or relative to rates of New Zealand Superannuation as proposed by some submitters is outside the scope of the Bill.” We accept that. It states: “The Bill does, however, include benefit and student allowance provisions that specify the Consumer Price Index treatment of the $25 on 1 April.” This is the bit where it gets interesting: “On 1 April 2016 the $25 increase is effectively added after the annual CPI increases to the base benefit and allowance rates are applied. This means that on 1 April 2016 the relevant benefit or student allowance base rate as at 31 March is increased to reflect the annual CPI increase. The additional $25 is then added to form a new base rate.”

So for the next Consumers Price Index adjustment that we have on 1 April 2016, our base rate adjustments will occur and then the $25 is added to that base rate. So the $25 when it is first added will not have a Consumers Price Index adjustment made to it. Why is that? That seems like a bit of hair splitting to me. If the $25 is meant to be an increase to the base rate, make it to the base rate straight off the bat and give the whole thing a Consumers Price Index adjustment. Because if the Consumers Price Index adjustment is meant to reflect increases in the cost of living, then why would we exclude the increase in the base rate from that, when already, I think that it is fair to say, the $25 increase should have happened at the time that it was announced, rather than projecting it out to 1 April 2016? To then add insult to injury and not have that adjusted as part of the Consumers Price Index adjustment seems a little Scrooge-like from my perspective.

I would be really interested to hear from the Minister for Social Development what difference that made to the overall cost of the package. I mean, we already know that that $25 is affected by a range of other deductions. Surely—surely—the Government could have been generous enough to at least just allow that $25 to be included in that Consumers Price Index adjustment, if it is indeed a part of a base benefit rate.

And we certainly know that the Government has crowed about the fact that it calls this the first benefit increase in however many years. Putting aside the fact that that is actually incorrect—the first significant benefit increase was via the family tax credit as part of the Working for Families package. That was the last generous increase to the benefit rate. It might have had a different name, but it had the same effect. So if it is truly a base increase, then I would have thought that the Government would not need to be quite that Scrooge-like. I am interested in the Minister’s response to that.

But as Part 2, obviously, is talking again about the interaction between these different payments—Consumers Price Index adjustments and so on—I think that it is also worth pointing out some of the wider interaction between benefit provision, particularly for sole parents and our student allowance regime. Credit where credit is due—the Government has made some tweaks to the interaction between the student allowance regime and sole parent benefits to remove some of the anomalies, and I want to say to the Government that that was a good thing to do. Because we did have a situation for a while there, where, if you were one of the people affected by section 303 of the Education Act, if you were a sole parent but you were in study, so you were in receipt of a student allowance, your access to accommodation support was less generous, thus incentivising you to be on a sole parent payment. Then some of the requirements around the sole parent regime changed. That meant that you could not really study particularly and be on that regime, so it then forced you back on to that less generous support. So it is good that some of the accommodation changes have been made in that area to remove those anomalies.

But I would still like to point out that for the group of people who are affected by Part 2, who are in the category of being on a student allowance and might be in receipt of this base benefit increase—that is, people who are in study and have children—we do still see a situation where, for instance, parents who are eligible for benefit support but are studying have work-testing requirements on them that are just unrealistic and do not take into account the longer-term benefit for taxpayers, let alone for those families.

Let me give you an example. I had a case brought to my attention not too long ago of someone who was in study. They were studying to be a nurse, they had been in part-time work and on a benefit, and they realised that at that rate they were going to be on a benefit for a very long time and that that was not of use to her, her child, or to the State. So she transitioned into study, was able to still be in receipt of a benefit, but Work and Income pulled her in one day and said: “Look, we have found part-time work that you are obliged, by virtue of the age of your child, to be in, regardless of your study, and which we would like you to take up.” She pointed out that that part-time work, which from memory was in hospitality, clashed with her course work, meaning she would be unable to continue with her studies. Based on the legislative requirements for that particular individual, she was required to take up that part-time work obligation and withdraw from her study.

We would advise taking a longer-term view, for this bill in particular. For those individuals who are captured by student allowance payments or are in part-time study or what have you, if we take the longer-term view, that allows the discretion to say: “Regardless of any of the obligations set out in Part 1, if you are in study we take a broader view. If, for instance, we find some hours that the law actually would require you need to work, say in dishwashing, and that happens to clash with some study that you are doing that in 2 years’ time will mean you are not reliant on a benefit at all, then we will take some leniency in those situations.”

Because if the ultimate goal is to have someone independent, some of these part-time service industry jobs will not necessarily lend themselves to that. At that point we are in a position where we are cutting off our nose to spite our face. If the longer-term goal is assisting those in hardship and children in hardship, we know that well-paid, decent, stable work is the goal, not just work at any cost. We know there are a number of jobs where there is a significant amount of cost subsidy going on by the State to sustain people at an income level that means that they are able to support their children and to support their family.

So, in summary, Part 2—yes, it is a fairly minor part of the bill. The number of people who are covered by it are an interesting cohort who deserve greater discretion, but actually what they also deserve is a Consumers Price Index adjustment to their base benefit, and their base benefit, as argued by the Government, is meant to now include that extra $25. So why do we not treat it like that from the beginning and not just at a designated year that is convenient for the Government to prescribe?

TODD MULLER (National—Bay of Plenty): I rise to take a short call to talk about Part 2; in particular, comments around the amendment of the Education Act. As already discussed, this particular part facilitates a matching $25 increase, achieved through regulations, to the student allowance rates for students with dependent children. We have, of course, promoted this to ensure that we do not create an incentive to move from study to benefit rates, to ensure that the support is provided for those who qualify whilst at study. There is also a consequential amendment—it was discussed in some part by the previous speaker—to provide that the student allowance Consumers Price Index adjustment is applied on 31 March 2016 and that that happens before the adjustment then occurs, the $25 increase, on the next day.

I think that does make sense. It is going to take us a little while, as the various official reports have suggested, to be able to get this package right—it is a large one; it is the largest, as has been said, for many, many years—to get the systems in place to enable it. So that 1 April target date, I think, is the appropriate one. This, as already discussed, is a relatively small part of this very large and comprehensive support package of over $750 million. The regulatory impact statement itself talks about this particular part being an extra spend of $1.8 million in 2015-16, rising to $6 million in 2017-18. So, obviously, in the context of the overall package it is not huge, but it is important to ensure that when you do something you do it right, and make sure that all the appropriate consequential amendments occur. In terms of the overall complexity of the systems change that this particular part enables, the regulatory impact statement again suggests that this is moderate—moderate changes to IT systems and processes to enable it.

We had some conversation about this particular part in our select committee deliberations—some submissions. Some have been referenced already. I do want to draw the Committee’s attention to a couple of submitters. Law for Change submitted on this particular point, and stated that by increasing support for students with children, education would become a more feasible choice for parents and, in their view, greater assistance to enable parents to attain qualifications will help to reduce welfare dependence in the long term.

We also had a specific submission on this particular part by the New Zealand Federation of Business and Professional Women, which was also supportive of the increase, quite explicitly so, as it would enable parents with children to continue to participate in the education system. If I could quote specifically from Caritas Aotearoa - New Zealand, again in respect of this particular part: “We also welcome the adjustments to be made to student allowances to ensure that children in those families have the same advantage.”

Overall, in terms of the submitters on this particular point, they were all supportive of the increase in the student allowance for students with children and the fact that it was mirroring the increase in main benefit rates. Most of the submitters were of the view that increasing support for students with children will help improve the long-term prospects of that particular family.

This is a small part of a comprehensive bill that I have huge pride in being able to stand in support of. It provides significant support for those who are most vulnerable. There is not crowing; this is a Government that focuses on those who are most vulnerable, and does it in a comprehensive, considered, and reflective way. I am sure that it will be appreciated by those who receive it. Thank you.

SUE MORONEY (Labour): It is a pleasure to rise and speak in support of Part 2 of the Support for Children in Hardship Bill. This is the part that amends the Education Act 1989. As the previous speaker, Todd Muller, said, it is an attempt to make sure that the same payment exists for people whether they are in full-time study or whether they are in receipt of the unemployment benefit—or, in fact, whatever we call this thing these days; I think it is jobseeker support. It seems to have a whole range of different titles, but it is what we know as the support that people get if they have children—in particular, with this bill—and they have not got employment. It does attempt to actually get these two things lined up together, so that there is not an incentive for people to give up the future that comes with being in full-time study and instead go on another payment.

However, I do have to agree with the contribution made by Jacinda Ardern previously that it does actually show a very miserly approach from the Government to this particular part. Let us remember that the people who are going to be in receipt of this payment, which is described in Part 2, are people in the most dire hardship. These are families in the most dire hardship. The reality is that the $25 a week is not actually going to lift them out of poverty, because they are so far below the poverty line that they are not going to be lifted to being even close to getting out of poverty. So let us just remember it in that context, and then let us apply Part 2 to that, because, effectively, what it is saying is that people will get a Consumers Price Index adjustment to their student allowance before the $25 is applied to it.

I just want to quantify that a little. The Minister will have the actual figures, so I would ask her to share those with the Committee, but what is the impact of putting $25 on to the base rate first, before the Consumers Price Index is adjusted? At the moment, I believe, the Consumers Price Index is running at something like about 0.4 percent; it is certainly below 1 percent. On 1 April next year it will be expected to be running a great deal higher—well, we cannot look into that particular crystal ball and know, but let us imagine that it does creep up to, say, around 1 percent Consumers Price Index. One percent of $25 is 25c. That is, effectively, what we are quibbling over, here in Part 2. We are taking this debate up, quibbling over the people in the most dire need perhaps getting 25c, or less, more than if Part 2 was not there at all.

If Part 2 was not here, the impact would be that the $25 would be applied to the student allowance first, before the 1 April Consumers Price Index adjustment was made. I just want members opposite to reflect on that. We are quibbling about less than 25c, and it does not seem to me that that would be an awful lot to ask. But instead—I would hate to think how much time we spent on the officials getting the wording right to avoid that additional 25c payment, because it is going to happen once, and once only, and that is on 1 April next year.

We have already addressed that in the previous part, when it comes to the—what is it called? Is it called the supported living allowance? No—what is it called?

Jacinda Ardern: The supported living payment.

SUE MORONEY: The supported living payment, thank you. We have already done exactly the same measure for that, and now, in Part 2, we are applying it to the Education Act with regard to the student allowance. But in both of those instances we are talking about a tiny amount of money, and probably an awful lot of energy and time. It would be interesting to know the costings of how much time officials spent on coming up with this drafting to avoid that small amount of money.

I am speaking in support of the bill generally. I do not see that Part 2 actually adds much value. In fact, it takes away a small amount of value and takes an awful lot of words to do that. Maybe the Government thinks that it is somehow double-dipping, but in fact the $25 should be applied to the base allowance, and that should have the Consumers Price Index adjusted to it, as well.

Hon DAVID CUNLIFFE (Labour—New Lynn): It is a pleasure to take a call in this Committee stage of the Support for Children in Hardship Bill. I have got a couple of points to make on this small part, Part 2. The first is one of construction and drafting, and the second is a general point about Part 2’s interface with student support in tertiary education.

Firstly, it is a common feature of this debate that the Government’s moves here have been designed to give the impression of relief from poverty, rather than necessarily being the best-designed, actual impact. When we review the drafting of clause 12 in Part 2, we see, partly, how this smoke and mirrors is constructed. If I read from subclause (1), which inserts after section 303(3B) a new subsection (3BA)—and people at home may have an interesting time trying to follow this—this relates to beneficiaries who are on a student allowance. It is designed to transfer the $25-a-week increase to their allowances and to avoid double-counting, which you might say is a reasonable aim. But the way this is drafted is just—arcane would be the nicest way to put it.

It says: “Despite subsection (3B), if any rate of student allowance is increased on 1 April 2016 by regulations (regulations A), not being the regulations required to be made under subsection (3B) that come into force on 1 April 2016 [which of course are] (regulations B), then—(a) regulations A come into force immediately before regulations B; and (b) the adjustment to the rate of the allowance required to be made by regulations B is to the rate as at 31 March 2016; and (c) the amount by which the rate of allowance is increased by regulations A is added to the adjustment made by regulations B.” I am sure everyone at home has followed that—it is complete gobbledegook.

It may be logically and semantically correct, in that it does partition the time periods and applies the increase, but my goodness me, if this was a Government committed to plain English drafting and transparent policy, it has got to fail that test, unless everybody has got a PhD in legal semantics. But, of course, that belies the broader point, which is that this is a bill that, in the same spirit of obfuscation, gives and takes away at the same time. It ostensibly gives $25 a week, but, as our colleague Jacinda Ardern has rightly said, it would have been better to put that just straight into the base rate. As my colleague Sue Moroney has said, the net impact on poverty reduction is actually minuscule, and, therefore, this is a fairly expensive glossy public relations piece, but does nothing much to achieve its aim.

But I want to draw out the implication for tertiary education, because, of course, this applies to solo parents struggling—as I think we would all commend them for—to get a qualification so that they can get a job and get off the benefit. The fact is that some 90 percent of children who are in severe hardship are in solo parent families—single income families, and often beneficiaries. That is just the reality. We all know that costs for solo families are harder to afford. You have got only one income earner, but most of the same costs, such as the roof over your head, the groceries—kids eat a lot—school fees, uniforms, project costs, you name it. Now, of course, you really need a computer to take to school. So those costs seem to be going up and up and up, and parents are finding it harder and harder and harder. So that is one thing.

The second thing is that, in terms of this application in Part 2 to part-time students, there are going to be more people in that category, because we all know, in terms of the future of work, as has been studied by Labour’s Future of Work Commission, that jobs are changing. We are not going to see people with one career for the whole of their lives. We are going to see people with five, 10, 15 different jobs, just because the nature of the job market is changing. This is not to mention the fact that solo parents are often casualised, vulnerable, in part-time employment, with no protection from employment rights. The law changes under this Government have made that so much worse. Solo parents have become so much more vulnerable.

What is the Government’s answer to that problem? Well, it is right here—it is right here. You get the twenty-five bucks a week, but the solo parent now has to go to work when the youngest child turns 3, not 5—3 not 5.

Dr PARMJEET PARMAR (National): Thank you for the opportunity to take this call on the Support for Children in Hardship Bill, in the Committee of the whole House. This bill is to support children in hardship, and especially children in low-income families. This is for benefit-dependent families and families dependent on student allowances. We know that two-thirds of children in material hardship are in benefit-dependent families, or in some kind of other benefit-dependent families. This is in the evidence that shows that we need to focus on those families who are on low incomes. This bill is to give an increment in the base benefit rate, after tax, of $25. In Part 2 it matches that increment with the student allowance. I am not going to list the things that people can buy with this $25, but I totally trust those families to make wise decisions for their children and their families.

This bill is a very fair bill because we are giving an increment in the benefit rate. We are also matching it for the student allowance because we do not want people receiving the student allowance to feel that they are being disadvantaged because they are on a student allowance. This increment will be achieved through regulations. This bill amends the Education Act 1989 to ensure that the increase in the student allowance rate is not subject to the annual New Zealand Consumers Price Index adjustment, which is on 1 April 2016. So this increase will be on top of that.

We want parents to be in education, we want parents to be in some kind of training, and then we want them to get into jobs. That was recognised by submitters during the select committee process. Submitters recognised that the employment of caregivers was an important factor in reducing the poverty and hardship of children in low-income families. Submitters also recognised that currently in New Zealand the poverty rates are the highest in families where no adult is in paid employment. It is important that parents are in education and some kind of training so that later on they can get into some kind of employment. It is good for the family—for parents and for children as well, in the long run.

I have heard a lot about the part-time work obligation for sole parents. That is actually a step in the right direction. We have seen the numbers, which show that when there is encouragement for sole parents, they do get into work. It is about providing the environment that encourages them and assists them to get into work. I have also heard the argument that different families have different kinds of circumstances, and sometimes children at the age of 3 are not ready to be at an early childhood education centre or a day-care centre. My opinion, as a mother of two children, is that children will never be ready if we do not train them. As a mother, I remember when I used to drop my boys off at the day-care centre. It was not easy for the first 2 to 3 weeks. It was not just me; other parents were going through the same kind of phase. We used to hide and watch our children. Once we were convinced that they had calmed down, we would go to work.

When I used to drop my boys off at the day-care centre, I would see some children there who were much younger than my boys. That gave me a sense of what those people felt about being financially independent. This bill is about helping people, encouraging people, to become financially independent. Childcare assistance—yes, it is important if we want people to get into training or education.

The CHAIRPERSON (Hon Trevor Mallard): I am going to interrupt the member. I will apologise because I think that at least one of the speakers before her went quite a long way off the point on this particular part of the bill. She is going further off it, and I would like to bring her back to Part 2 of the bill. Thank you.

Dr PARMJEET PARMAR: Thank you, Mr Chair. Yes, I was responding to the previous speaker. Yes, Part 2 is about amending the Education Act 1989 and also matching the $25 increase through regulations.

The other thing that is related to this part is that it is important that we are fair with people—those who are receiving a benefit and those who are receiving the student allowance. We do not want people—those who are receiving the student allowance—to give up their student allowance and go on to a benefit because of the $25 increment that people are getting because they are on a benefit. This bill, overall, is to encourage people to get into training and jobs, and for that—

STUART NASH (Labour—Napier): That was quite an interesting speech. I mean, I have got four children, and I would not say I ever trained my kids—

Hon Member: Or chained.

STUART NASH: —or chained—certainly before the age of 3. I think I understood what the member was saying, but I am not too sure.

I would like to speak to the amendment to the Education Act 1989 that is found in Part 2. One of the reasons I decided to jump up about this is that I am passionate about education. I actually think education provides opportunities for people where opportunities would not exist if they were not educated. I have a poster in my office. It is a quote from Malcolm X and it says: “Without education, you’re not going anywhere in this world.” He said that in 1963, and I think that is truer today than it certainly was a generation or two ago, when the Minister was just starting out in work.

The other thing I would also like to say is that we know the cost to society of someone who is on the unemployment benefit versus the contribution that that person makes when they are working. But the cost and the contribution are not necessarily measured just in financial terms; they are also measured in societal terms. Let me give you an indication of this. There is a whole lot of research out there that indicates that when parents are working in meaningful jobs—or in any job, I should say—the impact that has on the children is significant in terms of role models, in terms of quality of life, and in terms of all the things that children actually need in order to have the opportunity to be high-functioning adults as they mature.

I would argue that not only should there not be any differentiation between the unemployment benefit versus the student allowance but I believe there should be a significant benefit for people who have children and who have decided to go back to study. It is a massive—

The CHAIRPERSON (Hon Trevor Mallard): I am now going to interrupt this member and say that this is quite a narrow part of the bill. He is making a really interesting speech, as have previous speakers, that could almost be applied to the second reading, but it might even be out of order at that point. So I ask the member to come back to this part of the bill.

STUART NASH: Thank you, Mr Chair. I suppose what I was trying to do was paint a picture.

This part of the bill talks about Consumers Price Index increases and how the Education Act must be amended to put this bill into force to allow that to happen. If you look at section 303(3B) of the Education Act, the amendment in clause 12 is inserted after section 303(3B) of the Education Act, and new section 303(6) says: “Subsection (3BA) is repealed on 30 April 2016, and this subsection is repealed immediately after.” But I suppose what I was attempting to do was highlight the importance of education to society, and just say that any changes made under any legislation, whether it be the Support for Children in Hardship Bill or any other piece of legislation before the House, should, I believe, take into account the overall benefits—not just the fiscal costs but the overall benefits—to society and to those children in hardship.

We are talking about student allowances here. We are talking about Consumers Price Index adjustments, and it is not a major amendment in this bill. It is not as if we are taking the Education Act 1989, which is, in essence, a very large piece of legislation that has been amended many times, and overhauling it. What we are, in effect, doing is taking just a little subsection of this to make sure that we do address the issues of support for children in hardship.

I do not think—and I think it is agreed by everyone—that there is a greater challenge in society today than supporting children who are in hardship. We had the Children’s Commissioner address some of the caucus members earlier on today. We all know that he is doing a fantastic job in terms of highlighting the issues of children in poverty and child poverty and doing what absolutely needs to be done to raise awareness and lift these children out of that. Education is a way to do that, and certainly education of the parents is vital in creating work habits that will lead these children to, you know, create work habits themselves, I suppose.

So I would have liked to see greater amendments being made to the Education Act 1989, to be honest. I would have liked to see the Government go a lot further. I would have liked to see a much higher incentive between the unemployment benefit and the student allowance for parents with children. The reason for that—

CARMEL SEPULONI (Labour—Kelston): That was a very good contribution from my colleague Stuart Nash. Thank you very much, Stuart Nash. I just want to refer to the departmental disclosure statement for the Support for Children in Hardship Bill. That states clearly that: “The Bill also makes a number of consequential amendments that result from the increased benefit and tax credit financial assistance and extended work availability obligations. These changes”—as discussed by some of the people in the Chamber—“include: an amendment to the Education Act is required to provide that the Student Allowance CPI adjustment is applied to 31 March 2016 allowance rates before the Package increases to those rates are made on 1 April 2016.” As I have said earlier, and as I have pointed out, many of the submitters were supportive of this because they did not want sole parents who were studying to be disadvantaged in any way, compared with those who may be on the benefit and not yet in work or in study.

But there were a number of submitters who looked at this in relation to the in-work tax credits situation. Whenever this came up we had a number of submitters who also pointed out something needed to be done with tax credits. So we had the New Zealand Federation of Business and Professional Women Inc., which welcomed “the amendments to the Education Act that also allows an adult parent continuing their education, who is also classified as low income to be eligible for this payment of $25.”, but they “would also like to see this group of New Zealanders entitled to the same work tax credits as those not choosing to further their education.”

So that is really interesting because it is not just the New Zealand Federation of Business and Professional Women Inc. that supported that but also the New Zealand Council of Christian Social Services. It thought that “In the context of this bill it would be reasonable to assume the targeted children living in smaller households are more likely to benefit from any additional income received through the proposed policy levers.”—so the benefit rates being lifted by $25; Working for Families, $12.50; childcare subsidy, a slight increase there; and student assistance—“when compared to the same targeted group living in a larger household”. But it did point out that: “In short, the bigger the family/whanau the tighter the financial stretch across each family member.”

So the Education Act will be amended to ensure that the $25 increase goes to those sole parents who are studying, but the same issue is in place for those students—that is, that the bigger the family, the more children in that family, and the tighter the financial stretch. In fact, the New Zealand Council of Christian Social Services pointed out some research by Michael Fletcher, who is a senior lecturer at Auckland University of Technology. He writes in his analysis of the full package that “a sole parent family with two children will still be around $77 per week below the lowest poverty threshold measured by the Ministry of Social Development”, and that is something that I think we should all be concerned about.

Although the New Zealand Council of Christian Social Services supported the proposed increase to the benefit rate, it felt that it did have the potential to create more complexity in the system, which could undermine the intent of the Bill, so we need to take that into consideration. It also pointed out the fact that $22.456 million over 4 years is identified as the implementation cost of introducing the proposed changes—across the benefit system and across the allowance system. It highlighted that this came up in the regulatory impact statement and that this is really a substantive amount of public money that the New Zealand Council of Christian Social Services felt might have better gone directly to the children who are in need. So the New Zealand Council of Christian Social Services recommended that the number of children in a household be incorporated into—

The CHAIRPERSON (Lindsay Tisch): Tie it back to Part 2.

CARMEL SEPULONI: Yes, sure—so that it was not just a $25 increase for students on a student allowance who were sole parents with children or for sole parent beneficiaries; it was not just $25, in the amendment, that was given to them, but that it would be $25 per child. Obviously, that would have had an impact on Part 2—

The CHAIRPERSON (Lindsay Tisch): We are discussing amendments to the Education Act. That is what Part 2 is about.

CARMEL SEPULONI: That would have had an impact on the amendments to the Education Act, because we would not be amending it—

SARAH DOWIE (National—Invercargill): I move, That the question be now put.

Motion agreed to.

Part 2 agreed to.

Part 3 Amendments to Inland Revenue Acts

JACINDA ARDERN (Labour): We come now, in Part 3 of the bill, to the amendments that relate to the inland revenue Acts. There has not been a significant amount of debate in this Committee on these elements of the bill, but what we are debating does affect the current in-work tax credit, the minimum family tax credit, and some of the abatement rates and thresholds—so all of those, obviously, relate to the inland revenue Acts.

I thought what may be most useful in my contribution on Part 3 is to reflect on some of the analysis that was carried out by submitters for this part of the legislation because, obviously, what I think we all need to concede in this Committee is that we do have a relatively complex range of tax credits in this space.

What is clear when you are debating any kinds of changes to family support is that they are not particularly well-known or well understood. For instance, the Working for Families tax credit package is often just known for the in-work tax credit, but that is only one element of that package. There is also the family tax credit, which, obviously, applies to beneficiaries, and there is the overlay of a minimum family tax credit, which exists to ensure that the minimum amount a family will receive in work is above the benefit rate. Overlying all of that, of course, is the abatement regimes that apply to all of those tax credits and so on. It is a reasonably complex environment that this new change has come in and added itself to. So it is good, I think, if we reflect upon the analysis provided by some of those submitters.

So, as I said, in Part 3 we are looking at three elements: the in-work tax credit, the minimum family tax credit, and abatement. When it comes to the minimum family tax credit, as I said, this provides a guaranteed minimum level of after-tax income to low-income families in full-time work. There is this assumption that if you are in full-time work, you always need to be earning above a benefit rate in order to create the incentive to be in work rather than on a benefit. That incentive is inherently built into our system. I think we should be really clear on that.

In fact, most of the analysis around the gaps between benefit rates and rates in work demonstrate that a significant gap has actually grown into our system—a significant gap—which is why it is so hard to adjust child poverty rates. In fact, I would be really interested to hear the Minister’s view on the role of the minimum family tax credit now, because the analysis by the Child Poverty Action Group suggests that we have about 4,000 families receiving that tax credit of roughly $12 a week. So it is a minimal payment for a small number of people, which I think demonstrates that, inherently, our system does make sure that there is a significant difference between what you receive in work and what you receive on a benefit, and I would say that that has to be credited to some of those tax credit regimes already in place.

Putting that aside, let us come now to the in-work tax credit and the question of whether the Minister considered removing the minimum family tax credit and perhaps just bolstering, for instance, the family tax credit generally. I would be really interested to hear that.

The in-work tax credit, obviously, has not been a credit that is without controversy, but the Children’s Commissioner supported in his submission the increase in support for Working for Families. He was of the view that the increase to the per-family rate of the in-work tax credit would be unlikely to make a significant impact for children in larger families. This comes back to the point we were making earlier that, in our view, any change the Government was going to make—whether it was $25 a week to the base benefit rate—should have been per child. I think that is a position that is being endorsed here by the Children’s Commissioner. The Diocese of Christchurch Child Poverty Advocate submitted that the increase in Working for Families was, in its view, minimal and unlikely to make a significant impact.

I guess our view, again, would be shared—we are in support of any increase in those base rates. The in-work tax credit, we need to keep in mind, though, is obviously about creating that differentiation between benefit and work, so it is benefiting those who are in work. The point we probably need to make there is that those in work are often still in poverty as well, so we cannot, I think, make the simple assumption, as the Minister and others have claimed, that work is the sole answer. We know that it is not, necessarily.

I come to the minimum family tax credit. I have already spoken on that, so let us actually dodge over that and come straight to the wider issue of abatement and threshold changes. Here, obviously, we are working in an environment where there have been a number of changes already made by that Government to abatement regimes, and one of the points that was made by submitters is that for some this increase will not actually bring those families up to the level where they were prior to the Government’s tweaking with Working for Families and the changes to that regime.

The Children’s Commissioner again talked about changes to the abatement rates, and stated a concern that they would reduce support for low-income families with children. The Children’s Commissioner’s submission noted that the change in abatement rates would mean that families earning over $36,350 would have their tax credits reduced at a higher rate. I think we would all agree that a family earning $36,350 is not a family flush with cash, when it, potentially, is raising multiple children in that situation, and we can add to that high accommodation costs. That is a difficult situation.

The submission also noted that the impact of the abatement rate will be greater than the increase in the in-work tax credit for families over $88,000 per annum, so, overall, the Children’s Commissioner is obviously of the view that the increase in the abatement rate will reduce support for families who are only moderately better off. Again, abatement rates are always problematic. There is always a point at which you have to start putting in a decline, unless you are looking at universality, of course, to some degree. But I think the point that has been made here is perhaps that the point at which it is being added is not the right place. The changes over years that have been made by the Government to Working for Families around abatement have had a cumulatively negative impact for families.

I want to come to the family tax credit, though, because this is the element of the Working for Families package that has the broadest reach. My interest in all of this when this was first put before Parliament was about why the family tax credit was not used as the tool to lift incomes for families on low incomes. That would mean that you would help beneficiaries, but you would also reach families in work who were in poverty. It is a perfect tool.

I asked that question to Mr Perry at the select committee. Mr Perry is, obviously, at the heart of a lot of the analysis around income adequacy in New Zealand and really key to these pieces of research and debate. The response that I got around why the family tax credit was not used instead of just a base benefit increase was that the Government presented a pool of cash that was available and that the package was designed around that. So, rather than coming with an issue and saying “Look, we want to reduce the severity and persistence of poverty for children in New Zealand. What can we do?”, we instead started with a different premise altogether. I think that very much demonstrates why we have the design that we have in Part 3.

As has been summarised by the departmental report, submitters did propose that the family tax credit could be increased instead of the in-work tax credit so that all children benefit, but it is very clear in this part of the report. It states: “In first developing the Child Material Hardship Package, officials considered the full range of instruments available to deliver increased support to children in poverty and hardship. This included a range of tax-credit and benefit change options. Officials were tasked with identifying the most effective and efficient means to provide increased financial support that could be delivered by 1 April 2016, and within a maximum budget allocation of $1 Billion over four years. Officials developed and refined various packages of measures to achieve the desired impact within the allocation and delivery parameters. Ministers selected the option that they considered best met the … intent,”.

Best met the intent? The intent was to do something by a certain date and do it within a certain pot of money. The intent that was never set out was to find which children are to be targeted and why. If that was the case, we would not just have homed in on a change to benefit rates. We would have gone for the family tax credit because that hits poverty. That hits poverty, regardless of the source of income, and you would not then have had to fiddle around with in-work tax credits and deal separately with base benefit rates.

That is the problem with Part 3. It does not use the most useful instrument.

CARMEL SEPULONI (Labour—Kelston): I want to talk a little bit in relation to the submissions and their relevance to Part 3 of this bill. When we were talking about tax credits, we actually had a number of submitters who pointed out issues with regard to tax credits. Some support was provided but also some concerns were raised, so I want to touch on that. I think it is really important that these submitters have their concerns heard during the select committee process, but I also think that when we have their support we should make that known.

We had the Auckland Action Against Poverty group, which said that the $20.11 average benefit increase per week, per family, was welcomed, as was the $8 average in-work tax credit increase per week, per family, but it pointed out the fact that on their own, those increases were insufficient to address hardship for New Zealand children. We had the Child Poverty Action Group discussing the increase to Working for Families tax credits. It stated that “The Bill increases the base rate of the in-work tax credit for low-income working families with children by $12.50 per week from 1 April 2016. CPAG says this reinforces the use of complex work-based measures to meet the needs of children. It would be much preferable to increase the rate of Family Tax Credit by $12.50 so all children benefit.” I wonder whether or not the Minister for Social Development took that into consideration, because it was a point that was raised not just by the Child Poverty Action Group but I also think there were some concerns raised by the Children’s Commissioner as well, along with individual submitters Graham Howell and Malcolm Croft.

When I was looking through Part 3, I did notice the fact that in order to apply this, it is the abatement rate that is being lifted slightly, and I just wanted to point out that we are very supportive of lifting abatement rates. In fact, we had a bill go through the House recently that we were hoping the Minister would support because it could have potentially meant almost $50 extra in the pockets of our poorest families, rather than $25, which we accept is something, but, as we have said on a number of occasions, it is not enough. So I would like to know whether or not the Minister took into consideration any of the concerns that were raised not just by the Child Poverty Action Group but also by Auckland Action Against Poverty, and whether or not their preference, which was to increase the rate of family tax credit by $12.50 so that all children benefit, was ever taken into consideration by the Minister or by the National Government.

Going to the Children’s Commissioner on this particular part of the bill, the Children’s Commissioner pointed out that the gap between market and benefit incomes has steadily grown over the past three decades because benefit incomes are not indexed to the median wage. So I think someone in here pointed out that before benefits were slashed—so, around 1991, I think—they were indexed to around 75 percent of the minimum wage, but it is so far from that now. And I know that the National Government has touted this as some major offering—the fact that it is giving these families an additional $25 each week—and I know the National Government has tried to highlight the fact that this is the first time benefits have been raised, but what the Government has not taken into consideration is that when Labour introduced Working for Families, actually—

The CHAIRPERSON (Lindsay Tisch): Come back to the bill. Come back to Part 3. Come back.

CARMEL SEPULONI: With regard to how it affects these families, when Labour did that, it lifted something like 120,000 children out of poverty. This measure does not lift that number of children out of poverty, and I think that that has to be of concern to all of us. So, yes, I would like to know whether or not the Minister has taken into consideration the preferences raised by the Child Poverty Action Group and any of the concerns around in-work family tax credits, and whether there has been any discussion on that.

JONO NAYLOR (National): Part 2 of this legislation, obviously, is dealing specifically with the changes to the inland revenue Acts and, in particular—

Carmel Sepuloni: We’re on Part 3, Jono.

JONO NAYLOR: Part 3, there we go. Part 3, not Part 2. Part 3 is, in fact, the bit that does deal with the inland revenue Acts. Even if I got the part wrong, at least I got the issues right.

It has got to be fair to say that as well as the significant changes that this bill makes to the payments to families who are beneficiaries, these changes also recognise that some families—even though they are in work in some way, shape, or form—are still experiencing some level of hardship. So this part of the bill is dealing with that part of the equation, in particular, obviously, through the Working for Families part of the programme, because we need to ensure that, actually, we are continuing to work with those families who are finding it hard, whatever situation is leading towards that. So from 2016—next year in April—the low to middle income working families who are not on a benefit will get up to $12.50 a week more through Working for Families, depending on their income.

I have heard a number of comments from members across the other side of the Chamber this afternoon, basically calling that amount insignificant—calling the $25 insignificant. They have talked about the price of cheese, they have talked about the price of eggs, and they have said that this is not necessarily going to simply lift people out of poverty. I do acknowledge that for some people $12.50 does not seem particularly significant, but I can say that, actually, for some people $12.50 is significant and it does make some difference.

No one has said—no one has said—that this bill is the silver bullet to solving child poverty in New Zealand. It is part of a suite of things that are being put forward. It is part of addressing the issue. It is part of a measured approach in changes to our benefit system and to our taxation system to ensure that we can provide some level of extra assistance.

I can tell you that for the first 4 years that my wife and I were raising our children, our primary source of income was the student allowance. That made things pretty difficult, but, actually, after being dependent on the student allowance, we were then dependent on a social worker’s starting-out salary, and we were grateful for the extra assistance that we got, when things were tight at that time, through this Working for Families.

That is a few moons ago—I know a bit of water has gone under the bridge since then—and it is appropriate, now that we have been able to get things into a place where we can afford to lift those amounts, particularly by increasing the in-work family tax credit by $12.50 and also through the minimum family tax credit, to ensure that some of these families are going to get that little bit extra. In order for us to do that, obviously we have got to put that in the context of everything else that this Government is doing.

This is not a silver bullet and this is not a one-off thing that is happening. This is part of a suite of measures that this Government has been putting in place to actually address some of the issues that need to be addressed, and this particular bill needs to be seen alongside those things as well.

JAN LOGIE (Green): I rise to take a call on this bill, on Part 3, and look at the changes to the family tax credit. In my contribution I would like to draw heavily from the submission from Susan St John and the Child Poverty Action Group, which was supported by other submitters, at least in part. She pointed out that this aspect of the bill was where the Government decided to increase the discriminatory aspects of Working for Families. We have already had a case that the Child Poverty Action Group took to the Court of Appeal that established that Working for Families has elements that are discriminatory—discriminatory against children whose parents are out of the paid workforce.

This bill increases that discrimination because the aspects of Working for Families that are available to children whose parents are not in work have not been touched in this aspect of the bill. So what it does is it provides an extra $12.50, not to all poor children but only to those whose parents are in 20-plus hours of paid work a week. It will increase their income from $60 to $72.50, which is just an inflation adjustment, in actual fact, she told us. So although the Government is telling us that here it is targeting its support and helping these families out, this is an inflation adjustment. This is the extent of this Government’s support for struggling working families and child poverty.

So this minimum family tax credit will apply to only 3,500 families, which is hardly a significant number when we are looking at the scale of child poverty in this country. I really do think that it needs to be pointed out that Jonathan Boston did say that it may—and that is underlined, “may”—have a positive impact on child-income poverty rates and deprivation rates, but the impact is likely to be very marginal, and, again, that is underlined. So that is a problem. This is doing nothing, really, to address the absolute real tragedy that is going on in our country at the moment.

But there is a part of this that I think galls me even more and made it very difficult for me in terms of our vote. It is that the Government is taking from poor families to be able to deliver this inflation adjustment. The Child Poverty Action Group was saying that by its calculations, a family earning the minimum wage and working 60 hours a week on $46,000 a year is about to be $2,225 a year worse off in real terms as a result of these provisions. So here we are, giving $12.50 a week extra to children who have parents who are working, entrenching inequality and discrimination and giving just a small amount of help, and that money is being taken from families who are also struggling. To me that is actually just unconscionable. It does not make sense in terms of ensuring everyone in our society is able to participate.

I think, also, if you look at the wider perspective in terms of New Zealand’s support for Working for Families, which is supposedly a large part of this Government’s policy intent—to get people into work you need to recognise that there was a 2011 OECD report that found that New Zealand’s childcare subsidies are the most tightly targeted towards low-income families of all the 30 developed nations and that we have no tax-free threshold for low-income earners. And that 2012 OECD report found that a Kiwi couple with two kids aged 2 and 3 where one parent earned the average wage and the other earned two-thirds of the average wage would lose 97.9c out of every extra dollar from the second earner’s wage via a combination of childcare costs, reduced tax credits—which are being changed in this bill—subsidies, and higher taxes, excluding petrol and other costs. Effectively, taking in the other costs of work, that person is working for less than nothing.

This is a Government whose policies supposedly support paid employment. This is the worst outcome for any of the 34 countries listed, and is compared with an OECD average of 57c in the dollar. Did you get that? It is 97.9c in the dollar compared with the OECD average of 57c in the dollar. That is this Government’s approach to supporting our families. Rather than the Government focusing on making that better, supporting these families and rewarding work where it is appropriate and making sure that we have a strong safety net, it has actually made things worse. The Working for Families tax credit used to be indexed to the Consumers Price Index, but since the law change was made in 2011, families have had to wait until inflation reaches 5 percent before there is an increase to their Working for Families payment. This has already saved the Government, it is estimated, over $1.1 billion. My understanding is that that is significantly more than the cost of this entire child hardship package.

So when the Government is telling us that it cares about child poverty and it cares about the fact that there are children in this country without shoes, without three meals a day, without a bed of their own, and without the family being able to buy them presents on their birthday and that there are children who are worried and excluded at school and who cannot afford to go on school trips or attend any events—when the Government tells us that it cares about that, actually, we need to look at what it is prioritising. If this bill is its main initiative and it is spending less on it that it has saved in the changes to Working for Families, then I have got to say that I am struggling to find that credible. I really am very clear that this is not delivering on what New Zealanders have told us they want for their children.

The outpouring of grief, as I think you could describe it, from New Zealanders in response to the campaigns around child poverty, and even feeding children school lunches—which would not have been very expensive either, but which somehow this Government could not bring itself to support—has been clear. New Zealanders want a society where every single child has the opportunities to succeed in life. This bill is not delivering that. This bill—

The CHAIRPERSON (Lindsay Tisch): Come back to Part 3—back to Part 3.

JAN LOGIE: —is ensuring that those barriers are kept in front of our children. It is preventing many from succeeding and, sadly, it is entrenching inequality and discrimination, which is not justified by any means, from my perspective.

IAIN LEES-GALLOWAY (Labour—Palmerston North): I raise a point of order, Mr Chairperson. Sorry, but we have had a couple of messages from people watching Parliament on television, saying that there are some issues with the sound system. I was just wondering whether you could get the technicians to check that out.

The CHAIRPERSON (Lindsay Tisch): Thank you. Through the microphones, I take it? I will just ask the messengers. Thank you very much.

POTO WILLIAMS (Labour—Christchurch East): I am going to take just a short call on this because, as you would appreciate, the amendments to the inland revenue Acts are not my strong point. However, I do want to talk about clause 15, which amends the abatement rate, and also clause 14, which is the base rate for the in-work tax credit. Some of the submitters spoke at length about the in-work tax credit and the inability of the in-work tax credit to do anything significant to address the issue of child poverty in New Zealand. One submitter actually stated that the use of the in-work tax credit has, among other things, raised human rights concerns that have necessitated complex adjustments to the tax system. They went on to state that consideration should be given to the Child Poverty Action Group’s recommendation to increase the rate of the family tax credit so that all children benefit.

When I look at page 31 of the regulatory impact statement, which sets out the table of the impact of the package on household budgets in relation to in-work tax credits, family tax credits, accommodation supplements, childcare assistance, and the like, it is obvious that this bill is going to have a minimal effect on actually raising incomes for those families. This is because, regardless of whether you are receiving an in-work tax credit—you know, if you are working 40 hours of the week and have four children—you are, on average, going to receive an increase in your net household budget of $17.50. In fact, across all of this table, regardless of whether you are a job seeker, a couple working 40 hours between you, or a sole parent on sole parent support, the rate remains around the $17.50 mark per week, except if you are a couple working about 60 hours between you, which means you also get $30.50 for childcare assistance.

But I want to qualify that with the statement that is made above this table. It states that this table has been presented based on the assumption that in all cases the wage rate is $15 an hour, and the family is based in South Auckland and paying close to a median rent for suitably sized accommodation. Well, I would have to argue that in relation to the cost of accommodation in South Auckland in particular, and Auckland in general, that $17.50 makes very little difference. In fact, families will find themselves in a negative position in relation to the cost of accommodation.

So although the Government members have said that this is part of a suite of measures to support children in hardship, there has not been anything demonstrated to date that would actually address the significant impact of accommodation costs on families, particularly if we are talking large numbers of families in South Auckland, who are purported to be supported by this bill. That is my contribution. Thank you.

The CHAIRPERSON (Lindsay Tisch): Sorry, members, there is a problem with the sound on Parliament TV and the web streaming. Technicians are working on that to resolve the issue, so thank you for bringing it to my attention.

STUART SMITH (National—Kaikōura): It is a pleasure to rise and speak to Part 3 in this Committee of the whole House stage, which relates to the inland revenue Acts. I have listened with interest to some of the contributions coming from across the Committee this evening. I think it has been quite interesting. I note one of the speakers pointed out that submitters were grateful for the increases but did not feel that they had gone far enough. I think that that actually lines up with quite a few of the Opposition’s contributions this evening. I think that is quite ironic because that particular party had 9 years in Government and chose not to do anything about it. [Interruption] They may well yawn, but, really, it must be a real source of embarrassment for them when we come to Part 3.

Part 3 deals very much with how people receive their abatements and so on. We have also heard quite a number of contributions about what is the best way to deal with raising these particular benefits for those people and saying that it does not go far enough because it does not get up close to the wages of people working. But that is the point. Really, benefits are there as a safety net, and the benefit to families and children living in a family where their parent or parents or caregivers are working—that example that they see every day is worth lots and lots to those people, which cannot be measured in dollar terms. I think that that has been completely forgotten by the other side.

It is very easy to complain. One person alluded to a bill that would have added $50 a week to the abatement rate. That is all very well if you do not have to balance the books. And what about the people who are out there working and showing that great example to their families about what the benefit of a day’s work is? When you have earned the money yourself, it is worth far more to you, and you will spend it more carefully than something that is given to you, which, actually, tends to have not much value at all.

I really was quite interested in the arguments about the vehicle for increasing benefits, because you can go backwards and forwards across it, but Ministers considered this very carefully. The Minister herself has spent a lot of time on this bill. She has talked to officials who have done a lot of work on this, and I was very impressed, when we had them in to the Social Services Committee, by the breadth and depth of their knowledge on this particular issue. When we had some thoughts from them rebutting some of the evidence given in the select committee, it was pretty clear that the solution that was chosen was the one that is most appropriate and delivers the best solution, given what is the aim of that—that is, not to take it right up to the wages that people are earning because, actually, that is not the right incentive that we should be sending. I support that, and I think that is brave and that is leadership, but that is exactly what people elect Governments to do—to lead and make tough decisions. I commend the Minister for taking that stand and for going to such a wide net and then pulling it back into what is actually going to give an elegant solution to raising benefits. First time in 43 years—I think that deserves a round of applause, almost, but I am sure we will not get it from members on the other side of the Chamber.

I also am quite interested that the Greens were quite adamant about how these things keep missing out and how they were not quite enough. All of these submitters who came in seeking more increases and greater solutions in that area—that is their job to do that, to advocate for as much as they can get, and to go past what is actually needed to try to get more. That is their job. I am very happy to commend this bill to the Committee. Thank you.

IAIN LEES-GALLOWAY (Labour—Palmerston North): I must respond to the previous contributor, Stuart Smith, who said something like Labour had 9 long years to do something about child poverty. Well, Working for Families raised over 100,000 children out of child poverty. The leader of the National Party, John Key—I think he was the finance spokesperson at the time—called it “communism by stealth”, and National voted against it. And, of course, Labour’s policy at the last election would have raised over 50,000 more children out of poverty—far more significant than any aspect of this legislation.

But let us look at Part 3, in particular, because Part 3 deals with the family tax credit and the thresholds. By any measure, the increases that are available to people under Part 3 just do not touch the sides—4,000 families. Four thousand families, so—what are we talking—8,000, or maybe 10,000 children at the most, will be entitled to an extra $12 a week, and that is at a cost to the Government of $1.8 million annually? This is a Government that is spending $26 million on a flag referendum and that gave $30 million to a foreign corporate—

The CHAIRPERSON (Lindsay Tisch): Come back.

IAIN LEES-GALLOWAY: —and its response in Part 3 of this legislation is to spend $1.8 million annually? So it will take at least 13 years for this measure to get on to a par with a flag referendum?

The CHAIRPERSON (Lindsay Tisch): Come back to Part 3.

IAIN LEES-GALLOWAY: That is not an adequate response to child poverty. It is rich for a member on the Government benches to get up and say that they are doing more than other parties have done when we have been in Government when that party, in Opposition, railed against measures that had a far more significant impact on child poverty, and poverty in general, than this legislation does.

The increase of $12.50 that a handful of families is going to be entitled to under Part 3 is, essentially, an inflation adjustment. It is something that probably ought to be just built into the system anyway. It is not an increase in real terms. It is helping a handful of families to catch up with some of the increases in the cost of living. As I say, it certainly will not touch the sides. The difference that this will make is utterly negligible. If I was one of the National members, I would be ashamed to get up and speak in favour of these changes in the way that they have done, because in real terms the difference that people are going to experience is utterly negligible. At best, you could say it is assisting families to catch up with the cost of living over the last few years.

Of course any change in the right direction is worth supporting, but let us be honest about what this really is. The minimum family tax credit is highlighted with these changes, and, of course, one of the big problems with the minimum family tax credit is that there are points where it has a nearly 100 percent effective marginal tax rate. I have said this before about other legislation relating to these issues: I would have thought that National would want to do more about marginal tax rates, especially for people on the lowest incomes and especially for people who are trying to transition from benefit into work or who are trying to make work a larger proportion of the income that they receive. National rails against effective marginal tax rates for rich people, but when it comes to these people, the people who are trying to scrape by on the very least and, in particular, families—people who are trying to raise children on the very least—this Government shows, again, utter inaction.

The CHAIRPERSON (Lindsay Tisch): Members, I would just like to mention that the sound issue seems to be resolved now.

MATT DOOCEY (National—Waimakariri): I move, That the question be now put.

A party vote was called for on the question, That the question be now put.

Ayes 75

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

Noes 46

New Zealand Labour 32; Green Party 14.

Motion agreed to.

Part 3 agreed to.

Schedule

The question was put that the amendments set out on Supplementary Order Paper 132 in the name of the Hon Anne Tolley to the schedule be agreed to.

Amendments agreed to.

Schedule as amended agreed to.

Clauses 1 and 2

JACINDA ARDERN (Labour): I want to make a short contribution on this part of the Support for Children in Hardship Bill because clauses 1 and 2 have been controversial, particularly clause 2, which is, obviously, the commencement date for this bill. For those who may only just be tuning in to this debate, we are actually debating a policy that was announced at the last Budget—so, some months ago now—and we are debating a commencement date for this piece of legislation that means that this benefit increase will not kick in for those who are in the most significant hardship until April 2016. Obviously, the point of contention for members on this side of the Chamber has been that, yes, we support an increase in benefit rates for those in hardship—absolutely. Our argument has been around the adequacy, and perhaps the way that that increase has been designed. But what was not in question for us was that the need was immediate—the need was immediate. In fact, it has been in place for some time now.

Again—I have to come back to this, because it has been raised continually in this House—it has been lauded as the first benefit increase in 40 years, but that is not correct. Working for Families increased benefit rates when it was introduced under the last Labour Government—

Jono Naylor: Your deputy leader agreed with us.

JACINDA ARDERN: —via the family tax credit. What was that, Jono Naylor?

Jono Naylor: Your deputy leader agreed with us in her speech on Part 2.

JACINDA ARDERN: But am I getting a concession from the Government yet that benefit rates were increased? Because the one thing that I will add as a caveat to that is that we always said—and this was said first by Annette King when she was the spokesperson in this area—that we had unfinished business. No one on this side of the Chamber is claiming that Working for Families was the beginning and the end of everything that we had to say on poverty and inequality issues in this country. It was not, but it was a damn good start, and it was a necessary start, and a concession that it was a necessary start is the fact that the Government has not repealed it. In fact, it continues to play with elements of it in this bill.

Our contention has been, when it comes to clause 2, that we needed it right away. We needed it absolutely right away. In fact, as we have always argued in debating this bill, if you were really, genuinely looking at hardship, then you would look at some of the real catalysts for that hardship. Since Working for Families was implemented, one of the massive contributing factors to that growth in hardship—if you look at the income measures around median income and the before and after-housing costs, it tells you exactly what some of the problem is. Some of that problem is the after housing costs, because, of course, in our most populated city in the country and in the South Island, in Christchurch, we have had a significant increase in housing costs. That has taken a disproportionate amount of income out of those low-income families trying to put a roof over their heads, which has exacerbated the issue of income inadequacy. So that is a contributing factor.

The reason I raise that is that Working for Families, obviously, was dealing with income inadequacy across the board, but that has been exacerbated by an increase in housing costs, and that is now a new challenge that we need to continue to address. So these things are never static; they are dynamic, and we need to keep addressing them. What is not dynamic is simply the fact that the need exists, and we need to do something about it with immediate attention. That is why we have a problem with this commencement date. It should not have been delayed. As has been raised in the debate as well, the idea that the Consumers Price Index adjustment will kick in first, then the base increase, and the base increase of $25 will not be Consumers Price Index - adjusted—well, that seems unfair. We are waiting a year for it to be introduced. Why not Consumers Price Index adjust it at the same time?

Speaking briefly, then, to the title clause, this is the Support for Children in Hardship Bill. What undermines the notion of support for children is that, actually, income is one thing; parental support is another. Fundamental to a child’s well-being and their success in life is the support from, and the attachment they have to, their caregivers. We are increasingly becoming aware of the impact and the importance of that relationship between a child and their caregiver. It is known as attachment; it is also known as attachment disorder when it is a poor relationship. The flow-on effects of a poor relationship in that regard are costly to us as taxpayers. It may seem like it is just a relational issue, but, actually, when it comes to things like conduct disorder and behavioural issues, which we as taxpayers end up putting money into from a remedial perspective, we all end up paying for a poor bond between a child and a caregiver. I use the word “caregiver” loosely because we do know that it is not specific as to who that individual needs to be. It just needs to be a trusting relationship and a consistent relationship between a child at a very young age and an adult. In fact, I think it was David Fergusson who estimated that the costs of a poor attachment and potentially, later on, conduct disorder generally can be up to a million dollars per child, so it pays to invest early.

That idea of support is not just monetary; it is about that physical connection with and presence of a caregiver. What this bill does is it gives with the one hand on the income side and it takes away with the other, in the sense that we are now putting in a requirement for that potentially single caregiver to be in work when that child is at a younger age. What we do not seem to factor in is the detriment and the undoing of any positive effect we might have with that income boost caused by the negative impact of that change in threshold.

The use of the word “support” does need to be taken more broadly. As a Labour Party we have always talked about income inadequacy as one issue when it comes to the deprivation that children in poverty experience across the board. But it is not just about money—it never has been—it is about the wider support network that sits around that family and that child. Again, we would have liked there to be more analysis of the evidence that tells us where that support is most needed because we also know, as I mentioned in one of my contributions around where that persistence in severe poverty exists, that it is predominantly in sole parent households. So if you are looking for support for children in hardship as a bill, actually, the support also needs to go specifically to those single-parent households. We know in those cases that, obviously, care arrangements are difficult. They are more restricted. You cannot simply just take in those extra 20 hours of work without thinking about your care arrangements. Again, this is supporting with one hand with the increase of the 25 bucks, but taking away on the other by increasing those hours of work and, potentially, again restricting what that caregiver is able to manage in terms of their relationship with that child.

So I think the title is disingenuous. It is singular in the sense that it is simply about income, and not about that broader support network.

We would also highlight again, I think—because, as I have said, it is not just about income, from our perspective, when we are talking about those families in most need. We make an assumption in our society that a family, particularly, maybe, a sole parent who is raising a child, has a support network. That is not a given. It is no longer the case in New Zealand that you have that village, that community, or even, necessarily, that whānau around you, but this bill is based on that premise. It assumes someone else can pick up caregiver roles when that individual is unable to do it because of work obligations.

All of the policies we have always looked at around income inadequacy and poverty and deprivation have also included what we can do to improve that support mechanism—what role Well Child / Tāmariki Ora can play, what role Plunket can play, and what role can those networks play universally by being in the home, providing that contact with the family to other support agencies to bring in the village that used to exist in raising children but has ebbed away. That is what true support looks like, and if we were genuinely considering a bill that was true to the name, true to the title of “Support for Children in Hardship”, there would be elements of support that went beyond a single child and that would look to the network that exists around that child’s family as well.

STUART NASH (Labour—Napier): Thank you—

Hon Member: Is that it?

STUART NASH: No, no. The interesting thing about this bill, and a number that are before the House—and there will be a bill before the Committee after this one, on tax—is that it seems to me that a lot of tax legislation, i.e., giving the ability to the Government to, usually, take money off Kiwis, is retrospective.

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

The CHAIRPERSON (Hon Chester Borrows): Kia ora mai tātou. Tēnā tātou katoa. Members, we are debating the Support for Children in Hardship Bill. When we adjourned for the dinner break, Stuart Nash had 4 minutes and 45 seconds remaining. He was obviously cut short prior to dinner. He is welcome to resume his call.

STUART NASH: I think I will resume that call. I was sort of cut off in mid-flow, 15 seconds into my speech. What I was talking about is that the commencement date of the bill, called the Support for Children in Hardship Bill, is April 2016, and after this bill, we are about to go to a tax bill, as we have done quite recently in this House, and there are a number of clauses in that tax legislation that are retrospective. It seems a little odd that when we have bills that take money off people or change tax laws, which are quite fundamental to our economy, often they are retrospective, but when we are giving money back to people, and often the most disadvantaged, for some reason there is a big lag before this comes in.

What this bill does is actually give $25 a week to some families, come April 2016. That is not to be sneezed at—$25. It will make a big difference to some families, but the interesting thing about this is that it is not indexed to how many children a family has. So if a family has one child, they will get $25 a week. If a family has six children, that family will also get $25 a week. That does not seem very equitable to me. I am unsure whether that is an unintended consequence. I am unsure whether it is a cruel joke or what the intent behind that is, because if it is an unintended consequence I expect us to be back in this House with another remedial bill within 6 months, remedying that—well, I hope we are.

We are talking about children in hardship. Let us put some context to this. There are 305,000 children living in poverty at the moment. I think we can transpose the word “poverty” for “hardship” because it is pretty much the same. But the interesting thing about this is 60 percent of these are beneficiary families, but 40 percent of these children come from families whose parents work. This is a new category called the working poor.

We had a very interesting meal last Friday, when we gathered a whole lot of old, or former not old—[Interruption]—yes, some of them were Labour MPs to celebrate the 80th anniversary of the election of the first Labour Government. It was interesting because on the placemats we had a Speech from the Throne from Michael Joseph Savage. What he said was that the Labour Government believes that every man—he did say “man”, but I am sure he meant “man and woman”—earns enough money to support a family. That principle is universal, and yet here we are, literally 80 years later, still fighting for the right for people to earn enough money to support a family.

The fact that we have not progressed in 80 years, to me, is a real shame. In fact, you could argue that by the end of that Labour Government, men and women were earning enough money to support a family. I think that was one of the major legacies of that first Labour Government. But now here we are, back in the House, arguing for the fact that people need to be able to earn enough money to ensure that their children have every opportunity to reach their full potential. Every now and again what we hear from people is: “Oh, these people, they earn too much money. They get too much money back from the Government.” The interesting thing about that is that very, very rarely is that criticism heard from someone who has to live on these tax credits.

Parliament has deemed that people have to receive a certain amount of money to be able to live with dignity if they have children. It was passed and it is accepted, but we would argue that at this point in time it is simply not enough money. An increase of $25 a week really does not go far at all, especially if you have more than one child. In fact, if you have a lot of children it does not go anywhere, to be honest. But the interesting thing for me is—and we heard this from some people on the Government benches—sure, this should be enough to support a family, but what it has also got to be is enough to ensure that families can escape that poverty trap.

People in New Zealand need enough money to ensure that their children have every opportunity to be as good as they possibly can be. The travesty of what is happening at the moment is that a lot of our children are not actually afforded that opportunity. The thing that I would argue is that we need to do more to change, to get society back to the conditions and to the principles espoused by that Savage Labour Government in that first Speech from the Throne. It was a fantastic speech.

CARMEL SEPULONI (Labour—Kelston): I just want to discuss the commencement date of this bill and point out that actually the decision to fund this package was made on 21 May 2015—Budget day. That is when the announcement was made. I guess our concern is that the commencement of this bill will not actually be until 1 April 2016. What we are all aware of in the House is that with 305,000 children living in poverty, there was a very real immediate need to address that poverty. With 60 percent of the 305,000 children living in poverty being from beneficiary homes, the Government had a very real opportunity to move this through quickly and to make a very small difference, but, none the less, a difference, in the lives of those children.

We are disappointed with the commencement date. We are particularly disappointed with the commencement date, given that through urgency just a couple of weeks ago we had the Government pushing through the Social Security (Commencement of Benefits) Amendment Bill, which saw a number of people deprived of the opportunity to make claims after they were underpaid because of some technical error over the last 17 years. It is disappointing that the Government uses urgency in those situations, but here we have a very real need—we have 305,000 children living in poverty, with 181,000 of them living in beneficiary homes—and yet the Government did not see it as necessary to try to push this through any faster.

So now we wait until 1 April 2016, and it is an unnecessary delay, because you would not have any opposition from any party in this House if you decided to move the commencement date of this bill forward. That is a concern that I wanted to express. In fact, I want to know from the Minister whether the Minister would consider actually amending the commencement date to bring it forward earlier so that these families may have a little bit more money in their pockets, particularly around the Christmas period and in January and February when the kids go back to school. Would the Minister consider shifting the commencement date of this bill?

The title of this bill is the Support for Children in Hardship Bill. I am just going to put it out there right now and say that, given that it does very little to address the needs of the 305,000 children living in poverty, perhaps a better title for this bill would have been the “Supporting a Few Children in Hardship Bill”. I say that because the Government decided that it wanted to spend $250 million per year on a package that would make it appear as if it was addressing the issue of child poverty, but it picked a measurement of material hardship that really suited its half-baked approach. We see that the Government’s selected measure, which would give it a figure of between 60,000 and 100,000 families—not the household income measure that has been frequently reported in the past, the latest of which shows the number of children in poverty has increased to 305,000—meant that it was choosing the lowest possible figure in terms of estimates around children in poverty, which has also meant that it will be assisting, at the very most, only 18,000 families with children. That is a smidgen of the 305,000 that we know of.

I want to say that it was really disappointing, actually, to hear National MPs like the chair of the Social Services Committee, Alfred Ngaro, use that 100,000 figure when he was referring to children living in poverty, because I am sure that member, like so many other members in the House, knows that that is a major understatement, and he is doing a disservice to those children and those families who are living in poverty.

How much extra do those 18,000 families get? Well, actually, they get $23.10 per family a week. I want to just refer back to what my colleague Stuart Nash was saying—and this is why I think it should be the “Support For a Few Children in Hardship Bill”, which was that, actually, that amount of money is per family. It is not per child in those families, so it does disadvantage those families with more children. It does mean that that small amount of money is going to have to be stretched across these families, and it makes it much more difficult for them to get any benefit out of it.

I want to refer back to the title—the “Support For a Few Children in Hardship Bill”—and I also want to maybe relabel this bill, and what else can I call it? Actually, no, I am going to call it the “Lack of Support For the Parents of These Children in Hardship Bill” because there are measures that this Government has put through that we do not support in this bill. We are forced to support this bill because these families are so hard up that the $25, even though it is only a little bit, is going to be something that will go into their pockets.

But what we are concerned about, in terms of the “Lack of Support For the Parents of These Children in Hardship Bill”, is that we see a Government that is pushing through legislation that has no evidence base. We have the age where work obligations kick in going from 5 years to 3 years, despite the fact that there is no evidence to support that doing that will see these families better off. In fact, when I put parliamentary questions through to the Ministry of Social Development to ask it what evidence it had collected to support the measures in this bill, it has said, over the last 2 years, nothing—no evidence whatsoever. And when we started to look for evidence to see what happens when you impose these types of work obligations on families, what we found is that families can actually be worse off. Families can actually be worse off because what you end up doing is pushing parents out into the lowest-paid jobs, and they can be worse off working than they actually were on a benefit. That is in no way supporting the children in hardship whom this Government says it is supporting.

We have major reservations about extending the work obligations from 15 hours to 20 hours. And our reason for that is currently we know that the parents of these children have access to 20 hours of free early childhood education, but there is also travel time that needs to be taken into consideration. The Government would have us believe that parents could access a childcare subsidy on top of that that would help with the additional hours that would be travel time in terms of the picking up and dropping off of their children, but we have seen evidence this year that shows that once they are off benefit, parents are less likely to access the child subsidy that they may be entitled to access. In fact, I have seen letters to parents where they have been told: “No, you’re not eligible for childcare subsidy because you’re able to access 20 hours free.” It makes absolutely no sense, but I have seen it in black and white. So we have got concerns for the parents of these children living in hardship because they are actually going to be stretched more, and it may impact on their ability to be able to look after their children.

As I said before, in renaming it the “Lack of Support For the Parents and Caregivers of These Children Living in Hardship Bill”, I just want to point out that the National Government voted against a Supplementary Order Paper that I put up that would have put study alongside work obligations, so that these parents would be supported to go into part-time study or to take up part-time work. And the reason that makes sense to us—and I am sure it makes sense to the general public as well—is that actually we do not just want to be pushing out the parents or caregivers of these children living in hardship into minimum wage jobs. Where we can we want to be providing them with the opportunity to upskill, train, potentially increase their earning capacity, and potentially increase their options in terms of getting into more secure work when they go out into the workforce. But, unfortunately, National—so short-sighted—has not supported that Supplementary Order Paper.

In fact, in the Social Services Committee we had National members of the select committee saying: “Well, they can get a student allowance.” They can only get a student allowance if they are studying full time, and that is 32 hours or more. So there is no opportunity here now for these parents to be able to access part-time study—let us say, 20 hours to 31 hours. In some instances that is all that would be practical, perhaps because of the needs of their children, or perhaps because of the number of their children. But it would have made sense for the National Government to support that provision, and as I said, it just goes to show that in many ways this bill should be named the “Lack of Support For the Parents and Caregivers of These Children Living in Hardship Bill”.

We are supporting this bill because of the $25 increase, but we have major reservations that might cause us to rename this bill.

CHRIS HIPKINS (Labour—Rimutaka): I am very happy to take a brief call on the Support for Children in Hardship Bill, when we are talking about the title and commencement clauses of this legislation. I have to say that I am a big fan of the non-political naming of bills in New Zealand. It has been a tradition in the New Zealand Parliament that the way we name bills is that we use factual descriptions for bills in Parliament, not political sloganeering. I think one of the best examples of where you see political sloganeering in the way bills are created is obviously the United States Congress, where you get bills like the No Child Left Behind Bill, which became the No Child Left Behind Act, which does not actually tell you very much about what the bill does.

The point that I want to make is that the Support for Children in Hardship Bill basically creates an expectation around what the legislation is actually going to do that does not necessarily match up with what the legislation actually does. That is one of the reasons why I think the bill is misnamed. In fact, we should just go back to the Kiwi tradition, the New Zealand parliamentary tradition, of naming bills after what they actually do. So in this case it is primarily a bill to amend the Social Security Act. Previously this would have been called the “Social Security Act 1964 Amendment Bill”. That would be what Parliament would have called it. The naming of it as something else actually politicises the title of the bill and therefore creates expectations around it. So it is a marketing ploy rather than a good legislative ploy.

Therefore, the House then brings itself to the question of: well, does the substance of the bill match up to the marketing that we are getting within the title? If we look at it and we say “OK, the bill talks about support for children in hardship.”, one would think that applies to all children in hardship. The estimates suggest that this might apply to 18,000 families with children, and yet there could be up to 305,000 children living in hardship in New Zealand, depending on whose measure you are willing to accept. Therefore, the bill fails at its first hurdle, in the sense that I do not believe that it is appropriately named.

But I actually have a technical issue that I want to get some clarity from the Minister on, and that is to do with the commencement. If we look at clause 2(1) of the bill, where we are talking about when Part 1 comes into effect, it comes into effect on 1 April 2016 if an Order in Council is made under section 61HA(2) of the Social Security Act. Incidentally, section 61HA(2) of the Social Security Act is actually being inserted by this very bill, and that is the point that I am about to come to. If an Order in Council is made under that section, then the Act comes into force on the same date, but Part 1 comes into force immediately before that order.

The reason that is interesting is that it suggests that the Government can make an Order in Council to come into force before this bill has actually come into force as a piece of law. That, to me, seems to be quite an interesting legislative instrument. I suspect that the reason that the Government is doing this is so it can determine what it wants the Order in Council to be on 1 April, when the legislation comes into force, and it is just trying to avoid any sort of legal irregularities around the fact that the Order in Council was made immediately prior to the Act—as it will then be—actually coming into force.

It seems to me to be a slightly interesting legislative instrument. It is the first time that I have seen something like that, which basically gives the Government the ability to make an Order in Council under an Act that has not yet come into force. I just wanted to check with the Minister in the chair, Nathan Guy, that, in fact, the intention in doing this is to ensure that, basically, the Order in Council can be prepared prior to the Act coming into force. But it is just to avoid the technicality, I guess, of the Act and the Order in Council coming into force at the same time, and there potentially being some sort of circular legal argument that somehow invalidates the situation.

The rest of the commencement clause, basically, is relatively straightforward. It comes into force either on the day after on which it receives the Royal assent—i.e., when it is signed by the Governor-General—or on 1 April 2016, which is not unusual when it comes to Social Security Act amendments because they tend to be for the full year. Having said that, I think that some very legitimate arguments have been raised for why we always treat the expenditure side of the equation as coming into force some way down the track, but often, when it comes to the other end of the equation and the revenue generation side of things, the Government seems to be a lot harsher. We dealt with some issues just recently, in fact, where there was legislation that was backdated, and I think that is generally a bad principle.

Overall, I think the bill is worth supporting, because the clauses we are supporting—support for children in hardship is something that the Parliament should take seriously. I am disappointed, in the sense that I do not believe that the bill lives up to the promise in the title. I do not believe it supports enough of the children in hardship. I think it overlooks many of the impacts. Again, let us come back to the title—“Children in Hardship Bill”. Actually, why do children live in hardship? It is not because the children do not earn enough money. It is actually because the parents do not earn enough money to support them, which is another reason why I think—and, in fact, the bill deals largely with parental income issues, and I do not know that the title of the bill adequately reflects what this bill actually does.

If we want to get really serious about dealing with children in hardship, we do have to look very seriously at the fact that 305,000 New Zealand children—if you accept the most commonly accepted definition of poverty—are living below the poverty line in New Zealand. That is a major, major embarrassment to a country like New Zealand, and we should certainly be doing a lot more about that. We need to look at early childhood education and the barriers to participation in early childhood education, and the link between workforce participation and early childhood education. I do not think that those are sufficiently understood yet, and I think we need to look much more closely at those. The bill is worth supporting. It has a lot of gaps in it. It is a start, but it is certainly by no means a big step.

POTO WILLIAMS (Labour—Christchurch East): Tēnā koe, Mr Chair. I will start with the title of the Support for Children in Hardship Bill. Like other colleagues, I want to refer to the word “hardship” within the bill, because over the course of the debate that has become interchanged with “poverty”, “deprivation”, and other words that indicate that our children are actually suffering. However, what has failed to occur in all of the debate is actually some measure of that, or some definition around what hardship might actually look like.

It would appear that hardship occurs to only the 18,000 or so children who are going to be impacted on by this particular bill. That, of course, is not the case when we consider the 300,000-odd children who are living in poverty, which no one in any part of the Chamber is disputing. Calling the bill “Support for Children in Hardship” does cause us to consider whether we should define hardship. Should it become a measure that we then make some advance to ensure that we can reduce those targets, because when you are talking about hardship, or poverty, or deprivation, you cannot ignore the other things that surround the difficult lives that these children have. Perhaps in the title we should be looking at developing words that encourage a suite of responses to these children, such as adequate, warm, dry, affordable housing and such as access to decent education, with all the resources that level out the playing field for all of our children so that they have equal opportunity—so I do have a problem with the word “Hardship” within the title of the bill.

I also have a problem with the word “Children”, because, as we know, the bill is really more around the household income, as opposed to supporting individual children. We know that the bill will support a family—increasing benefit rates up to $25 a week—but not necessarily the individual children within that family. Your family might have four or five children but be able to access only the $25 a week. The fact that the children are part of the title I have an issue with.

I also have a problem with the fact that we have been led to believe that these families will get an extra $25 a week when we know that it could be anywhere in the region of $17, or $12, or $23, depending on the situation that your family finds itself in. The Government has been trumpeting the fact that it is providing more money to the family, which is great, and we support that. However, the view that has been widely trumpeted that it will be $25 a week for all families is clearly not the case.

I have a real problem with the commencement date. If we are desperate to ensure that our families are well resourced, should the commencement date not be the day after which this bill will receive Royal assent and not 1 April 2016? It would bring to a whole lot more families some support when they need it, not having to wait for a further 4 or 5 months for that to happen.

We could call this bill the “Complex Tax Changes (When They Should Have Just Passed Labour’s Bill to Increase Abatement Rates) Bill” because there are some complicated changes to the inland revenue Acts that will change abatement rates when, if the Government was really serious about supporting children in hardship, it would have supported Labour’s bill, which might have put an extra $50 into the pockets of our families.

This bill should also be called the “Changes to the Definition of Part-time Work (And All That That Might Entail) Bill”. Of course, we know that the definition is moving from 15 hours a week to 20 hours a week. We are talking about families, probably mostly women, who will be required to go back to work, who will be work tested. They are likely to go into roles that are at minimum wage, or just above, and are probably quite precarious, in terms of being under the 90-day legislation. It will be probably fairly casualised employment. I have an issue with us wanting to have long-term sustainable support for children in hardship when we have not really done the groundwork to ensure that the workplaces, the types of work, and the payment for that work are going to be sustainable for those families in the long term, because they will be in a position of less power, being potentially new back to the workforce, low skilled, and going into low-paid jobs.

I also have concerns about what happens to the children. All those families, when they are required to be work tested and get back into the workforce, when we are in situations where adequate, good quality, and affordable day care is not available to some of those families—it could be that we are talking about families in rural settings. I also have a major concern when we are talking about the types of roles that might require shift work or working outside the normal hours, when decent and affordable childcare might be available.

So really, in summary, there are some major concerns about the naming of this particular bill. Does it really support children in hardship? How do we define hardship? Is it about the children, or is it about the income that comes into the family? Is it more about the definition of “part-time work” and what the nature of that work might be, or is it really about providing opportunities for families and parents and children to better themselves? I think not, but thank you for the opportunity to make this contribution.

SUE MORONEY (Labour): It is great to have an opportunity to rise and speak about the title and commencement clauses of the Support for Children in Hardship Bill. I do intend to talk mostly about the title. I hope to get an opportunity to also talk about the commencement date, but we will see how we go because I have got quite a bit to say about the title.

I want to say what I really do not like about the title of this bill, the Support for Children in Hardship Bill. It is far too accepting, in my view, that in a country like New Zealand we will have children who live in hardship, and that all we really need to do is just support them. I do not like that concept at all, and neither does the Labour Party because the Labour Party has zero tolerance for child poverty—and that is the sort of ambition that you would want from a Government. You would want a Government to say it is not acceptable that children live in hardship or in poverty, rather than to actually give a bill a title that is very accepting of the very idea that in Aotearoa New Zealand, the sort of country where we produce food, where the living standards were once very good, right across the board—today the Government has to name a specific piece of legislation the Support for Children in Hardship Bill.

This bill will become the Support for Children in Hardship Act. It will be on our books for a very long time, in terms of our legislature. I feel offended by that as a New Zealander. If that Government still had the ambition it once said it had for New Zealand it would never think of giving a bill this sort of title—a bill that accepts that in this country children will live in hardship, and that the Government’s only real role in that is to fling them a bit of support.

What is that bit of support the Government is flinging them, under this bill? It turns out to be about $17, or maybe $23.10 at the outmost, per family. We have already heard a number of speakers talk about how the Government has kind of gone into poverty denial on this. Even though we know there are now 305,000 children in this food-producing nation of ours who are living in poverty, the Government lacks ambition so much in this area that it has decided that it will try to address only 18,000 of the most worst-off families.

The reason I raise this is that if the Government really understands poverty and knows the depth of this poverty, it surely knows that adding $17 a week, or maybe $23.10 per week, for each of these families, at the most, is not going to fundamentally change the problem for those children. In fact, statistically, not one of those children will be lifted out of poverty with this addition—not one of those children. These families living in—as the Government calls it in the title of this bill—hardship are living at the most extreme end of hardship in this country. It is completely unacceptable, and it should not be recognised in the name of a bill.

If this Government was truly ambitious for New Zealand and wanted to address this issue, then it would be addressing the fundamental causes of poverty. It would be addressing the lack of wealth distribution we have in this country now, under this Government. It would be addressing the fact that two out of five of these children live in homes where their parents are in paid employment—paid employment—and that that paid employment has such appalling conditions and wages going alongside it that those children live in poverty even though their parents are out earning wages.

These are the families on the zero-hour contracts that the Government wants to codify in law. These are the families that have been forced to choose—well, not choose. They have been told they cannot get the benefit after their child turns a certain age, 3 years of age, and that they must take whatever work is offered to them. That is putting these children in hardship, as this bill names it. If the Government was ambitious it would have had a better title for this bill.

At the outset I indicated that I wanted to address the commencement clause, but I did warn that I had rather a lot to say about the title. I will now move on and briefly address the commencement clause of this bill. Again, it shows a Government that lacks ambition. It shows a Government that lacks urgency over this issue. It announced in its Budget this year—in May this year, many months ago—that it was going to bring this measure in. That measure should have been taken urgently. There should not be a wait until 1 April 2016 before any family can get any benefit from it. If the Government truly understood the depth of the urgency of the need of these families it would have acted an awful lot earlier.

We are about to move into the most expensive period of the year for families. We are moving into the Christmas festive season. For many families this is the most expensive time of year. Yet here we are, on 1 December, and this Government could have moved much more urgently to address this issue and given these families a little bit to come and go on over the so-called festive season—it will not be terribly festive for these families, I can tell you. If the Government was truly committed to the urgency of this, then we would be talking about 1 December—today’s date—for introducing this additional payment.

We have got Christmas coming up. We have got the holiday season coming up. We have got the school year about to start next year, with the cost of uniforms, the cost of school fees, and the cost of stationery. All of those things impact upon families and make it extremely difficult for these so-called children in hardship to participate fully in their education.

I am going to wrap up my contribution there. I think it is extremely disappointing that the Government lacks so much ambition for New Zealand that it accepts that there will be children in hardship in Aotearoa and accepts that doing anything about it is not terribly urgent.

JAMI-LEE ROSS (Junior Whip—National): I move, That the question be now put.

JAN LOGIE (Green): I am pleased to take a short call on the title and the commencement of this bill, the Support for Children in Hardship Bill. I would like to reinforce initially, before going on to make other points, the point made by the Labour Party’s Sue Moroney about how sad it is to see the concept and the acceptance of so many of our children living in hardship being put on to the statute book.

That is not the Green Party’s vision for New Zealand. Our vision is for a country where all of our children are able to thrive, and that does not include living in hardship. We know that when a child is living in hardship and is living in poverty, their lifetime opportunities are being taken away from them. Childhood poverty impacts on your ability to learn, on your health, and on your ability to succeed in life, for the rest of your life. To accept that and to put it on to our statute book is a sad thing, and it is a sad day to be doing that.

I would like to also focus on the fact that this bill is suggesting that there is support for children. Just coming back to some of the submissions that were made on this bill, I note Unicef’s contribution. Unicef noted that it felt that we have been so focused on work that we have lost sight of children. To me, that speaks a truth that is quite reflected in this bill. The bill might be better named the “Support for Parents Into Further Work Bill”, because that does seem to be the main thrust of this bill. It is again removing parents’ choice in the way to parent and is putting more people into the job market, even though we have still very entrenched and, I think, unacceptably high levels of unemployment. Over 100,000 people who are in part-time employment are still looking for more hours. This is just flooding the market with another group of people when we know we do not have enough jobs to go around. So the bill would seem even to be better named the “Stick of Ideology Bill”.

I note also in the Unicef submission where it talked about the fact that children say that they want their parents around and that they want them to stop being angry, and that children in this country are really affected by the stress that their parents are experiencing—and these are parents in work and parents out of work. If we were focused on children and supporting children, then actually we would be looking right across the policy levers to improve that situation.

I was at the launch of the living wage in Porirua recently, when there was a young man who got up and spoke. He talked about running away from home at the age of 6 to go down to the local shops to ask for a job because he was so upset and feeling so bad for his parents who were working so hard and were struggling so much and were so stressed that he just wanted to be able to help them out. That is unnecessary and unacceptable. To quote the words of the great Russel Norman, Governments cannot mend a broken heart but they can put food in a kid’s belly, and they should.

If we were looking at supporting our children in this country, that is what we would be focusing on. We would be focusing on making sure that all of our children had enough food and that they all had a stable roof over their head—something that is increasingly unlikely for so many of these children. We would make sure that they were able to attend sports activities and cultural groups, that they could get to different places to visit different people and experience different things, that they would have warm enough clothing in winter, that when it is raining they would have shoes on their feet and raincoats—things that when I grew up in Invercargill in a family, with lots of friends who were working-class families, were just completely taken for granted.

JAMI-LEE ROSS (Junior 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 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.

Clause 1 agreed to.

The question was put that the amendment set out on Supplementary Order Paper 132 in the name of the Hon Anne Tolley to clause 2 be agreed to.

Amendment agreed to.

Clause 2 as amended agreed to.

The Committee divided the bill into the Social Security Amendment Bill, the Education Amendment Bill, and the Taxation (Support for Children in Hardship) Bill, pursuant to Supplementary Order Paper 134.

Bill to be reported with amendment presently.

Bills

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

In Committee

Debate resumed from 3 November.

Part 3 Amendments to Income Tax Act 2007

STUART NASH (Labour—Napier): I am happy to stand and talk on the Taxation (Annual Rates for 2015-16, Research and Development, and Remedial Matters) Bill. It is a bill with quite a long name—there is no doubt about that—and Part 3 is quite a long part. In Part 3 there are a whole lot of remedial clauses that change a number of Acts, mainly the Income Tax Act, but there are several sections that I would like to concentrate on and perhaps get a couple of answers for. There seems to be a level of inconsistency in the legislation and I cannot quite get my head around it, just being a simple man from Hawke’s Bay, of course.

I will look at Part 3, clause 75C, which amends section CW 42 of the Income Tax Act, and we are talking about business income here. What this clause has added is this. The old law said “no person with some control over the business is able to direct or divert, to their own benefit or advantage, an amount derived from a business.” What this is basically saying is that a person is not allowed to divert money away from a charity for their own gain. But what this law has added is “other than the trustee or trustees, the society, or the institution,” and I am not too sure why they have exempted the trustee or trustees, the society, or the institution from the ability to transfer money away from the business. It would seem to me that there are, in fact, a lot of charities that are actually governed by trustees or societies or institutions, and what this is actually doing is exempting a decent chunk of those who are involved in the governance of charities from the condition that allows them to divert money. I am not too sure why that is there, and there is a whole lot of inconsistency with that.

If I move down that same clause, to section CW 42(5)—we are talking about clause 75C(2) here—they have deleted the words “to their own benefit or advantage”. So what this section is about in the Income Tax Act is that it talks about the control of a company. The Income Tax Act says that the control of a company is basically defined around someone’s ability to direct or divert amounts from the business, but they are deleting the words “to their own benefit or advantage”, and yet those words feature significantly throughout the Income Tax Act. There seems to be a level of inconsistency where that term is used. I am not too sure why that is the case, but I just cannot get my head around the inconsistencies with regard to that.

I go down to clause 75D, which amends section CW 42B, and again what it does is this. Clause 75D(1) says “words before the paragraphs, replace ‘a trust and its trustees, or a company … whose activities are predominantly’ with”—this is talking about social housing—“ ‘a trustee or company … whose activities involve’ ”. So what it is actually doing is it is redefining in law who can actually take advantage of community housing trusts and companies. So what, in the past, income tax law said was that to be defined as a community housing trust or company, your activity has got to be predominantly in the area of managing community housing trusts and companies. Now what the law says is that the company or the trust only has to be involved in that business, and I am not 100 percent sure what the definition of “involvement” is.

This is where we get into sticky legal situations because we know that the Government is selling down a lot of the State houses into social housing organisations, and we could have a large trust or a large company that says “We’re just going to take three or four of the houses here and that will mean that we can take advantage of tax benefits in the Income Tax Act.”, because the company itself can say “We are involved in social housing benefits.” So the definition between “involved in social and community housing” versus “predominantly in the business of social and community housing” is substantial, and I perhaps see some unintended consequences here.

But the other thing that is slightly strange is that, as mentioned, it removes the words “trust and its trustees, or a company” and replaces them with the term “a trustee or company”. I was always of the view that a trustee was a person who actually administered a trust, so what it is saying here is it is removing the word “trust” and putting in the word “trustee”. So by definition this is not applicable to a trust; it is applicable only to a trustee.

Maybe I am getting my legal technicalities mixed up here, but I would have thought that if you put in a trust or a trustee, which, again, is a term that is used throughout the Act, it would cover everything and it would make sure that there was no confusion. After all, one of the major tests of tax legislation is that it avoids confusion—that it is clear.

I go down to clause 75D(2), and this is another clause to do with charities and business income. It has added some words, that is “no person with some control over the activities, other than the entity, is able to direct or divert,”—now, these are new words—“to their own benefit or advantage, an amount derived from the activities.” The reason I highlight this is that I think I mentioned before that we deleted the words “to their own benefit or advantage”. Again, it just appears to be a real inconsistency, within the space of about three or four clauses. The reason why, I am unsure. There is probably a good reason. Perhaps the Minister in his infinite wisdom could let me know when it is applicable to use “to their own benefit or advantage” or when it is irrelevant and therefore why it has been removed from some clauses and why it has been added to other clauses. Again, it seems to me that there must be a good reason for it, but I am unsure of that reason.

I would also like to talk about clause 76. This amends section CW 55BA of the Income Tax Act, and this is about the tax treatment of tertiary institutions and their subsidiaries. What this actually says, under the subheading “Exempt income”, is that “An amount of income derived by a tertiary education institution”—let us say, for example, a university—“or a tertiary education subsidiary is exempt income.” So what this is basically saying is that, for example, a business incubator, which a lot of the universities have, is exempt income—i.e. it does not have to pay tax. But the interesting thing about this is that to be exempt income it has to be 100 percent owned by a tertiary institution or a group of tertiary institutions.

The interesting thing about this is that it actually says, in new section CW 55BA(2)(a)(ii) “market value interests”—so this is exempt income—“in the company adding up to 100%, when a market value circumstance exists;”. The interesting thing about this is I wonder whether in fact this may have the unintended consequence that when a university incubator or a university seeks to commercialise intellectual property that some of its staff have developed, what this will actually do is it will delay or stop a university from going out to the market to seek equity in order to raise capital. Once it drops down below that 100 percent ownership, then it is not exempt income any more.

One thing that we really want to encourage our universities to do is commercialise a lot of the intellectual property that is resident within our institutions, and there are a number of exceptionally talented academics across the whole university scheme, even though, I must admit, this is not just about universities. It is about polytechs or any tertiary education institutions. But what we do not want to do is have an unintended consequence where the university does not go out to the market to seek capital in any way, shape, or form because it knows that it will move from exempt income into income that is taxable. I think that may be a little bit of a problem going forward, and I would like to understand why—well, part of me understands why. Tertiary education institutions are exempt from income tax because it is a bit like robbing Paul to pay Peter. You take income tax off a tertiary institution and then you give it back in terms of other income that the Government gives to universities, polytechs, etc., but I think this may well end up with unintended consequences.

But the other interesting thing about this is that it talks about the control of a company, and it says: “(b) where no person … with some control over the company is able to direct or divert, to their own benefit or advantage, an amount derived from the company.”

GRANT ROBERTSON (Labour—Wellington Central): I am sure my colleague Dr Clark will join us shortly in this discussion on the Taxation (Annual Rates for 2015-16, Research and Development, and Remedial Matters) Bill. I want to talk mainly, in this first contribution, around the quite large set of clauses and amendments relating to the cashing out of research and development tax losses. But before I do that I actually want to pick up where my colleague Stuart Nash just left off and talk about clause 76.

I have to say that at the Finance and Expenditure Committee we did not have a long discussion about clause 76. It did come up and there were a couple of amendments made to the clause as a result of the brief discussion we had. But I do think it is important to put on the record the concern that the Labour Party has that in making a change that is, as Mr Nash noted, primarily about ensuring that there is consistency in the way that tertiary institutions are treated in terms of tax: be it in their role as a tertiary institution educating people, be it a polytech or a university undertaking lectures and providing the normal kind of degree qualifications if it was a university that we would expect, the income they derive is regarded as being exempt. What this clause does is put in place a regime for the subsidiaries of tertiary education institutions. Again, as Mr Nash has noted, these now come in many forms. They run all the way from start-up companies based upon the research of a particular researcher at a university all the way through to small limited companies set up by polytechnics to provide a particular kind of educational service that might be a bit outside the norm. So it could be the provision of a particular service to international students that is regarded as more of a company-based arrangement than the traditional polytech structure.

In trying to create a mechanism that encompasses all of those different new subsidiaries of tertiary institutions, something is missing in this clause. There is an attempt to deal with the breadth of these institutions in the amendment that is now in new section CW 55BA(2), where a tertiary education subsidiary is a company “(a) in which the tertiary education institution, alone or together with other tertiary education institutions, holds—(i) voting interests in the company adding up to 100%; or (ii) market value interests in the company adding up to 100%, when a market value circumstance exists;”. That deals with the issue of universities or polytechs cooperating with one another. What it does not deal with is what is becoming more commonplace in the tertiary settings, particularly in the university settings, which is different styles of ownership. These include where individual academics are now starting to take some sense of ownership of these companies, so they have their own identity separate from the tertiary institution that they work for. It is also the situation now that private investment does come in from quite an early point. Another kind of investment comes in. We have large research programmes in our tertiary institutions at the moment that are funded by research funding organisations from other countries.

If we take the example of the terrific longitudinal study run down at the University of Otago, that study has been largely funded in recent times by the American National Institutes of Health, by the UK research foundations. How are they going to be treated under this kind of situation? How will a company that spins out from the genetic research that has arisen out of that longitudinal study be treated in a tax sense? We do not want a free ride here for companies that should legitimately be paying tax, but where they are genuinely research organisations developed out of a tertiary institution that has a slightly different ownership or share arrangement than 100 percent, what do we do? Perhaps the Minister in the chair, the Hon Paul Goldsmith, might want to take a call to say whether or not there is a different set of structures for those sorts of companies to be considered. But certainly on this side of the Chamber we want to put on the record that we want to see an encouragement of the development and commercialisation of the research that happens inside our tertiary institutions, and any tax treatment that discourages that, as could be possible under this clause, provides us with some concern.

I note, in terms of this clause, that there is a section around who controls the company and there is an important change that was made by the Finance and Expenditure Committee to delete—[Bell rung]

The CHAIRPERSON (Hon Chester Borrows): This is your fourth call.

GRANT ROBERTSON: My fourth call on this part?

The CHAIRPERSON (Hon Chester Borrows): I just thought I would let you know.

GRANT ROBERTSON: Gracious, it has been so long since those first two calls that I was not aware that it was my fourth call. I will briefly, then, complete the comment that I was making there that there was a change made removing the question of whether an individual was going to benefit or be advantaged from the work of a company. That will help in the situation that I mentioned before where specific academics might have taken a share within a company, separate from the university they work for. So I do recognise that matter has been dealt with, but I would ask that we get some clarification around making sure we are not setting up a regime that provides a disincentive to universities commercialising their research.

In the brief period that I have remaining to me to speak on this part, I did want to come back to the question of the cashing out of research and development tax losses, and largely because this is an area where the committee did make a large number of changes. The purpose of this is supported by members on this side of the Chamber. The idea is that we can provide, at the early stage of a company’s establishment, the ability to cash out the losses from research and development. We want to see those companies investing in research and development from day one, and if this is one way that we can do that, then we can support that. I would say that the Government’s reluctance to go down the path of a comprehensive research and development tax credit leads it to have to put in pages and pages of definitions and difficult-to-understand processes, which people will have to go through in order to work out whether or not they are actually eligible for this.

It is worth noting the changes that the committee made. So we are clear that under the proposals, research and development start-up companies can claim up to 28 percent. That is the current company tax rate and it helps to be clear and simple about that. The main eligibility requirement is that the company must be a loss-making company, resident in New Zealand, with a sufficient proportion of expenditure on research and development. That was one of the areas that, again, presented some difficulty for us, because of the potential for a range of ownership arrangements that would make a company primarily a New Zealand one, clearly being resident in New Zealand.

And then there is that question of what is a sufficient proportion of expenditure on research and development. The amount of losses that can be cashed out has been capped at $500,000 for the 2015-16 year, increasing by $300,000 over the next 5 years to $2 million. When we were discussing this in the committee, the issue that I wanted to raise was how research and development was defined and who would make up their mind as to whether or not this genuinely was research and development. And in the end what we drew out, as the discussion went on, was that that role was, effectively, being outsourced to Callaghan Innovation.

Callaghan Innovation is a relatively new organisation—a good organisation, in my view, doing some good things in our community. But there are still some issues for us on this side of the Chamber as to whether or not Callaghan Innovation is the right organisation to be doing that checking and whether it has the scope of expertise to always know whether a particular or given company actually is undertaking research and development in its sphere. And for me this highlights the concern we have that by creating a system where we do not have a broad-based research and development tax credit we create a large number of hoops and we create a new role—a bureaucratic role, essentially—for Callaghan Innovation, whose job should be to be out there in the community supporting researchers to do research, not acting as some kind of judge in a sort of Dragons’ Den contest about whether something is or is not research and development. So, again, we could have come up with something simpler, something that did not involve so much hoop jumping. We understand that Callaghan Innovation is going to be paid for its work, which is fair enough—it is a Crown research institute that has to make sure that it pays its own way. But we think there is the potential for this to be a fairly substantial distraction from the kind of work that it is going to do.

Just briefly, the other clauses in here—and I would urge the Minister in the chair, the Hon Nathan Guy, or another member of the Government who was on the select committee to actually work through—

Hon Clayton Cosgrove: David Bennett.

GRANT ROBERTSON: No, no, not David Bennett. Not David Bennett. I urge another member of the committee, except for David Bennett, to stand up and work our way through the eligibility criteria, the wage intensity criteria, why $500,000 was listed as the amount to be cashed out, and then, particularly of interest to me, are the excluded activities. I would like to know about those.

Dr DAVID CLARK (Labour—Dunedin North): I am very sorry to see Mr Robertson cut short, given he is limited to only four speeches in this part of the bill. He was cut down in his prime, but I am sure there will be another opportunity, maybe in the title and commencement debate, to finish the argument that he was developing. I did not have the privilege of sitting through the select committee process on this particular bill, although the questions I will bring up relate to previous editions of a very similar bill, because a very similar bill gets put through this Parliament every year tidying up a number of these same issues, and that is a good thing.

I want to say something very positive from the Opposition benches about this bill. This is a necessary and important thing, and I hope that those listening at home or watching on the TV can also see that there is a very constructive thing going on here, where Opposition members are drawing attention to concerns about the bill, which is designed to patch up where there are loopholes. This, Part 3 of the bill, is tidying up the Income Tax Act to make sure it achieves the purpose that it is set down to achieve. So when my colleagues pick some holes in it, they are actually doing the Government a favour, because there is an opportunity for Supplementary Order Papers to amend the bill to tidy up any little things that come to light through this part of the debate. So my questions are in a similar vein. The Minister in the chair, Nathan Guy, I am sure, can get himself briefed if the answers are not immediately to mind.

Firstly, I want to just talk about clause 69B, which talks about the exceptions for overseas accommodation. I am wondering what level of discussion was had that settled on the paragraph (a) and (b) definitions in new section CE 1C(1B) of what should be included in this aspect of the Act around the cost of accommodation. Paragraph (a) says, for the purposes of subsection (1): “the actual cost to the employee for the accommodation; or (b) a reasonable estimate of the expenditure that is likely to be incurred by the employee, or group of employees, for whom the amount is payable.” When this debate has been had in the past, there has been a debate around what constitutes accommodation for the purposes of work and what constitutes accommodation that goes above and beyond that—so the nature of the accommodation.

If someone is going to do a simple job fixing a factory line and they are put up in a five-star hotel with swimming pools for a period of a week when the job takes 1 day, even though it is “at or near an overseas work location”—those are the words that are found in the Act—is that a legitimate form of accommodation to take and to be included for the purposes of tax exemption? It seems in the spirit of the law that that would not be the case, but how you draw those lines is a very difficult thing to do, and I wonder—the Minister may know the answer to that—about what debate was had this time in the select committee and why these words were chosen, which seem very broad to me. This seems a very broad definition. It is simply “at or near an overseas work location”, full stop. The cost to the employee for the accommodation—there is no specified time limit around it or the reasonable estimate, and there is no specification of what type of accommodation. So that is my first question that I would appreciate a response from the Minister on.

The second question relates to clause 75D, which some colleagues have already referred to, the community housing trusts and companies aspect of the bill, and the shift from the words—in clause 75D(1) it says to replace “a trust and its trustees, or a company (as applicable, the ‘entity’) whose activities are predominantly” with “a trustee or company (the ‘entity’) whose activities involve”. This is the shift from a trust being defined as something that predominantly does something, to something “whose activities involve”. I am trying to understand what the purpose of that shift was because, again, if this shift means that, say, for a charitable purpose, trusts want to house medical people in a community where they cannot attract medical people because the accommodation is too expensive—this is a debate that has been had before—is that achieved, and is there an unintended consequence where trusts are also doing other activities that are not really in the spirit of a trust for that purpose? Why has this been changed? There will have been a live debate—[Bell rung]. Mr Chair?

The CHAIRPERSON (Hon Chester Borrows): Dr David Clark, fourth call.

Dr DAVID CLARK: Thank you, Mr Chair. There will have been a live debate, I suspect, about that, if I am not mistaken. What are the checks and balances, and how has the select committee assured itself that that purpose will be achieved?

The next area that I am interested in—and perhaps I should declare a personal conflict—is the accommodation provided to ministers of religion. This old chestnut—it comes up every time in these remedial matters bills in recent years. Let us remind ourselves that the purpose of this is to ensure—excuse my voice is going; I have a cold—

Grant Robertson: He’s really emotional.

Dr DAVID CLARK: It is not an emotional response. It is to ensure—as I understand it, and the Minister can correct me if I am wrong—that those small communities, often in hard-up places that have very few professionals left in the community, want to retain their minister of religion. This is because often in some small communities in remote places the minister of religion will be the only person with a tertiary education who has training in counselling and conflict resolution, and who can witness documents and so forth. For isolated communities it is very beneficial to have that kind of person available, aside from the usual stuff that ministers of religion do in those communities: the “hatch, match, and dispatch”, as it is called in the trade. Aside from the hatch, match, and dispatch, having people in town who can perform those other more secular functions of witnessing documents, negotiating their way through disputes, and so on is what is being protected here.

But the definition is the bit that I want to ask about because it seems very broad. I know that my colleague the Hon Clayton Cosgrove may delve further into this, but on the surface—he was talking about it earlier, I certainly hope he will; I will be disappointed otherwise—it leaves it largely up to the religion itself to define who is in and who is out: somebody whose duties are related mainly to the practice, study, teaching, or advancement of religious beliefs. What constitutes “religious beliefs” is, I guess, the fundamental question, and how broad is this category? We know in human rights legislation that we have a real issue again and again and again when we have some kinds of discrimination where there are exemptions for people who fall under a religious category. So the Catholic Church, for example, quite openly says that it will not ordain women to the priesthood at this stage, and that does not sit neatly with our wider human rights legislation, and it creates problems.

At some level, in our society, a conflict occurs that is challenging to resolve. Actually, in this House, we are often not willing to go near it. Here, in this particular clause of the bill, we have the advancement of religion generally defined. I am wondering whether there is going to be guidance provided as to what constitutes a religion that is inside and what is outside the scope when we are talking about this accommodation exception in clause 81 on pages 48 and 49 of the bill. I would be very interested in what the Minister in the chair, the Hon Nathan Guy, has to say about the definition of that exception. I can see he is studiously studying his papers, and I look forward to his contribution shortly. Thank you very much for the opportunity.

KANWALJIT SINGH BAKSHI (National): I move, That the question be now put.

The CHAIRPERSON (Hon Chester Borrows): I will hear from Fletcher Tabuteau on his fourth call.

FLETCHER TABUTEAU (NZ First): I just wanted to touch on one of the issues raised in clause 76, “Section CW 55BA Tertiary education institutions and subsidiaries”. It talks specifically about those who have control over an institution.

This is where it gets confusing, and this is where the Labour Party had a lot to say. The clause kind of contradicts itself, and I would just raise this with the Minister: “where no person, other than a tertiary education institution, with some control over the company is able to direct or divert,”. So it has only got some control, but then it is able to direct or divert, which raises some of the questions around the eligibility of a controller of an institution, and about what they are entitled to do in terms of accessing those funds, diverting those funds, and that particular issue.

Unfortunately, my primary purpose of this first call for the evening was on clause 71, “Section CF3 amended (Withdrawals from foreign superannuation scheme)”. You can imagine that New Zealand First gets many questions from constituents on superannuation—

Hon David Cunliffe: No, they don’t. No you don’t.

FLETCHER TABUTEAU: And it is obviously no surprise to my friends around me in the Chamber. But, actually, I have to admit that the clause goes on for four pages of the bill, and so my call at this point of the evening is to actually ask for some explanation from the Minister.

I have to admit that I was not on the Finance and Expenditure Committee and was not part of the debrief, but I think, when you look at some of the terminology and some of the wording used, you will find that you will get these unintended consequences that New Zealand First speaks so often about when we are referring to remedial matters from the National Government.

I will use just a few examples. Clause 189 corrects an oversight around the omission of the phrase “an educational bursary” within MB 13(2)(f) in the Income Tax Act 2007. The reality there is that it was always intended to be both an educational scholarship, and the educational bursaries were supposed to be included in that calculation. And yet here we are, nearly 10 years later, amending the legislation.

The other one that has just been spoken to eloquently and with great knowledge was in clause 81 around the commencement date—

Hon Clayton Cosgrove: Very piously, I thought.

FLETCHER TABUTEAU: —piously?—for accommodation provisions applying to ministers of religion. So I think when you look at the legislation, we have to acknowledge that the reason it is in there is that the incorrect date was inadvertently changed in the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014. These provisions would apply from 1 July 2013 and not 15 April, as is currently written in the Act. So here we are now fixing it up.

I will come to it later on in the piece because it is not the appropriate part of the debate tonight to talk to it, but Supplementary Order Paper 129, I think it was, is an example of just what it is that the public needs to be wary of. We have so much to work through here, and mistakes are already being made. I acknowledge that the Government is trying to rectify them at the moment, but the reality is that this is a large piece of work, and the debate needs to be extensive. I think, when I come to that Supplementary Order Paper, we need to acknowledge that the work has not been done, and we are going to need to look at it again.

Just to finish off in the time that I have, back to clause 71(3)(a): “A foreign superannuation withdrawal is not income of the person, under subsection (2)(d) if—(a) the benefit is an interest of the person in the scheme that is withdrawn on the death of the person or under a relationship agreement arising from an event”—

STUART SMITH (National—Kaikōura): I move, That the question be now put.

Hon DAVID CUNLIFFE (Labour—New Lynn): There are a couple of matters that I would like to draw the Minister’s attention to. The first is clause 76 appearing on page 47 of the bill, and in particular the insertion of new subsections CW 55BA(2)(a) and (b). This relates to tertiary institutions and the definition of an eligible tertiary institution for the tax deduction around exempt income. The principle set out in the clause is that the tertiary education institution or subsidiary must be 100 percent wholly owned in order to qualify. New subsection 2(b) says that one of the circumstances is that “where no person, other than the tertiary institution, with some control over the company is able to direct or divert, to their own benefit”. That, in the light of recent history, will be a problematic clause for a number of institutions currently in the market place. I would like to note some in particular, and why that clause is likely to catch them out.

Without going into unfortunate personal details, and I will not, it is well documented that the Taratahi Agricultural Training Centre has had a very mixed period of its history over the last 5 years, which has included the enrolment of some 70—70—staff as students, inappropriately—

The CHAIRPERSON (Lindsay Tisch): Order! That is not part of this.

Hon DAVID CUNLIFFE: Well, Mr Chairman—

The CHAIRPERSON (Lindsay Tisch): Come back to Part 3.

Hon DAVID CUNLIFFE: Clause 76, inserting new section CW 55BA(2)(b) goes to the issue of whether a person “with some control over the company”—I am quoting from the bill—“is able to direct or divert, to their own benefit”. I am making the point that that has actually occurred in the case of the Taratahi Agricultural Training Centre.

The CHAIRPERSON (Lindsay Tisch): That is making assumptions; you cannot do that. It is hypothetical. Come back to Part 3.

Hon DAVID CUNLIFFE: The Tertiary Education Commission employed Deloitte, and Deloitte concluded that funds had been diverted by the institution inappropriately. That is why the Government clawed back $6.47 million of inappropriately appropriated funds from the institution, on the basis of the Tertiary Education Commission’s review. That is not the only institution that would be caught by new subsection (2)(b).

The second one, of course, is the Western Institute of Technology, based in Taranaki. That institution had a habit of inflating its student numbers. It too, finally, after a whistleblower, was caught out—

The CHAIRPERSON (Lindsay Tisch): No. Come back. [Interruption] I have just stood up. The member is making a lot of comments that are not directly related to the bill. Come back to the bill. We are on Part 3 now, and I will not warn the member again—Part 3.

Hon DAVID CUNLIFFE: I raise a point of order, Mr Chairperson.

The CHAIRPERSON (Lindsay Tisch): No, look—I have ruled. Part 3—that is what we are on.

Hon DAVID CUNLIFFE: I raise a point of order, Mr Chairperson. I would like to seek your clarification on—

The CHAIRPERSON (Lindsay Tisch): No, I have asked the member twice now. Come back to Part 3—that is what we are on—and just focus on the content of what Part 3 is about.

Hon DAVID CUNLIFFE: I raise a point of order, Mr Chairperson. I am reading from Part 3.

The CHAIRPERSON (Lindsay Tisch): You are using a lot of examples that are not relevant. Just keep on Part 3.

Hon DAVID CUNLIFFE: I am going to read, without reference to those individual institutions, the language of clause 76 of Part 3 one more time. New subsection (2)(b) says: “where no person, other than a tertiary institution, with some control over the company is able to direct or divert, to their own benefit or advantage, an amount derived from the company.” Without naming a single example, I can say that over $50 million of taxpayers’ funds have been so diverted in the last 12 months, and caught out by the Tertiary Education Commission, and repaid. And those would fall afoul of Part 3 of this bill, as written.

I commend the Government, firstly, for the drafting of this clause, and, secondly, I commend the Government for the fact that, finally, after whistleblowers raised the alarm, those miscreants were caught. But they might not have been, and that is why we need to be extremely careful about the implications of Part 3 of the bill.

Let me turn to a different clause of the bill that relates to black hole expenditure for research and development—[Bell rung] Thank you, Mr Chairperson—enough on tertiary institutions. The key part of this bill, which is represented in its title—the title of the bill, the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Bill, turns on this part of Part 3, which is based upon the cashing out of losses for research and development expenditure. For the Committee to consider that, we need to compare the provisions of this clause against the current, pre-legislation status quo and the prior status quo. What this bill does is it allows certain loss-making companies to cash out losses of research and development expenditure, rather than carry them forward, up to a limit of $500,000 in the first year and $300,000 in subsequent years. Cash will need to be repaid—will need to be repaid—and losses reinstated once the company makes a return on the research and development investment. So, essentially, what this clause provides for is a tax deferral or, in effect, a loan from the taxpayer to the company, by deferring the period in which it has to pay its tax through a carry-forward.

That, in principle, is one possible means of sharing with the taxpayer the risk from innovation. There are two things that the literature makes really clear about innovation. The first is that the innovator never captures all the benefits on their own balance sheet, because there are spillover benefits that go beyond the company. Therefore, the public has an interest in encouraging innovation, including through the tax system—fair enough. Here is where the design question comes: is a cashing out of losses preferable to a research and development tax credit, or preferable to a grants system? Let us examine both of those options.

The research and development tax credit is the predominant policy instrument used around the OECD. It was also in the current Labour Opposition’s previous two manifestos at a 12.5 percent discount rate. It is a little higher—I think, 24 percent—in the Australian economy. That is a very simple, low-overhead way of achieving that objective.

The alternative approach that has been used up to now is the use of a grant system, as my colleague Grant Robertson mentioned, through Callaghan Innovation as the predominant provider. The problem with that is it is either discretionary, which has a high overhead, or non-discretionary subject to automatic criteria, as it currently is, which has led to a series of phenomenal botch-ups. The New Zealand taxpayer funded through Callaghan Innovation the Oracle America’s Cup bid against Team New Zealand. We gave it a research and development tax write-off through Callaghan Innovation—unbelievable. It funded a subsidy to the German multinational buyer to, effectively, develop and, arguably, expropriate New Zealand intellectual property through a subsidiary in New Zealand. It funded a company that was going to mine seabed sand resources and another one mining phosphate before either of them had a resource consent and which neither of them ever got, and they had to repay the money. You see, this is the problem with this so-called grant system. The research and development tax credit is a much simpler, cleaner, and, actually, more market-based system, which most Western Governments have found preferable.

So here in this bill is the Government’s fig leaf. It knows that the current system does not really work very well. It does not work for small start-ups, the quality control problems are enormous, and the bureaucratic overhead is skyrocketing. It needs the appearance of having a market-friendly instrument. Here it is: cashing out losses and paying them back later. But, as the regulatory impact statement makes clear, the impact of this instrument is so small, so limited, that any rational policy maker, irrespective of political stripe, would go back to the tax credit system that this Government turned down in the first place. That, based on the criteria set out in the regulatory impact statement, would be the rational thing to do, rather than this hodgepodge—this policy framework is more like a fruitcake; you never know quite what raisin you are going to find in it—of a baseline of a non-discretionary grant system and this overlay, which is kind of like the icing, of a tax loss, cash-out, payback system. It does not work, it is high-overhead, and it is confusing. Business is saying to us that it wants a simple research and development tax credit system, like it was promised in 2011 and 2014, but which it is still waiting for from this Government.

DAVID BENNETT (National—Hamilton East): I move, That the question be now put.

The CHAIRPERSON (Lindsay Tisch): I am going to hear from Jan Logie. She has an amendment.

JAN LOGIE (Green): It is with pleasure that I rise to speak to an amendment that we have added to introduce an income tax fringe benefit tax exemption for electric vehicles and public transport. I think this is very, very timely, considering the talks that are happening in Paris at the moment around the—[Interruption]—this is exactly on topic, Mr Chair.

The CHAIRPERSON (Lindsay Tisch): Do not talk about climate change.

JAN LOGIE: The point of the fringe benefit tax exemptions is to incentivise the use of electric vehicles and the use of public transport within our businesses, to be able to help us transition as a country to a carbon-neutral economy, which is going to be better for the health of everyone—

The CHAIRPERSON (Lindsay Tisch): I hear where the member is coming from. Just concentrate on what the bill is about. You can use that as an example, but concentrate on what the bill has in it about the fringe benefit tax that your amendment is about.

JAN LOGIE: Sorry, could I seek some clarification on that, Mr Chair?

The CHAIRPERSON (Lindsay Tisch): No, no. Do not talk about electric cars and things like that. Your amendment is fine.

JAN LOGIE: Yes, which is about electric cars.

The CHAIRPERSON (Lindsay Tisch): Yes, and use that as an example, but do not concentrate on it. Yes, carry on—carry on.

JAN LOGIE: I am sorry, Mr Chair. This is possibly me being obtuse, but the amendment is specifically about electric cars and public transport, so I am not sure how I can make that an example, because that is what it is about. So I will try to speak to this.

In New Zealand 20 percent of our greenhouse gas emissions come from pollution from transport, and we really need to get active and come up with some solutions to help us transition as a country. This amendment would help us do that. Currently, road transport accounts for 90 percent of that transport emission, and we are spending over $6 billion every year on importing petrol and diesel. These are things we could change if we incentivised businesses to use electric cars and to encourage their staff members to use public transport.

This is at the heart of what this bill is about: for very, very little cost to our tax system, we can encourage businesses to start buying electric cars and help change our car fleet in the country as a consequence. This amendment puts the fringe benefit tax exemption into place for 7 years for electric cars to give businesses the incentive to start changing their fleets.

In turn, one of the great flow-on benefits of that, I think, will be that when those businesses turn over their cars, they will be introducing electric cars into our secondhand-car market in New Zealand, enabling more New Zealanders to be able to go electric to clean up our emissions and to improve the health of New Zealand. That, surely, is a win-win.

The fringe benefit tax exemption for public transport does not have a time limit on it in this amendment, because that has no time limit, and we would hope that businesses would take that opportunity to encourage their staff to use public transport into perpetuity. Sadly, at the moment very few of them do that, so there is not likely to be a huge cost to it.

I would say, just bringing it back to that wider point around the absolute importance of this, that as we have heard in the media recently, there has been some discussion that there is very little New Zealand can do about reducing our emissions below one of the lowest targets in the world. This bill proves that there is a lot we can do, because one example—two small amendments to this bill to put in a fringe benefit tax exemption for electric cars and public transport would, potentially, shift our culture and business practices to put us on that road to a low-carbon future.

That is about protecting the well-being of our communities right now, business bottom lines, and the future of our country and this planet, and I really hope members in this Committee will look at this amendment.

ALASTAIR SCOTT (National—Wairarapa): I move the motion be now put.

Hon Member: No, that’s hopeless. Try again.

The CHAIRPERSON (Lindsay Tisch): The question is that we are moving to the vote on Part 3.

The question was put that the amendments set out on Supplementary Order Paper 129 in the name of the Hon Todd McClay to Part 3 be agreed to.

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

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.

Amendments agreed to.

The question was put that the following amendments in the name of Jan Logie to Part 3 be agreed to:

to insert the following new clauses:

75A Section CX 6 amended (Private use of motor vehicle)

In section CX 6, after subsection (2), insert:

Exclusion: electric vehicles

(2A) Subsection (1) does not apply if the motor power of the vehicle is wholly or partly derived from an external source of electricity.

Expiry of exclusion: electric vehicles

(2B) Subsection (2A) expires on the close of the day that is 7 years after the date on which that subsection comes into force.

75AA Section CX 9 replaced (Subsidised transport)

Replace section CX 9 with:

CX 9 Subsidised transport

When fringe benefit arises

(1) A fringe benefit arises when an employer provides subsidised transport to an employee.

Exclusion

(2) This section does not apply if the transport is subsidised with a public transport pass.

Defined in this Act: employee, employer, fringe benefit, subsidised transport

Compare: 2004 No 35 s CX 8

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

Ayes 14

Green Party 14.

Noes 107

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

Amendments not agreed to.

Part 3 as amended agreed to.

Part 4 Amendments to other enactments

Hon CLAYTON COSGROVE (Labour): I want to go straight to the Minister of Revenue’s amendments in Supplementary Order Paper 129 that pertain to GST and bodies corporate with reference to clauses 248 to 251 of the bill. It is worth just recalling the context for this. I think it was 19 October when we first debated this, and I raised with the Minister of Revenue a major problem that he and his department had overlooked in respect of issues concerning GST on those small businesses that own premises in a building by way of a unit title interest in a body corporate.

In essence, without rehearsing those arguments again, what was amazing about that—I know the Minister put in a Supplementary Order Paper after I wrote to him on the 20th and provided him with my amendment, and they are very similar, but I have got to raise two points. One is that I think the department—or, certainly, the Minister—knew about this problem for a very, very long time. That is the advice I have. This had the potential to inflict a high degree of cost in terms of retrospectivity on small businesses throughout the country.

The Minister, after I wrote to him on the 20th providing him with an amendment, has submitted one of his own, and, as I say, I have put on record that in large parts it does meet the mark in terms of remedying this. What it appears to provide is a look-through rule—which is what was committed to by the Government, the Minister, and, essentially, the department prior to this bill’s introduction, but then they changed their minds. What it appears to do is provide the look-through rule, but only for supplies made on or before 26 February 2015, the date the bill was introduced.

My amendment applies to supplies before 1 April 2016, by which time the bill will have been enacted, and people—that is, the businesses concerned: those individuals—will be able to make decisions as to whether they register or not based on the new, clearer law. Because the Minister’s Supplementary Order Paper provides the date of 26 February 2015, it means that those small businesses that have incurred costs through an unregistered body corporate from 27 February on are still denied refunds and will still be double taxed under GST.

The question is: why would you want to do that? The Minister of Revenue, the Hon Todd McClay—I have got the dates, and I can re-rehearse them again, of course—announced in June 2014 the Government’s intention to change the law. The Government gave a series of commitments. The bill was introduced in February 2015, and, instead of disallowing bodies corporate from registering for GST, the bill then proposed that the registration be generally elective. No look-through rule was provided even though that commitment was made as far back as June 2014.

The question is, why would the Minister change the dates? Presumably, the view is that when the bill was introduced on 26 February people had noticed that there would be no look-through rule as promised by the Minister in June 2014. They could then immediately have the body corporate registered for GST so they could get refunds to GST, which all presupposes that small businesses are extremely conversant with the detail and the technical aspects of GST law. It presupposes that those small businesses understand intricately the process of parliamentary legislation-making. It presupposes that those small businesses will be hanging on to every word of Parliament as this bill is introduced right through and analysing every subtle nuance and every clause within the proposed legislation. That is just bunkum. Small businesses have got a lot more productive things to do. Their eye is on the ball of the small business. They cannot be expected to pick up on every little nuance of Parliament.

So what we proposed in my amendment was that it apply to supplies before 1 April 2016. That gives people time to absorb the changes. It is a transitional provision, and fairness prevails. So although I would say that we will be opposing the Minister’s Supplementary Order Paper 129, we will not be opposing it because we are against it in principle. We are opposing it and supporting my amendment because the Minister has left out a really important chunk, in terms of those dates, that has the ability to greatly disadvantage a whole series of parties and businesses that will still be liable for cost. We think it is inelegant. We think that this should have been brought to the Minister—well, presumably the Minister knew. It should not have taken a letter from me on 20 October—months and months and months after the bill was introduced—for the Minister then to scurry around and go: “Oops, there is a major flaw in the bill.” I am advised by some learned tax historians that we may have made a little bit of history, because I think it has been a very, very long time since an Opposition has actually been able to provide a major amendment to a piece of tax legislation that the Government has been forced to pick up.

But the big question I would like to ask the Minister—and it worries the living daylights I think out of the industry and many practitioners—is, why are these mistakes continually being made? If you go back—and I will not labour the point—to the Peter Dunne carpark tax and the Peter Dunne computer tax, all these sorts of things that were rubbish right out of the Finance and Expenditure Committee when they came through, and they were dealt to, the Government was forced to then back down and say that this is just crazy. But I have got to say this: it is not a political comment. It is not a comment about which political party is in Government, but I know that when we were in Government the quality of advice that Ministers were receiving was, I think, bluntly, world class—absolutely world class. People like Robin Oliver and other people who—apart from David Bennett, who I do not think was employed in the department but no doubt feels he is a guru on tax matters—had been around for years and years and years, and were part of the Inland Revenue Department furniture. A number of these proposals would never find their way to a Minister’s desk, or if they did, you had Ministers whose eyes were on the ball and who would say “No, no, this is crazy. We are not doing it.”

This particular piece of ineptitude had the ability to impact on thousands of small businesses all around the country. I give the Minister his due when we raid—

Andrew Bayly: I think that’s pretty harsh, Clayton.

Hon CLAYTON COSGROVE: No, it is a fact though. If the member actually reads it—and I will tell you why it is a fact. It is because his own Minister has amended it. So if he reads his own Minister’s Supplementary Order Paper 129—Ministers are not in the habit of doing things on a whim—it actually remedies a major problem. My point to that member over there is this: it should not have taken an Opposition without an Inland Revenue Department behind it to raise the issue with the Minister. To his credit, he amended it because it was going to provide a major hole and a major impact on small businesses. If the member in the back row had read the bill or maybe even read the Minister’s letter with the explanation, he may know why. He purports to stand up for small businesses.

Chris Bishop: That’s right.

Hon CLAYTON COSGROVE: So why did that member and Mr Bishop not pick up on this, an issue that would impact huge cost on those small businesses retrospectively. They are in Government. They have got all the resources, and they blew it and they missed it. Even the Minister himself did not even pick it up. I will give him his due. As I have said often before, he is the guy with the shovel behind the elephant post-Peter Dunne. Peter Dunne was asleep at the wheel, and Mr McClay has had to come in and clean it up. But it is a worry that Opposition members and others—and through the good grace of experts outside this place—have managed to pull this one out for the Government, and managed to write to the Minister and say: “Here is a Supplementary Order Paper. This will fix the problem.”

To the Minister’s credit, he has delivered one back in his own name, but still there is an inequity and a gap because the dates, in my view, are wrong. The 1 April 2016 date, as I understand it, was the one that was promised, the one that was committed to, and the one that will ensure that there is no inequity or an unfairness. As I say, if this is not corrected, what it means is that those small businesses that have incurred costs through unregistered bodies corporate from 27 February on are still going to be denied refunds and will still be double taxed under GST. I do not know what the member, whose name I cannot recall, in the back row thinks of that. Does he think that is a problem for small business? Does he think that is OK? He is a guru. Does he worry about these things? Does it keep him awake at night if he purports to support small business?

We are going to support the bill, but we think there is still an inadequacy in the Minister’s Supplementary Order Paper 129. He has gone 90 percent of the way there but there are still businesses and individuals that are going to be impacted on.

STUART NASH (Labour—Napier): That was a rousing speech from Mr Cosgrove. In fact, he is right on this, and it is a shame that the Government actually does not put up its hand and take on board what he is communicating.

There are a couple of things—not large things—I would like to talk about on this bill. It will not be a long call, but I would like to talk about clause 230 inserting new section 70C. We heard a lot in the Finance and Expenditure Committee about how the Inland Revenue Department (IRD) wants to move to an electronic way of doing business. That is admirable; there is no doubt about that. But it is quite interesting that in statements in return to research and development tax loss credits it says: “A person must file by electronic means,”. I guess we can assume that if someone is picking up research and development tax credits, then they are going to be au fait with the way of the world in the 21st century—i.e., fully electronic—but I wonder whether, at this point in time, what we do is we do not deem that they must file by electronic means. Maybe we just give them a touch up and say they “may” or they “should”, because when we have legislation I always look at words like “must”, “may”, “should”, etc., and they give me an indication of what the legislative intent is. Often if it says “may”, then it gives guidance. If it says “must”, then obviously it prescribes it—this is how it has to be done.

I just wonder whether, at this point in time, we do not say “must” and we should say “may” to give the person an option. It is making an assumption that the person who is pulling down research and development credits is not necessarily dealing with computer software or something high tech. They may still be dealing in the backyard, putting together a really innovative idea for the 22nd century, but they are still on a paper-based system. In this case they must deal with research and development tax credits through an electronic scheme.

What I would really like to talk about, and something that did take a little bit of the select committee’s time, is clause 232B. What this is talking about is officers maintaining secrecy. If we look at clause 232B, what it basically says is that nothing shall prohibit the Commissioner of Inland Revenue to communicate with an officer, employee, or agent of the Callaghan Innovation fund for the purpose of administering subpart MX of the Income Tax Act 2007. The reason this took up a bit of our time is that when we were talking about research and development tax credits we were not too sure about what was defined by research and development and what was not. So the IRD came up with the view that Callaghan Innovation was in fact the organisation that would be the main arbiter on whether or not something constituted research and development. The problem we had with that was that what often happens, or usually happens—in fact, the vast majority of the time—in these cases, is that an organisation comes up with research and development and they are very protective of this. They come up with some new proprietary technology for doing whatever, or they come up with a new patent, and they require the research and development funding to actually commercialise it. But there does exist in New Zealand—and I have seen this happen a number of times, and one particular company in Napier comes to mind—an element of distrust with the Government. Let us be open and honest about this. This is not in any way, shape, or form—in any way, shape, or form—to impinge on the integrity of those with the Callaghan Innovation fund. I do need to make that clear.

Hon Damien O’Connor: They are the puppets.

STUART NASH: Well, they do some really good stuff. They are designed to implement the vision of Professor Callaghan, and Professor Callaghan had a vision for how New Zealand should be. He was a very decent bloke.

The other thing also is it does say in clause 232B(2) that nothing shall prohibit the commission from “(w) communicating to an officer, employee, or agent of the department that is, with the authority of the Prime Minister, for the time being responsible for the administration of the Research, Science, and Technology Act 2010,”. Again, I have concerns because I suspect that what will happen is that a number of New Zealand companies that would be eligible for research and development tax credits and eligible for Callaghan Innovation funding will have a very robust discussion around the board table, and they will make a decision that they will not approach the Government because the element of trust that the intellectual property will be protected just does not exist. When we say here that nothing shall prohibit the Commissioner of Inland Revenue from talking to officers of the Callaghan Innovation fund, I think that we open ourselves up again to unintended consequences.

Obviously, what we do not want to do is to create an environment where people do not trust the Callaghan Innovation fund, or they do not seek funding, but also we do not want to create a system where people avoid tax by going to the Callaghan Innovation fund. So I think that what we should have done, and I take some responsibility because I think I was on the select committee for this—I am not too sure. In fact, I do not know whether I was or not; we get a whole lot of these tax bills coming through. I think we actually should have set up a system where it was a lot easier for companies to claim their research and development tax credits and not worry about tax implications, but also to allay their concerns around their intellectual property. Secrecy is maintained by an Act of Parliament, of course. What happens if someone from the Callaghan Innovation fund or the commissioner or anyone breaches the secrecy? They are in very deep trouble. But what we do need to do as a Parliament, I believe, is create a much higher culture of trust in the Government, and I know, at this point in time—as mentioned, talking to one particular company—that does not exist.

I will leave it at that at this point, but there are some other contributions coming. Thank you very much.

GRANT ROBERTSON (Labour—Wellington Central): I want to make just a brief contribution as well to support my colleague Clayton Cosgrove’s amendment introducing a new clause 254B to deal with the issue, as we have previously discussed, of what happens to those small-business people in particular, who run their businesses essentially via a premises that is a unit title within a body corporate. Most of us will be able to picture the kind of business. I know of one. I used to be a tenant in a building that was a body corporate, down on Lambton Quay. It contains a number of businesses. There is a shoe store in it, there is a key engraver, and a repairer. These are people who are often small-business people whose premises they do not own themselves, but they are the unit title holder within a body corporate.

What this clause of the bill aimed to do was to create some consistency around the rules of GST registering for bodies corporate. There have been a couple of legal cases that have changed the law. It means that there has been an inconsistency in interpretation between how the Inland Revenue Department (IRD) treats bodies corporate in terms of GST and the decisions of the court. We support the principle of that approach. It is important that there is consistency in terms of GST treatment.

What Mr Cosgrove led the Government to do, by writing to it, was to assess how to deal with people in this situation who, looking back on their business expenses, would normally have been able to claim GST input credits on their legitimate business activities—to enable them to do that in the spirit of a transitional part of the law. Both sides of the House are now in agreement that that was a gap that was not brought to the attention of the Finance and Expenditure Committee—it should have been. This process of discussion around the treatment of bodies corporate for GST has been the subject of to-ing and fro-ing between IRD and tax practitioners for some time, so it was of some surprise to members of the select committee to learn afterwards that this gap had suddenly been identified.

Hon Clayton Cosgrove: It was a surprise to the Government.

GRANT ROBERTSON: Well, it was a surprise to the Government, until Mr Cosgrove let it know about it. So we reached the point where, yes, there was an agreement that there was a problem here.

The issue is the date from which the small businesses concerned can continue to make their claims. The Government has proposed, in Supplementary Order Paper 129, a date of 26 February 2016—that you can be claiming on services before that date. Mr Cosgrove has proposed the date of 1 April 2016. My contribution here is to ask the Government what on earth it thinks it is doing, choosing the date of 26 February 2015, because what we have been told is that that date has been chosen because it is the date of the introduction of the bill. Well, quite frankly, you may as well have asked Mr Cosgrove his birth date, and chosen that date as the day, be it any more—

Hon Clayton Cosgrove: I won’t tell it.

GRANT ROBERTSON: Halloween, did you say? Yes, I think it is possibly Halloween. Very appropriate. The date of introduction of a bill is completely irrelevant.

Why does the date of introduction matter? Who knows what is going to happen to a piece of legislation when it is introduced to Parliament? It may be voted up; it may be voted down by Parliament. The date of introduction means nothing whatsoever. Is it some assumption by the Government that it is all-powerful and that the moment that it introduces a bill it effectively becomes law—that everybody reads it and says: “OK, that’s now what the situation will be and we must obey these new tax laws.”?

There is nothing in the process of Parliament that would support using an arbitrary date like the introduction date. I would defy members of the Government to tell me when it has ever occurred that the date of introduction is somehow regarded as the date by which taxpayers must obey a new law. As we are seeing right now, tax bills get significant amendment as they go through the House. Every tax bill since I have been a member of this House has seen significant changes, large Supplementary Order Papers—

Dr David Clark: There’s a correlation there.

GRANT ROBERTSON: That is right. It is all about me, Dr Clark. Every tax bill has seen large Supplementary Order Papers being made.

How can the Government justify choosing this date? If this is actually about being fair to small businesses that are now dealing with a change in process, with different treatment for bodies corporate—to need to make a series of decisions about whether those bodies corporate have registered and what that means—I think the Government needs to reconsider and support Mr Cosgrove’s amendment because it is fairer.

Hon CLAYTON COSGROVE (Labour): I want to pick up on Mr Robertson’s point, but I just want to express some disappointment. This is a Supplementary Order Paper. Let us be very clear about it. In February of this year—on 26 February—the Government introduced the legislation. The process is that it goes before the Finance and Expenditure Committee. It was referred to the select committee on 11 March. The closing date for submissions was 30 April. The committee received the submissions, heard them, and the bill came back to the House. Throughout that whole period this particular issue relating to GST and bodies corporate was never raised with the committee by officials, was never raised by Government members, and we were never written to by the Minister of Revenue asking us to deal with this. The bill came to the House, and I think it was 19 October when, in a speech that I and other colleagues made, we raised it with the Minister.

That was the first time this issue was raised, and we provided, actually, quite a detailed explanation as to the potential impact on small businesses if this hole was not plugged, if the issue was not dealt with. It took the Minister then over a month, on 17 November, to get back to us. His opening line to me in his letter is: “I refer to your letter of 20 October 2015 and the matters you raised in your speech.”—blah, blah, blah—“I acknowledge your concerns about the historical uncertainties surrounding GST treatment of unit title bodies corporate. I agree that it is desirable to provide greater certainty to GST-registered persons and businesses that tax positions taken during this time will not be routed.” The bill was introduced in February, after a whole series of departmental reports and research and papers to Cabinet, what have you—that was February. It took him until 17 November, when the scales fell from his eyes, to actually realise that this was a problem and to do something about it.

Hon Damien O’Connor: That was quick for him.

Hon CLAYTON COSGROVE: That was quick, yeah.

My question is this: how on earth—I say to the Minister in the chair, and, forgive me, the Minister in the chair is not the portfolio Minister, but represents the portfolio Minister, none the less, and I am surprised that the portfolio Minister has not taken a call. He has not taken a call, I think, on these pieces of legislation at any stage this evening. This was a monumental stuff-up—a monumental stuff-up that would have cost small businesses goodness knows how many hundreds of thousands of dollars, or millions of dollars, across the board. We do not know. What I would like to know from the Minister, because it goes to looking at future tax bills, is what confidence do we have that there will not be another hole in another piece of legislation, which maybe Opposition members do not pick up on to dig the Government out of the mire, and it goes through? An explanation, I think, is warranted, because it goes to the credibility and integrity of the Minister of Revenue and, via the Minister of Revenue, to the Inland Revenue Department itself.

Why was this missed? Was it known about? The advice I have from industry is that it was known about for quite a length of time, but nothing was done. If nothing was done, was that because officials were negligent? Was that because the Minister knew about it and did not clear the paper on his desk between February of this year and 17 November? Did he not bother about it? Did he not care about it? Did he not think it was a big issue? Well, he did think it was a big issue when it was raised in this House, and I suspect he went back and went: “Oops, we’ve got a major problem.” Why did it take a month to correct? Why was the Finance and Expenditure Committee not informed of this as we examined the bill? Because this is not just a small Supplementary Order Paper; this is a major one.

As to Mr Robertson’s point, it is fanciful that an arbitrary date of the date of introduction was proposed as the mechanism in the Minister’s Supplementary Order Paper. He does not give any explanation for why. He just says: “Well, date of introduction, so what?”. He does not acknowledge that there will be those who will be impacted by this in terms of being double taxed under GST and denied refunds, unless we adopt the date that I have proposed, which is 1 April 2016. If it is agreed that people are going to be double taxed under GST and denied refunds, could a Government member—or maybe the chair of the select committee, Mr Bennett, who was running the show—tell us whether they are in agreement with that? Are they happy that that inequity will exist? Are they happy that people will be double taxed under GST? This is the party that purports to support small business.

Is the Minister happy with that inequity? Is the Minister going to propose any other amendments to remedy it? We have done most of the work for him; it would be good if he took this point on. Perhaps the Minister in the chair could turn to the officials and ask them that question, because there is no explanation as to why the date of introduction was chosen, apart from, you know, finger in the ear. Maybe the Minister tossed a coin, rolled a few dice, or, I do not know, watched two flies run up a wall—

Grant Robertson: Lotto numbers.

Hon CLAYTON COSGROVE: —lotto numbers, horoscope, who knows? But this is a very serious issue because small businesses and others in this situation will be double taxed in respect of GST and will be denied refunds. If the Government is just happy to sit there and go “Tough”, well, that is OK; that is now on record. But I do not see any of the three—I think there are two members of the Finance and Expenditure Committee here. There is Mr Bennett, the chair. No Minister—no Minister—has taken a call to answer any of these questions. It is bad law, it is extremely bad process, and it is extremely bad for the credibility and integrity of the Inland Revenue Department, which, I have got to say, has generally been pretty good—up until a few recent incidents over the last Parliament—in terms of advice. But the Finance and Expenditure Committee got zero advice on this.

Were the officials told by the Minister to provide no advice on this issue? There is a question that could be answered. Why was it missed? Why was it missed through the Cabinet process? Why was it missed through the Finance and Expenditure Committee in terms of advice? Why, when it came back into this House from the Finance and Expenditure Committee, and we were examining it, did the Minister of his own volition not put a Supplementary Order Paper in to correct it? Why did it take a letter from me and pressure from Opposition members to get this thing corrected? There is not politics in this. This is an issue about the quality of advice, the accountability of Ministers, and whether Ministers are up to it—whether they are actually up to it, whether they are reading the papers, whether they are asking the questions. I am also advised that members of industry canvassed this issue with officials, with the department, and with the Minister, and nothing was done, not a thing—not a thing. Thousands of small businesses could be just thrown on the heap and impacted in respect of the GST.

Well, the Minister has provided a partial solution, but it appears that the Government is still prepared to have people double taxed under GST and denied refunds, simply because it plucked a date of February 2015 out of its head and put it in this legislation, saying: “That’s the drop-dead date.” Could the Minister advise us, as she is writing down the list of questions, as to why that is fair, why that is equitable? Is she prepared to revisit this issue and change those dates? If the Minister is not, could she advise us as to why? If she feels it is equitable to have people double taxed and refunds denied, could she provide us with an explanation? Could Mr McClay, the revenue Minister, who is probably hiding under a desk, obviously, because he has not taken a call on this—he is hiding under the desk or under the Table or somewhere, I do not know. He has gone down a burrow somewhere around this Chamber. I would have thought, given that he missed it—he did not punch the ticket—that he would actually be taking a call and explaining this. The courts, of course, do look at these debates, if there is court action around this. They do actually look at these debates in terms of their evidential value.

But it is arrogant for a Minister to say “This is what I want to do. I know there is an inequity inherently in this. I know people will be double taxed under GST.” I wonder whether Mr Scott, the vintner down the back—who normally gets up and has a crack at us and says we are out of touch with small businesses, we do not know what we are talking about, and it is all nanny State and PC—is going to get up and tell us whether he is happy with people being double taxed under GST and businesses being denied their refunds. Oh, there is silence—silence—silence from all those members over there, even the one in the middle. There is silence. They are prepared to do this. They are prepared to see this inequity slide through. It will be interesting to see what the one in the middle does when he goes back to his constituents—whether he goes down a burrow in the electorate when people front up and say: “Hang on. Why I am being dealt to? Why for the guy down the road is it OK for them? They get treated fairly. But because of a date that that member’s party plucked out of nowhere, I’m double taxed and I’m denied my refunds.”

I wonder what Mr Scott’s explanation will be to small businesses. Will he be able to say: “Well, here’s an explanation from the Minister.”? No, because the Minister will not answer any questions. Maybe the member can. Maybe he can whip down the burrow, follow the Minister down there, and change his mind.

Dr DAVID CLARK (Labour—Dunedin North): I leapt up because the members opposite seemed reluctant, despite the challenge from the Hon Clayton Cosgrove. I must commend him for his work in spotting those changes and picking them up. I guess he is out there actually listening to the businesses, and asking: “What is wrong with this legislation? How could it be improved?”. It is embarrassing that the Government has not picked up on this itself. It is embarrassing that it required a letter from a diligent Opposition member to get this change written into the law. Already my colleagues have suggested that the dates could be changed to make it better still for small businesses.

I want to pick up on a similar theme, actually, because in this bill we see more examples of unnecessary compliance. It is a bill designed to tidy up the tax laws, to make sure that compliance is as simple as possible—that is its usual purpose—that it is there and complete, and that the tax is hard to avoid if it is fairly due. That is why we are making these amendments that are here—the amendments to other Acts, in Part 4. One of the interesting ones is clause 227, where we are removing a completely irrelevant section. This is a section that this Government here, on the benches opposite, put in place in 2011. It has been on the statute book for 4 years—for 4 years. It has required people receiving Working for Families to furnish details to the Inland Revenue Department (IRD) of each family assistance credit paid to them in the tax year.

Why has the Government required that? We learn from the notes that the IRD does not request or require this information at all. So anyone who has been diligent, who has read the law, who has said “I want to be sure that I meet all my obligations.”, will have been filing these details, when it was completely unnecessary or they were not used by the department. This is the kind of thing that is in this law. This unnecessary compliance, because it is information that is not even being used by the department, has been required by law to be collected for the past 4 years. Thank goodness we are getting rid of it now. But those same people who might have been double taxed under GST here may also find themselves required to submit information that the IRD neither needs nor uses. Thank goodness we are cleaning it up, finally, here. This is the kind of law that gets made when there is not attention to detail, when the Minister is not across his portfolio, when he is asleep at the wheel.

We support this kind of change in the legislation. But, you know, we are reminded, in the double GST example that my colleague has brought up, of the child support collection requirements that have been put on small businesses by this Government—that small businesses collect back-owed child support. Again, this is something put on small-business owners that they did not previously have to do, and that introduces potential conflict into the workplace. The child support legislation that was previously passed through this House, introducing a new formula—

The CHAIRPERSON (Lindsay Tisch): Order! [Interruption] Order! Come back to the bill.

Dr DAVID CLARK: The point, which is relevant to this bill, is that it is good that we are tidying up those things that need to be tidied up, but they should not have got in there in the first place. We should not need to be here, debating the removal of unnecessary and irrelevant legislation that was put through this House just 4 years ago.

So for 4 years this information has been confusing. Some people will have complied with it unnecessarily. Likewise, this double GST issue has been going on for goodness knows how long. But the issue had not been spotted until members on this side of the Chamber pointed it out. We must question why the Minister has missed these things up until now. I would like the Minister very much to get to his feet and say why clause 227 has been required now, and not earlier—not requesting or requiring information—and why people will have thought that they had to supply details of every family assistance tax credit paid to them since 2011 and up until now. Why has the Minister not spotted it previously?

So I hope the Minister will leap to his feet shortly, because my voice will not carry for much longer. I think I have made my point, and I am dying to hear the answer. Thank you, Mr Chair, for the opportunity to raise that issue.

The other point I would quickly like to make, though, while my voice holds, is that the family scheme income statements, clause 232, gives options for families to—[Bell rung] Mr Chairman?

The CHAIRPERSON (Lindsay Tisch): Dr David Clark, while your voice holds.

Dr DAVID CLARK: Thank you, Mr Chairman, while my voice holds. It gives an opportunity for families to submit separately their family scheme income statements. To me, exactly when this applies and why it applies—I understand it is to make it simpler. The guidance here says that in some circumstances, especially those with child support arrangements, it can be difficult to identify each spouse’s portion of family scheme income. That is when it is suggested that the statement of family scheme income be submitted separately. That is in the explanatory note, not in the bill itself. The bill itself does not shed much light on the issue, as I read it initially.

It says in new section 80KV(2) set out in clause 232 that a person “must”, within the time required, file the person’s return of income. New section 80KV(3) describes what “must” be done again, but there is a clause that says: “unless that other person gives a statement of their family scheme income”. I want to know how that is coordinated, what the rules around coordinating those separate family scheme income submissions are, and how they were decided. On the surface, at least, it appears a little confusing as to when who takes the lead, and on what. Thank you, Mr Chairperson.

Hon CLAYTON COSGROVE (Labour): I seek leave to table two documents. One is a letter from the Minister of Revenue, Todd McClay, to me of 17 November 2015 finally outlining his proposed Supplementary Order Paper.

The CHAIRPERSON (Lindsay Tisch): Leave is sought for that purpose. Is there any objection? There is no objection. It can be tabled.

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

Hon CLAYTON COSGROVE (Labour): The second one is the letter from me of 20 October 2015 to Mr McClay raising the same issue, with my Supplementary Order Paper attached.

The CHAIRPERSON (Lindsay Tisch): Leave is sought for that purpose. Is there any objection? There is no objection. It can be tabled.

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

Hon DAVID CUNLIFFE (Labour—New Lynn): I rise to take a final call on Part 4 of the Taxation (Annual Rates for 2015-16, Research and Development, and Remedial Matters) Bill and wish to address the Committee on the issue of foreign superannuation. Clauses 71, 75, 96, 133, 145, 213, 256, and 266 admittedly span a couple of parts, but they are related. May I make two preliminary comments. The first is that we commend the objectives that the Government has set out here to make a number of remedial changes that clarify—I think the operative word is “clarify”—aspects of the rules applying to foreign superannuation interests and ensure that the new rules operate as intended.

Members and the Minister will of course know that foreign superannuation has for many years been a bit of a bugbear. Foreign residents who move to New Zealand who have been contributing members to foreign superannuation schemes typically must report those investments to the New Zealand Inland Revenue Department. They forgo their entitlements and they are replaced by New Zealand superannuation, in general. There is a lot of fine print around that, including whether the migrant to New Zealand has been in a tax-based scheme or a contributory scheme, and the tax consequences if their contribution level has been above the minimum. It is around those grey areas that some of these changes are addressed. The second preliminary comment is that it is an absolute honour to be doing some more work in the area of superannuation.

The key features of the proposed changes include, firstly, ensuring that foreign superannuation rules under the foreign investment fund or FIF rules apply to interest acquired when a person was a New Zealand tax resident under domestic law but is not resident in New Zealand under a double tax agreement, as can often happen. Secondly, the changes reintroduce the exclusion from the foreign investment fund rules for interest in registered Australian superannuation schemes acquired while a person was a New Zealand resident.

That provision is a pretty interesting one to reflect upon at this time, when New Zealanders who are resident for most of their lives in Australia and are paying into contributory schemes like Medicare Australia and Medicaid in Australia cannot qualify to draw down the benefits of those schemes. Members on this side of the Chamber have been at some pains to point out the inequity in that. People might have been born in New Zealand, moved to Australia when they were 2 or 3 years old, worked for 40 years, paid into the Australian tax system, and when they get older they get sick and they cannot qualify because there is no process under Australian law for the vast majority of New Zealanders resident in Australia to qualify for permanent residency.

Here in this Part 4 we are reintroducing the exclusion from the foreign investment fund rules for interests in registered Australian schemes acquired while a person was a New Zealand resident. That is, we are making it easier for Australians who were New Zealand residents and had interests in Australian schemes to ensure that they do not miss out on the tax benefits in New Zealand, and that it is fair and equitable for them. Why is the Government not doing more to ensure that New Zealanders who have lived all their lives in Australia but who cannot qualify for permanent residence are treated with an equal degree of fairness in the Australian system?

The third key feature of the foreign superannuation provisions of the bill is to ensure that the schedule method in the foreign superannuation rules applies to lump-sum withdrawals and transfers from a foreign superannuation interest, and the sub-point is if the taxpayer has less than $50,000 of foreign investment fund interest. Let us translate that into English. What that means is that the schedule method, the particular way that the tax rate applies to different levels of investment, applies not only to periodic payments like annuities but also to lump-sum transfers. So if someone has a superannuation scheme, they can elect either to keep paying into it, and when they turn 65 they get an annuity from it, or under certain circumstances they may be able to take a lump-sum investment, but there has been confusion around the margins—

Hon HEKIA PARATA (Minister of Education): I would like to take the opportunity to respond to, or answer, some of the questions that have been raised by the member Clayton Cosgrove as to why the saving provision in the Supplementary Order Paper 129 does not apply after 26 February 2015. The proposed application date provides greater certainty for taxpayers. The amendment is intended to create certainty in an area where there has been much historical uncertainty.

Grant Robertson: We accepted that.

Hon HEKIA PARATA: I am just being very clear. On 26 February 2015, the date of introduction of the Taxation (Annual Rates for 2015-16, Research and Development, and Remedial Matters) Bill, the position for bodies corporate was clearer. The proposed legislation clarified that they could register for GST and claim deductions themselves. A later application date would mean two potentially conflicting sets of rules would apply at the same time. Overlapping rules may involve additional complexity in the legislation and create confusion and additional uncertainty for bodies corporate and their unit holders. A later application date may result in compliance costs for bodies corporate.

Previously, a look-through approach similar to the savings provision was proposed and consulted on. The approach was not supported by submitters, because of the compliance costs associated with applying the approach. If the saving provision was to apply from a later date, bodies corporate may incur additional compliance costs if unit owners wish to change their tax positions and claim deductions on a look-through basis. Submissions supported the proposed approach and the application date. Submitters to the Finance and Expenditure Committee supported the approach taken in the bill and the application of this approach from the date of introduction—26 February 2015. Submitters did not raise concerns that the amendment did not give unregistered bodies corporate enough time to determine whether or not to register. And, finally, there may be fiscal risks if the saving provision applied after 26 February 2015.

The amendment contained in the bill includes special rules, applying from the date of introduction, to ensure that GST is neutral for bodies corporate that decide to register. Applying the savings provision to goods and services acquired after 26 February undermines these rules and may give certain unit owners a tax advantage. This could be perceived as unfair by unit owners unable to gain the same tax advantage. The financial costs of the proposal were budgeted based on this neutrality, so allowing additional deductions to be claimed post - 26 February could create a fiscal risk to the Government, particularly if the application date enabled unit holders to structure their affairs to best take advantage of the provision. I trust that this assists the member.

The CHAIRPERSON (Lindsay Tisch): The Hon Clayton Cosgrove.

Hon DAVID CUNLIFFE (Labour—New Lynn): Mr Chairman, that is Clayton Cosgrove; I am David Cunliffe. People often confuse us—

The CHAIRPERSON (Lindsay Tisch): I am sorry—my apologies.

Hon DAVID CUNLIFFE: —much to my chagrin, I have to say. But there we are.

In terms of transfers between foreign superannuation schemes, under the rules in amended section CF 3 as set out in clause 71 of the Taxation (Annual Rates for 2015-16, Research and Development, and Remedial Matters) Bill, a transfer from one foreign superannuation scheme to another non - Australian foreign superannuation scheme is not taxable income. This is achieved through omission in the current section CF 3(2), which lists the types of foreign superannuation withdrawals that are considered to be income but previously had not listed transfers from one scheme to another. The issue there is that this is trying to close a loophole, a loophole whereby a foreign resident can simply transfer from one scheme to another, stay a step ahead of the good old Inland Revenue Department and its fantastic computer system—

Grant Robertson: Oh yeah, we’ll get to that tomorrow morning.

Hon DAVID CUNLIFFE: We are coming to that tomorrow morning, and thereby—

The CHAIRPERSON (Lindsay Tisch): 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 the Support for Children in Hardship Bill with amendment, and that the Committee had divided it into three bills, progress on the Taxation (Annual Rates for 2015-16, Research and Development, and Remedial Matters) Bill, no progress on the Radio New Zealand Amendment Bill, no progress on the Weathertight Homes Resolution Services Amendment Bill, and no progress on the Radiation Safety Bill.

Report adopted.

The House adjourned at 9.57 p.m.