Thursday, 9 March 2017
Volume 720
Sitting date: 9 March 2017
THURSDAY, 9 MARCH 2017
THURSDAY, 9 MARCH 2017
Mr Speaker took the Chair at 2 p.m.
Prayers.
Business Statement
Business Statement
Hon GERRY BROWNLEE (Leader of the House): When the House resumes on Tuesday, 14 March the Government will look to progress the New Zealand Intelligence and Security Bill, the Taxation (Annual Rates for 2016-17, Closely Held Companies, and Remedial Matters) Bill, the Resource Legislation Amendment Bill, and a number of other bills on the Order Paper.
CHRIS HIPKINS (Labour—Rimutaka): I raise a point of order, Mr Speaker. I understand the Government intends to bring some racing legislation to the House shortly, and I wonder whether the Leader of the House could indicate whether the Government intends to progress that before the election.
Hon GERRY BROWNLEE (Leader of the House): The Government is always interested in racing legislation through this House. It is largely up to the Opposition as to exactly what pace that goes at—either a pace or a gallop. Perhaps, though, with some agreement, we could trot through all of the legislation on the Order Paper.
Oral Questions
Questions to Ministers
Economic Outlook—Reports, Forecasts, and Wages
1. TODD MULLER (National—Bay of Plenty) to the Minister of Finance: How is the New Zealand economy expected to perform over the medium term?
Hon STEVEN JOYCE (Minister of Finance): This week the International Monetary Fund (IMF) released its concluding statement of its article IV review of New Zealand, which notes that our economy is undergoing a broad-based economic expansion driven by residential and infrastructure investment, migration, and the dairy price recovery. The IMF expects this growth to remain strong and above trend into 2018. This positive outlook supports the view from Treasury that economic growth will be around 3.5 percent for each of the next 2 years.
Todd Muller: What does the IMF say about the Government’s fiscal strategy?
Hon STEVEN JOYCE: The IMF considers that the Government’s fiscal strategy is broadly appropriate, and notes we are already incorporating higher infrastructure spending and new growth-friendly measures at a time when the economy is forecast to be growing above its potential. It also notes that the strong fiscal position provides room for the Government to further accommodate the needs of strong population growth, including the higher infrastructure expenditure signalled by the Government in the Budget Policy Statement. It allows the Government to give additional attention to our identified Budget priority areas of supporting low and middle income earners, improving public services, and reducing the country’s debt.
Todd Muller: What recommendations did the IMF make for New Zealand?
Hon STEVEN JOYCE: The IMF made a range of recommendations, some of which we agree with, and many of which are already under way. This includes consideration of the introduction of debt-to-income ratio limits, further strengthening of the banks’ balance sheets, measures to increase housing supply, and greater trade liberalisation. The IMF also suggested a broad-based capital gains tax, but we believe the better approach is targeting housing investors with the 2-year brightline test, the discontinuation of depreciation, and the resident withholding tax for overseas-based investors.
Grant Robertson: Can the Minister confirm that real wages are due to increase by less than 1 percent across the next 3 years?
Hon STEVEN JOYCE: My answer to the member would be: “According to whom?”.
Todd Muller: What other reports has he seen on the performance of the economy?
Hon STEVEN JOYCE: I think there are many New Zealanders who are interested in the performance of the New Zealand economy. I see that Westpac Banking Corporation recently released its quarterly economic forecast, in which it states that “New Zealand finds itself in something of a sweet spot right now.”, with the economy growing at a steady pace for some time and with a pipeline of building work and also dairy price recoveries expected to drive above average GDP growth for the next few years. It further notes that New Zealand stands out as a strong performer within a difficult global environment.
Grant Robertson: Can the Minister confirm that Treasury has forecast that real wages are due to increase by less than 1 percent across the next 3 years and that labour productivity is due to fall again this year, making New Zealand’s position as the fourth worst performer for labour productivity in the OECD even worse?
Hon STEVEN JOYCE: In terms of productivity performances, the member knows that is quite a long lagging indicator, so it will be some time before we know whether that prediction comes to pass. But in terms of real wage growth, yes, I am aware of the Treasury predictions, but the good news is that real wages have been growing substantially over the last 8 years. In fact, wages have been growing at approximately twice the rate of inflation, and I have more confidence that that trend will continue than the one being predicted by Treasury in this forecast.
State and Social Housing—Availability and Accommodation Supplement
2. PHIL TWYFORD (Labour—Te Atatū) to the Minister for Social Housing: Does her statement that the Prime Minister’s commitment to 65,000 Income Related Rent Subsidy places was for the number of “places the Budget appropriation provides” mean she considers the commitment met, even if there are not 65,000 tenants actually housed using income-related rent subsidies?
Hon AMY ADAMS (Minister for Social Housing): No. I would, however, like to make it clear that my reference on Tuesday to budgeted places can only ever be an estimate as we work in total dollar terms, because the amount paid to any Income Related Rent Subsidy (IRRS) household varies significantly due to the personal circumstances of the household, the rent they pay, and the area they live in. In the former Prime Minister’s speech the member is referring to, the former Prime Minister made it clear he was targeting a $40 million a year increase in the appropriation. I can tell the member that from then until now it has, in fact, increased by $108 million a year.
Phil Twyford: What is the point in creating ghost subsidy places if there are not actually going to be houses to put people in? Where are the people supposed to live?
Hon AMY ADAMS: The member entirely misses the point, which is that the important thing is the number of places we have available for people who qualify for a social house. That number currently sits at around 66,000. We have indicated we want to take it to 72,000. All of those—
Phil Twyford: People aren’t living in those 60—
Hon AMY ADAMS: —Mr Twyford, listen carefully now—places are eligible for an IRRS. Money is available. People can fill them whether they qualify for an IRRS or not. They are eligible for an IRRS.
Phil Twyford: Is the reason she has changed the target that the Government has not built enough houses because it has taken $1.8 billion out of Housing New Zealand in taxes, dividends, and interest payments—enough to build 5,000 new State houses?
Hon AMY ADAMS: The member is simply wrong. The Government has increased the number of social houses available. The Government has increased the appropriation available to fund social housing places. The Government is spending hundreds of millions of dollars more than the Labour Government did, and it is delivering stock that is not only more in number but is warmer, dryer, safer, and more modern than the decrepit state of affairs we inherited from Labour.
Dr Megan Woods: That wasn’t the question. Try again.
Mr SPEAKER: Order! The question was very definitely addressed, and I do not need advice from Dr Megan Woods.
Phil Twyford: Why does the Government not just build more State houses instead of using Housing New Zealand as a cash cow so that it does not have to continue spending millions of dollars every month putting homeless Kiwi families up in motels?
Hon AMY ADAMS: Perhaps if the member did not talk all through my answers, he would hear me say that we have created 66,000 places and we have announced that we are on a plan to take that to 72,000 houses. Seventy-two thousand is more than 66,000. The number is going up, we are spending more, we are making them better, and we are making them more fit for purpose.
Phil Twyford: Will the Minister admit that creating social housing places or Budget appropriations is not the same thing as actual houses that people can live in with an IRRS?
Hon AMY ADAMS: The 66,000 social housing places are actual real houses with walls, roofs, kitchens, plumbing, and every single one of them is eligible to receive an IRRS. [Interruption]
Mr SPEAKER: Order! [Interruption] Order! Mr Twyford, you have had your opportunity.
Roading, Northland—State Highway Projects
3. Dr SHANE RETI (National—Whangarei) to the Minister of Transport: What recent announcements has the Government made on the Whangarei to Northport highway?
Hon SIMON BRIDGES (Minister of Transport): The Government recognises the absolute importance of a reliable roading network to support future economic growth in Northland. That is why last week I was pleased to announce that up to $500 million will be invested to upgrade State Highway 1 linking Whangarei to Northport. The investment will see 22 kilometres of State highway upgraded to four lanes, with the section between Oakley and Port Marsden Highway expected to be completed within 3 to 5 years, followed by an upgrade between Whangarei and Oakley to be finished in 5 to 7 years. This upgrade will make travelling along this stretch of highway safer, will result in shorter travel times, and will also ensure the future prosperity of Northland by providing a very reliable and resilient connection to the port.
Dr Shane Reti: What other transport projects is the Government delivering to support economic growth in Northland?
Hon SIMON BRIDGES: Last week I was joined by the member in marking the completion of two State highway projects. The first was an $18 million upgrade of State Highway 1 over the Brynderwyns, where the current road is being realigned in places, tight corners removed, and a median wire rope barrier installed in an effort to bring down the high crash rate on the road. The second was an upgrade of State Highway 1 through Whangarei to remove bottlenecks and improve safety for those travelling through the city. The Government also marked the start of new two-lane bridges at Matakohe, and the members should keep an eye out for further progress on other projects later this year. These projects are just a part of the Government’s multibillion-dollar investment north of Auckland, demonstrating our commitment to the region and its great future.
Schools—Operational Funding and Funding per Student
4. CHRIS HIPKINS (Labour—Rimutaka) to the Minister of Education: What was the percentage change in operational and teacher salaries funding for schools on a per child basis, once inflation and roll growth have been taken into account, between 2008 and 2016?
Hon HEKIA PARATA (Minister of Education): Tēnā koe, Mr Speaker. I welcome this question today, as the member is finally admitting that there has been a funding increase, despite his many erroneous proclamations that there has been “a funding freeze”. First, I want to clarify for the House that operational funding and teacher salaries, which are the components in the member’s question, are not the only components of school funding. Schools, for example, also receive funding for learning support, for curriculum resources, and for professional learning and development. However, the percentage change in operational funding for schools on a per child basis, once inflation and roll growth have been taken into account, between 2008 and 2016 is an increase of 18 percent per child—1-8, 18 percent per child. Between 2008 and 2016, teacher salaries have gone up in real terms by 3.36 percent. This cannot be broken down per student, as the member’s question asks, as salaries are dependent on the age of the student and the experience of the individual teacher.
Chris Hipkins: Does she believe it is fair and accurate to say that funding for schools has gone up by 35 percent, as she has claimed, by using figures that include early childhood education funding, which has increased mainly as a result of more children participating?
Hon HEKIA PARATA: I do think it is fair and accurate to say that Vote Education has gone up by 35 percent, because it has.
Chris Hipkins: Did she state that funding for schooling has gone up by 35 percent?
Hon HEKIA PARATA: I am not aware that I have made that particular statement—
Grant Robertson: Yeah, well, you did.
Hon HEKIA PARATA: Well, perhaps the member—
Hon Member: Google it.
Hon HEKIA PARATA: Well, I do not spend my time on Google like that member does; I spend it on Planet Earth amongst research and evidence. So what I can tell the House is that Vote Education has gone up from just over $8 billion in 2008 to $11.04 billion in 2016, which represents a 35 percent increase.
Chris Hipkins: Does she accept that most schools will not receive an inflation-adjusted increase to their operation budgets this year due to her funding freeze announced in the Budget, and how does she expect those schools to cover the increases in their power bills, lawn mowing, art supplies, and everything else, if not by making cutbacks?
Hon HEKIA PARATA: I do not accept that, because what has been distributed to schools in 2017 is $1.35 billion in operational grants—which means more, not a freeze. In addition, $12.3 million has been targeted to those schools that have children who come from long-term benefit-dependent homes. Something like 98.4 percent of schools have received a share of that funding, and the balance that have not have not because they do not have students who come from long-term benefit-dependent homes.
Chris Hipkins: How many schools will receive an increase in funding as a result of the new funding formula that she just announced, how many will receive a decrease, and how many will not receive any change?
Hon HEKIA PARATA: I do not hold in my head how much the dollar changes for 2,438 schools, but if I had had warning of that I would certainly have made an attempt to do so. What I can tell the member is that if 98.4 percent of schools are getting a share of the net new $12.3 million then their funding has gone up, depending on—
Chris Hipkins: Not if inflation’s gone up more.
Hon HEKIA PARATA: —the composition of the roll at their school. If the member understood more the portfolio he is ostensibly the Opposition speaker for, he would understand that it is a very complex system. We provide more funding for different year groups. We provide more funding where learning support is required. We provide more funding, more new classrooms, and more schools than the previous administration did. So there is not a straight line average that would serve the member’s appetite for simplicity.
Schools, Buildings—Building Projects and Funding
5. TODD BARCLAY (National—Clutha-Southland) to the Minister of Education: What recent announcements has she made on delivering new schools for our growing communities?
Hon HEKIA PARATA (Minister of Education): I was delighted to announce that Auckland, Tauranga, and Canterbury will each see a new primary school opening its door for students in 2019. Late last week I signed establishment notices for Flat Bush South East School in South-east Auckland, Pyes Pa West School in Tauranga, and Lincoln South School in Canterbury. Last week I had the honour of accompanying the Prime Minister and officially opening Haeata Community Campus, the tenth brand new school in Christchurch since the earthquake, which contributes to the completion of 16 school projects in the Greater Christchurch area this year, and starting another 17. The schools—Haeata, along with Rolleston College, which I attended with my colleague the Hon Amy Adams—are fabulous examples of innovation, collaboration, and modern learning, and in the case of Haeata, have been overwhelmed by community support, with over 900 students already enrolled.
Todd Barclay: What other recent announcements have been made on progress for school property in other communities of New Zealand?
Hon HEKIA PARATA: And the good news just keeps on coming. I also announced, alongside my colleague Minister Kaye, that ShapEd has been selected as the preferred bidder for the Minister of Education’s third public-private partnership. This $220 million project will see four brand new primary schools built in Auckland and Hamilton, and two secondary schools rebuilt in Christchurch. The new schools include Kumeu - Huapai Primary School, Flat Bush South East Primary School, Sylvester Primary School in Hamilton, and Scott Point Primary School. Shirley Boys’ High and Avonside Girls’ High School will be rebuilt on a collocated site in Christchurch, and, alongside my colleague Minister Kaye, I also recently announced that the Government is investing $800,000 to build two new classrooms at Te Anau Primary School, in the member’s electorate, to accommodate the projected roll growth. And the House erupted with applause for this investment in our young people!
Chris Hipkins: Did the Government fail to spend $54 million of the funding it had allocated last year for school construction projects; and is this flurry of announcements now just more proof that the Government is frantically trying to play catch up after cutting nearly 14 percent of the funding for school capital projects over the last 8 years?
Mr SPEAKER: Two supplementary questions there.
Hon HEKIA PARATA: I think that parents, as I said yesterday, will be worried about the kinds of maths that the Labour Opposition seems to engage in. No, there has not been a flurry—or if there has, it has been every year that we have been in Government, because we have been building classrooms, redeveloping and refurbishing schools, building new schools, and working with schools to design collaborative environments. I invite the member to go visit some of those schools and hear how happy and excited those communities are.
Freshwater Management—Water Quality of Rivers and Lakes
6. CATHERINE DELAHUNTY (Green) to the Minister for the Environment: Does he stand by his statement that New Zealanders will have access to “open, honest information on the state of our rivers” with the Government’s Clean Water package?
Hon Dr NICK SMITH (Minister for the Environment): Yes. The first step we took on improving information on fresh water was establishing the Land, Air, Water Aotearoa (LAWA) national website, which is jointly run with the Cawthron Institute and regional councils and which provides site-specific, real-time data. The second step is our Environmental Reporting Act, which took effect in 2016, which the member’s party opposed. In April we will see the first domain report on fresh water produced independently by the Government Statistician and the Secretary for the Environment. The third step is the maps and website released as part of the Government’s package, which, for the first time, gives consistent information across New Zealand on all our rivers over 40 centimetres deep and lakes that are greater than 1.5 kilometres in perimeter, totalling 54,000 kilometres.
Catherine Delahunty: How comfortable would he be letting his children swim at sites like the Manawatū one at Weber Road and many other sites that the LAWA website, confusingly, gives a thumbs up for swimming but also warns there is a toxic algae bloom?
Hon Dr NICK SMITH: The Greens—like normal—exaggerate the risks from algae blooms. There has been only one example in New Zealand of anybody getting sick from an algae bloom, and that was in my own electorate of Nelson. I think it is scaremongering on behalf of the Greens, which will only result in discouraging people from getting out and enjoying a swim. The website that we have created specifically identifies those rivers where there is a risk from algae. That greatest risk is to small children, or to dogs that may chew the algae.
Barbara Kuriger: What would be the impact on a region like Wellington of adopting the alternative standard of rivers having to be within the tolerance of water quality 99 percent of the time?
Hon Dr NICK SMITH: Well, water monitoring by the regional council over the past summer every week shows that the Hutt, the Ōtaki, and the Ruamāhanga rivers each had only one exceedance of the guidelines, and those were on days when the river was in flood. In respect of the Waikanae River, every one of its tests was clear. Under the policy being advocated by the Opposition, every one of those rivers in Wellington would be deemed unswimmable, despite the fact that only those people with a lack of common sense would want to go swimming in a river in flood. We want a plan to improve our rivers, but not an impractical plan that discourages New Zealanders from getting out and enjoying our great outdoors.
Catherine Delahunty: Does he think it is confusing for the public, including dogs and small children, that a river can have a warning for the toxic algae bloom while still meeting this Government’s standard of being safe for swimming?
Hon Dr NICK SMITH: What I do know is that for the 9 years of the Labour Government, supported by the Greens, there was no information at all—no information at all. The new website provides good information—
Catherine Delahunty: I raise a point of order, Mr Speaker. [Interruption]
Mr SPEAKER: Order!
Catherine Delahunty: I asked the Minister about whether he thought this information was confusing. I am not interested in his rant about the Labour Party.
Mr SPEAKER: Order! But in the final part of the answer given by the Minister—
Catherine Delahunty: Very hard to hear.
Mr SPEAKER: When the member then rose to her feet, the answer was definitely addressed, in the final part. The member may not have heard it.
Hon Dr NICK SMITH: I seek leave to actually table the recordings by the Wellington Regional Council of all the rivers in the Wellington region that show that the times when they were unswimmable were when they were in flood. Other than that—
Mr SPEAKER: Is that information publicly available on the Wellington City Council website?
Hon Dr NICK SMITH: No, it is actually not. It is analysis that has been provided.
Mr SPEAKER: I will take the member’s word for it. Leave is sought to table that particular analysis. Is there any objection? There is none. It can be tabled.
Document, by leave, laid on the Table of the House.
Catherine Delahunty: Given that there is no up-to-date, daily data on the LAWA website for freshwater sites for all of Northland, Auckland, Waikato, and 30 other sites around the country, how are people supposed to know whether they will get sick from swimming?
Hon Dr NICK SMITH: The problem is that when our rivers go into major flood, the E. coli levels go through the roof, and the only party that is stupid enough in this Parliament to stand up and pretend that it can somehow stop rivers flooding is the Green Party, and I just make a plea that it might get someone with a little bit of science or practical experience, so this Parliament can debate sensible policy.
Catherine Delahunty: I raise a point of order, Mr Speaker. I asked about why there was no up-to-date daily data. It was a specific question, not an opportunity for a personal attack.
Mr SPEAKER: Order! The answer was certainly direct and political. I think, on this occasion, the member has a point. I do not think the question has been addressed, and I will invite the member to ask the question again.
Catherine Delahunty: Given that there is no up-to-date daily data on the LAWA website for freshwater sites for all of Northland, Auckland, Waikato, and 30 other sites around the country, how are people supposed to know whether they will get sick from swimming on that day?
Hon Dr NICK SMITH: It is not practical to provide information every single day on every single stretch of the 54,000 kilometres of river. I am already getting criticism from regional councils that the Government’s requirements for more information are going to impose costs on ratepayers. But where the Green Party is wrong is that if people apply a little bit of a modicum of common sense and do not swim when rivers are in flood and follow the advice that is now more comprehensive than has ever been provided, Kiwis can get out and enjoy a good swim in the bulk of New Zealand’s rivers.
Catherine Delahunty: Will regional councils get an immediate increase in Government funding to ensure that better data collection and monitoring is undertaken on rivers and lakes, so that New Zealanders can make better decisions about when swimming in fresh water will make them sick?
Hon Dr NICK SMITH: This Government has increased the investment in cleaning up our rivers by sixfold, and actually under far tougher economic circumstances than when members opposite chose to spend diddly-squat on our rivers. In respect of the cost of monitoring, yes, there will be some cost for regional councils. The difference between this side and the Opposition is that we are being practical and realistic about it.
Catherine Delahunty: Given how murky the information on the LAWA website is, should people rely on the Ministry for the Environment website, where many of the rivers only have data as up to date as 2014?
Hon Dr NICK SMITH: I would question that member holding—saying they cannot rely on an independent scientific institute like the Cawthron Institute in my home community in Nelson, which is well reputed for providing independent environmental information and is responsible, with regional councils, for maintaining the information on the LAWA website. What I would say to the member is that before this Government there was no website, no information, no maps, and that is where we have taken a substantial step forward.
Catherine Delahunty: Considering he has insisted that New Zealanders use common sense when judging water quality, why will he not take common-sense measures and stop dairy conversions and subsidise irrigation that will prevent pollution from dirtying our rivers, rather than wasting our time with an incoherent clean water plan that the public cannot understand or make use of?
Hon Dr NICK SMITH: Unless you adopt the sort of extreme position of, for instance, Mr Joy, who wants to ban farm animals in New Zealand from 2050, then we need—[Interruption] That is true. That is what he said. We do not hold that position. We hold a position that says that, actually, New Zealand can have a strong, growing agricultural sector, and if we put an extra 56,000 kilometres of fencing in, this country can enjoy good water quality, and families can enjoy a swim but they can also have a job and an income.
Hon David Parker: Does the Minister understand that his proposed swimmable standard allows rivers to be categorised as swimmable, despite effluent and nutrient pollution at levels that his own standard says cause nuisance slime growth?
Hon Dr NICK SMITH: The irony is that the 540 E. coli level of swimmability that is behind the Government’s standards was set when that member was in the Cabinet room. It was set in 2003, with that very member’s—
Hon David Parker: I raise a point of order, Mr Speaker. My question was about slime, not E. coli.
Mr SPEAKER: I heard your question; I am not sure whether we are going to get the answer. I think, as the best way forward—as it has now become disjointed, because it was not an easy question—I am going to invite the member to ask the question again.
Hon David Parker: Does he now understand that his proposed swimmable standard allows rivers to be categorised as swimmable despite effluent and nutrient pollution at levels that his own standard says cause nuisance slime growth?
Hon Dr NICK SMITH: The swimmability standard was set in 2003 by the previous Labour Government. What we have provided is a website that does not just include information on E. coli but also provides information on the level of algae where that is an issue—albeit with respect to lakes, it is recorded as the algae level—with more comprehensive information than has ever been provided for New Zealanders.
Hon David Parker: This is a publicly available document, but it is 100 pages long. I seek leave to table the page of the standard that classifies as a “swimmable river” rivers that have nuisance blooms of periphyton—
Mr SPEAKER: I need to know what the actual document is, please.
Hon David Parker: It is the document that the Minister released last week, Clean Water, and it is page 34 of the appendix.
Mr SPEAKER: No; it is available to all members if they need to make reference to it.
Social Development, Ministry—Client Data Collection
7. CARMEL SEPULONI (Labour—Kelston) to the Minister for Social Development: Does she agree with the Prime Minister, who said, “I must emphasise that increasing access to data will not be at the expense of security or risk to privacy” in regards to the Government’s collection of private client data from contracted social services?
Hon ANNE TOLLEY (Minister for Social Development): Yes, absolutely. Just like doctors and counsellors, who collect similar data, the Ministry of Social Development (MSD) has robust procedures for gathering and protecting personal information, and has done so safely for decades, from a variety of sources. Of course, we are working closely with the Privacy Commissioner to ensure that clients’ privacy rights are protected. The Government is not interested in personal files or case notes, and MSD will not be looking at individual records. As I have said before, it is about having the data so that we can better understand what services are needed, what is effective, and where the gaps are. I think both taxpayers and the people who access these services expect the $330 million that the Government funds in community-based social services every year to be spent on the programmes to get the very best results for vulnerable children, young people, and adults.
Carmel Sepuloni: Does she consider the rights and privacy of citizens seeking assistance from community law centres to be more important than the rights and privacy of citizens seeking support from mental health and addiction services, Rape Crisis, or Women’s Refuge, given that community law centres have recently been made exempt from private client data-sharing requirements, or are they just lucky to have legislation to protect them?
Hon ANNE TOLLEY: Community law centres are not funded by MSD through community investment, and the whole purpose of collecting data by MSD through community investment is so that we can ensure that the right services are available to all of New Zealand’s vulnerable children, young people, and adults.
Carmel Sepuloni: Is she aware that Rape Crisis spokesperson Andrea Black has been told by clients that “They would not seek help with us if they knew this was going to happen.”, in response to the Government’s collection of private client data; if so, is she concerned that under her watch, survivors of sexual assault will be putting off accessing support services they desperately need?
Mr SPEAKER: Two supplementary questions—the Hon Anne Tolley.
Hon ANNE TOLLEY: Well, providers will ultimately make decisions about whom they will provide that service to and for. I would encourage any provider with concerns or questions that they feel have not been answered by MSD to talk to MSD urgently so that their concerns can be allayed. They will then be able to reassure their clients about how this data is being used, but, more importantly, about how it is being protected, ensuring that they continue receiving funding for those services.
Carmel Sepuloni: How does she expect the public and service providers to have confidence in her approach to private, sensitive, client data-sharing, when the Privacy Commissioner is conducting an inquiry after she has already recklessly inserted the requirements into contracts?
Hon ANNE TOLLEY: Yes, I do understand that the Office of the Privacy Commissioner is responding to requests to have a look at the collection of individual client-level data by contracted providers, but the ministry has been working with the Privacy Commissioner throughout the process to ensure clients’ privacy rights are protected, and we have invited the Office of the Privacy Commissioner to be part of a collaborative approach to working through what needs to be in place to ensure that the client-level data that we are collecting does protect the interests and rights of individuals.
Carmel Sepuloni: If the Privacy Commissioner highlights serious concerns about the Government’s private client-data collection through the inquiry, will she significantly adjust the approach or abandon it altogether?
Hon ANNE TOLLEY: Well, of course, if working collaboratively with the Privacy Commissioner, we will listen to any recommendations that he has to make. However, this Government makes good use of data in order to make sure that the $330 million we spend every year out providing community services goes to the people who need it. We want to make sure that we fill any gaps in services, and so we will continue to work with the sector to make sure it understands there is no intention to look further than that client-level data and protect the privacy of those clients.
Jan Logie: When organisations working with male survivors of sexual abuse report “Many clients don’t even want to give their full names due to social stigma”, how does the Minister think those men are going to access a service that requires them to give the Government their full names, addresses, and children’s details?
Hon ANNE TOLLEY: As I said before, providers ultimately make decisions about whom they will provide a service to and for, and I would hope that providers would be able to reassure their clients that there will be sufficient protection of client privacy in order for them to access the services that they want.
Jan Logie: Why were community organisations not consulted or even made aware of the new requirement to collect individual data until it appeared in their contracts?
Hon ANNE TOLLEY: I absolutely reject that. This has been talked about. In fact, I have stood in front of audiences of NGOs and talked about this for 2 years now.
Jan Logie: Will the Minister review this ill-thought-through policy in light of significant organisations saying clearly that they will not hand over clients’ private data in return for funding?
Hon ANNE TOLLEY: This Government is determined to make sure that the $330 million the Government spends every year on providing services to the community goes to the people who need those services and to make sure that there are no gaps and people left without services.
Darroch Ball: How long has the Minister known about the breaches of contract, including potential fraud and corruption, during the contract between the Ministry of Social Development and Pacific Media Network, delivering the Pasefika Proud campaign, which has seen the taxpayer ripped off to the tune of $1.5 million?
Hon ANNE TOLLEY: Well, that is very wide of the question—
Mr SPEAKER: It is.
Hon ANNE TOLLEY: —and I have no data and I have no advice to actually provide an answer to that question.
Housing Affordability and Availability—Reports and Government Measures to Address
8. MELISSA LEE (National) to the Minister for the Environment: What advice has he received on the parallel planning issues for New Zealand from the just released UK Government Report, “Fixing our broken housing market”?
Hon Dr NICK SMITH (Minister for the Environment): The UK white paper highlights restriction on land supply as the No. 1 cause of Britain’s housing unaffordability. Prime Minister Theresa May notes in the report that the housing market in the UK is broken, with average house prices eight times incomes, and the negative impact this is having on homeownership rates and the housing costs for low-income families. It identifies restrictive planning policy as the No. 1 problem and proposes reforms to free up land supply, require councils to plan for growth, and simpler and quicker planning processes. The report parallels the recommendations of the New Zealand Productivity Commission.
Melissa Lee: What specific provisions in the Government’s Resource Legislation Amendment Bill, set down for second reading today, will help address these fundamental causes of housing market failure?
Hon Dr NICK SMITH: The bill contains five critical reforms. Firstly, it introduces a new specific function for councils to ensure they provide sufficient development capacity for growth. Secondly, it streamlines the planning process for bringing new areas available for housing, reducing the process from years to months. The third change is it removes appeals on subdivision consents for areas that are zoned residential. A fourth change is removing the duplicate charges of development contributions and financial contributions under both the Resource Management Act and the Local Government Act. The fifth change is the planning standards that will make it so much simpler for people to get on and build houses. The bill is a litmus test for which parties in this Parliament are serious about addressing housing.
Melissa Lee: How will the bill’s changes to the Reserves Act and the Public Works Act help support increased housing supply?
Hon Dr NICK SMITH: There are examples where changes in reserves can both increase housing supply and amenity. At Three Kings, the area of reserve is retained and actually expanded, but also reconverted to provide for much better recreational space and much better amenity for the local community. The bill enables resource consents and reserve changes to be dealt with in one integrated process. Housing developments require infrastructure, like roads and pipes, and their construction can be delayed under the Public Works Act. The process is made faster, with more generous compensation. The payment for an affected landowner, over and above market values, increases from $2,000 to $35,000, with an additional $10,000 incentive for early settlement. I credit Maurice Williamson with that particular innovation.
Immigration Policy—Settings
9. RON MARK (Deputy Leader—NZ First) to the Minister of Immigration: Does he stand by all his statements; if so, why?
Hon MICHAEL WOODHOUSE (Minister of Immigration): Yes; because I believe them to be accurate.
Ron Mark: If our immigration policy settings are making sure “the right people come in and the wrong people don’t.”, does that include the over 1,800 unschooled migrants for the Christchurch rebuild since 2011?
Hon MICHAEL WOODHOUSE: Emphatically, yes. Those people are needed to rebuild our second-largest city. Despite the very good efforts that this Government is going to to make sure that Kiwis are being trained and getting the jobs that are available, there will still be a very strong excess demand that will be met by the international labour market.
Ron Mark: If our immigration policy settings are “just about bang on”, why did he approve pet groomers, fitness centre managers, massage therapists—among others—and 760 approvals that were either not recorded or stated since 2010?
Hon MICHAEL WOODHOUSE: Clearly because there was a demand for those roles that could not be met locally. But I should add this: if the member is concerned about the number of labour market - tested visa holders, he should look to his own party. The number of those visas granted in the last 10 years has gone down materially by more than a third since that member’s party was supporting Labour in Government.
Ron Mark: If our immigration policy settings are making sure that the right people come in now, why are 30 unemployed migrants granted citizenship—or do we have a shortage of unemployed New Zealanders?
Hon MICHAEL WOODHOUSE: If they were granted citizenship, that is probably a question best directed at the Minister of Internal Affairs, but, I should say, it was because they were entitled to.
Tertiary Education—Centres of Asia-Pacific Excellence
10. Dr JIAN YANG (National) to the Minister for Tertiary Education, Skills and Employment: What announcements has he made to grow New Zealand’s ties with the Asia-Pacific region through new tertiary education initiatives?
Hon PAUL GOLDSMITH (Minister for Tertiary Education, Skills and Employment): Today I announced, during a visit to Victoria University of Wellington, the establishment of three new Centres for Asia-Pacific Excellence (CAPEs). This is a major investment in cross-institutional centres of excellence in language, culture, politics, and economics, focused on countries or groups of countries within the Asia-Pacific region. The centres will help individuals better prepare to connect and do business with the Asia-Pacific region, and provide initiatives for small to medium sized enterprises wanting to grow their understanding of these neighbouring regions. Much of our trade, tourism, and migration are focused on the Asia-Pacific, so it makes sense to deepen our understanding of the region.
Dr Jian Yang: What geographical areas will these Centres for Asia-Pacific Excellence focus on?
Hon PAUL GOLDSMITH: Each CAPE will focus on a different area of speciality. They will facilitate student and faculty exchanges and become a focal point for New Zealand’s relationship with that part of the world. The first CAPE, led by the University of Auckland, will specialise in North Asia. The second, led by Victoria University, will focus on South-east Asia, and the final centre will specialise in Latin America, and will also be led by Victoria University, in partnership with the University of Otago, the University of Auckland, and the University of Waikato. Each centre will be a nationwide resource to deliver benefits to New Zealand as a whole.
Dr Jian Yang: How does the establishment of CAPEs support the Government’s wider Business Growth Agenda?
Hon PAUL GOLDSMITH: A priority for this Government is to build a more competitive and productive economy. The Centres for Asia-Pacific Excellence programme is part of the Building Export Markets work stream of the Business Growth Agenda, which will provide centres of excellence for New Zealand businesses to draw upon as they build international connections and seize opportunities overseas. CAPEs will do this by working with businesses to understand their needs and the types of initiatives they will find useful for growing their Asia-Pacific understanding and capability.
Mental Health Services, Canterbury—Funding and Staffing
11. Dr DAVID CLARK (Labour—Dunedin North) to the Minister of Health: Does he think that the levels of staffing are acceptable in mental health services at Canterbury District Health Board when staff are saying they are fearful for their own safety and are feeling anxious all the time?
Hon Dr JONATHAN COLEMAN (Minister of Health): I would just like to start by congratulating the learned Doctor on his elevation to the health portfolio, and note his instant impact in getting health moved from question No. 1 to question No. 11 on a Thursday. As regards the question itself, although this is an operational matter for the district health board, any assaults on staff are unacceptable. As the general manager for mental health for the Canterbury District Health Board (DHB) has said regarding staffing levels, “We are confident that our levels are sufficient to keep the services functional and safe. It doesn’t mean incidents don’t happen.” As the acting chair of the district health board told the Health Committee yesterday, staff assaults in the district health board have dropped from 2,000 to 700 per year. The final thing that I would say is that the Government has increased mental health spending in Canterbury by 25 percent over the last 8 years, including a $20 million package last year. Last week I was down in Christchurch with Mayor Lianne Dalziel, launching a $6 million fund for community resilience. Mental health is a difficult area, and of course there is always more to do.
Dr David Clark: Is the Minister comfortable with money being taken from older people’s healthcare to prop up mental health services in Canterbury?
Hon Dr JONATHAN COLEMAN: It has not been.
Dr David Clark: I seek leave to table a letter showing that the Canterbury District Health Board is being forced to reallocate funding to cover mental health—
Mr SPEAKER: I just need—whose letter is it?
Dr David Clark: It is a letter sent from the Canterbury District Health Board in response to an Official Information Act (OIA) inquiry dated 24 June 2016.
Mr SPEAKER: On that basis I will put the leave and the House will decide. Leave is sought to table that particular letter gained under the OIA. Is there any objection to it being tabled? There is none; it can be tabled. Supplementary—[Interruption] Order! I know the member has moved one seat further away, but she is still very loud with some of her interjections. I would be grateful if she would cooperate.
Document, by leave, laid on the Table of the House.
Dr David Clark: Is the Minister aware of well-documented research on natural disasters and longer-term patterns of mental health needs of affected populations, and the growing need for mental health support over time; if so, why is the Canterbury DHB still funded below the national average per head for mental health services?
Hon Dr JONATHAN COLEMAN: Yes, I am aware of that research, and it shows that it actually takes about 5 to 10 years for these effects to wash through the system in a population, so we are about in the middle of that now. That is why mental health expenditure has been increased by 20 percent over the term of this Government, including an extra $20 million package that was announced last February and, most recently, that $6 million package announced in conjunction with the council.
Dr David Clark: Does he think it is acceptable that patients in Canterbury are being treated in a building that is being “shored up with big planks” and that has “visible cracks in the wall,”; if not, why did the Government not approve the move of regional mental health services from the now crumbling Princess Margaret Hospital when the Canterbury DHB asked for it in 2012?
Mr SPEAKER: Order! There are two supplementary questions there.
Hon Dr JONATHAN COLEMAN: What the member has got to remember is that there is $1 billion being invested in the rebuild of health services across Canterbury. We have had Burwood Hospital, we are working on the main health campus, and there has been a wide range of primary care facilities worked on. There is also a business case being worked on for mental health services, so the member will just have to be patient. But I think he should look on the bright side: $1 billion is a huge rebuild—the biggest health rebuild in the history of New Zealand.
Dr David Clark: Does he think the DHB being forced to spend an additional $2.5 million on supporting clinical staff at Princess Margaret Hospital is ideal, given the wear and tear on staff, clinical isolation of the facilities, and demoralising conditions—or is it simply the inevitable price of his independently verified $1.7 billion cut to the health sector and his decision-making delays?
Mr SPEAKER: Again, there are two supplementary questions.
Hon Dr JONATHAN COLEMAN: The member has to make up his mind as to whether he thinks that the Government is spending too much or too little. Now he seems to be complaining. Having started off saying that we are spending too little, he is now complaining about an extra $2.5 million. He would be really angry if he fully understood that, actually, we are spending an extra $106 million on top of the population-based funding formula in Canterbury since the Christchurch earthquakes. The member needs to get his facts straight and stop making the figures up.
Housing—Building Consents and Supply
12. DENIS O’ROURKE (NZ First) to the Minister for Building and Construction: Does he stand by all his statements on building activity; if so, how?
Hon Dr NICK SMITH (Minister for Building and Construction): Yes, particularly my statement that building activity is at an all-time high of $19 billion a year and the dwelling consent numbers have more than doubled, from 13,000 a year to 30,000 a year, over the last 5 years.
Denis O’Rourke: Are the Minister’s claims of a “construction boom” credible when code compliance certificates issued by Auckland Council show that between 2011 and 2016 there was a gap of over 13,500 between building consents and dwelling completions, especially of high-density units?
Hon Dr NICK SMITH: The member clearly does not understand the building system, because code compliance certificates are issued for whole units or retirement villages, so you would not expect the number of building consents that count dwellings to match the number of complexes, particularly as over the last 5 years we have seen stronger growth in townhouses, in apartments, and in retirement villages than in stand-alone homes.
Denis O’Rourke: Is it not the Minister himself who is guilty of junk science by using 2013 census data to try to prove building completions in 2017, when the yawning gap between consents and physical dwelling completions kicked off in 2013?
Hon Dr NICK SMITH: The reason I have confidence in the building consent numbers is that if you look over any census over the last four decades and you count the number of building consents that are issued, they are very, very close to, within 1 percent of, the number of new dwellings that are counted in the census. The second point I would make to the member is whether, in denying that there is any sort of building boom, he can explain why the labour force survey shows an increase of 70,000 more people working in the building industry. Only a blind man would say that there is not a building boom in New Zealand. Just look at the number of cranes across Auckland currently. [Interruption]
Mr SPEAKER: Order! [Interruption] Order! Mr Robertson.
Denis O’Rourke: As Auckland Council and all other councils collect code compliance certificate data, but the Minister chooses to ignore it, are New Zealanders not being deliberately misled by him on the true magnitude of the continuing housing crisis?
Hon Dr NICK SMITH: The member simply does not get it. I have got an apartment building of 50 apartments. That is 50 dwellings, but one code compliance certificate. That does not mean that the houses are not being built. In fact, if the member looks around New Zealand, building activity by every measure is at a very high level—over 30,000 houses a year, the highest in more than 10 years.
Bills
New Zealand Intelligence and Security Bill
Second Reading
Hon CHRISTOPHER FINLAYSON (Attorney-General) on behalf of the Minister for National Security and Intelligence: I move, That the New Zealand Intelligence and Security Bill be now read a second time. The bill is the most significant reform of the Intelligence and Security Agency’s legislation for many years and it is the Government’s response to the first independent review of intelligence and security in New Zealand, led by Sir Michael Cullen and Dame Patsy Reddy. The bill explicitly sets out the agency’s powers and activities more clearly than ever before, and I emphasise this does not mean they are new. We are being just as comprehensive as possible to improve the transparency and accountability of the agencies.
I want to thank submitters for their time and efforts, and I also want to thank the Foreign Affairs, Defence and Trade Committee for its careful consideration of the bill. The committee has recommended a number of changes that, in my view, are going to strengthen and improve the bill. I acknowledge particularly the helpful contributions in the committee by other political parties, particularly Labour and New Zealand First. The report back reflects their constructive approach.
Can I also express my thanks to Mr Dunne. Throughout this process he has raised a number of concerns with me. He has been particularly concerned about ensuring that the scope of the agency’s powers is not greatly expanded, that the approach to national security provides appropriate protection for New Zealanders, and that the right mechanisms are in place to hold the agencies accountable for their actions. Those are very valid issues and I think the new warranting regime, the robust oversight in the bill, and the changes recommended by the select committee have addressed them.
The most significant recommendation made by the select committee relates to the approach to the definition of “national security”. That definition plays a critical role in the bill by determining when agencies can obtain a warrant to target New Zealanders. The bill as introduced contained the definition proposed by the reviewers. However, as advised by officials and parliamentary counsel at the time, the definition, with respect, had a number of shortcomings. Its scope was unclear. It seemed to be unnecessarily complex, and, as a result, there were some concerns about its workability.
Because of those issues the Government put forward an alternative definition to allow submitters to consider it alongside the bill. That definition would require the proposed activity to be necessary to contribute to the protection of national security and be directed at one or more specified activities of national security concern—for example, terrorism or violent extremism. We specifically asked the committee to look closely at how national security would be dealt with in the legislation. After careful consideration and listening to the submissions, the committee agreed to replace the reviewers’ definition with the officials’ definition, but, importantly, they narrowed it to ensure that only those activities of legitimate national security concern for New Zealand are included in the list.
So, for example, the committee limited the espionage and other foreign intelligence activity limb to those activities directed at New Zealand interests in New Zealand or carried out by New Zealanders. It also limited the threats to the international security limb to those threats that have the potential to impact adversely on New Zealand’s interest, and significantly narrowed the serious crime limb. It also removed the threats to the life and safety of New Zealanders limb since such threats would be captured by other limbs of the definition, as well as a few other changes to ensure that the test is appropriately targeted, and we can look more closely at that during the Committee stage. I think the new definition is going to ensure that the agencies can continue to deliver on priorities for the Government while guaranteeing that New Zealanders are the subject of surveillance only when absolutely necessary.
Another significant change is the removal of purpose-based warrants. Some submitters, including the Inspector-General of Intelligence and Security, were concerned that the objectives sought to be achieved by purpose-based warrants could already be achieved through the class-based warrant. After testing a range of operational examples, officials agreed and so those provisions have been removed.
The committee also recommends improvements on how practice or training warrants are dealt with in the legislation. As originally drafted, such warrants were included in part of the general warranting regime. In response to concerns from submitters, they have been separated out. This has enabled the powers available under them to be narrowed so that only those necessary for training and testing are available. There are also additional safeguards such as the addition of the triple-lock protection for all practice warrants, and requirements to report to the Minister and the inspector-general after carrying out activity under a practice warrant.
Some drafting changes have also been made in Part 4 of the bill to ensure that New Zealand citizens and permanent residents will have the benefit of the triple-lock protection in situations where activities authorised by a warrant will likely lead to the collection of information about them. This was always the intention, and the constructive changes made by the committee puts this beyond doubt.
A new development is the creation of a scheme for mandatory disclosure of certain information held by telecommunications network operators and financial service providers, termed business records. This information includes, for example, phone records, customer subscriber details, bank statements—some of which are often critical in the early stages of an intelligence investigation. It does not include the contents of information. This information is currently provided on a voluntary basis and the new legislation will provide a statutory authority for this work.
A major focus for both the reviewers and the Government has been to ensure robust and independent oversight of these agencies. Given their intrusive capabilities and the secret nature of their work, this is absolutely essential. As introduced, the bill already provided for very extensive oversight. The focus since has been to strengthen oversight by adding practical hooks to make it easier for the inspector-general and the relevant Ministers to perform their functions.
The number of mandatory ministerial policy statements has been substantially increased to cover a range of matters, including a number of areas of the agency’s work where their activities involve a degree of deception or intrusion into the private lives of individuals. Ministerial policy statements regulate lawful activity, so failure to act in a manner consistent with a ministerial policy statement will not of itself make an act unlawful. The bill, however, makes it clear that directors-general and employees must have regard to any relevant ministerial policy statement when making decisions or taking action.
The final point I wish to address is the issue of the committee, the Intelligence and Security Committee (ISC), and the wider representation enabled by the bill. The bill increases the maximum size of this committee from five to seven members. This was recommended by the reviewers, and the select committee has not recommended any changes. The ISC is not a select committee; it is a statutory committee. And I believe that a membership of seven enables a broader political representation than is currently possible. It is up to the Leader of the Opposition and the Prime Minister each to nominate a certain number of members of Parliament to the committee and, in my opinion, I do not think the bill should be any more prescriptive than this, although I know that there is a different view on the other side, and Mr Parker and I are continuing discussions on that. But I do think it is important that the Leader of the Opposition and the Prime Minister in future Parliaments have the flexibility to appoint the members they think most appropriate to serve on this committee. I simply add that, in my opinion, seven is the appropriate maximum membership for the committee for it to remain an effective working committee on intelligence matters.
I would also say, of course, that this bill is subject to a mandatory review clause. The Intelligence and Security Committee has evolved over the years since the concept was first introduced in 1996 and there could well be changes that future Parliaments may wish to introduce. But for the moment, as we develop this committee, I think we have made a very good start. So, once again, I thank the committee for their tremendous work and commend the bill to the House.
Hon DAVID PARKER (Labour): The task that we are undergoing is trying to balance the powers that the intelligence agencies need to do their work—and I think every party now acknowledges there is a role for an SIS and a Government Communications Security Bureau (GCSB) in our country. We need legislation that enables them to do what they need to do, but prescribes their powers in a way that appropriately balances the privacy and the civil liberties of New Zealanders, in particular, against excessive intrusion by agencies of the State. I want to give you four examples of why we need to update these laws and why I think this change to the law is necessary.
The first and what I think is the most disgraceful episode is one that occurred in 2011 when Warren Tucker, the then head of the GCSB, colluded with the Prime Minister’s department and used or misused information and misrepresented advice in relation to the Hon Phil Goff during the election campaign. The GCSB colluded in that effort. The Hon Phil Goff was besmirched, he was accused of being wrong, he was accused of misleading, and I think some people accused him of lying. It turned out that none of those things were true and that the GCSB was part of a political attack against the Leader of the Opposition at the time during an election. It was an absolutely disgraceful episode in the history of New Zealand’s intelligence agencies and, of course, it did not all come out. The truth did not all come out until the Nicky Hager book, which disclosed various emails, and it became clear through that process that the arms of State, including the new head of the GCSB, Rebecca Kitteridge—
Hon Christopher Finlayson: SIS.
Hon DAVID PARKER: The SIS, sorry. It was the Inspector-General of Intelligence and Security, was it not? The Inspector-General, Cheryl Gwyn, got on top of it. There was an apology made to Phil Goff, and Warren Tucker went into his retirement with a serious stain upon his reputation. That is the first example.
The second example was the Dotcom fiasco, really, which, under the pressure of litigation by Dotcom, it was made clear that some of the actions of the State, including via the GCSB, were illegal. That led to a conclusion both that some of its actions were illegal and that it was ambiguous as to whether some of its other actions were legal as well, which created problems for the GCSB to do the work that it needed to do. That showed that there was a need for a legislative upgrade.
There was some interim legislation that came before the House. There was notoriety around the country—I think there were big protest meetings. I went to one of them in Auckland, along with David Shearer and others, where Dame Anne Salmond was speaking, and they brought to light that the legislation that was then proposed did go further than was being portrayed by the Prime Minister in terms of rights of surveillance against New Zealanders. The Prime Minister, at the last minute—I think in just about the third reading of the bill—acknowledged that there were rights of surveillance against New Zealanders that went further than metadata, and he promised that in a substantive sense he would not allow those theoretical rights to be used in practice by the organisation. That was better than nothing, but the legislation should have covered that, rather than it being a ministerial promise.
The third example is in respect of an example that was given to us by the Inspector-General of Intelligence and Security, Cheryl Gwyn. When she submitted to the Foreign Affairs, Defence and Trade Committee, she gave us a copy of a decision by the Investigatory Powers Tribunal in the United Kingdom last year that considered what had been happening with their agencies. I was shocked—and I think other members of the committee were shocked as well—to find that in the United Kingdom their spy agencies had been gathering data, including locational data, about the whereabouts of people using cellphones, including the residents of Great Britain, without warrant and without the knowledge of Parliament, and without the knowledge of the security agency oversight committee. The only person who knew was the Minister and, effectively, the decision said, there had been active hiding of this fact from the various arms of Government—not just for 1 year, but for many, many years. It showed that you really do need good oversight rules in order to protect and to get this balance right.
After that history that I have outlined, the Prime Minister wisely appointed Chris Finlayson to sort it out. There was a report prepared by Sir Michael Cullen and Dame Patsy Reddy, which laid out the foundations for the approach that has been taken. I would have to say that Chris Finlayson has overseen a process in respect of the development of this legislation and the use of the select committee and the listening to of the concerns of civil society, and I have never seen a better approach in my 15 years in Parliament. I think that the Attorney-General and his officials at DPMC have done an absolutely splendid job.
They let the select committee do its job as well. We had some fantastic submissions, not just from the inspector-general but also from the Privacy Commissioner, from the Law Society, and from civil liberty groups. All of those groups were listened to, and I think the serious concerns, or the serious matters that were being raised, were well addressed by the select committee with the cooperation of officials and the Minister. It was so pleasing to see an example of when the select committee’s skills and the select committee process was allowed to run and do its job. That happens best with competent Ministers who do not see the directive—or the approval—that they have had from the draft bill from Cabinet as meaning that there are no further decisions to be taken, and who are willing to see to improvements in the bill.
In the short time that I have got available, I am going to address some of the important changes. I agree with the changes made to the definition of “national security”. National security is left undefined, as it is in the UK, but then to get a warrant against a New Zealander it has to fall within a series of categories, all of which are serious, like espionage. I have a question as to whether the example relating to serious crime is set at too low a threshold, at 2 years, and that is an issue that the Labour Party is in discussion with National over. Purpose warrants—it is good that they are gone. They were a back-door way of doing things in a more simple, less rigorous fashion than is required, in respect of other warranting routes.
Business records—it is good that we have a regulated route for the obtaining of the records from banks and telecommunications companies (TELCOs). The now very public experience of Nicky Hager, in respect of Westpac, has meant that banks and TELCOs are becoming nervous about doing these things voluntarily, and they want to have a regulated route that prescribes what it is that they should do. We now have that, but we also have a requirement for records and ministerial policy statements, which enables the inspector-general to keep an eye on that as well. As the Minister has said, we have got ministerial oversight statements in a number of other areas that were not provided for in the bill as it came to select committee.
There are a couple of other matters. The Minister has referred to the size of the committee; perhaps another of my colleagues could come back to that, because I do not have time for that. We agree proportionality is important. We hear the argument that the Minister makes as to having a size of committee that is not unwieldy, but we would quite like some further discussion around that. We put in protections to prevent the services being used for political purposes, and there is some express recognition given to that in the form of the bill that is reported back.
There are some other changes, which I am sure will be detailed by other members of the committee. One of the primary concerns that was expressed by the Cullen-Reddy report is that you ought not go too far giving rights in respect of things called economic interests. These really ought to be matters relating to national security rather than economic interests, because it is so hard to define and would, effectively, give too broad powers to the SIS or the GCSB to use their powers against New Zealanders. So the powers in respect of the economic issues are prescribed in this bill in a way that I think is appropriate and meets the concerns expressed by the reviewers.
The Labour Party thinks this means that we have among the best oversight legislation of our spy agencies in the world, and this legislation has our support. We think that it is very important that the main parties show that support, so that we maintain public confidence that we have got this balance right.
Hon SIMON BRIDGES (Minister for Economic Development): It is a privilege to speak on this fundamentally important bill, the New Zealand Intelligence and Security Bill, in its second reading. Can I join with the Hon David Parker in noting the very detailed, diligent approach of the Minister, the Hon Chris Finlayson, and I also note on this particular occasion the collegiality across the House that he has had on it. That is very important, indeed.
With the international environment in a state of flux, a state of uncertainty, it is important to have legislation that empowers our intelligence and security agencies to protect New Zealand’s national security, international relations, and economic well-being, while also ensuring, of course, that these powers are clear and are subject to appropriate oversight. New Zealand’s cyber-security, for which I have some responsibility, as Minister for Communications, with other Ministers, has become an increasingly critical element of our national security and our economic well-being. Our national security depends on securing and protecting our most significant national assets. Strong cyber-security practices will also help build a fundamentally more competitive and productive economy. Using information technologies to their full potential will help drive innovation and improve productivity. In short, there are opportunities in this area if we do things very well.
New Zealanders and New Zealand businesses are affected by a range of cyber-enabled threats every day. The number of people affected by cyber-incidents increases every year, and, increasingly, the attacks are becoming evermore sophisticated. The National Cyber Security Centre within the Government Communications Security Bureau (GCSB) logged 338 cyber-incidents in the 2015-16 year—an average of 28 each month. In this period, 38 Government agencies and 44 private sector firms sought advice or assistance from the National Cyber Security Centre in handling cyber-incidents.
Cyber-security incidents are increasingly making it into the headlines all over the world, and the nature of the threat is also very much changing. More devices, including everyday items like even refrigerators and household appliances, are connected to the internet, creating evermore opportunity, as I say, for malicious actors.
Ransomware—that is, malicious software that blocks access to a computer system or files until the victim makes a payment—has become more common. The number of ransomware attacks worldwide increased threefold over 2016. New Zealand is ranked fourth as a target for ransomware in the Asia-Pacific region, with an average of 108 ransomware attacks a day. This is an issue that extends across my portfolios, from economic development to communications policy. This bill is one of a range of actions that the Government is taking to improve our cyber-security outcomes and to achieve a secure, prosperous, and resilient online New Zealand.
A wide range of work, as I say, in addition to this bill—this very important bill—is under way to address the cyber-security threat. New Zealand’s Computer Emergency Response Team, situated in the Ministry of Business, Innovation and Employment, will open its doors in the first half of this year. I am also expecting a report back from the Cyber Security Skills Taskforce, with a road map to improve cyber-security skills, to help with, as I say, both the very clear threats involved in this area but also the opportunities from doing this very well. I will also soon release the first annual report on New Zealand’s Cyber Security Strategy for 2015. The report marks really good progress in addressing the cyber-security challenges facing New Zealand, but we need to remain focused across a range of actions to improve New Zealand’s resilience to cyber-threats, to build the capability of New Zealanders, businesses, and Government agencies to protect themselves online, to address cyber-crime, and to ensure that international engagement helps us in all these areas of cyber-security.
This bill is intended to preserve the GCSB’s information assurance and cyber-security role while maintaining strong oversight of its activities. I consider it achieves this balance and that it will allow the GCSB to work closely with the other agencies and organisations striving to improve New Zealand’s cyber-security.
I think, really, as I have said now—but in summary—we are in uncertain times internationally. We are in a flux. It is important that we have the best possible law in place in this area. Cyber-security is, within this important law, an incredibly important part of the story and the context. The number of incidents is ever-increasing. The ransomware—that is, the malicious software, and so on—is ever-increasing, and that is, rightly, making its way into our headlines and into popular consciousness, if you like, given the threats and the incidence of ransomware. This bill—but also, as I have emphasised, a range of other actions—ensures that our response as a country is, I think, fit for purpose and strikes the right balance. I commend the bill to the House.
GRANT ROBERTSON (Labour—Wellington Central): It is a pleasure to take a call on this bill today. I did not, however, have the pleasure of being on the Foreign Affairs, Defence and Trade Committee during its deliberations, but from what my colleague the Hon David Parker has said, and, indeed, what other members have said, it was quite clearly a process that went, I guess, a bit above and beyond what some other select committees have done, in terms of ensuring that there was a thorough examination and that alternative ideas were listened to. That is very important, so I congratulate the committee and obviously the Minister, Chris Finlayson, who had to leave the Chamber. He was so overexcited by the support that he received from David Parker.
Hon Simon Bridges: He’s not used to it.
GRANT ROBERTSON: He is certainly not used to it from Simon Bridges. David Parker was certainly expressing, I think, what a lot of people here believe—that Mr Finlayson has done a very good job of ensuring that all voices have been heard on this legislation.
In terms of the wider context of this bill, I just want to take the time to talk about why we have ended up in this position, with this legislation. The first thing is that the Labour Party certainly accepts that this legislation needed to happen. The time had come, with a series of incredibly unfortunate incidents that highlighted the discrepancies in our legislation, the weaknesses in the operation of the GCSB in particular, but also the SIS, the contradictions, and the gaps. Something needed to be done, and this legislation, built as it is off the review done by Dame Patsy Reddy and by Michael Cullen, was important and was necessary.
But I think we have also got to talk about where New Zealanders are today, in terms of their view of the security agencies, what went on in New Zealand, and what was revealed in New Zealand in the 2011, 2012, and 2013 periods. My colleague David Parker outlined some of the concerns about that, including the Phil Goff and Warren Tucker situation, which he mentioned; the complete shambles around the Dotcom case; and the really quite “outside of norms” appointment of Ian Fletcher as the head of the GCSB, and all that followed from that. That contributed to quite a significant reduction in the confidence of New Zealanders in our security agencies.
That is a very serious development. What these security agencies are responsible for are activities that make New Zealanders uncomfortable. They are necessary activities, but they make New Zealanders uncomfortable because they infringe upon our privacy. They infringe upon values that New Zealanders hold dear about our privacy. The agencies that have it in their power to spy on people, to intrude into people’s lives, must have the confidence of the New Zealand public. The issue that the country got itself to, by the end of 2013, was that they did not trust the GCSB and the SIS; they certainly did not trust the then Prime Minister on that issue. We really did need to rebuild that. That is why this bill mattered and that is why this exercise needed to be done in the way it was.
These agencies are necessary. I put myself in the category of New Zealanders who would rather we did not need them. They would rather that we did not have them. But the truth is that in the world we live in, we do need these agencies. It is that balance, in the minds of New Zealanders, that I think this bill has sought to strike.
Globally, as we moved through that period in 2011 and 2012, greater concerns were being expressed about the intrusion of security agencies into private lives. I think what had happened was a form of mission creep—that over the years the powers that had been given to security and intelligence agencies around the world had been expanded a little and a little more and a little more, but always under the cloak of secrecy. Therefore, when it was finally exposed in New Zealand, as a result of those shambolic actions I mentioned before, many New Zealanders were appalled at the state of the security intelligence apparatus—just how far it could go and just how weak the oversight of it was. We have to acknowledge that position and that view in the minds of many New Zealanders.
Equally in the minds of many New Zealanders are the threats they see around the world—the growth in global terrorism, and the notion, as Minister Bridges just mentioned, that terrorism can now come down the wire to you, in your computer. So New Zealanders know that there are these two competing things that they have heard about—the expansion of the powers that they were uncomfortable with, or the unaccountable powers they were uncomfortable with, and the growing threat. This bill and the Labour Party seek to find a better balance in those two things between the security that New Zealanders hold dear and the rights to privacy that they hold dear. We sought, in going into this process, to ensure that we had as our driving force that balance. I believe that at the end of this process we appear to have got largely to that place.
We did have serious concerns about the definition of national security being too broad and that it did not focus on the actual threats to security and Government. The new definition is far better. The idea of a closed list, a narrower list, actually helps New Zealanders to understand what kinds of matters are genuine threats to national security—terrorism, violent extremism, espionage, the proliferation of weapons of mass destruction.
As my colleague David Parker said, the question of the definition of serious crime we do still have some concerns about, and there is some ongoing dialogue on that matter. But we are comfortable that we now have a definition of national security that is actually one that New Zealanders can look at and say: “Those are the threats that worry me. Those are the threats that New Zealand must take seriously, and have the apparatus in place to deal with.”
Both the Minister and David Parker have gone through a number of the other changes, particularly around the types of warrants. I do think that the purpose-based warrant was going to cause some problems for New Zealanders in terms of what those definitions of national security actually meant in practice, in terms of the way the security agencies do their work. So I am pleased that they are not going to be used, certainly in the case of New Zealanders, and that we are moving back to a class-based warrant system in that regard. The triple-lock practice is one that is starting to give people a bit more confidence.
I do think the rebuilding of confidence—and I will acknowledge this today in the House—has been helped by a much stronger Inspector-General of Intelligence and Security’s office. The slightly sad sight, before the law was changed the last time, in 2013, of the former inspector-general, the somewhat bewildered retired judge, being pursued down the road by TV cameras, having very little idea of what it was he was even meant to be doing, was sad, slightly comic, but actually very bad for New Zealand. Through Cheryl Gwyn and Ben Keith and the people involved in the inspector-general’s office, we are now starting to see the kind of robust oversight that I think New Zealanders want inside our system.
The other change, and the one that my colleague David Parker mentioned, that the Labour Party does continue to have concerns about is around the committee, the scope of the committee, and the representation in this Parliament. Of course, a committee like this needs some level of proportionality—we absolutely accept that—but to build the confidence that we want from New Zealanders in this legislation, we need to ensure that Opposition parties of a reasonable size and scale are represented. I want to say that we should not be afraid, in this House, to include in that committee parties that may not fully support all the activities of those agencies. That is actually a good thing. If those parties abide by the rules of the committee, then their voices are important voices to hear in this debate.
My view is actually a personal view—that the oversight arrangements, from a parliamentary point of view, could be even more robust than what we have in this bill. I know that Andrew Little, the Labour leader, intends to table a Supplementary Order Paper around the membership of the committee. I think it is an ongoing debate. I looked, in 2013, when we last looked at this matter, for some other examples around the world—in Australia, in Norway, where you have much wider oversight. I believe we should continue to consider that—ensuring that there are obligations upon the people who are on the committee to abide by the important secrecy provisions, as they would no doubt need to, but, equally, to hear their voice and have their voice heard. I urge the Government to consider supporting the Supplementary Order Paper when it is tabled at the Committee stage, and also to consider how we can continue to strengthen those accountability arrangements.
The Labour Party will be supporting this bill. We think it is important that there is a bipartisan approach around this new legislation. It goes a very long way towards addressing the concerns that we had at the first reading around strengthening accountability and around narrowing the definition of “national security”, and ensuring that we rebuild confidence. I look forward to the further progress of this legislation.
Hon MARK MITCHELL (Minister for Land Information): It is my great pleasure to take a call on this, the second reading of the New Zealand Intelligence and Security Bill. Can I just start by first of all acknowledging our officials and advisers who are in the public gallery today. Without their support throughout the select committee process, we could not have returned this legislation back to the House. So I just want to take an opportunity to first of all acknowledge you guys and the great work that you have done in supporting the Foreign Affairs, Defence and Trade Committee.
Could I please acknowledge the Hon Chris Finlayson. I think that the Hon David Parker paid a very fitting tribute to him in terms of the support the committee has received in the work that it has done. Can I also acknowledge the committee, and, as the outgoing chair, can I acknowledge the incoming chair, Todd Muller, who has been a member of the committee throughout the entire process of this bill. He has heard the submissions and understands the legislation very well, and he is now continuing to guide the legislation through the House. Can I congratulate him and wish him all the best on chairing what I feel is a very good committee. Can I also acknowledge the deputy chair, Dr Shane Reti, for the support that he has given through the process, as well—Shane, I appreciate that. Can I acknowledge—
Dr David Clark: I was there in moral support.
Hon MARK MITCHELL: Yes, you were there in moral support; that is right, David. David Shearer actually took the lead on the Opposition side throughout the process, which started with the countering foreign fighters bill—can I acknowledge him; Phil Goff; David Parker, who has now come on to the committee; Dr Kennedy Graham, who has also been an integral part of the process; Lindsay Tisch; Jami-Lee Ross; the Hon David Bennett; and also Fletcher Tabuteau from New Zealand First. It is important for me to make those acknowledgments, because this is my chance to put them on the record.
Can I speak to one part of the bill that is very important. I am going to cut short my contribution so that Todd Muller has got more time to speak to the bill, but I want to speak about business record authorisation. Through the committee process, there was a recommendation for a new scheme for mandatory disclosure of business record information held by telecommunications network operators and financial service providers. This information includes, for example, phone records, customer subscription details, and bank statements. It does not include the contents of any communication.
Access to this type of information is crucial for the agencies to operate, especially in the early stages of an intelligence investigation, and, at the moment, this information is disclosed on a voluntary basis because of an exemption from the Privacy Act’s information privacy principles. The purpose of the new framework is to maintain the agencies’ current access to business record information, not to give them access to anything new. This is very important because before this there has not really been any real clarity around how that information exchange is going to take place. Now, inside the bill, we have captured it, and it is very clear in terms of how that process is going to work.
I want to just very quickly refer to a comment that the last speaker, Grant Robertson, mentioned, around how when we look around the world globally now, unfortunately there is a fair bit of instability. We have seen the coalition forces in Iraq being very effective in the war against the Islamic State of Iraq and Syria, or Daesh, and the coalition is putting pressure on it. But one thing that that will create is that you will start to see more activity springing up around the world as the pressure comes on in Syria and Iraq. It is very important—and I am not being an alarmist at all. We are very lucky in this country in that we have got an outstanding SIS and GCSB service. It is their job to make sure that they do the best job they can to keep our country safe and to keep us all safe. This piece of legislation goes a long way to making sure that they are able to do that. Thank you very much.
Dr KENNEDY GRAHAM (Green): The Green Party wishes, first, to pay tribute to the democratic process that has resulted in the passage of this intelligence and security bill through Parliament to date. The submissions were insightful, the discussion within the Foreign Affairs, Defence and Trade Committee was respectful and informative, and the officials were most professional and creative in their response to our concerns.
We welcome, moreover, the improvements in the final draft of the bill. We note, especially, a stronger obligation on the agency heads to ensure that agency activities will not promote or harm the interests of any political party or candidate; a new assurance that cooperation with foreign jurisdictions will be in accordance with New Zealand law and human rights obligations; the clear assurance that lawful acts of advocacy, protest, or dissent are secure from intelligence activity; a register of assumed identities and legal entities; due particularity in applications and additional criteria for the issue of the warrants; a closed list of elements related to national security; the requirement for a type 1 warrant to be jointly authorised by the Minister and the Chief Commissioner of Intelligence Warrants, with a review by the Inspector-General of Intelligence and Security; the removal of purpose-based warrants; the destruction of unauthorised information; the deletion of the provision for retention of incidentally obtained intelligence; the destruction of irrelevant information; and the deletion of ministerial empowerment to amend, suspend, or override primary legislation.
The Green Party also acknowledges the increased professionalism and integrity of the New Zealand intelligence services in recent years. It views this, however, as a rectification of unacceptable shortcomings in the past, not as a justification for new and intrusive powers by the State.
Notwithstanding the legislative improvements identified above, the Green Party continues to oppose the bill because it believes that the underlying political judgment on which the bill rests is flawed. The bill rests on an erroneous view of counter-terrorism policy. The stated purpose of the bill is to protect New Zealand as a “free, open, and democratic society”. To that end, it gives our intelligence agencies adequate and appropriate powers to contribute to the protection of national security, international relations and well-being, and economic well-being. This is to be done with due regard to New Zealand law, integrity, and professionalism, and democratic oversight. In order to do that, the bill enhances the espionage capacity of the State, with the effect of eroding the freedom and openness of the society in the name of security.
It is acknowledged by both those for and against the bill that intrusive powers of espionage by the State axiomatically erode individual human rights. The argument for greater intrusive powers, advanced in the Cullen-Reddy report and in ministerial speeches, is that a balance between national security and individual rights needs to be struck. In today’s world of terrorism and radical extremism, it is argued, the responsibility of the State to undertake espionage on its own citizens as well as foreigners has increased, and this unavoidably alters the balance. This justifies, the argument goes, a single legislative framework in the interests of efficiency, and expanded intrusive powers in the interests of effectiveness.
The explanatory note does not elaborate on the bill’s purpose, but senior Ministers have done so. The former Prime Minister stated in August 2016: “it is vital our agencies operate under legislation which enables them to be effective in an increasingly complex security environment, where we are confronted by growing numbers of cyber threats and the rise of [terrorists] such as ISIL …”. The Minister of Foreign Affairs spoke to the UN Security Council along similar lines in May of that year. As a result of these political perceptions, the national terrorist threat assessment was raised in 2014 from “very low, not expected”, to “low, possible but not expected”. This, the Government concludes, justifies a single legislative framework, more intrusive State powers, and this bill.
The Green Party, with respect, views it differently. It does not agree that a threat that is not expected to occur justifies these changes. Terrorism is but one of seven harms associated with national security, most of which are not germane to that threat assessment. The Green Party views terrorism as a criminal offence rather than a national security threat. It regards national security as a political goal, not an individual inherent human right.
There are also difficulties regarding the statement of purpose. Although there is now greater provision relating to national security in the bill, the other purposes remain vague, legally undefined, and politically unfocused. New Zealand’s well-being is not defined in the bill and can mean virtually anything. Adding a subset of that, economic well-being, as a separate and discrete purpose is conceptually confusing for legislation.
There are also difficulties regarding cooperation with foreign intelligence agencies. The balance of information and opinion advanced in the select committee hearings confirms the Green Party’s view that the bill would be detrimental to the national interest. It would undermine New Zealand’s domestic integrity and diminish its international reputation. Close cooperation with foreign intelligence agencies, such as those operating under current US policy, will prove highly problematic, if not impossible, to meeting the standards of integrity, professionalism, and respect for human rights established in the bill. How are New Zealand intelligence and security agency heads to collaborate with the “Five Eyes” over the US presidential travel ban against Muslims, thereby discriminating against persons on the basis of religion? On what basis of law and political integrity does the New Zealand intelligence community collaborate with the Central Intelligence Agency in light of today’s revelations about the manner in which that agency hoovers up data from individuals’ cellphones and smart TVs?
The underlying political point is this: while terrorism has become a fact of contemporary global life, its perception is distorted among Western Governments. Most terrorist acts actually occur in non-Western countries. The phenomenon of terrorism in Western counties is correlated with the extent of their engagement in military action in crisis situations that lack a clear UN mandate.
All members in this House live and work in the real world. Green MPs know, at least as acutely as anyone else in this House, about strife and strategic scheming around the world. We know about the threat of terrorism. But there are different, more effective, and more insightful ways of plying this trade than what we have before us. We shall be continuing to oppose the bill.
DENIS O’ROURKE (NZ First): New Zealand First’s objectives have always been, firstly, the protection of civil liberties, freedoms, and privacy—that first and foremost. But we also accept the need for protection from threats to our safety and to our essential interests, thus fully recognising the need for effective intelligence. So we accept the need to conduct surveillance and collect intelligence about New Zealand citizens and residents, as well as others, provided there is a robust process for authorisations through the warrant system; provided the law is clear, certain, and effective; and provided that there are comprehensive review and oversight provisions giving the public confidence that security agencies are independently supervised and fully accountable.
New Zealand First is pleased that this bill, we believe, actually achieves all of that. We think it is a good bill. It has come through a very long and very good process and we have a good result, which will allow New Zealand First to continue to vote in favour of it.
I want to go through some of the main changes the Foreign Affairs, Defence and Trade Committee made to the bill. I may not get through all of them, but I will try. I want to begin with the deletion of clause 5, relating to the definition of “national security”—that was a pointless exercise. It would have only academic interest; it would have no practical use.
Instead, it is much better to rely on new clauses 55A, relating to New Zealand citizens and permanent residents, and 55B, relating to others. These clauses define the circumstances in which the intelligence and security agencies may take action. The clauses have a closed list of things that are most important to national security, and we think that is a much better approach. It achieves certainty and clarity and avoids very difficult—almost impossible, sometimes—interpretations of the law to particular circumstances, especially when there is urgency, as there so often would be.
But the clauses still preserve the necessity test and create two tests, in fact, for type 1 warrants relating to New Zealand citizens and permanent residents. The first of these is that the authorising Minister and the Commissioner of Intelligence Warrants must be satisfied of the necessity to contribute to the protection of national security generally. However, the second is that the intelligence agencies’ activity must be necessary to protect against one or more of a limited number of harms, specifically listed in clause 55A. They include terrorism or violent extremism, espionage, other foreign intelligence agency activity, sabotage, proliferation of weapons of mass destruction, serious crime, interference with information or information infrastructure, and the threats listed in clause 55A(2)(g)—and I want to read those. They are “threats to—(i) international security that have the potential to impact adversely on New Zealand’s interest: (ii) the operations of the Government of New Zealand: (iii) the sovereignty of New Zealand, including New Zealand’s territorial and border integrity and its right to manage or control its natural resources.”
For those reasons, we in New Zealand First believe that the balance needed in this sort of legislation—to protect personal privacy on the one hand but also to ensure an adequate system to protect New Zealand security on the other hand—is achieved. We think that the bill does, in fact, do that and does it very well.
Part 3 of the bill would enable an employee of an intelligence and security agency to have an assumed identity, for obvious reasons. Part 3, we think, is very necessary. It provides for each of the agencies to keep a register of assumed identities, and for that to be maintained so that they can be accessed at any time by the Minister responsible and by the Inspector-General. We think that is very important—particularly for the inspector-general to be able to do that, to exercise his oversight function effectively.
The amendment to clause 53(2) and (3) is very important too. That provides for applications for type 1 intelligence warrants, which concern New Zealanders, to be made jointly to the responsible Minister and also to the Commissioner of Intelligence Warrants, instead of to the Attorney-General. For type 2 applications, which relate to non-New Zealanders, they would be made only to the responsible Minister, rather than to the Attorney-General. I think that is a very important change, because the Minister is aware of the day-to-day businesses of the agencies and knows what is happening, whereas the Attorney-General would not be in such a good position. So I think that is actually a very positive and worthwhile change.
I want to go on to the amendment to clause 51, because, as you will know, there will be many situations in which you might get a mix of people being involved—for example, in a terrorist cell some may be New Zealand citizens, some may not be. That amendment requires that where that happens, a type 1 warrant has to be obtained as though everybody in that cell was a New Zealand citizen or permanent resident, and that is just common sense.
There are also good changes made to clause 53 for warrant applications to contain adequate information. It is very important that it does so. It now requires you to specify the type of intelligence warrant applied for, the details of the activity to justify it, and, in particular, the grounds on which the application is to be made, thereby ensuring that the legal requirements, which I have already mentioned, would be satisfied. That will ensure that the Minister or the commissioner has the level of information that is necessary to make that judgment. It is very important that that information be there for that purpose, and, of course, it will also enhance the ability of the inspector-general to carry out his or her functions for oversight.
Moving on to clause 64 of the bill, as introduced, which provided for purpose-based warrants, which would allow a warrant without specifying persons or places and that sort of detail—that was clearly not needed. The other warrants, type 1 and type 2, were sufficient by themselves, so we agree with the deletion of that clause.
New Zealand First is also happy with all of the provisions relating to the destruction of information where it is no longer required, where it has become irrelevant, or where it has been obtained by regular means. Good changes have been made in that respect.
Similarly, we think that clause 109 has been properly deleted. It would have allowed the Governor-General to amend schedule 2 by Order in Council—clearly a “Henry VIII” power, as it authorised the delegation of legislation to amend, suspend, or override primary legislation.
We also agree with the new changes in Part 5 relating to business records—we think that is robust and satisfactory. We are satisfied that there would be rigorous control over access to banking and telecommunications records, as well as greater oversight and transparency.
Finally, in the last few seconds, New Zealand First is very happy with the provisions, and also with the requirement in Part 7 for a framework requiring the Minister responsible to issue policy statements. There is a list there of a number of such subjects that would be covered by policy statements—for example, providing information assurance and cyber-security activities by consents, conducting surveillance in a public place, and so on. Overall, New Zealand First is very happy with the bill, very happy with the process, and will be happy to continue to support it.
TODD MULLER (National—Bay of Plenty): I am very pleased to be able to stand and speak in favour of the New Zealand Intelligence and Security Bill in its second reading. Can I also please begin by acknowledging the efforts of Minister Chris Finlayson. I think he has worked extremely hard alongside the Foreign Affairs, Defence and Trade Committee to land legislation that balances the protection of New Zealand’s security interests, on the one hand, with, in my view, the enhancement of the integrity of the agencies’ reputations themselves on the other. Over time, significant trust in those agencies will build because of the effective oversight provisions that have been built into this legislation. It is a very good outcome.
Can I also acknowledge my predecessor, the Hon Mark Mitchell, for his very adept chairmanship and for facilitating a very collaborative and insightful process, which landed, I think, a very good result.
In particular, I would like to focus on the issues around the definition of “national security”. The initial bill had a particular definition that caused us, as a committee, some challenge. It was very unclear in terms of its scope. There were a whole lot of inherent complexities with the approach of the initial bill, and there were serious concerns around its workability. After a significant discussion amongst us—and with the particular support of the officials, who have done a tremendous job here—we have landed in this legislation a two-pronged approach to national security. Now, in order to get a warrant to target a New Zealander, the proposed activity must firstly be necessary to contribute to the protection of national security. Critically, it must also be able to identify and enable assessment of the protection against a closed list of harms. We have already heard this afternoon, in this conversation, the list of those harms and the precise specificity, if you like, about those. That, certainly from our perspective, gives us a lot of confidence.
Look, there is a lot about this that I would like to talk to, but I am very conscious of the fact that a lot has already been covered. Can I just echo the confidence that I have that we have landed something that is very fit for purpose and should give New Zealanders much comfort. Thank you.
The ASSISTANT SPEAKER (Lindsay Tisch): The next call is a split call. Barry Coates—5 minutes.
BARRY COATES (Green): Tēnā koe, Mr Assistant Speaker. I am pleased to rise to speak on this crucially important bill, the New Zealand Intelligence and Security Bill, in its second reading. I have also been pleased to participate in some of the discussions on the Foreign Affairs, Defence and Trade Committee, and I add my thanks to the former chair of the committee and committee members.
From my perspective, terrorism and extremism are a threat to citizens around the world, and security agencies do have an important role in averting these threats. But we also need to remember that terrorists succeed if our human rights are trampled in the process of surveillance. We lose the strength of our democracy and our freedom, and that is what we have seen happen too often in the past.
We have seen spying on New Zealand citizens and on anti-Springbok protesters, and the attempt to prevent asylum by Ahmed Zaoui. We have seen raids on the Tūhoe people. We have seen the Dotcom arrest and spying on Nicky Hager. Some of these cases are very recent. We have also seen mass interception of communications data. We have seen New Zealand spying on our allies, including our Pacific Island neighbours. We have seen weak oversight by Parliament over these activities, and we have seen New Zealand collaborating closely in the “Five Eyes” network. The latest WikiLeaks revelations show that these surveillance threats are more pervasive than ever. This is only going to get worse under Donald Trump.
We, as a society, have participated in interventions in Iraq, Afghanistan, Syria, and other Middle Eastern countries that, far from extinguishing the threat of terrorism, have exacerbated that threat. We have created breeding grounds for extremism.
I pay tribute to my colleagues—to Keith Locke, to Russel Norman, and many others—for raising these issues consistently over many years. The Green Party has been a watchdog on these issues, within Parliament and beyond. These issues came to such a crisis point that they precipitated the independent review known as the Cullen-Reddy review of our intelligence services. This background says that we have had a major problem, we continue to have a major problem, and therefore we need extremely strong controls over our security and intelligence services.
I agree with my colleague Dr Kennedy Graham that there are some positive elements to this bill, and I would highlight the additional powers that have been granted to the Inspector-General of Intelligence and Security, stronger parliamentary accountability, and controls over the purpose and approval process for warrants. These are important steps forward. But during the process, we have also heard deep concerns from across New Zealand society about these issues. We have heard concerns from InternetNZ and other organisations associated with the internet. We have seen Spark and Vodafone expressing concern, and the Office of the Privacy Commissioner, the Human Rights Commission, and the Law Society. There are many, many more who have expressed concerns that we get this balance right. So the balance that we need to strike is between the necessary surveillance and the protection of our rights.
We see a problem. There is not enough protection of New Zealand citizens from spying. Under this bill, the Government Communications Security Bureau will be permitted to spy on New Zealanders. It provides the powers to target whistleblowers rather than protecting them. This bill strengthens oversight, but the Intelligence and Security Committee lacks important powers still and, as Grant Robertson said, its membership is too narrow.
The seven harms that are outlined in this bill include threats to New Zealand’s interests and threats that adversely affect the operations of the Government. These purposes and this rationale for surveillance is far too broad.
I would conclude by saying that terrorists win when our human rights, our privacy, and our freedoms as citizens are lost. Although recognising there has been progress, this bill does not sufficiently protect our human rights, our privacy, and our freedoms.
Hon ANNETTE KING (Deputy Leader—Labour): I rise to speak in support of this bill and to first of all acknowledge that the security of New Zealanders and the balance of that security with human rights and freedoms is often a hard balancing act. We often spend a lot of time debating how we get that balance right. Such is the case of this bill that we are having our second reading on today, the New Zealand Intelligence and Security Bill.
I was fortunate to be able to sit in on some of the very early—look at, if you like, the inquiry that was undertaken by Sir Michael Cullen and Dame Patsy Reddy, at the review they were doing and the issues that were coming up. During their deliberations, they did meet with Andrew Little and me to go over the sorts of issues that they could see and the changes that needed to be made. What reassured me about that review was the quality and the experience of those two people who were undertaking it.
That was the first thing that gave me some confidence—that if the Government was to listen to that review, we were likely to get some very good legislation from it. The second was that I spoke briefly with the then Prime Minister, who said that he would not proceed with such a bill unless there was consensus, particularly from the main parties, in this Parliament. So important was it to have this sort of legislation—legislation that goes to security but also to human rights and freedoms of New Zealanders—that it was important to have a majority of support for such legislation.
Then we got to the bill itself. You have heard today from my colleague David Parker, and you will hear from David Cunliffe, that we believe a fantastic job was done at the Foreign Affairs, Defence and Trade Committee. I want to pay tribute to David Parker but also to David Shearer, from our side, and the members of the National Government side of the committee, who put together and looked at the changes that we now feel comfortable with. We know that there are other issues that we will pursue, and we will talk about those at the Committee stage.
We believe it has been a very, very good process. I want to commend the Attorney-General and his role in this bill. Chris Finlayson has done a superb job; that is according to David Parker—I was not on the committee—and I am sure David Cunliffe will be able to affirm that. He has handled this in a very sensitive and sensible way, to get as much buy-in and agreement on a piece of legislation as you could ever get. I just want to make sure that we commend him for that.
I think that, really, when you go back to why we needed some change, you can go right back to something that David Parker talked about, and that went back to the issue of Warren Tucker. Warren Tucker, in fact, as is well-known—I will not go through the whole thing—was not truthful in what he said in a meeting with Phil Goff. Arising from that, we had no confidence in his ability to tell us what was going on. From that moment on, we never met with him unless there were two of us together with him, and I became one of those who did meet with him. We did not have the confidence that you ought to have in the main agencies that are so important in New Zealand. But with the change of leadership—when you change the leadership of the NZ Security Intelligence Service and the Government Communications Security Bureau—and with the Inspector-General, Cheryl Gwyn, we started to get confidence that those people themselves were going to ensure that any changes that were made were going to be ones that were in the best interests of New Zealand, at the same time ensuring that our human rights and freedoms were not taken away from us unnecessarily.
There are many things that I could talk about in this bill, but with only 5 minutes I am going to wait until the Committee stage. I just want to conclude by saying that we would be mad to think that New Zealand would be free of terrorist activity. We would be mad. We already know that there are people in New Zealand who would do New Zealanders harm. Our first responsibility as politicians and parliamentarians is to ensure the safety of New Zealanders, and this bill goes a long way to doing that.
Dr SHANE RETI (National—Whangarei): It is a pleasure to speak briefly to this, the second reading of the Intelligence and Security Bill. I would also like to acknowledge the Minister Chris Finlayson; the previous Foreign Affairs, Defence and Trade Committee chair, Mark Mitchell; the current chair, Todd Muller; and other select committee members.
As is always the case, this bill has been enhanced by the public submissions process, and I want to acknowledge all those who submitted and the officials who helped us make our way through the information. I want to particularly focus on oversight provisions in the bill. At a high level, a good oversight framework would have many layers, and I want to briefly describe five domains and how this bill addresses each one.
The first is the requirement for independent or judicial approval to issue intelligence warrants. This is effected by joint-issuing by the Attorney-General and Chief Commissioner of Intelligence Warrants. No. 2 is the independent review of the execution of warrants. The Inspector-General of Intelligence and Security has a specific mandate to review conduct in applying for a warrant. No. 3 is the robust and independent complaints and investigative functions. This bill strengthens the role of the inspector-general, enhancing access to records and removing limitations on the scope of inquiries. Point four is the democratic oversight. The Intelligence and Security Committee’s functions are enhanced in this bill, including the ability to request investigations from the inspector-general. The fifth point is the transparent application of freedom of information and privacy laws, and this bill makes agencies accountable to more privacy principles in the Privacy Act.
To briefly conclude, the oversight provisions were already significantly strengthened from previously, when this bill began the select committee process. This strengthening has continued to be fine-tuned during the submissions process. I will leave the final oversight words to the Privacy Commissioner, who, in giving oral evidence to the committee, said that if passed in its current form, the bill would be reaching “best practice” in terms of the requirements and rigour of oversight it would put in place. I commend this bill to the House.
Hon DAVID CUNLIFFE (Labour—New Lynn): May I join with other speakers, firstly, in acknowledging the work of the Minister for National Security and Intelligence, the two Foreign Affairs, Defence and Trade Committee chairs, Mark Mitchell and Todd Muller, and join with my colleague Annette King in recognising, in our team, the work of David Shearer, now departed, and David Parker, who played a leading role in the work on the select committee, on which I have sat for only the last few meetings and, therefore, will caveat my comments with that proviso.
I want to reaffirm Labour’s support for the bill and the quality of the process that has led us to this reading today, and, in doing so, I want to stress a number of points. Firstly is the importance of there being public confidence in the agencies, and the protections that lie around them, and, in doing so, to note briefly some exceptions in the past that gave us reason to want to look very closely at the content of the bill.
Secondly, I want to affirm the legitimate reasons why there is a need to modernise and, in some cases, with proper protections, extend the role of our intelligence oversight agencies. Thirdly, I want to emphasise the importance of proper protections of privacy and civil liberty, which, as history said, can be the first or second casualties of an improper approach to these issues. Finally, I want to note the need for ongoing vigilance in these matters as they are applied and implemented, because the intent of Parliament must of course be followed through in the practices of the agencies. In saying that, of course, I wish to acknowledge the support that was given to the select committee by officials from all the relevant agencies, including the Department of Prime Minister and Cabinet (DPMC), whose work was of a very high standard indeed.
The intelligence and security agencies have had a good but not unblemished record in recent New Zealand history. As my colleague David Parker said, there were the Dotcom fiasco; the Tucker-Goff incident where records were released inappropriately for hostile political purposes; the issues around offshore developments that give the New Zealand public cause for concern—of course, WikiLeaks in the last week underscoring some of the reasons for that. And, indeed, in the previous form of the legislation there was the need for a personal assurance from the then Prime Minister that a potential legal loophole that could have allowed warrantless surveillance of New Zealand citizens, in respect of the need to protect information infrastructure—the importance of codifying those verbal assurances in the law as we have them.
To recall the process, it started, as others have said, with Attorney-General Finlayson being appointed the Minister in charge of the NZ Security Intelligence Services; the Cullen-Reddy review, which was widely applauded by parties around the House, and they brought a lot of experience to their analysis; the work of the DPMC and of external stakeholders such as the Law Society, civil liberties groups, the Privacy Commissioner, etc.; and the considered way in which the select committee under its various chairs has worked through submissions and the material provided to it.
With all of that, the bill crosses several important Rubicons—lines that previous legislation did not. There is no doubt that in its desire and its legitimate aim to modernise and make more efficient and effective the agencies concerned, there are a number of innovative steps that require the House’s careful consideration. The first is: this is a single legislative framework. It is integrated between the work hitherto domestically of the New Zealand Security Intelligence Service and the hitherto external offshore or by specific authorisation only work of the Government Communications Security Bureau, the GCSB.
This legislation, for the first time, provides a legal mechanism for the warrantless surveillance of New Zealand citizens, and that is a significant step. I am going to come back to the ways in which the privacy issues that that raises have been dealt with. So those are some of the Rubicons that have been crossed and some of the reasons why the select committees had a very close scrutiny of the issues.
What are the reasons for that? Well, it does not make a lot of sense, on the face of it, for the two agencies to have completely separate legislative frameworks, to not be able to routinely talk to each other subject to the provisions of the legal protections, to be outside some of the important provisions of the State Sector Act, and, in other words, to have some artificial barriers that prevent them doing their legitimate work. However—and this is where the select committee has done a lot of good work, I think—that has to be balanced by a tight definition of “security”, and that has been narrowed and tightened by the select committee to imply that economic security issues, economic well-being issues, have a more proscribed and limited action within the bill.
The select committee has emphasised the importance of triple-lock mechanisms, of authorisation mechanisms, around warrants and has reaffirmed that, in all cases bar very limited exceptions, both the signature of the Minister and the Commissioner of Intelligence Warrants, who must be a former or retired High Court judge or similar, are required to authorise those warrants. Of course, it has proscribed the accessing of information on New Zealand citizens, which would otherwise be required by warrant, which is obtained from third party providers such as other friendly countries.
The bill has removed the power, as drafted in clause 109, that would allow the Government of the day by Order in Council—that is, the Minister’s signature, ratified by Cabinet, provided to the Governor-General as an executive act—to add new source databases or information resources to the list of matters that may be legitimately accessed by the agencies. In that way, any such future amendment must come back to this House and must be subject to proper public debate and scrutiny.
The information of someone around an adoption has been excluded and requires ongoing proper protection, given the sensitivity to families of that matter. Stricter restrictions have been imposed on access to business records, although I have to say the definition of “business records” in the bill remains reasonably broad.
So far we have noted the bipartisan support of the bill and the balance it achieves. We note the legitimate reasons why modernisation of the law was required. We have noted the work of the select committee in ensuring proper protections of human rights and privacy issues and that those have been tightened in the drafting of the bill. Of course, all of this requires proper vigilance in implementation. The Labour Party is much heartened by the strengthening of the powers of the Inspector-General of Intelligence and Security so that the inspector-general may inquire into any matter, including sensitive operational matters, and may now be tasked by the Intelligence and Security Committee of Parliament, which is expanded in this bill.
It will be important to ensure vigilance in implementation, because, at the end of the day, the effective operation of the bill according to the mutually expressed will of Parliament across both sides of the aisle—and I am sure it is the intent of those who supported the drafting—is that proper human rights, privacy rights, and the rule of law be upheld at all times, because those are things that are too precious in our democracy to trade away. They have been hard fought for, and they have been fought for by New Zealanders who are recognised in the wreaths that adorn the walls of this Chamber. We will not trade those protections away in seeking to guarantee the ongoing security of New Zealand citizens. We will uphold the proper principles of the rule of law, the protection of civil rights, and those traditions that make our democracy strong and sound.
These are important matters and MPs are always mindful of the fact that we are generalists who are brought to bear on issues that require deep specialisation, and we, therefore, approach this with a seriousness of purpose and a commitment to ongoing vigilance, which I hope will provide some further assurance to New Zealanders that a proper balance has been struck.
The question was put that the amendments recommended by the Foreign Affairs, Defence and Trade Committee by majority be agreed to.
A party vote was called for on the question, That the question be agreed to.
Ayes 106
New Zealand National 59; New Zealand Labour 31; New Zealand First 12; Māori Party 2; ACT New Zealand 1; United Future 1.
Noes 14
Green Party 14.
Question agreed to.
Bill read a second time.
Name changed to Intelligence and Security Bill.
Bills
Taxation (Annual Rates for 2016-17, Closely Held Companies, and Remedial Matters) Bill
Second Reading
Debate resumed from 7 March.
The ASSISTANT SPEAKER (Lindsay Tisch): When we were last debating the second reading of this bill, Grant Robertson had the call and has 4 minutes remaining to speak.
GRANT ROBERTSON (Labour—Wellington Central): Thank you—4 minutes.
Hon Ruth Dyson: I thought it was 3:47.
GRANT ROBERTSON: Well, I think an extra 13 seconds is well merited on this piece of legislation.
When I was last debating this the other evening, I covered mainly the broader issues around our concerns about ad hoc tax legislation and the spectre of having to revise and amend legislation that the House passed only a matter of months ago and our concerns on that, and also the question that this piece of legislation sets New Zealanders’ annual tax rates for the 2016-17 year, which is actually nearly over.
The Government has not quite managed to get this bill in front of the House until now. We are debating the second reading today, and I suspect that by the time we get through the Committee stage and the third reading, we will be pushing through April, and so there will be just a couple of months where the tax rates that New Zealanders have actually been paying this year will have been legislated for. I will leave viewers and listeners to make their own minds up as to what that says about the levels of organisation within the Government—particularly within the management of the House.
I do just want to refer very briefly to a couple of the substantive issues in the bill that the committee dealt with. I just want to acknowledge on this occasion—I know I am not supposed to say this, but he was not here the other evening when we began the second reading—the former chair of the Finance and Expenditure Committee, David Bennett, who really did shepherd this piece of legislation through its work. We do miss him. Chris Bishop gave a speech that David Bennett just would not have given in this House the other night, and I will leave it up to listeners to decide what that means as well. But I do acknowledge Mr Bennett’s work in seeing this legislation through.
The two issues I want to mention that did attract the attention of submitters were around the changes for look-through companies—closely held companies, generally, but in particular look-through companies, which are, as other speakers have said in this debate, legitimate devices for managing the affairs, particularly, of small businesses and small groupings of taxpayers. What the bill and the officials sought to do was to ensure that look-through companies are being used appropriately, not being misused. The committee understood that this was a small number of look-through companies that may be falling into that category.
What submitters wanted to do was to make sure that the tightening of the rules did not take out those people who were legitimately using these devices. I believe we have struck that balance, in particular through the change around the transitional provision for existing look-through companies. I think that gives an assurance to those who are using these vehicles that if they are being used legitimately at the moment, there is now a process that will not impose a burden upon those companies during the 2017-18 tax year. There were some exceptions around charities, and those concerns will, I suspect, come back to the committee at a time in the future.
The other major issue was around the changes to the net non-resident withholding tax and the approved issuer levy rules, as they apply to interest paid on debt provided by non-residents. This is consistent with the changes around non-resident withholding tax that both the Government and the Labour Party have proposed in the past, and I do believe they make good sense as well.
So, overall, the Labour Party is happy, as we always are, to support tax legislation that gives us a fair system and gives a system that is clear and understood by all taxpayers in it. I want to thank the officials, who had quite a tough job of pulling together a number of disparate elements into one piece of legislation. I shall leave it to our colleague Andrew Bayly to describe, in great depth, aircraft overhaul expenses and the changes that are being made to those, because he and David Seymour—
The ASSISTANT SPEAKER (Lindsay Tisch): I am sorry. The member’s time has expired.
ALASTAIR SCOTT (National—Wairarapa): It gives me great pleasure to rise in support of the Taxation (Annual Rates for 2016-17, Closely Held Companies, and Remedial Matters) Bill. It has already been described well by my predecessors—speaking-wise, that is. It covers seven Acts, including the income tax Acts and GST Acts. It deals with lists of charities that are now able to take advantage of tax benefits. Look-through companies have been described, as have GST, non-resident withholding tax, and tainted capital gains—and that is where we have a situation where we have a capital gain that is, essentially, locked up in a limited liability company. This legislation allows that capital gain to be distributed to shareholders as if the shareholders were the original taxable entities in themselves. A much fairer—as Mr Robertson described it—system has evolved as a result of this legislation.
I would just like to pick up a couple of points that Mr Wood mentioned in his contribution. He asked for a review of the tax system. He did not think the tax system was very fair, and he thought this was an opportunity to do something with the tax rates. I can tell Mr Wood that the only thing that would occur with a review—and with a Labour-Green Government, if that could ever possibly happen—would be that tax rates would rise.
And there is really no concern, Mr Robertson, about the tax rates being set at a late rate, because the public knows that the National Government is reliable and steady as she goes, and that the discussion is around decreasing taxes. That is simply because things are in hand, the economy is growing, and choices are available.
But I can tell you, Mr Wood, that were the Greens attached to a Labour coalition agreement, there is absolutely no way that taxes would ever be considered to be thought of to be falling. That is because of the ad hoc, expansive, “lollipop”—“lolly scramble”—policies advocated by, particularly, the Greens.
Hon Ruth Dyson: I like lollipops better.
ALASTAIR SCOTT: Well, the “lollipop”—Ms Dyson—“lolly scramble” policies that your party advocates are, for example, free tertiary education—
The ASSISTANT SPEAKER (Lindsay Tisch): Order! We should focus on the substance of the bill and not on speculating.
ALASTAIR SCOTT: Thank you, Mr Assistant Speaker. That is the second time that has happened to me in a couple of days. This is a very tidy piece of legislation. It sets the income tax rates for the year 2016-17. The public can be assured that with this Government the tax rates will remain the same or go down. That is because there are options available to the Minister of Finance to do such a thing, which would be an impossible situation to imagine with a Labour-Greens coalition. I do commend this bill to the House.
JULIE ANNE GENTER (Green): I feel I will have to respond to the previous speaker, Alastair Scott’s, contribution to some extent, to say that I think that he is mistaken about the nature of the policies proposed by both the Green Party and the Labour Party, because the Green Party is, as always, a party that is very focused on living within our means and so a Green Government would, of course, be entirely fiscally responsible but, better than that, would take into account the things that New Zealanders actually want.
I would say that New Zealanders know that you get what you pay for, and that if we do not make contributions to Government services, then with a National Government they will see increasingly eroding public services and squeezed health services, because—as that member accurately pointed out—his party is ideologically committed to reducing taxes, particularly on those who are earning the most money and those who own the most wealth. So the rich will get richer under the National Government, and the rest of the country will suffer and not receive the services that they want—the social and physical infrastructure that they know will build a long-term, healthy economy and society. This is what a Green and Labour Government would absolutely prioritise—a long-term, healthy society—because we know we can have that.
So when it comes to tax law, it is riveting, and I am sure people at home would love me to go through the detail of this particular bill. Unfortunately, I was not on the Finance and Expenditure Committee for the entirety of the submissions on the bill, though I was there for the beginning. People at home can see this is the bill, this is the commentary on the bill, and this is the disclosure statement and the regulatory impact statement, all for just one bill. So tax law—as always, it is very interesting to delve into the detail of it.
I will start by saying there are a couple of principles, and one is that tax law needs constant monitoring and improvements to make sure it is working the way that it is intended to work. So I congratulate the work of the officials on this, and all of the officials at IRD, who are, hopefully, working very hard and are properly resourced to ensure that our tax law is being complied with and is working as intended, because, as ever, there will be people who are seeking to exploit loopholes in the tax law to avoid paying their fair share of tax, and there will be things that are not working as intended that actually send the wrong signals to households and businesses and create problems for them in achieving what they want to achieve.
One of the major parts of this bill—the one that we heard the most submissions on in Part 2—related to closely held companies and, particularly, look-through companies, which was the replacement structure introduced in 2010-11, when we lost the loss attributing qualifying company category. What a look-through company does, or was intended to do, is enable the owners of the company, the shareholders, to pay the tax directly on the earnings or to offset the losses of that company against their own personal income. So it is not the company that pays the tax or absorbs the losses; it goes straight through the company to the owners of the company, and that enables them to offset, at times, losses against their personal income. There have been some difficulties with this identified by IRD over the last few years. There was not quite the same uptake that it expected, and so there are changes that have been proposed.
Hopefully, this will enable the tax law to be more transparent but also to work as intended, because I think one of the unintentional consequences of the look-through companies, combined with our very unusual foreign trust law, was that a number of people offshore who are non-resident in New Zealand were able to set up foreign trusts in New Zealand with look-through companies and, effectively, use these structures in a way to avoid paying tax in their home country. That is something that we certainly—I do not think most New Zealanders would be in favour of our tax law and foreign trusts law being used to that extent.
There has been another bill already passed into legislation in this House recently that does address some of the problems with foreign trust law. This one had already been initiated and makes changes to the eligibility of having a look-through company and to the way in which dividends were treated, and, of course, the select committee made the decision to add some transitional provisions for those who were affected by the changes to the eligibility to be a look-through company. So you can find that in clause 118B in this bill.
Another change is to non-resident withholding tax and the approved issuer levy—or AIL, for those who really follow the acronyms of tax law. All of that is part of our ongoing work through the OECD on BEPS—that is, base erosion and profit shifting.
This is incredibly important work. It is incredibly important that we address this global challenge, because companies and individuals globally have been incentivised, to some extent, to minimise their tax liability. You can understand why companies and individuals and households would try to minimise their tax liability, but we actually need tax in order to invest in the physical and social infrastructure that makes society possible and makes business possible. Most of the great innovations that have been incredibly profitable—whether it is Apple or Facebook, or a variety of different innovations—are almost always supported by some sort of Government investment. Whether that is the simple physical infrastructure of something like the internet or whether it is Government grants or investment in research and education that enables those businesses to create good ideas and then run with them, we need to have businesses and individuals giving back to society, so that we can maintain the level of investment in the infrastructure that makes our society possible and makes ongoing prosperity possible.
So I think, globally, there really needs to be a movement. It is important that New Zealand continues to contribute to this, and I am happy to say that it seems to me that the changes in this bill will go some way to assisting with a bit of a crackdown on multinationals that are trying to exploit our tax laws and trying to avoid paying their fair share of tax here in New Zealand. Of course, that ends up hurting the people of New Zealand, and, ultimately, it is going to hurt us all in the long run, because we are all in this together and it is a really important job for the Government to protect and empower people to ensure that the rules are fair and to ensure that the rules are complied with.
The global challenge we have right now is because of the interconnectedness of communications and the global scale of trade, and all of that makes it more likely that companies can play countries off against each other. They can threaten to pull their particular investment in a country on the basis of tax preference. Companies—multinationals—are actually in the position of playing countries off against each other, so that countries are in a race to the bottom to make their tax laws the most favourable for the companies, which is going to be worse for each society. Globally, we have to work together to stop this sort of behaviour, so that society can flourish in the long run.
I will just end by talking about—going back to Part 1 of this bill, which of course sets the income tax rates for the coming year. I actually thought the observation my colleague Michael Wood made in his contribution to this reading of the bill was really important, which is that the income tax rates set for the coming year, effectively, reflect a redistribution away from the poorest New Zealanders and middle-class New Zealanders to high-income earners. They were instituted by this National Government with its tax changes now 7 years ago.
There is an ongoing cost to that, and that ongoing cost can be seen in the increasing pressure on mental health services, and health services in general. It can be seen in education, in the ongoing need for schools to rely more and more now on contributions from parents for programmes and the sorts of technologies that students need to be learning at school. It can be seen in the ongoing deficit in infrastructure investment in Auckland, which is going to result in an absolute catastrophe in a few years’ time, with the ongoing population growth. We simply are not seeing the level of investment in public transport infrastructure that we need. A lot of this comes back to the choices that were made by this National Government to prioritise tax cuts for high-income earners over the future of the country.
RICHARD PROSSER (NZ First): I am very pleased—quite excited, in fact—to rise on behalf of New Zealand First and on behalf of my colleague Fletcher Tabuteau to take a call on the Taxation (Annual Rates for 2016-17, Closely Held Companies, and Remedial Matters) Bill at its second reading. I am excited because, obviously, as Mr Robertson touched on, and Ms Genter as well, the minutiae of tax law is a riveting business. Just to have the chance to be enmeshed in it for even a fleeting few moments will serve as a highlight of one’s parliamentary career—however long that lasts.
New Zealand First will be supporting this bill, and for that reason I do not intend to take up too much of the House’s time going through it in intimate detail, but there are some matters that we feel do warrant being addressed further.
Like many omnibus taxation bills, this one contains many technical details and quite a plethora of legislative minutiae. As my colleague mentioned in the first reading, there are more than 50 changes to amendments across seven pieces of legislation, ranging from the Income Tax Act 2007 to the Stamp and Cheque Duties Act 1971. Personally, I have not had a cheque book for about 6 years now, but I guess some people still use them and cheque duties are therefore relevant.
These somewhat weighty taxation tomes contain a multitude of proposed amendments, under the umbrella of remedial matters, and they do deserve a greater degree of focused attention and consideration by the House. Although I was not present for all the submissions, it is apparent that even industry experts were confused at some stages as to which particular taxation bill they were submitting on.
This bill makes amendments to aircraft overhaul reserves, horse racing prizes, GST on second-hand goods and gold, the time frame for refunds of overpaid tax, losses offset by mineral miners, parent tax credit entitlement rules, foreign tax dividend payment provisions, the disposal of livestock on the sale of a business, and the sharing of non-personal information under an approved information-sharing agreement. The list could go on, and doubtless it does.
The submissions received by the select committee, both written and oral, definitely informed the improvements to the original legislation. The select committee process, even for matters as detailed as this, is a fundamental part of our open democracy. It is the process whereby industry and community groups and individuals have the opportunity to voice their opinions and express their concerns.
References to the time frame regarding the confirmation of the 2016-17 tax rates, in Part 1 of this bill, have already been made. We do have to ask how it is that we are determining rates in March for the 2016-17 year. Mr Scott has assured us there will be no increases in tax under this Government, only reductions, so we certainly hope that such taxes that have been paid thus far, under rules that have yet to be set, have in fact been completely lawful and we are not going to find ourselves in the situation where we have to come back and pass retrospective legislation to tidy up the fact that actions have been taken without the proper legal framework in place.
The bill aims to improve current tax settings within a broad based - low rate framework. That sounds a bit like a sound bite, and I guess the electorate will judge that on its merits. The Government’s revenue strategy seeks to ensure that our tax system is broadly fair, to encourage voluntary compliance. Well, that is always good. A bit of carrot is always better than the entire stick.
New Zealand First acknowledges that changes in business practices are dynamic, and the rate of change in the 21st century continues to accelerate. Amending our tax system so it remains responsive to those changes and fit for purpose is therefore important. The overview of this bill states that the tax treatment of alternative forms of income and expenditure needs to be as even as possible.
A significant section of this bill proposes changes to look-through company rules, regarding eligibility entry tax, deduction limitations, debt remission, tainted capital gains, resident withholding tax and dividends, and PAYE for shareholder-employees. My understanding is that look-through companies are the modern equivalent of what used to be loss attributing qualifying companies back in the day when I had anything to do with such matters, before handing it over to my accountant because this kind of thing tends to make my eyes glaze over.
When I was contracting, I said to him: “I don’t want to do any unnecessary paperwork. I’m going to write one cheque at the end of the year, and it can either be for your bill or for the tax department’s bill.” He took on the challenge. I paid him, and that was all taken care of. So I never got deeply involved in it, but I understand that the structure of the look-through company was put in place to counteract some of the business practices that had evolved around loss attributing qualifying companies. We are allowing some individuals, entities, to perhaps pay a little bit less of what society would consider their fair share of the tax burden. Now it appears that the replacement is itself in need of a little bit of tweaking and adjustment.
The rule changes are intended to reduce compliance costs yet remain robust and in line with policy intentions, and, like many other pieces of taxation legislation debated in this House, it is imperative that any unintended consequences of proposed rule changes are minimised—if, indeed, not eliminated.
Members of the select committee, including the Rt Hon Winston Peters, have responded to submitters and made some common-sense amendments, like the transitional provision for existing look-through companies. The committee’s proposed changes to grandparenting guidelines for charities and Māori authorities that use look-through companies strengthen the legislation as it was originally proposed, and that, of course, we support.
The bill also proposed changes to land tainting rules and council-controlled organisations, and amendments proposed in the bill to the Income Tax Act 2007 exempt entities controlled by local authorities from the land tainting rules. In its submission, in fact, the Dunedin City Council supported the officials’ view that in the context of local authority groups, land tainting rules are overreaching their purpose. Officials have no tax avoidance concerns in relation to land owned with a local authority group.
Another significant part of the bill deals with non-resident withholding tax, specifically regarding related parties and branch lending. Changes as proposed to the non-resident withholding tax and the approved issuer levy rules are to ensure that they are both applied consistently to economically similar transactions. A new category of non-resident passive income is introduced, that being non-resident financial arrangement income. The select committee recommends refining the definition of this, which would, in turn, amend the description of how the non-resident financial arrangement income is calculated.
New Zealand First does support Supplementary Order Paper 261, tabled by Minister Collins, regarding the depreciation rollover for businesses that were affected by the November 2016 quakes. I also would like, at this point, to draw the House’s attention to Supplementary Order Paper 260, from New Zealand First’s deputy leader, Ron Mark. The proposed tax deductibility measures in this Supplementary Order Paper would make it clear that the cost of any seismic work may be deducted, thereby reducing net income on which tax is levied under the Income Tax Act 2007. We certainly hope that the Government will see fit to see the wisdom in that and support it, to the benefit of taxpayers and, indeed, Government revenues.
We agree with the Government’s intent regarding this legislation, in the main, given the select committee’s efforts to change the bill, reflecting the concerns of submitters. The Government has got this one right, and that being the case, New Zealand First is happy to support this piece of legislation. Thank you.
JAMI-LEE ROSS (National—Botany): I am going to be extremely brief; I am not as excited as Richard Prosser.
Grant Robertson: You sat through the submissions.
JAMI-LEE ROSS: I did sit through all the submissions, Grant Robertson. We had submissions, it was a very technical bill, and there were technical changes made at the Finance and Expenditure Committee, which Grant Robertson spent many, many hours following closely. He has done an excellent speech, of course, on many of the technical matters.
The bill covers, as has been outlined, the most important part around setting the annual rates for taxation for New Zealand for the year. It also has had, as has been canvassed already, very technical changes around closely held companies, simplifying processes to make it easier for New Zealanders to do business. It has changes around GST, changes around non-resident withholding tax—they are in such detail in this bill that we could spend hours going through them in detail, like Mr Prosser. But I am not going to do that—
Dr David Clark: Is this bill worth putting through the House or not?
JAMI-LEE ROSS: It is worth putting through the House, because it has the annual rates. The most important part of it, Dr Clark—the new health spokesperson—is that it funds the health system, which is seeing more New Zealanders getting access to elective surgeries. He is going to spend hours decrying that in the House. It funds all of the Government services that his constituents are enjoying year after year, and when he goes to the election later this year, he is going to find that all the services that are funded by this bill are proving to be beneficial for New Zealanders. He should probably calm down a little bit when he speaks in the House later.
The ASSISTANT SPEAKER (Lindsay Tisch): The next call is a split call, and I am calling Barry Coates—5 minutes.
BARRY COATES (Green): Tēnā koe e Te Māngai. This bill goes by the name of the Taxation (Annual Rates for 2016-17, Closely Held Companies, and Remedial Matters) Bill—what a mouthful. I think my next member’s bill might be to limit the length of titles of Government bills.
I want to highlight some of the welcome provisions in this bill. There is a removal of GST from capital-raising costs. That is really important for entrepreneurs and small companies, and we support it. We are adding 14 charities with overseas tax purposes—congratulations to those charities. As a former head of Oxfam New Zealand, I welcome new ideas and new energy into the overseas development sector. There are also minor changes to the Working for Families tax credits. Obviously, that is tinkering, and far deeper reform is required if that system is to work for the benefit of all in our society.
The most significant changes in this bill are to tax laws that close loopholes, particularly the stronger look-through company rules and the non-resident withholding tax and approved issuer levy rules. We support these. These are important ways to close the loopholes that have allowed foreign multinationals to get away with not paying New Zealand tax amounting to hundreds of millions of dollars, if not more, while wage and salary earners are left to bear the brunt of the taxes.
Last week we saw some papers go out for consultation, announced by the new Minister of Revenue, Judith Collins. Those changes—those consultation papers—are consistent with the amendments that are proposed in this bill. We welcome this bill as part of that broader effort to reform our tax system. We also welcome New Zealand’s participation in the OECD base erosion and profit-shifting process, often known as BEPS. It is really important that New Zealand is a part of that process and that we are actively implementing some of the recommendations that come out of it.
We are concerned that this bill is very much tinkering and that the proposals made last week do not go far enough. We need, in New Zealand, a diverted profits tax, which would provide the incentives for multinationals to pay their fair share of tax, to cooperate with tax authorities, and otherwise, as in Australia and the UK, they would pay a penalty rate of tax. Those measures are necessary to bring companies to the table. We need GST on the imported products that are sold online, and we need a claiming back of unpaid taxes from all of those who have abused our tax rules in the process of avoiding their legitimate tax obligations in the past, as the UK, Italy, and France have done in taking cases against multinational companies.
From the Greens’ perspective, although we welcome the amendments in this bill, these loopholes in our tax system have lasted for far too long. The Government needs to stop giving New Zealand companies disadvantages against foreign companies and foreign competition. We need to stop giving foreign investors advantages so that they can buy our assets tax free and have an advantage over bidders from New Zealand. We need to stop loading the burden of tax on to wage and salary earners, and we need to stop giving tax cuts to the rich.
So what do we want from our tax system? This bill will help with the first of the requirements. We want a system of integrity, and part of that integrity is to make sure that multinationals cannot avoid paying their fair share of taxes. We also need a system of tax that is far more fair and protects the vulnerable, supports productive work, and provides incentives for innovation. And we need a tax system that makes the polluter pay and supports a low-emissions economy and sustainability. These are what our tax system should be doing.
This bill does some useful tinkering. We will support it, but we believe that a far deeper process of tax reform is urgently required. The Green Party aims to provide a fairer tax system when we become part of the Government on 23 September. Thank you.
Dr DAVID CLARK (Labour—Dunedin North): I have 5 minutes, so I have no choice but to make it brief. I think one of the most important things happening in this bill is the obvious bit that is right up front: the annual rates. We are confirming the annual tax rates for New Zealand. That is an important process that this Parliament does every year—as “annual” suggests—but then a notable thing this time around is that we are in March, and these tax rates are due to expire in June. I suspect that by the time this bill gets through the House, it will be April. It may even be an April Fool’s joke that we are experiencing as it goes through. It is a bad joke to have the tax rates confirmed this late in the piece. It is shoddy—9 months down the track, the tax year is nearly gone, and it is chaotic. It shows that this Government really is kind of all over the place when it comes to what goes on in this House, but we also see it in the policy setting.
If we cast our minds back to when these tax rates were first introduced to New Zealand in 2010, we remember that they involved a switch around of the tax system, where over 40 percent of the benefits of the tax cuts that were given went to the wealthiest 10 percent of New Zealanders. The bottom 20 percent in that 2010 tax package got just 2 percent of the value of those tax cuts in 2010. And—and—the Prime Minister of the day introduced a great big GST increase that swallowed up all of the benefit for those lower income earners who thought they were getting a tax cut in that 2010 package. That in itself broke a promise that the Prime Minister had made: he said he would not increase GST, but he did. So there was some level of deception—I suppose that is the kind way of putting it—in that particular tax package. That is the tax package that is carried through to today.
The point I would want to make around that is that this Government has borrowed to fund that tax package that gave the very wealthiest New Zealanders—those in the top 10 percent—over 40 percent of the value of that tax package. This is a Government that has borrowed and borrowed and borrowed and borrowed to fund tax cuts for the very wealthiest New Zealanders, and I think that that gives us all here pause for thought. That shows the priorities of this Government. It has debt now of $80 billion. This is the biggest borrowing Government in New Zealand history standing opposite us here in this Parliament. This National Government has borrowed more than Muldoon’s Government borrowed—
The ASSISTANT SPEAKER (Lindsay Tisch): Back to the bill.
Dr DAVID CLARK: —and it has done that to fund those tax cuts that were put through in 2010—and we are affirming those rates here today in the bill that I have in my hand here. Part 1 says, on page 21 of the copy here, that we affirm those tax rates yet again, and they are there in a way that ensures that the very wealthiest have got the biggest tax cut.
It may well be that this is now the right tax package. You know? For now, we have people who are gaining from the particular tax package that we have. But, in the meantime, health services have been cut—$1.7 billion in health services have been cut. And then, the Government has just been borrowing—borrowing, borrowing, borrowing—to afford this particular tax package that we have got now, for those wealthiest New Zealanders. That does not seem right to me—that does not seem right to me at all.
Now, on this side of the House, we will support this tax bill going through because it does tidy a few things up, and we believe that a tax system should be fair and tidy without too many loopholes in it. That is what we believe on this side of the House. We want a fair tax system where everybody pays their fair share. Look, we think it could be better, we think it could be fairer, and we think the tax system in New Zealand needs an absolutely thorough review—not the kind of piecemeal approach you get with these bills that the Government is putting though, which has this minor change here, closing this look-though rule there, and so on. I suspect part of it is that because they took so long to upgrade the IT system in 2012, the then Prime Minister of that Government said it would be a shame if we could not put a policy through because we had an outdated tax package to run it. Well, that tax package is still in place. I suspect that is part of what is holding the Government back, but I think it is just out of ideas. That is why we are seeing this particular piecemeal tax package and are affirming again that tax package that included borrowing to fund tax cuts for the very wealthiest New Zealanders.
Hon CRAIG FOSS (National—Tukituki): The previous speaker, Dr David Clark, in his 5 minutes, was probably right for about 5 seconds of that. Almost every other point he made was incorrect and, actually, had very little to do with the bill itself, of which there are many of these types of bills. I think the bill has been supported totally across the House. It is an omnibus bill, and yes, there is tinkering in it. There are some fundamental shifts in it as well—that is what taxation bills do. And, yes, there will be more of this nature to come in the ongoing upgrading, updating, and tidying up of New Zealand’s tax law and tax parameters to help our economy to continue to grow like it has been over the last few years, and, particularly, in leading the OECD.
The bill—as I have mentioned, I think—came through the Finance and Expenditure Committee relatively unscathed, and I acknowledge and thank the committee for its work and the suggestions it made with officials to make for better legislation as it arrives in the House. One earlier speaker noted the need for “constant vigilance”, I think she said, in and around all things tax—that is absolutely correct. Total, constant, and absolute vigilance is needed in and around all things tax to make sure the tax system is as effective and as efficient as the desires of the Government and the people of New Zealand need it and want it to be.
In the context of these changes in this tax bill, I do note, because, obviously, many members seem to forget this, that this kind of upgrade, and the tax system that we currently have, contribute to help making New Zealand No. 1 or No. 2 of countries leading the world for the ease of doing business, No. 1 or No. 2 for starting a business. All this contributes to our top ranking across the OECD in particular and in those countries we compete with and source capital from, to lead us in the top 1 or 2 or 3 all the way through. The job of making a better, more efficient and effective tax system is never complete, but this is yet another step as we move towards—
The ASSISTANT SPEAKER (Hon Trevor Mallard): Order! I am going to interrupt the member. The member has, I think, gone for well over 2 minutes now without really referring to the substance of the bill at all. I think it is fair to say that members in the Chair are going to take a tighter attitude on that. Hearing repeated comments from various members, which are not related to the substance of the bill but are very general, are going to be less acceptable than they have been in the last few years.
Hon CRAIG FOSS: Thank you, Mr Assistant Speaker, and I acknowledge you are tightening up as you have arrived in the chair during my speech. Just to round off, this is, as I have said, an omnibus bill. I am enjoying this, and I thank the rest of the House for their support and ongoing commitment to the good, rapid progress of upgrading New Zealand’s taxation law. Thank you.
STUART NASH (Labour—Napier): As a number of my colleagues and members have alluded to, this is quite a large bill—the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Bill—for a good reason. There is some very complex tax legislation in this, and by its very nature tax, law is complex. But what we seem to have seen in this House—and I must make this point before I talk about the substance of the bill—is a note that has been passed on to the Financial and Expenditure Committee (FEC) members, as well as through the IRD, that the number of tax bills coming through the FEC is such that there is a belief that those who are submitting actually have not got the time to give these bills the respect that they need.
These are complex pieces of legislation. The people who are actually often submitting on these bills are the big law, accountancy, and other companies. They take these very seriously. They go through these with a fine-tooth comb. We know that there is a high level of consultation, both prior to the bills’ drafting as well as through every stage of drafting, in order to get them right. My view is that if the IRD actually wants to create good legislation—and we all want that—then it just has to pull back a little bit.
A member last night talked about the fact that we should not be complaining about the amount of tax legislation coming through the House, because what it shows is that there is a very busy Government working on a whole lot of complex areas. Well, that is true, but the correct way to do this is if it had started 6 months into Government, as opposed to waiting for 6 years into Government. This FEC has, I think, seen more tax legislation in the last 2½ years than it saw in the first 6 years.
There are four pieces of tax law that this bill deals with. The first one is about closely held companies. What are now closely held companies started out life as loss attributing qualifying companies—this would have been about 25, 30 years ago, I think. The reason for loss attributing qualifying companies is that they provide the tax advantages of a partnership while providing the limited liability advantages of a company. The main difference between both of those is that they can have only five core shareholders. There are supplementary shareholders—like, if I were a shareholder and five of my colleagues were, then my wife could also be one because she is from the same family as me, and closely held.
Closely held companies morphed from loss attributing qualifying companies—and my understanding is that they actually started life as a way for property developers to get into houses. Then they were abused a little bit—for example, forestry companies ended up with partnerships of 25 loss attributing qualifying companies under one partnership, so that they got around the 25-partner rule by having 125. What happened is that the IRD realised that these companies were being abused to a certain extent. They went from loss attributing qualifying companies to qualifying companies, and now they have gone from qualifying companies to being called closely held companies.
What this legislation seeks to do is to simplify this even further. There has been a lot of consultation around this—I acknowledge that—because it is a complex area of tax law and, in fact, there are now a lot of closely held companies out there. There are still a number of qualifying companies out there, but this legislation means that they have all got to morph through to closely held companies. One of the good things about that, I must admit, is that a look-through company can transition to a closely held company without triggering immediate tax consequences. That is quite important. If someone holds a qualifying company and is required to move through to a closely held company, this just simplifies it, and we are all for business simplification.
The second area increases and tightens the rules around tax treatment of interests earned, changes to non-resident withholding tax, and approved issuer levies. Again, this is a reasonably complex area of law, but what happened was that those with significantly bigger brains than me, and certainly with much more knowledge of the tax system, were finding loopholes. The last thing we want in our tax system is loopholes, because the integrity of the tax system cuts to the very heart of the economy. Actually, what is really the last thing we want is foreigners ripping us off—there is enough of that that goes on as it is—so this legislation tightens those rules around non-resident withholding tax and approved issuer levies.
The third area is GST. Basically, we have got a pretty simple GST regime in this country, but it could be better—there is no doubt about that. One of the things in this bill, and one of reasons why we will support it—well, we support all tax legislation, but one of the things that is good is that it actually means that GST can be deducted off costs associated with capital fund-raising. That just makes sense. Again, that makes it easier for businesses to go out and raise capital when they are looking to grow.
My comment on this is that there are a number of things that we can do to make it easier for businesses to grow and to really encourage businesses to innovate, to seek capital, to raise capital, and to drive sustainable growth. The concern I have is that this is possibly one of the more minor things we could use the tax system for, in terms of business growth. There are things like research and development tax credits, which the last Labour Government put in place; however, this Government withdrew them, against the advice of Treasury. In fact, I am a huge believer in using the tax system to drive certain behaviours.
I think that if this Government was really bold, and if this Government really wanted to support businesses—and certainly small to medium businesses—in the sort of growth that creates sustainable jobs for New Zealanders, then it would use the tax system in a much more positive way to drive the sort of growth that Mr Robertson talked about. Mr Robertson today highlighted the fact that New Zealand has the fourth-lowest labour productivity in the OECD. What that actually highlights is that businesses are not investing in capital assets that drive productivity growth. We love to think that we live in this land of milk and honey—and it is the best country in the world, we know that—but this bill could have been used to drive growth in a way that really increases productivity. It is a major problem with this legislation. The Productivity Commission came out and outlined a whole lot of different areas where we could do so much better.
The fourth area that this bill deals with involves a whole lot of technical amendments, and in any bill the size of this one—well, it is actually a remedial matters bill, and in any remedial matters bill involving the tax system there are a number of pieces of tax legislation and similar legislation that will be changed. The challenge with this is that it creates a whole lot of work for those who, as I mentioned, submitted on it. It is also a whole lot of work for the tax experts, but, more so, for those who are charged with implementing it—and often it is those small to medium businesses that are required to do that.
One of the things that is interesting about this bill is that 14 charities have been added to the list of donee organisations with overseas purposes. These are held in schedule 32 of the Income Tax Act. What this means is that New Zealanders who donate to these organisations are actually eligible for tax benefits on their donations from 1 April 2016. We all know that the charitable status of certain organisations is actually quite contentious at the moment. For example, in Napier there is a scaffolding company that has just been undercut by a charitable organisation that does not pay tax—because it does not pay tax, it has actually undercut that organisation by 25 percent on every single contract. This is an organisation that is set up as a charity but undertakes commercial operations. I think we probably all know who we are talking about here.
Just to reiterate, Labour does support this bill. We support the majority of tax legislation that goes through this House, because most of it is good. We just believe that the legislation put forward by this Government could have been a whole lot bolder. I would love to be standing up here talking about the 5-year brightline test, as recommended by the IRD. Mr Robertson agrees with that, do you not, Mr Robertson?
Alastair Scott: It’s in the bill, is it?
STUART NASH: There is so much we could do for businesses. Mr Alastair Scott knows this—he is a businessman. Mr Alastair Scott may look at this and he—[Interruption] Mr Craig Foss, who was the Minister for Small Business—I hate to think how much dialogue he has had with the Minister of Revenue that says: “Please, can we do something to help small businesses?”. In the meantime, until 23 September, we have got to put up with this. It is hardly inspirational, and it certainly is not aspirational. On that note, thank you very much.
BARBARA KURIGER (National—Taranaki - King Country): It is my pleasure to commend this Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Bill to the House.
Bill read a second time.
Bills
Resource Legislation Amendment Bill
Second Reading
Hon DAVID PARKER (Labour): I raise a point of order, Mr Speaker. You will be aware of the controversies around this process. I have a copy of the form of the bill that is the only one that is available to members, and it is the first reading version. This debate cannot proceed until that—
Grant Robertson: You mean, on the Table?
Hon DAVID PARKER: Well, this is the Table. Members do not have available to them the piece of legislation that is the one we are meant to be debating.
The ASSISTANT SPEAKER (Hon Trevor Mallard): I have asked the Clerk to attempt to obtain copies of bills for members, because it is a most undesirable position to be in, to have a bill, which I presume is 3 days out of a select committee, and not have that available. In fact, I do not know a precedent for this. I will look, while the Minister for Building and Construction is speaking, at the exact rules and will be deferring my ruling on whether the debate will proceed until the end of the Minister’s speech. Clearly he has a copy of the bill.
EUGENIE SAGE (Green): I raise a point of order, Mr Speaker.
The ASSISTANT SPEAKER (Hon Trevor Mallard): Eugenie Sage, you are not going to debate what I have just said, are you?
EUGENIE SAGE: No, except that I looked quite carefully on the Table to get a copy of the bill as reported back, and could not find it. So I think it does impede the ability of members to discuss it when it has not been on the Table when we have looked.
The ASSISTANT SPEAKER (Hon Trevor Mallard): I understand that that is the case, and that is as described by Mr Parker. What I have said is that I am aware of rulings in the past, in different circumstances, which the members might not find satisfactory if I were to follow the precedents. What I am asking for is some indulgence so I can look at those Speakers’ rulings from the past to see whether, in fact, I can differentiate from them. But I will do that while the Minister is speaking.
Hon DAVID PARKER (Labour): I would ask you to reconsider, Mr Assistant Speaker, because I do not think you can have a debate on a bill that is not before us, in the context where it has come back from a select committee. Unless you are willing to reconsider, I am going to have to move a motion.
The ASSISTANT SPEAKER (Hon Trevor Mallard): I am advised by Mr Robertson that the bill is now on the Table, but I will also advise the member that the precedents on this, from my memory, are unfortunate but clear.
Hon Dr NICK SMITH (Minister for Building and Construction): The copies of the full select committee report and the bill have been publicly available since 4 o’clock on Monday, so it is rather pedantic of Opposition members to pretend that simply because the copies have only just arrived on the Table that in any way impedes the capacity for Parliament to debate the bill.
Hon DAVID PARKER (Labour): I would have recalled the Speaker but a copy has now arrived. It would have been absolutely absurd for us to have this debate without the legislation being available to us. Even this, I think, is just an incredibly poor process—that members have not been able to pick up the legislation that we are meant to be debating right now.
Hon Dr Nick Smith: Mr Assistant Speaker—
The ASSISTANT SPEAKER (Hon Trevor Mallard): Sorry, I do have a matter to deal with before I get back to the member. Just to make it clear to the Hon David Parker that when I am in the chair, I am the Speaker, and if he does not like my opinion, he cannot call the real one. The question I just want to ask the Hon Dr Nick Smith now is whether, in fact, given this issue and the fact that I think we are both aware that something is going to happen quite soon, he does want to continue with this debate now.
Hon Dr NICK SMITH (Minister for Building and Construction): Yes, Mr Assistant Speaker. I move, That the Resource Legislation Amendment Bill be now read a second time. This is the second phase of the Government’s substantive reforms to the Resource Management Act (RMA). It is the largest package of reforms since the original Act was passed 25 years ago. The success of the Government’s first phase of reforms is witnessed by projects like the Waterview Connection, like the Kapiti Expressway, like major roading programmes in Christchurch, and like the new power stations that have been able to be consented in a far more crisp way.
This bill is particularly focused on addressing the long-term issues around housing. It is a litmus test for parties in this Parliament as to whether they are serious about addressing the long-term issues affecting housing supply and affordability. This Parliament is full of MPs who want the omelette but are not prepared to break the egg. Unless we address the core issue of opening up land supply, reducing the time taken to get consents, reducing the cost of land subdivision, and enabling the construction of infrastructure, we are not serious about addressing New Zealand’s long-term housing supply and affordability issues.
The evidence of the connections between the Resource Management Act and the housing issues are overwhelming. Eighty percent of the real increase in the cost of a home today as compared with 25 years ago is in the price of the section. I point out that the average section was worth $100,000 in 1990 in Auckland, and the most recent average is $500,000. You are not going to build a starter affordable house if the price of the section is that expensive. Here is the further evidence: why is it possible in Christchurch to buy a home of 150 square metres for under $400,000 when the same home in Auckland would cost over $700,000? The building materials cost in Christchurch is about the same. The cost of labour in Christchurch is about the same. The cost of the consenting process is about the same. The core issue is that the average price of a section in Auckland is $500,000, and the price of a section in Christchurch is $190,000.
In Christchurch we used the Canterbury Earthquake Recovery Act to overrule the RMA and to substantially increase the supply of land, and that is why rents have dropped in that city by 8 percent over the last 12 months.
Hon Ruth Dyson: Rubbish! That is such a lie.
Hon Dr NICK SMITH: That is why, in that city, homes are so much more affordable.
The ASSISTANT SPEAKER (Hon Trevor Mallard): Order! I will ask Hon Ruth Dyson to withdraw and apologise.
Hon Ruth Dyson: I withdraw and apologise.
Hon Dr NICK SMITH: The core Act that governs the creation of sections is the Resource Management Act. It is not just the Government that is calling for that reform; the New Zealand Institute, the Reserve Bank, and Treasury are, and the Productivity Commission has produced two substantive reports. Similar issues in the UK, where house prices are similarly at ratios of eight times those of incomes, have been inquired into. The report in the House of Commons in the last couple of weeks—a 400-page report—said exactly the same thing.
This is a test of leadership, because whether it be the issue of superannuation or RMA reform, members of this side of the House, and particularly the Prime Minister, are prepared to deal with the long-term issues for New Zealand whereas members opposite are far more interested in playing short-term politics. Mr Little and Mr Twyford have acknowledged that tight urban limits have been at the core of New Zealand’s housing issues and, when we have the very bill before the House that will make a difference, they vigorously oppose it, and that is a lack of leadership. If Andrew Little was really up to the cut, he would take the sort of measure that John Key did on the issue of smacking when Labour was in the Government and be prepared to address these long-term questions.
When it comes to the issue of housing, these are not new issues. I remind members opposite, that house prices doubled under the former Labour Government, and homeownership declined in every year that they were in Government. If there was a quick, easy fix, it would have been done a long time ago. What we need is a systematic, long-term reform of the very Act that drives the creation of sections and is at the core of those major issues in New Zealand’s housing market.
There are 10 very specific amendments in this bill that will make a material difference. The first is that this bill specifically includes a new function and requirement on councils to ensure that they provide a sufficient supply of land for development and for growth. Secondly, a key weakness of our current planning system is that it takes so long for plan changes. Auckland has been functioning for the last 20 years on a plan that was drafted in 1993 when its population was 600,000 fewer. The streamlined planning provisions in this bill will enable new land to be able to be zoned for housing in a matter of months, rather than the many years of the current law.
This bill quite specifically removes appeals on resource consents for residential activities where a land has been zoned for housing purposes. That too is a key change in speeding up the process. We have a very confusing regime for developers in that we have councils able to charge both financial contributions under the RMA and development contributions under the Local Government Act. Those two regimes do not make sense. They create uncertainty, they can result in double-charging, and it is sensible in this reform that we require those two provisions to be integrated.
This bill provides for planning standards. It does not make sense that across this country we have over 50 definitions on how you measure the height of a building. We have, across this country, more than a thousand different categories of zoning of land that makes development a nightmare for those people that are trying to build the buildings for jobs and the buildings for houses. Those planning standards that are provided for in this bill will make a real difference.
The changes to the Reserves Act that enable you to be able to integrate the changes to reserves with planning changes in resource consents—there are thousands of homes in which that is exactly the circumstance of which this bill will provide for a better process.
You cannot build houses unless you have infrastructure. Right now there are difficulties with the Public Works Act in terms of being able to bring infrastructure on stream, and the sensible, more generous provisions for those people whose property is required for infrastructure while speeding up the process makes absolute sense.
There are the new boundary provisions that enable homes and those issues to be resolved more quickly. There is the issue of fixed fees. There is the issue of having the capacity to be able to even waiver the need for a consent in minor cases.
There are far more reforms, and bigger reforms. There is the issue of natural hazards that was an act of neglect in it not being including in the original law, which was recommended by the Royal Commission, and we need only look at a subdivision like Bexley to say that natural hazards should have been at the front end of the decision making in those areas. There are the new collaborative requirements. There are the new provisions in this bill that provide decommissioning plans for those activities in the exclusive economic zone. There are the new provisions requiring the fencing of streams and rivers and lakes in New Zealand so that we might have cleaner waterways.
I want to acknowledge the Māori Party. Yes, it has advocated strongly for the iwi participation agreements that are in this bill, but it is a party that is prepared to deal with the issues that are at the core of housing rather than simply playing politics. I also note the substantive issues in this bill about bringing together the different processes for national direction, whether it is a national policy statement, whether it is a national environmental standard, or whether it is those 360 regulations.
There have been cries of foul that this is bill is going to remove the powers for communities to be able to have a say. Here is what I have to say to the Parliament. Why should it, after Parliament has regulated and set a standard for earthquake-prone buildings—
The ASSISTANT SPEAKER (Hon Trevor Mallard): Order! The member’s time has expired. Before I call a member I am going to go back and give the Hon David Parker half an apology for the comments that I made earlier. Under Standing Order 267(2) unless a bill is under urgency it has to be made available to members. The experiences I have had in the past have been under urgency and, therefore, my initial reaction was wrong. However, this bill was made available to members on 6 March, and was available on Monday, and, therefore, that does not apply.
Hon DAVID PARKER (Labour): I raise a point of order, Mr Speaker. With respect, your gloss on the obligation to—there are two issues here. A matter cannot be put on the Order Paper until a bill has been tabled in the Table Office more than 2 days before the debate—2 or 3 days, whatever the limit was that you suggested. That is a different matter from whether the bill is meant to be on our Table in the House when we debate a bill.
I have been in the House too when matters have been considered under urgency and an urgency debate has started before the bill has been tabled in the Bills Office. It is a terrible practice but we seem to have some ruling, which should be overridden one day by a Speaker of this House to make sure that we do not have fallacious debates where we cannot see legislation. That is under urgency. There is no ruling that I am aware of in Standing Orders that says that this Parliament is meant to debate a bill that is not available to members when they are debating it.
The ASSISTANT SPEAKER (Hon Trevor Mallard): OK. Well, I have heard your point of view and my ruling is that as long as bills have been made available at the appropriate time in the Bills Office, if members see a bill as coming up and it is not on the Table, I do not think it is asking too much of them to walk the 20 metres and get it or to ask the Clerk to get the bill before the debate. This has been on the Order Paper all day and the bill has, in fact, been available since Monday.
Hon DAVID PARKER (Labour): Are you making a ruling when you do not need to in respect of such a serious matter? If you are making a ruling that is going to bind future Speakers in respect of that rule when you actually do not need to, because the matter was cured by the—
The ASSISTANT SPEAKER (Hon Trevor Mallard): The member will resume his seat. The ruling that I have made is that Standing Order 267 applies to bills being available to members. I happen to agree with the member on the question of urgency where bills are not available to members and are being debated, but if bills are available to members for debate, then I do not think a debate should be held up. I think it is a matter of politeness and a matter of efficiency, and I have no doubt there will be some investigation in the Clerk’s Office as to why it took from Monday to today to actually get the thing out when it was down for debate today. But that is a matter, I think, of efficiency rather than a ruling.
EUGENIE SAGE (Green): Just speaking to the point of order, I have a concern that you are making a potential ruling here that may mean that bills do not have to be available on the Table and I think that has quite significant implications if we are just expected to pick them up electronically. I think they physically should be available in the Chamber and your ruling, I suggest, is actually potentially saying that that does not need to be the case.
The ASSISTANT SPEAKER (Hon Trevor Mallard): I can hear the member, but I am not going to make the extreme ruling that debate cannot happen if there has been either an efficiency question here or members—I think if members are unable to make it to the Bills Office in order to get a copy of a bill, then it is part of the role of the staff here to do that.
RICHARD PROSSER (NZ First): Speaking to the point of order.
The ASSISTANT SPEAKER (Hon Trevor Mallard): Has the member really got something new to add?
RICHARD PROSSER: Well, I am looking at Standing Order 267(4)(b): “the bill is not available for debate until copies of it, as reprinted, have been circulated to members.” My understanding, from Mr Parker’s original point of order, is that this is a reprint. I could be mistaken. I just wonder whether you could clarify that.
The ASSISTANT SPEAKER (Hon Trevor Mallard): That is the case. My understanding is that, under the modern practices of the House for about the last 10 years, the circulation to members has been its availability in the Bills Office for those members who have become aware of its existence electronically, or through any other method, and they request it. We used to—earlier in my time—have every bill and every reprint taken to every member’s office, and we decided that that was not actually a very good practice.
Debate interrupted.
Ministerial Statements
Kaikōura—National Transition Period Extension
Hon GERRY BROWNLEE (Minister of Civil Defence): I wish to make a ministerial statement under Standing Order 356 in relation to the extension of a national transition period under the Civil Defence Emergency Management Amendment Act 2016. The amendment Act passed last year by this House enables a state of emergency to end but a state of transition, before you get full recovery, to begin. It requires a declaration and it requires that declaration to be notified to the House. So pursuant to Part 5A of the Civil Defence Emergency Management Amendment Act 2016, I formally give the House notice that I have today approved an extension to the national transition period in the Kaikōura and Hurunui districts, and the Wairau-Awatere ward of Marlborough district.
The extension came into force at 1 p.m. today and will last for a further 90 days. The extended national transition period for these areas will now end at 1 p.m. on 7 June 2017 unless extended or terminated earlier. An extension of the national transition period will help recovery managers to deal with the ongoing recovery issues, such as restricted access to some places in the district and to buildings while further geotechnical and engineering investigations are carried out.
The national transition period allows the national recovery manager to coordinate the work of central government agencies while also allowing local authorities to continue effective recovery work on the ground. There is a very constructive engagement between local authorities and the recovery manager progressing at the present time. This simply enables it to go on for a longer period in order to make things better for people in that district.
CLARE CURRAN (Labour—Dunedin South): The Labour Party supports the extension to the national transition period. We support any measures that will hasten and improve the recovery process for the people of Kaikōura and the recovery of their economy, and our thoughts remain with the people who live and work in those areas and those who are working on the ground to assist in their recovery.
I note that in this very House just around about a week before the Kaikōura earthquake, Parliament passed a piece of legislation that provided a framework for recovery management, providing a mandate for recovery managers, strengthening the requirements for plans for recovery, and supporting a seamless transition from response into that recovery phase, and establishing a transitional notice mechanism that makes emergency powers available for a specified period of time.
So I think we can see that the legislation is being effective. However, around the time of the Kaikōura earthquake there were some significant concerns in the public arena about how the public was informed, particularly around the threat of a national tsunami and the lack of an effective alerting service. After that process there was a review promised of that, and that still has not occurred. I do want to put on record that it is very important that that review occur.
Then, 3 weeks ago, we had the Christchurch fires, which we are talking about now, and that also had questions raised about the communications, the chains of command, and the communication channels. So these things are important. They require a bipartisan approach. We are expressing our support for the Minister of Civil Defence’s statement today. We note that there are issues that do need to be addressed, in terms of how we approach the immediate aftermath of these major events and how the communication channels work. We are keen to work with the Government on that.
STEFFAN BROWNING (Green): The Greens will support this extension as well for the genuine purposes of recovery that are purported here. We are concerned, however, that we got this at such short, short notice, and we have had no real time to look at the implications or to even talk with our constituencies about what this might mean for them. So our support is a slightly nervous one. The region that I live in is covered by this, and I have businesses coming to me consistently, and individuals, homeowners, and communities, whether it be Waiau or Seddon in particular, that feel that they are being cast aside by this Government in the recovery. The processes that we hear from the Minister of Civil Defence, saying that there is good dialogue with the teams that are working there—but is there good dialogue with communities? There is not. And there is not with their local member of Parliament either. He might be seeing some that it suits him to, but he is not doing the rest.
The business support package that was extended out—why not roll that out another 90 days as well? When it was announced that it would be extended, effectively, from my reading, all that was being extended was the using-up of the change from the money announced in the previous extension. There was no serious new money, apart from that $1 million for a mayoral fund. That is not going to help those communities and businesses through this coming winter—this very dark winter that is coming there until that road is opened. I put it to the Minister, and other Ministers, that they should be setting up a suspensory loan facility for those businesses so they can stay there. There are businesses going under today, while we are here now. There are communities wondering whether they have got any future—now. This may help for some of it, but there was a slow stuff around on the road, and the Minister knows full well about the mucking around with the land transport authority and other things that have been going on.
This is another example of a very untidy, messy, and badly managed approach to the recovery. We will support it, but we would like to see some much more positive stuff for the businesses in that area. Let us hope you will facilitate something very, very soon that gives the communities real confidence that there is a far more recoverable future—more than just the road recovery. That is where we come from. We will support it. We have some nervousness about some of the implications. We are upset about the lack of time to consult around it. We are hoping for much, much more from the Government, but there is support from the Greens. Thank you.
RICHARD PROSSER (NZ First): New Zealand First thanks Minister Gerry Brownlee for this notice, albeit it is a little bit late—coming some 5 hours after the notice actually came into force. We do share some of Mr Browning’s concerns, but I would say in response to that that they are probably not germane to the issuance of this particular order. I think that they are something that is separate, and perhaps the way in which the earthquake recovery is dealt with on the ground is a matter for another discussion.
The extension of this order itself—I think we are fortunate in New Zealand that the imposition of emergency powers and the imposition of executive authority over and above normal legal procedures is something that happens on a rare basis. We trust that it happens for very good reason when it does and we tend to support it for those reasons, and this certainly appears to be a case in point. We do know that when natural disasters occur, cleaning up after them and getting things back on track is not something that can occur always to a formula. There are delays that crop up, there are additional elements of damage that are found, and jobs are found to be taking longer than was previously thought, and so in situations like that, it only makes sense that the emergency systems that are put in place in order to facilitate recovery can be extended as necessary.
So, not to hold up the House any further, I say that New Zealand First does thank the Minister for this notice. We do support it. We share some of Mr Browning’s concerns, but they are, as I say, probably better dealt with in another forum. Thank you.
The ASSISTANT SPEAKER (Hon Trevor Mallard): The Hon Gerry Brownlee in reply.
Hon GERRY BROWNLEE (Minister of Civil Defence): Can I thank other parties in the House for their support for this particular extension. Can I just apologise for the way in which the information has been disseminated this afternoon. I must say that I have myself been caught somewhat short, but that simply reinforces in my mind the need for some reconsideration of how emergency services are managed in New Zealand, and I will be in touch with other parties to reconvene the cross-party group, as we were going to be meeting at the time that the Christchurch fires occurred.
I take on board the comments from Steffan Browning. I know that he has done a lot of work up in the parts of the country that he spoke about—the Awatere and around the Clarence, etc., right down into Kaikōura. I know that that is very much appreciated, and I have appreciated the feedback he has been able to give us at various times. The comments from Clare Curran, I think, were salient, and it will be up to, I guess, the entire Parliament to try to sort out some of this. But I, once again, thank people for their support and apologise for the very short notice of the extension coming to the House.
Sittings of the House
Sittings of the House
BARBARA KURIGER (Third Whip—National): I seek leave for the House to adjourn.
The ASSISTANT SPEAKER (Hon Trevor Mallard): Is there any objection? There—
Hon Members: For the day.
The ASSISTANT SPEAKER (Hon Trevor Mallard): For the day—oh! Not until 23 September? OK. There being no objection, the debate on the Resource Legislation Amendment Bill is set down for resumption next sitting day, and the House stands adjourned until 2 p.m. on Tuesday, 14 March 2017.
The House adjourned at 5.53 p.m.